<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
--------------------------------------------
OR
( ) TRANSITION PERIOD REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _____________
COMMISSION FILE NUMBER 316456
GULF CANADA RESOURCES LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CANADA
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
98-0086499
(I.R.S. EMPLOYER IDENTIFICATION NO.)
ONE NORWEST CENTER
1700 LINCOLN STREET, SUITE 5000
DENVER, COLORADO 80203-4525
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
TELEPHONE (303) 813-3800
(REGISTRANT'S TELEPHONE CODE, INCLUDING AREA CODE)
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. (X) YES ( ) NO
ON AUGUST 11, 1997, THERE WERE 269,540,646 ORDINARY SHARES ISSUED AND
OUTSTANDING.
<PAGE> 2
GULF CANADA RESOURCES LIMITED
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION:
Item 1. Unaudited Consolidated
Financial Statements 3-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. OTHER INFORMATION 11-13
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
GULF CANADA RESOURCES LIMITED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
JUNE 30, 1997 Dec. 31, 1996
- --------------------------------------------------------------------------------------------------------------
(millions of Canadian dollars) (UNAUDITED)
==============================================================================================================
<S> <C> <C>
ASSETS
CURRENT
Cash and short-term investments $ 44 $ 53
Accounts receivable 275 299
Other 108 82
- --------------------------------------------------------------------------------------------------------------
427 434
INVESTMENTS, DEFERRED CHARGES AND OTHER ASSETS 363 375
PROPERTY, PLANT AND EQUIPMENT 5,725 3,413
- --------------------------------------------------------------------------------------------------------------
$ 6,515 $ 4,222
==============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Short-term loans $ 1,022 $ 223
Accounts payable 316 277
Current portion of other long-term liabilities 24 22
Other 121 90
- --------------------------------------------------------------------------------------------------------------
1,483 612
LONG-TERM DEBT 2,036 1,398
OTHER LONG-TERM LIABILITIES 215 187
DEFERRED INCOME TAXES 1,298 763
MINORITY INTEREST 32
- --------------------------------------------------------------------------------------------------------------
5,064 2,960
- --------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital
Senior preference shares 577 577
Ordinary shares 846 599
Contributed surplus 73 80
Retained earnings (deficit) (67) (20)
Foreign currency translation adjustment 22 26
- --------------------------------------------------------------------------------------------------------------
1,451 1,262
- --------------------------------------------------------------------------------------------------------------
$ 6,515 $ 4,222
==============================================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.
3
<PAGE> 4
GULF CANADA RESOURCES LIMITED
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
AND RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
1997 1996 1997 1996
==========================================================================================================
(millions of Canadian dollars) (Unaudited)
<S> <C> <C> <C> <C>
EARNINGS (LOSS)
REVENUES
Net oil and gas $ 290 $ 202 $ 548 $ 397
Net gain on asset disposals 41 5 48 5
Other 11 10 35 20
- ------------------------------------------------------------------------------------------------------------
342 217 631 422
- ------------------------------------------------------------------------------------------------------------
EXPENSES
Operating - production 101 75 182 140
- other 3 4 5 6
Exploration 30 11 51 39
General and administrative 16 13 29 26
Depreciation, depletion and amortization 127 52 226 141
Restructuring charges 4 0 5 0
Finance charges, net 56 33 111 21
Income tax expense 19 11 58 24
- ------------------------------------------------------------------------------------------------------------
356 199 667 397
- ------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) FOR THE PERIOD $ (14) $ 18 $ (36) $ 25
============================================================================================================
RETAINED EARNINGS (DEFICIT)
BALANCE, BEGINNING OF PERIOD $ (48) $ 12 $ (20) $ 14
Earnings (loss) for the period (14) 18 (36) 25
Dividends declared on preference shares (5) (7) (11) (16)
- ------------------------------------------------------------------------------------------------------------
BALANCE, END OF PERIOD $ (67) $ 23 $ (67) $ 23
============================================================================================================
PER SHARE INFORMATION
EARNINGS (LOSS) (dollars per share) $ (0.07) $ 0.05 $ (0.18) $ 0.04
============================================================================================================
</TABLE>
Earnings (loss) per share is after deduction of senior preference share
dividends (but does not include the special dividends for payment of arrears
which have been charged to contributed surplus). This per share amount was
calculated based upon the following:
Average number of ordinary share outstanding:
<TABLE>
<CAPTION>
(millions)
<S> <C> <C> <C> <C>
268.8 241.8 266.7 232.5
==========================================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.
4
<PAGE> 5
GULF CANADA RESOURCES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months
ended June 30,
1997 1996
=================================================================================================
(millions of Canadian dollars) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
EARNINGS (LOSS) FOR THE PERIOD $ (36) $ 25
NON-CASH ITEMS INCLUDED IN EARNINGS (LOSS):
Depreciation, depletion and amortization 226 141
Net gain on asset disposals (48) (5)
Exploration expense 51 39
Deferred income taxes 37 16
Other 16 0
- -------------------------------------------------------------------------------------------------
CASH GENERATED FROM OPERATIONS 246 216
Other long-term liabilities (7) (9)
Changes in non-cash working capital 55 (12)
Other, net 1 (2)
- -------------------------------------------------------------------------------------------------
295 193
- -------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds on asset disposals 73 35
Acquisitions (1,066) (4)
Capital expenditures and exploration expenses (551) (338)
Changes in non-cash working capital (15) (39)
Other, net 72 (2)
- -------------------------------------------------------------------------------------------------
(1,487) (348)
- -------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Short-term loans 791 40
Proceeds from issue of long-term debt 429 167
Long-term debt repayments (260) (169)
Issue of equity 240 133
Regular dividends declared on preference shares (11) (16)
Special dividends declared on preference shares (7) (5)
Changes in non-cash working capital 0 (1)
Other 1 0
- -------------------------------------------------------------------------------------------------
1,183 149
- -------------------------------------------------------------------------------------------------
DECREASE IN CASH AND CASH EQUIVALENTS (9) (6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 53 14
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 44 $ 8
=================================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.
5
<PAGE> 6
GULF CANADA RESOURCES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements reflect
all adjustments (consisting of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair statement of
the results for the interim periods presented. The interim financial
information and notes thereto should be read in conjunction with the
Company's latest annual report to the shareholders. The unaudited
financial statements contained herein are prepared in accordance with
U.S. generally accepted accounting principles; whereas the latest
annual report was prepared in accordance with Canadian generally
accepted accounting principles. As such, certain amounts in the
financial statements contained herein may appear materially different
from amounts contained in the latest annual report and the financial
results for the six months ended June 30, 1997 prepared under Canadian
generally accepted accounting principles. The results of operations
for the three and six month periods ended June 30, 1997 are not
necessarily indicative of results to be expected for the entire year.
2. ACQUISITION OF CLYDE PETROLEUM PLC
In the first quarter of 1997 Gulf completed the acquisition of Clyde
Petroleum plc (Clyde) for a net cash cost of $1,055 million and the
assumption of $449 million of long-term debt ($308 million net of
cash). The acquisition has been accounted for by the purchase method
and, accordingly, the purchase price has been allocated to Clyde's
assets and liabilities based on their fair values. A value of $1,592
million has been assigned to property, plant and equipment; $449
million of the difference has been allocated to long-term debt and the
remainder to other assets and liabilities. The acquisition was
financed with the issue of 23 million Gulf ordinary shares for net
proceeds of $232 million (US$173 million) on January 15, 1997; and
with US$225 million of 8.25 percent senior notes due 2017 issued on
March 21, 1997 for net proceeds of $307 million. Gulf also drew $839
million on a borrowing facility to partially finance the acquisition,
to repay $223 million of other short-term debt and for other operating
requirements. As a result of the acquisition Gulf also acquired a
US$200 million long-term bank facility within Clyde and repaid US$150
million of privately placed notes.
The following presents the pro forma results of operations for the six
months ended June 30, 1997 and the comparative six months ended June
30, 1996, as though the companies had combined as of January 1, 1997
and 1996, respectively.
<TABLE>
<CAPTION>
Six months ended June 30,
1997 1996
===========================================================================================
(millions of Canadian dollars, except per share amounts) (unaudited)
<S> <C> <C>
NET OIL AND GAS REVENUES $ 609 $ 558
EARNINGS (LOSS) (27) 49
EARNINGS (LOSS) PER ORDINARY SHARE $(0.14) $0.13
</TABLE>
3. ACQUISITION AGREEMENT
In July 1997, Gulf and Stampeder Exploration Ltd. entered into an
agreement for Gulf to acquire all of the outstanding shares of
Stampeder. Each Stampeder share will be exchanged for 0.69124
6
<PAGE> 7
of an ordinary share of Gulf. The agreement has been approved by the
Boards of Directors of Gulf and Stampeder and is subject to 66 2/3
percent of Stampeder shares being tendered to the offer.
4. CAPITALIZATION
On July 18, Gulf restructured and syndicated the majority of the
short-term portion of its debt into a $966 million (US$700 million)
long-term bank facility. As a result of this restructuring, Gulf
reduced its short-term debt maturities to $332 million (US$240
million).
5. CONTINGENCIES AND OTHER MATTERS
As part of Gulf's upstream operations and as a result of certain
discontinued downstream operations, Gulf has ongoing site restoration
and remediation responsibilities. Site restoration costs within
upstream operations involve the surface clean- up and reclamation of
wellsites and field production facilities to ensure that they can be
safely returned to appropriate alternative land uses. In addition,
over the long-term, certain plant facilities will require
decommissioning which will involve dismantling of facilities as well
as the decontamination and reclamation of these lands. Total
anticipated future costs, given Gulf's current inventory of wells and
facilities, is in the order of $220 million over the next twenty
years. Gulf has accrued $79 million ($11 million as current) for
future upstream site restoration costs and continues to accrue these
costs on a consistent basis.
There have been no other significant subsequent developments relating
to the downstream potential liabilities since year end, and as such
the estimated costs and associated accrual have not changed materially
since year end.
Gulf is involved in various litigation, regulatory and other
environmental matters in the ordinary course of business. In
management's opinion, an adverse resolution of these matters would not
have a material impact on operations or financial position.
6. ISSUANCE OF NEW STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In February 1997 the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 128.
"Earnings Per Share", which is effective for interim periods and annual
financial statements ending after December 15, 1997. Early adoption of
the statement is not permitted. The Company believes that adoption of
the statement will not have a material effect on its earnings per share
disclosures.
7
<PAGE> 8
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
FORWARD LOOKING STATEMENTS
This document includes "forward looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of
1934 ("Exchange Act"). All statements other than statements of
historical facts included in this document, including without
limitation, statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding Gulf's
financial position, estimated quantities and net present values of
reserves, business strategy, plans and objectives of management of
Gulf for future operations and covenant compliance, are
forward-looking statements. Although Gulf believes that the
assumptions upon which such forward-looking statements are based are
reasonable, it can give no assurances that such assumptions will prove
to have been correct. Important factors that could cause actual
results to differ materially from Gulf's expectations ("Cautionary
Statements") are disclosed below and elsewhere in this document. All
subsequent written and oral forward-looking statements attributable to
Gulf or persons acting on its behalf are expressly qualified by the
Cautionary Statements.
FINANCIAL REVIEW
The following discussion and analysis has been prepared based upon the
financial results of operations as presented in this document, which
were prepared in accordance with U.S. generally accepted accounting
principles. A discussion and analysis of financial results of
operations for the same period prepared in accordance with Canadian
generally accepted accounting principles has been distributed to
Gulf's shareholders. All dollar amounts set forth herein are in
Canadian dollars, except where otherwise indicated.
Gulf follows the successful efforts method of accounting for oil and
gas exploration and development costs. The initial acquisition costs
of oil and gas properties and the costs of drilling and equipping
successful exploratory wells are capitalized. The costs of
unsuccessful exploration wells are charged to earnings. All other
exploration costs are charged to earnings as incurred. All
development costs, including the costs of liquid injectants used in
enhanced oil recovery projects, are capitalized. Maintenance and
repairs are charged to earnings; renewals and betterments, which
extend the economic life of the assets, are capitalized. Capitalized
costs of proved oil and gas properties are amortized using the
unit-of-production method based on estimated proved oil and gas
reserves. Depreciation of plant and equipment is based on estimated
remaining useful lives of the assets using either the straight-line
method or the unit-of-production method based on estimated proved oil
and gas reserves. Individually insignificant unproved properties are
amortized on a group basis at rates determined after considering past
experience and lease terms. As changes in circumstances warrant, the
net carrying values of proved properties, plant and equipment are
assessed to ensure that they do not exceed future cash flows from use.
Capitalized costs of significant unproved properties are also assessed
regularly to determine whether an impairment in value has occurred.
Gulf's revenues, cash flow, profitability and future rate of growth
are substantially dependent upon prevailing prices for oil and gas.
Prices for oil and gas are subject to wide fluctuations in response to
relatively minor changes in supply of and demand for oil and gas,
market uncertainty and a variety of additional factors that are beyond
the control of Gulf.
CASH GENERATED FROM OPERATIONS & EARNINGS (LOSS)
Net oil and gas revenues for the six months ended June 30, 1997 rose
$151 million to $548 million, representing a 38 percent increase over
revenues of $397 million for the first half of 1996. This increase was
offset partially by Gulf's hedging program ($31 million) and by a rise
in royalties of $27 million. For
8
<PAGE> 9
the second quarter, Gulf realized an $88 million increase in net oil
and gas revenues from $202 million in 1996 to $290 million in 1997.
This increase was due primarily to higher volumes from the
first-quarter acquisition of Clyde Petroleum plc (48,000 barrels of
oil equivalent per day (boe/d)). The second-quarter increase was
offset partly by volume declines of 9,000 boe/d in Western Canada.
Revenues for the quarter were buoyed by higher average liquids and
natural gas prices. After hedging, the Company realized an average
price of $25.09 per barrel for its liquids in the second quarter of
1997 compared to $24.07 per barrel in the second quarter of 1996, and
$1.96 per thousand cubic feet for gas compared to $1.67.
Gulf's cash generation rose to $246 million for the first six months
of 1997, representing a $30 million improvement over the same period
last year. Higher cash generation from operations was offset partially
by higher interest expenses, increased general and administrative
expenses associated with the Clyde acquisition and the impact of
corporate hedging activities.
On a segmented basis, Western Canadian conventional oil and gas
operations generated $237 million for the first six months of 1997
versus $230 million for the same period in 1996, while Gulf's Syncrude
interest generated $33 million cash during the first six months of
1997, up from $27 million for the first half of 1996. In Indonesia,
six-month cash generation increased by $21 million to $47 million in
1997, reflecting the additional assets acquired as part of the Clyde
acquisition as well as new production from the Kakap block. Cash
generated from Gulf's North Sea operations included $39 million from
the United Kingdom and $30 million from the Netherlands. Cash
generated from Australia was $8 million. For the majority of Gulf's
international assets, there are no pre-1997 figures for comparison
since, with the exception of Indonesia, Gulf's current international
production is related to the Clyde acquisition.
The Company had a loss of $36 million for the six-month period ended
June 30, 1997, compared with earnings of $25 million during the first
half of 1996. Earnings for the first half of 1996 included $39 million
of interest income related to a tax refund. Same-period earnings
(loss) this year included $48 million in gains on the sale of assets.
As expected, asset sales, plant turnarounds and planned maintenance at
Syncrude contributed to a net loss of $14 million in the second
quarter of 1997 compared with earnings of $18 million in the second
quarter of last year. The decrease in second-quarter earnings included
the effect of a $75 million increase in depreciation, depletion and
amortization, again reflecting the Clyde acquisition as well as the
purchase of Western Canadian assets in mid-1996. Second-quarter
earnings (loss) in 1997 were impacted as well by a $19 million rise in
exploration expenses, increased interest expenses, higher general and
administrative expenses and corporate hedging.
Exploration expenses increased by $12 million to $51 million for the
first half of 1997 due to increased exploration activity, largely in
Western Canada. The increase was concentrated in the second quarter,
as exploration expenses rose $19 million from the second quarter of
1996 to $30 million for the same period in 1997. Production costs for
the first half of 1997 rose to $182 million from $140 million during
the same period last year, reflecting increased workover and plant
turnaround projects in Western Canada. On a unit of production basis,
costs were $6.32 per boe during the first half of 1997 compared with
$6.21 per boe for the first half of 1996.
General and administrative expenses increased $3 million to $29
million, related primarily to Clyde's continuing operations. On a unit
of production basis, G & A costs decreased to $ 1.02 per boe from
$1.16 per boe for the same period a year ago. Restructuring charges of
$5 million reflect organizational changes.
Depreciation, depletion and amortization charges rose from $141
million in the first half of 1996 to $226 million in the first half of
1997. Of the $85 million increase for the first half of the year, $62
million, or 73 percent, was attributable to the acquisition of Clyde.
The balance related primarily to an increase in conventional crude oil
production and higher depletion rates in Western Canada. DD&A rose
from $52 million in the second quarter of 1996 to $127 million in the
second quarter of 1997.
Finance charges for the first half of 1997 were $111 million, up $90
million from the first six months of 1996. On a quarterly basis, net
finance charges rose to $56 million in 1997 versus $33 million in
1996, due
9
<PAGE> 10
to higher debt levels. For the first half of 1997, the Company
incurred short-term net interest expense of $13 million, compared with
$39 million in interest earned during the first half of 1996 related
to a tax refund. In addition, interest expenses on long-term debt rose
from $22 million in the first half of 1996 to $72 million in the first
half of 1997. Higher nondeductible charges under Canadian tax law and
a relatively high international tax burden, which included the
petroleum revenue tax in the United Kingdom, also increased the
Company's overall effective tax rate.
NET CASH FLOW AND FINANCIAL POSITION
Gulf's acquisitions, totaling $1,066 million for the first half of
1997, were the most significant investing activity. Capital
expenditures and exploration expenses were $551 million for the first
half of 1997, representing a 63 percent increase over expenditures of
$338 million for the same period in 1996. Western Canada accounted for
$263 million, down $7 million over 1996. Additionally, Gulf spent $33
million on Syncrude, $146 million in Indonesia and $89 million on
other international projects. For the first six months, the Company
received $73 million in proceeds from asset sales compared with $35
million in 1996. Gulf continued to repay arrears dividends on its
preferred shares, totaling $7 million for the first half of 1997, in
addition to ongoing regular dividends. Total dividends for the first
six months of 1997 were $18 million compared with $22 million for the
same period in 1996, reflecting lower interest rates during the first
half of this year.
Gulf's financing activities for the Clyde acquisition increased
short-term loans by $799 million (including an $8 million foreign
translation loss) for the first six months of 1997, compared to an
increase of $40 million over the same period in 1996. Proceeds from
the issue of long-term debt were $429 million and debt repayments
totaled $260 million versus $167 million and $169 million respectively
during the first half of 1996. In addition, Gulf realized proceeds
from the issue of equity totaling $240 million for the first half of
1997 compared with $133 million for the same period in 1996. On July
18, Gulf restructured and syndicated successfully the majority of the
short-term portion of its debt maturities into a $966 million bank
facility. As a result of this restructuring, Gulf reduced its
short-term debt maturities to $332 million. The $32 million minority
interest relates to the new SGS Limited Partnership established at the
end of June.
OUTLOOK
The Company is preparing to take public approximately 20 percent of
its Indonesian subsidiary. Projected proceeds from this offering,
together with planned Western Canada asset sales, will be used to
repay debt (target year-end net debt of approximately $2.2 billion).
Gulf plans to issue new shares to finance the acquisition of Stampeder
Exploration Ltd. In addition, Gulf has received an independent
valuation of its assets in the Zama/Virgo area and intends to sell
these assets, with proceeds from the sale targeted toward repayment of
the debt acquired in the Stampeder acquisition.
As part of its reorganization, Gulf is proceeding with several
prominent companies to form new service organizations with greater
competitive focus and improved profitability. Gulf's marketing group
and IPL Energy Inc. have formed an independent venture that will be
the largest crude oil and liquids marketer in Canada. Gulf's marketing
group has also signed a letter of intent with MCN Investment
Corporation to form Gulf-CoEnergy Services in order to provide
full-service gas marketing to Gulf and other North American gas
producers.
10
<PAGE> 11
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
All holders of Ordinary Shares of the Corporation at the close of business on
March 26, 1997 received a copy of the Management Proxy Circular regarding the
following matters voted on at the annual and special meeting of shareholders
held on April 30, 1997:
1. The election as director of all twelve nominees as listed below:
<TABLE>
<CAPTION>
Name For Withheld
- ---- --- --------
<S> <C> <C>
R.H. Allen 179,438,366 9,090
J.P. Bryan 179,438,074 9,382
M.G. DeGroote 179,431,803 15,653
S.H. Hartt 179,433,000 14,456
S.H. Hefner, Jr. 179,437,661 9,795
H.E. Joudrie 179,434,179 13,277
T. M. Long 179,432,675 14,781
D. F. Mazankowski 179,429,222 18,234
A.H. Michell 179,438,497 8,959
H. M. Neldner 179,438,537 8,919
W. O'Donoghue 179,438,338 9,118
R. N. Robertson 179,438,338 9,118
</TABLE>
2. The appointment of Ernst & Young as auditors, with remuneration to be
fixed by the directors.
For: 178,777,486 Against: 669,451 Withheld: 519
3. The reservation of an additional 6,000,000 Ordinary Shares for
issuance under the Incentive Stock Option Plan (1994):
For: 159,245,319 Against: 20,201,794 Withheld: 343
No other matters were brought up at the meeting.
11
<PAGE> 12
ITEM 5: OTHER INFORMATION
None.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The following exhibits are filed with this Form 10-Q and they are identified by
the number indicated.
Exhibit
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession*
(3) Articles of Incorporation and By-laws
3.1 Articles of Incorporation of the Registrant
3.2 By-laws of the Registrant
(4) Instruments defining rights of security holders, including indentures
4.1 Indenture between the Registrant and Chase Manhattan Bank
dated July 1, 1989 pertaining to the Registrant's 9% Debentures due
1999 (incorporated herein by reference to the Registrant's
Registration Statement on Form F-10 (Reg. No. 33- 30138)
4.2 Indenture between the Registrant and The Bank of New York
dated January 27, 1994 pertaining to the Registrant's 9- 1/4% Senior
Subordinated Debentures due 2004 (incorporated herein by reference to
the Registrant's Registration Statement on Form F-10 (Reg. No. 33-
73252)
4.3 Indenture between the Registrant and The Bank of New York
dated July 5, 1995 pertaining to the Registrant's 9-5/8% Senior
Subordinated Debentures due 2005 (incorporated herein by reference to
the Registrant's Registration Statement on Form F-10 (Reg. No.
33-93452)
4.4 Indenture between the Registrant and The Bank of New York
dated August 7, 1996 pertaining to the Registrant's 8.35% Senior Notes
due 2006 (incorporated herein by reference to the Registrant's
Registration Statement on Form F-10 (Reg. No. 333-5332)
4.5 Indenture between the Registrant and The Bank of New York
dated March 21, 1997 pertaining to the Registrant's 8- 1/4% Senior
Notes due 2017 (incorporated herein by reference to the Registrant's
Registration Statement on Form F-10 (Reg. No. 333-6608)
(10) Material Contracts
10.1 Pre-Merger Agreement dated July 27, 1997 between the
Registrant and Stampeder Exploration Ltd. (incorporated herein by
reference to the Registrant's Report on Form 6-K filed with the
Commission on August 6, 1997)
10.2 Loan Agreement dated July 18, 1997 between the Registrant and
the Lenders named in Schedule A thereto and the Bank of Montreal (as
agent for the Lenders)
10.3 Incentive Stock Option Plan (1994)
(11) Statement re computation of per share earnings*
12
<PAGE> 13
(15) Letter re unaudited interim financial information*
(18) Letter re change in accounting principals*
(22) Published report regarding matters submitted to vote of security
holders*
(23) Consents of experts and counsel*
(24) Power of attorney*
(27) Financial Data Schedule*
(99) Additional exhibits*
_________________________________
*Inapplicable to this filing
b. Reports on Form 8-K.
None.
The Registrant filed with the Commission a report on Form 6-K dated June 16
1997 describing its offer to purchase all of the outstanding common shares of
CS Resources Limited, which offer has expired without being consummated. The
Registrant filed with the Commission a report on Form 6-K dated August 5, 1997
describing a Pre-Merger Agreement dated July 27, 1997 pursuant to which the
Registrant and Stampeder Exploration Ltd. ("Stampeder") agreed to a merger of
the two companies by means of a formal take-over bid ("Offer") made by the
Registrant for all of the outstanding shares of Stampeder on the basis of
0.69124 of an ordinary share of the Registrant for each common share of
Stampeder, subject to 66 2/3 percent of Stampeder shares being tendered to the
Offer. The Offer is scheduled to expire on August 28, 1997.
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.
GULF CANADA RESOURCES LIMITED
DATE: AUGUST 13, 1997 BY: /S/ CRAIG GLICK
CRAIG GLICK
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND SECRETARY (DULY AUTHORIZED OFFICER AND
PRINCIPLE FINANCIAL OFFICER)
13
<PAGE> 14
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession*
(3) Articles of Incorporation and By-laws
3.1 Articles of Incorporation of the Registrant
3.2 By-laws of the Registrant
(4) Instruments defining rights of security holders, including indentures
4.1 Indenture between the Registrant and Chase Manhattan Bank
dated July 1, 1989 pertaining to the Registrant's 9% Debentures due
1999 (incorporated herein by reference to the Registrant's
Registration Statement on Form F-10 (Reg. No. 33- 30138)
4.2 Indenture between the Registrant and The Bank of New York
dated January 27, 1994 pertaining to the Registrant's 9- 1/4% Senior
Subordinated Debentures due 2004 (incorporated herein by reference to
the Registrant's Registration Statement on Form F-10 (Reg. No. 33-
73252)
4.3 Indenture between the Registrant and The Bank of New York
dated July 5, 1995 pertaining to the Registrant's 9-5/8% Senior
Subordinated Debentures due 2005 (incorporated herein by reference to
the Registrant's Registration Statement on Form F-10 (Reg. No.
33-93452)
4.4 Indenture between the Registrant and The Bank of New York
dated August 7, 1996 pertaining to the Registrant's 8.35% Senior Notes
due 2006 (incorporated herein by reference to the Registrant's
Registration Statement on Form F-10 (Reg. No. 333-5332)
4.5 Indenture between the Registrant and The Bank of New York
dated March 21, 1997 pertaining to the Registrant's 8- 1/4% Senior
Notes due 2017 (incorporated herein by reference to the Registrant's
Registration Statement on Form F-10 (Reg. No. 333-6608)
(10) Material Contracts
10.1 Pre-Merger Agreement dated July 27, 1997 between the
Registrant and Stampeder Exploration Ltd. (incorporated herein by
reference to the Registrant's Report on Form 6-K filed with the
Commission on August 6, 1997)
10.2 Loan Agreement dated July 18, 1997 between the Registrant and
the Lenders named in Schedule A thereto and the Bank of Montreal (as
agent for the Lenders)
10.3 Incentive Stock Option Plan (1994)
(11) Statement re computation of per share earnings*
<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
(15) Letter re unaudited interim financial information*
(18) Letter re change in accounting principals*
(22) Published report regarding matters submitted to vote of security
holders*
(23) Consents of experts and counsel*
(24) Power of attorney*
(27) Financial Data Schedule*
(99) Additional exhibits*
_________________________________
*Inapplicable to this filing
<PAGE> 1
<TABLE>
<S> <C> <C> <C>
Canada Business Loi regissant FORM 9 FORMULE 9
Corporations Act les societes ARTICLES OF AMALGAMATION STATUTS DE FUSION
par actions de (SECTION 185) (ARTICLE 185)
regime federal
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1. Name of amalgamated corporation.
Gulf Canada Resources Limited
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2. The place in Canada where the registered office is to be Lieu au Canada ou doit etre situe le siege social
situated
Calgary, Alberta
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3. The Classes and any maximum number of shares that the Categories et tout nombre maximal d'actions que la societe
corporation is authorized to issue est autorisse a emettre
The annexed Schedule A is incorporated herein.
- ------------------------------------------------------------------------------------------------------------------------------------
4. Restrictions, if any, on share transfers Restrictions sur le transfert des actions, s'il y a lieu
Not Applicable
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5. Number (or minimum and maximum number) of directors Nombre (ou nombre minimal et maximal) d'administrateurs
A minimum of 7 and a maximum of 25.
- ------------------------------------------------------------------------------------------------------------------------------------
6. Restrictions, if any on business the corporation may Limites imposees l'activite commerciale de la societe, s'il y
carry on a lieu
Not Applicable
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7. Other provisions, if any Autres dispositions s'il ya lieu
The annexed Schedule B is incorporated herein
- ------------------------------------------------------------------------------------------------------------------------------------
8. The amalgamation has been approved pursuant to La fusion a ete approuvee en accord avec l'articles ou le
that section or subsection of the Act which is paragraph de la Loi indique ci-apres
indicated
[ ] 183
[X] 184(1)
[ ] 183(2)
- ------------------------------------------------------------------------------------------------------------------------------------
9. Name of the amalgamating Corporation
corporations No. Title
No. de la Signature Date Titre
societe
- ------------------------------------------------------------------------------------------------------------------------------------
Gulf Canada Resources Limited 266753-3 /s/ C. S. GLICK Nov. 19, 1996 Senior Vice President
- ------------------------------------------------------------------------------------------------------------------------------------
Gulf Canada Frontier Exploration 326508-1 /s/ R. H. AVCHINLECK Nov. 19, 1996 President
Limited
- ------------------------------------------------------------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY - A L'USAGE DU MINISTERE SEULEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATION NO. - NO DE LA SOCIETE FILED - DEPOSEE
331675-1 November 26, 1996
</TABLE>
<PAGE> 2
EXHIBIT 3.1
THIS IS SCHEDULE A REFERRED TO IN THE
FOREGOING ARTICLES OF AMALGAMATION
THE CLASSES AND ANY MAXIMUM NUMBER OF
SHARES THAT THE CORPORATION IS AUTHORIZED TO ISSUE
The authorized share capital of Gulf Canada Resources
Limited/Resources Gulf Canada Limitee (the "Corporation") shall consist of:
(a) an unlimited number of preference shares designated as Senior
Preference Shares, issuable in series ("Senior Preference
Shares");
(b) an unlimited number of preference shares designated as Junior
Preference Shares, issuable in series ("Junior Preference
Shares"); and
(c) an unlimited number of ordinary shares ("ordinary shares");
which shares shall have attached thereto the rights, privileges, restrictions
and conditions set out below.
The first series of Senior Preference Shares shall be
designated as Fixed/Adjustable Rate Senior Preference Shares, Series 1 which,
in addition to the rights, privileges, restrictions and conditions attaching to
the Senior Preference Shares as a class, shall have attached thereto the
rights, privileges, restrictions and conditions set out in Appendix A annexed
hereto.
The second series of Senior Preference Shares shall be
designated as Cumulative Redeemable Auction Perpetual Senior Preference Shares,
Series 2 which, in addition to the rights, privileges, restrictions and
conditions attaching to the Senior
<PAGE> 3
-2-
Preference Shares as a class, shall have attached thereto the rights,
privileges, restrictions and conditions set out in Appendix B annexed hereto.
SENIOR PREFERENCE SHARES
The rights, privileges, restrictions and conditions attaching
to the Senior Preference Shares, as a class, are as follows:
1. DIRECTORS' AUTHORITY TO ISSUE IN ONE OR MORE SERIES.
1.1 The directors of the Corporation may issue the Senior
Preference Shares at any time and from time to time in one or more series.
Before any shares of a particular series are issued, the directors of the
Corporation shall fix the number of shares that will form such series and shall
determine, subject to the limitations set out in the articles, the designation,
rights, privileges, restrictions and conditions to be attached to the Senior
Preference Shares of such series, including, but without in any way limiting or
restricting the generality of the foregoing, the rate or rates, amount or
method or methods of calculation of preferential dividends thereon, whether
cumulative, non-cumulative or partially cumulative, and whether such rate(s),
amount or method of calculation shall be subject to change or adjustment in the
future, the currency or currencies of payment, the date or dates and place or
places of payment thereof and the date or dates from which such preferential
dividends shall accrue, the pre-emptive rights attached thereto (if any), the
consideration and the terms and conditions of any purchase for cancellation,
retraction or redemption rights (if any), the conversion or exchange rights
attached thereto (if any), the voting rights attached thereto (if any) and the
terms and conditions of any share purchase plan or sinking fund or other
provisions attaching
<PAGE> 4
-3-
thereto. Before the issue of the first shares of a series of Senior Preference
Shares, the directors shall send to the Director (as defined in the Canada
Business Corporations Act) articles of amendment in prescribed form containing
a description of such series including the designation, rights, privileges,
restrictions and conditions determined by the directors.
2. RANKING OF SENIOR PREFERENCE SHARES.
2.1 No rights, privileges, restrictions or conditions attaching to
a series of Senior Preference Shares shall confer upon a series a priority in
respect of dividends or return of capital over any other series of Senior
Preference Shares then outstanding.
2.2 The Senior Preference Shares shall be entitled to priority
over the Junior Preference Shares and the ordinary shares of the Corporation
and over any other shares of any other class of the Corporation ranking junior
to the Senior Preference Shares with respect to priority in the payment of
dividends and the return of capital and the distribution of assets in the event
of the liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or any other distribution of the assets of the
Corporation among its shareholders for the purpose of winding-up its affairs.
2.3 If any amount of cumulative dividends, whether or not
declared, or declared non-cumulative dividends or amounts payable on a return
of capital in the event of the liquidation, dissolution or winding-up of the
Corporation in respect of a series of Senior Preference Shares is not paid in
full, the Senior Preference Shares of all series shall participate rateably in
respect of all accumulated cumulative dividends, whether or not declared, and
all declared non-cumulative dividends in accordance with the sums that would
be payable on such shares if all such dividends were declared and paid in full,
and in respect of amounts payable on return of capital in the event of
liquidation, dissolution
<PAGE> 5
-4-
or winding-up of the Corporation in accordance with the sums that would be
payable on such repayment of capital if all sums so payable were paid in full;
provided, however, that in the event of there being insufficient assets to
satisfy in full all such claims as aforesaid, the claims of the holders of the
Senior Preference Shares with respect to amounts payable on return of capital
shall first be paid and satisfied and any assets remaining thereafter shall be
applied towards the payment and satisfaction of claims in respect of dividends.
2.4 The Senior Preference Shares of any series may also be given
such other preferences not inconsistent with sections 2.1 to 2.3 hereof over
the Junior Preference Shares and the ordinary shares and over any other shares
ranking junior to the Senior Preference Shares as may be determined in the case
of the rights of the Senior Preference Shares.
2.5 Subject to the rights, privileges, restrictions and conditions
attached to any particular series of Senior Preference Shares, in the event of
the liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or any other distribution of the assets of the
Corporation among its shareholders for the purpose of winding-up its affairs,
the holders of each series of Senior Preference Shares shall, before any amount
shall be paid to or any property or assets of the Corporation shall be
distributed among the holders of the Junior Preference Shares or the ordinary
shares of the Corporation or any other shares of the Corporation ranking junior
to the Senior Preference Shares, be entitled to receive
(i) an amount equal to the stated capital attributable to
each series of Senior Preference Shares,
respectively, together with, in the case of
<PAGE> 6
-5-
a series of Senior Preference Shares entitled to
cumulative dividends thereon, all unpaid accumulated
cumulative dividends, whether or not declared, (which
for such purposes shall be calculated as if such
cumulative dividends were accruing from day to day
for the period from the expiration of the last period
for which such cumulative dividends were paid up to
but excluding the date of distribution) and, in the
case of a series of Senior Preference Shares entitled
to non-cumulative dividends, all declared and unpaid
non-cumulative dividends thereon, and
(ii) if such liquidation, dissolution, winding-up or
distribution shall be voluntary, an additional
amount, if any, equal to any premium which would have
been payable on the redemption of any series of
Senior Preference Shares if such shares had been
called for redemption by the Corporation effective
the date of distribution and, if any series of Senior
Preference Shares could not be redeemed on such date,
then an additional amount equal to the greatest
premium, if any, which would have been payable on the
redemption of any other series of Senior Preference
Shares.
3. RESTRICTIONS ON DIVIDENDS AND REDEMPTIONS, ETC.
3.1 Except with the approval of the holders of the Senior
Preference Shares given in the manner described in section 6.1 below, no
dividends shall at any time be declared and paid or set apart for payment on
the Junior Preference Shares or the ordinary shares or any other shares of the
Corporation ranking junior to the Senior
<PAGE> 7
-6-
Preference Shares unless and until all dividends up to and including the
dividends payable for the last completed period for which such dividends shall
be payable on each series of Senior Preference Shares then issued and
outstanding shall have been declared and paid or set apart for payment; nor
shall the Corporation call for redemption, redeem, purchase for cancellation,
acquire for value or reduce or otherwise pay off any of the Senior Preference
Shares (less than the total amount then outstanding) or any Junior Preference
Shares or ordinary shares or any other shares of the Corporation ranking junior
to the Senior Preference Shares unless and until all dividends up to and
including the dividends payable for the last completed period for which such
dividends shall be payable on each series of the Senior Preference Shares then
issued and outstanding shall have been declared and paid or set apart for
payment.
4. VOTING RIGHTS.
4.1 Except as herein referred to or as otherwise provided by law
or in accordance with any voting rights which may from time to time be
attached to any series of Senior Preference Shares, the holders of the Senior
Preference Shares as a class shall not be entitled as such to receive notice
of, to attend or to vote at any meeting of the shareholders of the Corporation.
5. SPECIFIC MATTERS REQUIRING OR NOT REQUIRING APPROVAL.
5.1 Except as otherwise provided by law, the holders of the Senior
Preference Shares shall not be entitled to vote separately as a class in
respect of a proposed amendment to the articles to:
(a) increase or decrease any maximum number of authorized Senior
Preference Shares, or increase any maximum number of
authorized shares of a class
<PAGE> 8
-7-
having rights or privileges equal or superior to the Senior
Preference Shares;
(b) effect an exchange, reclassification or cancellation of all or
part of the Senior Preference Shares; or
(c) create a new class of shares equal or superior to the Senior
Preference Shares.
5.2 The provisions of sections 1.1 to 6.1, inclusive, may be
deleted, amended, modified or varied in whole or in part by a certificate of
amendment issued by the Director appointed under the Canada Business
Corporations Act, but only with the prior approval of the holders of the Senior
Preference Shares given as hereinafter specified in addition to any other
approval required by the Canada Business Corporations Act (as now enacted or
from time to time amended, varied or replaced).
6. APPROVAL OF THE HOLDERS OF
THE SENIOR PREFERENCE SHARES.
6.1 The approval of the holders of the Senior Preference Shares
with respect to the matters referred to in sections 3.1 and 5.2 may be given by
a majority of not less than two-thirds of the votes cast at a meeting of the
holders of the Senior Preference Shares duly called for that purpose and held
upon at least 21 days notice at which the holders of not less than 25 per cent
of the outstanding Senior Preference Shares are present or represented by
proxy. If at any such meeting the holders of a majority of the outstanding
Senior Preference Shares are not present or represented by proxy within
one-half hour after the time appointed for such meeting, then the meeting shall
be
<PAGE> 9
-8-
adjourned to such date being not less than 30 days later and at such time and
place as may be appointed by the chairman and not less than 21 days notice
shall be given of such adjourned meeting. At such adjourned meeting the holders
of the Senior Preference Shares present or represented by proxy may transact
the business for which the meeting was originally called and a resolution
passed thereat by a majority of not less than two-thirds of the votes cast at
such adjourned meeting shall constitute the approval of the holders of the
Senior Preference Shares referred to above. The formalities to be observed in
respect of the giving of notice of any such meeting or any adjourned meeting
and the conduct thereof shall be those from time to time prescribed by the
Canada Business Corporations Act (as now enacted or from time to time amended,
varied or replaced) and the by-laws of the Corporation with respect to meetings
of shareholders. On every poll taken at a meeting of holders of Senior
Preference Shares as a class, or at a joint meeting of the holders of two or
more series of Senior Preference Shares, each holder of Senior Preference
Shares entitled to vote thereat shall have one vote in respect of each $ 1.00
of the issue price of each Senior Preference Share held by him.
JUNIOR PREFERENCE SHARES
The rights, privileges, restrictions and conditions attaching to the Junior
Preference Shares, as a class, are as follows:
1. DIRECTORS' AUTHORITY TO ISSUE IN ONE OR MORE SERIES.
1.1 The directors of the Corporation may issue the Junior
Preference Shares at any time and from time to time in one or more series.
Before any shares of a particular series are issued, the directors of the
Corporation shall fix the number of
<PAGE> 10
-9-
shares that will form such series and shall determine, subject to the
limitations set out in the articles, the designation, rights, privileges,
restrictions and conditions to be attached to the Junior Preference Shares of
such series, including, but without in any way limiting or restricting the
generality of the foregoing, the rate or rates, amount or method or methods of
calculation of preferential dividends thereon, whether cumulative,
non-cumulative or partially cumulative, and whether such rate(s), amount or
method of calculation shall be subject to change or adjustment in the future,
the currency or currencies of payment, the date or dates and place or places of
payment thereof and the date or dates from which such preferential dividends
shall accrue, the pre-emptive rights attached thereto (if any), the
consideration and the terms and conditions of any purchase for cancellation,
retraction or redemption rights (if any), the conversion or exchange rights
attached thereto (if any), the voting rights attached thereto (if any) and the
terms and conditions of any share purchase plan or sinking fund or other
provisions attaching thereto. Before the issue of the first shares of a series
of Junior Preference Shares, the directors shall send to the Director (as
defined in the Canada Business Corporations Act) articles of amendment in
prescribed form containing a description of such series including the
designation, rights, privileges, restrictions and conditions determined by the
directors.
2. RANKING OF JUNIOR PREFERENCE SHARES.
2.1 No rights, privileges, restrictions or conditions attaching to
a series of Junior Preference Shares shall confer upon a series a priority in
respect of dividends or return of capital over any other series of Junior
Preference Shares then outstanding.
2.2 The Junior Preference Shares shall be entitled to priority
over the ordinary shares of the Corporation and over any other shares of any
other class of the
<PAGE> 11
-10-
Corporation ranking junior to the Junior Preference Shares with respect to
priority in the payment of dividends and the return of capital and the
distribution of assets in the event of the liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, or any other
distribution of the assets of the Corporation among its shareholders for the
purpose of winding-up its affairs.
2.3 If any amount of cumulative dividends, whether or not
declared, or declared non-cumulative dividends or amounts payable on a return
of capital in the event of the liquidation, dissolution or winding-up of the
Corporation in respect of a series of Junior Preference Shares is not paid in
full, the Junior Preference Shares of all series shall participate rateably in
respect of all accumulated cumulative dividends, whether or not declared, and
all declared non-cumulative dividends in accordance with the sums that would
be payable on such shares if all such dividends were declared and paid in full,
and in respect of amounts payable on return of capital in the event of
liquidation, dissolution or winding-up of the Corporation in accordance with
the sums that would be payable on such repayment of capital if all sums so
payable were paid in full; provided, however, that in the event of there being
insufficient assets to satisfy in full all such claims as aforesaid, the claims
of the holders of the Junior Preference Shares with respect to amounts payable
on return of capital shall first be paid and satisfied and any assets remaining
thereafter shall be applied towards the payment and satisfaction of claims in
respect of dividends.
2.4 The Junior Preference Shares of any series may also be given
such other preferences not inconsistent with sections 2.1 to 2.3 hereof over
the ordinary shares and
<PAGE> 12
-11-
over any other shares ranking junior to the Junior Preference Shares as may be
determined in the case of the rights of the Junior Preference Shares.
2.5 In the event of the liquidation, dissolution or winding-up of
the Corporation, whether voluntary or involuntary, or any other distribution of
the assets of the Corporation among its shareholders for the purpose of
winding-up its affairs, the holders of each series of Junior Preference Shares
shall, before any amount shall be paid to or any property or assets of the
Corporation shall be distributed among the holders of the ordinary shares of
the Corporation or any other shares of the Corporation ranking junior to the
Junior Preference Shares, be entitled to receive
(i) an amount equal to the stated capital attributable to
each series of Junior Preference Shares,
respectively, together with, in the case of a series
of Junior Preference Shares entitled to cumulative
dividends thereon, all unpaid accumulated cumulative
dividends, whether or not declared, (which for such
purposes shall be calculated as if such cumulative
dividends were accruing from day to day for the
period from the expiration of the last period for
which such cumulative dividends were paid up to but
excluding the date of distribution) and, in the case
of a series of Junior Preference Shares entitled to
non-cumulative dividends, all declared and unpaid
non-cumulative dividends thereon, and
(ii) if such liquidation, dissolution, winding-up or
distribution shall be voluntary, an additional
amount, if any, equal to any premium which would have
been payable on the redemption of any series of
Junior
<PAGE> 13
-12-
Preference Shares if such shares had been called for
redemption by the Corporation effective the date of
distribution and, if any series of Junior Preference
Shares could not be redeemed on such date, then an
additional amount equal to the greatest premium, if
any, which would have been payable on the redemption
of any other series of Junior Preference Shares.
3. RESTRICTIONS ON DIVIDENDS AND REDEMPTIONS, ETC.
3.1 Except with the approval of the holders of the Junior
Preference Shares given in the manner described in section 6.1 below, no
dividends shall at any time be declared and paid or set apart for payment on
the ordinary shares or any other shares of the Corporation ranking junior to
the Junior Preference Shares unless and until all dividends up to and including
the dividends payable for the last completed period for which such dividends
shall be payable on each series of Junior Preference Shares then issued and
outstanding shall have been declared and paid or set apart for payment; nor
shall the Corporation call for redemption, redeem, purchase for cancellation,
acquire for value or reduce or otherwise pay off any of the Junior Preference
Shares (less than the total amount then outstanding) or any ordinary shares or
any other shares of the Corporation ranking junior to the Junior Preference
Shares unless and until all dividends up to and including the dividends payable
for the last completed period for which such dividends shall be payable on each
series of the Junior Preference Shares then issued and outstanding shall have
been declared and paid or set apart for payment.
<PAGE> 14
-13-
4. VOTING RIGHTS.
4.1 Except as herein referred to or as otherwise provided by law
or in accordance with any voting rights which may from time to time be attached
to any series of Junior Preference Shares, the holders of the Junior Preference
Shares as a class shall not be entitled as such to receive notice of, to attend
or to vote at any meeting of the shareholders of the Corporation.
5. SPECIFIC MATTERS REQUIRING OR NOT REQUIRING APPROVAL.
5.1 Except as otherwise provided by law, the holders of the Junior
Preference Shares shall not be entitled to vote separately as a class in
respect of a proposed amendment to the articles to:
(a) increase or decrease any maximum number of authorized
Junior Preference Shares, or increase any maximum
number of authorized shares of a class having rights
or privileges equal or superior to the Junior
Preference Shares;
(b) effect an exchange, reclassification or cancellation
of all or part of the Junior Preference Shares; or
(c) create a new class of shares equal or superior to the
Junior Preference Shares.
5.2 The provisions of sections 1.1 to 6.1, inclusive, may be
deleted, amended, modified or varied in whole or in part by a certificate of
amendment issued by the Director appointed under the Canada Business
Corporations Act, but only with the prior approval of the holders of the Junior
Preference Shares given as hereinafter specified in
<PAGE> 15
-14-
addition to any other approval required by the Canada Business Corporations Act
(as now enacted or from time to time amended, varied or replaced).
6. APPROVAL OF THE HOLDERS OF
THE JUNIOR PREFERENCE SHARES.
6.1 The approval of the holders of the Junior Preference Shares with
respect to the matters referred to in sections 3.1 and 5.2 may be given by a
majority of not less than two-thirds of the votes cast at a meeting of the
holders of the Junior Preference Shares duly called for that purpose and held
upon at least 21 days notice at which the holders of not less than 25 per cent
of the outstanding Junior Preference Shares are present or represented by
proxy. If at any such meeting the holders of a majority of the outstanding
Junior Preference Shares are not present or represented by proxy within
one-half hour after the time appointed for such meeting, then the meeting shall
be adjourned to such date being not less than 30 days later and at such time
and place as may be appointed by the chairman and not less than 21 days notice
shall be given of such adjourned meeting. At such adjourned meeting the holders
of the Junior Preference Shares present or represented by proxy may transact
the business for which the meeting was originally called and a resolution
passed thereat by a majority of not less than two-thirds of the votes cast at
such adjourned meeting shall constitute the approval of the holders of the
Junior Preference Shares referred to above. The formalities to be observed in
respect of the giving of notice of any such meeting or any adjourned meeting
and the conduct thereof shall be those from time to time prescribed by the
Canada Business Corporations Act (as now enacted or from time to time amended,
varied or replaced) and the by-laws of the Corporation with respect to meetings
of shareholders.
<PAGE> 16
-15-
On every poll taken at a meeting of holders of Junior Preference Shares as a
class, or at a joint meeting of the holders of two or more series of Junior
Preference Shares, each holder of Junior Preference Shares entitled to vote
thereat shall have one vote in respect of each $1.00 of the issue price of each
Junior Preference Share held by him.
ORDINARY SHARES
The rights, privileges, restrictions and conditions' attaching to the ordinary
shares are as follows:
1. DIVIDENDS.
Subject to the prior rights of the holders of the Senior
Preference Shares and the Junior Preference Shares and to any other shares
ranking senior or on a parity to the ordinary shares with respect to the
payment of dividends, the holders of ordinary shares shall be entitled to
receive dividends and the Corporation shall pay dividends thereon as and when
declared by the board of directors of the Corporation out of assets properly
applicable to the payment of dividends, in such amount and in such form as the
board of directors may from time to time determine and all dividends which the
directors may declare on the ordinary shares shall be declared and paid in
equal amounts per share on all ordinary shares at the time outstanding.
2. DISSOLUTION.
2.1 In the event of the liquidation, dissolution or winding-up of
the Corporation, whether voluntary or involuntary, or any other distribution of
assets of the Corporation among its shareholders for the purpose of winding-up
its affairs, subject to the prior rights of the holders of the Senior
Preference Shares, the Junior Preference Shares or
<PAGE> 17
-16-
any other shares ranking senior to the ordinary shares with respect to the
distribution of assets upon liquidation, dissolution, or winding-up, the
holders of the ordinary shares shall be entitled to receive an amount of
one-tenth of $0.01 per share and thereafter shall be entitled to share the
remaining property and assets of the Corporation and to participate in any
distribution thereof with the holders of shares of any other class ranking on a
parity to the ordinary shares in any distribution thereof.
3. VOTING RIGHTS.
3.1 Except for meetings at which only holders of another specified
class or series of shares of the Corporation are entitled to vote separately as
a class or series, the holders of the ordinary shares shall be entitled to
receive notice of and to attend all meetings of the shareholders of the
Corporation and shall have one vote for each ordinary share held at all
meetings of the shareholders of the Corporation.
<PAGE> 18
THIS IS SCHEDULE B REFERRED TO IN THE FOREGOING ARTICLES OF AMALGAMATION.
The board of directors of the Corporation may, without
authorization of the shareholders of the Corporation, from time to time, in
such amounts and on such terms as it deems expedient:
(a) borrow money upon the credit of the Corporation;
(b) issue, reissue, sell or pledge debt obligations of the
Corporation;
(c) give a guarantee on behalf of the Corporation to secure
performance of an obligation of any person; and
(d) charge, mortgage, hypothecate, pledge or otherwise create a
security interest in all or any of the currently owned or
subsequently acquired real and personal, movable and
immovable, property of the Corporation, including book debts,
rights, powers, franchise and undertaking, to secure any
obligation of the Corporation.
For greater certainty the foregoing powers conferred on the
directors shall be deemed to include the powers conferred on a company by
Division VII of the Special Corporate Powers Act, being Chapter P-16 of the
Revised Statutes of Quebec, 1977 and every statutory provision that may be
substituted therefor or for any provision therein.
The board of directors may from time to time by resolution
delegate to a committee of directors or to one or more of the directors or
officers of the Corporation all or any of the powers hereby conferred upon the
board to such extent and in such manner as the board shall determine at the
time of each such delegation. Nothing in this section shall limit or restrict
the borrowing of money by the Corporation on bills of exchange or promissory
notes made, drawn, accepted or endorsed by or on behalf of the Corporation.
<PAGE> 19
APPENDIX A
GULF CANADA RESOURCES LIMITED/
RESSOURCES GULF CANADA LIMITEE
SENIOR PREFERENCE SHARES SERIES 1
The first series of Senior Preference Shares shall be
designated Fixed/Adjustable Rate Senior Preference Shares Series 1 (the "Series
1 Preference Shares"), shall consist of 171,007,335 Series I Preference Shares
and shall have attached thereto, in addition to the rights, privileges,
restrictions and conditions attached to the Senior Preference Shares as a
class, the rights, privileges, restrictions and conditions (the "Series 1
Provisions"):
ARTICLE 1
GENERAL
1.1 DEFINITIONS
Where used in these Series 1 Provisions, the following words
and phrases shall, unless there is something in the context otherwise
inconsistent therewith, have the following meanings, respectively:
(a) "Additional Preference Shares" has the meaning specified in
section 5.1;
(b) "Additional Preference Share Conversion Date" has the meaning
specified in section 5.1;
(c) "Additional Preference Share Conversion Notice" has the
meaning specified in section 5.1;
(d) "Adjustment Factor" for any Month means the percentage per
annum, positive or negative, based on the Calculated Trading
Price of the Series
<PAGE> 20
-2-
1 Preference Shares for the preceding Month, determined in
accordance with the following:
<TABLE>
<CAPTION>
If such the Adjustment
Calculated Trading Price is Factor shall be
--------------------------- ---------------
<S> <C>
101% of Redemption Price or more.............. -0.20%
100.75% of Redemption Price and less
than 101% of Redemption Price......... -0.15%
100.50% of Redemption Price and less
than 100.75% of Redemption Price...... -0.10%
100.25% of Redemption Price and less
than 100.50% of Redemption Price...... -0.05%
99.75% of Redemption Price and less
than 100.25% of Redemption Price...... Nil
99.50% of Redemption Price and less
than 99.75% of Redemption Price............... +0.05%
99.25% of Redemption Price and less
than 99.50% of Redemption Price............... +0.10%
99.00% of Redemption Price and less
than 99.25% of Redemption Price............... +0.15%
less than 99.00% of Redemption Price.......... +0.20%
</TABLE>
provided that if the Series 1 Preference Shares do not trade on the
Exchange during any Month, the Adjustment Factor for the following
Month shall be nil;
(e) "Adjustment Rate" for any Month (other than the Month ending
March 31, 1988) means the percentage per annum which is the
sum of the Adjustment Factor for such Month and the Adjustment
Rate for the immediately
<PAGE> 21
-3-
preceding Month and, for the Month ending March 31, 1988,
means the Adjustment Factor for such Month;
(f) "Annual Dividend Rate" for any Month means the rate per annum
(rounded to the nearest one-thousandth of one per cent)
determined by adding 65% of Prime for such Month to the
Adjustment Rate for such Month, provided that the Annual
Dividend Rate for any Month shall in no event be greater than
80% of Prime for such Month or be less than 50% of Prime for
such Month;
(g) "board of directors" means the board of directors of the
Corporation or, if duly constituted and empowered, the
executive committee of the board of directors of the
Corporation for the time being, and reference, without further
elaboration, to action by the directors means either action by
the directors of the Corporation as a board or action by the
said executive committee as such committee;
(h) "business day" means a day other than a Saturday, Sunday or
any other day treated as a holiday in the municipality in
Canada in which the Corporation's registered office is then
situated;
(i) "Calculated Trading Price" for any Month means:
(i) the aggregate of the Daily Adjusted Trading
Value for all Trading Days in such Month
divided by
(ii) the aggregate of the Daily Trading Volume for
all Trading Days in such Month;
<PAGE> 22
-4-
(j) "CBCA" means the Canada Business Corporations Act S.C.1974-75,
c.33, as amended, and as such statute may from time to time be
amended, varied, replaced or re-enacted;
(k) "Consolidation Date" has the meaning specified in section 4.1;
(l) "Consolidation Factor" has the meaning specified in section
4.1;
(m) "Daily Accrued Dividend Deduction" for any Trading Day means:
(i) the product obtained by multiplying the dividend
accrued on a Series 1 Preference Share in respect of
the Month in which the Trading Day falls by the
number of days elapsed from but excluding the day
prior to the Ex-Dividend Date immediately preceding
such Trading Day to and including such Trading Day
(or if such Trading Day is an Ex-Dividend Date by
one (1))
divided by
(ii) the number of days from and including such
Ex-Dividend Date to but excluding the following Ex-
Dividend Date;
(n) "Daily Adjusted Trading Value" for any Trading Day means:
(i) the aggregate dollar value of all trades of Series 1
Preference Shares on the Exchange occurring during
such Trading Day
less
(ii) the Daily Trading Volume for such Trading Day
multiplied by the Daily Accrued Dividend Deduction
for such Trading Day;
<PAGE> 23
-5-
(o) "Daily Trading Volume" for any Trading Day means the aggregate
number of Series 1 Preference Shares traded in all
transactions occurring during such Trading Day on the
Exchange;
(p) "Dividend Default" has the meaning specified in article 6;
(q) "Exchange" means The Toronto Stock Exchange or, if the board
of directors of the Corporation has determined that such
exchange is not the principal trading market for the Series 1
Preference Shares, then such other stock exchange in Canada or
the United States that the board of directors of the
Corporation shall determine to be the principal trading market
for the Series 1 Preference Shares and, should no alternative
exchange be available, then such other trading market as the
board of directors of the Corporation shall determine to be
the principal trading market for the Series 1 Preference
Shares;
(r) "Ex-Dividend Date" means:
(i) the Trading Day which, under the rules or normal
practices of the Exchange, is designated or
recognized as the ex-dividend date relative to any
dividend record date for the Series 1 Preference
Shares; or
(ii) if the board of directors of the Corporation fails to
declare a dividend in respect of a Month, the last
Trading Day in such Month;
(s) "herein", "hereto", "hereunder", "hereof", "hereby" and
similar expressions mean or refer to these Series I Provisions
and not to any particular Article, section, clause,
subdivision or portion hereof, and the expressions "Article"
<PAGE> 24
-6-
and section followed by a number or a letter mean and refer to
the specified Article or section hereof;
(t) "holder of Series I Preference Shares" means a person or, in
the case of joint holders, the persons, recorded on the
securities register of the Corporation as being the registered
holder or holders of one or more Series 1 Preference Shares;
(u) "Initial Dividend Period" means the period from and including
the date of issue of the Series 1 Preference Shares to and
including March 1, 1988;
(v) "Initial Dividend Rate" means 6% per annum;
(w) "Month" means a calendar month;
(x) "Prime" for a Month means the average (rounded to the nearest
one-thousandth of one per cent) of the Prime Rates in effect
on each day of such Month, provided that if "Prime" for any
Month cannot be determined, then "Prime" for such Month shall
be Prime for the immediately preceding Month that was
determinable;
(y) "Prime Rate" means the average of the prime commercial lending
rates of interest established and announced from time to time
by The Royal Bank of Canada and the Canadian Imperial Bank of
Commerce, or their respective successors, as the reference
rates of interest per annum to determine the interest rates
they will charge on Canadian dollar loans to their most
creditworthy customers in Canada, provided that if neither of
such banks has a Prime Rate in effect on any day in a Month,
the Prime Rate for that day will be 1.15% per annum plus the
average during such
<PAGE> 25
-7-
Month of the average yields at weekly tender on 91-day
Government of Canada Treasury Bills as reported by the Bank of
Canada;
(z) "Quarter" means during the period from and including June 2,
1986 to and including March 1, 1988, each of the four dividend
periods in a twelve month period (A) commencing on June 2 and
ending on September 1, (B) commencing on September 2 and
ending on December 1, (C) commencing on December 2 and ending
on March 1, and (D) commencing on March 2, and ending on June
1;
(aa) "Redemption Price" means:
(i) prior to the effective date of any consolidation of
the Series 1 Preference Shares pursuant to Article 4
hereof, $5.00, and
(ii) on or after the effective date of any such
consolidation of the Series 1 Preference Shares, the
product of $5.00 and the Consolidation Factor;
(ab) "Series 1 Preference Shares" means the Senior Preference
Shares Series 1 of the Corporation;
(ac) "Trading Day" means a day on which the Exchange is open for
trading; and
(ad) "transfer agent and registrar" means a corporation from time
to time appointed by the board of directors as the transfer
agent and registrar or one of the transfer agents and
registrars for the Series 1 Preference Shares and, in the
event that no such person is appointed, "transfer agent and
registrar" means the Corporation.
<PAGE> 26
-8-
1.2 GENDER, ETC.
Words importing only the singular number include the plural
and vice versa and words importing any gender include all genders.
1.3 CURRENCY
All monetary amounts referred, to herein shall be in lawful
money of Canada.
1.4 HEADINGS
The division of these Series 1 Provisions into Articles,
sections, clauses or other subdivisions and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation hereof.
1.5 BUSINESS DAY
In the event that any date upon which any dividends on the
Series 1 Preference Shares are payable by the Corporation, or upon or by which
any other action is required to be taken by the Corporation or any holder of
Series 1 Preference Shares hereunder, is not a business day, then such dividend
shall be payable or such other action shall be required to be taken on or by
the next succeeding day which is a business day.
<PAGE> 27
-9-
1.6 CANADA BUSINESS CORPORATIONS ACT
These Series 1 Provisions shall be governed by and are subject
to the applicable provisions of the CBCA and all other laws binding upon the
Corporation and, except as otherwise expressly provided herein, all terms used
herein which are defined in the CBCA shall have the respective meanings
ascribed thereto in the said Act.
ARTICLE 2
DIVIDENDS
2.1 PAYMENT OF DIVIDENDS
The holders of Series 1 Preference Shares shall be entitled to
receive, and the Corporation shall pay thereon, as and when declared by the
board of directors out of monies of the Corporation properly applicable to the
payment of dividends, cumulative preferential cash dividends payable in the
manner hereafter provided.
2.2 DIVIDENDS FOR THE INITIAL DIVIDEND PERIOD
(a) The dividends payable in respect of the Initial Dividend
Period shall be an amount per share determined in accordance
with clause 2.2(b) hereof and shall be payable quarterly on
the first day of September, December, March and June in each
year commencing June 1, 1986. The record date for the purposes
of determining holders of Series 1 Preference Shares entitled
to receive dividends for any Quarter shall be the last Trading
Day of such Quarter.
<PAGE> 28
-10-
(b) The dividends payable in respect of the Initial Dividend
Period shall be as follows: (a) during the period from and
including the date of issue of the Series 1 Preference Shares
to and including June 1, 1986, an amount per share equal to
the quotient obtained (rounded to the nearest one-tenth of one
cent) by dividing (i) the product obtained by multiplying the
Initial Dividend Rate by the Redemption Price in effect on the
record date for such dividend and by the number of days during
such period, by, (ii) 365, and (b) during each Quarter in the
Initial Dividend Period, an amount per share equal to
one-quarter of the product obtained by multiplying the Initial
Dividend Rate and the Redemption Price in effect on the record
date for the dividend payable for such Quarter.
2.3 DIVIDENDS AFTER THE INITIAL DIVIDEND PERIOD
The dividends payable after the expiration of the Initial
Dividend Period shall be payable monthly in respect of each Month in an amount
per share equal to the quotient obtained (rounded to the nearest one-tenth of
one cent) by dividing (i) the product obtained by multiplying the Annual
Dividend Rate in effect for such Month by the Redemption Price in effect on the
record date for the payment of the dividend for such Month, by (ii) 12, and
shall be payable in arrears on the 12th day (or if that day is not a Trading
Day, on the next succeeding Trading Day) of the following Month. The record
date for the purposes of determining holders of Series 1 Preference Shares
entitled to receive the dividend for any Month after the expiration of the
Initial Dividend Period shall be the last Trading Day of the Month.
<PAGE> 29
-11-
2.4 CUMULATION OF DIVIDENDS
If on any dividend payment date a dividend accrued to and
payable on such date is not paid in full on the Series I Preference Shares then
issued and outstanding, the dividend or the unpaid part thereof shall be paid
on a subsequent dividend payment date or dividend payment dates determined by
the board of directors on which the Corporation shall have sufficient monies
properly applicable to the payment of the same. The holders of Series 1
Preference Shares shall not be entitled to any dividends other than or in
excess of the preferential cumulative dividends provided for in this Article 2.
2.5 METHOD OF PAYMENT
Any dividends declared on the Series 1 Preference Shares shall
be paid by mailing by pre-paid first class mail, on or before the dividend
payment date, addressed to each holder of Series 1 Preference Shares at his
address as it appears on the books of the Corporation or, in the case of joint
holders, to the address of that one of the joint holders whose name stands
first in the books of the Corporation, a cheque for such dividends (less the
amount of any tax or other amounts required to be deducted or withheld by the
Corporation) payable to or to the order of such holder (or, in the case of
joint holders, payable to, and in the name of, all such holders, failing
written instructions from them to the contrary) in lawful money of Canada at
par at any branch in Canada of the Corporation's bankers for the time being.
Notwithstanding the foregoing, any dividend cheque may be delivered to a holder
of Series 1 Preference Shares at his address as aforesaid. The mailing or
delivery of any such cheque in the
<PAGE> 30
-12-
foregoing manner shall satisfy such dividends to the extent of the sum
represented by such cheque (plus the amount of any tax or other amounts
required to be deducted or withheld as aforesaid) unless such cheque is not
paid on presentation. Dividends which are represented by cheques which have not
been presented to the Corporation's bankers for payment or which otherwise
remain unclaimed for a period of six years from the date on which they were
declared to be payable shall be forfeited to the Corporation.
2.6 CALCULATION AND NOTICE OF DIVIDENDS
AFTER THE INITIAL DIVIDEND PERIOD
After the Initial Dividend Period, the Corporation shall as
promptly as practicable calculate the Adjustment Rate for each Month and give
notice thereof to all stock exchanges on which the Series I Preference Shares
are listed for trading, or if the Series I Preference Shares are not listed on
a stock exchange, to the Investment Dealers Association of Canada. The
Corporation shall use its best efforts to ensure that, so long as any Series 1
Preference Shares are outstanding, the Series 1 Preference Shares will be
listed and posted for trading on The Toronto Stock Exchange or, failing The
Toronto Stock Exchange, on another stock exchange in Canada.
<PAGE> 31
-13-
ARTICLE 3
REDEMPTION AT THE OPTION
OF THE CORPORATION; PURCHASE FOR CANCELLATION
3.1 REDEMPTION RIGHTS
The Corporation may, subject as hereinafter provided and
subject to any applicable restrictions imposed by law, upon giving notice as
hereinafter provided, redeem at any time or from time to time the whole or any
part of the then outstanding Series 1 Preference Shares on payment for each
share to be redeemed of an amount (referred to in this Article 3 as the
"Redemption Amount") equal to the Redemption Price in effect or to be in effect
at the date fixed for redemption together with all accrued and unpaid dividends
calculated to the date fixed for redemption (which for such purpose shall be
calculated as if such dividends were accruing from day to day for the period
from the expiration of the last period for which cumulative dividends have been
paid up to but excluding the date of such redemption).
3.2 METHOD OF REDEMPTION
In the case of redemption of Series 1 Preference Shares under
the provisions of this Article 3, the Corporation shall, not less than 30 days
before the date specified for redemption, send by pre-paid first class mail or
deliver to each person who at the date of mailing is a holder of Series 1
Preference Shares to be redeemed a notice in writing of the intention of the
Corporation to redeem such Series 1 Preference Shares. Such notice shall be
addressed to each such holder at his address as it appears on the books of the
Corporation or, in the event of the address of any such holder not so
<PAGE> 32
-14-
appearing then, to the last known address of such holder; provided, however,
that accidental failure to give any such notice to one or more of such holders
shall not affect the validity of such redemption, but, upon such failure or
omission being discovered, notice shall be given forthwith to such holder or
holders and such notice shall have the same force and effect as if given in due
time. Such notice shall set out the Redemption Amount, the date specified for
redemption, the place or places within Canada or the United States at which
holders of Series 1 Preference Shares may present and surrender such shares for
redemption and, if part only of the shares held by the person to whom it is
addressed is to be redeemed, the number thereof so to be redeemed.
3.3 PAYMENT OF REDEMPTION AMOUNT
On or after the date so specified for redemption, the
Corporation shall pay or cause to be paid to or to the order of the holders of
the Series 1 Preference Shares to be redeemed the Redemption Amount in respect
thereof on presentation and surrender at the registered office of the
Corporation or at any other place or places within Canada or the United States
designated in such notice of redemption, of the certificate or certificates
representing the Series 1 Preference Shares called for redemption. Payment in
respect of the Series 1 Preference Shares being redeemed shall be made by
cheque payable to the holder thereof in lawful money of Canada at par at any
branch of the Corporation's bankers for the time being. Subject to the
provisions of section 3.4, on and after the date specified for redemption in
the notice referred to in section 3.2, the Series 1 Preference Shares called
for redemption shall cease to be entitled to dividends or any other
participation in the assets of the Corporation and the
<PAGE> 33
-15-
holders thereof shall not be entitled to exercise any other rights as
shareholders in respect thereof unless payment of the Redemption Amount shall
not be made upon presentation and surrender of certificates in accordance with
the foregoing provisions, in which case the rights of the holders shall remain
unaffected.
3.4 DEPOSIT OF REDEMPTION AMOUNT
The Corporation shall have the right at any time on or after
the mailing or delivery of notice of its intention to redeem any Series 1
Preference Shares as aforesaid to deposit the Redemption Amount of the Series 1
Preference Shares so called for redemption, or of such of the said shares
represented by certificates which have not at the date of such deposit been
surrendered by the holders thereof in connection with such redemption, to a
special account in one or more specified Canadian chartered or United States
banks or trust company in Canada or United States, named in such notice of
redemption or in a subsequent notice to the holders of the Series 1 Preferences
Shares in respect of which the deposit is made, to be paid without interest to
or to the order of the respective holders of such Series 1 Preference Shares
called for redemption upon presentation and surrender to such bank(s) or trust
company(ies) of the certificates representing such shares. Upon such deposit
being made or upon the date specified for redemption in such notice, whichever
is the later, the Series 1 Preference Shares in respect of which such deposit
shall have been made shall be deemed to have been redeemed and all rights of
the holders thereof after such deposit or such redemption date, as the case may
be, shall be limited to receiving without interest their proportionate part
(less any tax required to be deducted or withheld therefrom) of the total
<PAGE> 34
-16-
Redemption Amount so deposited upon presentation and surrender of the
certificate or certificates representing the Series 1 Preference Shares
redeemed. Any interest allowed on any such deposit shall belong to the
Corporation.
3.5 UNCLAIMED REDEMPTION MONIES
Redemption monies that are represented by a cheque which has
not been presented to the Corporation's bankers for payment or that otherwise
remain unclaimed (including monies held on deposit in a special account as
provided for in section 3.4) for a period of six years from the date specified
for redemption shall be forfeited to the Corporation.
3.6 PARTIAL REDEMPTION
In case a part only of the Series 1 Preference Shares is at
any time to be redeemed, the shares so to be redeemed shall be selected by lot
or in such other manner as the board of directors of the Corporation in its
sole discretion may deem equitable. If a part only of the Series 1 Preference
Shares represented by any certificate shall be redeemed, a new certificate
representing the balance of such shares shall be issued to the holder thereof
at the expense of the Corporation upon presentation and surrender of the
first-mentioned certificate.
<PAGE> 35
-17-
3.7 PURCHASE FOR CANCELLATION
The Corporation may, subject to any restrictions imposed by
law, purchase at any time all or from time to time any number of the
outstanding Series 1 Preference Shares (a) by purchase through the facilities
of any stock exchange on which the Series 1 Preference Shares are listed or
otherwise in the open market (including purchases through or from an investment
dealer or firm holding membership on a stock exchange) or pursuant to tenders
received by the Corporation upon an invitation for tenders addressed to all
holders of the Series 1 Preference Shares, in either case at any price per
share or (b) in any other manner provided that the price does not exceed the
Redemption Price in effect on the date of purchase, together with all accrued
and unpaid dividends calculated to the date of purchase (which for such purpose
shall be calculated as if such dividends were accruing from day to day for the
period from the expiration of the last period for which cumulative dividends
have been paid up to but excluding the date of purchase), and costs of
purchase. If upon any invitation for tenders the Corporation receives tenders
for Series 1 Preference Shares at the same price in an aggregate number greater
than the number for which the Corporation is prepared to accept tenders, the
Series 1 Preference Shares to be purchased shall be selected from the Series 1
Preference Shares offered at such price as nearly as may be pro rata (to the
nearest 10 shares) according to the number of Series 1 Preference Shares
offered in each such tender, or in such manner as the board of directors of the
Corporation in its sole discretion shall by resolution determine.
<PAGE> 36
-18-
ARTICLE 4
CONSOLIDATION
4.1 RIGHT OF CONSOLIDATION
The Corporation may, at any time on or before March 1, 1988,
upon giving notice as hereinafter provided, consolidate the Series 1 Preference
Shares on the basis that five (5) (or an integral multiple of five (5) not
exceeding twenty (20)) Series 1 Preference Shares shall be consolidated into
one (1) Series 1 Preference Share. The number of Series 1 Preference Shares
that, as a result of any such consolidation, shall have been consolidated into
one (1) Series 1 Preference Share is herein referred to as the "Consolidation
Factor" and the Consolidation Factor shall initially be one (1). Subject to
giving notice as hereinafter provided, the Corporation may effect any such
consolidation by resolution of the board of directors, without any further or
other authorization of the holders of the Series 1 Preference Shares or the
holders of any other class of shares of the Corporation. The resolution of the
board of directors shall provide, inter alia, for the redesignation, if
required by a stock exchange on which the Series 1 Preference Shares are then
listed, of the Series 1 Preference Shares, the Consolidation Factor, the date
(the "Consolidation Date") upon which the consolidation shall become effective
and the giving of notice to the holders of Series 1 Preference Shares as
hereinafter provided. The consolidation of the Series 1 Preference Shares
shall, subject to giving notice as hereinafter provided, become effective on
the Consolidation Date without further formality.
<PAGE> 37
-19-
4.2 METHOD OF CONSOLIDATION
In the case of consolidation of Series 1 Preference Shares
under the provisions of this Article 4, the Corporation shall, not less than
thirty (30) days before the Consolidation Date, send by pre-paid first class
mail or deliver to each person who at the date of mailing is a holder of Series
1 Preference Shares a notice in writing of the intention of the Corporation to
consolidate the Series 1 Preference Shares. Such notice shall be addressed to
each such holder at his address as it appears on the books of the Corporation
or, in the event of the address of any such shareholder not so appearing then,
to the last known address of such shareholder; provided, however, that
accidental failure to give any such notice to one or more of such shareholders
shall not affect the validity of such consolidation. Such notice shall set out
the Consolidation Factor, as a result of such consolidation, the Consolidation
Date, the place or places within Canada or the United States at which holders
of Series 1 Preference Shares may present and surrender certificates
representing such Series 1 Preference Shares for new certificates representing
such shares on a post-consolidated basis and the new designation of such
Series 1 Preference Shares on a post-consolidated basis.
4.3 EXCHANGE OF SHARE CERTIFICATES
On or after the Consolidation Date, the holders of the Series
1 Preference Shares shall surrender the share certificates representing such
shares at the place or places so specified and receive in exchange therefor new
certificates representing such shares on a post-consolidated basis. On or after
the Consolidation Date, the share certificates representing the Series 1
Preference Shares prior thereto shall cease to
<PAGE> 38
-20-
represent such shares and shall represent only the right of the holder thereof
to receive new certificates in respect of such shares on a post-consolidated
basis.
4.4 FRACTIONAL SHARES
If a holder of Series 1 Preference Shares is entitled to less
than a whole share on a post-consolidated basis, the Corporation shall issue
to the transfer agent and registrar of the Series 1 Preference Shares, on
behalf of such holder, a scrip certificate in bearer form which shall only
entitle the holder thereof to receive a share certificate representing a whole
share on a post-consolidated basis in exchange for scrip certificates
aggregating a whole such share. A holder of such a scrip certificate will not
be entitled to exercise any voting rights or to receive any dividends or
distributions on or in respect of scrip certificates. The transfer agent and
registrar for the Series 1 Preference Shares shall exchange such scrip
certificates so issued to it for whole shares on a post-consolidated basis and
shall make reasonable efforts to sell, on behalf of the holders of such scrip
certificates, such whole shares on the Exchange or elsewhere in its discretion
and shall distribute any proceeds realized from such sale rateably to the
holders of such scrip certificates.
<PAGE> 39
-21-
ARTICLE 5
CONVERSION INTO ADDITIONAL PREFERENCE SHARES
5.1 CONVERSION PRIVILEGE
Upon and subject to the terms and conditions hereinafter set
forth, the holders of Series 1 Preference Shares shall have the right to
convert all or any part of their Series 1 Preference Shares into fully paid and
non-assessable shares of another class or series of preference shares of the
Corporation ("Additional Preference Shares") if the Corporation elects on or
after March 1, 1988 by giving notice (the "Additional Preference Share
Conversion Notice") on a dividend payment date to each holder of the Series 1
Preference Shares and to each stock exchange on which the Series 1 Preference
Shares are listed that it has created Additional Preference Shares into which
any or all of such Series 1 Preference Shares may, at the option of the holder,
be converted. The Corporation shall send the Additional Preference Share
Conversion Notice by pre-paid first class mail or deliver the same to each
person who at the date of mailing is a holder of Series 1 Preference Shares and
shall specify in the Additional Preference Share Conversion Notice (i) that the
holders of the Series 1 Preference Shares have the right to convert all or any
part of their Series 1 Preference Shares on the next succeeding dividend
payment date (the "Additional Preference Share Conversion Date") after the
giving of the Additional Preference Share Conversion Notice on a share for
share basis and (ii) a summary of the rights, privileges, restrictions and
conditions of the Additional Preference Shares into which the Series 1
Preference Shares may be converted.
<PAGE> 40
-22-
5.2 CONVERSION PROCEDURE
The conversion privilege provided upon giving of the
Additional Preference Share Conversion Notice may be exercised by a holder of
Series 1 Preference Shares by notice in writing given on or prior to the
Additional Preference Share Conversion Date to the transfer agent and registrar
for the Series 1 Preference Shares, accompanied by the certificate or
certificates representing Series 1 Preference Shares in respect of which the
holder thereof desires to exercise such right of conversion. Such notice shall
be signed by such holder or duly authorized attorney and shall specify the
number of Series 1 Preference Shares which the holder desires to have
converted. If less than all the Series 1 Preference Shares represented by a
certificate or certificates accompanying any such notice are to be converted,
the holder shall be entitled to receive, at the expense of the Corporation, a
new certificate representing the Series 1 Preference Shares represented in the
certificate or certificates surrendered as aforesaid which are not to be
converted. Any such notice given by a holder of Series 1 Preference Shares
exercising such conversion privilege shall be irrevocable.
5.3 SHARE CERTIFICATES ON CONVERSION
On any conversion of Series 1 Preference Shares pursuant to
this Article 5 the share certificates for Additional Preference Shares of the
Corporation resulting therefrom shall be issued in the name of the holder or
joint holders of the Series 1 Preference Shares converted as the same appears
on the books of the Corporation, or in such name or names as such holder or
joint holders may direct in writing (either in the notice referred to in
section 5.2 or otherwise), provided that such holder or joint
<PAGE> 41
-23-
holders shall pay any applicable security transfer taxes; in any such case the
transfer form on the back of the certificates in question shall be endorsed by
the holder or joint holders of the Series 1 Preference Shares or his duly
authorized attorney, with signature guaranteed in a manner satisfactory to the
transfer agent.
5.4 DATE OF CONVERSION
Subject as hereinafter provided in this section 5.4, the right
of a holder of Series 1 Preference Shares to convert the same into Additional
Preference Shares shall be deemed to have been exercised, and the holder or
joint holders of Series 1 Preference Shares to be converted (or any person or
persons in whose name or names any such holder or joint holders of Series 1
Preference Shares shall have directed certificates representing Additional
Preference Shares to be issued as provided in section 5.3) shall be deemed to
have become the holder or holders of Additional Preference Shares of record of
the Corporation for all purposes on the Additional Preference Share Conversion
Date, notwithstanding any delay in the delivery of certificates representing
the Additional Preference Shares into which such Series 1 Preference Shares
have been converted.
5.5 LEGAL OPINION
The right of the Corporation to elect to create Additional
Preference Shares into which any or all of such Series 1 Preference Shares may,
at the option of the holder, be converted into Additional Preference Shares is
subject to the Corporation receiving a legal opinion from its counsel dated the
date of the Additional Preference Share Conversion Notice that the Additional
Preference Shares into which the Series 1
<PAGE> 42
-24-
Preference Shares are to be converted will not be "term preferred shares"
within the meaning of that expression as defined in the Income Tax Act (Canada)
as the same may be amended from time to time.
5.6 RESTRICTION ON ISSUE OF
ADDITIONAL PREFERENCE SHARES
If the Corporation elects to create Additional Preference
Shares, it may issue such shares only if the Corporation:
(a) uses all reasonable efforts to qualify, if necessary, the
Additional Preference Shares for distribution to the public in
all provinces and territories of Canada and states in the
United States in which there are then holders of Series 1
Preference Shares or in which there is then a stock exchange
on which the Series 1 Preference Shares are listed; and
(b) uses all reasonable efforts to list the Additional Preference
Shares on each stock exchange on which the Series 1 Preference
Shares are then listed.
ARTICLE 6
VOTING RIGHTS
Except as otherwise provided herein or in the provisions
attaching to the Senior Preference Shares as a class, the holders of the Series
1 Preference Shares are not entitled as such to receive notice of, or to
attend, or to vote at, any meeting of the shareholders of the Corporation
unless the Corporation shall have failed to pay dividends
<PAGE> 43
-25-
on the Series 1 Preference Shares pursuant to section 2.2 and section 2.3 for a
period of 24 months, whether or not consecutive ("Dividend Default"). In the
event of a Dividend Default, and only for so long as any dividends on the Series
1 Preference Shares remain in arrears, the holders of the Series 1 Preference
Shares will be entitled to receive notice of, and to attend, meetings of
shareholders of the Corporation at which directors are to be elected and will
be entitled, voting separately as a class together with the holders of any
other series of Senior Preference Shares who have similar voting rights, to
elect two directors of the Corporation. In connection with the foregoing, the
holders of the Series 1 Preference Shares shall have one vote for each $1.00 of
the Redemption Price of a Series 1 Preference Share. Nothing herein contained
shall be deemed or construed to limit the ability of the Corporation from time
to time to increase or decrease the number of its directors.
In connection with any action to be taken by the Corporation
which requires the approval of the holders of Series 1 Preference Shares voting
as a series or as part of the class, each such share shall entitle the holder
thereof to one vote for each $1.00 of the Redemption Price of a Series 1
Preference Share.
ARTICLE 7
RESTRICTIONS ON DIVIDENDS AND
RETIREMENT AND ISSUE OF SHARES
Subject to any restrictions under applicable law, so long as
any of the Series 1 Preference Shares are outstanding, unless all dividends on
the Series 1 Preference Shares then outstanding and on all other shares of the
Corporation ranking as to
<PAGE> 44
-26-
dividends prior to or on a parity with the Series 1 Preference Shares accrued
up to and including the immediately preceding respective date or dates for the
payment of dividends thereon have been declared and paid or set apart for
payment, the Corporation will not, without the approval of the holders of the
Series 1 Preference Shares given as specified below:
(a) pay, declare or set apart for payment any dividends (other
than stock dividends in shares of the Corporation ranking
junior to the Series 1 Preference Shares) on shares ranking
junior to the Series 1 Preference Shares; or
(b) redeem, purchase or otherwise retire or make any capital
distribution on or in respect of any shares ranking junior to
the Series 1 Preference Shares (except out of the net cash
proceeds of a substantially concurrent issue of shares ranking
junior to the Series 1 Preference Shares); or
(c) redeem, purchase or otherwise retire less than all the Series
1 Preference Shares; or
(d) except pursuant to any purchase obligation, sinking fund,
retraction privilege or mandatory redemption provisions
attaching to any series of preferred shares from time to time
issued, redeem, purchase or otherwise retire for value any
shares ranking on a parity with or junior to the Series 1
Preference Shares; or
(e) issue any additional Series 1 Preference Shares or any shares
ranking prior to or on a parity with the Series 1 Preference
Shares with respect to the payment of dividends or the
distribution of assets in the event of the
<PAGE> 45
-27-
liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, or in the event of any other
distribution of assets of the Corporation amongst its
shareholders for the purpose of winding up its affairs.
Any approval of the holders of the Series 1 Preference Shares required
hereunder may be given by the affirmative vote of at least a majority of the
votes cast at a meeting, or adjourned meeting, of the holders of the Series 1
Preference Shares duly called and held for that purpose.
ARTICLE 8
STATED CAPITAL
The number of Series 1 Preference Shares which may be issued
shall be limited to the number of Series 1 Preference Shares issuable pursuant
to the Plan of Arrangement of the Corporation under section 185.1 of the CBCA
effective as of February 10, 1986. The stated capital of the issued and
outstanding Series 1 Preference Shares shall be 22% of the stated capital
attributable to the issued and outstanding common shares of Gulf Canada Limited
immediately prior to the Plan of Arrangement becoming effective under the CBCA,
and the stated capital of each Series 1 Preference Share, prior to any
consolidation thereof pursuant to Article 4 of these Series 1 Provisions, shall
be the stated capital attributable to the Series 1 Preference Shares as a
series, divided by the number of issued Series 1 Preference Shares.
<PAGE> 46
-28-
ARTICLE 9
RIGHTS ON LIQUIDATION
In the event of the liquidation, dissolution or winding up of
the Corporation or other distribution of the assets of the Corporation for the
purpose of winding-up its affairs, the holders of the Series 1 Preference
Shares shall be entitled to receive an amount equal to the Redemption Price in
effect on the record date established for any such distribution together with
all accrued and unpaid dividends calculated to the date of distribution (which
for such purpose shall be calculated as if such dividends were accruing from
day to day for the period from the expiration of the last period for which
cumulative dividends have been paid up to but excluding the date of
distribution), before any amount shall be paid to or any property and assets of
the Corporation distributed among the holders of the Junior Preference Shares,
the ordinary shares or any other shares of the Corporation ranking junior to
the Series 1 Preference Shares and, after payment thereof, the Series 1
Preference Shares shall not be entitled to share in any further distribution of
the assets of the Corporation.
<PAGE> 47
-29-
ARTICLE 10
MODIFICATION
The Series 1 Provisions (including this Article 10) may be
deleted, varied, modified, amended or amplified by articles of amendment but
only with the prior approval of the holders of Series 1 Preference Shares given
as hereinafter specified, in addition to any vote or authorization required by
the CBCA.
ARTICLE 11
APPROVAL OF MODIFICATION
Except as otherwise expressly provided herein, the approval of
the holders of the Series 1 Preference Shares with respect to any modification
of the Series 1 Provisions pursuant to Article 10 or with respect to any and
all other matters referred to herein (in addition to and distinct from any vote
or authorization required by the CBCA and any authorization required by section
170 thereof (or any other statutory provision of like or similar effect, from
time to time in force)) may be given by resolution passed by the affirmative
vote of at least two-thirds of the votes cast by holders of Series 1 Preference
Shares who voted in respect of that resolution at a meeting of holders of the
Series 1 Preference Shares duly called for that purpose at which a majority of
the outstanding Series 1 Preference Shares are present or represented by proxy.
If at any such meeting the holders of a majority of the outstanding Series 1
Preference Shares are not present or represented by proxy within one-half hour
after the
<PAGE> 48
-30-
time appointed for such meeting, then the meeting shall be adjourned to such
date being not less than 30 days later and at such time and place as may be
appointed by the chairman and not less than 21 days notice shall be given of
such adjourned meeting. At such adjourned meeting the holders of the Series 1
Preference Shares present or represented by proxy may transact the business for
which the meeting was originally called and a resolution passed thereat by not
less than two-thirds of the votes cast at such adjourned meeting shall
constitute the approval of the holders of the Series 1 Preference Shares
referred to above. The formalities to be observed in respect of the giving of
notice of any such meeting or any adjourned meeting and the conduct thereof
shall be those from time to time prescribed by the CBCA and the by-laws of the
Corporation with respect to meetings of shareholders.
<PAGE> 49
APPENDIX B
GULF CANADA RESOURCES LIMITED/
RESSOURCES GULF CANADA LIMITEE
CUMULATIVE REDEEMABLE AUCTION
PERPETUAL SENIOR PREFERENCE SHARES, SERIES 2
I N D E X
<TABLE>
<CAPTION>
Page No.
--------
<C> <C>
PART I
1. Interpretation and Application................................. 1
2. Notices........................................................ 10
3. Amendment...................................................... 11
4. Approval of Holders of Series 2 Preference Shares.............. 11
5. Tax Election................................................... 12
PART II
1. Payment of Dividends........................................... 12
2. Amount of Dividends............................................ 13
3. Cumulative Dividends........................................... 15
4. Redemption at the Option of the Corporation.................... 15
5. Manner of Redemption........................................... 15
6. Purchase for Cancellation...................................... 16
7. Restriction on Dividends and Retirement and Issue of Shares.... 17
8. Liquidation, Dissolution or Winding-Up......................... 18
9. Information and Voting Rights.................................. 18
III. PART III
CORPORATION DETERMINED RATE PROCEDURES
1. Determination of New Dividend Rate............................. 19
2. Acceptance of Corporation Determined Dividend Rate............. 20
3. Termination of Application..................................... 20
4. Miscellaneous.................................................. 21
</TABLE>
<PAGE> 50
- ii -
<TABLE>
<C> <C>
IV. PART IV
DEALER BIDS PROCEDURES
1. Bids by Dealers.............................................. 21
2. Termination of Application................................... 25
3. Miscellaneous................................................ 25
V. PART V
AUCTION PROCEDURES
1. Orders by Existing Holders and Potential Holders............. 26
2. Submission of Orders by Dealers to the Auction Manager....... 28
3. Determination of Sufficient Clearing Bids,
Winning Bid Rate and Current Dividend Rate................... 30
4. Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocation of Shares......................... 32
5. Miscellaneous................................................ 35
</TABLE>
<PAGE> 51
GULF CANADA RESOURCES LIMITED
SENIOR PREFERENCE SHARES, SERIES 2
The second series of Senior Preference Shares shall consist of
300 shares designated "Cumulative Redeemable Auction Perpetual Senior
Preference Shares, Series 2" (the "series 2 Preference Shares") and, in
addition to the rights, privileges, restrictions and conditions attaching to
the Senior Preference Shares as a class, shall have attached thereto the
following rights, privileges, restrictions and conditions:
I. PART I
1. INTERPRETATION AND APPLICATION
(a) For the purposes hereof, including Parts II, III, IV and V hereof,
the following expressions have the following meanings:
"ACT" shall mean the Canada Business Corporations Act, as now enacted
or from time to time amended, varied or replaced;
"AUCTION" shall mean the periodic operation of the Auction
Procedures;
"AUCTION DATE" shall mean the second Tuesday of each calendar month
of each Auction Dividend Period included within an Auction Term or,
if such Tuesday is not a Business Day, the next preceding Business
Day;
"AUCTION DIVIDEND PAYMENT DATE" shall mean, in respect of each
Auction Dividend Period, the second Business Day following the end of
the Auction Dividend Period;
"AUCTION DIVIDEND PERIOD" shall mean, with respect to the first
Auction Dividend Period of any Auction Term, the period from and
including the immediately preceding Dividend Payment Date to and
including the first Auction Date and, with respect to any subsequent
Auction Dividend Period of such Auction Term, shall mean the period
from but excluding each Auction Date to and including the next
succeeding Auction Date; for greater certainty, the first Auction
Dividend Period of an Auction Term shall commence on the day
immediately following the last day of the Initial Three Year Term and
on the day immediately following the last day of each Corporation
Determined Term and each Dealer Determined Term unless the provisions
of Parts III or IV hereof shall have been implemented prior to such
day so as to result in a Corporation Determined Term or Dealer
Determined Term commencing on such day;
"AUCTION MANAGER" shall mean the trust corporation duly appointed
from time to time by the Corporation as Auction Manager in respect of
the Series 2 Preference Shares pursuant to the Auction Manager
Agreement;
<PAGE> 52
- 2 -
"AUCTION MANAGER AGREEMENT" shall mean an agreement made between the
Auction Manager and the Corporation which provides, among other
things, that the Auction Manager will follow the Auction Procedures
for the purposes of determining the Current Dividend Rate for the
Series 2 Preference Shares;
"AUCTION PROCEDURES" shall mean the procedures set forth in Part V
hereof for determining the applicable dividend rate for the Series
2 Preference Shares from time to time during an Auction Term;
"AUCTION TERM" shall mean any term of not less than two consecutive
Auction Dividend Periods with respect to which the Auction Procedures
apply commencing on the first day of the first of such Auction
Dividend Periods and terminating on the last day of any subsequent
Auction Dividend Period which immediately precedes the beginning of a
Corporation Determined Term or a Dealer Determined Term, as the case
may be;
"AVAILABLE SHARES" shall have the meaning specified in paragraph (i)
of section V.3.(a) hereof;
"AVERAGE DAILY PRIME RATE" shall mean, for any day, the arithmetic
average, rounded to the nearest one-hundredth of one percent (0.01%),
of the Daily Prime Rates of the Banks on such day; provided that if
on such day there shall be no Daily Prime Rate for one or more of the
Banks, the Average Daily Prime Rate for such day shall be the average
of the Daily Prime Rates of the other Bank or Banks as the case may
be; and further provided that if on such day there shall be no Daily
Prime Rate for any of the Banks, the Average Daily Prime Rate for
such day shall be 1.5% above the average yield per annum on 91-day
Government of Canada Treasury bills as reported by the Bank of Canada
for the most recent weekly tender preceding such day;
"AVERAGE PRIME RATE" shall mean, for any period consisting, of more
than one day, the arithmetic average, rounded to the nearest
one-hundredth of one percent (0.01%), of the Average Daily Prime Rate
for each day during such period;
"BANKERS' ACCEPTANCE RATE", for any day, shall mean the average bid
rate for one-month Canadian dollar bankers' acceptances which appears
on the Reuters Screen as of 10:00 a.m., Toronto time, on that day;
provided that if such rate does not appear on the Reuters Screen, the
rate on that day shall be determined on the basis of the average
quoted bid rates of the Banks for one-month Canadian dollar bankers'
acceptances for settlement on that day quoted by the Banks as of
10:00 a.m., Toronto time, on that day; provided further that if the
duration of a Dividend Period for which
<PAGE> 53
- 3 -
a Corporation Determined Dividend Rate or Dealer Determined Dividend
Rate which is referenced to a Bankers' Acceptance Rate is two
calendar months or longer, then the references in this definition to
one-month Canadian dollar bankers' acceptances shall be read as
references to Canadian dollar bankers' acceptances having a term
substantially the same as the number of whole calendar months within
such Dividend Period;
"BANKS" shall mean Canadian Imperial Bank of Commerce, The Royal Bank
of Canada, The Toronto-Dominion Bank, Bank of Montreal and The Bank
of Nova Scotia and the term "BANK" shall mean one of the Banks and,
for the purposes of this definition, "BANKS" shall include any bank
with which one or more of such Banks may merge and any bank which may
become a successor to the business of one of such Banks;
"BID" and "BIDS" shall have the respective meanings specified in
section V.1.(a) hereof;
"BIDDER" and "BIDDERS" shall have the respective meanings specified
in section V.1.(a) hereof;
"BUSINESS DAY" shall mean a day on which the Banks are open for
business in Toronto and which is not a Saturday or a Sunday and, for
the purposes of Parts IV and V, a day on which The Toronto Stock
Exchange or any successor stock exchange is open for business;
"CORPORATION DETERMINED DIVIDEND RATE" shall mean the annual dividend
rate specified by the Corporation in its notice pursuant to section
III.1. hereof, which annual dividend rate shall be one of:
(i) the Corporation Determined Percentage of the Average Prime Rate
determined for each Dividend Payment Date immediately following
the Dividend Period for which such determination is being made
based on the Average Prime Rate for the calendar month ending on
the last day of the calendar month prior to the calendar month
during which the Dividend Payment Date for which the
determination is being made falls; provided, however, that if
the duration of the relevant Dividend Period is two calendar
months or longer, then such determination shall be made based on
the Average Prime Rate for that number of calendar months which
is equal to the number of whole calendar months in such Dividend
Period and ending on the last day of the calendar month prior to
the calendar month during which the Dividend Payment Date for
which the determination is being made falls;
<PAGE> 54
- 4 -
(ii) the Corporation Determined Percentage of the Bankers' Acceptance
Rate determined on the first Business Day of the Dividend Period
for which such determination is being made; or
(iii) a fixed annual percentage rate;
"CORPORATION DETERMINED PERCENTAGE" shall mean a percentage of the
Average Prime Rate or of the Bankers' Acceptance Rate to be selected
by the Corporation and set forth in the notice referred to in section
III.1. hereof;
"CORPORATION DETERMINED TERM" shall mean a term selected by the
Corporation consisting of one or more consecutive Dividend Periods,
commencing on or after April 30, 1992, the first day of which shall
be either (i) a Dividend Payment Date, or (ii) in the case of a
Corporation Determined Term which immediately follows an Auction
Term, the day immediately following the last day of the Auction
Dividend Period, and the last day of which shall be the last day of
the last Dividend Period selected by the Corporation, to which the
provisions of Part III hereof shall apply for the purpose of
determining the dividend to be paid on each Dividend Payment Date
relating to each Dividend Period within such term, provided that such
term and the dividend rate applicable thereto have been approved by
the holders of Series 2 Preference Shares in accordance with section
III.2. hereof;
"CURRENT DIVIDEND RATE" shall be the rate per annum which has been
determined in accordance with section V.3.(b) hereof for the next
succeeding Auction Dividend Period;
"DAILY PRIME RATE" shall mean, for any Bank, on any day, the annual
rate of interest quoted or published by such Bank as its prime rate
in effect on such day;
"DEALER" shall mean any registered investment dealer or other person
permitted by law (i) for the purposes of Part IV, to perform the
functions required of a Dealer in Part IV or (ii) for the purposes of
Part V, to perform the functions required of a Dealer in Part V and
who has entered into a Dealer Agreement with the Auction Manager that
remains effective;
"DEALER AGREEMENT" shall mean an agreement between the Auction
Manager and a Dealer pursuant to which the Dealer agrees to
participate in Auctions in compliance with the procedures set forth
in Part V;
<PAGE> 55
- 5 -
"DEALER DETERMINED DIVIDEND RATE" shall mean the annual dividend rate
specified by the Dealer in the Accepted Dealer Offer referred to in
section IV.l. (c) hereof which shall be one of;
(i) the Dealer Determined Percentage of the Average Prime Rate
determined for each Dividend Payment Date immediately following
the Dividend Period for which such determination is being made
based on the Average Prime Rate for the calendar month ending on
the last day of the calendar month prior to the calendar month
during which the Dividend Payment Date for which the
determination is being made falls; provided, however, that if
the duration of the relevant Dividend Period is two calendar
months or longer, then such determination shall be made based on
the Average Prime Rate for that number of calendar months which
is equal to the number of whole calendar months in such Dividend
Period and ending on the last day of the calendar month prior to
the calendar month during which the Dividend Payment Date for
which the determination is being made falls;
(ii) the Dealer Determined Percentage of the Bankers' Acceptance Rate
determined on the first Business Day of the Dividend Period for
which such determination is being made; or
(iii) a fixed annual percentage rate;
"DEALER DETERMINED PERCENTAGE" shall mean a percentage of the Average
Prime Rate or the Bankers' Acceptance Rate to be selected by each
Dealer and to be set forth in each Dealer Offer in accordance with
section IV.1.(b) hereof;
"DEALER DETERMINED TERM" shall mean a term selected by a Dealer
consisting of one or more consecutive Dividend Periods, commencing on
or after April 30, 1992, the first day of which shall be either (i) a
Dividend Payment Date, or (ii) in the case of a Dealer Determined
Term which immediately follows an Auction Term, the day immediately
following the last day of the Auction Dividend Period, and the last
day of which shall be the last day of the last Dividend Period
selected by such Dealer, to which the provisions of Part IV hereof
shall apply for the purpose of determining the dividend to be paid on
each Dividend Payment Date relating to each Dividend Period within
such term;
"DEALER OFFER" shall mean a written irrevocable and unconditional
offer from a Dealer in response to a Notice Requesting Bids to
purchase all of the Series 2 Preference Shares outstanding on the
last day of the Initial Three Year Term or the current Corporation
Determined Term or Dealer Determined Term or on the Settlement Date
immediately following the end
<PAGE> 56
- 6 -
of the current Auction Dividend Period, as the case may be, at a
purchase price per Series 2 Preference Share equal to $500,000 and
containing the information specified in section IV.1.(b) hereof;
"DEALER RESPONSE DATE" shall have the meaning ascribed thereto in
section IV.l. (a) hereof;
"DIVIDEND PAYMENT DATE" shall mean the last day of each calendar
month in each year commencing April 30, 1989; provided, however, that
during a Corporation Determined Term or a Dealer Determined Term
"DIVIDEND PAYMENT DATE" shall mean the last day of the last calendar
month of each Dividend Period proposed by the Corporation pursuant to
the provisions of section III.1. or specified in an Accepted Dealer
Offer pursuant to the provisions of sections IV.1.(b) and (c);
"DIVIDEND PERIOD" shall mean the period from and including the date
of issue of the Series 2 Preference Shares to but excluding the first
Dividend Payment Date and, thereafter, the period from and including
each Dividend Payment Date to but excluding the next succeeding
Dividend Payment Date except for the first Dividend Period following
an Auction Term in which case "DIVIDEND PERIOD" shall mean the period
from and including the day immediately following the end of the
Auction Term to but excluding the next succeeding Dividend Payment
Date which falls at least one calendar month after the said day;
"EXISTING HOLDER" shall mean a holder of Series 2 Preference Shares
(i) who has signed a Purchaser's Letter, (ii) who has delivered or
caused to be delivered such Purchaser's Letter to the Auction Manager
and to any Dealer to which such Existing Holder submits information
pursuant to section V.1.(a) hereof, and (iii) who is registered in
the ledger maintained by the Auction Manager in respect of holders of
Series 2 Preference Shares;
"HELD BY" with respect to any Series 2 Preference Shares registered
in the name of the Auction Manager shall include such shares
beneficially owned by an Existing Holder but does not include, with
respect to such shares, the Auction Manager;
"HEREOF" and similar expressions mean or refer to the provisions
relating to the Series 2 Preference Shares;
"HOLD ORDER" and "HOLD ORDERS" shall have the respective meanings
specified in section V.1.(a) hereof;
<PAGE> 57
- 7 -
"INITIAL THREE YEAR TERM" shall mean the period from and including
the date of issue of the Series 2 Preference Shares to but excluding
April 30, 1992;
"MAXIMUM RATE" with respect to any Auction Dividend Period shall mean
the Bankers' Acceptance Rate determined on the Auction Date
immediately preceding the beginning of such Auction Dividend Period
plus 0.40%;
"NOTICE REQUESTING BIDS" shall mean a notice from the Corporation to
one or more Dealers requesting them to submit Dealer Offers as
provided for in section IV.1.(a) hereof;
"NOTIFICATION TO HOLDERS" shall mean the notification from the
Corporation to holders of Series 2 Preference Shares of the
acceptance of a Dealer Offer as provided for in section IV.l. (d)
hereof;
"ORDER" and "ORDERS" shall have the respective meanings specified in
section V.l. (a) hereof;
"POTENTIAL HOLDER" shall mean any person, including any Existing
Holder, (i) who has executed a Purchaser's Letter, (ii) who has
delivered or caused to be delivered such Purchaser's Letter to the
Auction Manager and to any Dealer to which such Potential Holder
submits information pursuant to section V.l. (a) hereof and (iii) who
has submitted an order to acquire Series 2 Preference Shares in an
Auction;
"PURCHASER'S LETTER" shall mean a letter addressed to the Auction
Manager and a Dealer in which a person agrees, among other things, to
be bound by the Auction Procedures in the event such person
participates in an Auction-
"REDEMPTION DATE" shall have the meaning specified in section II.5
hereof.;
"REDEMPTION PRICE" shall have the meaning specified in section II.4
hereof.;
"REMAINING SHARES" shall have the meaning specified in paragraph
(iv) of section V.4.(a) hereof;
"REUTERS SCREEN" means the display designated as page "CDOR" on the
Reuter Monitor Money Rates Service (or such other page as may replace
the CDOR page on that service) for the purpose of displaying Canadian
dollar bankers' acceptance rates and Government of Canada Treasury
bill rates;
<PAGE> 58
- 8 -
"SELL ORDER" and "SELL ORDERS" shall have the respective meanings
specified in section V.1.(a) hereof;
"SETTLEMENT DATE" shall mean the first Business Day following an
Auction Date;
"SUBMISSION DEADLINE" shall mean 11:00 a.m., Toronto time, on any
Auction Date or such later time on any Auction Date, as specified by
the Auction Manager from time to time, by which Dealers are required
to submit Orders to the Auction Manager;
"SUBMITTED BID" and "SUBMITTED BIDS" shall have the respective
meanings specified in section V.3.(a) hereof;
"SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS" shall have the
respective meanings specified in section V.3.(a) hereof;
"SUBMITTED ORDER" and "SUBMITTED ORDERS" shall have the respective
meanings specified in section V.3.(a) hereof;
"SUBMITTED SELL ORDER" and "SUBMITTED SELL ORDERS" shall have the
respective meanings specified in section V.3.(a) hereof;
"SUFFICIENT CLEARING BIDS" shall have the meaning specified in
section V.3.(a) hereof; and
"WINNING BID RATE" shall mean the dividend rate per annum determined
in accordance with section V.3.(a) hereof.
(b) In the event that any date on which any dividend on the Series 2
Preference Shares is payable, or on or by which any other action is
required to be taken hereunder or in connection herewith, is not a
Business Day, then such dividend shall be payable, or such other
action shall be required to be taken, on or by the next succeeding
day that is a Business Day.
(c) In the event of the non-receipt of a cheque by a holder of Series 2
Preference Shares entitled to such cheque, or the loss or destruction
thereof, the Corporation, upon being furnished with reasonable
evidence of such non-receipt, loss or destruction, and an indemnity
reasonably satisfactory to the Corporation, shall issue to such
holder a replacement cheque for the amount of such cheque.
(d) The provisions of Part III hereof with respect to the fixing of a
Corporation Determined Dividend Rate for a Corporation Determined
Term may be initiated by the Corporation no earlier than 60 days and
no later than 45
<PAGE> 59
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days prior to the end of the Initial Three Year Term and, thereafter,
may be used by the Corporation from time to time during any
Corporation Determined Term, Dealer Determined Term or Auction
Dividend Period (other than during the first Auction Dividend Period
within an Auction Term), as the case may be, provided that in such
circumstances such provisions are initiated no earlier than 25 days
and no later than 20 days prior to the end of the current Corporation
Determined Term or Dealer Determined Term or Auction Dividend Period,
as the case may be.
(e) The provisions of Part IV hereof with respect to the solicitation of
Dealer Offers for the purpose of fixing a Dealer Determined Dividend
Rate for a Dealer Determined Term may be initiated by the Corporation
no earlier than 30 days and no later than 25 days prior to the end of
the Initial Three Year Term and, thereafter, may be used by the
Corporation from time to time during any Corporation Determined Term,
Dealer Determined Term or Auction Dividend Period (other than during
the first Auction Dividend Period within an Auction Term), as the
case may be, provided that in such circumstances such provisions are
initiated no earlier than 13 days and no later than 10 days prior to
the expiry of the current Corporation Determined Term or Dealer
Determined Term or Auction Dividend Period, as the case may be.
(f) The provisions of Part V hereof shall apply following the end of the
Initial Three Year Term and following the end of any Corporation
Determined Term, Dealer Determined Term or Auction Dividend Period, as
the case may be, unless at any such time a Corporation Determined
Dividend Rate is in effect in accordance with the provisions of Part
III hereof or a Dealer Determined Dividend Rate is in effect in
accordance with the provisions of Part IV hereof.
(g) For the purposes hereof, including Parts II, III, IV and V hereof,
"accrued and unpaid dividends" means the aggregate of (i) all unpaid
dividends on the Series 2 Preference Shares in respect of any
Dividend Payment Date for any completed Dividend Period and in
respect of any Auction Dividend Payment Date for any completed
Auction Dividend Period and (ii) the amount calculated as though
dividends on each Series 2 Preference Share had been accruing on a
day to day basis in a manner consistent with section II.2. hereof
from and including the day immediately following the last day of the
most recently completed Dividend Period or Auction Dividend Period,
as the case may be, to but excluding the date on which the
computation of accrued dividends is to be made; provided that, for
the purpose of calculating accrued and unpaid dividends payable on
(x) the Redemption Date in the event notice of redemption of the
Series 2 Preference Shares has been given pursuant to the provisions
of section II.5., (y) the purchase date in the case of any purchase
of Series 2 Preference Shares made under section II.6. or (z) the
relevant date for the
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purposes of section II.8., the Average Prime Rate, if applicable to
the calculation of the Corporation Determined Dividend Rate for a
Corporation Determined Term or to the calculation of the Dealer
Determined Dividend Rate for a Dealer Determined Term, shall be
determined based on the period of 30 days ending on a day not more
than 15 days prior to the Redemption Date or purchase date and set
out in the applicable notice of redemption or invitation for tenders
(as the case may be) or ending on the relevant date for the purposes
of section II.8., as the case may be.
(h) The index and the headings of the various sections hereof are for
convenience of reference only and shall not affect the interpretation
of any of the provisions hereof.
2. NOTICES
(a) Any notice or other communication from the Corporation provided for
herein, including without limitation any notice of redemption, shall
be in writing and shall be sufficiently given if delivered or if sent
by ordinary unregistered first class prepaid mail to the holders of
Series 2 Preference Shares at their respective addresses appearing on
the securities register of the Corporation or, in the event of the
address of any such holder not so appearing, then at the last address
of such holder known to the Corporation, or if given to such holders
by telex, telecopier or other electronic means of communication.
Notwithstanding the foregoing, any notice given under Parts III, IV or
V hereof shall be given by telex, telecopier or other electronic
means of communication, if possible. Accidental failure to give any
notices or other communications to one or more holders of Series 2
Preference Shares shall not affect the validity of the notices or
other communications properly given or any action, including the
redemption of all or any part of the Series 2 Preference Shares,
taken pursuant to such properly given notices or other communications
but, upon such failure being discovered, the notice or other
communication, as the case may be, shall be sent forthwith to such
holder or holders and shall have the same force and effect as if
given in due time.
(b) If the Corporation determines that mail service is or is threatened
to be interrupted at the time when the Corporation is required or
elects to give any notice hereunder, or is required to send any
cheque or any share certificate to the holder of any Series 2
Preference Share, whether in connection with the redemption of such
share or otherwise, the Corporation may, notwithstanding the
provisions hereof:
(i) give such notice by means of publication once in each of two
successive weeks in newspapers of general circulation published
or distributed in Toronto and Montreal; and
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(ii) fulfill the requirement to send such cheque or such share
certificate by arranging for the delivery thereof to such holder
by the transfer agent for the Series 2 Preference Shares at its
principal office in Toronto, and such cheque and/or certificate
shall be deemed to have been sent on the date on which notice of
such arrangement shall have been given as provided in (i) above,
provided that as soon as the Corporation determines that mail
service is no longer interrupted or threatened to be interrupted
such cheque or share certificate, if not theretofore delivered
to such holder, shall be sent by mail as herein provided.
(c) Notice given by the Corporation by mail shall be deemed to be given
on the day upon which it is mailed unless on the day of such mailing
an actual disruption of mail services has occurred in the province in
or to which such notice is mailed. Notice given by the Corporation by
publication shall be deemed to be given on the day on which the first
publication is completed in each city in which notice is required to
be published and notice given by the Corporation by telex, telecopier
or other electronic means of communication shall be deemed to be
given on the day on which it is sent (or, if such day is not a
Business Day, on the next following Business Day). Notice given to
the Corporation pursuant to the provisions hereof shall be deemed to
be given on the date of actual receipt thereof by the Corporation.
3. AMENDMENT
The provisions hereof may be repealed, altered, modified or amended
but only with the prior approval of the holders of Series 2 Preference Shares
given in accordance with section I.4. in addition to any vote, authorization,
confirmation or approval required by the Act.
4. APPROVAL OF HOLDERS OF SERIES 2 PREFERENCE SHARES
The approval of the holders of Series 2 Preference Shares required as
to any and all matters referred to herein (in addition to or as distinct from
any vote, authorization, confirmation or approval required by the Act) may be
given by an instrument or instruments in writing signed by the holders of all
of the issued and outstanding Series 2 Preference Shares or by a resolution
passed by at least 66 2/3% of the votes cast at a meeting of the holders of
Series 2 Preference Shares duly called for that purpose and held in accordance
with section 6.1 of the provisions attaching to the Senior Preference Shares as
a class, mutatis mutandis.
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5. TAX ELECTION
The Corporation shall elect, in the manner and within the time
provided under section 191.2 of the Income Tax Act (Canada) or any successor or
replacement provision of similar effect, to pay tax at a rate such that and
shall take all other necessary action under such Act such that no holder of
Series 2 Preference Shares shall be required to pay tax on dividends received
on the Series 2 Preference Shares under section 187.2 of Part IV.1. of such Act
or any successor or replacement provision of similar effect.
II. PART II
1. PAYMENT OF DIVIDENDS
(a) For the Initial Three Year Term, the holders of Series 2 Preference
Shares shall be entitled to receive and the Corporation shall pay
thereon, as and when declared by the board of directors of the
Corporation, out of the monies of the Corporation properly applicable
to the payment of dividends, monthly cumulative preferential cash
dividends in an amount determined in accordance with section II.2.(a)
hereof payable on the Dividend Payment Dates in each year, the first
of which dividends shall be paid on April 30, 1989 and the last of
which dividends shall be paid on April 30, 1992.
(b) After the expiry of the Initial Three Year Term for each Dividend
Period falling within a Corporation Determined Term, the holders of
Series 2 Preference Shares shall be entitled to receive and the
Corporation shall pay thereon, as and when declared by the board of
directors of the Corporation, out of the monies of the Corporation
properly applicable to the payment of dividends, cumulative
preferential cash dividends in an amount determined in accordance
with section II.2.(b) hereof payable, with respect to each such
Dividend Period, on the Dividend Payment Date immediately following
the end of such Dividend Period.
(c) "After the expiry of the Initial Three Year Term, for each Dividend
Period falling within a Dealer Determined Term, the holders of Series
2 Preference Shares shall be entitled to receive and the Corporation
shall pay thereon, as and when declared by the board of directors of
the Corporation, out of the monies of the Corporation properly
applicable to the payment of dividends, cumulative preferential cash
dividends in an amount determined in accordance with section II.2.(c)
hereof payable, with respect to each such Dividend Period, on the
Dividend Payment Date immediately following the end of such Dividend
Period.
(d) After the expiry of the Initial Three Year Term, for each Auction
Dividend Period falling within an Auction Term, the holders of Series
2 Preference
<PAGE> 63
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Shares shall be entitled to receive and the Corporation shall pay
thereon, as and when declared by the board of directors of the
Corporation, out of the monies of the Corporation properly applicable
to the payment of dividends, monthly cumulative preferential cash
dividends in an amount determined in accordance with section II.2.(d)
hereof payable, with respect to each such Auction Dividend Period, on
the Auction Dividend Payment Date immediately following the end of
such Auction Dividend Period.
(e) The Corporation shall pay such dividends on the Series 2 Preference
Shares to the holders of record thereof at the close of business on
the sixth Business Day immediately preceding the relevant Dividend
Payment Date or Auction Dividend Payment Date (as applicable) by
mailing by prepaid first class mail, on or before the relevant
Dividend Payment Date or Auction Dividend Payment Date, as the case
may be, addressed to each holder of Series 2 Preference Shares at his
address as it appears on the books of the Corporation or, in the case
of joint holders, to the address of that one of the joint holders
whose name stands first in the books of the Corporation, a cheque for
such dividend (less the amount of any tax or other amounts required
to be deducted or withheld by the Corporation) drawn in lawful money
of Canada on a Canadian chartered bank and payable at par at any
branch of such bank in Canada. Notwithstanding the foregoing, any
dividend cheque may be delivered to a holder of Series 2 Preference
Shares at his address as aforesaid. The delivery or mailing of any
such cheque in the foregoing manner shall satisfy such dividends to
the extent of the sum represented by such cheque (plus the amount of
any tax or other amounts required to be deducted or withheld as
aforesaid) and shall be a full and complete discharge of the
Corporation's obligation to pay the dividends unless, in the case of
payment by cheque, the cheque is not honoured when presented for
payment. Dividends which are represented by a cheque which has not
been presented to the Corporation's bankers for payment or which
otherwise remain unclaimed for a period of six years from the date on
which they were declared to be payable shall be forfeited to the
Corporation.
2. AMOUNT OF DIVIDENDS
(a) The dividend to be paid on each Series 2 Preference Share for each
Dividend Period during the Initial Three Year Term shall be the
amount which is the product of (1) $500,000, (2) 72% of the Bankers'
Acceptance Rate determined on the first Business Day of the relevant
Dividend Period and (3) the number of days in such Dividend Period
divided by 365.
(b) After the expiry of the Initial Three Year Term, for each Dividend
Period falling within a Corporation Determined Term, the dividend to
be paid on each Series 2 Preference Share on the Dividend Payment
Date immediately
<PAGE> 64
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following the end of such Dividend Period shall be the amount which
is the product of (1) $500,000, (2) the Corporation Determined
Dividend Rate for such Dividend Period and (3) the number of days in
such Dividend Period divided by 365.
(c) After the expiry of the Initial Three Year Term, for each Dividend
Period falling within a Dealer Determined Term, the dividend to be
paid on each Series 2 Preference Share on the Dividend Payment Date
immediately following the end of such Dividend Period shall be the
amount which is the product of (1) $500,000, (2) the Dealer
Determined Dividend Rate for such Dividend Period and (3) the number
of days in such Dividend Period divided by 365.
(d) After the expiry of the Initial Three Year Term, for each Auction
Dividend Period included within an Auction Term, the dividend to be
paid on each Series 2 Preference Share on the Auction Dividend
Payment Date immediately following the end of such Auction Dividend
Period shall be .determined as follows:
(i) on the Auction Dividend Payment Date immediately following the
end of the first Auction Dividend Period during any Auction
Term, the dividend to be paid on each Series 2 Preference Share
shall be the amount which is the product of (1) $500,000, (2)
72% of the Bankers' Acceptance Rate determined as of the first
Business Day of such Auction Dividend Period and (3) the number
of days in the first Auction Dividend Period divided by 365; and
(ii) on the Auction Dividend Payment Dates immediately following the
end of the second and subsequent Auction Dividend Periods during
any Auction Term, the dividend to be paid on each Series 2
Preference Share shall be the amount which is the product of (1)
$500,000, (2) the Current Dividend Rate for each such Auction
Dividend Period as determined on the Auction Date immediately
prior to the beginning of such Auction Dividend Period and (3)
the number of days in such Auction Dividend Period divided by
365.
(e) If, for any reason, the dividend rate applicable hereunder is, in
respect of any particular day, not determined or not determinable in
accordance with the provisions hereof, the rate applicable in respect
of such day shall be the Bankers' Acceptance Rate on such day plus
0.40%.
<PAGE> 65
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3. CUMULATIVE DIVIDENDS
If on any Dividend Payment Date or Auction Dividend Payment Date
the dividends accrued to such date are not paid in full on all Series 2
Preference Shares then outstanding, such dividends, or the unpaid part thereof,
shall be paid on a subsequent date or dates determined by the board of
directors of the Corporation on which the Corporation shall have sufficient
monies properly applicable to the payment of such dividends. The holders of
Series 2 Preference Shares shall not be entitled to any dividends other than or
in excess of the cumulative preferential cash dividends herein provided for.
4. REDEMPTION AT THE OPTION OF THE CORPORATION
Subject to the provisions of the Act and other laws governing
the Corporation and the articles of the Corporation, the Corporation at any
time, upon giving notice as hereinafter provided, may redeem the whole or from
time to time any part of the then outstanding Series 2 Preference Shares on
payment for each share to be redeemed of a price of $500,000 together, in each
case, with an amount equal to all accrued and unpaid dividends thereon to but
excluding the date fixed for redemption (the whole constituting and being
herein referred to as the "Redemption Price"). If the Corporation desires to
redeem only part of the Series 2 Preference Shares, the Series 2 Preference
Shares to be redeemed shall be redeemed as nearly as may be pro rata
(disregarding fractions) from each of the holders of Series 2 Preference
Shares. Any Series 2 Preference Shares which are so redeemed shall be cancelled
and not reissued.
5. MANNER OF REDEMPTION
In the case of any redemption of Series 2 Preference Shares
pursuant to section II.4. hereof, the Corporation shall, not less than 30 days
before the date specified for redemption if such date falls within the Initial
Three Year Term and thereafter not less than 10 days before the date specified
for redemption, give notice in writing to each person who at the date of the
giving of such notice is the registered holder of Series 2 Preference Shares to
be redeemed of the intention of the Corporation to redeem such Series 2
Preference Shares. Such notice shall set out the date (the "Redemption Date")
on which the redemption is to take place, the Redemption Price and, unless all
the Series 2 Preference Shares held by the holder to whom it is addressed are
to be redeemed, the number of Series 2 Preference Shares so held which are to
be redeemed. The Redemption Date shall be a day which is (i) a Settlement Date
immediately following an Auction Dividend Period or (ii) a Dividend Payment
Date immediately following the end of a Dividend Period. On and after the
Redemption Date, the Corporation shall pay or cause to be paid to the holders
of the Series 2 Preference Shares so called for redemption the Redemption Price
therefor on presentation and delivery, at the registered office of the
Corporation or at such other place or places within Canada designated in such
notice, of the certificate or certificates representing the
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Series 2 Preference Shares so called for redemption. Payment of the Redemption
Price shall be made by cheque of the Corporation or its paying agent drawn in
lawful money of Canada on a Canadian chartered bank and payable at par at any
branch of such bank in Canada, and such payment shall be a full and complete
discharge of the Corporation's obligation to pay the Redemption Price owed to
the holders of Series 2 Preference Shares so called for redemption unless the
cheque is not honoured when presented for payment. From and after the
Redemption Date, the holders of Series 2 Preference Shares called for
redemption shall not be entitled to exercise any of the rights of holders of
Series 2 Preference Shares in respect of such shares except the right to
receive the Redemption Price therefor, provided that if payment of such
Redemption Price is not duly made by or on behalf of the Corporation in
accordance with the provisions hereof, then the rights of such holders shall
remain unaffected. If part only of the Series 2 Preference Shares represented
by any certificate shall be redeemed, a new certificate for the balance of such
shares shall be issued at the expense of the Corporation.
The Corporation shall have the right, at any time after giving
notice of its intention to redeem any Series 2 Preference Shares, to deposit
the aggregate Redemption Price of the Series 2 Preference Shares so called for
redemption, or of such of the Series 2 Preference Shares represented by
certificates as have not at the date of such deposit been delivered by the
holders thereof in connection with such redemption, in a special account in any
chartered bank or any trust company in Canada to be paid without interest to or
to the order of the respective holders of the Series 2 Preference Shares called
for redemption, upon presentation and delivery to such bank or trust company of
the certificates representing such Series 2 Preference Shares. Upon such
deposit being made or upon the Redemption Date, whichever is the later, the
Series 2 Preference Shares in respect whereof such deposit shall have been made
shall be and shall be deemed to be redeemed and the rights of the holders
thereof after such deposit or the Redemption Date, as the case may be, shall be
limited to receiving without interest their proportionate part of the total
Redemption Price so deposited upon presentation and delivery of the
certificates representing the Series 2 Preference Shares held by them
respectively. Any interest allowed on any such deposit shall belong to the
Corporation. Redemption monies that are represented by a cheque which has not
been presented to the Corporation's bankers for payment or that otherwise
remain unclaimed (including monies held on deposit in a special account as
provided for in this section above) for a period of six years from the date
specified for redemption shall be forfeited to the Corporation.
6. PURCHASE FOR CANCELLATION
Subject to the provisions of the Act, any restrictions imposed
by law, and the articles of the Corporation, the Corporation may, at any time
or from time to time, purchase (if obtainable) the whole or any part of the
outstanding Series 2 Preference Shares by invitation for tenders to all the
holders of record of Series 2 Preference Shares outstanding at any price per
share not exceeding $500,000 per share together with
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an amount equal to all accrued and unpaid dividends thereon up to but excluding
the date of purchase, and the costs of purchase.
The Corporation shall give notice of its intention to invite
tenders to all holders of Series 2 Preference Shares by giving notice of such
invitation to each holder of Series 2 Preference Shares in accordance with the
provisions from time to time of the by-laws of the Corporation respecting
notice to shareholders. If, upon any invitation for tenders under the provisions
of this section II.6., the Corporation shall receive tenders of Series 2
Preference Shares at the same price, which shares when added to any Series 2
Preference Shares tendered at a lower price or prices aggregate a number
greater than the number for which the Corporation is prepared to accept
tenders, the Series 2 Preference Shares so tendered at the same price which the
Corporation determines to purchase shall be purchased as nearly as may be pro
rata (disregarding fractions) in proportion to the total number of Series 2
Preference Shares so tendered by each of the holders of Series 2 Preference
Shares who submitted tenders at such price. Any Series 2 Preference Shares so
purchased shall be cancelled and not reissued. If part only of the Series 2
Preference Shares represented by any certificate shall be purchased, a new
certificate for the balance of such shares shall be issued at the expense of
the Corporation.
7. RESTRICTION ON DIVIDENDS AND RETIREMENT AND ISSUE OF SHARES
Subject to the provisions of the Act and any restrictions under
applicable law, so long as any Series 2 Preference Shares are outstanding,
unless all dividends on the Series 2 Preference Shares then outstanding and on
all other shares of the Corporation ranking as to dividends prior to or on a
parity with the Series 2 Preference Shares accrued up to and including the
immediately preceding respective date or dates for the payment of dividends
thereon have been declared and paid or set apart for payment, the Corporation
will not, without the approval of the holders of the Series 2 Preference Shares
given as specified below:
(i) pay, declare or set apart for payment any dividends (other
than stock dividends in shares of the Corporation ranking
junior to the Series 2 Preference Shares) on shares ranking
junior to the Series 2 Preference Shares; or
(ii) redeem, purchase or otherwise retire or make any capital
distribution on or in respect of any shares ranking junior
to the Series 2 Preference Shares (except out of the net
cash proceeds of a substantially concurrent issue of shares
ranking junior to the Series 2 Preference Shares); or
(iii) redeem, purchase or otherwise retire less than all the
Series 2 Preference Shares; or
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(iv) except pursuant to any purchase obligation, sinking fund,
retraction privilege or mandatory redemption provisions
attaching to any series of preferred shares from time to
time issued, redeem, purchase or otherwise retire for value
any shares ranking on a parity with or junior to the Series
2 Preference Shares; or
(v) issue any additional Series 2 Preference Shares or any
shares ranking prior to or on a parity with the Series 2
Preference Shares with respect to the payment of dividends
or the distribution of assets in the event of the
liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, or in the event of any
other distribution of assets of the Corporation amongst its
shareholders for the purpose of winding up its affairs.
Any approval of the holders of the Series 2 Preference Shares required under
this section I.7. may be given by the affirmative vote of at least a majority
of the votes cast at a meeting, or adjourned meeting, of the holders of the
Series 2 Preference Shares duly called and held for that purpose.
8. LIQUIDATION, DISSOLUTION OR WINDING-UP
In the event of the liquidation, dissolution or winding-up of
the Corporation or other distribution of assets of the Corporation for the
purpose of winding-up its affairs the holders of the Series 2 Preference Shares
shall be entitled to receive $500,000 per share plus an amount equal to all
accrued and unpaid dividends thereon calculated to the date of distribution
before any amount shall be paid to or any property and assets of the
Corporation shall be distributed to the holders of the Junior Preference
Shares, the ordinary shares or any other shares of the Corporation ranking
junior to the Series 2 Preference Shares and, after payment thereof, the Series
2 Preference Shares shall not be entitled to share in any further distribution
of the assets of the Corporation.
9. INFORMATION AND VOTING RIGHTS
The holders of Series 2 Preference Shares shall be entitled to
receive all financial statements and other information sent by the Corporation
to the holders of its ordinary shares but they shall not, as such, except as
expressly provided herein, have the right to receive notice of, or to attend or
to vote at, any meetings of shareholders of the Corporation unless the
Corporation shall have failed to pay in the aggregate dividends with respect to
Dividend Periods, whether or not consecutive, aggregating at least 24 months on
the Series 2 Preference Shares in which case, and only for so long thereafter
as any dividends on the Series 2 Preference Shares remain in arrears, the
holders of Series 2 Preference Shares shall be entitled to receive notice of,
and to attend, meetings of shareholders of the Corporation at which directors
are to be elected and shall be entitled, voting separately as a class together
with all other holders of any
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other series of Senior Preference Shares having similar voting rights, to elect
two directors of the Corporation. In connection with the foregoing, the holders
of the Series 2 Preference Shares shall have 500,000 votes for each Series 2
Preference Share held.
Nothing herein contained shall be deemed or construed to limit
the ability of the Corporation from time to time to increase or decrease the
number of its directors.
In connection with any action to be taken by the Corporation
which requires the approval of the holders of Series 2 Preference Shares voting
as a series or as part of the class, each such share shall entitle the holder
thereof to 500,000 votes for each Series 2 Preference Share.
III. PART III
CORPORATION DETERMINED RATE PROCEDURES
1. DETERMINATION OF NEW DIVIDEND RATE
No earlier than 60 days and no later than 45 days prior to the
end of the Initial Three Year Term or no earlier than 25 days and no later than
20 days prior to the end of the current Corporation Determined Term or Dealer
Determined Term or Auction Dividend Period (and provided such Auction Dividend
Period is not the first Auction Dividend Period within an Auction Term), as the
case may be, the Corporation may notify the holders of Series 2 Preference
Shares of a proposed Corporation Determined Dividend Rate to apply with respect
to a proposed Dividend Period or Dividend Periods having a duration of one
calendar month or whole multiples thereof within a proposed Corporation
Determined Term. Such notification to such holders shall also:
(i) specify a date by which each holder must notify the
Corporation in writing of its acceptance of the proposed
Corporation Determined Dividend Rate, the proposed Dividend
Period duration and the proposed Corporation Determined
Term, if such holder intends to accept such rate, period
duration and term, which date shall be at least 35 days
prior to the end of the Initial Three Year Term or at least
15 days prior to the end of the current Corporation
Determined Term or Dealer Determined Term or Auction
Dividend Period, as the case may be; and
(ii) specify that the proposed Corporation Determined Dividend
Rate, the proposed Dividend Period duration and the
proposed Corporation Determined Term shall become effective
for the purposes of determining the dividends to be paid on
the Dividend Payment Dates for Dividend Periods during such
proposed
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Corporation Determined Term only if all of the holders of
Series 2 Preference Shares accept such rate, period
duration and term.
2. ACCEPTANCE OF CORPORATION DETERMINED DIVIDEND RATE
If,
(i) by the time prescribed in paragraph (i) of section III.2.
hereof, all of the holders of Series 2 Preference Shares
have accepted the proposed Corporation Determined Dividend
Rate, the proposed Dividend Period duration and the
proposed Corporation Determined Term as evidenced by notice
in writing to the Corporation, and
(ii) at least 30 days prior to the end of the Initial Three Year
Term or at least 12 days prior to the end of the current
Corporation Determined Term or Dealer Determined Term or
Auction Dividend Period, as the case may be, the
Corporation has notified all of such holders that each of
them has agreed with the Corporation on such rate and term;
such Corporation Determined Dividend Rate, Dividend Period duration and
Corporation Determined Term shall apply for the purposes of determining the
dividend to be paid on the Series 2 Preference Shares on each Dividend Payment
Date in respect of Dividend Periods during such Corporation Determined Term.
3. TERMINATION OF APPLICATION
Notwithstanding the acceptance of a Corporation Determined
Dividend Rate, Dividend Period duration and a Corporation Determined Term as
provided for in this Part III, the Corporation may notify the holders of Series
2 Preference Shares that the Corporation does not intend to implement
application of the Corporation Determined Dividend Rate, Dividend Period
duration and Corporation Determined Term as set forth in the notification to
holders provided that such notification is given by the Corporation prior to
the end of the Initial Three Year Term or the current Corporation Determined
Term, Dealer Determined Term or Auction Dividend Period, as the case may be. In
such circumstances, the provisions of Part IV hereof may be applied in
accordance with such Part, failing which the provisions of Part V hereof shall
be applied in accordance with such Part. Any such notification shall not limit
or restrict the right of the Corporation, prior to the expiry of any subsequent
Corporation Determined Term, Dealer Determined Term or Auction Dividend Period,
as the case may be, to implement the provisions of this Part III by forwarding
a notification to the holders of Series 2 Preference Shares.
<PAGE> 71
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4. MISCELLANEOUS
In the event that there is any inconsistency, ambiguity or
uncertainty in the interpretation or application of the procedures set forth in
this Part III, the board of directors of the Corporation (or any person or
persons designated by the board of directors) may, in such manner as it shall
determine in its sole discretion, interpret such procedures in order to deal
with such inconsistency, ambiguity or uncertainty and any such determination
evidenced by a certificate of the Secretary of the Corporation (which shall be
provided to holders of Series 2 Preference Shares) shall be conclusive.
IV. PART IV
DEALER BIDS PROCEDURES
1. BIDS BY DEALERS
(a) No earlier than 30 days and no later than 25 days prior to the
end of the Initial Three Year Term or no earlier than 13 days
and no later than 10 days prior to the end of the current
Corporation Determined Term or Dealer Determined Term or Auction
Dividend Period (and provided such Auction Dividend Period is
not the first Auction Dividend Period within an Auction Term),
as the case may be, the Corporation may solicit bids from one or
more Dealers for the purchase of all of the Series 2 Preference
Shares. Such solicitation shall be contained in a Notice
Requesting Bids to be sent by the Corporation to such Dealers
which notice shall:
(i) invite each Dealer to submit to the Corporation a Dealer
Offer; and
(ii) specify a date, which date shall not be more than 5 days
after the giving of such notice, by which any such offer
must be received (the "Dealer Response Date") by the
Corporation.
(b) Each Dealer receiving a Notice Requesting Bids may submit a
Dealer Offer provided such Dealer does so by the Dealer Response
Date and provided that such Dealer Offer specifies:
(i) for the purpose of determining the Dealer Determined
Dividend Rate in the event such Dealer's Dealer Offer is
accepted under section IV.1.(c):
(A) the Dealer Determined Percentage of the Average Prime
Rate (to be determined as described in paragraph (i)
of the definition herein of "Dealer Determined
Dividend Rate");
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(B) the Dealer Determined Percentage of the Bankers'
Acceptance Rate (to be determined as described in
paragraph (ii) of the definition herein of "Dealer
Determined Dividend Rate"); or
(C) a fixed annual percentage rate;
(ii) a Dealer Determined Term for which the rate referred to in
paragraph (i) of this section IV.1.(b) shall apply;
(iii) the amount of any fees to be paid by the Corporation to
the Dealer in respect of the Series 2 Preference Shares in
the event such Dealer's Dealer Offer is accepted by the
Corporation; and
(iv) the duration of the Dividend Period, which shall be a
period of one calendar month or a whole multiple thereof,
to be applicable during the Dealer Determined Term
specified pursuant to paragraph (ii) of this section
IV.1.(b).
(c) If the Corporation wishes to accept a Dealer Offer, it shall
signify such acceptance on or before 15 days prior to the end of
the Initial Three Year Period or on or before five days prior to
the end of the current Corporation Determined Term or Dealer
Determined Term or Auction Dividend Period, as the case may be,
by notice to the Dealer whose Dealer Offer it accepts (an
"Accepted Dealer Offer"). The Dealer Determined Dividend Rate,
the duration of the Dividend Period and Dealer Determined Term
specified in the Accepted Dealer Offer shall apply for the
purposes of determining the dividends to be paid on the Series 2
Preference Shares on each Dividend Payment Date in respect of
each Dividend Period during such Dealer Determined Term. The
Dealer whose Dealer Offer is accepted will be required to
purchase all of the Series 2 Preference Shares not retained by
the existing holders on the last day of the Initial Three Year
Term or the current Corporation Determined Term or Dealer
Determined Term or on the Settlement Date immediately following
the current Auction Dividend Period, as the case may be, on the
terms contained in the Accepted Dealer Offer.
(d) Concurrently with its acceptance of a Dealer Offer, and in any
event not later than 15 days prior to the end of the Initial
Three Year Term or not later than five days prior to the end of
the current Corporation Determined Term or Dealer Determined
Term or Auction Dividend Period, as the case may be, the
Corporation shall notify (a "Notification to Holders") each
existing holder of Series 2 Preference Shares that the
Corporation has accepted a Dealer Offer. Such notification
shall:
(i) specify the Dealer Determined Dividend Rate to apply to the
Series 2 Preference Shares;
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(ii) specify the Dealer Determined Term for which the Dealer
Determined Dividend Rate referred to in paragraph (i) of
this section IV.1.(d) shall apply and the duration of the
Dividend Period within such Dealer Determined Term;
(iii) notify such holders of the right of each holder either to
sell all or some of the Series 2 Preference Shares it holds
to such Dealer or to continue to hold all or some of the
Series 2 Preference Shares it holds;
(iv) notify such holders of the date (which shall be not more
than 10 days and not less than six days prior to the end of
the Initial Three Year Term or not more than three days and
not less than two days prior to the end of the current
Corporation Determined Term or Dealer Determined Term or
Auction Dividend Period, as the case may be) by which the
Corporation must have received written notice from such
holder of its decision to sell all or some of the Series 2
Preference Shares it holds as provided for in section
IV.1.(e) hereof;
(v) notify such holders that any holder of Series 2 Preference
Shares that fails to respond to the Notification to Holders
by the date specified for response therein will be deemed
to have elected to continue to hold all of the Series 2
Preference Shares then held by it subject to the terms and
conditions as to the Dealer Determined Dividend Rate and
the Dealer Determined Term which are set forth in the
Notification to Holders; and
(vi) identify the Dealer whose Dealer Offer has been accepted.
(e) Upon receipt of the Notification to Holders, an existing holder
of Series 2 Preference Shares may elect to sell Series 2
Preference Shares in accordance with the terms specified in such
Notification to Holders by notifying the Corporation in writing
of such decision and of the number of shares to be sold. Each
holder of Series 2 Preference Shares who elects to sell all or
some of its Series 2 Preference Shares shall, together with such
notice, deposit the certificate or certificates representing the
Series 2 Preference Shares which such holder desires to sell
(with the transfer panel on such certificate duly completed and
signed or, in the alternative, with a duly completed stock
transfer power of attorney accompanying such certificate or
certificates) at the registered office of the Corporation, or at
any place where the Series 2 Preference Shares may be
transferred or any other place or places in Canada specified by
the Corporation to holders of Series 2 Preference Shares in the
Notification to Holders. If a holder of
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Series 2 Preference Shares wishes to sell only some of the
Series 2 Preference Shares represented by any share certificate
or certificates, the holder may deposit the certificate or
certificates, as aforementioned, and the Corporation shall issue
and deliver to such holder, at the expense of the Corporation, a
new share certificate representing the Series 2 Preference
Shares which are not being delivered for sale. Any holder of
Series 2 Preference Shares that fails to respond to the
Notification to Holders by the date specified for response
therein will be deemed to have elected to continue to hold all
of the Series 2 Preference Shares then held by it subject to the
terms and conditions as to the Dealer Determined Dividend Rate,
Dividend Period duration and the Dealer Determined Term which
are set forth in the Notification to Holders. The Corporation
shall have all such powers and authority as may be necessary to
determine finally the adequacy of all transfer instruments and
related matters with respect to the sale of shares by an
existing holder to a Dealer hereunder. Any determination by the
Corporation to the effect that any instrument of transfer is
incomplete or ineffective shall bind the holder intending to
sell any of its Series 2 Preference Shares pursuant to the
provisions of this Part IV and shall also bind the Dealer in
question.
(f) At least one Business Day prior to the end of the Initial Three
Year Term or the current Corporation Determined Term, Dealer
Determined Term or Auction Dividend Period, as the case may be,
the Corporation shall notify the Dealer submitting the Accepted
Dealer Offer of the number of shares to be purchased by such
Dealer in accordance with section IV.1. (g) hereof and of the
identity of the vendor or vendors thereof.
(g) On the last day of the Initial Three Year Term or the current
Corporation" Determined Term or Dealer Determined Term or on the
Settlement Date immediately following the end of the current
Auction Dividend Period, as the case may be, the Dealer
submitting the Accepted Dealer Offer shall purchase the Series 2
Preference Shares from the holders specified in section IV.1. (f)
hereof at the purchase price of $500,000 per Series 2 Preference
Share. For the purposes of completing such purchase, the Dealer
submitting the Accepted Dealer Offer shall deposit with the
Corporation, at its registered office, on or prior to noon
(Toronto time) on such date, a certified cheque payable to the
Corporation, as agent for the vendor or vendors referred to in
section IV.1. (f) hereof, representing the aggregate purchase
price for the Series 2 Preference Shares to be purchased
pursuant to this section IV.1. (g) together with a direction as
to registration particulars with respect to such Series 2
Preference Shares to be purchased. Upon receipt of such
certified cheque as aforesaid, the Corporation shall deliver to
the vendor or vendors at the registered office of the
Corporation cheques payable to the vendor or vendors in payment
of the purchase price for such Series 2 Preference Shares (less
any tax
<PAGE> 75
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required to be deducted and withheld therefrom) against delivery
of the certificates therefor duly completed in accordance with
section IV.1. (e), and delivery of such cheques by the
Corporation shall be deemed to be payment and shall satisfy and
discharge all liability for such purchase price to the extent Of
the amount represented by such cheques (plus any tax required to
be and in fact deducted and withheld therefrom and remitted to
the proper tax authority), unless such cheques are not paid on
due presentation.
2. TERMINATION OF APPLICATION
Notwithstanding the acceptance of a Dealer Offer as provided for
in this Part IV, the Corporation may notify the holders of Series 2 Preference
Shares that the Corporation does not intend to implement application of the
Dealer Determined Dividend Rate, Dividend Period duration and Dealer Determined
Term as set forth in the Notification to Holders provided that such
notification is given by the Corporation prior to the end of the Initial Three
Year Term or the current Corporation Determined Term, Dealer Determined Term or
Auction Dividend Period, as the case may be. In such circumstances, the
provisions of Part V hereof shall be applied in accordance with such Part and,
for greater certainty, the Dealer whose Dealer Offer has been accepted shall
not be obliged to purchase any Series 2 Preference Shares pursuant to such
Dealer Offer. Any such notification shall not limit or restrict the right of
the Corporation, prior to the end of any subsequent Corporation Determined
Term, Dealer Determined Term or Auction Dividend Period, as the case may be, to
implement the provisions of this Part IV by forwarding a Notice Requesting Bids
to one or more Dealers.
3. MISCELLANEOUS
In the event that there is any inconsistency, ambiguity or
uncertainty in the interpretation of application of the procedures set forth in
this Part IV, the board of directors of the Corporation (or any person or
persons designated by the board of directors) may, in such manner as it shall
determine in its sole discretion, interpret such procedures in order to deal
with such inconsistency, ambiguity or uncertainty and any such determination
evidenced by a certificate of the Secretary of the Corporation (which shall be
provided to holders of Series 2 Preference Shares) shall be conclusive.
<PAGE> 76
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V. PART V
AUCTION PROCEDURES
1. ORDERS BY EXISTING HOLDERS AND POTENTIAL HOLDERS
(a) Prior to the Submission Deadline on each Auction Date:
(i) each Existing Holder may submit to a Dealer information as to
the number of Series 2 Preference Shares, if any, held by such
Existing Holder which such Existing Holder: each Existing Holder
may submit to a Dealer information as to the number of Series 2
Preference Shares, if any, held by such Existing Holder which
such Existing Holder:
(A) desires to continue to hold without regard to the Current
Dividend Rate; and/or
(B) desires to continue to hold, provided that the Current
Dividend Rate shall not be less than the dividend rate per
annum specified by such Existing Holder; and/or
(C) offers to sell without regard to the Current Dividend Rate;
and
(ii) Potential Holders may submit to a Dealer offers to purchase
Series 2 Preference Shares, provided that any such offer shall
be effective only if the Current Dividend Rate shall not be less
than the dividend rate per annum specified by such Potential
Holder.
The communication to a Dealer of the information referred to in
this section V.1.(a) is an "Order" and, collectively, are "Orders", and each
Existing Holder and each Potential Holder placing an Order is a "Bidder" and,
collectively, are "Bidders"; an Order containing the information referred to in
subparagraph (i) (A) of this section V.l. (a) is a "Hold Order" and,
collectively, are "Hold Orders"; an Order containing the information referred
to in subparagraph (i) (B) or paragraph (ii) of this section V.l. (a) is a "Bid"
and, collectively, are "Bids"; and an Order containing the information referred
to in subparagraph (i) (C) of this section V.1.(a) is a "Sell Order" and,
collectively, are "Sell Orders".
(b) (i) A Bid by an Existing Holder shall constitute an irrevocable
offer to sell at a price per Series 2 Preference Share equal to
$500,000:
(A) the number of Series 2 Preference Shares specified in such
Bid if the Winning Bid Rate determined on the applicable
Auction Date is less than the rate specified in such Bid;
<PAGE> 77
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(B) the number of Series 2 Preference Shares specified in such
Bid or a lesser number to be determined as set forth in
paragraph (iv) of section V.4.(a) hereof if the Winning Bid
Rate determined on such Auction Date is equal to the rate
specified in such Bid; or
(C) a number of Series 2 Preference Shares which is less than
the number thereof specified in such Bid to be determined
as set forth in paragraph (iii) of section V.4.(b) hereof if
the rate specified in such Bid is higher than the Maximum
Rate and Sufficient Clearing Bids do not exist.
(ii) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell at a price per Series 2 Preference
Share equal to $500,000:
(A) the number of Series 2 Preference Shares specified in such
Sell Order if Sufficient Clearing Bids do exist; or
(B) a lesser number of Series 2 Preference Shares to be
determined as set forth in paragraph (iii) of section
V.4.(b) hereof if Sufficient Clearing Bids do not exist.
(iii) A Bid by a Potential Holder shall constitute an irrevocable
offer to purchase at a price per Series 2 Preference Share equal
to $500,000:
(A) the number of Series 2 Preference Shares specified in such
Bid if the Winning Bid Rate determined on the applicable
Auction Date is higher than the rate specified in such Bid;
(B) the specified number or a lesser number of Series 2
Preference Shares to be determined as set forth in
paragraph (v) of section V.4.(a) hereof if the Winning Bid
Rate determined on such Auction Date is equal to the rate
specified in such Bid; or
(C) the specified number of Series 2 Preference Shares if the
rate specified in such Bid is equal to or lower than the
Maximum Rate and Sufficient Clearing Bids do not exist.
(c) A rate specified by an Existing Holder or Potential Holder in any Bid
shall be a fixed annual percentage rate or a specified percentage of
the Bankers' Acceptance Rate determined on the relevant Auction Date.
(d) If none of the holders of Series 2 Preference Shares is an Existing
Holder for the purposes of this Part V on any date which would be an
Auction
<PAGE> 78
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Date hereunder, the Current Dividend Date for the next succeeding
Auction Dividend Period shall be equal to 50% of the Bankers'
Acceptance Rate determined on the Auction Date.
2. SUBMISSION OF ORDERS BY DEALERS TO THE AUCTION MANAGER
(a) Each Dealer shall submit to the Auction Manager in writing in
accordance with its Dealer Agreement prior to the Submission Deadline
on each Auction Date all Orders obtained by such Dealer and
specifying with respect to each Order:
(i) the name of the Bidder placing such Order;
(ii) the aggregate number of Series 2 Preference Shares that are the
subject of the Order;
(iii) to the extent that the Bidder is an Existing Holder, the number
of Series 2 Preference Shares, if any, subject to any:
(A) Hold Order placed by such Existing Holder;
(B) Bid placed by such Existing Holder and the rate specified
in such Bid; and/or
(C) Sell Order placed by such Existing Holder; and
(iv) to the extent that the Bidder is a Potential Holder, the rate
specified in the Bid of such Potential Holder.
(b) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Manager shall round such
rate up to the next highest one-thousandth of one percent (0.001%).
(c) If for any reason an Order or Orders covering in the aggregate all
the Series 2 Preference Shares held by an Existing Holder is not
submitted to the Auction Manager prior to the Submission Deadline,
the Auction Manager shall deem a Hold Order to have been submitted on
behalf of such Existing Holder covering the number of Series 2
Preference Shares held by such Existing Holder and not subject to
Orders submitted to the Auction Manager.
(d) If one or more Orders covering in the aggregate more than the number
of Series 2 Preference Shares held by any Existing Holder are
submitted to the Auction Manager, such Orders shall be considered
valid as follows and in the following order of priority:
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(i) all Hold Orders shall be considered valid, but only up to and
including, in the aggregate, the number of Series 2 Preference
Shares held by such Existing Holder, and, solely for purposes of
allocating compensation among the Dealers submitting Hold
Orders, if the number of Series 2 Preference Shares subject to
such Hold Orders exceeds the number of Series 2 Preference
Shares held by such Existing Holder, the number of Series 2
Preference Shares subject to each such Hold Order shall be
reduced pro rata to cover the number of Series 2 Preference
Shares held by such Existing Holder;
(ii) (A) any Bid shall be considered valid up to and including the
excess of the number of Series 2 Preference Shares held by
such Existing Holder over the number of Series 2 Preference
Shares subject to any Hold Order referred to in paragraph
(i) of this section V.2.(d);
(B) subject to subparagraph (ii) (A) of this section V.2.(d), if
more than one Bid with the same rate is submitted on behalf
of such Existing Holder and the number of Series 2
Preference Shares subject to such Bids is greater than such
excess, such Bids shall be considered valid up to the
amount of such excess, and, solely for purposes of
allocating compensation among the Dealers submitting Bids
with the same rate, the number of Series 2 Preference
Shares subject to each Bid with the same rate shall be
reduced pro rata to cover the number of Series 2 Preference
Shares equal to such excess;
(C) subject to subparagraph (ii) (A) of this section V.2.(d), if
more than one Bid with different rates is submitted on
behalf of such Existing Holder, such Bids shall be
considered valid in the ascending order of their respective
rates up to the amount of such excess; and
(D) in any event, the number, if any, of such Series 2
Preference Shares subject to Bids not valid under this
paragraph (ii) shall be treated as the subject of a Bid by
a Potential Holder; and
(iii) all Sell Orders shall be considered valid but only up to and
including in the aggregate the excess of the number of Series 2
Preference Shares held by such Existing Holder over the sum of
the Series 2 Preference Shares subject to Hold Orders referred
to in paragraph (i) of this section V.2.(d) and valid Bids by
Existing Holders referred to in paragraph (ii) of this section
V.2.(d).
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(e) If more than one Bid is submitted on behalf of any Potential Holder,
each Bid submitted shall be a separate Bid.
3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND
CURRENT DIVIDEND RATE
(a) On the Submission Deadline on each Auction Date, the Auction Manager
shall assemble all Orders submitted or deemed submitted to it by the
Dealers (each such Order as submitted or deemed submitted by a Dealer
being individually a "Submitted Hold Order", a "Submitted Bid" or a
"Submitted Sell Order", as the case may be, or a "Submitted Order"
and, collectively, "Submitted Hold Orders", "Submitted Bids" or
"Submitted Sell Orders", as the case may be, or "Submitted Orders")
and shall determine:
(i) the excess of (A) the total number of Series 2 Preference Shares
held by Existing Holders issued and outstanding over (B) the
number of Series 2 Preference Shares that are the subject of
Submitted Hold Orders (such excess being the "Available
Shares");
(ii) from the Submitted Orders, whether:
(A) the number of Series 2 Preference Shares that are the
subject of Submitted Bids by Potential Holders specifying
one or more rates equal to or lower than the Maximum Rate;
exceeds or is equal to the sum of:
(B) (I) the number of Series 2 Preference Shares that are the
subject of Submitted Bids by Existing Holders
specifying one or more rates higher than the Maximum
Rate; and
(II) the number of Series 2 Preference Shares that are the
subject of Submitted Sell Orders;
and if such excess or equality exists (other than because all of
the Series 2 Preference Shares are the subject of Submitted Hold
Orders), then such Submitted Bids in subparagraph (A) hereof
shall be "Sufficient Clearing Bids"; and
(iii) if Sufficient Clearing Bids exist, the lowest rate specified in
the Submitted Bids which if the Auction Manager accepted:
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(A) (I) each Submitted Bid from Existing Holders specifying
that lowest rate, and
(II) all other Submitted Bids from Existing Holders
specifying lower rates,
thus entitling those Existing Holders to continue to hold the
aggregate number of Series 2 Preference Shares that are
specified in those Submitted Bids; and
(B) (I) each Submitted Bid from Potential Holders specifying
that lowest rate, and
(II) all other Submitted Bids from Potential Holders
specifying lower rates,
thus entitling those Potential Holders to purchase the aggregate
number of Series 2 Preference Shares that are specified in those
Submitted Bids;
would result in such Existing Holders described in subparagraph
(A) hereof continuing to hold an aggregate number of Series 2
Preference Shares which, when added to the aggregate number of
Series 2 Preference Shares to be purchased by such Potential
Holders described in subparagraph (B) hereof, would equal not
less than the number of Available Shares. This lowest rate is
the "Winning Bid Rate".
(b) Promptly after the Auction Manager has made the determinations
pursuant to section V.3.(a) hereof, the Auction Manager shall advise
the Corporation of the Bankers' Acceptance Rate and, based on such
determinations, of the dividend rate applicable to the Series 2
Preference Shares for the next succeeding Auction Dividend Period
(the "Current Dividend Rate") as follows:
(i) if Sufficient Clearing Bids exist, that the Current Dividend
Rate for the next succeeding Auction Dividend Period shall be
equal to the Winning Bid Rate so determined;
(ii) if Sufficient Clearing Bids do not exist (other than because all
of the Series 2 Preference Shares are the subject of Submitted
Hold Orders), that the Current Dividend Rate for the next
succeeding Auction Dividend Period shall be equal to the Maximum
Rate; or
(iii) if all of the Series 2 Preference Shares are the subject of
Submitted Hold Orders, that the Current Dividend Rate for the
next succeeding
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Auction Dividend Period shall be equal to 50% of the Bankers'
Acceptance Rate determined on the Auction Date.
4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS
AND ALLOCATION OF SHARES
Based on the determinations made pursuant to section V.3.(a) hereof,
the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and
the Auction Manager shall take such other action as set forth below:
(a) If Sufficient Clearing Bids have been made, subject to the provisions
of sections V.4.(c) and V.4.(d) hereof, Submitted Bids and Submitted
Sell Orders shall be accepted and rejected in the following order of
priority and all other Submitted Bids shall be rejected:
(i) (A) the Submitted Sell Order of each Existing Holder shall be
accepted and (B) the Submitted Bid of each Existing Holder
specifying any rate that is higher than the Winning Bid Rate
shall be rejected, thus requiring each such Existing Holder to
sell the Series 2 Preference Shares that are the subject of such
Submitted Sell Order and such Submitted Bid;
(ii) the Submitted Bid of each Existing Holder specifying any rate
that is lower than the Winning Bid Rate shall be accepted, thus
entitling each such Existing Holder to continue to hold the
Series 2 Preference Shares that are the subject of such
Submitted Bid;
(iii) the Submitted Bid of each Potential Holder specifying any rate
that is lower than the Winning Bid Rate shall be accepted, thus
requiring each such Potential Holder to purchase the number of
Series 2 Preference Shares specified in such Submitted Bid;
(iv) the Submitted Bid for each Existing Holder specifying a rate
that is equal to the Winning Bid Rate shall be accepted, thus
entitling each such Existing Holder to continue to hold the
Series 2 Preference Shares that are the subject of such
Submitted Bid, unless the number of Series 2 Preference Shares
subject to all such Submitted Bids is greater than the total
number of Available Shares minus the number of Series 2
Preference Shares subject to Submitted Bids described in
paragraphs (ii) and (iii) of this section V.4.(a) (the
"Remaining Shares"). In this event, the Submitted Bids of each
such Existing Holder described in this paragraph (iv) shall be
rejected, and each such Existing Holder shall be required to
sell Series 2 Preference Shares, but only in an amount equal to
the difference between (A) the number of Series 2 Preference
Shares then held by such Existing
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Holder subject to such Submitted Bid, and (B) the number of
Series 2 Preference Shares obtained by multiplying (x) the
number of Remaining Shares by (y) a fraction, the numerator of
which shall be the number of Series 2 Preference Shares held by
such Existing Holder subject to such Submitted Bid and the
denominator of which shall be the sum of the number of Series 2
Preference Shares subject to such Submitted Bids made by all
such Existing Holders who specified a rate equal to the Winning
Bid Rate; and
(v) the Submitted Bid of each Potential Holder specifying a rate
that is equal to the Winning Bid Rate shall be accepted but only
in an amount equal to the number of Series 2 Preference Shares
obtained by multiplying (A) the excess, if any, of the total
number of Available Shares over the number of Series 2
Preference Shares subject to accepted Submitted Bids described
in clauses (ii), (iii) and (iv) of this section V.4.(a) by (B) a
fraction, the numerator of which shall be the number of Series 2
Preference Shares specified in such Submitted Bid and the
denominator of which shall be the sum of the number of Series 2
Preference Shares subject to Submitted Bids made by all
Potential Holders who specified a rate equal to the Winning Bid
Rate.
(b) If Sufficient Clearing Bids have not been made (other than because
all of the Series 2 Preference Shares are subject to Submitted Hold
Orders), subject to the provisions of sections V.4.(c) and V.4.(d)
hereof, Submitted Bids and Submitted Sell Orders shall be accepted or
rejected in the following order of priority and all other Submitted
Bids shall be rejected:
(i) the Submitted Bid of each Existing Holder specifying any rate
that is equal to or lower than the Maximum Rate shall be
accepted, thus entitling that Existing Holder to continue to
hold the Series 2 Preference Shares that are the subject of such
Submitted Bid;
(ii) the Submitted Bid of each Potential Holder specifying any rate
that is equal to or lower than the Maximum Rate shall be
accepted, thus requiring such Potential Holder to purchase the
number of Series 2 Preference Shares specified in such Submitted
Bid; and
(iii) the Submitted Bid of each Existing Holder specifying any rate
that is higher than the Maximum Rate shall be rejected and the
Submitted Sell Order of each Existing Holder shall be accepted,
thus requiring each such Existing Holder to sell Series 2
Preference Shares but only in an amount equal to the number of
Series 2 Preference Shares obtained by multiplying the aggregate
number of Series 2 Preference Shares subject to Submitted Bids
described in paragraph (ii) of this section V.4.(b) by a
fraction, the numerator of
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which shall be the number of Series 2 Preference Shares
held by such Existing Holder subject to such Submitted
Bid or Submitted Sell Order and the denominator of which
shall be the number of Series 2 Preference Shares
subject to all such Submitted Bids and Submitted Sell
Orders.
(c) If, as a result of the procedures described in section V.4.(a)
or V.4.(b) hereof, any Existing Holder would be entitled or
required to sell, or any Potential Holder would be entitled or
required to purchase, a fraction of a Series 2 Preference Share
on any Settlement Date, the Auction Manager shall, in such
manner as it shall determine in its sole discretion, round up or
down the number of Series 2 Preference Shares to be purchased or
sold by any Existing Holder or Potential Holder on such
Settlement Date so that the number of shares purchased or sold
by each Existing Holder or Potential Holder shall be whole
Series 2 Preference Shares.
(d) If, as a result of the procedures described in section V.4.(a)
hereof, any Potential Holder would be entitled or required to
purchase a fraction of a Series 2 Preference Share on any
Settlement Date, the Auction Manager shall, in such manner as it
shall determine in its sole discretion, allocate shares for
purchase among Potential Holders so that only whole Series 2
Preference Shares are purchased on such Settlement Date by any
Potential Holder, even if such allocation results in one or more
of such Potential Holders not purchasing Series 2 Preference
Shares on such Settlement Date.
(e) Based on the results of each Auction, the Auction Manager shall
determine to which Potential Holder or Potential Holders
purchasing Series 2 Preference Shares an Existing Holder or
Existing Holders shall sell Series 2 Preference Shares being
sold by such Existing Holder or Existing Holders. Such purchases
and sales of Series 2 Preference Shares shall be completed in
accordance with the procedures specified in the Purchaser's
Letter on the Settlement Date by payment by each Potential
Holder purchasing Series 2 Preference Shares of the aggregate
purchase price of the Series 2 Preference Shares to be purchased
from a relevant Existing Holder equal to $500,000 per Series 2
Preference Share against delivery by such Existing Holder
selling Series 2 Preference Shares to such Potential Holder of a
certificate or certificates representing the number of Series 2
Preference Shares being sold, duly endorsed for transfer.
<PAGE> 85
- 35 -
5. MISCELLANEOUS
Notwithstanding the provisions of Part V hereof, the Auction
Manager shall not follow the Auction Procedures on the Auction Date immediately
preceding: (i) the Redemption Date in the event that written notice of
redemption of all the outstanding Series 2 Preference Shares has been given
pursuant to the provisions of section II.5. hereof or (ii) the first day of a
Corporation Determined Term or Dealer Determined Term.
In the event that there is any inconsistency, ambiguity or
uncertainty in the interpretation or application of the procedures set forth in
this Part, the board of directors of the Corporation (or any person or persons
designated by the board of directors) may, in such manner as it shall determine
in its sole discretion, interpret such procedures in order to deal with any
such inconsistency, ambiguity or uncertainty and any such determination
evidenced by a certificate of the Secretary of the Corporation (which shall be
provided to holders of Series 2 Preference Shares) shall be conclusive.
<PAGE> 1
EXHIBIT 3.2
BY-LAW NO. 1
A BY-LAW RELATING GENERALLY TO
THE TRANSACTION OF THE BUSINESS
AND AFFAIRS OF
GULF CANADA RESOURCES LIMITED
(hereinafter referred to as the "Corporation")
BE IT ENACTED as a by-law of the Corporation as follows:
DIRECTORS
1. QUORUM
A majority of directors shall constitute a quorum for the transaction
of business at any meeting of directors.
2. MEETINGS OF DIRECTORS
Directors' meetings may be called by the Chairman of the Board (if
any), the President, a Vice-President who is a member of the board, any two
directors, or by the Secretary on the direction of any of the foregoing.
Notices of meetings shall be delivered, mailed, telephoned or telegraphed to
each director not less than 48 hours before the date of the meeting provided
that meetings of the board may be held at any time without notice if all the
directors are present or if all the absent directors have waived notice.
Notice of any meeting of directors or any irregularity in any meeting or in the
notice thereof may be waived by any director either before or after the
meeting. No notice of the first meeting of directors to be held following the
election of directors at a meeting of the shareholders need be given in order
for the meeting to be duly constituted, provided a quorum of the directors is
present.
3. VOTES TO GOVERN
At all meetings of the board, every question shall be decided by a
majority of the votes cast on the question; and in case of an equality of
votes, the chairman of the meeting in addition to his original vote shall be
entitled to a second or casting vote.
4. INTEREST OF DIRECTORS AND OFFICERS GENERALLY IN CONTRACTS
No director or officer shall be disqualified by his office from
contracting with the Corporation nor shall any contract or arrangement entered
into by or on behalf of the Corporation with any director or officer or in
which any director or officer is in any way interested be liable to be voided
nor shall any director or officer so contracting or being so interested be
Iiable to account to the Corporation for any profit realized by any such
contract or arrangement by reason of such director or officer holding that
office or of the fiduciary relationship thereby established; provided that the
director or officer shall have complied with the provisions of the Act.
<PAGE> 2
INDEMNIFICATION
5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall indemnify a director or officer of the
Corporation, a former director or officer of the Corporation or a person who
acts or acted at the Corporation's request as a director or officer of a body
corporate of which the Corporation is or was a shareholder or creditor, and his
heirs and legal representatives to the extent permitted by the Act and by law.
The Corporation is authorized to enter into any agreements evidencing its
indemnity in favour of the foregoing persons to the full extent permitted by
law.
6. INDEMNITY OF OTHERS
Except as otherwise required by the Act and subject to paragraph 5,
the Corporation may from time to time indemnify and save harmless any person
who was or is, a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was an employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, agent of or participant in another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including legal fees), judgments, fines and any amount actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
honestly and in good faith with a view to the best interests of the
Corporation, and with respect to any criminal or administrative action or
proceeding that is enforced by a monetary penalty, had reasonable grounds for
believing that his conduct was lawful. The termination of any action, suit or
proceeding by judgment, order, settlement, or conviction, shall not, of itself,
create a presumption that the person did not act honestly and in good faith
with a view to the best interests of the Corporation, and, with respect to any
criminal or administrative action or proceeding that is enforced by a monetary
penalty, had no reasonable grounds for believing that his conduct was lawful.
7. RIGHT OF INDEMNITY NOT EXCLUSIVE
The provisions for indemnification contained in the by-laws of the
Corporation shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall enure to the benefit of the heirs,
executors and administrators of such a person.
8. NO LIABILITY OF DIRECTORS OR OFFICERS FOR CERTAIN ACTS, ETC.
To the extent permitted by law, no director or officer for the time
being of the Corporation shall be liable for the acts, receipts, neglects or
defaults of any other director or officer or employee or for joining in any
receipt or act for conformity or for any loss, damage or expense happening to
the Corporation through the insufficiency or deficiency of title to any
property acquired by the Corporation or for or on behalf of the Corporation or
for the insufficiency or deficiency of any security in or upon which any of the
moneys of or belonging to
<PAGE> 3
the Corporation shall be placed out or invested or for any loss or damage
arising from the bankruptcy, insolvency or tortious act of any person, firm or
corporation with whom or which any moneys, securities or effects shall be
lodged or deposited or for any loss, conversion, misapplication or
misappropriation of or any damage resulting from any dealings with any moneys,
securities or other assets belonging to the Corporation or for any other loss,
damage or misfortune whatever which may happen in the execution of the duties
of his respective office or trust or in relation thereto unless the same shall
happen by or through his failure to act honestly and in good faith with a view
to the best interests of the Corporation and in connection therewith to
exercise the care, diligence and skill that a reasonably prudent person would
exercise in comparable circumstances. If any director or officer of the
Corporation shall be employed by or shall perform services for the Corporation
otherwise than as a director or officer or shall be a member of a firm or a
shareholder, director or officer of a corporation which is employed by or
performs services for the Corporation, the fact of his being a director or
officer of the Corporation shall not disentitIe such director or officer or
such firm or corporation as the case may be, from receiving proper remuneration
for such services.
OFFICERS
9. APPOINTMENT OF OFFICERS
The directors shall annually or as often as may be required appoint a
President and a Secretary and may designate such other officers of the
Corporation and appoint such other officers as they may consider advisable.
None of such officers need be a director of the Corporation.
10. DUTIES OF OFFICERS
The officers shall perform such duties as may be specified by the directors.
11 REMOVAL OF OFFICERS
All officers shall be subject to removal by the directors at any time,
with or without cause.
SHAREHOLDERS
12. PLACE OF MEETINGS
Meetings of shareholders of the Corporation may be held at such place
or places within Canada that the directors may from time to time determine.
13. VOTES
Every question submitted to any meeting of shareholders shall be
decided in the first instance on a show of hands and in case of an equality of
votes the chairman of the meeting shall both on a show of hands and at a poll
have a second or casting vote in addition to the vote or votes to which he may
be entitled as a shareholder or proxy nominee.
<PAGE> 4
14. QUORUM
A quorum for any meeting of shareholders shall be persons present not
being less than 2 in number and holding or representing by proxy not less than
501 per cent of the total number of the issued shares of the Corporation for
the time being enjoying voting rights at such meeting.
BANKING ARRANGEMENTS, CONTRACTS, ETC.
15. BANKING ARRANGEMENTS
The banking business of the Corporation, or any part thereof, shall be
transacted with such banks, trust companies or other financial institutions as
the board may designate, appoint or authorize from time to time by resolution
and all such banking business, or any part thereof, shall be transacted on the
Corporation's behalf by such one or more officers and/or other persons as the
board may designate, direct or authorize from time to time by resolution and to
the extent therein provided.
16. EXECUTION OF INSTRUMENTS
Contracts, documents or instruments in writing requiring execution by
the Corporation may be signed by any two directors or by any two of the
Chairman of the Board, the President, a Vice-President and the Treasurer or by
any one of the foregoing together with the Secretary or an Assistant Secretary.
The Secretary or an Assistant Secretary shall affix the corporate seal to such
instruments as require the same. The board is authorized from time to time by
resolution to appoint any officer or officers or any other person or persons on
behalf of the Corporation to sign and deliver either contracts, documents or
instruments in writing generally or to sign either manually or by facsimile
signature and deliver specific contracts, documents or instruments in writing.
The term "contracts, documents or instruments in writing" as used in this
by-law shall include deeds, mortgages, charges, conveyances, transfers and
assignments of property of all kinds including specifically, but without
limitation, transfers and assignments of shares, warrants, bonds, debentures or
other securities and all paper writings.
MISCELLANEOUS
17. VOTING SECURITIES IN OTHER ISSUERS
All securities of any other body corporate or issuer of securities
held from time to time by the Corporation may be voted at all meetings of
shareholders, bondholders, debenture holders or holders of such securities, as
the case may be, of such other body corporate or issuer and in such manner and
by such person or persons as the directors of the Corporation shall from time
to time determine.
18. INVALIDITY OF ANY PROVISIONS OF THIS BY-LAW
The invalidity or unenforceability of any provision of this by-law
shall not affect the validity or enforceability of the remaining provisions of
this by-law.
__________________________________
1 amended in 1996 to 5 per cent
<PAGE> 5
19. FINANCIAL YEAR
The financial year of the Corporation shall terminate on such date in
each year as the board may from time to time by resolution determine.
INTERPRETATION
20. In this by-law and all other by-laws of the Corporation, words
importing the singular number only shall include the pIural and vice versa;
wording importing the masculine gender shall include the feminine and oneuter
genders; words importing persons shall include an individual, partnership,
association, body corporate, executor, administrator or legal representative
and any number or aggregate of persons; "articles" include the original or
restated articles of incorporation, articles of amendment, articles of
amalgamation, articles of continuance, articles of arrangement, articles of
reorganization and articles of revival; "board" shall mean the board of
directors of the Corporation; "Act" shall mean the Canada Business Corporations
Act, S.C. 1974-75, Chapter 33 as amended from time to time or any act that may
hereafter be substituted therefor; and "meeting of shareholders" shall mean and
include an annual meeting of shareholders and a special general meeting of
shareholders.
Passed by the Board of Directors on December 12,1985.
<PAGE> 6
BY-LAW NO. 2
A BY-LAW RESPECTING THE BORROWING
OF MONEY, THE ISSUING OF SECURITIES
AND THE SECURING OF LIABILITIES BY
GULF CANADA RESOURCES LIMITED
(hereinafter referred to as the "Corporation")
BE IT ENACTED as a by-law of the Corporation as follows:
1. Without limiting the borrowing powers of the Corporation as set forth
in the Act, the board may from time to time:
(a) borrow money upon the credit of the Corporation;
(b) issue, reissue, sell or pledge bonds, debentures, notes or
other evidence of indebtedness or guarantee of the Corporation,
whether secured or unsecured; and
(c) mortgage, hypothecate, pledge or otherwise create an interest
in or charge upon all or any property (including the undertaking and
rights) of the Corporation, owned or subsequently acquired to secure
payment of any such evidence of indebtedness or guarantee of the
Corporation.
Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Corporation.
2. The Board may from time to time delegate to such one or more of the
directors and officers of the Corporation as may be designated by the board all
or any of the powers conferred on the board by section 1 of this by-law or by
the Act to such extent and in such manner as the board shall determine at the
time of each such delegation.
Passed by the Board of Directors on December 12,1985
<PAGE> 1
EXHIBIT 10.2
GULF CANADA RESOURCES LIMITED
- and -
THE LENDERS NAMED HEREIN
- and -
BANK OF MONTREAL
(AS AGENT FOR THE LENDERS)
- --------------------------------------------------------------------------------
LOAN AGREEMENT
- --------------------------------------------------------------------------------
JULY 18, 1997
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Certain Rules of Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.3 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.4 Cross-References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.5 Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.6 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.7 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE II
THE FACILITY
2.1 The Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.3 Availment of Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.4 Drawdown Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.5 Notice of Drawdown to Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.6 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.7 Funding Reliance; Lender's Failure to Fund . . . . . . . . . . . . . . . . . . . . . . . . 30
2.8 Several Funding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.9 Pro-Rata Treatment of Drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.10 Restrictions on Drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.11 Conversion Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.12 Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.13 Evidence of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.14 Netting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE III
FURTHER PROVISIONS RELATING TOLIBOR DRAWDOWNS, BANKERS' ACCEPTANCES AND LETTERS OF CREDIT
3.1 Effects of Change of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.3 Bankers' Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.4 Issuance of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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ARTICLE IV
PAYMENT OF INTEREST AND OTHER FEES
4.1 Interest on Prime Rate Drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.2 Interest on Base Rate Drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.3 Interest on Libor Drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.4 Stamping Fees on Bankers' Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.5 Fees for Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.6 Incremental Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.7 Interest on Unpaid Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.8 Annual Rates of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.9 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.10 Limitation on Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.11 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.12 Waiver of Judgment Interest Act (Alberta) . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE V
REPAYMENTS AND PREPAYMENTS
5.1 Amounts Under Facility May be Reborrowed . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.2 Mandatory Facility Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.3 Repayment under the Facility after Term Out Date . . . . . . . . . . . . . . . . . . . . . 45
5.4 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.5 Currency Fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.6 Voluntary Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI
CONDITIONS PRECEDENT TO DRAWDOWNS
6.1 Conditions Precedent to First Drawdown . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.2 Conditions Precedent to All Drawdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VII
BORROWER'S REPRESENTATIONS AND WARRANTIES
7.1 Borrower's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VIII
COVENANTS
8.1 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.2 Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.3 Restricted/Unrestricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
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8.4 Certain Requirements in Respect of Mergers, etc. . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.2 Termination and Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.3 Remedies Cumulative and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.4 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE X
THE AGENT AND THE LENDERS
10.1 The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.2 The Agent's Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.3 The Agent's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.4 Protection of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.5 Indemnification of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.6 Termination or Resignation of an Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.7 Rights of the Agent as Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.8 Financial Information Concerning Gulf . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.9 Knowledge of Financial Situation of the Borrower . . . . . . . . . . . . . . . . . . . . . 73
10.10 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.11 Capacity as Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE XI
PAYMENT
11.1 Payments to Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.2 Payments by Lenders to Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.3 Payments by Agent to Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.4 No Set-Off or Counterclaim by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.5 Non-Receipt by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.6 When Due Date Not Specified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.7 Agent's Authority to Debit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE XII
GENERAL
12.1 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.2 Indemnifications by the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
12.3 Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
12.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
12.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
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12.6 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
12.7 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
12.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
12.9 Whole Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
12.10 Binding Effect; Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
12.11 Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
</TABLE>
<TABLE>
<S> <C>
Schedule A - Schedule of Lenders
Schedule B - Compliance Certificate
Schedule C - Drawdown Notice
Schedule D - Bankers' Acceptance Undertaking
Schedule E - Extension Agreement
Schedule F - Extension Request
Schedule G - Bank Transfer Agreement
Schedule H - Borrower's Counsel's Opinion
Schedule I - Lenders' Counsel's Opinion
Schedule J - Notice of Amendment of Unrestricted Subsidiaries
Schedule K - Letter of Credit Documentation
Schedule L - List of Unrestricted Subsidiaries
</TABLE>
-iv-
<PAGE> 6
LOAN AGREEMENT
THIS AGREEMENT, made as of the 18th day of July, 1997,
B E T W E E N:
GULF CANADA RESOURCES LIMITED, a corporation governed by the
laws of Canada
(hereinafter called the "Borrower")
- and -
THE LENDERS NAMED IN SCHEDULE A to this Agreement as amended
from time to time
(hereinafter called the "Lenders")
- and -
BANK OF MONTREAL, a bank existing under the laws of Canada, as
the Agent on behalf of the Lenders
(hereinafter, in such capacity, called the "Agent")
WITNESSES THAT WHEREAS the Borrower has requested the Facility
(as hereinafter defined) for general corporate purposes and the Lenders have
agreed to provide the Facility to the Borrower on the terms and conditions
herein set forth;
NOW THEREFORE in consideration of the premises and mutual
agreements and covenants contained in this Agreement and other good and
valuable consideration (the receipt and adequacy of which are hereby mutually
acknowledged), the Parties hereby agree as follows:
<PAGE> 7
- 2 -
ARTICLE I
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions - Whenever used in this Agreement, unless there is
something inconsistent in the subject matter or context, the following words
and terms shall have the meaning set out below:
"ADVANCE" means a utilization of the Facility by the Borrower by way
of a Prime Rate Drawdown, Base Rate Drawdown, Libor Drawdown, Bankers'
Acceptance Drawdown or L/C Drawdown from a Lender, in each case, in
accordance herewith;
"AGENT" means Bank of Montreal or such other Person as shall have been
appointed as a successor agent pursuant to Section 10.6;
"AGREEMENT" means this agreement, including all schedules and all
instruments supplementing or amending this Agreement, "HEREOF",
"HERETO" and "HEREUNDER" and similar expressions mean and refer to
this Agreement and not any particular article or section of this
Agreement;
"APPLICABLE LAW" means, with respect to any Person, property,
transaction or event, and whether or not having the force of law, all
applicable laws, statutes, regulations, rules, guidelines, by-laws,
treaties, orders, policies, judgments, decrees and official directives
of Government Authorities or Persons acting under the authority of any
Government Authority including, for greater certainty, the proposals
for international convergence of capital measurement and capital
standards developed by the Bank for International Settlements subject
to the implementation measures to be adopted in Canada in respect
thereto as referred to in a bulletin of the Office of the
Superintendent of Financial Institutions Canada dated August 19, 1988;
"APPLICABLE SPREAD" means, at any time, the number of Basis Points, if
any, by which the number of incremental Basis Points, at such time,
applicable in respect of Bankers' Acceptances exceeds the number of
incremental Basis Points, at such time, applicable in respect of Prime
Rate Drawdowns;
"AUDITORS" means the present auditors of the Borrower or such other
national firm of chartered accountants who from time to time may
become the auditors of the Borrower;
"AVAILABLE FACILITY AMOUNT" means at any time U.S. $700,000,000 (as
reduced or cancelled from time to time in accordance herewith) less
the aggregate Outstanding Amount at such time;
"BANKERS' ACCEPTANCE" means a non-interest bearing bill of exchange in
Canadian Dollars, having a term of not less than 10 nor more than 183
days and maturing on a Business Day,
<PAGE> 8
- 3 -
drawn by the Borrower and accepted by the Lender as evidenced by the
Lender's endorsement thereof at the direction of the Borrower;
"BANKERS' ACCEPTANCE DRAWDOWN" means a Drawdown in Canadian Dollars
effected by the sale or purchase of a Bankers' Acceptance pursuant to
the terms of this Agreement;
"BANKERS' ACCEPTANCE LOAN" means, at any time, the aggregate face
amount of all Bankers' Acceptances then outstanding as a result of all
Bankers' Acceptance Drawdowns;
"BANKERS' ACCEPTANCE PROCEEDS" means, in respect of each Bankers'
Acceptance Drawdown, funds in an amount which is equal to:
Face Amount
-----------------
1 + (Rate x Term)
-------------
365
(where "Face Amount" is the principal amount of the Bankers'
Acceptance being purchased, "Rate" is the Reference BA Discount Rate
divided by 100 and "Term" is the number of days in the term of the
Bankers' Acceptance), less the applicable stamping fees in respect
thereof;
"BANKERS' ACCEPTANCE UNDERTAKING" means an agreement substantially in
the form set forth in Schedule D;
"BASE RATE" means, at any time, the rate of interest, expressed as an
annual rate on the basis of a year of 365 days, or 366 days in the
case of a leap year, established by the Agent from time to time as the
reference rate of interest it will charge for loans made in Canada in
U.S. Dollars to Canadian customers;
"BASE RATE DRAWDOWN" means a Drawdown in U.S. Dollars with respect to
which the Borrower has elected or is deemed to have elected to have
interest calculated by reference to the Base Rate or to which, in
accordance with the provisions of this Agreement, the Base Rate is
deemed or stated to apply;
"BASE RATE LOAN" means, at any time, the aggregate of the principal
amounts of all Base Rate Drawdowns then outstanding;
"BASIS POINTS" OR "BP" means one one-hundredth (0.01) of one percent;
"BLOCK A PROJECT" means the project for the commercial development of
gas reserves located in the Block "A" Production Sharing Contract area
in Aceh province, Sumatra, Indonesia;
"BUSINESS DAY" means a day on which banks are open for business in
Calgary and Toronto which is not a Saturday or a Sunday and,
additionally, in respect of any Libor Drawdown or
<PAGE> 9
- 4 -
Libor Loan, a day on which dealings in United States Dollar deposits
are transacted in the London eurodollar interbank market;
"CANADIAN DOLLARS" and the symbol "CDN. $" mean the lawful currency of
Canada;
"CBRS " means C.B.R.S. Inc. carrying on business as "Canadian Bond
Rating Service" and its successors;
"CHANGE OF CONTROL" means the acquisition, directly or indirectly, of
more than 50% of the Voting Securities of the Borrower by any Person
(or group of Persons acting in concert with respect to the ownership
or voting of such Voting Securities), provided that any such
acquisition by The Torch Group (being those parties other than the
Borrower and A&G Resources Corporation to the Shareholders Agreement
dated January 25, 1995) shall not be considered to be a Change of
Control;
"COMMITMENT" means, with respect to each Lender, such Lender's
obligation to make Advances hereunder pursuant to Section 2.1;
"COMMITMENT AMOUNT" has the meaning ascribed to it in Section 2.1;
"COMMODITY SWAP" means an agreement entered into between the Borrower
and a counterparty on a case by case basis, the purpose and effect of
which is to mitigate or eliminate the Borrower's exposure to
fluctuations in commodity prices;
"COMPLIANCE CERTIFICATE" means a certificate of the Borrower
substantially in the form set out in Schedule B and signed by a senior
officer (including the President, any Vice-President, the Treasurer or
any Assistant Treasurer) of the Borrower;
"CONFLICTED LENDER" means, with respect to any Potentially Hostile
Acquisition, a Revolving Lender that is the lead bank, lead agent or
sole lender to the Person who is the target of such Potentially
Hostile Acquisition;
"CONVERSION" means a conversion of a Drawdown pursuant to Section
2.11;
"CORRIDOR PROJECT" means the project for the commercial development of
gas reserves from the Corridor Block Production Sharing Contract area
of South Sumatra, Indonesia and associated lands;
"CORRIDOR SUPPORT AGREEMENT" means the Sponsor Support Agreement dated
February 26, 1997 between the Borrower and The Sumitomo Bank, Limited,
as agent for the lenders for the Corridor Project, a copy of which has
been provided by the Borrower to the Agent;
<PAGE> 10
- 5 -
"CURRENCY SWAP" means a contract entered into between the Borrower and
a counterparty on a case by case basis in connection with forward
rate, currency swap or currency exchange and other similar currency
related transactions, the purpose and effect of which is to mitigate
or eliminate the Borrower's exposure to fluctuations in exchange
rates;
"DATE OF CONFIRMATION" means, in the case of any extension of the Term
Out Date in accordance with Section 2.1, the earliest of: (i) the date
the Agent gives notice to the Borrower that each of the Revolving
Lenders has executed and delivered to the Agent the Extension
Agreement; (ii) the date the Borrower (provided the Borrower is
entitled to do so) provides the notice to the Agent of its election
pursuant to paragraph 2.1(c)(i) or 2.1(c)(ii) to extend the Term Out
Date with respect to the Commitments of the Extending Lenders; and
(iii) the Term Out Date as the same was determined prior to the
Extension Request to which the Extension Agreement relates;
"DBRS" means Dominion Bond Rating Service Limited and its successors;
"DESIGNATED PROJECT GUARANTEES" means, collectively, all Financial
Guarantees in respect of the Corridor Project and the Block A Project,
including the Corridor Support Agreement (and any other project of
Gulf that the Borrower requests, and the Majority Lenders agree, be
included in this paragraph) in respect of which any Person has or may
have recourse to any member of the Restricted Group;
"DRAWDOWN" means an Advance, a Conversion or a Rollover, as the
context requires;
"DRAWDOWN DATE" means the date proposed for a Drawdown requested by
the Borrower pursuant to the provisions of this Agreement;
"DRAWDOWN NOTICE" means a notice by the Borrower to the Agent in
respect of a Drawdown, given either in writing or by fax (in the case
of fax notice with prompt original written confirmation thereof
pursuant to the provisions of Section 2.4) substantially in the form
set forth in Schedule C;
"EBITDA" means with respect to any period, the earnings (loss) from
continuing operations in the ordinary course of business (which for
certainty shall not include gains or losses from sales of assets and
sales of securities other than sales described in subsection
5.2(a)(i), (ii) and (iii) and shall not include dividends and other
earnings distributed to the Restricted Group by Unrestricted
Subsidiaries) before income taxes of the Borrower and the Restricted
Group (determined on a consolidated basis for such entities in
accordance with GAAP) plus, to the extent deducted in the
determination of the foregoing, without duplication, the sum of: (i)
interest expense, (ii) depreciation and depletion expense, (iii)
amortization expense, (iv) expensed exploration (in accordance with
the successful efforts method of accounting), and (v) any other
non-cash charges;
"EFFECTIVE DATE" means the date of this Agreement;
<PAGE> 11
- 6 -
"ELIGIBLE LENDER" means, any of the Lenders and/or any other financial
institution(s) resident in Canada for purposes of the Income Tax Act
(Canada) and listed in Schedule I or Schedule II to the Bank Act
(Canada) acceptable to the Borrower and the Agent, each acting
reasonably;
"ELIGIBLE PARTNERSHIP" means a partnership formed pursuant to the laws
of the Province of Alberta, all the interests of which from and after
the transfer of assets hereinafter mentioned are owned by the Borrower
and Restricted Subsidiaries and to which all or substantially all of
the assets of the Borrower have been transferred in accordance with
Section 8.4;
"ENVIRONMENTAL APPROVALS" means all applicable permits, licences,
authorizations, consents, directions or approvals required by
Government Authorities pursuant to the Environmental Laws with respect
to the operation of Gulf's business;
"ENVIRONMENTAL LAWS" means in respect of any jurisdiction, Canadian or
foreign, all laws, by-laws, rules, regulations, orders, codes and
judgments of any Government Authority relating to the protection of
the environment and public health and safety and, without restricting
the generality of the foregoing, includes without limitation those
Environmental Laws relating to the storage, transportation, treatment
and disposal of Hazardous Substances, product safety, and the
emission, discharge, release or threatened release of Hazardous
Substances into the air, surface water, ground water, land surface,
subsurface strata or any building or structure and, in each such case,
as such Environmental Laws may be amended or supplemented from time to
time;
"EQUITY" means, in respect of any body corporate, the aggregate of:
(i) the share capital attributable to the issued shares, or any right
to acquire shares, outstanding on the date of determination,
(excluding, in the case of the Borrower, any share capital
attributable to securities, or any right to acquire securities, in
each case, other than Equity Shares); (ii) (without duplication) any
surplus (whether contributed or capital); (iii) any retained earnings
(or deficit); and (iv) any cumulative foreign currency translation
adjustment; in each case, of the body corporate and as determined in
accordance with GAAP;
"EQUITY SHARES" means the ordinary shares and Preferred Shares of the
Borrower as constituted on the Effective Date and shares, issued after
the Effective Date, of any class or series of shares of the Borrower
provided that the rights, privileges, terms and conditions of or
attaching to such shares (whether as set forth in the constating
documents of the Borrower or in any agreement or understanding with
the Borrower, any Subsidiary or any Person not acting at arm's length
with the Borrower) do not entitle the holder thereof to redeem,
retract or otherwise have the shares repurchased or retired in whole
or in part other than by the issuance of securities that are,
themselves, Equity Shares as otherwise defined herein;
"EQUIVALENT AMOUNT" means, on any date, the amount of Canadian Dollars
or United States Dollars, as the case may be, which can be purchased
with the specified amount of United
<PAGE> 12
- 7 -
States Dollars or Canadian Dollars, as the case may be, at the
applicable Exchange Rate on that date;
"EVENT OF DEFAULT" means any of the events described in Section 9.1;
"EXCHANGE RATE" means, on any date, for any conversion of United
States Dollars into Canadian Dollars, or vice versa, the applicable
spot buying rate for Canadian Dollars or United States Dollars, as the
case may be, reported by the Bank of Canada as its daily official noon
(Toronto time) rate of exchange on such date if it is a Business Day
or on the immediately preceding Business Day if such date is not a
Business Day;
"EXISTING ACQUISITION FACILITY" means the facilities provided pursuant
to the amended and restated loan agreement made as of December 17,
1996, between the Borrower, Bank of Montreal, as agent and
underwriter, and the lenders named therein, and amended and restated
as of January 24, 1997;
"EXTENDING LENDERS" has the meaning ascribed to it in Section 2.1;
"EXTENSION AGREEMENT" means an agreement substantially in the form set
forth in Schedule E;
"EXTENSION REQUEST" means a document substantially in the form set
forth in Schedule F, accompanied by an Extension Agreement duly
completed and executed by the Borrower;
"FACILITY" has the meaning ascribed to it in Section 2.1;
"FACILITY AMOUNT" means the aggregate of the Outstanding Amount and
the Available Facility Amount;
"FAIR MARKET VALUE" means the highest price available in an open and
unrestricted market between informed, prudent parties, acting at arm's
length and under no compulsion to act, expressed in terms of money or
money's worth;
"FINANCIAL GUARANTEE" means, without duplication, any Guarantee and
any undertaking to assume, guarantee, endorse, contingently agree to
purchase or to provide funds for the payment of, or otherwise become
liable in respect of, any indebtedness, liability or obligation of any
Person provided in connection with, or as a condition of, the
availability or provision of Funded Debt to any other Person
(including the Corridor Support Agreement, but excluding any Guarantee
or undertaking that: (A) would otherwise be a Financial Guarantee but
in respect of which recourse is limited to securities of an
Unrestricted Subsidiary; or (B) which is provided by a member of the
Restricted Group in respect of any indebtedness, liabilities or
obligations of a member of the Restricted Group); provided, at any
particular time, that the amount of each Financial Guarantee shall be
deemed to be the amount guaranteed thereby determined as at such time,
unless the Financial Guarantee is limited to
<PAGE> 13
- 8 -
a specified amount or to realization on specified assets, in which
case the amount of such Financial Guarantee shall be deemed to be the
lesser of (i) such specified amount or the Fair Market Value of such
specified assets, as the case may be, and (ii) the amount guaranteed
thereby;
"FINANCIAL STATEMENTS" means the financial statements of Gulf for the
fiscal year ended December 31, 1996, consisting of the balance sheet
and the statements of income, retained earnings and changes in
financial position and all notes to such financial statements as
reported upon by Ernst & Young, together with the unaudited financial
statements of Gulf for the Fiscal Quarter ended March 31, 1997;
"FISCAL QUARTER" means a three month period ending on the last day of
March, June, September or December in each year;
"FUNDED DEBT" means, without duplication, (i) the amount of any
indebtedness, liabilities and obligations in respect of monies
borrowed; (ii) the book value of any capital leases or other leases
classified as debt under GAAP or for Canadian income tax purposes;
(iii) amounts constituting any Prepaid Obligation; (iv) amounts owing
as deferred consideration for the acquisition of assets or receipt of
services or both unless the same are payable on normal trade terms in
less than six months from the date such assets are acquired or such
services are received and are not the subject of any renewal or
extension provisions or arrangements (together with any Funded Debt
thereof assumed or acquired therewith); and (v) any Guarantee in
respect of Funded Debt as hereinbefore defined, but for greater
certainty, shall, in respect of the Borrower, exclude the Preferred
Shares;
"GAAP" has the meaning ascribed to it in Section 1.3;
"GOVERNMENT AUTHORITIES" means any nation or government, any province,
state, city or other political subdivision and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including without
limitation, all applicable federal, provincial and municipal agencies,
ministries, departments, inspectors and officials;
"GUARANTEE" means any undertaking to assume, guarantee, endorse,
contingently agree to purchase or to provide funds for the payment of,
or otherwise become liable in respect of, any Funded Debt of any
Person (other than an undertaking that, at any particular time, would
otherwise constitute a Guarantee but in respect of which recourse is
limited to securities of an Unrestricted Subsidiary); provided that at
any particular time, the amount of each Guarantee shall be deemed to
be the amount of the Funded Debt guaranteed thereby determined as at
such time, unless the Guarantee is limited to a specified amount or to
realization on specified assets, in which case the amount of such
guarantee shall be deemed to be the lesser of (i) such specified
amount or the Fair Market Value of such specified assets, as the case
may be, and (ii) the amount of such Funded Debt;
<PAGE> 14
- 9 -
"GULF" means the Borrower and all of its Subsidiaries;
"HAZARDOUS SUBSTANCE" means any contaminant, pollutant or hazardous
substance that is likely to cause harm or degradation to the
environment or risk to human health or safety, and without restricting
the generality of the foregoing, includes without limitation, any
pollutant, contaminant, waste, hazardous waste, toxic substance or
dangerous good which is defined or identified in any Environmental Law
or industry standard, or which is present in the environment in such
quantity or state that it contravenes any Environmental Law;
"INTER-RESTRICTED GROUP FUNDED DEBT" means Funded Debt of one or more
members of the Restricted Group owed solely to one or more other
members of the Restricted Group in respect of which Funded Debt no
Person, other than a member of the Restricted Group, has or may have
recourse to the assets of the member of the Restricted Group who has
the Funded Debt;
"INTEREST PAYMENT DATE" means,
(i) with respect to a Prime Rate Drawdown and a Base Rate
Drawdown, the first Business Day of each calendar month; and
(ii) with respect to a Libor Drawdown, the last day of the
Libor Interest Period applicable thereto and also, if the
Libor Interest Period is longer than 93 days, the last day of
each 90 day period during such Libor Interest Period or, if
any such day is not a Business Day, the Business Day next
following;
"INTEREST SWAP" means a contract entered into between the Borrower and
a counterparty on a case by case basis, in connection with interest
rate swap transactions, interest rate options, cap transactions, floor
transactions, collar transactions and other similar interest rate
related transactions, including forward rate agreements, the purpose
and effect of which is to mitigate or eliminate the Borrower's
exposure to fluctuations in interest rates;
"LENDERS" means the Lenders listed in Schedule A hereof, as amended
from time to time in accordance herewith;
"LENDING OFFICE" with respect to any Lender, means the office of such
Lender specified as its "Lending Office" opposite its name on Schedule
A or such other office of such Lender in Canada as such Lender may
from time to time specify to the Borrower and the Agent;
"L/C DRAWDOWN" means a Drawdown by way of Letter of Credit;
"LETTER OF CREDIT" means an irrevocable letter of credit or letter of
guarantee, in each case, in Canadian Dollars or U.S. Dollars issued or
that may be issued from time to time by the Lenders at the request of
the Borrower;
<PAGE> 15
- 10 -
"LETTER OF CREDIT DOCUMENTATION" means the documentation substantially
in the form set forth in Schedule K;
"LETTERS OF CREDIT LOANS" means, at any time, the aggregate of the
maximum liability undertaken by the Lenders as a result of all L/C
Drawdowns then outstanding;
"LIABILITIES" means, without duplication, all obligations, contingent
and otherwise, which are classified as liabilities in accordance with
GAAP;
"LIBOR DRAWDOWN" means a Drawdown in U.S. Dollars with respect to
which the Borrower has elected to have interest calculated by
reference to the Libor Rate or to which, in accordance with the
provisions of this Agreement, the Libor Rate is stated to apply;
"LIBOR INTEREST PERIOD" means, for any Libor Drawdown, the period of
1, 2, 3, 6 months, or such other period as may be agreed to by all
Lenders, as may be selected by the Borrower pursuant to the relevant
Drawdown Notice, commencing on the Drawdown Date of such Libor Loan,
provided that:
(i) if such Interest Period would otherwise end on a day
which is not a Business Day, such Libor Interest Period shall
end on the next following Business Day (unless such next
following Business Day is the first Business Day of a calendar
month, in which case such Libor Interest Period shall end on
the Business Day immediately preceding the day on which such
Libor Interest Period would otherwise end); and
(ii) Libor Interest Periods shall terminate on such dates
as will permit the repayment of the Facility on the dates and
in the manner provided for herein;
"LIBOR LOAN" means, at any time, the aggregate of the principal
amounts of all Libor Drawdowns then outstanding;
"LIBOR RATE" means, for the Libor Interest Period applicable to a
Libor Drawdown, the average interest rate per annum (expressed on the
basis of a 360 day year) for a period equal to the number of days in
such Libor Interest Period at which U.S. Dollar deposits are offered
for deposit in the London eurodollar interbank market at approximately
11:00 a.m. (London, England time) on the second Business Day preceding
the first day of such Libor Interest Period as published on the
Reuters Service Page LIBOR (or such other page as may, from time to
time, replace such page on that service for the purpose of displaying
the rates at which U.S. Dollar deposits are offered for deposit in the
London eurodollar interbank market) or, failing the availability of
such service, as published on page 3750 of the Telerate screen (or
such other page as may, from time to time, replace such page on that
service for the purpose of displaying the rates at which U.S. Dollar
deposits are offered for deposit in the London eurodollar interbank
market);
<PAGE> 16
- 11 -
"LOANS" means, at any time, the aggregate of all Bankers' Acceptance
Loans, Prime Rate Loans, Base Rate Loans, Libor Loans and Letters of
Credit Loans then outstanding;
"MAJORITY LENDERS" means one or more Lenders who, in the aggregate,
have outstanding more than 66 2/3% of the principal amount of the
Loans or, if no such principal amount is then outstanding, Lenders who
have more than 66 2/3% of the Commitments and except in respect of the
matters requiring approval by all Lenders as set forth in Section
12.7, any reference to Lenders in the context of a requirement for any
approval, consent or waiver shall be deemed to be a reference to
Majority Lenders;
"MATERIALLY ADVERSE" means any state of fact, change, event or
occurrence which would:
(i) materially adversely affect the Borrower's ability to
perform its obligations under, or the validity or
enforceability of, this Agreement; or
(ii) be materially adverse to the financial condition of
the Restricted Group;
"MATURITY DATE" means the date which is the fourth anniversary of the
Term Out Date;
"MINIMUM TANGIBLE NET WORTH" means Cdn. $1,300,000,000 plus 70% of
Gulf's net income (loss) determined in accordance with GAAP, for the
period commencing on March 31, 1997 and ending on the last day of the
most recently completed Fiscal Quarter on a cumulative basis, provided
that in no circumstance shall Minimum Tangible Net Worth be less than
Cdn. $1,300,000,000;
"MOODY'S" means Moody's Investors Service, Inc. and its successors;
"NET PROCEEDS" means all cash proceeds paid to the Borrower or any of
its Restricted Subsidiaries or any Unrestricted Subsidiary to the
extent distributed to the Restricted Group in respect of (i) the sale
of an asset after repayment of any debt secured by the asset or
required to be paid to complete such sale, (ii) the issuance of
securities, (iii) the secondary distribution of securities; and (iv)
such other transactions as may be approved as provided in Section 5.2,
in each case after deduction of reasonable legal and other fees,
Taxes, commissions, usual adjustments and other usual expenses, and
such other amounts as may be agreed to by the Majority Lenders;
"NON-MATERIAL RESTRICTED SUBSIDIARY" means a Restricted Subsidiary
having a gross asset value (as shown on the latest financial
statements of the Subsidiary) of less than Cdn. $1,000,000 and having
no indebtedness, liabilities or obligations in respect of which any
Person may have recourse to the Borrower or any other Restricted
Subsidiary in excess of Cdn. $1,000,000;
"NONEXTENDING LENDERS" has the meaning ascribed to it in Section 2.1;
<PAGE> 17
- 12 -
"NONREVOLVING LENDERS" means the Lenders whose Loans are in the Term
Period;
"NOTICE OF AMENDMENT OF UNRESTRICTED SUBSIDIARIES" means a notice
substantially in the form set forth in Schedule J;
"OUTSTANDING AMOUNT", with respect to any Loan or Loans outstanding
hereunder, means the aggregate amount of indebtedness of the Borrower
outstanding thereunder, excluding interest, fees and any other amounts
which have accrued but are not yet due in respect of such Loan(s);
"PARTIES" means the Borrower, the Lenders and the Agent and "PARTY"
refers to any one of them;
"PAYMENT OFFICE" means the office that is designated by the Agent to
the Borrower and Lenders from time to time as the office where
payments to be made to the Agent pursuant to this Agreement shall be
made;
"PERMITTED DESIGNATED PROJECT GUARANTEE AMOUNT" means the amount equal
to:
(i) U.S. $150,000,000; and
(ii) the amount, if any, by which:
(A) 5% of the Equity of Gulf exceeds
(B) the aggregate amount of Financial Guarantees
excluding Designated Project Guarantees;
"PERMITTED ENCUMBRANCES" means:
(i) liens or privileges imposed by law such as carriers',
warehousemens', mechanics' and materialmens' liens and
privileges; or liens and privileges arising out of judgments
or awards in respect of which an appeal or proceedings for
review are being prosecuted in good faith and with respect to
which a stay of execution shall have been secured pending such
appeal or proceedings for review or security or other
appropriate protection of its properties and assets (excluding
such security) from seizure shall have been provided; or liens
for taxes, assessments or governmental charges or levies not
at the time due or delinquent or the validity of which is
being contested at the time in good faith in proceedings
before a court or other Government Authority and in each case,
in respect of which any appropriate reserves have been taken;
or liens in favour of operators and non-operators pursuant to
oil and gas operating agreements and oil and gas facility or
pipeline operating agreements and other similar operating
agreements; undetermined or inchoate liens, privileges and
charges incidental to current operations which have not at
such time been filed
<PAGE> 18
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pursuant to law or which relate to obligations not due or
delinquent; or the deposit of cash or securities in connection
with any lien or privilege hereinbefore in this paragraph
referred to;
(ii) minor encumbrances, including, without limitation,
easements, rights of way, servitudes or other similar rights
in land granted to or reserved by other Persons, rights of way
for sewers, electric lines, telegraph and telephone lines and
other similar purposes, or zoning or other restrictions as to
the use of real property, which encumbrances, easements,
servitudes, rights of way, other similar rights and
restrictions do not in the aggregate either materially detract
from the value of the property and assets of the Restricted
Group or materially impair its use, in each case, in the
operation of Gulf's business;
(iii) the right reserved to or vested in any municipality
or governmental or other public authority by the terms of any
lease, licence, franchise, grant or permit or by any statutory
provision, to terminate any such lease, licence, franchise,
grant or permit, or to require annual or other periodic
payments as a condition of the continuance thereof;
(iv) security given to a public utility or any
municipality or governmental or other public authority when
required by such utility or municipality or other authority in
connection with the operation of Gulf's business, all in the
ordinary course of its business;
(v) the reservations, limitations, provisos and
conditions, if any, expressed in any original grants from the
Crown;
(vi) security given in respect of any Interest Swaps,
Currency Swaps or Commodity Swaps in the ordinary course of
its business provided that such security is cash, marketable
securities, a letter of credit (in respect of which the
liability is included in Total Senior Debt) or a Financial
Guarantee;
(vii) purchase money security interests as defined in the
Personal Property Security Act (Alberta) as such Act may be
amended from time to time, in the aggregate for such security
interests up to a maximum of 5% of the Equity of Gulf at the
date the security is created, incurred or assumed;
(viii) security created, incurred or assumed in the ordinary
course of business in the aggregate for such types of security
up to a maximum of 5% of the Equity of Gulf at the date the
security is created, incurred or assumed;
(ix) security created, incurred or assumed in respect of
Funded Debt of the Restricted Group in the aggregate for such
types of security up to a maximum
<PAGE> 19
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(excluding Inter-Restricted Group Funded Debt) of 5% of the
Equity of Gulf at the date the security is created, incurred
or assumed;
(x) security in respect of obligations of an Unrestricted
Subsidiary over shares of Unrestricted Subsidiaries held by
the Restricted Group;
(xi) security in respect of accounts receivable for sales
under the Receivables Purchase and Sale Agreement dated
November 29, 1994, as amended, among the Borrower, Corporate
Receivables Trust and Toronto Dominion Securities Inc., or any
replacement of such arrangement, provided that in no event
shall proceeds thereunder exceed Cdn. $125,000,000;
(xii) security in respect of Funded Debt of acquired
entities provided the same complies with subsection 8.3(b);
(xiii) security given by a Restricted Subsidiary that is a
Restricted Subsidiary pursuant to subsection 8.3(b) if such
security was given prior to the Restricted Subsidiary becoming
a Restricted Subsidiary pursuant to such paragraph;
(xiv) security given by a Restricted Subsidiary to the
Borrower or to a Restricted Subsidiary in respect of
Inter-Restricted Group Funded Debt; and
(xv) security granted by Crusader Limited (now Gulf
Australia Resources Limited) for the benefit of the holders of
certain notes issued by Crusader Limited creating a security
interest in shares of Triton Energy Corporation and property
exchanged for such shares, which notes are exchangeable for
shares of Triton Energy Corporation;
"PERSON" means any individual, sole proprietorship, partnership,
limited partnership, unincorporated association, unincorporated
syndicate, unincorporated organization, trust, body corporate, and a
natural person in his or her capacity as trustee, executor,
administrator or other legal representative or Government Authority;
"POTENTIALLY HOSTILE ACQUISITION" means the acquisition of more than
9.5% of the Voting Securities of, amalgamation or merger with, a
Person any of the securities of which are publicly traded unless the
acquisition, amalgamation or merger is approved by the board of
directors, board of trustees or other individuals in a similar
capacity of such Person;
"PREFERRED SHARES" means the Fixed/Adjustable Rate Senior Preference
Shares Series 1 and the Cumulative Redeemable Auction Perpetual Senior
Preference Shares, Series 2 of the Borrower as constituted on the
Effective Date;
"PREPAID OBLIGATIONS" means "take-or-pay" or similar prepaid
Liabilities of a Person whereby such Person is obligated to settle, at
some future date more than 60 days from the
<PAGE> 20
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date the obligation is incurred, payment in respect of petroleum
substances, whether by deliveries (accelerated or otherwise) of
petroleum substances, payment of money or otherwise howsoever;
"PREVIOUS FOUR FISCAL QUARTERS" means, at the time of any
determination, the four consecutive completed Fiscal Quarters ending
on, or last preceding, the date of such determination;
"PRIME RATE" means, at any time, the greater of: (i) the floating
annual rate of interest publicly announced from time to time by the
Agent as its prime rate, being a reference rate in effect on the date
of such announcement, based on a year of 365, or 366 days in the case
of a leap year, for Canadian dollar loans to commercial customers in
Canada; and (ii) the Agent's Reference BA Discount Rate in respect of
bankers' acceptances having a term of 30 days plus the Applicable
Spread;
"PRIME RATE DRAWDOWN" means a loan in Canadian Dollars by the Lenders
to the Borrower with respect to which the Borrower has elected, or is
deemed to have elected, to have interest calculated by reference to
the Prime Rate or to which, in accordance with the provisions of this
Agreement, the Prime Rate is deemed or stated to apply;
"PRIME RATE LOAN" means, at any time, the aggregate of the principal
amounts of all Prime Rate Drawdowns then outstanding;
"PROJECT SUBSIDIARY" means:
(i) a Subsidiary that holds the production sharing
contract(s) for the Corridor Project or the Block A Project,
being, at the Effective Date, Gulf Resources (Grissik) Ltd.
(formerly Asamera (Overseas) Limited) or Gulf Resources Aceh
Ltd. (formerly Asamera Oil Indonesia Ltd.);
(ii) a Subsidiary that directly incurs indebtedness for
borrowed money that is solely for the purpose of funding,
directly or indirectly, the investment in the Corridor Project
or the Block A Project, or any other project of Gulf that the
Borrower requests and the Majority Lenders approve;
(iii) any Subsidiary of a Subsidiary described in paragraph
(i) or (ii) or of which a Subsidiary described in paragraph
(i) or (ii) is a Subsidiary; and
(iv) any Subsidiary of a Subsidiary described in paragraph
(iii) or of which a Subsidiary described in paragraph (iii) is
a Subsidiary;
that has no material assets (other than the securities or debt of
another Project Subsidiary), liabilities or operations other than in
relation to such Project;
<PAGE> 21
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"REFERENCE BA DISCOUNT RATE" means, in respect of a Bankers'
Acceptance being accepted by a Lender on a Drawdown Date, (i) for a
Lender that is listed in Schedule I to the Bank Act (Canada), the
average bankers' acceptance rate as quoted on Reuters CDOR page (or
such other page as may, from time to time, replace such page on that
service for the purpose of displaying quotations for bankers'
acceptances accepted by leading Canadian financial institutions) at
approximately 10:00 a.m. (Toronto time) on such Drawdown Date for
bankers' acceptances having a comparable maturity date as the maturity
date of such bankers' acceptance (the "CDOR Rate"); or, if such rate
is not available at or about such time, the average of the bankers'
acceptance rates (expressed to five decimal places) as quoted to the
Agent by the Schedule I BA Reference Banks as of 10:00 a.m. (Toronto
time) on such Drawdown Date for bankers' acceptances having a
comparable maturity date as the maturity date of such Bankers'
Acceptance ; and (ii) for a Lender that is listed in Schedule II to
the Bank Act (Canada), the rate established by the Agent to be the
lesser of (A) the CDOR Rate plus 10 Basis Points; and (B) the average
of the bankers' acceptance rates (expressed to five decimal places) as
quoted to the Agent by the Schedule II BA Reference Banks as of 10:00
a.m. (Toronto time) on such Drawdown Date for bankers' acceptances
having a comparable maturity date as the maturity date of such
Bankers' Acceptance;
"REMEDIAL ORDER" means any control order, stop order or other
administrative complaint, direction, order or sanction issued, filed
or imposed by a Government Authority pursuant to the Environmental
Laws requiring any remediation or clean-up, or requiring that any
on-going activity be reduced, modified or eliminated, in each case as
a result of any release or threatened release of any Hazardous
Substance into the environment or any violation of Environmental Law;
"RESTRICTED GROUP" means, collectively, the Borrower and the
Restricted Subsidiaries;
"RESTRICTED SUBSIDIARIES" means all Subsidiaries that are not
Unrestricted Subsidiaries;
"REVOLVING LENDERS" means the Lenders the Loans of which are in the
Revolving Period;
"REVOLVING PERIOD" means, the period commencing on the Effective Date
and ending on the Term Out Date;
"ROLLOVER" means a rollover of a Drawdown pursuant to subsection
2.12(a);
"SCHEDULE I BA REFERENCE BANKS" means the Lenders listed in Schedule I
to the Bank Act (Canada) as are, at such time, designated by the
Agent, with the prior consent of the Borrower (acting reasonably), as
the Schedule I BA Reference Banks;
"SCHEDULE II BA REFERENCE BANKS" means the Lenders listed in Schedule
II to the Bank Act (Canada) as are, at such time, designated by the
Agent, with the prior consent of the Borrower (acting reasonably), as
the Schedule II BA Reference Banks;
<PAGE> 22
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"SENIOR DEBT" means all Funded Debt of the Borrower, on an
unconsolidated basis, ranking at least pari passu with the Loans and
includes, without limitation, the 9% Debentures due 1999, the 8.35%
Senior Notes due 2006, and the 8.25% Debentures due 2017;
"STANDARD & POOR'S" means Standard & Poor's Corporation and its
successors;
"SUBSIDIARY" means any body corporate in respect of which such Person
owns, directly or indirectly, more than 50% of the Voting Securities
(provided that such Person shall be deemed (for the purposes of
determining whether any body corporate is a Subsidiary) to own,
directly or indirectly, all of the Voting Securities of any Subsidiary
owned by any other Subsidiary if such Person, directly or indirectly
owns more than 50% of the Voting Securities of the second mentioned
Subsidiary), together with any other body corporate with which such
Person is consolidated in such Person's consolidated financial
statements;
"TANGIBLE NET WORTH" means the Equity of Gulf less the book value of
the intangible assets of Gulf determined in accordance with GAAP;
"TAXES" means all domestic federal or provincial taxes, imposts,
rates, levies, assessments and governmental charges including, without
limitation, all income taxes, capital gains, sales, excise, use,
property, capital, payroll, GST, business, transfer and value added
taxes and all customs and import duties, together with all interest,
fines and penalties with respect thereto;
"TERM OUT DATE" means, in respect of each Lender, the 364th day
following the Effective Date or, in respect of each Extending Lender,
in the case of any extension of such date in accordance with Section
2.1, the 364th day (or such lesser period as may be set forth in the
Extension Agreement relating to such extension) following the Date of
Confirmation;
"TERM PERIOD" means the period from the Term Out Date to the Maturity
Date;
"TOTAL SENIOR DEBT" shall include, without duplication: (i) all Funded
Debt of the Restricted Group; and (ii) for greater certainty, the
aggregate amount of Designated Project Guarantees (other than those
subordinate to the Loans) in excess of the Permitted Designated
Project Guarantees Amount, but shall exclude: (iii) the aggregate
amount of Designated Project Guarantees up to but not exceeding the
Permitted Designated Project Guarantees Amount; (iv) any
Inter-Restricted Group Funded Debt; and (v) the principal amount of
the Subordinated Debentures of Gulf outstanding as at December 31,
1996 which was U.S. $500,000,000 and any replacement subordinated
debt;
"TRANSACTION PRICE" means, in respect of any acquisition, merger,
purchase or sale, the aggregate of:
(i) in the case of an acquisition, merger or purchase,
the sum of: (A) the aggregate Fair Market Value, as of the
date of the acquisition, merger or purchase,
<PAGE> 23
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of the consideration paid or delivered by Gulf, directly or
indirectly, for the assets acquired pursuant to such
acquisition, merger or purchase; and (B) the aggregate amount
of all Liabilities assumed by Gulf, directly or indirectly, in
respect of the assets acquired pursuant to such acquisition,
merger or purchase; and
(ii) in the case of a sale, the sum of: (A) the aggregate
Fair Market Value, as of the date of the sale, of the
consideration paid or delivered to Gulf, directly or
indirectly, for the assets sold; and (B) the aggregate amount
of all Liabilities assumed by the purchaser of the assets from
Gulf, directly or indirectly, in respect of the assets sold;
"UNITED STATES DOLLARS", "U.S. DOLLARS" and the symbol "U.S.$" mean
the lawful currency of the United States of America;
"UNRESTRICTED SUBSIDIARIES" means all of the following Subsidiaries:
(i) each body corporate of which the Restricted Group
beneficially owns, directly or indirectly, less than 100% of
the Voting Securities;
(ii) any other Subsidiary that has Funded Debt unless any
one or more of the following exceptions apply:
(A) such Funded Debt is non recourse to the
Borrower or any such Restricted Subsidiary (other
than such representations, warranties and covenants
as are customary in non recourse financing not
pertaining to the payment of principal or interest);
(B) the Funded Debt is owed to a member of the
Restricted Group;
(C) the Senior Debt of the Borrower is assigned a
rating of at least BB+ by Standard and Poor's and Ba1
by Moody's and the Funded Debt of that Subsidiary
consolidated with the Funded Debt of its direct and
indirect wholly owned Subsidiaries (other than those
Subsidiaries designated as Unrestricted Subsidiaries
in accordance with subsection 8.3(d)) does not exceed
2.5 times the aggregate EBITDA of that Subsidiary
consolidated with the EBITDA of such direct and
indirect wholly owned Subsidiaries, and each such
Subsidiary shall also be a Restricted Subsidiary
(whether or not it individually meets the foregoing
test) unless the Borrower designates such Subsidiary
as an Unrestricted Subsidiary in accordance with
subsection 8.3(d);
(D) the Senior Debt of the Borrower is assigned a
rating of at least BBB- by Standard and Poor's and
Baa3 by Moody's and the Borrower is in compliance
with subsection 8.1(l);
<PAGE> 24
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(E) the Subsidiary has delivered to the Agent a
guarantee in form and substance acceptable to the
Agent, acting reasonably, pursuant to which such
Subsidiary guarantees all present and future
indebtedness and liabilities to the Lenders under
this Agreement together with an opinion in form and
substance acceptable to the Agent, acting reasonably,
including without limitation such matters as the
enforceability of such guarantee and the absence of
any conflict, breach or contravention with or of any
material agreement relating to Funded Debt, provided
however that the Agent, on behalf of the Lenders,
shall release and cancel such guarantee upon the
request of the Borrower if the Borrower subsequently
designates such Subsidiary as an Unrestricted
Subsidiary pursuant to subsection 8.3(d) or if such
Subsidiary is then qualified to be a Restricted
Subsidiary under another exception in this paragraph
(ii); or
(F) the aggregate of the Funded Debt of all such
Subsidiaries qualifying as a Restricted Subsidiary
pursuant to this paragraph (F) (excluding
Subsidiaries that are otherwise qualified to be
Unrestricted Subsidiaries pursuant to this definition
or subsection 8.3(e)) does not exceed U.S.
$10,000,000;
(iii) any other Subsidiary designated by the Borrower as an
Unrestricted Subsidiary pursuant to subsection 8.3(d);
(iv) any Subsidiary (which does not otherwise qualify as
an Unrestricted Subsidiary pursuant to the foregoing
paragraphs or paragraph (v)) the designation of which as an
Unrestricted Subsidiary is requested by the Borrower and
approved by the Majority Lenders; and
(v) any Subsidiary of a Subsidiary that is an
Unrestricted Subsidiary,
but shall not include:
(vi) any Subsidiary that would otherwise qualify as an
Unrestricted Subsidiary pursuant to paragraph (ii) if the
Subsidiary has irrevocably deposited with a trustee as trust
funds money in the respective currency in which the Funded
Debt is payable in an amount sufficient to pay and discharge
the entire indebtedness, liabilities and obligations in
respect of such Funded Debt (including interest on amounts in
default, if any) for the purpose of, specifically pledged as
security for and dedicated solely to the retirement of all of
such Funded Debt;
(vii) any Subsidiary that would otherwise qualify as an
Unrestricted Subsidiary pursuant to paragraphs (i), (ii),
(iii) or (v), the designation of which as a Restricted
Subsidiary is requested by the Borrower and approved by the
Majority Lenders; and
<PAGE> 25
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(viii) any Unrestricted Subsidiary in respect of which the
Borrower exercises the option in accordance with subsection
8.3(b) to treat such Subsidiary as a Restricted Subsidiary;
and, as at the Effective Date, all of such Unrestricted Subsidiaries
are set forth in Schedule L; and
"VOTING SECURITIES" means securities to which are attached votes that
may be cast to elect the directors, trustees or other individuals in a
similar capacity of the issuer either under all circumstances or under
some circumstances that have occurred and are continuing.
1.2 Certain Rules of Interpretation - In this Agreement:
(a) time is of the essence in the performance of the Parties'
respective obligations;
(b) the headings of Articles and Sections are inserted solely for
convenience of reference and are not intended as complete or accurate
descriptions of content;
(c) the use of words in the singular or plural, or with a
particular gender, shall not limit the scope or exclude the
application of any provision of this Agreement to such Person or
Persons or circumstances as the context otherwise permits;
(d) whenever a provision of this Agreement requires an approval or
consent by a Party to this Agreement and notification of such approval
or consent is not delivered within the applicable time limit, then,
unless otherwise specified, the Party whose consent or approval is
required shall be conclusively deemed to have withheld its consent or
approval;
(e) unless otherwise specified, time periods within or following
which any payment is to be made or act is to be done shall be
calculated by excluding the day on which the period commences and
including the day which ends the period and by extending the period to
the next Business Day following if the last day of the period is not a
Business Day; and
(f) whenever any payment is to be made or action to be taken under
this Agreement is required to be made or taken on a day other than a
Business Day, such payment shall be made or action taken on the next
Business Day following.
1.3 Accounting Principles - Wherever in this Agreement reference
is made to generally accepted accounting principles ("GAAP"), such reference
shall be deemed to be to consistently applied generally accepted accounting
principles in effect in Canada, from time to time, provided that, for greater
certainty, any change thereto shall not be applied retroactively to any
circumstance prior to such change.
1.4 Cross-References - Unless otherwise specified, references in
this Agreement to any Article, Section, subsection, paragraph or Schedule are
references to such Article, Section,
<PAGE> 26
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subsection, paragraph or Schedule of this Agreement and, unless otherwise
specified, references in any Article, Section, subsection, paragraph or
Schedule to any clause are references to such clause of such Article, Section,
subsection, paragraph or Schedule.
1.5 Ratings - A rating, whether public or private, by DBRS, CBRS,
Standard & Poor's or Moody's shall be deemed to be in effect: (i) in respect
of any determination of interest in respect of Prime Rate Drawdowns, Base Rate
Drawdowns and Libor Drawdowns on the next Interest Payment Date after receipt
by the Agent of an announcement or publication by DBRS, CBRS, Standard & Poor's
or Moody's, as the case may be, of such rating or, in the absence of such
announcement or publication, of a written statement of the rating agency and
will remain in effect until the next Interest Payment Date after the date when
any change in such rating is deemed to be in effect; and (ii) otherwise, on the
receipt by the Agent of an announcement or publication by DBRS, CBRS, Standard
& Poor's or Moody's, as the case may be, of such rating or, in the absence of
such announcement or publication, of a written statement of the rating agency
and will remain in effect until such date as any change in such rating is
deemed to be in effect.
1.6 Currency - Unless otherwise denoted or the context otherwise
requires, any references to dollars, currency or $ herein are references to
U.S. Dollars.
1.7 Schedules - The following are the Schedules to this Agreement
and are incorporated by reference and deemed to be part of this Agreement:
<TABLE>
<S> <C>
Schedule A - Schedule of Lenders
Schedule B - Compliance Certificate
Schedule C - Drawdown Notice
Schedule D - Bankers' Acceptance Undertaking
Schedule E - Extension Agreement
Schedule F - Extension Request
Schedule G - Bank Transfer Agreement
Schedule H - Borrower's Counsel's Opinion
Schedule I - Lenders' Counsel's Opinion
Schedule J - Notice of Amendment of Unrestricted Subsidiaries
Schedule K - Letter of Credit Documentation
Schedule L - List of Unrestricted Subsidiaries
</TABLE>
ARTICLE II
THE FACILITY
2.1 The Facility -
(a) Commitment - Upon the terms and subject to the conditions
herein set forth, the Lenders severally agree to establish in favour
of the Borrower a revolving/term credit facility
<PAGE> 27
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of up to a maximum of U.S. $700,000,000 (the "Facility") to be
available to the Borrower in either U.S. Dollars or the Equivalent
Amount of Canadian Dollars, or any combination thereof and otherwise
in accordance with the provisions of this Agreement from time to time
on any Business Day during the Revolving Period in an aggregate amount
not to exceed at any time the amount set forth opposite such Lender's
name on Schedule A, as reduced in accordance with this Agreement,
(being such Lender's "Commitment Amount"). Each Drawdown shall be,
for each Revolving Lender, in an aggregate amount not greater than
such Revolving Lender's Commitment Amount less the Loans owed to it
and shall consist of Advances made by it, rateably (subject to
decrease in accordance with subsections 2.6(b) and 2.6(e) and Section
5.2, increase in accordance with subsection 2.6(c) and modification in
accordance with Section 2.9) according to the proportion of the
aggregate of all Revolving Lender's Commitment Amounts constituted by
such Revolving Lender's Commitment Amount. Within the limits of each
Lender's Commitment and subject to Section 2.7, the Borrower may
borrow, repay and reborrow under this Section during the Revolving
Period. Prior to the Term Out Date, any prepayments or repayments
made by the Borrower in respect of Loans in the Revolving Period
shall not reduce the Revolving Lender's Commitment Amounts.
(b) Extension - Not more than 120 nor less than 60 days before the
Term Out Date, the Borrower may, by delivery to the Agent of an
Extension Request, request that the Revolving Lenders extend the Term
Out Date with respect to the Commitment of such Lenders as the same
was determined prior to giving effect to such Extension Request. Upon
receipt of such Extension Request, the Agent shall distribute such
Extension Request to each Revolving Lender. If the Agent receives
confirmation from each of the Revolving Lenders of their execution of
the Extension Agreement to which such Extension Notice relates within
30 days of receipt by such Lenders of the aforesaid Extension Request
from the Agent, the Term Out Date with respect to the Commitments of
such Revolving Lenders shall be extended from the date the Agent gives
notice to the Borrower that each Revolving Lender has executed and
delivered to the Agent the Extension Agreement and for the period (not
exceeding 364 days) set forth in the Extension Agreement. Anything
herein contained to the contrary notwithstanding, no Lender shall have
any obligation to extend the Term Out Date hereunder and its decision
to extend the Term Out Date shall be in its absolute discretion.
(c) Extension Options - If one or more Revolving Lenders do not
confirm their execution of the Extension Agreement to which such
Extension Notice relates within the aforesaid 30 days (such Revolving
Lenders being hereinafter referred to as "Nonextending Lenders"), the
Borrower shall be entitled to:
(i) extend the Term Out Date with respect to the
Commitments of the Revolving Lenders who have so confirmed
their execution of the Extension Agreement (such Revolving
Lenders being hereinafter referred to as the "Extending
Lenders") from the date the Borrower notifies the Agent of the
Borrower's exercise of this entitlement and for the period
(not exceeding 364 days) set forth in the Extension Agreement
and to terminate the Commitment(s) of the Nonextending
Lender(s)
<PAGE> 28
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unutilized as of the Term Out Date as the same was determined
prior to giving effect to such Extension Request; or
(ii) extend the Term Out Date with respect to the
Commitments of the Extending Lenders from the date the
Borrower notifies the Agent of the Borrower's exercise of this
entitlement and for the period (not exceeding 364 days) set
forth in the Extension Agreement; prior to the fifth Business
Day preceding the Term Out Date as the same was determined
prior to giving effect to such Extension Report, replace one
or more of the Nonextending Lenders with one or more Eligible
Lenders (in respect of whom, the Term Out Date shall be the
same date as the Term Out Date with respect to the Commitments
of the Extending Lenders); and terminate the Commitment(s) of
the Nonextending Lender(s), to the extent not so replaced,
unutilized as of the Term Out Date as the same was determined
prior to the Extension Request; or
(iii) elect to revoke such Extension Request;
provided that: (i) if the Borrower does not notify the Agent of its
election hereunder prior to the fifth Business Day preceding the Term
Out Date as the same was determined prior to giving effect to such
Extension Request with respect to the Commitments of such Revolving
Lenders, the Borrower shall be deemed to have elected to revoke such
Extension Request; and (ii) if the Commitments of the Nonextending
Lenders constitutes 25% or more of the Facility, all of the unutilized
Commitments of all Revolving Lenders shall be terminated on the Term
Out Date as the same was determined prior to giving effect to such
Extension Request and the Term Out Date shall not be extended.
(d) Cancellation of Unutilized Commitments - The unutilized
portion of the Commitment of any Nonextending Lender and of all
Revolving Lenders, if the Borrower determines or is deemed to have
elected to revoke the Extension Request, shall terminate on the Term
Out Date.
2.2 Purpose - The Facility shall be available to the Borrower for
its general corporate purposes. Advances shall be used by the Borrower (i) for
the repayment in full of the Existing Acquisition Facility and (ii) thereafter
for lawful general corporate purposes of the Borrower and its Subsidiaries
including, without limitation, the financing of oil and gas acquisitions and
exploration and development activities.
2.3 Availment of Facility -
Upon the terms and subject to the conditions herein set forth,
the Borrower may borrow under the Facility by way of:
(i) Prime Rate Drawdowns;
(ii) Base Rate Drawdowns;
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(iii) Libor Drawdowns;
(iv) Bankers' Acceptance Drawdowns; and
(v) L/C Drawdowns;
or any combination or combinations of the foregoing at the discretion of the
Borrower.
2.4 Drawdown Notices -
A Drawdown Notice shall be substantially in the form set forth
in Schedule C and shall state the type of Drawdown being requested, the
proposed Drawdown Date, together with any other information required by such
Schedule or this Section 2.4.
If a Drawdown Notice is given by fax, the Borrower shall send
to the Agent written confirmation bearing an original signature of an
authorized signatory of the Borrower of such notice within two Business Days of
the giving of such notice. Any notice on which the Agent has acted, whether
made by fax or otherwise in writing shall be irrevocable and binding on the
Borrower.
The following notice periods shall apply to each type of
Drawdown:
(a) Prime Rate Drawdowns and Base Rate Drawdowns - Subject to the
terms and conditions of this Agreement, the Borrower shall be entitled
to Prime Rate Drawdowns or Base Rate Drawdowns by giving a Drawdown
Notice to the Agent by 10:00 a.m. (Calgary time) on no less than the
number of Business Days prior to the proposed Drawdown Date set forth
below:
<TABLE>
<CAPTION>
Amount of Drawdown (U.S.) Number of Business Days
<S> <C>
$0 - $10,000,000 one
$10,000,001 - $50,000,000 two
Greater than $50,000,000 three
</TABLE>
where the Amount of Drawdown shall be based upon the currency of the
Advance proposed in the Drawdown Notice (or, where a Prime Rate
Drawdown is requested, on the Equivalent Amount in U.S. Dollars) and
more than one Drawdown Notice in respect of the same Drawdown Date
shall for the purposes of this subsection be considered one Drawdown
Notice.
(b) Libor Drawdowns - Subject to the terms and conditions of this
Agreement, the Borrower shall be entitled to Libor Drawdowns under the
Facility by delivering a Drawdown Notice to the Agent by 10:00 a.m.
(Calgary time) no less than three Business Days prior to the proposed
Drawdown Date, which notice shall also specify the principal amount of
the Drawdown and the Libor Interest Period selected in respect of such
Drawdown;
<PAGE> 30
- 25 -
(c) Bankers' Acceptance Drawdowns - Subject to the terms and
conditions of this Agreement, the Borrower shall be entitled to
Bankers' Acceptance Drawdowns under the Facility, by delivering a
Drawdown Notice to the Agent, by 10:00 a.m. (Calgary time) no less
than one Business Day prior to the proposed Drawdown Date, which
notice shall also specify the term and the aggregate face amount of
the Bankers' Acceptances to be accepted by the Lenders; and
(d) L/C Drawdowns - Subject to the terms and conditions of this
Agreement, the Borrower shall be entitled to require the Lenders to
issue Letters of Credit under the Facility by delivering a Drawdown
Notice to the Agent with respect to the Letters of Credit being
requested, by 10:00 a.m. (Calgary time) no less than five Business
Days prior to the proposed Drawdown Date;
provided that if the Drawdown is an Advance to be used in whole or in part for
any Potentially Hostile Acquisition, the Borrower shall deliver the Drawdown
Notice relating to such Drawdown an additional two Business Days prior to the
proposed Drawdown Date and the Drawdown Notice shall provide the name of the
entity subject to the Potentially Hostile Acquisition. If the Borrower intends
to use the Facility, in whole or in part, for any Potentially Hostile
Acquisition in respect of which the Transaction Price may be in excess of U.S.
$50,000,000, the Borrower shall provide written notice of its intention to so
use the Facility to the Agent within one Business Day after its public
announcement of the Potentially Hostile Acquisition and the Agent shall
forthwith and, in any event, within one Business Day of receipt of such notice
from the Borrower provide such notice to the Lenders. Each Drawdown Notice
shall be irrevocable and binding on the Borrower.
2.5 Notice of Drawdown to Lenders - Promptly upon receipt of any
Drawdown Notice or upon a drawing under any Letter of Credit, the Agent shall
notify each Lender by facsimile of the proposed Drawdown or the drawing, as
applicable, of such Lender's proportionate share thereof and of the other
matters covered by the Drawdown Notice. In the case of a proposed Bankers'
Acceptance Drawdown, the Agent shall also, on the Drawdown Date, notify each
Lender and the Borrower of the applicable Reference BA Discount Rate. In the
case of a proposed Drawdown by way of L/C Drawdown, the Agent shall also notify
each Lender of the other relevant particulars of the Drawdown. Any such notice
in respect of a drawing under a Letter of Credit shall be deemed to be a
request for a Prime Rate Drawdown if the Letter of Credit is denominated in
Canadian Dollars or a Base Rate Drawdown if the Letter of Credit is denominated
in U.S. Dollars, in the amount of such drawing with a Drawdown Date on the next
Business Day.
2.6 Funding
(a) Each Lender shall, before 11:00 a.m. (Calgary time) on the
Drawdown Date (other than in respect of Bankers' Acceptance Drawdowns
which are addressed in subsection 2.6(d)) or the date a drawing by a
beneficiary is to be made under a Letter of Credit, make available
(for the account of such Lender's Lending Office) to the Agent at its
Payment Office, in same day funds, such Lender's rateable portion
(subject to subsection 2.6(e)) of any such Drawdown (other than an L/C
Drawdown) or of such drawing under a Letter of
<PAGE> 31
- 26 -
Credit, as the case may be. In the case of a Drawdown (other than an
L/C Drawdown), upon fulfilment of the applicable conditions precedent
set forth in Article VI, the Agent will make such funds available to
the Borrower at the Payment Office. Subject to subsections 2.6(e) and
(f) in the case of an L/C Drawdown, upon fulfilment of the applicable
conditions precedent set forth in Article VI, each Lender shall issue
a Letter of Credit in the amount of such Lender's rateable portion of
the amount of the L/C Drawdown based upon such Lender's Commitment and
deliver the same to the Borrower at the Payment Office or at such
other office of the Agent as the Borrower may reasonably request, and
upon such issuance, each Lender shall be deemed to have made an
Advance to the Borrower in such amount. In the case of a drawing by a
beneficiary under a Letter of Credit, the Agent shall pay such funds
to the beneficiary thereof and the Borrower shall be deemed to have
converted such portion of the Advance which was deemed to occur on the
issuance of the Letter of Credit into a Prime Rate Drawdown if the
Letter of Credit is denominated in Canadian Dollars or a Base Rate
Drawdown if the Letter of Credit is denominated in U.S. Dollars, in
the amount of such payment on the date of such payment by the Agent;
(b) At the option of the Borrower to be exercised by delivery of
notice to that effect to the Agent at least five Business Days prior
to the date of any proposed L/C Drawdown, the Borrower may obtain from
up to five Lenders (which shall include the Agent as Lender)
designated by the Borrower in such notice a quotation of the fees
which such Lender would charge to act as issuer of the relevant Letter
of Credit to be issued in connection with the L/C Drawdown. Upon the
giving of such notice to such designated Lenders, any such Lender
(including the Agent as Lender) may provide such a quotation to the
Borrower not less than three Business Days prior to the date of the
proposed L/C Drawdown. The Borrower shall accept the tender which is
the lowest quotation tendered unless there are no quotations tendered
that are less than 0.125% per annum, or there are quotations tendered
that are equal to but no quotations less than 0.125% per annum, in
which cases the Agent shall be deemed to have tendered a quotation of
0.125% per annum and the Agent shall be chosen to issue the relevant
Letter of Credit on behalf of all Lenders (and for so doing, as set
out below, shall be entitled to such fee of 0.125%). Forthwith
following the tendering of the quotations, the Borrower shall notify
the Agent of the identity of the issuing Lender and the face amount of
the Letter of Credit to be issued. The Lender whose tender was so
selected, shall, upon the request of the Borrower, issue the relevant
Letter of Credit on behalf of all Lenders as provided in subsection
2.6(c) below, and shall be entitled to retain the full amount of the
fee quoted or deemed to have been quoted by it. All fees under this
paragraph shall be based on the face amount of the relevant Letter of
Credit and payable quarterly in arrears in the same manner as
described in Section 4.5; and
(c) In the event that pursuant to subsection 2.6(b), the Agent or
any other Lender acts as issuer of a Letter of Credit, the provisions
of this Agreement with respect to L/C Drawdowns and drawings under a
Letter of Credit shall apply mutatis mutandis and, without limiting
the generality of the foregoing, upon issuance of the relevant Letter
of Credit, each Lender shall be deemed to have made available the
relevant L/C Drawdown and shall be liable to, and hereby indemnifies,
the issuing Lender in respect of such Letter of Credit to the extent
of
<PAGE> 32
- 27 -
such Lender's ratable portion of the face amount of such Letter of
Credit, based on such Lender's Commitment. The Borrower shall provide
to the issuing Lender of such Letter of Credit such documentation (not
inconsistent with the provisions of Schedule K) as such issuing Lender
may reasonably require in connection with such Letter of Credit and
the Agent, acting reasonably, shall be entitled to determine any
procedures to be followed in connection with the issuance of such
Letter of Credit and any drawings thereunder.
(d) Each Lender shall, before 11:00 a.m. (Calgary time) on the
Drawdown Date in the case of a Bankers' Acceptance Drawdown, make
available the Bankers' Acceptance Proceeds in respect of such Bankers'
Acceptances. After the Agent's receipt of such funds and upon
fulfilment of the applicable conditions precedent set forth in Article
VI, the Agent will make such funds available to the Borrower at the
Payment Office.
(e) Notwithstanding subsection (a) and anything else to the
contrary set forth herein, a Revolving Lender shall not be required to
make available any portion of any Drawdown that will be used directly
and indirectly in, or result, directly or indirectly, in a Potentially
Hostile Acquisition, if the Revolving Lender is a Conflicted Lender
provided that a Lender will be deemed not to be a Conflicted Lender in
respect of any Drawdown unless the Lender gives notice to the Agent of
the Lender's status as a Conflicted Lender within one Business Day of
the notice to the Lender by the Agent of such Drawdown, provided
further that a Conflicted Lender that does not make available a
Drawdown that will be used directly or indirectly in, or result,
directly or indirectly, in a Potentially Hostile Acquisition shall
(notwithstanding any other provision of this Agreement) not be
entitled to vote in respect of any determination required by Majority
Lenders in connection with such Drawdown and the principal amount of
the Loans or the amount of the Commitment of such Conflicted Lender
shall be excluded in the determination of the Majority Lenders in such
connection. In respect of any Subsequent Drawdown(s) in respect of
which a previously Conflicted Lender is not a Conflicted Lender, the
portion of such Drawdown(s) to be made available by such Conflicted
Lender shall be allocated by the Agent so as to result, to the extent
possible, in the outstanding Loans of the Revolving Lenders, including
such Conflicted Lender, being in the same proportion as the aggregate
of all Revolving Lenders' Commitments constituted by such Revolving
Lender's Commitment.
(f) If the Agent receives notice from a Conflicted Lender prior to
the date of any Drawdown that such Lender's rateable portion of such
Drawdown will not be made available in reliance upon subsection
2.6(e), the portion of the Drawdown to be provided by each other
Revolving Lender shall be increased so as to equal the proportion of
the aggregate of all Revolving Lender's Commitments, excluding the
Commitment of the Conflicted Lender, constituted by such other
Revolving Lender's Commitment provided that, after giving effect to
the Drawdown, such Revolving Lender's Outstanding Amount does not
exceed such Revolving Lender's Commitment Amount.
2.7 Funding Reliance; Lender's Failure to Fund - Unless the Agent
shall have received notice from a Lender prior to any Drawdown Date that such
Lender's rateable portion of such
<PAGE> 33
- 28 -
Drawdown will not be made available as provided for in subsection 2.6(e), the
Agent may assume that each Lender will make available to the Agent its ratable
portion of any Drawdown requested in a Drawdown Notice on the date of such
Drawdown in accordance (other than an L/C Drawdown) with Section 2.6 and the
Agent may, in reliance upon such assumption, but shall not be obligated to,
make available to the Borrower on such date a corresponding amount. If and to
the extent any such Lender shall not have so made such rateable portion
available to the Agent and the Agent shall have so made such corresponding
amount available to the Borrower, such Lender and the Borrower severally agree
to pay or repay to the Agent (on the next Business Day following notice thereof
by the Agent to the Borrower) such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent, at (i) in the case
of the Borrower, the interest rate applicable at the time to Drawdowns
hereunder and (ii) in the case of such Lender, the Prime Rate and, on demand,
to indemnify the Agent against any cost or loss it may suffer or incur in
connection with or related to the Agent having made such amount available to
the Borrower prior to having received the corresponding amount. If such Lender
shall pay to the Agent such corresponding amount, such amount so paid shall
constitute such Lender's Advance as part of such Drawdown for purposes of this
Agreement.
2.8 Several Funding Obligations - The failure of any Lender to
make an Advance to be made by it as part of any Drawdown shall not relieve any
other Lender of its obligation, if any, hereunder to make its Advance on the
Drawdown Date, but no Lender shall be responsible for the failure of any other
Lender to make the Advance to be made by such other Lender on the Drawdown
Date.
2.9 Pro-Rata Treatment of Drawdowns -
(a) Each Drawdown 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 Drawdowns outstanding hereunder to each Lender
will, to the extent possible, thereafter be pro rata to the respective
Commitments of the Lenders. Subject to subsections 2.6(e) and (f),
the Agent is authorized by the Borrower and each Lender to determine,
in its sole and unfettered discretion, the portion of each Drawdown
and each type of Drawdown to be made available by each Lender and the
application of repayments and reductions of Loans to give effect to
the provisions of this Section provided that, no Lender shall, as a
result of any such determination, have Loans outstanding in an amount
which is in excess of the amount of its Commitment.
(b) 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 Cdn. $100,000, the Agent is authorized by the
Borrower and each Lender to make such allocation as the 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 Cdn. $100,000, then the Agent
may allocate (on a basis considered by it to be equitable) the excess
of such Drawdown over the next lowest whole multiple of Cdn. $100,000
to one Lender, which shall purchase a Bankers'
<PAGE> 34
- 29 -
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 Loans of a Lender exceed the proportion of
the aggregate of all Lender's Commitments constituted by such Lenders'
Commitment by more than Cdn. $100,000 as a result of such exercise of
discretion by the Agent.
2.10 Restrictions on Drawdowns - Each Drawdown under the Facility
shall be subject to the following restrictions, as applicable:
(a) all Drawdowns shall be made on a Business Day;
(b) after giving effect to a Drawdown, the Outstanding Amount
shall not exceed the aggregate of the Commitment Amounts;
(c) no Drawdowns will be permitted if an Event of Default has
occurred and is continuing or (other than in the case of a Conversion
or Rollover, provided that, in the case of a Conversion or Rollover
into a Bankers' Acceptance Drawdown or Libor Drawdown, the maturity
date or the applicable Libor Interest Period shall not extend beyond
the earliest date upon which the event would constitute an Event of
Default) if an event has occurred and is continuing which with the
giving of notice, the passing of time, or both, would constitute an
Event of Default;
(d) Drawdowns shall be in Canadian Dollars or United States
Dollars as stipulated and at such time stipulated in the Drawdown
Notice duly provided by the Borrower to the Agent in respect thereof,
subject to the restrictions and limitations of this Agreement and upon
fulfilment of all conditions precedent to such Drawdown;
(e) each Drawdown by way of a Bankers' Acceptance Drawdown shall
be in a minimum principal amount of Cdn. $10,000,000 and additional
increments of integral multiples of Cdn. $1,000,000;
(f) each Drawdown by way of a Libor Drawdown shall be in a minimum
principal amount of U.S. $10,000,000 and additional increments of
integral multiples of U.S. $1,000,000;
(g) each Letter of Credit shall be in a minimum amount of Cdn.
$5,000,000 or U.S. $5,000,000, as the case may be;
(h) no Libor Drawdown, Bankers' Acceptance or Letter of Credit
issued pursuant to an L/C Drawdown shall have a maturity or expiry
date later than the Maturity Date or that is inconsistent with any
other obligation to repay the whole or any part of the principal
amount of Loans under this Agreement;
<PAGE> 35
- 30 -
(i) the obligation of any Lender to make any Libor Drawdown for
any period exceeding 6 months (including the Conversion of any other
Drawdown into a Libor Drawdown) is contingent upon its favourable
determination that sufficient U.S. Dollars are available to it to fund
such Libor Drawdown for such period;
(j) the amount of Letters of Credit Loans at any time shall not
exceed U.S. $100,000,000; and
(k) no Letter of Credit shall have an expiry date of more than one
year from the date of issuance of such Letter of Credit.
2.11 Conversion Option - Subject to the provisions of this
Agreement, the Borrower may, by giving to the Agent a Drawdown Notice in
accordance with Section 2.4:
(a) convert all or any portion of a Prime Rate Drawdown into a
Base Rate Drawdown, Libor Drawdown or Bankers' Acceptance Drawdown;
(b) convert all or any portion of a Base Rate Drawdown into a
Prime Rate Drawdown, Libor Drawdown or Bankers' Acceptance Drawdown;
(c) on the last day of the Libor Interest Period, convert all or
any portion of such Libor Drawdown into a Prime Rate Drawdown, Base
Rate Drawdown or Bankers' Acceptance Drawdown; or
(d) on the maturity date of a Bankers' Acceptance Drawdown,
convert all or any portion of such Bankers' Acceptance Drawdown into a
Prime Rate Drawdown, Base Rate Drawdown or Libor Drawdown.
In respect of any Conversion which effects a change in the currency of
such Drawdown from Canadian Dollars to U.S. Dollars, or vice versa, repayment
shall be made in the currency of the Drawdown being converted and the
Conversion shall be made at the Exchange Rate on the date of such Conversion
provided that for the purposes of determining compliance with subsection
2.10(b) in respect of any Conversion which effects a change in the currency of
such Drawdown from Canadian Dollars to U.S. Dollars or vice versa, the
Equivalent Amount of Canadian Dollars shall be determined as of the date of the
Drawdown Notice.
In the case of a Conversion of a Prime Rate Drawdown, Base Rate
Drawdown or Libor Drawdown into a Bankers' Acceptance Drawdown, the Bankers'
Acceptance Proceeds shall be retained by the Agent to be applied to the
principal amount of the converted Drawdown and the Borrower shall pay to the
Agent on the date of such Conversion an amount equal to the difference between
the principal amount at maturity of the Bankers' Acceptance and the Bankers'
Acceptance Proceeds therefrom.
<PAGE> 36
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2.12 Rollovers -
(a) The Borrower may roll over any Libor Drawdown (on the last day
of the applicable Libor Interest Period) into another Libor Drawdown
or Bankers' Acceptance Drawdown (on the maturity of the applicable
Bankers' Acceptance) into another Bankers' Acceptance Drawdown, by
giving the Agent the appropriate Drawdown Notice pursuant to Section
2.4.
(b) The Bankers' Acceptance Proceeds of the new Bankers'
Acceptance shall be retained by the Agent to be applied by it to the
principal amount of the maturing Bankers' Acceptance and the Borrower
shall pay to the Agent, on the maturity date of the maturing Bankers'
Acceptance an amount equal to the difference between the principal
amount at maturity of the maturing Bankers' Acceptance and the
Bankers' Acceptance Proceeds of the replacement Bankers' Acceptance.
(c) Notwithstanding any other provision of this Agreement, if the
Borrower fails to deliver such a Drawdown Notice to the Agent in
respect of a Libor Drawdown (or pay to the Agent an amount equal to
such Libor Drawdown on or before the expiration of such Libor Interest
Period as applicable) or in any case, during the continuance of an
Event of Default, then the relevant amount of the Libor Drawdown
shall, at the expiration of such Libor Interest Period, be deemed to
be converted into a Base Rate Drawdown, in an amount equal to the
principal amount of such Libor Drawdown.
(d) Notwithstanding any other provision of this Agreement, if the
Borrower fails to deliver such a Drawdown Notice to the Agent in
respect of a Bankers' Acceptance Drawdown (or pay to the Agent an
amount equal to the principal amount of the maturing Bankers'
Acceptance on or before the maturity date thereof), then the maturing
Bankers' Acceptance paid by the Agent shall be deemed, upon such
payment, to be converted into a Prime Rate Drawdown in an amount equal
to the face amount of such maturing Bankers' Acceptance.
2.13 Evidence of Indebtedness - The Agent shall open and maintain
on its books at the Payment Office, accounts in respect of the Facility to
evidence the Loans under the Facility and all other amounts owing by the
Borrower to the Lenders or the Agent hereunder. The Agent shall enter in the
foregoing accounts details of all amounts from time to time owing, paid or
repaid by the Borrower hereunder. The information entered in the foregoing
accounts shall constitute prima facie evidence of the obligations of the
Borrower to the Lenders and the Agent hereunder with respect to the Loans and
all other amounts owing by the Borrower to the Lenders or the Agent hereunder.
The Borrower shall, on reasonable notice to the Agent, be entitled to obtain
from the Agent extracts of all entries made in such accounts.
2.14 Netting - On any transaction date, the Agent shall be entitled
to net amounts payable on such date by the Agent to a Lender against amounts
payable on such date by such Lender to the Agent, in connection with
transactions conducted under this Agreement in the same type of Advance, for
the account of the Borrower. Similarly, on any transaction date, the Borrower
hereby
<PAGE> 37
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authorizes each Lender to net amounts payable on such date by such Lender to
the Agent, for the account of the Borrower, against amounts payable on such
date by the Borrower to such Lender under this Agreement in accordance with the
Agent's calculations.
ARTICLE III
FURTHER PROVISIONS RELATING TO
LIBOR DRAWDOWNS, BANKERS'
ACCEPTANCES AND LETTERS OF CREDIT
3.1 Effects of Change of Law - If, at any time, a Lender
determines in good faith, which determination shall be final, conclusive and
binding upon the Borrower, absent manifest error, that: (a) by reason of
circumstances affecting financial markets inside or outside the United States,
deposits of U.S. Dollars are unavailable to such Lender in London; (b) adequate
and fair means do not exist for ascertaining the applicable interest rate on
the basis provided in the definition of Libor Rate; (c) the making or
continuation of any Libor Drawdown has been made impracticable: (i) by the
occurrence of a contingency which materially and adversely affects the funding,
in the London interbank market generally, of Libor Loans at any interest rate
computed on the basis of the Libor Rate; or (ii) by reason of a change since
the date of this Agreement in any Applicable Law by any Government Authorities
charged with the administration thereof affecting such Lender or any relevant
financial market, the Libor Rate shall no longer represent the effective cost
to such Lender of deposits to fund Libor Drawdowns; or (d) any change to
present Law or the enactment of any future Law or any change therein or in the
interpretation or application thereof by any Government Authorities charged
with the administration thereof or by any court, has made it unlawful for such
Lender to make or maintain or to give effect to its obligations in respect of
Libor Drawdowns as contemplated hereby, then:
(a) the right of the Borrower to request Libor Drawdowns from such
Lender shall be suspended until such Lender determines that the
circumstances causing such suspension no longer exist;
(b) if any affected Libor Drawdown from such Lender is not yet
outstanding, any applicable outstanding Advance Notice shall be deemed
to be an Advance Notice for a Base Rate Advance in the same amount;
(c) if any Libor Drawdown from such Lender is outstanding at any
time when the right of the Borrower to request Libor Drawdowns from
such Lender is suspended, it and all other Libor Drawdowns from such
Lender shall become, on the last day of the then current Libor
Interest Period applicable thereto (or on such earlier date as may be
required to comply with any Applicable Law), a Base Rate Drawdown and
shall remain outstanding as a Base Rate Drawdown, until such time as
such Lender determines that the circumstances causing such suspension
no longer exist; and
<PAGE> 38
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(d) upon a determination by such Lender that the circumstances
causing the suspension of Libor Loans no longer exist, each Base Rate
Drawdown outstanding as a result of subsection 3.1(c) may be
converted, subject to availability, by the Borrower in accordance
herewith to a Libor Drawdown maturing on the last day of any Libor
Interest Period for any outstanding Libor Drawdowns or, if no Libor
Drawdowns are then outstanding, at any time by giving the Agent the
appropriate Drawdown Notice pursuant to Section 2.4.
3.2 Illegality
(a) If after the date of this Agreement any change occurs in any
Applicable Law, or in the interpretation or application thereof by any
court or by any Government Authority or other authority or entity
charged with the administration thereof, which makes it unlawful for
any Lender (in its opinion, acting reasonably and in good faith) to
make, fund or maintain any part of the Facility or to give effect to
its obligations in respect of any Drawdowns thereunder, the Lender
may, by written notice thereof to the Borrower and the Agent, declare
its obligations under this Agreement to be terminated with respect to
such affected part of the Facility (which notice shall be final,
conclusive and binding upon the Borrower, absent manifest error),
whereupon the same shall forthwith terminate.
(b) Any such notice shall be accompanied by a certificate of an
officer of the Lender identifying in reasonable detail the event or
condition which makes it unlawful for the Lender to lend or allow to
remain outstanding such portions of the Facility or any Drawdowns
thereunder (such notice to be final, conclusive and binding upon the
Borrower, absent manifest error).
(c) The Borrower shall: (i) prepay to the Lender within the
greater of: (A) ten Business Days after such notice; and (B) the time
required by such law, (or at the end of such longer period as the
Lender at its discretion has agreed) the principal amount of all
Drawdowns so affected together with accrued interest and such other
amounts which may be payable hereunder as a result of such prepayment
(excluding any cost associated with the repayment by the Borrower of a
Libor Drawdown other than at the expiration of the applicable Libor
Interest Period); or (ii) prior to the date of such required
repayment, replace such Lender with one or more Eligible Lenders (in
respect of whom the Term Out Date shall be the same date as the Term
Out Date with respect to the Commitment of the Lender being replaced).
(d) If any such change shall only affect a portion of the Lender's
obligations under this Agreement which is, in the reasonable opinion
of the Lender, severable from the remainder of this Agreement so that
the remainder of this Agreement may be continued in full force and
effect without otherwise affecting any of the obligations of the
Lender or the Borrower hereunder in respect of such Lender or under
any of the other documents contemplated hereby, the Lender shall only
declare its obligations under the affected portion so terminated.
(e) In the event that the provisions of this Section 3.2 are, or
threaten to become applicable in respect of any Lender, such Lender
shall use its reasonable efforts (at the
<PAGE> 39
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expense of the Borrower) to change its Lending Office or take such
other action as may be reasonable in the circumstances to eliminate
the applicability of this Section 3.2 to such Lender.
3.3 Bankers' Acceptances
(a) Delivery of Blank Drafts - To facilitate the acceptance of
Bankers' Acceptances pursuant to this Agreement the Borrower shall,
upon the execution of this Agreement and from time to time as required
by the Lenders, provide to the Lenders drafts duly endorsed in blank
by the Borrower in quantities sufficient for the Lenders to fulfil
their obligations hereunder. None of the Agent and the Lenders shall
be responsible or liable for any failure to issue a Bankers'
Acceptance as required hereunder if the cause of such failure is, in
whole or in part, due to the failure of the Borrower to provide
requested drafts to the Lender on a timely basis, nor shall any of the
Agent and the Lenders be liable for any damage, loss or other claim
arising by reason of any loss or improper use of any such draft except
a loss or improper use arising by reason of the failure of the Agent
or the Lender, as the case may be, to exercise the same degree of care
with respect to such draft as it exercises for its own securities.
(b) Documentation - Prior to any Bankers' Acceptance Drawdown
being made available, the Borrower shall have executed and delivered
to the Agent the Bankers' Acceptance Undertaking.
(c) Maturing Bankers' Acceptances - In anticipation of the
maturity of each Bankers' Acceptance issued hereunder, the Borrower
may either:
(i) deliver to the Agent a Drawdown Notice requesting the
Conversion or Rollover of such Bankers' Acceptance pursuant to
the provisions of Section 2.11 or 2.12, respectively; or
(ii) not later than 10:00 a.m. (Calgary time) on the
maturity date of the relevant Bankers' Acceptance, pay to the
Agent an amount equal to the principal amount of the maturing
Bankers' Acceptance.
In the event the Borrower shall fail to so notify the Agent of a
Rollover or Conversion or shall fail to make such payment, as the case
may be, the face amount of the maturing Bankers' Acceptance shall be
converted into a Prime Rate Drawdown on the relevant maturity date.
(d) Discount Rate - The Agent shall advise the Borrower, as soon
as practicable but in any event prior to 10:30 a.m. (Calgary time) on
the date of any Bankers' Acceptance Drawdown, of the Reference BA
Discount Rate applicable to each Bankers' Acceptance thereunder.
<PAGE> 40
- 35 -
3.4 Issuance of Letters of Credit
(a) Form of Letters of Credit - Any Letter of Credit to be issued
by the Lenders under the Facility shall be in such form as may be
agreed upon by the Borrower and the relevant issuing Lender, each
acting reasonably.
(b) Documentation - Prior to any L/C Drawdowns, the Borrower shall
have executed and delivered the Letter of Credit Documentation to the
issuer of the relevant Letter of Credit.
(c) Prepayment - The Borrower may, at any time, and shall, if the
repayment or required repayment of any of the Loans would require the
reduction of L/C Drawdowns, surrender to the Agent any Letter(s) of
Credit having an aggregate remaining face amount at least equal to the
required reduction to the Agent or, deposit cash with the Agent for
the account of each of the Lenders rateably in accordance with the
Letters of Credit Loans outstanding to such Lender, in an
interest-bearing collateral cash account of the Borrower with the
Agent, with interest at the Agent's prevailing rate for similar
deposits, in an amount equal to the required reduction. Upon such
surrender or receipt of such cash, the L/C Drawdowns outstanding under
the Facility shall be deemed to have been reduced by the aggregate
remaining face amount of the Letters of Credit so surrendered or the
amount of such cash so deposited together with interest thereon as
applicable.
ARTICLE IV
PAYMENT OF INTEREST AND OTHER FEES
4.1 Interest on Prime Rate Drawdowns - The Borrower shall pay
interest in Canadian Dollars on the principal amount of each Prime Rate
Drawdown (with, subject to Section 4.7, interest on overdue interest at the
same rate) at a nominal rate per annum equal to the Prime Rate in effect from
time to time plus the incremental number of Basis Points set forth in respect
of Prime Rate Drawdowns in Section 4.6.
Interest on each Prime Rate Drawdown shall accrue daily on the outstanding
principal balance thereof and shall be calculated and payable in arrears:
(a) on each successive Interest Payment Date, for the period then
ending;
(b) in the case of a prepayment of part or all of a Prime Rate
Drawdown, on the date of such prepayment, with respect to interest
accrued on the amount of principal being prepaid;
(c) in the case of amounts repaid pursuant to Section 5.2, 5.3 or
5.5, on the date of such repayment, with respect to interest accrued
on the amount of principal of any Prime Rate Drawdown being repaid;
and
<PAGE> 41
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(d) on the date that all amounts owing hereunder are repaid in
full, whether on demand, by reason of acceleration or otherwise;
on the basis of the actual number of days for which a particular principal
amount is outstanding computed on the basis of a year of 365 days, or 366 days
in the case of a leap year. Interest on overdue interest on Prime Rate
Drawdowns shall be payable on demand. Changes in the Prime Rate shall cause an
immediate and automatic adjustment of the interest rate applicable to each
Prime Rate Drawdown as and from the effective date of such change without the
necessity of any notice to the Borrower, such notice being hereby expressly
waived by the Borrower. Interest on the Prime Rate Drawdowns shall be payable
in accordance with the foregoing after as well as before demand, default,
maturity and judgment.
4.2 Interest on Base Rate Drawdowns - The Borrower shall pay
interest in United States Dollars to the Agent on the principal amount of each
Base Rate Drawdown (with, subject to Section 4.7, interest on overdue interest
at the same rate) at a nominal rate per annum equal to the Base Rate in effect
from time to time plus the incremental number of Basis Points set forth in
respect of Base Rate Drawdowns in Section 4.6.
Interest on each Base Rate Drawdown shall accrue daily on the
outstanding principal balance thereof and shall be calculated and payable in
arrears:
(a) on each successive Interest Payment Date, for the period then
ending;
(b) in the case of a prepayment of part or all of a Base Rate
Drawdown, on the date of such prepayment, with respect to interest
accrued on the amount of principal being prepaid;
(c) in the case of amounts repaid pursuant to Section 5.2, 5.3 or
5.5, on the date of such repayment with respect to interest accrued on
the amount of the principal of any Base Rate Drawdown being repaid;
and
(d) on the date that all amounts owing hereunder are repaid in
full, whether on demand, by reason of acceleration or otherwise;
on the basis of the actual number of days for which a particular principal
amount is outstanding, computed on the basis of a year of 365 days or 366 days
in the case of a leap year. Interest on overdue interest on Base Rate
Drawdowns shall be payable on demand. Changes in the Base Rate shall cause an
immediate and automatic adjustment of the interest rate applicable to each Base
Rate Drawdown as and from the effective date of such change without the
necessity of any notice to the Borrower, such notice being hereby expressly
waived by the Borrower. Interest on the Base Rate Drawdowns shall be payable
in accordance with the foregoing after as well as before demand, default,
maturity and judgment.
4.3 Interest on Libor Drawdowns - The Borrower shall pay interest
in United States Dollars on the principal amount of each Libor Drawdown for the
Libor Interest Period applicable
<PAGE> 42
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thereto at a nominal rate per annum equal to the Libor Rate applicable to such
Libor Drawdown plus the incremental number of Basis Points set forth in respect
of Libor Drawdowns in Section 4.6.
Interest on each Libor Drawdown shall accrue daily on the amount of such Libor
Drawdown and shall be calculated and payable in arrears on each successive
Interest Payment Date applicable to a Libor Drawdown, on the basis of the
actual number of days for which such Libor Drawdown is outstanding, computed on
the basis of a year of 360 days. Interest on each Libor Drawdown shall be
payable in accordance with the foregoing after as well as before demand,
default, maturity and judgment.
4.4 Stamping Fees on Bankers' Acceptances - The Borrower shall
pay, in respect of each draft accepted by the Lenders as a Bankers' Acceptance,
a stamping fee equal to a nominal rate per annum equal to the number of Basis
Points set forth in respect of Bankers' Acceptances in Section 4.6, in each
case, of the face amount of such Bankers' Acceptance and calculated over the
term of such Bankers' Acceptance, such stamping fee to be payable on the date
of issuance of the Bankers' Acceptance.
4.5 Fees for Letters of Credit - The Borrower shall pay with
respect to each Letter of Credit issued hereunder, in addition to any fee
payable under Section 2.6, a fee equal to a nominal rate per annum equal to the
number of Basis Points set forth in respect of Letters of Credit in Section
4.6, calculated on the face amount of the relevant Letter of Credit over the
term of the Letter of Credit, such fee to be payable at the time of issuance.
If any Letter of Credit is cancelled or drawndown prior to expiration of its
term, the fee applicable to the remaining term thereof shall be refunded to the
Borrower.
4.6 Incremental Interest and Fees - Until, pursuant to Section
5.2, the aggregate of the Lenders' Commitment Amounts and principal amount of
the Loans made by the Lenders under the Facility has been reduced to U.S.
$500,000,000, the applicable Basis Points or incremental Basis Points payable
in respect of Loans shall be as set forth below:
<TABLE>
<S> <C>
Prime Rate Drawdowns 0 bp
(Prime Rate plus)
Base Rate Drawdowns 0 bp
(Base Rate plus)
Bankers' Acceptances 87.5 bp
(Stamping Fee)
LIBOR Drawdowns 87.5 bp
(Libor Rate plus)
Letters of Credit 87.5 bp
Commitment Fee 37.5 bp
</TABLE>
Thereafter, the applicable Basis Points or incremental Basis Points
payable in respect of Loans shall be as set forth below in the column setting
forth the lowest of the two highest ratings
<PAGE> 43
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assigned the Borrower by Standard and Poor's, Moody's, DBRS and CBRS provided
that one of the two ratings has been assigned by Standard and Poor's or
Moody's.
<TABLE>
<S> <C> <C> <C> <C> <C>
Standard and Poor's BBB+ or BBB BBB- BB+ BB or
Higher Lower
Moody's Baa1 or Baa2 Baa3 Ba1 Ba2 or
Higher Lower
DBRS BBB (high) or BBB BBB(low) BB (high) BB or
Higher Lower
CBRS B++ (high) or B++ B++ (low) B+ (high) B+ or
Higher Lower
Interest Rates and Fees
Prime Rate Drawdowns
(Prime Rate plus) 0 bp 0 bp 0 bp 0 bp 0 bp
Base Rate Drawdowns
(Base Rate plus) 0 bp 0 bp 0 bp 0 bp 0 bp
Bankers' Acceptances
(Stamping Fee) 30 bp 40 bp 50 bp 65 bp 75 bp
LIBOR Drawdowns
(Libor Rate plus) 30 bp 40 bp 50 bp 65 bp 75 bp
Letters of Credit 30 bp 40 bp 50 bp 65 bp 75 bp
Commitment Fee 8 bp 9 bp 10 bp 12.5 bp 25 bp
</TABLE>
4.7 Interest on Unpaid Costs and Expenses - Unless the payment of
interest is otherwise specifically provided for herein, where the Borrower
fails to pay to the Agent any amount required to be paid by it to the Agent
hereunder (including unpaid interest), the Borrower shall pay interest on such
unpaid amount from the time such amount is due until such amount is paid in
full at a nominal rate per annum, equal to the Prime Rate in effect from time
to time plus 2% with respect to amounts required to be paid by the Borrower in
Canadian Dollars, and at a nominal rate per annum, equal to the Base Rate in
effect from time to time plus 2% with respect to amounts required to be paid by
the Borrower in U.S. Dollars, such interest to be computed on the basis of a
year of 365 days or 366 days in the case of a leap year and to be calculated
and (to the maximum extent permitted by Applicable Law) compounded monthly on
each Interest Payment Date and to be payable on demand as well after as before
default, maturity and judgment, with interest on any unpaid interest at the
same rate.
4.8 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.
<PAGE> 44
- 39 -
4.9 Commitment Fee
(a) Calculation and Payment - Commencing on the Effective Date,
the Borrower shall pay to the Agent a commitment fee in U.S. Dollars
equal to a nominal rate per annum set forth in respect of the
Commitment Fee in Section 4.6 (based on a 365 day year, or 366 days in
the case of a leap year) on the undrawn portion of the Facility, such
fee to be calculated quarterly in arrears on the daily undrawn portion
of the Facility, to accrue to and including the last day of each
Fiscal Quarter to be invoiced by the Agent to the Borrower and to be
paid quarterly on or before the third Business Day of the next
succeeding Fiscal Quarter following receipt of such invoice.
(b) Calculation of Undrawn Portion - The undrawn portion of the
Facility shall be calculated by deducting the Outstanding Amount from
the aggregate of the Commitment Amounts.
4.10 Limitation on Interest - Notwithstanding any other provisions
of this Agreement or any other document entered into in connection with this
Agreement, the Borrower shall not be obliged to make any payments of interest
or other amounts payable to the Agent hereunder or under any other document
entered into in connection with this Agreement in an amount or rate equal to or
in excess of that which would be prohibited by law or would result in the
receipt by the Lenders of interest at a criminal rate (as the terms "interest"
and "criminal rate" are defined under the Criminal Code (Canada)) or which
would contravene any local usury laws which may be applicable to any
obligations of the Borrower to the Lenders or the Agent under or in connection
with this Agreement.
4.11 Increased Costs - If, after the Effective Date, there is
adopted any Applicable Law, any change therein or any change in the
interpretation or application thereof by any court or by any Government
Authority or other authority or entity charged with the administration thereof,
whether or not having the force of law, which:
(a) subjects any Lender to any Taxes or changes the basis of
taxation, or increases any existing Taxes, on payments of principal,
interest or other amounts payable by the Borrower to the Lender under
this Agreement (except for Taxes on the overall net income or capital
of the Lender);
(b) imposes, modifies or deems applicable any reserve, cash
margin, special deposit or similar requirements against assets held
by, or deposits in or for the account of or loans by or any other
acquisition of funds by the relevant funding office of any Lender; or
(c) imposes on any Lender or any Person controlling such Lender a
requirement to maintain or allocate additional capital in relation to
the Facility;
(other than as a result of a change in the credit rating of the Borrower) in a
manner uniform with other financial institutions listed in the same Schedule to
the Bank Act (Canada) as the Lender if such other financial institutions were
substituted for the Lender hereunder and the result of any of the
<PAGE> 45
- 40 -
foregoing is, in the opinion of such Lender (acting reasonably and in good
faith), to increase the cost to such Lender of making or maintaining any
Drawdown or reduce the income receivable by such Lender in respect of any
Drawdown by an amount which is material, then upon such Lender giving written
notice thereof, from time to time, to the Agent and the Borrower (such notice
to set out in reasonable detail the facts giving rise to and a summary
calculation of, such increased cost or reduced income and to be final,
conclusive and binding upon the Borrower, absent manifest error), the Borrower
shall pay to such Lender, not later than five Business Days after such notice,
that amount which shall compensate such Lender for such additional cost or
reduction in income (arising to or incurred by the Lender not more than 90 days
prior to the date of such notice) and thereafter on each issuance of a Bankers'
Acceptance and date for payment of fees in respect of Letters of Credit and
Interest Payment Date, in all other cases. For greater certainty, the Borrower
shall not be required to compensate any Lender for any withholding taxes which
the Borrower is required to withhold and remit in respect of any principal,
interest or other amount paid or payable by the Borrower to any Lender in
accordance with the terms of this Agreement unless such obligation arises as a
result of an action by the Borrower.
4.12 Waiver of Judgment Interest Act (Alberta) - To the extent
permitted by Applicable Law, the provisions of the Judgment Interest Act
(Alberta) shall not apply to this Agreement and are hereby expressly waived by
the Borrower.
ARTICLE V
REPAYMENTS AND PREPAYMENTS
5.1 Amounts Under Facility May be Reborrowed - Subject to Section
5.2 and to the other terms and conditions of this Agreement and as long as
there shall not have occurred and be continuing an Event of Default or any
event which with the giving of notice, the passing of time, or both, would
constitute an Event of Default, any amounts borrowed under the Facility and
repaid from time to time may be reborrowed during the Revolving Period.
5.2 Mandatory Facility Reductions
(a) Until such time as the aggregate of the Available Facility
Amount and the Outstanding Amount has been permanently reduced to U.S.
$500,000,000, the Borrower shall make repayments and permanent
reductions in the Available Facility Amount and shall repay to each of
the Lenders, rateably according to the proportion of the aggregate of
all Revolving Lenders' Commitment Amounts constituted by such
Revolving Lender's Commitment Amount, the aggregate of all of the
following amounts received on or prior to April 30, 1998: (A) the Net
Proceeds from the issuance of securities by the Borrower (other than
for proceeds received by the Borrower from the issuance of shares
pursuant to the exercise of options under the existing employee and
director stock option plans of the Borrower, except to the extent that
the proceeds of such exercises aggregate at least Cdn. $5,000,000 in
any seven day period, and proceeds from the issuance of senior and
<PAGE> 46
- 41 -
subordinated debt securities); and (B) 50% of the sum of the Net
Proceeds from asset sales by the Borrower and the Restricted
Subsidiaries (except to the extent such Restricted Subsidiaries do not
make such payments because they are precluded from doing so pursuant
to the terms of their Funded Debt) and from secondary distributions of
securities by the Borrower or its Subsidiaries, including without
limitation the shares in the capital of Gulf Indonesia Resources
Limited held directly or indirectly by the Borrower. For greater
certainty, no prepayments will be required to be made by the Borrower
in respect of Net Proceeds attributable to (i) the sale of accounts
receivable under the Receivables Purchase and Sale Agreement dated
November 29, 1994, as amended, among the Borrower, Corporate
Receivables Trust and Toronto Dominion Securities Inc., or any
replacement of such arrangement; (ii) the surrender, exchange, lease,
sublease or farmout of any property or assets in the ordinary course
of business; (iii) the sale of production of hydrocarbons or
by-products in the ordinary course of business; (iv) the sale or other
disposition of property or assets not exceeding U.S. $1,000,000 in
respect of any single transaction or related series of transactions
and in an aggregate amount not exceeding U.S. $5,000,000 in any fiscal
year; and (v) sales or other dispositions of assets or property from
one member of the Restricted Group to another member of the Restricted
Group. Such prepayments shall be made within five Business Days of
completion of each such transaction (except to the extent that
prepayments in respect of Libor Loans could not be made at such time
in accordance with the provisions of this Agreement, in which case
such prepayment or the balance thereof as applicable shall be made at
the expiration of the applicable LIBOR Interest Period). In addition
to the foregoing, Net Proceeds which are required to be applied to
make prepayments and permanent reductions in the Facility Amount, the
Borrower may apply such other Acceptable Proceeds (as hereinafter
defined) as the Borrower may elect to make prepayments and permanent
reductions in the Facility Amount. The Net Proceeds required to be
used and any other Acceptable Proceeds for repayments and permanent
reductions under this subsection 5.2(a) shall permanently reduce the
aggregate of all Revolving Lenders' Commitment Amounts by the amount
of such Net Proceeds or other Acceptable Proceeds, as the case may be,
and the Commitment Amount for each Revolving Lender shall be
permanently reduced by the repayment required, or permitted, to be
made by the Borrower to each Lender pursuant to the terms of this
subsection 5.2(a);
(b) If, pursuant to subsection 5.2(a), the Available Facility
Amount together with the aggregate Outstanding Amount has not been
reduced to U.S. $500,000,000 by April 30, 1998, the Borrower shall
make a prepayment and permanent reduction in the Facility Amount and
shall repay with Acceptable Proceeds (as hereinafter defined), to each
of the Lenders, rateably according to the proportion of the aggregate
of all Revolving Lenders' Outstanding Amounts constituted by such
Revolving Lender's Outstanding Amount, the principal amount of the
Loans made by such Lenders under the Facility by payment on April 30,
1998, of that amount or amounts as will reduce the aggregate amount of
such Loans on April 30, 1998 to U.S. $500,000,000 and on such date the
aggregate of all Revolving Lenders' Commitment Amounts shall be
permanently reduced to U.S. $500,000,000 and the Commitment Amount
for each Revolving Lender shall be permanently reduced by the
<PAGE> 47
- 42 -
repayment required to be made by the Borrower to each Lender pursuant
to the terms of this subsection 5.2(b).
For the purpose of this Section 5.2, "Acceptable Proceeds" means up to
100% of the proceeds from the issuance of securities by the Borrower
(other than senior or subordinated Funded Debt unless Lenders who have
at least 80% of the Commitments otherwise agree), from asset sales by
the Borrower and its Subsidiaries, from secondary distributions of
securities by the Borrower and its Subsidiaries and from such other
proceeds as Lenders who have at least 80% of the Commitments may
agree.
5.3 Repayment under the Facility after Term Out Date - The
Borrower shall repay to each of the Lenders the principal amount of the Loans
made by such Lender under the Facility by payment, on each of the dates set
forth below, of that amount (in U.S. Dollars) as will reduce the principal
amount of such Loans outstanding on the date of such payment (denominated in
U.S. Dollars) to that proportion of the principal amount of such Loans
outstanding on the Term Out Date set forth opposite the date of such payment:
<TABLE>
<CAPTION>
Proportion of the principal amount
of such Loans outstanding
Payment Date on the Term Out Date
-------------------------------------------------------------------------
<S> <C> <C>
- 6 month anniversary of the 7/8
Term Out Date
- 12 month anniversary of the 6/8
Term Out Date
- 18 month anniversary of the 5/8
Term Out Date
- 24 month anniversary of the 4/8
Term Out Date
- 30 month anniversary of the 3/8
Term Out Date
- 36 month anniversary of the 2/8
Term Out Date
- 42 month anniversary of the 1/8
Term Out Date
- Maturity Date 0
</TABLE>
together with any accrued and unpaid interest at the Maturity Date payable on
the Maturity Date. On and after the Term Out Date, any repayment made by the
Borrower in respect of Loans in the Term Period shall reduce each Lender's
Commitment Amount.
<PAGE> 48
- 43 -
5.4 Voluntary Prepayments -
(a) The Borrower may at any time during the Term Period upon not
less than three Business Days prior notice but without premium or
penalty, prepay to the Nonrevolving Lenders in whole or in part, any
Prime Rate Drawdown or Base Rate Drawdown together with accrued
interest thereon to the date of such prepayment. Any such prepayment
of the Facility shall be applied to scheduled repayments thereof in
the order requested by the Borrower.
(b) If any Libor Drawdown or Bankers' Acceptance Drawdown is
repaid on other than the expiration of the applicable Libor Interest
Period or the maturity of the Bankers' Acceptance, respectively, the
Borrower shall, within three Business Days after notice from the
Agent, pay to the Agent for the account of each Lender rateably in
accordance with the portion of the Libor Drawdown or Bankers'
Acceptance Drawdown outstanding to such Lender:
(i) in the case of the prepayment of any Libor Drawdown,
all reasonable loss (excluding loss of profit) or
expense incurred as a result of such prepayment
including, without limitation, any cost or expense
incurred by reason of the liquidation or
re-employment in whole or in part of deposits or
other funds required by the Lenders to fund any Libor
Drawdown; and
(ii) in the case of the prepayment of any Bankers'
Acceptance Drawdown, the amount determined by the
Agent acting reasonably, to be the amount required to
be paid on the date of such prepayment to yield to
the Lenders the face amount of the Bankers'
Acceptance to be prepaid on the maturity thereof.
(c) On and after the Term Out Date, any prepayment made by the
Borrower in respect of the Loans in the Term Period shall rateably
reduce each Lender's Commitment Amount.
5.5 Currency Fluctuations - Notwithstanding any other provision of
this Agreement, if any Loan outstanding is denominated in Cdn. Dollars the
Agent shall have the right to calculate the Outstanding Amount for all purposes
including making a determination from time to time of the available undrawn
portion of the Facility. If following such calculation, the Agent determines
that the Outstanding Amount is greater than 105% of the Loans permitted hereby
to be outstanding at such time, then the Agent shall so advise the Borrower and
the Borrower shall repay, on the later of three 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 Loans permitted hereby to be outstanding at such time,
together with all accrued interest on the amount so paid.
5.6 Voluntary Reduction of Commitments - The Borrower may at any
time, without penalty, upon that number of Business Days prior notice to the
Agent as would be applicable to a Prime Rate Drawdown of like amount, terminate
in whole or reduce rateably (in accordance with
<PAGE> 49
- 44 -
the Lenders' respective Commitments) in part the unutilized portions of the
respective Commitments of the Lenders provided that each partial reduction
shall be in the aggregate amount of U.S. $10,000,000 (or such other amounts as
the Agent may approve) and additional increments of integral multiples of U.S.
$1,000,000. All accrued Commitment Fees on the aggregate amount by which such
Commitments are terminated or reduced shall be due and payable by the Borrower
on the effective date of such termination or reduction. All terminations or
reductions of the Commitments shall be rateable among the Lenders in proportion
to their respective Commitment Amounts and shall be permanent.
ARTICLE VI
CONDITIONS PRECEDENT TO DRAWDOWNS
6.1 Conditions Precedent to First Drawdown - The obligation of the
Lenders to advance the first Drawdown of the Facility is subject to the
condition precedent that the Agent shall have received on or before the
Drawdown Date of the proposed first Drawdown all of the following in form and
substance satisfactory to the Agent and the Agent's counsel (in each case,
acting reasonably):
(a) a certified copy of all documentation with respect to the
authority of the Borrower to execute, deliver and perform this
Agreement;
(b) the opinion of legal counsel to the Borrower, substantially in
the form attached hereto as Schedule H;
(c) the opinion of legal counsel to the Agent and the Lenders
substantially in the form attached hereto as Schedule I;
(d) a certificate of a senior officer of the Borrower stating that
as of such date, all of the representations and warranties made by the
Borrower herein are true and correct and that no event has occurred
which constitutes or would constitute, with the giving of notice, the
passing of time, or both, an Event of Default; and
(e) a Drawdown Notice for an Advance of the amount to fully repay,
upon the first Drawdown Date, all amounts owing by the Borrower under
the Existing Acquisition Facility together with:
(i) an irrevocable direction to apply such Advance to the
repayment of the amounts owing by the Borrower under the
Existing Acquisition Facility; and
(ii) an irrevocable notice from the Borrower terminating
in whole the Existing Acquisition Facility effective on such
first Drawdown Date.
<PAGE> 50
- 45 -
6.2 Conditions Precedent to All Drawdowns - The obligations of the
Lenders to advance any Drawdown of the Facility shall, in addition to any other
requirements of this Agreement, be subject to the following conditions
precedent:
(a) the Agent shall have received, if applicable, a proper and
timely Drawdown Notice;
(b) there shall not have occurred and be continuing any event
which constitutes or (other than in the case of a Conversion or
Rollover, provided, that in the case of a Conversion or Rollover into
a Bankers' Acceptance Drawdown or Libor Drawdown, the maturity date or
period shall not extend beyond the earliest date upon which such event
would constitute an Event of Default) would constitute, with the
giving of notice, the passing of time, or both, an Event of Default;
(c) each of the representations and warranties made in subsections
7.1(a), (c), (d), (e), (g) and (p) shall be true and correct (and the
acceptance by the Borrower of such Drawdown shall be deemed to
constitute a further representation and warranty by the Borrower that
such statements are true and correct) as if given on, and with effect
as of, the Drawdown Date other than with respect to a Conversion or
Roll-over; and
(d) such other documentation as the Agent may reasonably request
in respect of any Letter of Credit.
6.3 Waiver - The conditions set forth in Sections 6.1 and 6.2 are
provided for the sole benefit of the Lenders and may, with the prior consent of
Majority Lenders, be waived by the Agent, in whole or in part (with or without
terms or conditions) in respect of any Drawdown without prejudicing the right
of the Lenders at any time to assert such conditions in respect of any
subsequent Drawdown.
ARTICLE VII
BORROWER'S REPRESENTATIONS AND WARRANTIES
7.1 Borrower's Representations and Warranties - To induce the
Lenders to make available the Facility, the Borrower represents and warrants
to and in favour of the Lenders as follows, which representations and
warranties of the Borrower shall survive the execution and delivery of this
Agreement and the making of each Drawdown, notwithstanding any investigations
or examinations which may be made by the Agent, the Lenders or the Agent's
counsel:
(a) Existence of Borrower - Each of the Borrower and the
Restricted Subsidiaries (excluding Non-Material Restricted
Subsidiaries) is a corporation duly incorporated or continued,
organized, and validly subsisting under the jurisdiction of its
incorporation and has all necessary corporate power and authority to
own its properties and carry on its business as presently carried on;
<PAGE> 51
- 46 -
(b) Qualification - Each of the Borrower and the Restricted
Subsidiaries is duly licensed and qualified to carry on business in
each jurisdiction in which the location of its respective property or
assets or the conduct of its business require such licence or
qualification save and except, in the aggregate, where such failure
would not be Materially Adverse;
(c) Corporate Authority - The Borrower has all necessary corporate
power, authority and capacity to enter into this Agreement and to do
all such acts and things as are required hereunder to be done,
observed or performed by it, in accordance with the terms of this
Agreement;
(d) Valid Authorization of Agreement - The Borrower has taken all
necessary action to authorize the execution, delivery and performance
of this Agreement in accordance with its terms;
(e) Enforceability - This Agreement constitutes a valid and
legally binding obligation enforceable against the Borrower in
accordance with its terms, subject, however, to limitations with
respect to enforcement imposed by law in connection with bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and to the extent that equitable remedies such as specific
performance and injunction are in the discretion of the court from
which they are sought;
(f) Title - Each member of the Restricted Group has good and
marketable title to its properties and assets, free and clear of all
liens, claims, restrictions or encumbrances other than Permitted
Encumbrances except where the absence of such title would not, in the
aggregate, be Materially Adverse;
(g) Validity of Agreement - Non-Conflict - None of the Borrower
nor the Restricted Subsidiaries is a party to, bound or affected by or
subject to any indenture, mortgage, lease, agreement, contractual
obligation, instrument, charter or by-law provision, resolution of
directors or shareholders of the Borrower or any of the Restricted
Subsidiaries, order, rule, judgment, decree, licence, or permit which
would be violated, contravened, breached by, or under which default
would occur or a lien, claim, restriction or encumbrance would be
created upon any of the properties or assets of any member of the
Restricted Group as a result of the execution and delivery of this
Agreement or the carrying out of the Borrower's obligations hereunder
where such violation, contravention, breach, default, lien, claim,
restriction or encumbrance, in the aggregate, would be Materially
Adverse;
(h) Government Approval, Regulation, etc. - No authorization or
approval or other action by, and no notice to or filing with, any
Government Authority or regulatory body or other Person is required
for the due execution, delivery or performance by the Borrower of this
Agreement except for authorizations, approvals, actions, notices or
filings which have been duly obtained or made and are in full force
and effect except where the violation or the absence of or lack of
good standing under any such authorization would not, in the
aggregate, be Materially Adverse;
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(i) Absence of Litigation - There is not now in progress, pending
or, to the Borrower's knowledge, threatened against the Borrower or
any Restricted Subsidiary, any litigation, action, suit,
investigation, claim, complaint or other proceeding, including appeals
and applications for review, by or before any court, tribunal,
governmental agency, commission, board, bureau, agency or
instrumentality, domestic or foreign which would, in the aggregate, be
Materially Adverse;
(j) Financial Statements - The Financial Statements and the notes
to such Financial Statements have been prepared in accordance with
GAAP applied on a basis consistent with that of the preceding periods
and present fairly (i) all of the assets, liabilities and financial
position of Gulf as at December 31, 1996 and as at March 31, 1997, and
(ii) the results of operations and changes in financial position of
Gulf for the fiscal year ended December 31, 1996 and for the first
Fiscal Quarter ended March 31, 1997, all financial reports and
financial statements delivered to the Agent or the Lenders pursuant to
this Agreement, including without limitation any financial information
on which any compliance certificates are based have been prepared in
accordance with GAAP and present fairly the financial information set
out therein;
(k) No Event of Default - No Event of Default has occurred and is
continuing and no event has occurred which, with the giving of notice,
the passing of time, or both, would constitute an Event of Default;
(l) Compliance with Laws - None of the Borrower nor any Restricted
Subsidiary is in violation of any indenture, mortgage, lease,
agreement, obligation, instrument, charter or by-law provision,
judgment, decree, license, order, statute, rule, permit or regulation
relating in any way to the Restricted Group, to the operation of its
business or to its property or assets and each of the Borrower and the
Restricted Subsidiaries has obtained all licences, franchises,
permits, registrations and similar authorizations, all of which are in
good standing, necessary for the conduct by it of its businesses,
except where the violation or the absence of or lack of good standing
under any such authorization would not, in the aggregate, be
Materially Adverse;
(m) Environmental Laws
(i) Each of the Borrower and its Subsidiaries is in
compliance with all Environmental Laws and material
Environmental Approvals, except to the extent that failure to
comply therewith would not, in the aggregate, be Materially
Adverse;
(ii) each of the Borrower and its Subsidiaries:
A. possesses or has applied for all
Environmental Approvals required in order to conduct
its business operations; and
<PAGE> 53
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B. all such Environmental Approvals are valid
and in full force and effect; and
C. is now in compliance in all respects with all
such Environmental Approvals; and
D. no consent or approval is required of the
Borrower in connection with the transactions
contemplated herein in order to maintain such
Environmental Approvals in full force and effect;
except to the extent that failure to apply for, obtain, comply
with or maintain such Environmental Approvals would not, in
the aggregate, be Materially Adverse;
(iii) except to the extent that failure to so comply would
not, in the aggregate, be Materially Adverse, each of the
Borrower, and its Subsidiaries has complied with all
reporting, notification and inspection requirements imposed by
Environmental Laws, and all operating, monitoring and
reporting records have been maintained in accordance with all
Environmental Laws and Environmental Approvals; and
(iv) except to the extent that failure to do so would not,
in the aggregate, be Materially Adverse, each of the Borrower
and its Subsidiaries has complied with all contracts and
agreements entered into by the Borrower and its Subsidiaries
with Government Authorities relating to environmental matters;
(n) Insurance - Each of the Borrower and the Restricted
Subsidiaries has insurance with respect to its properties, assets and
business and against such casualties and contingencies and in such
types and such amounts, as is in accordance with sound business
practices for corporations of the size and type of business and
operations thereof;
(o) Taxes - Each of the Borrower and the Restricted Subsidiaries
has: (i) duly and timely filed all tax returns and reports as required
by law, has duly and correctly reported all income and other amounts
required to be reported and has paid all Taxes, penalties, interest,
fines and governmental charges in respect thereof, to the extent that
such Taxes, penalties, interest, fines and other governmental charges
have been assessed by the relevant taxation authority, except any such
taxes or charges which are being diligently contested in good faith by
appropriate proceedings for which adequate reserves in accordance with
GAAP shall have been set aside on its books; and (ii) duly and timely
paid all instalments of Taxes required to be paid by it and has made
full provision on its books for all taxes and all penalties, interest
and fines in respect thereof which relate to periods ending
immediately prior to the date hereof, except such failures with
respect to (i) and (ii) which would not, in the aggregate, be
Materially Adverse. Other than actions, suits, proceedings,
investigations, audits, claims and matters which would not, in the
aggregate, be Materially Adverse, there are no actions, suits,
proceedings, investigations, audits or claims now pending or, to the
best of the knowledge, information and belief of the senior officers
of the Borrower after due
<PAGE> 54
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enquiry, threatened against the Borrower or any Restricted Subsidiary
in respect of any Taxes or any penalties, interest and fines in
respect thereof and there are no matters under discussion with any
taxation or other Government Authority relating to any such matters
not provided for in the Financial Statements; and
(p) Accuracy of Information - All factual information furnished by
or on behalf of Gulf in writing to the Agent or the Lenders for
purposes of or in connection with this Agreement (including, without
limitation, all engineering and other information with respect to the
proved and probable reserves attributable to the petroleum and natural
gas interests of Gulf and the interests of Gulf in the assets on which
such information is based) or any transaction contemplated hereby
provided on or before the Effective Date is, and all other such
factual information provided pursuant to this Agreement to the Agent
or the Lenders (excluding information provided pursuant to paragraph
8.1(d)(vi) other than pursuant to a written request) will be, true and
accurate on the date as of which such information is dated or
certified (subject to any corrections, amendments or additions to such
information furnished to the Agent or the Lenders, as the case may be,
prior to any reliance thereon thereby) except to the extent that any
inaccuracies therein are not in the aggregate Materially Adverse and
such information is not, or shall not be, as the case may be,
incomplete by omitting to state any material fact necessary to make
such information not misleading, save and except in such respects as
are not, in the aggregate, Materially Adverse.
ARTICLE VIII
COVENANTS
8.1 Covenants - The Borrower covenants and agrees with the Agent
and the Lenders that, unless the Lenders otherwise consent in writing, so long
as any amount payable hereunder is outstanding:
(a) Punctual Payment - The Borrower shall duly and punctually pay
the principal amount of all Loans, all interest thereon, all fees and
all other amounts required to be paid by the Borrower hereunder or
pursuant to agreements with the Agent or Lenders respecting Letters of
Credit or Bankers' Acceptances and other documents related to the
Facility at the times and places and in the manner provided for herein
or therein;
(b) Conduct of Business - Save and except where the failure to do
so would not, in the aggregate, be Materially Adverse, each of the
Borrower and the Restricted Subsidiaries shall do all things necessary
to maintain its legal existence in good standing under the laws of the
jurisdiction of its incorporation and to maintain its qualification to
carry on business in each jurisdiction in which the location of its
respective property or assets or the conduct of its business requires
such license or qualification and to maintain all franchises,
licenses, rights, approvals, permits, consents, rights and privileges
necessary for the conduct of its business and to perform its
obligations under this Agreement;
<PAGE> 55
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(c) Compliance with Laws - Each of the Borrower and the Restricted
Subsidiaries shall comply with all Applicable Laws and all applicable
statutory obligations, judgments, decrees, licences, orders, statutes,
rules, permits and regulations, the non-compliance with which would be
Materially Adverse;
(d) Financial Statements and Other Information - The Borrower
shall deliver to the Agent and the Lenders:
(i) as soon as practicable and in any event within 120
days after the end of each of its fiscal years, the unaudited
unconsolidated annual financial statements of the Restricted
Group and the audited consolidated annual financial statements
of Gulf consisting of balance sheets, statements of profit and
loss and surplus, and statements of changes in financial
position for such year, together with the notes thereto, and
setting forth in comparative form the corresponding figures
for the preceding year, all prepared in accordance with
generally accepted accounting principles consistently applied
throughout the period and prior periods, together with a
report of the Auditors thereon;
(ii) as soon as practicable and in any event within 60
days after the end of each of the first three Fiscal Quarters
of each year, unaudited consolidated financial statements of
Gulf similar to those required pursuant to paragraph 8.1(d)(i)
as of the end of such period and for such period then ended
and for the period from the beginning of the current fiscal
year to the end of such period, setting forth, in the case of
the consolidated financial statements, in comparative form,
the corresponding figures for the comparable period in the
preceding fiscal year, prepared in accordance with generally
accepted accounting principles consistently applied and
certified by the controller, treasurer or other duly
authorized financial officer of the Borrower subject only to
changes resulting from audit and normal year-end adjustments;
(iii) as soon as practicable and in any event within 60
days after the end of each Fiscal Quarter, a Compliance
Certificate and a Notice of Unrestricted Subsidiaries;
(iv) as soon as practicable after any Extension Request, a
report prepared by qualified engineers (which, for greater
certainty need not be independent and may be employed by Gulf)
reasonably estimating the proved and probable reserves
attributable to the petroleum and natural gas interests of
Gulf (excluding Unrestricted Subsidiaries) as of a date not
earlier than the last day of the last financial year of the
Borrower preceding the date of the Extension Request;
(v) promptly, notice of any event or occurrence
(including, without limitation, any event or occurrence which
constitutes a breach of any Environmental Laws or
Environmental Approvals) which may be Materially Adverse;
<PAGE> 56
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(vi) from time to time, such additional available
information regarding the financial position or business of
Gulf as the Agent or the Lenders acting through the Agent may
reasonably request; and
(vii) promptly after the occurrence of any change in
Unrestricted Subsidiaries, a Notice of Amendment of
Unrestricted Subsidiaries;
(e) Notice of Litigation - The Borrower shall give notice to the
Agent of the occurrence of any litigation, action, suit,
investigation, claim, complaint or other proceeding, if the result
thereof, or in respect of such matters as in the aggregate, might be
Materially Adverse or if any thereof in any manner draws into question
the validity or enforceability of this Agreement, and from time to
time shall provide the Agent with all reasonable non-privileged
information requested by the Agent or any of the Lenders concerning
the status of any such litigation, action, suit, investigation, claim,
complaint or other proceeding. Such notice shall be given within 15
days of senior management becoming aware of such litigation,
proceeding or dispute and shall be in form and detail satisfactory to
the Agent, acting reasonably;
(f) Notice of any Event of Default - The Borrower shall forthwith
give notice to the Agent of any fact which, to the best of the
Borrower's knowledge, would reasonably be construed as constituting an
Event of Default or of any event which, to the best of the Borrower's
knowledge, with the giving of notice, lapse of time or otherwise would
constitute an Event of Default;
(g) Books and Records - The books and records relating to the
financial affairs of Gulf shall at all times be maintained in
accordance with good and customary business practice, all financial
statements provided for herein shall be prepared in accordance with
GAAP (excepting, in the case of unconsolidated statements, GAAP with
respect to the consolidation thereof) and present fairly the financial
information set forth therein and at any reasonable time and from time
to time upon reasonable prior notice, the Borrower shall permit the
Agent or the Agent at the request of the Lenders, at the reasonable
expense of the Borrower, access to examine such books and records;
(h) Use of Proceeds - The Borrower shall use the proceeds of all
Drawdowns for the purposes contemplated in Section 2.2;
(i) Pari Passu Ranking - The Borrower shall ensure that Loans
under the Facility rank pari passu with all other present and future
senior unsecured indebtedness of the Borrower;
(j) Environmental Compliance - The Borrower shall and shall cause
each Restricted Subsidiary to comply with all, and shall advise the
Lenders if it or any Subsidiary becomes aware that it is not in
compliance with, any applicable Environmental Laws and Environmental
Approvals, except to the extent that failure to comply would not, in
the aggregate, be Materially Adverse. At the request of the Lenders,
in their sole discretion, the
<PAGE> 57
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Borrower shall undertake to have an environmental audit (by an
independent environmental auditor to be chosen by the Agent with the
prior consent of the Borrower, acting reasonably) of part or all of
its operations conducted for the benefit of the Lenders at the cost of
the Borrower, such cost to the Borrower not to exceed U.S. $100,000
for each audit requested. If such environmental audit establishes
environmental liability to the Restricted Group in excess of: (A) U.S.
$25,000,000 in the 5 years next following the date of such audit or
during the remaining Term Period, whichever is shorter; and (B)
provisions in the annual or quarterly financial statements of the
Borrower last preceding the date of such environmental audit,
provision for such amount shall be made in the next quarterly or
annual financial statements of the Borrower or the amount of such
liability during the remaining Term Period shall be added to Total
Senior Debt for purposes of subsection 8.1(l) until such time as
provision for such amount is made in the financial statements of the
Borrower or the Majority Lenders are satisfied, in their sole
discretion, acting reasonably, that the liability is no longer
Materially Adverse. The Lenders may not request an environmental
audit, at the cost of the Borrower, more than once every two financial
years of Gulf provided that, at the request of the Lenders in their
sole discretion, the Borrower shall undertake to have an environmental
audit as aforesaid, at the cost of the Lenders at any time provided
that the Lenders may not request an environmental audit, whether at
the cost to the Borrower or at the cost to the Lenders, more than once
every financial year of Gulf;
(k) Negative Pledge - The Borrower shall not, and shall not
permit any Restricted Subsidiary to, create, issue, incur, assume or
permit to exist any security interest on its properties or assets in
priority to the Lenders' rights in respect of the Facility, other than
Permitted Encumbrances;
(l) Financial Covenants -
(i) At the end of each Fiscal Quarter the Tangible Net
Worth of Gulf on a consolidated basis shall equal or exceed
the Minimum Tangible Net Worth;
(ii) At the end of each Fiscal Quarter:
Total Senior Debt
---------------------------------------- less than 3.0
Cumulative
Restricted + Acquisition - Disposition
EBIDTA EBIDTA EBIDTA
where:
"CUMULATIVE RESTRICTED EBITDA" means the aggregate
EBITDA of the Restricted Group for the Previous Four
Fiscal Quarters;
<PAGE> 58
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"ACQUISITION EBITDA" means EBITDA properly
attributable to assets acquired by the Restricted
Group within the Previous Four Fiscal Quarters which
was generated in the Previous Four Fiscal Quarters
when such assets were not owned by the Restricted
Group and thus not included in the Cumulative
Restricted EBITDA provided, however, that Acquisition
EBITDA shall not include the EBITDA properly
attributable to any such asset acquisition having a
Transaction Price less than U.S. $5,000,000 as long
as the aggregate of the Transaction Prices for assets
acquired in the Previous Four Fiscal Quarters by the
Restricted Group does not exceed U.S. $50,000,000 in
which case the aggregate EBITDA relating to all such
acquisitions shall be included; and
"DISPOSITION EBITDA" means EBITDA properly
attributable to assets disposed of by the Restricted
Group within the Previous Four Fiscal Quarters which
was generated in the Previous Four Fiscal Quarters
when such assets were owned by the Restricted Group
and thus included in the Cumulative Restricted EBITDA
provided, however, that Disposition EBITDA shall not
include the EBITDA properly attributable to any such
asset disposition having a Transaction Price less
than U.S. $5,000,000 as long as the aggregate of the
Transaction Prices for assets disposed of in the
Previous Four Fiscal Quarters by the Restricted Group
does not exceed U.S. $50,000,000 in which case the
aggregate EBITDA relating to all such dispositions
shall be included;
(m) Negative Covenants - The Borrower shall not, and shall not
permit any Restricted Subsidiaries to, without the prior written
consent of the Majority Lenders:
(i) provide Financial Guarantees, excluding Designated
Project Guarantees, in an aggregate amount in excess of 5% of
the Equity of Gulf unless such Financial Guarantees or the
Funded Debt guaranteed thereby is included in Total Senior
Debt;
(ii) sell, assign, transfer or otherwise dispose of
properties or assets (excluding (A) the sale of accounts
receivable under the Receivables Purchase and Sale Agreement
dated November 29, 1994, as amended, among the Borrower,
Corporate Receivables Trust and Toronto Dominion Securities
Inc., or any replacement of such arrangement; (B) the
surrender, exchange, lease, sublease or farmout of any
property or assets in the ordinary course of business; (C) the
sale of production of hydrocarbons or by-products in the
ordinary course of business; and (D) sales or other
dispositions of assets or property from one member of the
Restricted Group to another member of the Restricted Group) in
any four consecutive Fiscal Quarters pursuant to which the
Restricted Group receives Net Proceeds in an amount which
exceeds 5% of the Equity of Gulf (which Equity shall be
calculated as of the first day of such four Fiscal Quarters)
(the last day of any four Fiscal Quarters in which such excess
occurs hereinafter referred to as the "Excess Date") unless,
subject to
<PAGE> 59
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compliance with Section 5.2, the proceeds from the sale or
other disposition of such properties or assets are utilized
for either investments in the normal course of Gulf's business
or the repayment of Senior Debt (including the Loans), and any
such proceeds not so utilized are repaid to the Lenders
(except to the extent such Restricted Subsidiaries do not make
such payments to the Borrower because they are precluded from
doing so pursuant to the terms of their Funded Debt), on the
next applicable Interest Payment Date following the end of the
fourth Fiscal Quarter after the Excess Date. Any such
repayment of the Facility shall be applied to scheduled
repayments in inverse order of maturity;
(iii) merge, amalgamate, consolidate, reorganize or enter
into a plan of arrangement with any other Person or become a
party to any other transaction whereby all or substantially
all of the property or assets of the Restricted Group may
become the property or assets of another Person, including, in
the case of an amalgamation, of the continuing company
resulting therefrom, unless such merger, amalgamation,
consolidation, reorganization, plan of arrangement,
partnership or other transaction: (A) involves at least one
member of the Restricted Group; and (B) does not constitute an
Event of Default and would not constitute with the giving of
notice, the passing of time, or both, an Event of Default and,
in the case of the Borrower, complies with subsection 8.4(a);
(iv) make any material change in the nature of the
Restricted Group's business, being the exploration and
production of oil and gas, oil and gas pipelines, gas
processing, oil refining, and any other ancillary industry
related to the exploration and production of oil and gas, and
not make any investments outside the normal course of such
business, which are in the aggregate in excess of 5% of the
book value of the assets of the Restricted Group at the end of
the last completed Fiscal Quarter of the Borrower; or
(v) continue the Borrower's existence under the laws of
any jurisdiction other than the laws of Canada or any province
thereof without the prior consent of the Majority Lenders in
their sole discretion, acting reasonably;
(n) Insurance - The Borrower will and will cause each of its
Restricted Subsidiaries to maintain, with financially sound and
reputable insurers, insurance with respect to its properties and
business and against such casualties and contingencies and in such
types and such amounts as shall be in accordance with sound business
practices for corporations of the size and type of business and
operations as Gulf;
(o) Defend Title - The Borrower shall and shall cause each of the
Restricted Subsidiaries to diligently maintain, protect and defend its
right, title, estate and interest in, to and in respect of the
property and assets (including proceeds thereof) of the Borrower and
Restricted Subsidiaries against any claim or demand whatsoever and
take all such acts and steps as are necessary or advisable at any time
and from time to time to maintain ownership
<PAGE> 60
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of and keep in good standing all of the Borrower's and Restricted
Subsidiaries' property and assets, all in accordance with good oil and
gas industry practice, except where the failure to so maintain,
protect or defend would not, in the aggregate, be Materially Adverse;
(p) Taxes - The Borrower will and will cause each of its
Restricted Subsidiaries (excluding Non-Material Restricted
Subsidiaries) to duly and timely file all returns in respect of all
federal and provincial and other Taxes or other assessments or
governmental charges or levies applicable thereto and to pay, or make
provision for payment of, all such Taxes, assessments, charges or
levies imposed upon it or upon its income or profits or upon property
or assets belonging to it, unless, in any such case, the same is being
contested in good faith by appropriate proceedings and an adequate
reserve therefor has been established and is maintained in accordance
with GAAP and except where the failure to so file a return or pay, or
provide for, such taxes, assessments, charges or levies would not, in
the aggregate, relate to a liability to the Restricted Group in excess
of U.S. $500,000;
(q) Obligation to Notify of a Credit Rating Change - At any time
that a rating assigned by DBRS, CBRS, Standard and Poor's or Moody's
changes as it relates to the Borrower, the Borrower shall, upon
receiving notice of the public dissemination of notice of such change,
immediately, and in any event within 5 Business Days following receipt
thereof, notify the Agent of such new rating and the date of such
change;
(r) Maintain Property - The Borrower shall and shall cause each of
the Restricted Subsidiaries to maintain all of its property and assets
in good condition and repair in accordance with good oil and gas
industry practice, except where the failure to do so would not, in the
aggregate, be Materially Adverse; and
(s) Ownership of Assets - At least 50% of the total assets of the
Restricted Group, determined in accordance with GAAP, shall at all
times be owned by the Borrower or by its Restricted Subsidiaries which
do not have Funded Debt in excess of Cdn. $10,000,000, in the
aggregate (other than Funded Debt owing to other Restricted
Subsidiaries having Funded Debt not exceeding Cdn. $10,000,000 in the
aggregate).
8.2 Environmental Indemnity - The Borrower hereby covenants and
agrees to be responsible for, and to indemnify each of the Agent, the Lenders
and each of their officers, directors, employees and agents (in this Section,
collectively referred to as the "Indemnified Parties") and hold each of them
harmless from and against all claims, demands, liabilities, losses, costs,
damages and expenses (including, without limitation, reasonable legal fees and
all costs incurred in the investigation, pursuing of any claim, proceeding with
respect to, defense and settlement of any item or matter hereinafter set out)
that the Indemnified Parties may incur or suffer, directly or indirectly, as a
result of or in connection with:
(i) the presence of any Hazardous Substance on, upon or
within Gulf's properties or assets, or the escape, seepage,
leakage, spillage, discharge, emission, release, disposal or
transportation away from Gulf's properties or assets of any
Hazardous
<PAGE> 61
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Substance, whether or not there is compliance with all
applicable Environmental Laws and Environmental Approvals; and
(ii) the imposition of any Remedial Order affecting the
Borrower's properties or assets, or any non- compliance with
Environmental Laws or Environmental Approvals pertaining to
Gulf's properties or assets by any Person, including Gulf, the
Agent, the Lenders or any Person acting on behalf of the Agent
or any of the Lenders;
in any way arising in connection with or related to such Indemnified Party's
participation in the Facility or this Agreement provided that any such claims,
demands, liabilities, losses, costs, damages and expenses are not as a result
of the act or omission of the Indemnified Party.
8.3 Restricted/Unrestricted Subsidiaries
(a) The Borrower covenants and agrees that the Subsidiaries listed
in Schedule L (as Schedule L may be amended by the Borrower pursuant
to this Agreement from time to time after the Effective Date) as
"Unrestricted Subsidiaries" shall be all of the Unrestricted
Subsidiaries of the Borrower (excepting only Subsidiaries of
Unrestricted Subsidiaries).
(b) If an entity is purchased by the Borrower or any Restricted
Subsidiary and such entity would not otherwise qualify as a Restricted
Subsidiary and the Funded Debt (other than Inter-Restricted Group
Funded Debt) of the entity remains non-recourse to the Borrower or any
Restricted Subsidiary, the Borrower shall be permitted 12 months from
the date of purchase to: (A) retire the Funded Debt of such entity
with the proceeds of Funded Debt of the Borrower ranking no higher
than pari passu with the Facility, or other funds to the extent
necessary to qualify as a Restricted Subsidiary; or (B) assume the
Funded Debt of such entity provided it ranks no higher than pari passu
with the Facility; provided in either case that the additional Funded
Debt of the Borrower does not result in subsection 8.1(l) being
contravened. During the 12 months from the date of purchase and prior
to such retirement, or assumption of the Funded Debt of such entity,
the entity may be designated as a Restricted Subsidiary or
Unrestricted Subsidiary, at the Borrower's option. If the entity does
not qualify as a Restricted Subsidiary within the 12 month period, the
entity (unless it would not otherwise be an Unrestricted Subsidiary
as defined herein) shall be designated as an Unrestricted Subsidiary.
(c) Neither the Borrower nor any Restricted Subsidiary may:
(i) sell, assign, transfer or otherwise dispose of any
properties or assets (other than the disposition of securities
of Unrestricted Subsidiaries held thereby) to any one or more
Unrestricted Subsidiaries unless: (x) it shall be for
consideration not less than the Fair Market Value thereof at
the date of such disposition; and (y) after taking into
account the overall effect of any transaction giving rise to
the change (including for certainty, accounting for any
concurrent repayment of Senior Debt) subsection
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8.1(l) would not have been contravened by the Borrower if such
disposition had occurred prior to the end of the last Fiscal
Quarter preceding the date of such disposition; or
(ii) purchase or otherwise acquire any properties or
assets from any one or more of the Unrestricted Subsidiaries
unless: (x) it shall be for consideration not greater than the
Fair Market Value of such properties or assets at the date of
such acquisition; and (y) after taking into account the
overall effect of any transaction giving rise to the change
(including for certainty, accounting for any concurrent
repayment of Senior Debt) subsection 8.1(l) would not have
been contravened by the Borrower if such acquisition had
occurred prior to the end of the last Fiscal Quarter preceding
the date of such disposition.
(d) The Borrower may from time to time deliver a Notice of
Amendment of Unrestricted Subsidiaries to the Agent which, in respect
of any change to Schedule L, shall be effective as of the date of the
giving of such notice provided that, after taking into account the
overall effect of any transaction giving rise to the change (including
for certainty, accounting for any concurrent repayment of Senior Debt)
subsection 8.1(l) would not have been contravened and no Event of
Default shall occur as a result of such designation by the Borrower if
such change had occurred prior to the end of the last Fiscal Quarter
preceding the date of such change.
(e) If, at the end of any Fiscal Quarter, any Subsidiary, which
was qualified as a Restricted Subsidiary at the end of the immediately
preceding Fiscal Quarter pursuant to the exceptions set forth in
subparagraphs (ii)(C) and (D) of the definition of "Unrestricted
Subsidiaries", no longer qualifies as a Restricted Subsidiary because
of a reduction in the ratings assigned to the Senior Debt of the
Borrower, then such Subsidiary shall continue to be treated as a
Restricted Subsidiary unless it fails to qualify as a Restricted
Subsidiary pursuant to the exceptions set forth in subparagraphs
(ii)(C) and (D) of the definition of Unrestricted Subsidiaries at the
end of the next Fiscal Quarter and shall thereafter cease to be
treated as a Restricted Subsidiary.
8.4 Certain Requirements in Respect of Mergers, etc.
(a) The Borrower shall not merge, amalgamate, consolidate,
reorganize or enter into a plan of arrangement with any other Person
or become a party to any other transaction whereby all or
substantially all of the property or assets of the Restricted Group
may become the property or assets of another Person, including, in the
case of an amalgamation, of the continuing company resulting
therefrom, or whereby the obligation of the Borrower to pay any amount
hereunder would become subject to novation or assumed or undertaken by
any other such Person or continuing company, unless but may do so if:
(i) no Event of Default, and no event which with the
giving of notice, the passage of time or both would constitute
an Event of Default, exists, and no such
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event would arise as a result of such merger, amalgamation,
consolidation, reorganization, plan of arrangement or
transaction;
(ii) such other Person or continuing company (herein
referred to as a "Successor") is an incorporated company with
limited liability and incorporated in Canada or a province
thereof or an Eligible Partnership;
(iii) the Successor shall execute, prior to or
contemporaneously with the consummation of such transaction,
an agreement supplemental hereto and such other instruments,
if any, as are satisfactory to the Majority Lenders, acting
reasonably, and in the opinion of counsel to the Borrower
approved by the Agent are necessary or advisable to evidence:
(A) the assumption by the Successor of liability for the due
and punctual payment of the principal of and interest and
fees on the Loans and all other amounts payable hereunder; (B)
the covenant of the Successor to pay the same; and (C) the
agreement of the Successor to observe and perform all the
terms, conditions, covenants and obligations of the Borrower
under this Agreement (subject to such changes, in the case of
a Successor that is an Eligible Partnership, as are necessary
to reflect that the Borrower is not a corporation); and
(iv) such transaction shall, to the satisfaction of the
Majority Lenders, acting reasonably, and in the opinion of
counsel to the Borrower approved by the Agent, be upon such
terms as substantially to preserve and not to impair any of
the rights and powers of the Agent or of the Lenders and not
to affect adversely the liability of the Lenders for any
present or future Taxes, or other governmental assessments,
charges or levies of whatsoever nature.
(b) Whenever the conditions of subsection (a) have been duly
observed and performed, the Agent shall execute and deliver the
supplemental agreement provided for in paragraph 8.4(a)(iii) on behalf
of each of the parties hereto (other than the Borrower) and thereupon:
(i) the Successor shall possess and from time to time may
exercise each and every right and power of the Borrower under
this Agreement in the name of the Borrower or otherwise and
any act or proceeding by any provision of this Agreement
required to be done and performed with like force and effect
by the like directors or officers of the Successor; and
(ii) at the request of the Borrower (except, if
applicable, as a partner of an Eligible Partnership), the
Borrower shall be released from its liability and obligations
under this Agreement and the Agent, at the request and at the
expense of the Borrower, shall execute and deliver to the
Borrower such instruments as shall be requisite to evidence
such release.
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ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default - The occurrence of any one or more of the
following events (each such event being herein referred to as an "Event of
Default") shall constitute a default under this Agreement:
(a) if the Borrower shall fail to pay any principal of, or
interest or fees on, the Loans when the same shall become due and
payable hereunder for a period of two Business Days after notice from
the Agent that such amount is due and payable;
(b) if the Borrower shall fail to perform or comply with any term,
condition, covenant or obligation contained in this Agreement (other
than those specified in subsection 9.1(a)) and, if capable of remedy,
such failure to perform or comply is not remedied within 30 days of
notice from the Agent so to remedy provided that, in the case of such
a failure to comply with subsection 8.1(o) or any applicable
Environmental Laws or Environmental Approvals which is capable of
remedy, there shall not be an Event of Default if the Borrower shall
have commenced the remedy thereof within 30 days of notice from the
Agent so to remedy and shall actively and diligently pursue such
remedy in good faith to completion;
(c) if any representation or warranty made by the Borrower in this
Agreement or in any certificate or other document at any time
delivered hereunder to the Agent shall prove to have been incorrect in
any material respect on and as of the date thereof and, if capable of
remedy, such matter is not remedied within 30 days of notice from the
Agent so to remedy;
(d) if the Borrower shall cease to carry on business;
(e) if proceedings are commenced for the dissolution, liquidation
or winding up of the Borrower or any Restricted Subsidiary (other than
a Non-Material Restricted Subsidiary and other than any dissolution,
liquidation or winding up of a Restricted Subsidiary where
substantially all of the assets of such Subsidiary are transferred to
another Restricted Subsidiary in connection therewith), or for the
suspension of the business or operations of the Borrower or any such
Restricted Subsidiary (other than a Non-Material Restricted
Subsidiary), unless such proceedings are actively and diligently
contested in good faith on a timely basis;
(f) if the Borrower or any Restricted Subsidiary (other than a
Non-Material Restricted Subsidiary) makes any assignment in bankruptcy
or makes any other assignment for the benefit of creditors, makes any
proposal under the Bankruptcy and Insolvency Act (Canada) or any
comparable law, files a petition or proposal to take advantage of any
act of insolvency, consents to or acquiesces in the appointment of a
trustee, receiver, receiver and manager, interim receiver, custodian,
sequestrator, liquidator or other Person with similar powers of itself
or of all or any substantial portion of its property or assets, or
files a petition
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or otherwise commences any proceedings seeking any reorganization,
arrangement, composition or readjustment under any applicable
bankruptcy, insolvency, moratorium, reorganization or other similar
law affecting creditors' rights or consents to, or acquiesces in, the
filing of such a petition;
(g) if a trustee, receiver, receiver and manager, interim
receiver, custodian, sequestrator, liquidator or any other Person with
similar powers shall be appointed of the Borrower or any Restricted
Subsidiary (other than a Non-Material Restricted Subsidiary) or of all
or any substantial portion of any of its property or assets, other
than a portion of any of its property or assets where recourse is
limited to such property or assets, a judgment or an order is made by
a tribunal of competent jurisdiction restraining its ability to deal
with all or any substantial portion of its property and assets or a
judgment or order is made by a tribunal of competent jurisdiction
approving any reorganization, arrangement, composition or readjustment
under any applicable bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting creditors' rights or the
Borrower or any Restricted Subsidiary is adjudged bankrupt and such
appointment, judgment or order is not vacated, stayed or set aside
within 30 days of the date thereof;
(h) if a writ of execution, distress, attachment or similar
process is issued or levied against all or a substantial portion of
the property or assets of the Borrower or any Restricted Subsidiary in
connection with any default by it in the payment of any amount in
excess of U.S. $25,000,000, or the Equivalent Amount thereof in
another currency as determined by the Agent, unless the writ is
withdrawn, released, vacated or stayed within 30 days, or a judgment
or order shall be rendered against the Borrower or any Restricted
Subsidiary by a court of competent jurisdiction with respect to such
default and such judgment or order shall not be satisfied (or adequate
security provided therefor) in accordance with its terms and continue
unstayed and in effect for 30 days;
(i) if an event of default, under any indenture, agreement or
instrument under which the Borrower or any Restricted Subsidiary has
at the date of this Agreement or shall hereafter have Funded Debt
(excluding indebtedness in respect of which recourse to the Borrower
and Restricted Subsidiaries is limited to securities of an
Unrestricted Subsidiary or specified assets of the Borrower and
Restricted Subsidiaries held thereby) in excess of U.S. $25,000,000,
or the Equivalent Amount thereof in another currency as determined by
the Agent, shall occur and be continuing (and all grace periods have
expired) and as a result thereof any such indebtedness shall have been
lawfully accelerated or shall lawfully be or become due and payable
prior to the date on which the same would otherwise have become due
and payable;
(j) any order by a Government Authority is issued, or a judgment
or order rendered, against the Borrower or Restricted Subsidiary
alleging or in respect of a violation of any Environmental Law or
Environmental Approval for an amount in excess of U.S. $25,000,000, or
the Equivalent Amount thereof in another currency as determined by the
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Agent, and such order or judgment shall not be satisfied (or adequate
security provided therefor) in accordance with its terms and continue
unstayed and in effect for 30 days;
(k) if all or a substantial part of the property or assets of the
Restricted Group shall be expropriated, whether for full or partial
consideration; or
(l) if a Change of Control occurs.
9.2 Termination and Acceleration - Upon the occurrence of an Event
of Default, the Agent shall at the request, or may with the consent, of the
Majority Lenders, by one or more notices to the Borrower do any or all of the
following:
(a) terminate the obligations of the Lenders including, without
limitation, the obligation of the Lenders to advance or allow any
further Drawdowns hereunder;
(b) declare all or any part of the principal amount of the Loans,
all interest accrued thereon and all fees and other amounts required
to be paid by the Borrower hereunder, to be immediately due and
payable without the necessity of presentment for payment, protest,
notice of non-payment or notice of protest (all of which are hereby
expressly waived);
(c) require the Borrower to pay to the Lenders an amount equal to
the aggregate face amount of all outstanding Bankers' Acceptances,
which amount shall be held by the Lenders as cash collateral in an
interest-bearing account, with interest at the Agent's prevailing
rate for similar deposits, until such Bankers' Acceptances mature and
shall be applied by the Lenders to satisfy such maturing Bankers'
Acceptances;
(d) require the Borrower to pay to the Agent an amount equal to
the maximum amount payable by the Lenders under all outstanding
Letters of Credit which amount shall be held by the Agent as cash
collateral in an account bearing interest at the Agent's prevailing
rate for similar deposits, to be applied by the Agent to satisfy any
payments which the Lenders may have to make under Letters of Credit;
and
(e) proceed to exercise any and all rights hereunder or under any
other document or instrument executed pursuant to this Agreement.
9.3 Remedies Cumulative and Waivers - For greater certainty, it is
expressly understood and agreed that the respective rights and remedies of the
Lenders hereunder or under any other document or instrument executed pursuant
to this Agreement are cumulative and are in addition to and not in substitution
for any rights or remedies provided by law or by equity; and any single or
partial exercise by the Lenders of any right of remedy for a default or breach
of any term, covenant, condition or agreement contained in this Agreement or
other document or instrument executed pursuant to this Agreement shall not be
deemed to be a waiver of or to alter, affect or prejudice any other right or
remedy or other rights or remedies to which the Lenders may be lawfully
entitled for such default or breach. Any waiver by the Lenders of the strict
observance, performance or
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compliance with any term, covenant, condition or agreement herein contained and
any indulgence granted either expressly or by course of conduct, by the Lenders
shall be effective only in the specific instance and for the purpose for which
it was given and shall be deemed not to be a waiver of any rights and remedies
of the Lenders under this Agreement or other document or instrument executed
pursuant to this Agreement as a result of any other default or breach hereunder
or thereunder.
9.4 Setoff - Any deposits or other sums credited by or due from
the Lenders to the Borrower and any securities or other property of the
Borrower in the possession of the Lenders or Agent may be, unless otherwise
agreed, applied to or set off against the payment of the obligations of the
Borrower hereunder and any or all other Liabilities, direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising, of the Borrower to the Lenders or Agent at any time after the
occurrence and during the continuance of any Event of Default, in each case for
the benefit of each of the Lenders rateably in accordance with the portion of
the Loans outstanding to such Lender.
ARTICLE X
THE AGENT AND THE LENDERS
10.1 The Agent - Each Lender hereby irrevocably appoints the
Agent to act as its agent in connection with this Agreement and any matter
contemplated hereunder, and irrevocably authorizes the Agent to exercise such
rights, powers and discretions as are delegated to the Agent pursuant to this
Agreement together with all such rights, powers and discretions as are
incidental hereto or thereto. The Agent shall have only those duties and
responsibilities which are expressly specified in this Agreement, and it may
perform such duties by or through its agents or employees. This Agreement
shall not place the Agent under any fiduciary duties in respect of any Lender.
As to any matters not expressly provided for by this Agreement, the Agent shall
not be required by the Lenders to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected with respect to the Lenders in so acting or refraining from acting)
upon the instructions of the Majority Lenders, and such instructions shall be
binding upon all Lenders; provided, however, that the Agent shall not be
required to take any action which exposes the Agent to liability or which is
contrary to this Agreement or Applicable Law.
10.2 The Agent's Responsibility -
(a) The Agent may assume that:
(i) any representation, warranty or statement made by the
Borrower in or in connection with any of this Agreement
(including, without limitation, in any Drawdown Notice) is
true and correct;
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(ii) no Event of Default has occurred;
(iii) the Borrower is not in breach of or in default under,
its obligations under this Agreement; and
(iv) there has been no assignment or transfer by any means
by any of the Lenders of their rights hereunder unless and
until the Agent receives a Bank Transfer Agreement
substantially in the form set forth in Schedule G whereby the
assignee is bound hereby as it would have been if it had been
an original Lender party hereto;
and the Agent may also:
(b) unless it has actual knowledge or actual notice to the
contrary, assume that each Lender's address is that identified with
its signature in Schedule A until the Agent has received from such
Lender a notice designating some other office of such Lender as its
address and act upon any such notice until the same is superseded by a
further such notice;
(c) engage and pay for the advice or services of any legal
counsel, independent public accountants or other experts whose advice
or services may to it seem necessary, expedient or desirable and rely
upon any advice so obtained and shall not be liable for any action
taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts;
(d) unless it has actual knowledge or actual notice to the
contrary, rely as to matters of fact which might reasonably be
expected to be within the knowledge of any Person upon a statement
signed by or on behalf of the such Person;
(e) unless it has actual knowledge or actual notice to the
contrary, rely upon any communication or document believed by it to be
genuine;
(f) refrain from exercising any right, power or discretion vested
in it under this Agreement unless and until instructed by the Majority
Lenders (or Lenders if instruction of the Lenders is specifically
required by the terms of this Agreement) as to whether or not such
right, power or discretion is to be exercised and, if it is to be
exercised, as to the manner in which it should be exercised;
(g) refrain from exercising any right, power or discretion vested
in it which would or might in its opinion be contrary to any law of
any jurisdiction or any directive or otherwise render it liable to any
Person, and may do anything which is in its opinion necessary to
comply with any such law or directive;
(h) retain for its own benefit, and without liability to account
for, any fee or other sum receivable by it for its own account;
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(i) accept deposits from, lend money to, provide any advisory or
other services to or engage in any kind of banking or other business
with any Party (including any Subsidiary thereof); and
(j) refrain from acting in accordance with any instructions of the
Majority Lenders to begin any legal action or proceeding arising out
of or in connection with any of this Agreement or any Bankers'
Acceptance or Letter of Credit, until it shall have received such
security as it may require (whether by way of payment in advance or
otherwise) against all costs, claims, expenses (including legal fees),
obligations, losses, damages, penalties, actions, judgments, suits,
disbursements and liabilities of any kind or nature whatsoever which
it will or may expend or incur in complying with such instruction.
10.3 The Agent's Duties - The Agent shall:
(a) promptly upon receipt thereof, inform each Lender of the
contents of any notice, document, request or other information
received by it in its capacity as Agent hereunder from the Borrower
excepting therefrom information and notices relating solely to the
role of Agent hereunder;
(b) promptly notify each Lender of the occurrence of any Event of
Default of which the Agent has written notice from the Borrower;
(c) each time the Borrower requests the prior written consent of
the Lenders or Majority Lenders, use its best efforts to obtain and
communicate to the Borrower the response of the Lenders or Majority
Lenders, as the case may be, in a reasonable and timely manner having
due regard to the nature and circumstances of the request;
(d) subject to the foregoing provisions of this Section and
compliance with this Agreement, act in accordance with any
instructions given to it by the Lenders or, where permitted, the
Majority Lenders; and
(e) if so instructed by the Lenders, or the Majority Lenders, as
applicable, refrain from exercising any right, power or discretion
vested in it under this Agreement or any document incidental hereto.
10.4 Protection of Agent - Notwithstanding anything to the contrary
expressed or implied herein, the Agent shall not:
(a) be bound to enquire as to:
(i) whether any representation, warranty or statement
made by the Borrower in or in connection with this Agreement
or any document incidental hereto is true or correct;
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(ii) the occurrence or otherwise of any Event of Default;
(iii) the performance or observance by the Borrower of its
obligations under this Agreement or any document incidental
hereto or to inspect the property or assets (including the
books and records) of the Borrower or any of its Subsidiaries;
(iv) any breach of or default by the Borrower of or under
its obligations under this Agreement; or
(v) the use or application by the Borrower of any of the
proceeds of the Facility;
(b) be bound to account to any Lender for any sum or the profit
element of any sum received by it for its own account;
(c) be bound to disclose to any Person any information relating to
the Borrower if such disclosure would or might in its opinion
constitute a breach of any law or regulation or be otherwise
actionable at the suit of any Person; or
(d) accept any responsibility for the accuracy and/or completeness
of any information supplied by others in connection herewith or for
the legality, validity, effectiveness, adequacy or enforceability of
this Agreement, any Bankers' Acceptance, any Letter of Credit or any
document incidental hereto or thereto and the Agent shall not be under
any liability or responsibility as Agent to any Lender as a result of
taking or omitting to take any action in relation to the Agreement,
any Bankers' Acceptance, any Letter of Credit or any document
incidental hereto or thereto save in the case of gross negligence or
wilful misconduct, and each of the Lenders and the Borrower agree that
it will not assert or seek to assert against any director, officer,
employee or agent of the Agent any claim it might have against any of
them in respect of the matters referred to in this Section.
10.5 Indemnification of Agent - Each of the Lenders agrees to
indemnify the Agent (to the extent not reimbursed by the Borrower), ratably
according to their respective Commitment Amounts, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Agent under this Agreement, or any of the transactions contemplated hereby,
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's own negligence or wilful
misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by such Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement or any of the transactions contemplated
hereby to the extent that the Agent is not reimbursed for the expenses by the
Borrower.
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10.6 Termination or Resignation of an Agent
(a) Notwithstanding the irrevocable appointment of the Agent, the
Majority Lenders may (with the consent of the Borrower, not to be
unreasonably withheld), upon giving the Agent 90 days' prior written
notice to such effect, terminate the Agent's appointment hereunder
provided that a successor Agent has been appointed at or prior to the
expiry of such notice.
(b) The Agent may resign its appointment hereunder at any time
without assigning any reason therefor upon giving 15 Business Day's
prior written notice to such effect to each of the other parties
hereto. Such resignation shall not be effective until a successor
Agent has been appointed.
(c) In the event of any such termination or resignation, the
Majority Lenders shall appoint a successor Agent who shall be a Lender
(who consents to such appointment) acceptable to the Borrower, acting
reasonably. The retiring Agent shall deliver copies of the accounts
to such successor and the retiring Agent shall be discharged from any
further obligation hereunder accruing thereafter but shall remain
entitled to the benefit of the provisions of this Section and the
Agent's successor and each of the other parties hereto shall have the
same rights and obligations among themselves as they would have had if
such successor originally had been a Party hereto as Agent.
(d) If no successor Agent has been appointed pursuant to the
subsections above by the expiry of the required period of prior notice
after the date such notice of resignation was given by the resigning
Agent, the resigning Agent's resignation shall become effective and
such of the Lenders as is designated by (and consents to such
designation) the Borrower shall thereafter perform all the duties of
the resigning Agent hereunder until such time, if any, as the Majority
Lenders appoint a successor Agent as provided above.
10.7 Rights of the Agent as Lender - With respect to its
Commitment, the Advances made by it, any Bankers' Acceptances accepted and
purchased by it and any Letters of Credit issued by it, the Agent shall have
the same rights, powers and obligations under this Agreement as any other
Lender and may exercise the same as though it were not the Agent; and the term
"Lender" or "Lenders" shall, unless otherwise expressly indicated, include any
Person serving as an Agent in its individual capacity. Any Person serving as an
Agent and its affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of business with,
the Borrower and any Person who may do business with or own securities of the
Borrower, all as if such Person serving as the Agent were not the Agent and
without any duty to account therefor to the Lenders.
10.8 Financial Information Concerning Gulf - Subject to subsection
10.3(a), the Agent shall not have any duty or responsibility either initially
or on a continuing basis to provide any Lender with any credit or other
information with respect to the financial condition and affairs of Gulf.
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10.9 Knowledge of Financial Situation of the Borrower - Each Lender
has itself been, and will continue to be, solely responsible for making its own
independent appraisal of and investigations into the financial condition,
creditworthiness, condition, affairs, status and nature of the Borrower.
Accordingly, each Lender confirms with the Agent that it has not relied, and
will not hereafter rely, on the Agent (i) to check or enquire on its behalf
into the adequacy, accuracy or completeness of any information provided by the
Borrower or any other Person under or in connection with this Agreement or the
transactions hereby contemplated (whether or not such information has been or
is hereafter distributed to such Lender by the Agent), or (ii) to assess to
keep under review on its behalf the financial condition, creditworthiness,
condition, affairs, status or nature of the Borrower. The Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectability, priority or
sufficiency of this Agreement or the financial condition of the Borrower or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement, or the financial
condition of the Borrower or the existence or possible existence of any Event
of Default or event of which would constitute an Event of Default with the
giving of notice, the passing of time, or both. Each Lender acknowledges that
a copy of this Agreement has been made available to it for review and each
Lender acknowledges that it is satisfied with the form and substance of this
Agreement. Each Lender hereby covenants and agrees that it will not make any
arrangements with the Borrower for the satisfaction by the Borrower of any
Advances without the consent of all the other Lenders.
10.10 Legal Proceedings
(a) Each of the Lenders hereby acknowledges that, to the extent
permitted by Applicable Law, the remedies provided hereunder to the
Lenders are for the benefit of the Lenders collectively and acting
together and not severally and further acknowledges that its rights
hereunder are to be exercised not severally, but collectively by the
Agent upon the decision of the Majority Lenders. Notwithstanding any
of the provisions contained herein, each of the Lenders hereby
covenants and agrees that it shall not be entitled to take any legal
proceedings with respect to this Agreement, any Bankers' Acceptance or
any Letter of Credit, but that any such legal proceeding shall be
taken only by the Agent with the prior written agreement of the
Majority Lenders provided that notwithstanding the foregoing, in the
absence of instructions from the Lenders and where in the sole opinion
of the Agent the exigencies of the situation warrant such action, the
Agent may without notice to or consent of the Lenders take such action
on behalf of the Lenders as it deems appropriate or desirable in the
interests of the Lenders and provided that the Agent shall not be
obligated to take any legal proceedings against the Borrower or any
other Person for the recovery of any amount due under this Agreement
or under any of the Bankers' Acceptances or Letters of Credit. Upon
any such written consent being given by the Majority Lenders, each
Lender shall cooperate fully with the Agent to the extent requested by
the Agent in the collective realization. Each Lender shall do all
acts and things to make, execute and deliver all agreements and other
instrument, including, without limitation, any instruments necessary
to effect any registrations, so as to fully carry out the intent and
purpose of this Section.
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(b) Each of the Lenders shall not seek, take, accept or receive
any security for any of the obligations and liabilities of the
Borrower hereunder or under any other document, instrument, writing or
agreement ancillary hereto other than such security as is provided
hereunder or thereunder and shall not enter into any agreement with
any of the parties hereto or thereto relating in any manner whatsoever
to this Agreement (including, without limitation, any Bankers'
Acceptances issued and purchased hereunder or any Letters of Credit
issued hereunder), unless all of the Lenders shall at the same time
obtain the benefit of any such security or agreement.
10.11 Capacity as Agent - In performing its functions and duties
under this Agreement, the Agent shall act solely as the agent of the Lenders
and shall not assume, and shall not be deemed to have assumed, any obligation
as agent or trustee for the Borrower or any other Person. The Agent shall not
be under any liability or responsibility of any kind to the Borrower, the
Lenders or to any other Person arising out of or in relation to any failure or
delay in performance or breach by any other Lender or Lenders or, as the case
may be, the Borrower or any other Person pursuant to or in any way in
connection with this Agreement.
ARTICLE XI
PAYMENT
11.1 Payments to Agent
(a) All payments in Canadian Dollars to be made by the Borrower in
connection with this Agreement or with a Bankers' Acceptance shall be
made by the Borrower in funds having same day value to the Agent, for
its own account or for the account of the Lenders, at its Toronto Main
Branch, 1269 - 332, in the name of International Loan Operations
(Central, Toronto) - the Gulf Agency Account, or at any other office
or account in Toronto designated by the Agent. Any such payment shall
be made on the date upon which such payment is due, in accordance with
the terms hereof, no later than 11:00 a.m. (Calgary time). Any such
payment shall be a good discharge, to the Borrower, for such payment
and, if any such payment is for the account of the Lenders, the Agent
shall hold the amount so paid "in trust" for the Lenders until
distributed to them in accordance with this Agreement.
(b) All payments in U.S. Dollars to be made by the Borrower in
connection with this Agreement shall be made by the Borrower in
immediately available funds to the Agent, for its own account or for
the account of the Lenders, at the branch referred to in subsection
11.1(a), for Transit 2 Account No. 4637-654 in the name of
International Loan Operations (Central, Toronto) - the Gulf Agency
Account, or at any other office or account in Toronto designated by
the Agent. Any such payment shall be made on the date upon which such
payment is due, in accordance with the terms hereof, no later than
10:00 a.m. (Calgary time). Any such payment shall be a good
discharge, to the Borrower for such payment and, if such
<PAGE> 74
- 69 -
payment is for the account of the Lenders, the Agent shall hold the
amount so paid "in trust" for the Lenders until distributed to them in
accordance with this Agreement.
11.2 Payments by Lenders to Agent
(a) All payments in Canadian Dollars to be made by any Lender to
the Agent in connection with Advances of the Borrower shall be made in
immediately available funds to the Agent, for the Borrower's account
(unless otherwise specified), at the branch, office or account
mentioned in or designated under subsection 11.1(a) and no later than
the time designated therein (unless another time is specified therefor
elsewhere in this Agreement).
(b) All payments in U.S. Dollars to be made by any Lender to the
Agent in connection with Advances of the Borrower shall be made in
immediately available funds to the Agent, for the Borrower's account
(unless otherwise specified), at the branch, office or account
mentioned in or designated under subsection 11.1(b) and no later than
the time designated therein (unless another time is specified therefor
elsewhere in this Agreement).
11.3 Payments by Agent to Borrower - Any payment received by the
Agent for the account of the Borrower shall be paid in funds having same value
to the Borrower by the Agent on the date of receipt, or if such date is not a
Business Day, on the next Business Day, to such account(s) as the Borrower may
designate.
11.4 No Set-Off or Counterclaim by Borrower - All payments by the
Borrower shall be made free and clear of and without any deduction for or on
account of any set-off or counterclaim.
11.5 Non-Receipt by Agent - Subject to Section 2.7, where a sum is
to be paid hereunder to the Agent for the account of another Party hereto, the
Agent shall not be obliged to make the same available to that other Party
hereto until it has been able to establish that it has actually received such
sum, but if it does pay out a sum and it proves to be the case that it had not
actually received the sum it paid out, then the Party hereto to whom such sum
was so made available shall, on request, ensure that the amount is refunded to
the Agent and shall, on demand, indemnify the Agent against any cost or loss it
may have suffered or incurred by reason of its having paid out such sum prior
to its having received such sum.
11.6 When Due Date Not Specified - Whenever this Agreement does
not provide a date when any amount payable hereunder shall be due and payable,
such amount shall be due and payable on the third Business Day following
written notice or demand for payment thereof by the Agent or any Lender, save
that nothing hereinbefore provided shall in any way affect or alter the rights
and remedies available to the Agent and any Lender under Article IX.
11.7 Agent's Authority to Debit - In respect of all amounts payable
by the Borrower under this Agreement as interest, the Borrower hereby
authorizes and instructs the Agent (provided that the Agent shall provide not
less than 4 hours (occurring between 7:30 a.m. and 4:30 p.m. (Calgary time) on
a Business Day) prior notice to the Borrower of the amount thereof) to debit,
from time to
<PAGE> 75
- 70 -
time when such amounts are due and payable, the account or accounts designated
pursuant to Section 11.1 or Section 11.3, as applicable, for the purpose of
satisfying payment thereof.
ARTICLE XII
GENERAL
12.1 Costs and Expenses - The Borrower shall pay promptly all
reasonable costs and expenses incurred by the Agent on its own behalf or on
behalf of the Lenders in connection with preparation, printing, execution and
delivery of each of this Agreement and the other documents to be delivered
hereunder, whether or not any Drawdown has been made hereunder, including,
without limitation, the fees and out-of-pocket expenses of Agent's counsel with
respect thereto and with respect to advising each of the Agent on its own
behalf or on behalf of the Lenders as to the rights and responsibilities
hereunder and the other documents delivered hereunder. The Borrower further
agrees to pay all costs and expenses incurred by the Agent on its own behalf or
on behalf of the Lenders (including fees and expenses of counsel, accountants
and other experts), in connection with any waiver or consent under, or
amendment to, this Agreement, or the preservation or enforcement of rights of
the Agent and the Lenders under this Agreement and other documents delivered
hereunder including, without limitation, all reasonable costs and expenses
sustained by each of the Agent and the Lenders as a result of any failure by
the Borrower to perform or observe its obligations contained in any of such
documents.
12.2 Indemnifications by the Borrower -
(a) Failure to Complete Drawdown - In addition to any liability of
the Borrower to the Agent or the Lenders under any other provision of
this Agreement, the Borrower shall indemnify each of the Agent and the
Lenders and hold each of them harmless against any reasonable loss
(excluding loss of profit) or expense incurred thereby as a result of
any failure by the Borrower to fulfil any of its obligations hereunder
including, without limitation, any cost or expense incurred by reason
of the liquidation or re-employment in whole or in part of deposits or
other funds required by the Agent to fund any Drawdown as a result of:
(i) the Borrower's failure to complete a Drawdown or to
make any payment, repayment or prepayment on the date required
hereunder or specified by it in any notice given hereunder;
(ii) the Borrower's failure to pay any other amount,
including without limitation any interest or fee, due
hereunder on its due date; or
(iii) the Borrower's failure to give any notice required to
be given by it to the Agent or a Lender hereunder.
<PAGE> 76
- 71 -
(b) General Indemnity - In addition to any liability of the
Borrower to the Agent or the Lenders under any other provisions of
this Agreement, the Borrower shall, to the fullest extent permitted by
Applicable Law, indemnify each of the Agent and the Lenders, and their
respective officers, directors, employees, representatives,
shareholders, agents and affiliates (as used in this Section each an
"Indemnified Party") from, hold each of them harmless against and
promptly upon written demand therefor pay or reimburse each of them
for, any and all actions, suits, proceedings (including any
investigations, litigation or inquiries), claims, demands, causes of
action, costs, losses (excluding loss of profit), liabilities, damages
or expense of any kind or nature whatsoever but excluding those based
on gross negligence or wilful misconduct of such Indemnified Party
(the "Indemnity Matters") which may be incurred by or asserted against
or involve any of them (whether or not any of them is designated a
party thereto) as a result of: (i) any actual or proposed use by the
Borrower of the proceeds of any Advance; (ii) any transaction in which
any proceeds of all or any part of a Drawdown is applied; or (iii) any
Event of Default, including, without limitation, the reasonable fees
and disbursements of counsel and all other expenses incurred in
connection with investigating, defending or preparing to defend any
such action, suit, proceeding (including any investigations,
litigation or inquiries), claim, demand or cause of action; provided,
that prior to the occurrence of an Event of Default, the Borrower
shall only be obligated to pay the reasonable fees and disbursements
of counsel engaged by the Agent to represent all of the Agent and the
Lenders. Subject to the proviso in the preceding sentence, the
Borrower shall be obligated to pay or reimburse each Indemnified Party
for all out-of-pocket costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred by such
Indemnified Party in the defense of any claims arising out of any
Indemnity Matter at the time such costs and expenses are incurred and
such Indemnified Party has given the Borrower written notice thereof.
(c) Contribution - If and to the extent that the foregoing
indemnities may be unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment and
satisfaction of each of the indemnified liabilities described which is
permissible under Applicable Law.
(d) Survival of Indemnity - The foregoing indemnities and the
indemnity set forth in Section 8.2 shall survive the termination of
this Agreement, the consummation of the transactions contemplated by
this Agreement, the repayment of the Facility, the invalidity or
unenforceability of any term or provision of this Agreement, or any
other document, any investigation made on behalf of the Agents or the
Lenders and the content or accuracy of any representation or warranty
made by the Borrower or any Subsidiary under this Agreement.
12.3 Funds - Each amount advanced, made available, disbursed or
paid hereunder shall be advanced, made available, disbursed or paid, as the
case may be, in immediately available funds or, after notice from the Agent, in
such other form of funds as may from time to time be customarily used in
Toronto, Canada in the settlement of banking transactions similar to the
banking transactions required to give effect to the provisions of this
Agreement on the day such advance, disbursement or payment is to be made.
<PAGE> 77
- 72 -
12.4 Notice - Any demand, notice or communication to be made or
given hereunder shall be in writing, except as otherwise expressly permitted or
required under this Agreement, and may be made or given by personal delivery or
by facsimile machine addressed to the respective Parties as follows:
to the Borrower:
Gulf Canada Resources Limited
401 - 9th Avenue S.W.
Calgary, Alberta
T2P 2H7
Attention: Treasury
Phone: (403) 233-4000
Fax: (403) 233-5500
with copy to:
Gulf Canada Resources Limited
One Norwest Center,
1700 Lincoln, Suite 5000
Denver, Colorado
80203-4525
Attention: Treasurer
Phone: (303) 813-3820
Fax: (303) 813-3900
<PAGE> 78
- 73 -
to the Agent:
Bank of Montreal
Loan Agency Services
After Sales
22nd Floor
1 First Canadian Place
Toronto, Ontario
M5X 1A1
Attention: Manager, Loan Agency Services
Tel No. (416) 867-5612
Fax No. (416) 867-5718
to the Lenders as set forth in Schedule A
or to such other delivery or facsimile machine address as any Party may from
time to time notify the others in accordance with this Section. Any demand,
notice or communication made or given by personal delivery shall be
conclusively deemed to have been given on the day of actual delivery thereof,
or, if given by facsimile transmission, on the first Business Day following the
transmittal thereof.
12.5 Governing Law - This Agreement shall be conclusively deemed to
be a contract made under, and shall for all purposes be governed by and
construed in accordance with, the laws of the Province of Alberta, Canada,
without prejudice to or limitation of any other rights or remedies available
under the laws of any jurisdiction where property or assets of the Borrower may
be situate.
12.6 Judgment Currency - If for the purposes of obtaining judgment
in any court in any jurisdiction with respect to this Agreement it becomes
necessary to convert into the currency of such jurisdiction (herein called the
"Judgment Currency") any amount due hereunder in any currency other than the
Judgment Currency, then such conversion shall be made at the exchange rate
(which shall, in respect of any conversion of U.S. Dollars to Cdn. Dollars or
vice versa, be the Exchange Rate) prevailing on the Business Day before the day
on which judgment is given. In the event that there is a change in such
exchange rate prevailing between the Business Day before the day on which the
judgment is given and the date of payment of the amount due, the Borrower
shall, on the date of payment, pay such additional or lesser amounts (if any)
as may be necessary to ensure that the amount paid on such date is the amount
in the Judgment Currency which when converted at such exchange rate prevailing
on the date of payment is the amount then due under this Agreement in such
other currency. Any additional amount due from the Borrower under this Section
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect of this Agreement.
<PAGE> 79
- 74 -
12.7 Amendments, Etc. - No amendment or waiver of any provision of
this Agreement, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Majority Lenders, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following: (a) increase the
Commitments or the Commitment Amounts of the Lenders or subject the Lenders to
any obligations in addition to those set out in this Agreement; (b) reduce the
principal of any outstanding Loans, or the rate of interest or fees on any of
the Loans or any fees or other amounts payable hereunder; (c) postpone any date
fixed for any payment of principal of, or interest or fees in respect of, any
Loans or any fees or other amounts payable hereunder; (d) change the percentage
of the Commitments or of the aggregate unpaid principal amount of the Loans
which shall be required for the Lenders to take any action under this Agreement
(including, without limitation, the definition of Majority Lenders); (e) change
any currency or mode of calculation or computation of any payment required
hereunder; (f) amend this Section 12.7 or subsection 8.1(l); or (g) amend,
release or waive or consent to any departure from any matter stated to require
approval or consent of all the Lenders. Except as otherwise specifically
provided herein, the Lenders shall use reasonable good faith efforts to respond
to any written request by the Borrower for permission to take any action which
is or may be prohibited under this Section within 20 Business Days of receipt
thereof.
12.8 Severability - Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions of this Agreement and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
12.9 Whole Agreement - This Agreement constitutes the whole and
entire agreement between the Parties relating to the subject matter of this
Agreement, and cancels and supersedes any prior agreements, undertakings,
declarations, commitments and representations, written or oral, in respect
thereof including, without limitation, the commitment letter dated June 13,
1997 sent by the Agent and accepted by the Borrower on June 16, 1997.
12.10 Binding Effect; Assignments
(a) Successors and Assigns - This Agreement shall become effective
on the date hereof and thereafter shall be binding upon and inure to
the benefit of and be enforceable by the Borrower, the Agent and each
Lender and their respective successors and assigns, except that the
Borrower shall not have the right to assign its rights hereunder or
any interest herein except to a Successor pursuant to Section 8.4. No
Lender may participate, assign or sell any of its rights or
obligations hereunder except as required by operation of law in
connection with the merger, consolidation or dissolution of any Lender
or as provided in this Section.
(b) Assignments - Each Lender may, at its own cost, in accordance
with Applicable Law and with the consent of the Borrower and the Agent
(which consent shall not be unreasonably withheld by either of them)
assign to any Eligible Lender, all or any part of the
<PAGE> 80
- 75 -
Loans owing to such Lender and any such Lender's continuing
obligations with respect to this Agreement (including any Bankers'
Acceptances), and all or any part of such Lender's Commitment (which
assignment shall be of a constant, and not of a varying, percentage of
all of the assigning Lender's Advances and Commitment) and to the
extent of any such assignment the assignee shall, to the fullest
extent permitted by law, have the same rights and benefits hereunder
and the same continuing obligations as it would have if it were such
Lender hereunder; provided, however that (i) the Agent and the
Borrower shall be entitled to continue to deal solely and directly
with the assignor Lender in connection with the interests so assigned
unless and until such assignee becomes a Lender pursuant to a Bank
Transfer Agreement substantially in the form set forth in Schedule G;
(ii) any transfer of less than all of any Lender's Advances and
Commitment shall be in an aggregate amount not less than U.S.
$10,000,000, and (iii) immediately after any transfer of less than all
of a Lender's rights in respect of the Loans owing to such Lender and
all of its Commitment such assignor Lender shall retain Loans and
Commitment of not less than U.S. $10,000,000 and provided further that
no assignee or transferee shall be entitled to receive pursuant to
such assignment or transfer more than the amounts which would
otherwise have been payable by the Borrower to such Lender, had such
assignment or transfer not been made, in respect of the rights,
benefits and/or obligations so assigned or transferred. For greater
certainty, the Borrower shall not be obligated to pay to any such
assignee or transferee any amount(s) pursuant to this Agreement which
is (are) greater than the amount(s), if any, which the Borrower would
otherwise have been obligated to pay to the Lender (whose rights,
benefits and/or obligations have been so assigned to such assignee or
transferee) had such assignment or transfer not have been made. Upon
(1) such execution of such Bank Transfer Agreement, (2) delivery of an
executed copy thereof to each of the Borrower and the Agent, (3)
payment of a recording fee in the amount of U.S. $2,500 by such
transferor Lender or assignee Lender to the Agent, and (4) payment by
such assignee Lender to such transferor Lender of an amount equal to
the purchase price agreed between such transferor Lender and such
assignee Lender to the Agent, such transferor Lender shall be released
from any further obligations hereunder accruing thereafter to the
extent of such assignment and such assignee Lender shall for all
purposes be a Lender party to this Agreement and shall have all the
rights and obligations of a Lender under this Agreement to the same
extent as if it were an original Party hereto, and no further consent
or action by the Borrower, the Lenders or the Agent shall be required.
Such Bank Transfer Agreement shall be deemed to amend this Agreement
and the Agent shall amend Schedule A hereto, to the extent, and only
to the extent, necessary to reflect the addition of such assignee
Lender as a Lender and the resulting adjustment of the Commitments
arising from the purchase by such assignee Lender of all or a portion
of the Advances and Commitment of such transferor Lender.
(c) No Lender may make any such assignment or transfer, or take
any action or steps to attempt to do so, until after October 18, 1997.
12.11 Participations - With the approval of the Borrower, not to be
unreasonably withheld, any Lender may at any time sell to one or more financial
institutions (each, a "Participant")
<PAGE> 81
- 76 -
participating interests in any of the Loans, Commitments, or other interests of
such Lender hereunder; provided, however, that:
(a) no participation contemplated in this Section 12.11 shall
relieve such Lender from its Commitments or its other obligations
hereunder or under any other agreement or document contemplated
herein;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(c) the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and each of the other Loan Documents;
(d) each Participant shall, for the purposes of Sections 9.4,
10.10, 12.1 and 12.2 hereof, be deemed to be a Lender hereunder and
entitled to the benefit of the provisions of such Sections to the same
extent as the relevant Lender;
(e) no Participant shall be entitled to direct the voting of the
relevant Lender in respect of any matter requiring the consent, waiver
or approval of the Majority Lenders, but shall be entitled to vote in
respect of any matter requiring the consent, waiver or approval of all
Lenders;
(f) such Participant is an Eligible Lender; and
(g) no participating interest shall be in an aggregate amount of
less than U.S. $10,000,000.
12.12 Further Assurances - Each of the Borrower, the Agent and the
Lenders shall promptly cure any default or defect by it in the execution and
delivery of this Agreement. The Borrower, at its expense, shall promptly
execute and deliver to the Agent, upon request by the Agent, all such other and
further documents, agreements, opinions, certificates and other instruments in
compliance with, or accomplishment of its covenants and agreements hereunder or
to more fully state its obligations as set out herein or to make any recording,
filing or notice or obtain any consent, all as may be reasonably necessary or
appropriate in connection therewith.
<PAGE> 82
- 77 -
12.13 Counterparts - This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument, and
it shall not be necessary in making proof of this Agreement to produce or
account for more than one such counterpart.
IN WITNESS WHEREOF the Parties have executed this Agreement as
of the date first written above.
GULF CANADA RESOURCES LIMITED
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
BANK OF MONTREAL, AS AGENT
By:
--------------------------
Richard Miller
Director
<PAGE> 83
SCHEDULE A
LENDERS
<TABLE>
<CAPTION>
NAME AND LENDING OFFICE OF
LENDER COMMITMENT AMOUNT EXECUTION
- -------------------------- ----------------- ---------
<S> <C> <C>
Bank of Montreal U.S. $91,000,000 Bank of Montreal
First Canadian Centre
350 - 7th Avenue S.W. By:
24th Floor -------------------------------------
Calgary, Alberta Name:
T2P 3N9 Title:
By:
-------------------------------------
Name:
Title:
ABN Amro Bank Canada U.S. $77,000,000 ABN Amro Bank Canada
Suite 2500
650 West Georgia Street By:
Vancouver, British Columbia -------------------------------------
V6B 4N8 Name:
Title:
By:
-------------------------------------
Name:
Title:
Bank of America Canada U.S. $77,000,000 Bank of America Canada
Suite 1900
855 Second Street, S.W. By:
Calgary, Alberta -------------------------------------
T2P 4J7 Name:
Title:
By:
-------------------------------------
Name:
Title:
The Chase Manhattan Bank of U.S. $77,000,000 The Chase Manhattan Bank of Canada
Canada
1 First Canadian Place By:
100 King Street -------------------------------------
Suite 6900 Name:
Toronto, Ontario Title:
M5X 1A4
By:
-------------------------------------
Name:
Title:
</TABLE>
<PAGE> 84
-2-
<TABLE>
<CAPTION>
NAME AND LENDING OFFICE OF
LENDER COMMITMENT AMOUNT EXECUTION
- -------------------------- ----------------- ---------
<S> <C> <C>
Royal Bank of Canada U.S. $77,000,000 Royal Bank of Canada
23rd Floor
335 - 8th Avenue S.W. By:
Calgary, Alberta -------------------------------------
T2P 1C9 Name:
Title:
By:
-------------------------------------
Name:
Title:
The Toronto-Dominion Bank U.S. $77,000,000 The Toronto-Dominion Bank
Suite 800
Home Oil Tower By:
324 8th Avenue S.W. -------------------------------------
Calgary, Alberta Name:
T2P 2Z2 Title:
By:
-------------------------------------
Name:
Title:
Bank of Tokyo - Mitsubishi U.S. $42,000,000 Bank of Tokyo - Mitsubishi (Canada)
(Canada)
Suite 2410 By:
666 Burrard Street -------------------------------------
Vancouver, British Columbia Name:
V6C 3L1 Title:
By:
-------------------------------------
Name:
Title:
Credit Lyonnais Canada U.S. $42,000,000 Credit Lyonnais Canada
Suite 2050
300 5th Avenue, S.W. By:
Calgary, Alberta -------------------------------------
T2P 3C4 Name:
Title:
By:
-------------------------------------
Name:
Title:
Societe Generale (Canada) U.S. $42,000,000 Societe Generale (Canada)
100 Yonge Street
Suite 1002 By:
Toronto, Ontario -------------------------------------
M5C 2W1 Name:
Title:
By:
-------------------------------------
Name:
Title:
</TABLE>
<PAGE> 85
-3-
<TABLE>
<CAPTION>
NAME AND LENDING OFFICE OF
LENDER COMMITMENT AMOUNT EXECUTION
- -------------------------- ----------------- ---------
<S> <C> <C>
Hongkong Bank of Canada U.S. $24,500,000 Hongkong Bank of Canada
777 8th Avenue, S.W.
Calgary, Alberta By:
T2P 3R5 -------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
The Industrial Bank of Japan U.S. $24,500,000 The Industrial Bank of Japan (Canada)
(Canada)
Suite 1220 By:
666 Burrard Street -------------------------------------
Vancouver, British Columbia Name:
V6C 2X8 Title:
By:
-------------------------------------
Name:
Title:
JP Morgan Canada U.S. $24,500,000 JP Morgan Canada
South Tower, Royal Bank Plaza
Suite 1800 By:
Toronto, Ontario -------------------------------------
M5J 2J2 Name:
Title:
By:
-------------------------------------
Name:
Title:
Paribas Bank of Canada U.S. $24,500,000 Paribas Bank of Canada
Royal Trust Tower
Suite 4100, P.O. Box 31 By:
Toronto-Dominion Centre -------------------------------------
Toronto, Ontario Name:
M5K 2N8 Title:
By:
-------------------------------------
Name:
Title:
</TABLE>
<PAGE> 86
SCHEDULE B
COMPLIANCE CERTIFICATE
TO: [LIST LENDERS] and Bank of Montreal, as Agent
- --------------------------------------------------------------------------------
This Certificate of Compliance is given pursuant to the terms of the loan
agreement (the "Loan Agreement") dated July 18, 1997 between the Lenders named
therein, the Agent and Gulf Canada Resources Limited with respect to the
Fiscal Quarter ended ________________________. Unless otherwise defined herein
or the context otherwise requires, all terms used in this Certificate of
Compliance shall have the same meaning herein as in the Loan Agreement. The
undersigned hereby certifies, on behalf of the Borrower, that:
1. the representations and warranties of the undersigned
contained in subsections 7.1(a), (c), (d), (e), (g) and (p) of the Loan
Agreement are true and correct on and as of the date hereof as though
made on and as of the date hereof;
2. all of the covenants of the undersigned contained in the Loan
Agreement together with all of the conditions precedent to a Drawdown
(if applicable) and all other terms and conditions contained in the
Loan Agreement have been fully complied with;
3. no Event of Default has occurred and remains outstanding and to
the best of the knowledge, information and belief of the undersigned
(after due enquiry), no event has occurred and is continuing which with
the passing of time, the giving of notice or both, would constitute
an Event of Default;
4. as of [INSERT DATE OF END OF FISCAL QUARTER]:
(a) Equity of Gulf Cdn.$
-------------------------
(b) Tangible Net Worth of Gulf Cdn.$
-------------------------
(c) Minimum Tangible Net Worth Cdn.$
-------------------------
(d) Total Senior Debt Cdn.$
-------------------------
(e) Cumulative Restricted EBITDA Cdn.$
-------------------------
(f) Acquisition EBITDA Cdn.$
-------------------------
(g) Disposition EBITDA Cdn.$
-------------------------
<PAGE> 87
-2-
(h)
Total Senior Debt
----------------------------------------
(Cumulative )
(Restricted + Acquisition - Disposition) = -----------------
( EDITDA EBITDA EBITDA )
(i) The Senior Debt rating assigned by:
(i) Standard & Poor's
-------------------------
(ii) Moody's
-------------------------
(iii) DBRS
-------------------------
(iv) CBRS
-------------------------
The undersigned hereby certifies, on behalf of the Borrower, that:
1. set forth in Exhibit I hereto are the names of all of the Unrestricted
Subsidiaries (excepting only Subsidiaries of Unrestricted Subsidiaries)
as of [INSERT DATE OF END OF FISCAL QUARTER] together with, in parenthesis,
the paragraph of the definition of "Unrestricted Subsidiaries" set forth in
the Loan Agreement pursuant to which such Subsidiary constitutes an
Unrestricted Subsidiary;
2. set forth in Exhibit II hereto are the names of all of the Restricted
Subsidiaries as of [INSERT DATE OF END OF FISCAL QUARTER];
3. the aggregate of the Transaction Prices for assets acquired from and
including the first day of the Previous Four Fiscal Quarters was
$_______________;
4. the aggregate of the Transaction Prices for assets disposed of from and
including the first day of the Previous Four Fiscal Quarters was
$_________________________.
DATED the __ day of ___, 199_.
GULF CANADA RESOURCES LIMITED
By:
-------------------------
Name:
Title:
<PAGE> 88
SCHEDULE C
DRAWDOWN NOTICE
TO: Bank of Montreal (the "Agent")
FROM: Gulf Canada Resources Limited (the "Borrower")
- --------------------------------------------------------------------------------
This Drawdown Notice is given pursuant to the terms of the loan agreement (the
"Loan Agreement") dated July 18, 1997 between the Lenders named therein, the
Agent and the Borrower. Unless otherwise defined herein or the context
otherwise requires, all terms used in this Drawdown Notice shall have the same
meaning herein as in the Loan Agreement.
Notice is hereby given pursuant to the provisions of Section 2.4 of the Loan
Agreement that the Borrower requests a Drawdown or Drawdowns as follows:
Borrowing:
- ---------
First Drawdown:
Date of Drawdown:
Currency:
-------------------------
Amount:
-------------------------
Drawdown Type:
-------------------------
Libor Interest Period (in months): [IF APPLICABLE]
Bankers' Acceptance Term (in days): [IF APPLICABLE]
Bankers' Acceptance Maturity Date: [IF APPLICABLE]
Conversion:
- ----------
Pursuant to subsection 2.11 ([DESIGNATE SUBSECTION]) to convert on [INSERT DATE
OF CONVERSION] the amount of $ [SPECIFY CURRENCY] [SPECIFY AMOUNT] of a
[SPECIFY TYPE]
Drawdown into:
-------------------------
Drawdown Type:
-------------------------
Libor Interest Period (in months): [IF APPLICABLE]
Bankers' Acceptance Term (in days): [IF APPLICABLE]
Bankers' Acceptance Maturity Date: [IF APPLICABLE]
<PAGE> 89
-2-
Rollover:
- --------
Pursuant to Section 2.12, to rollover on [INSERT DATE OF ROLLOVER] the [LIBOR
DRAWDOWN/BANKERS' ACCEPTANCE] as follows:
Amount
-------------------------
Currency (if Bankers' Acceptance):
-------------------------
Libor Interest Period (in months): [IF APPLICABLE]
Bankers' Acceptance Term (in days): [IF APPLICABLE]
Bankers' Acceptance Maturity Date: [IF APPLICABLE]
into a [LIBOR DRAWDOWN/BANKERS' ACCEPTANCE] as follows:
Amount:
-------------------------
Currency (if Bankers' Acceptance):
-------------------------
Libor Interest Period (in months): [IF APPLICABLE]
Bankers' Acceptance Term (in days): [IF APPLICABLE]
Bankers' Acceptance Maturity Date: [IF APPLICABLE]
[ADDITIONAL DRAWDOWNS IN SAME FORM AS REQUIRED]
The undersigned hereby certifies, on behalf of the Borrower, that:
1. the representations and warranties of the Borrower contained in
subsections 7.1 (a), (c), (d), (e), (g) and (p) of the Loan Agreement are true
and correct on and as of the date of this Drawdown Notice as though made on and
as of the date of this Drawdown Notice;
2. all of the covenants of the Borrower contained in the Loan Agreement
together with all of the conditions precedent to a Drawdown and all other terms
and conditions contained in the Loan Agreement have been fully complied with
[EXCEPT AS SET FORTH IN EXHIBIT I]; and
3. no Event of Default has occurred and remains outstanding and (other than
in the case of a Conversion or Rollover, provided, that in the case of a
Conversion or Rollover into a Bankers' Acceptance Drawdown or Libon Drawdown,
the maturity date or period shall not extend beyond the earliest date upon which
it would constitute an Event of Default) to the best of the knowledge,
information and belief of the undersigned (after due enquiry), no event has
occurred
<PAGE> 90
-3-
and is continuing which with the giving of notice, the passing of time or both,
would constitute an Event of Default.
DATED the ___ day of ___, 199___.
GULF CANADA RESOURCES LIMITED
By:
-------------------------
Name:
Title:
<PAGE> 91
SCHEDULE D
BANKERS' ACCEPTANCE UNDERTAKING
To: [LIST LENDERS]
(individually a "Lender" and collectively, the "Lenders")
- --------------------------------------------------------------------------------
Dear Sirs:
In consideration of ten dollars ($10) now paid by each Party to the other (the
receipt and sufficiency of which are hereby acknowledged) and in consideration
of the Lender delivering from time to time to the undersigned (the "Borrower")
bankers' acceptance forms in blank or discount note forms in blank (collectively
the "bankers' acceptance forms") to be signed by the Borrower and subsequently
returned to the Lender to be completed by such Lender for such amounts as the
Borrower may from time to time request pursuant to the terms of the loan
agreement dated as of July 18, 1997 between the Borrower, the Lenders as named
therein and Bank of Montreal, as the Agent, as amended from time to time (the
"Loan Agreement"), the parties hereto hereby agree as follows:
1. The Borrower shall hold and use prudently the bankers' acceptance forms
delivered to it in blank from time to time and shall return them from time to
time to the Lender, properly pre-signed and pre-endorsed and in sufficient
quantities to be dealt with by each Lender in conformity with the Loan
Agreement and this Agreement. The Lender shall provide to the Borrower written
acknowledgement of the receipt of such pre-signed and pre- endorsed bankers'
acceptance forms.
2. The Lender shall deal prudently with any bankers' acceptance forms pre-
signed and pre-endorsed by the Borrower and delivered from time to time by the
Borrower and shall use them only in accordance with the instructions of the
Borrower given to the Agent and in turn by the Agent to the Lender, in
conformity with the Loan Agreement.
3. In accordance with the instructions given from time to time by the
Borrower, the Lender is hereby authorized to complete the aforementioned
bankers' acceptance forms and, in the case of any such bankers' acceptance form
which, upon purchase by a Bank, constitutes a Bankers Acceptance, to provide its
acceptance thereon, the whole as provided in and subject to the Loan Agreement.
4. Except as provided in paragraph 5 below, the Borrower shall pay on demand
to the Agent for the account of each Lender at the Payment Office the face
amount of any bankers' acceptance form subsequently presented to such Lender
for payment and paid by such Lender or held by such Lender at maturity, that
has been unlawfully issued or used or put into circulation fraudulently or
without authority, and shall indemnify such Lender against any loss, cost,
damage, expense or claim regardless of by whomsoever made, that such Lender
may suffer or incur by reason of any fraudulent, unauthorized or unlawful
issue or use of any such bankers' acceptance form.
<PAGE> 92
-2-
5. The provisions of paragraph 4 shall not apply in respect of any
fraudulent, unauthorized or unlawful issue or use of any such bankers'
acceptance form which is caused by the negligence or wilful act or omission of
the Agent or a Lender or any of their respective officers, employees, agents or
representatives or which occurs as a result of the Agent or a Lender or any of
their respective officers, employees, agents or representatives failing to use
the same standard of care in the custody of such bankers' acceptance form as it
uses in the custody of its own property of a similar nature.
6. Neither the Agent nor any Lender shall be responsible or liable for any
failure to make credit available by way of Bankers' Acceptances under the terms
of the Loan Agreement if such failure is due to the failure of the Borrower to
return duly pre-signed and (in the case of bankers' acceptances) pre-endorsed
bankers' acceptance forms to the Lender on a timely basis following a request
by the Lender.
7. On request by the Agent on behalf of the Lenders, the Borrower shall
return to the Lenders all bankers' acceptance forms then held by the Borrower,
provided that all such bankers' acceptance forms which have been pre-signed or
pre-endorsed by the Borrower may be cancelled prior to their return.
8. On request by the Borrower made to the Agent, a Lender shall return all
pre-signed or pre-endorsed bankers' acceptance forms held by such Lender and
not yet issued in accordance with the Borrower's instructions.
<PAGE> 93
-3-
Unless otherwise defined herein or the context otherwise requires, all terms
used herein shall have the same meaning herein as in the Loan Agreement. This
Agreement shall benefit not only the parties hereto but also all other Persons
which may, from time to time, become Lenders in accordance with the provisions
of the Loan Agreement and, as such, are to receive bankers' acceptance forms.
Dated at Calgary, Alberta as of the __ day of ___, 1997.
GULF CANADA RESOURCES LIMITED
By:
-------------------------
Name:
Title:
c/s
By:
-------------------------
Name:
Title:
Accepted at Calgary, Alberta as of the ___ day of ___, 1997.
BANK OF MONTREAL
By:
-------------------------
Name:
Title:
(other signature pages depend on Lenders)
<PAGE> 94
SCHEDULE E
EXTENSION AGREEMENT
THIS EXTENSION AGREEMENT (the "Agreement"), dated as of __, 199_, is among GULF
CANADA RESOURCES LIMITED (the "Borrower"); each of the banks Party to the
hereinafter referenced Loan Agreement who have executed this Agreement below
(the "Lenders"); and BANK OF MONTREAL, as agent (in such capacity, together
with its successors and assigns in such capacity, the "Agent").
RECITALS:
A. The Borrower, the Agent and the Lenders have entered into that certain
loan agreement dated July 18, 1997 (as such may be amended, supplemented,
restated or otherwise modified from time to time, the "Loan Agreement").
Unless otherwise defined herein or the context otherwise requires, all terms
used herein shall have the same meaning herein as in the Loan Agreement);
B. The current Term Out Date in respect of the Lenders is _______ (the
"Current Term Out Date"). Pursuant to Section 2.1 of the Loan Agreement, the
Borrower has requested that the Lenders extend the Term Out Date until that
certain date which is _______________ [INSERT DATE OR NUMBER OF DAYS, IN EITHER
CASE, NOT IN EXCESS OF 364 DAYS FROM THE DATE OF CONFIRMATION];
C. Subject to the conditions set forth herein, the undersigned Lenders
have agreed to such extension;
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. The Borrower hereby represents and warrants that the representations
and warranties contained in subsections 7.1(a), (c), (d), (e), (g) and (p) of
the Loan Agreement are true and correct on and as of the date hereof as though
made on and as of the date hereof and no Event of Default has occurred and
remains outstanding and to the best of the knowledge, information and belief of
the undersigned (after due enquiry) on behalf of the Borrower, no event has
occurred and is continuing which, with the giving of notice, the passing of
time or both, would constitute an Event of Default.
2. Subject to the conditions that the representations and warranties set
forth in Section 1 above are true and correct on the date hereof, the Term Out
Date is hereby extended pursuant to Section 2.1 of the Loan Agreement with
respect to the Commitments of the Lenders to the [INSERT DATE OR NUMBER OF
DAYS, IN EITHER CASE, NOT IN EXCESS OF 364 DAYS FOLLOWING THE DATE OF
CONFIRMATION].
<PAGE> 95
-2-
3. This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original and all of which together shall constitute
but one and the same agreement.
EXECUTED as of the date first written above.
BORROWER:
GULF CANADA RESOURCES LIMITED
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title:
AGENT AND LENDERS:
BANK OF MONTREAL, individually as a
Lender and as Agent
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title:
[LENDERS EXECUTIONS TO BE ADDED]
<PAGE> 96
SCHEDULE F
EXTENSION REQUEST
TO: [LIST LENDERS] and Bank of Montreal, as Agent
- --------------------------------------------------------------------------------
This Extension Request is given pursuant to the terms of the loan agreement
(the "Loan Agreement") dated July 18, 1997 between the Lenders named therein,
the Agent and Gulf Canada Resources Limited. Unless otherwise defined herein
or the context otherwise requires, all terms used in this Extension Request
shall have the same meaning herein as in the Loan Agreement.
The current Term Out Date in respect of the Lenders listed below is _____, 199_
(the "Current Term Out Date"). Pursuant to Section 2.1 of the Loan Agreement,
the Borrower hereby requests that such Lenders (the "Revolving Lenders") extend
the Term Out Date until that certain date which is ____ [INSERT DATE OR NUMBER
OF DAYS, IN EITHER CASE, NOT IN EXCESS OF 364 DAYS FROM THE DATE OF
CONFIRMATION IN RESPECT OF THIS EXTENSION REQUEST].
Attached hereto are three copies of an Extension Agreement relating to the
subject matter hereof duly completed and executed by the Borrower and a report
prepared by [DESIGNATE QUALIFIED ENGINEERS PROVIDING REPORT] with respect to
the proved and probable reserves attributable to the petroleum and natural gas
interests of Gulf (excluding Unrestricted Subsidiaries) as of [DATE TO BE NOT
EARLIER THAN THE END OF THE LAST FINANCIAL YEAR OF THE BORROWER PRECEDING THE
DATE HEREOF].
The undersigned hereby certifies, on behalf of the Borrower, that:
(a) the representations and warranties contained in subsections
7.1(a), (c), (d), (e), (g) and (p) of the Loan Agreement are true and
correct on and as of the date hereof as though made on and as of the
date hereof;
(b) all of the covenants of the undersigned contained in the Loan
Agreement and all other terms and conditions contained in the Loan
Agreement have been fully complied with, [EXCEPT AS SET FORTH IN
EXHIBIT I]; and
<PAGE> 97
-2-
(c) no Event of Default has occurred and remains outstanding and to
the best of the knowledge, information and belief of the undersigned,
no event has occurred and is continuing which with the passing of time,
the giving of notice or both, would constitute an Event of Default.
DATED the __ day of ___, 199_.
GULF CANADA RESOURCES LIMITED
By:
-------------------------
Name:
Title:
<PAGE> 98
SCHEDULE G
BANK TRANSFER AGREEMENT
To: Gulf Canada Resources Limited
To: Bank of Montreal, as the Agent
- --------------------------------------------------------------------------------
This Agreement is entered into pursuant to Section 12.10 of the loan agreement
dated as of July 18, 1997 (together with all amendments and other
modifications, if any, from time to time thereafter made thereto, the "Loan
Agreement") among Gulf Canada Resources Limited (the "Borrower"); the various
financial institutions (the "Lenders") as are, or shall from time to time
become, parties thereto and Bank of Montreal, as agent, (the "Agent"). Unless
otherwise defined herein or the context otherwise requires, and terms used
herein have the same meaning herein as in the Loan Agreement.
This Agreement constitutes notice to each of you of the assignment and
delegation to __ (the "Assignee") of __% of the Advances and Commitment of __
(the "Assignor") outstanding under the Loan Agreement on the date hereof. After
giving effect to the foregoing assignment and delegation, the Assignor's and
the other Lenders' Commitment Amounts for the purposes of the Loan Agreement
are as set forth opposite such Person's name on the signature pages hereof.
[ADD PARAGRAPH DEALING WITH ACCRUED INTEREST AND FEES WITH RESPECT TO ADVANCES
ASSIGNED.]
The Assignee hereby acknowledges and confirms that it has received a copy of
the Loan Agreement, together with copies of the documents which were required
to be delivered under the Loan Agreement as a condition to the making of the
Advances thereunder. The Assignee further confirms and agrees that in becoming
a Lender and in making its Commitment and Advances under the Loan Agreement,
such actions have and will be made without recourse to, or representation or
warranty by Agent.
Except as otherwise provided in the Loan Agreement, effective as of the date of
acceptance hereof by the Agent:
(a) the Assignee
(i) shall be deemed automatically to have become a party to
the Loan Agreement, have all the rights and obligations of a
"Lender" under the Loan Agreement as if it were an
original signatory thereto to the extent specified in the
second paragraph hereof; and
(ii) agrees to be bound by the terms and conditions set
forth in the Loan Agreement as if it were an original signatory
thereto; and
<PAGE> 99
-2-
(b) the Assignor shall be released from any further obligations under
the Loan Agreement accruing thereafter to the extent specified in the
second paragraph hereof.
The Assignee hereby advises each of you of the following administrative details
with respect to the assigned Advances and Commitment and requests the Borrower,
by its signature below, to acknowledge its consent to the assignment and
transfer set forth herein and further requests the Agent and the Borrower to
acknowledge receipt of this document:
(a) Address for Notices:
Institution Name:
Attention:
Lending Office:
Telephone:
Facsimile:
(b) Payment Instructions:
This Agreement may be executed by the Assignor and Assignee in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute one and the
same agreement.
Adjusted Commitment Amount [ASSIGNOR]
- --------------------------
Unused Commitment __
Advances $__
Commitment Amount $__
By:
-------------------------
Title:
Commitment Amount [ASSIGNEE]
- -----------------
<PAGE> 100
-3-
Unused Commitment $
------------------------
Advances $
------------------------
Commitment Amount $
------------------------
By:
-------------------------
Title:
Accepted and acknowledged this __ day of ___, 199_.
BANK OF MONTREAL
as Agent
By:
-------------------------
Title:
GULF CANADA RESOURCES LIMITED
By:
-------------------------
Title:
By:
-------------------------
Title:
<PAGE> 101
SCHEDULE H
BORROWER'S COUNSEL'S OPINION
[LETTERHEAD OF BENNETT JONES VERCHERE]
July 18, 1997
Bank of Montreal Osler, Hoskin & Harcourt
Corporate and Institutional Suite 1900
Financial Services Toronto Dominion Square
350 - 7th Ave. S.W., 24th Floor 333 - 7th Avenue S.W.
Calgary, Alberta Calgary, Alberta
T2P 3N9 T2P 2Z1
And to the Lenders listed in Schedule A of Loan Agreement
Dear Sirs/Mesdames:
RE: LOAN AGREEMENT MADE AS OF JULY 18, 1997 BETWEEN GULF CANADA RESOURCES
LIMITED, THE LENDERS NAMED THEREIN AND BANK OF MONTREAL, AS AGENT FOR THE
LENDERS
We have acted as counsel to Gulf Canada Resources Limited (the "Borrower") in
connection with a loan agreement made as of July 18, 1997 (the "Loan
Agreement") between the Borrower, the Lenders listed in Schedule A thereto (the
"Lenders") and Bank of Montreal, as agent for the Lenders (the "Agent") which
provides a credit facility to the Borrower.
All capitalized terms used in this opinion letter shall, unless otherwise
defined in this opinion letter, have the meanings ascribed to them in the Loan
Agreement.
In connection with the opinions expressed in this letter we have considered
such questions of law and examined such public and corporate records,
certificates and other documents and conducted such other examinations as we
have considered necessary. In such examinations we have assumed the legal
capacity of all individuals, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
to authentic original documents of all documents submitted to us as certified,
conformed, photostatic or facsimile copies.
<PAGE> 102
Page 2
The law covered by the opinions expressed in this letter is limited to the laws
of the Province of Alberta and the laws of Canada applicable therein.
On the basis of the foregoing, and subject to the qualifications herein
expressed, we are of the opinion that:
I The Borrower is a body corporate incorporated under the Canada Business
Corporations Act.
II The Borrower has all necessary corporate power and capacity to enter
into the Loan Agreement and to perform its obligations thereunder.
III The execution and delivery of the Loan Agreement and the consummation of
the transactions contemplated therein have been duly authorized by all
necessary corporate action on the part of the Borrower.
IV The Loan Agreement has been duly executed and delivered by the Borrower
and is a legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms.
V The Borrower is not a party to, bound or affected by or subject to any
provision in its articles or by-laws, or any statutory law or
regulation, which is violated, contravened or breached by, or under
which any default occurs, as a result of the execution, delivery and
performance by it of the Loan Agreement.
VI The indebtedness of the Borrower to the Lenders under the Loan Agreement
constitutes Senior Indebtedness as defined in the Indenture dated as of
January 27, 1994 made between the Borrower and The Bank of New York, as
Trustee, and the Indenture dated as of July 5, 1995 made between the
Borrower and The Bank of New York, as Trustee, (collectively, the
"Subordinated Indentures") relating to the issuance of subordinated
debentures, provided that such indebtedness of the Borrower to the
Lender is not incurred in violation of the provisions of the
Subordinated Indentures. If indebtedness of the Borrower to the Lenders
in the amount of US$700,000,000 were incurred under the Loan Agreement
on the date hereof, such indebtedness would not, to our knowledge,
violate the provisions of the Subordinated Indentures.
VII If indebtedness of the Borrower to the Lenders in the amount of
US$700,000,000 were incurred under the Loan Agreement on the date
hereof, such indebtedness would not, to our knowledge, violate the
provisions of the indenture dated as of July 1, 1989 between the
Borrower and The Bank of New York, as successor trustee to The Chase
Manhattan Bank (National Association) or the indentures dated as of
August 7, 1996 and March 21, 1997
<PAGE> 103
Page 3
respectively between the Borrower and The Bank of New York, as trustee
(collectively, the "Senior Indentures").
The foregoing opinions are subject to the qualifications set out below:
7.1 CERTIFICATES OF COMPLIANCE. In expressing the opinion set forth
in paragraph 1 we have relied upon a certificate of compliance dated
July 14, 1997 issued by Industry Canada, a copy of which has been
delivered to you.
7.2 ENFORCEABILITY. The opinion set forth in paragraph 4 is based on the
assumption that the Loan Agreement has been duly authorized,
executed and delivered by, and is enforceable in accordance with its
terms against the Agent and the Lenders and is subject to the
following qualifications:
(a) BANKRUPTCY - enforceability may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium,
arrangement or winding up laws or other similar laws affecting
the enforcement of creditors' rights generally;
(b) EQUITABLE PRINCIPLES - enforceability may be limited by
equitable principles, including the principle that equitable
remedies, such as specific performance and injunction, may only
be granted in the discretion of a court of competent
jurisdiction;
(c) SEVERABILITY - the validity and enforceability of provisions
inserted in any agreement or instrument which purport to sever
from the agreement or instrument any provision which is
prohibited or unenforceable under applicable law without
affecting the enforceability or validity of the remainder of
the agreement or instrument would be determined only in the
discretion of the court;
(d) REASONABLENESS - notwithstanding any term or condition
contained in the Loan Agreement, a court of competent
jurisdiction may retain the discretion to determine when the
actions of the Lenders or their agents have been conducted in a
"commercially reasonable" manner, and determinations or demands
made by a person in the exercise of a discretion purported to
be given to it may be unenforceable if made in an unreasonable
or arbitrary fashion;
(e) INDEMNITY AND CONTRIBUTION - a court may decline to enforce
rights of indemnity and contribution under the Loan Agreement
which are found to be contrary to public policy;
<PAGE> 104
Page 4
(f) LIMITATIONS - enforceability may be limited by restrictions
which may be imposed by law on:
(i) the right of a creditor to receive immediate payment
of amounts stated to be payable on demand or which
have been accelerated;
(ii) the right of a party to the Loan Agreement to enforce
its rights under the Loan Agreement on the basis of a
default of a minor or non-substantive nature, such as
the failure to produce a document in a timely manner;
(iii) the effectiveness of provisions of the Loan Agreement
which provide that delay or failure by a party to
exercise any right, remedy or option will not operate
as a waiver thereof may not be enforceable; and
(g) WAIVERS OF RIGHTS - provisions of the Loan Agreement which
provide for the waiver of certain legal or equitable rights or
which absolve or purport to absolve a party from responsibility
for its acts may not be enforceable.
7.3 RELIANCE ON OFFICER'S CERTIFICATE. In expressing the opinions set
forth in the last sentence of paragraph 6 and in paragraph 7, we have
relied on a certificate of an officer of the Borrower, a copy of which
is attached as Schedule A hereto. In expressing the opinions set forth
in paragraphs 6 and 7, we have also assumed the laws of the State of New
York (which govern the Subordinated Indentures and the Senior
Indentures) are the same as the laws of the Province of Alberta. No
opinion is expressed as to compliance with the provisions of the
Subordinated Indentures and the Senior Indentures at any future date.
7.4 CONCLUSIVE, FINAL OR BINDING. A court is not required to treat as
conclusive, final or binding those certificates and determinations
which the Loan Agreement states are to be so treated.
7.5 CURRENCY QUALIFICATION. Pursuant to the Currency Act (Canada), a
judgment by a court in any province in Canada may be awarded in Canadian
currency only and such judgment may be based on a rate of exchange in
existence on a day other than the day of payment of such judgment.
7.6 INTEREST AFTER JUDGMENT. Under the Judgment Interest Act (Alberta)
interest after judgment may be limited to less than the rate provided
for contractually.
<PAGE> 105
Page 5
7.7 DEFAULT INTEREST. We express no opinion as to the enforceability of
any provision which purports to render any person liable for a higher
rate of interest after default than before.
This opinion is given solely for the benefit of the addressees of this
opinion and may not be relied upon in whole or in part by any other person.
Yours very truly,
<PAGE> 106
SCHEDULE "A"
CERTIFICATE
TO: Bennett Jones Verchere
Bank of Montreal, as Agent
Osler, Hoskin & Harcourt
This certificate is given in connection with an opinion dated July 18, 1997
delivered by Bennett Jones Verchere to the Bank of Montreal, as Agent for the
Lenders (the "Agent"), and to Osler, Hoskin & Harcourt in connection with the
loan agreement dated July 18, 1997 (the "Loan Agreement") between Gulf Canada
Resources Limited (the "Borrower"), the Agent and the Lenders named in Schedule
A thereto. Unless otherwise defined herein, capitalized terms shall have the
meaning ascribed to them in the Loan Agreement.
The undersigned hereby certifies, on behalf of the Borrower, as follows:
I If indebtedness of the Borrower to the Lenders under the Loan Agreement
were incurred on the date hereof in the amount of US$700,000,000, such
indebtedness would constitute Senior Indebtedness as defined in the
Indenture dated as of January 27, 1994 (the "1994 Indenture") made
between the Borrower and The Bank of New York, as trustee, and the
Indenture dated as of July 5, 1995 (the "1995 Indenture") made between
the Borrower and The Bank of New York, as trustee, (collectively the
"Subordinated Indentures"). Such indebtedness would not violate any of
the provisions of the Subordinated Indentures including, without
limitation, Section 1008 of the 1994 Indenture or Section 1009 of the
1995 Indenture. No Default or Event of Default exists under and as
defined in the Subordinated Indentures.
II If indebtedness of the Borrower to the Lenders under the Loan Agreement
were incurred on the date hereof in the amount of US$700,000,000, such
indebtedness would not violate any of the provisions of the Indenture
dated as of July 1, 1989 made between the Borrower and The Bank of New
York, as successor trustee to The Chase Manhattan Bank (National
Association) or the Indentures dated as of August 7, 1996 and March 21,
1997 respectively between the Borrower and The Bank of New York, as
trustee (collectively, the "Senior Indentures"). No Default or Event of
Default exists under and as defined in the Senior Indentures.
<PAGE> 107
Page 2
III The Subordinated Indentures and the Senior Indentures are the only
material agreements relating to borrowed monies to which the Borrower is
a party other than the Loan Agreement and the Existing Acquisition
Facility.
DATED this 18th day of July, 1997.
GULF CANADA RESOURCES LIMITED
By:
-----------------------------------
<PAGE> 108
SCHEDULE I
[LENDERS' COUNSELS' OPINION]
[LETTERHEAD OF OSLER, HOSKIN & HARCOURT]
July 18, 1997
Bank of Montreal Bank of Montreal
Loan Agency Services First Canadian Centre
After Sales 350 - 7th Avenue S.W.
22nd Floor 24th Floor
1 First Canadian Place Calgary, Alberta
Toronto, Ontario M5X 1A1 T2P 3N9
And to the Lenders Listed in Schedule A of Loan Agreement
Dear Sirs/Mesdames
RE: LOAN AGREEMENT MADE AS OF JULY 18, 1997 AMONG GULF CANADA RESOURCES
LIMITED, THE LENDERS NAMED THEREIN AND BANK OF MONTREAL, AS AGENT FOR THE
LENDERS
We have acted as counsel to Bank of Montreal (the "Agent") in connection with a
loan agreement made as of July 18, 1997 (the "Loan Agreement") between Gulf
Canada Resources Limited (the "Borrower"), the Lenders listed in Schedule A
thereto (the "Lenders") and the Agent, as agent for the Lenders, which provides
a credit facility to the Borrower.
All capitalized terms used in this opinion letter shall, unless otherwise
defined in this opinion letter, have the meanings ascribed to them in the Loan
Agreement.
In connection with the opinions expressed in this letter we have considered
such questions of law and examined such public and corporate records,
certificates and other documents and conducted such other examinations as we
have considered necessary. In such examinations we have assumed the legal
capacity of all individuals, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
to authentic original documents of all documents submitted to us as certified,
conformed, photostatic or facsimile copies.
<PAGE> 109
Page 2
The law covered by the opinions expressed in this letter is limited to the laws
of the Province of Alberta and the laws of Canada applicable therein.
On the basis of the foregoing and subject to the qualifications herein
expressed, we are of the opinion that:
IV The Borrower is a body corporate incorporated under the Canada Business
Corporations Act.
V The Borrower has all necessary corporate power and capacity to enter into
the Loan Agreement and to perform its obligations thereunder.
VI The execution and delivery of the Loan Agreement and the consummation of
the transactions contemplated therein have been duly authorized by all
necessary corporate action on the part of the Borrower.
VII The Loan Agreement has been duly executed and delivered by the Borrower and
is a legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms.
VIII The Borrower is not a party to, bound or affected by or subject to any
provision in its articles or by-laws, or any statutory law or
regulation, which is violated, contravened or breached by, or under
which any default occurs, as a result of the execution, delivery and
performance by it of the Loan Agreement.
IX The indebtedness of the Borrower to the Lenders under the Loan Agreement
constitutes Senior Indebtedness as defined in the Indenture dated as of
January 27, 1994 made between the Borrower and The Bank of New York, as
Trustee, and the Indenture dated as of July 5, 1995 made between the
Borrower and The Bank of New York, as Trustee, (collectively, the
"Subordinated Indentures") relating to the issuance of subordinated
debentures, provided that such indebtedness of the Borrower to the Lenders
is not incurred in violation of the provisions of the Subordinated
Indentures. If indebtedness of the Borrower to the Lenders in the amount
of US$700,000,000 were incurred under the Loan Agreement on the date
hereof, such indebtedness would not, to our knowledge, violate the
provisions of the Subordinated Indentures.
X If indebtedness of the Borrower to the Lenders in the amount of
US$700,000,000 were incurred under the Loan Agreement on the date hereof,
such indebtedness would not, to our knowledge, violate the provisions of
the indenture dated as of July 1, 1989 between the Borrower and The Bank
of New York, as successor trustee to The Chase Manhattan Bank (National
Association) or the indentures dated as of August 7, 1996 and March 21,
1997
<PAGE> 110
Page 3
respectively between the Borrower and The Bank of New York, as trustee
(collectively, the "Senior Indentures").
The foregoing opinions are subject to the qualifications set out below:
(a) RELIANCE. In expressing the opinions set forth in paragraphs 2, 3,
4 (in respect of due execution and delivery), 5, 6, 7, we have
relied upon the opinions of Bennett Jones Verchere, counsel to the
Borrower, dated the same date as this opinion and delivered to you.
Such opinions are in form and scope satisfactory to us and we are of
the opinion that we and you are justified in relying thereon.I
(b) CERTIFICATES OF COMPLIANCE. In expressing the opinion set forth in
paragraph 1 we have relied upon a certificate of compliance dated
July 14, 1997 issued by Industry Canada, a copy of which has been
delivered to you.
(c) ENFORCEABILITY. The opinion set forth in paragraph 4 is based on the
assumption that the Loan Agreement has been duly authorized,
executed and delivered by, and is enforceable in accordance with its
terms against the Agent and the Lenders and is subject to the
following qualifications:
(i) BANKRUPTCY - enforceability may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium,
arrangement or winding up laws or other similar laws affecting
the enforcement of creditors' rights generally;
(ii) EQUITABLE PRINCIPLES - enforceability may be limited by
equitable principles, including the principle that equitable
remedies, such as specific performance and injunction, may
only be granted in the discretion of a court of competent
jurisdiction;
(iii) SEVERABILITY - the validity and enforceability of provisions
inserted in any agreement or instrument which purport to sever
from the agreement or instrument any provision which is
prohibited or unenforceable under applicable law without
affecting the enforceability or validity of the remainder of
the agreement or instrument would be determined only in the
discretion of the court;
(iv) REASONABLENESS - notwithstanding any term or condition
contained in the Loan Agreement, a court of competent
jurisdiction may retain the discretion to determine when the
actions of the Lenders or their agents have been conducted in
a "commercially reasonable" manner, and determinations or
demands made by a person in the exercise of a discretion
purported to be given to it may be unenforceable if made in an
unreasonable or arbitrary fashion;
<PAGE> 111
Page 4
(v) INDEMNITY AND CONTRIBUTION - a court may decline to enforce
rights of indemnity and contribution under the Loan Agreement
which are found to be contrary to public policy;
(vi) LIMITATIONS - enforceability may be limited by restrictions
which may be imposed by law on:
(A) the right of a creditor to receive immediate payment of
amounts stated to be payable on demand or which have been
accelerated;
(B) the right of a party to the Loan Agreement to enforce its
rights under the Loan Agreement on the basis of a default
of a minor or non-substantive nature, such as the failure
to produce a document in a timely manner;
(C) the effectiveness of provisions of the Loan Agreement
which provide that delay or failure by a party to
exercise any right, remedy or option will not operate as
a waiver thereof may not be enforceable; and
(vii) WAIVERS OF RIGHTS - provisions of the Loan Agreement which
provide for the waiver of certain legal or equitable rights or
which absolve or purport to absolve a party from
responsibility for its acts may not be enforceable.
(d) RELIANCE ON OFFICER'S CERTIFICATE. In expressing the opinions set
forth in the last sentence of paragraph 6 and in paragraph 7, we
have relied on a certificate of an officer of the Borrower, a copy
of which is attached as Schedule A hereto. In expressing the
opinions set forth in paragraphs 6 and 7, we have also assumed the
laws of the State of New York (which govern the Subordinated
Indentures and the Senior Indentures) are the same as the laws of
the Province of Alberta. No opinion is expressed as to compliance
with the provisions of the Subordinated Indentures and the Senior
Indentures at any future date.
(e) CONCLUSIVE, FINAL OR BINDING. A court is not required to treat as
conclusive, final or binding those certificates and determinations
which the Loan Agreement states are to be so treated.
(f) CURRENCY QUALIFICATION. Pursuant to the Currency Act (Canada), a
judgment by a court in any province in Canada may be awarded in
Canadian currency only and such
<PAGE> 112
Page 5
judgment may be based on a rate of exchange in existence on a day
other than the day of payment of such judgment.
(g) INTEREST AFTER JUDGMENT. Under the Judgment Interest Act (Alberta)
interest after judgment may be limited to less than the rate
provided for contractually.
(h) DEFAULT INTEREST. We express no opinion as to the enforceability of
any provision which purports to render any person liable for a
higher rate of interest after default than before.
This opinion is given solely for the benefit of the addressees of this opinion
and may not be relied upon in whole or in part by any other person.
Yours very truly,
<PAGE> 113
SCHEDULE J
NOTICE OF AMENDMENT OF UNRESTRICTED SUBSIDIARIES
To: [LIST LENDERS] and Bank of Montreal, as Agent
- --------------------------------------------------------------------------------
This Notice of Amendment of Unrestricted Subsidiaries is given pursuant to the
terms of the loan agreement (the "Loan Agreement") dated July 18, 1997 between
the Lenders named therein, the Agent and Gulf Canada Resources Limited. Unless
otherwise defined herein or the context otherwise requires, all terms used in
this Notice of Unrestricted Subsidiaries shall have the same meaning herein as
in the Loan Agreement.
Schedule L is hereby amended as follows:
(A) To add as Restricted Subsidiaries: o
(B) To add as Unrestricted Subsidiaries: o
The undersigned hereby certifies that subsection 8.1(l) of the Loan Agreement
would not have been contravened by the Borrower if the changes made above had
occurred prior to the end of the last Fiscal Quarter preceding the date hereof.
DATED the ___ day of ________, 199_.
GULF CANADA RESOURCES LIMITED
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
<PAGE> 114
SCHEDULE K
LETTER OF CREDIT DOCUMENTATION
TO: BANK OF MONTREAL, as Agent, and [LIST LENDERS] (the "Lenders")
- --------------------------------------------------------------------------------
In consideration of the issuance by the Lenders of a Letter of Credit
substantially according to any Drawdown Notice, the Borrower agrees as follows:
1. The Agent and the Lenders assume no liability or responsibility for the
form, sufficiency, accuracy, genuineness, falsification or legal effect of any
document(s) required pursuant to the Letter of Credit, or for the general
and/or particular conditions stipulated in the document(s) or superimposed
thereon; nor do they assume any liability or responsibility for the
description, quality, delivery, value or existence of the services represented
by any document(s), or for the good faith or acts and/or omissions, solvency,
performance or standing of the beneficiary or any other Person whomsoever; and
the Borrower hereby assumes and undertakes all such risk, including acts of the
users of the Letter of Credit and the Borrower further agrees that the Agent
may hold the delivery of documents conforming to the Letter of Credit as
sufficient evidence of the good faith of the beneficiary and of the services
described therein, without assuming any responsibility in regard to the
services.
2. This Agreement is irrevocable with respect to the Letter of Credit and is
to continue in force and to be applicable to all transactions relating to the
Letter of Credit notwithstanding any change in the composition of the Borrower,
the parties to or parties contemplated in this Agreement including, without
limitation, any change arising from the accession of one or more new partners,
or from the death or succession of any partner or partners or amalgamation of
one or more corporations, and it shall cover any and all amounts that the
Lenders may ultimately be required to pay under the Letter of Credit by reason
of having issued same. The Borrower acknowledges that the Lender's obligations
to pay and/or fulfil any other obligation under the Letter of Credit is not
subject to claims or defence by the Borrower resulting from its relationship
with other parties.
3. The Borrower hereby indemnifies and agrees to hold the Agent and the
Lenders harmless from and against all losses, consequences or damages arising
out of any transmission, including delay and/or loss in transit of any
message(s), letter(s) or document(s) or for delay, mutilation or from
insufficient or incorrect particulars being transmitted or other error(s)
arising in the transmission or delivery of any telecommunication, including
transmission by cable, telegraph, telecopier, wireless or otherwise except to
the extent such losses, consequences or damages arise as a result of gross
negligence or wilful misconduct of the Agent or Lender as the case may be. The
Agent and the Lenders assume no liability or responsibility for errors in
translation and/or interpretation of technical terms, and reserve the right to
transmit Letter of Credit terms without translating them.
<PAGE> 115
Page 2
4. In case the expiry date of the Letter of Credit is extended and/or the
amount thereof is increased, and/or any of the terms and conditions are altered
at the Borrower's request or with the Borrower's consent, all the terms of this
Agreement shall remain in full force and effect, without releasing any party
thereto.
5. The rights and powers conferred hereby are in addition to and without
prejudice to any other rights which the Agent or the Lenders may now have or
hereafter acquire from the Borrower or others.
6. This Agreement will be governed and construed in accordance with the laws
of the Province of Alberta and the laws of Canada applicable herein. Should any
provision of this Agreement be illegal or not enforceable under such law, it
shall be considered severable and the Agreement and its conditions shall remain
in full force and effect as if the said provision had never been included.
7. This Agreement shall enure to the benefit of the Agent and each of the
Lenders and their respective successors and assigns, and shall be binding upon
the Borrower and the Borrower's executors, liquidators, administrators,
successors and assigns.
8. Except as otherwise expressly stated, each Letter of Credit is subject to
the current Uniform Customs & Practice for Documentary Credits of the
International Chamber of Commerce, as amended from time to time (the "UCP
Rules") or in the case of a Demand Guarantee, the Letter of Credit is subject
to the terms and conditions of the current "Uniform Rules for Demand
Guarantees" of the ICC. If the provisions of this Agreement conflict with the
UCP Rules, the provisions of this Agreement shall prevail. This Agreement
shall not be construed as limiting any rights of the Agent or the Lenders which
may be set out in separate documentation, between the Agent or the Lenders and
the Borrower, including any credit facility.
<PAGE> 116
SCHEDULE L
LIST OF UNRESTRICTED SUBSIDIARIES
CRUSADER GULF MISCELLANEOUS
- -------- ------------------
Crusader (Philippines) Pty Ltd. TS, Inc.
Pursuit Exploration Pty Ltd. Asamera (Cyprus) Ltd.
Crusader (Victoria) Pty Ltd. Asamera Hurghada Inc.
Crusader (Ireland) Pty Ltd. Canadian Oil Debco Inc.
Crusirel Ltd. 534404 Alberta Ltd.
156911 Canada Inc.
CLYDE Tuba 4 Transport Ltd.
- ----- 2276496 Canada Limited
Beaufinco Equipment Holdings Ltd.
Clyde Exploratie Maatscappij BV
CP (E&P) BV
CORRIDOR
- --------
Grissik Gas Company Ltd.
Gulf International (Barbados) Inc.
Asamera International (Barbados) Inc.
Gulf Resources (Grissik) Ltd. formerly
Asamera (Overseas) Limited
UNITED STATES RELATED
- ---------------------
Asamera Oil (US) Inc.
Asamera Petroleum Corporation
Asamera Pipeline Inc.
Asamera Minerals Florida Inc.
MANVILLE RELATED
- ----------------
Trilogy Italia Corporation
Trilogy France Resources SNC
Trilogy Resources Holding Co. Inc.
Trilogy France Corporation
<PAGE> 1
EXHIBIT 10.3
GULF CANADA RESOURCES LIMITED
INCENTIVE STOCK OPTION PLAN (1994)
May 3, 1995
<PAGE> 2
GULF CANADA RESOURCES LIMITED
INCENTIVE STOCK OPTION PLAN (1994)
1. PURPOSE
The purpose of the Incentive Stock Option Plan (1994) (the "1994
Plan") is to provide effective incentives to regular employees of Gulf Canada
Resources Limited ("Gulf") and its subsidiaries (for the purposes of the 1994
Plan collectively referred to as "the Company") and directors of Gulf and to
reward such persons in relation to the long-term performance and growth of the
Company and a total return to the shareholders and thereby align the interests
of these persons with those of the shareholders.
2. ELIGIBLE PERSONS
The President, subject to the approval of the Compensation Committee
(the "Committee") of the Board of Directors (the "Board") of Gulf, shall from
time to time designate those regular employees, including Officers, of the
Company to whom stock options ("options") shall be granted and shall determine
the extent and terms of their participation. Participation in the 1994 Plan
does not confer upon the employee any right to continued employment with the
Company. The Committee shall also decide, subject to the approval of the Board
and satisfaction of such other requirements as the Board may impose from time
to time, which directors of Gulf (including members of the Committee) shall be
entitled to options.
3. SHARE SUBJECT TO THE 1994 PLAN
A maximum of 19,970,800* Ordinary Shares of Gulf are reserved for
issuance under the 1994 Plan, which number of Ordinary Shares includes all
Ordinary Shares subject to unexercised options granted under the Incentive
Stock Option Plan (1990) (the "1990 Plan") prior to the date hereof. The
number of shares reserved for issuance under the 1994 Plan cannot be increased
without shareholder approval. Ordinary Shares subject to options which are
terminated, cancelled or expire prior to exercise shall be available for the
grant of further options under the 1994 Plan.
4. ADMINISTRATION
The 1994 Plan will be administered by the Committee. The Committee
shall have the power to formulate guidelines and administrative provisions for
the implementation of the 1994 Plan and to make such changes in such guidelines
and administrative provisions as from time to time the Committee considers
proper and in the best interests of the Company. The Committee shall decide
all matters relating to the administration, interpretation and application of
the terms of the 1994 Plan and may delegate to any Director or any employee of
the Company such administrative duties and powers as it may consider
appropriate. All decisions and acts of the Committee shall be final and
conclusive.
The Committee shall have full authority and discretion to:
(a) determine, consistent with the provisions of the 1994 Plan, the times
at which options shall be granted, the number of shares subject to
each option (subject to the restriction below), the period during
which each option becomes exercisable (subject to clause 6), and the
terms contained in each option agreement; and
(b) approve any forms required to carry out the purposes and provisions of
the 1994 Plan.
Notwithstanding that the Committee has discretion with respect to the
granting of options, no individual may be granted options such that he may
acquire, pursuant to the exercise of options, in excess of 5% of the
outstanding Ordinary Shares of Gulf, determined on a non-diluted basis.
The Committee's interpretation and construction of any provisions of
the 1994 Plan or any option granted hereunder shall be binding and conclusive
unless otherwise determined by the Board. Any power that may be exercised or
any actions that may be taken by the Committee under the 1994 Plan may also be
exercised or taken by the Board.
5. EXPIRATION OF THE 1994 PLAN
Options may be granted under the 1994 Plan at any time prior to
December 31, 1999.
6. TERM OF OPTIONS
Options granted under the 1994 Plan will have a term to be determined
by the President, subject to the approval of the Committee of the Board of
Gulf, up to a maximum of ten (10) years and each option shall be subject to
earlier termination as provided in clause 10.
7. EXERCISE OF OPTIONS
Subject to the Committee determining otherwise in respect of a
particular option, an option will first become exercisable only after two (2)
years following its grant and then only in such installments as the Committee
may determine.
8. OPTION PRICE
The price at which shares will be issued to an optionee pursuant to an
option shall be determined at the time the option is granted but shall in no
case be less than 100 percent of the fair market value on the day of the grant.
For the purposes of the 1994 Plan, "fair market value on the day of the grant"
means the last board lot sale price on The Toronto Stock Exchange on the last
trading day immediately prior to the day of the grant. Shares shall be issued
to an optionee pursuant to the exercise of an option only upon receipt by Gulf
from such optionee of payment in full either in cash or, where the optionee is
an employee or a former employee of Gulf or a subsidiary thereof, by an
exchange of Ordinary Shares of the Company previously owned by such optionee
for at least six (6) months prior to the date of the exercise or a combination
of both in an amount having a combined value equal to the aggregate purchase
price of the shares subject to the option or portion thereof being exercised.
9. TRANSFERABILITY
An option cannot be transferred by the optionee except pursuant to a
will or according to the laws governing descent and distribution.
* Maximum increased by 6,000,000 Ordinary Shares by the Shareholders at the
meeting held April 30, 1997. Total now 25,970,800.
<PAGE> 3
- 2 -
10. EARLY TERMINATION OF OPTION
Subject to the Committee determining otherwise in respect of a
particular option, the following provisions shall apply:
(a) If during the term of an unexercised option held by an employee, the
employee terminates employment with the Company for any reason other
than retirement, death or disability, then the option must be
exercised (if at all) on or before the expiration of three (3) months
immediately following the date of termination of employment but only
to the extent that the employee was entitled to exercise such option
at the date of termination of employment and in no event later than
ten (10) years from the date of the grant of such option.
(b) If during the term of an unexercised option held by an employee, the
Company terminates the employment of the employee for any reason other
than retirement, death, disability or just cause, then the option must
be exercised (if at all) on or before the expiration of one (1) year
immediately following the date of such termination but in no event
later than ten (10) years from the date of the grant of the option and
the vesting date for all options held by such employee shall
automatically be deemed to be the date of such termination of
employment.
(c) If during the term of an unexercised option, the optionee dies, then
the option must be exercised (if at all) on or before the expiration
of one (1) year immediately following the date of death but in no
event later than ten (10) years from the date of the grant of the
option and the vesting date for all options held by such optionee
shall automatically be deemed to be the date of death. In the event
of an optionee's death, the legal representative of the optionee or
the optionee's estate shall be entitled to exercise the option.
(d) If during the term of an unexercised option held by an employee, the
employee terminates employment with the Company by reason of
retirement or by reason of the employee's disability, then the option
must be exercised (if at all) on or before the expiration of five (5)
years immediately following the date of such termination of employment
but in no event later than ten (10) years from the date of the grant
of the option and the vesting date for all options held by such
employee shall automatically be deemed to be the date of such
termination of employment. In the event of the employee's disability,
the legal representative of the employee shall be entitled to exercise
the option. For the purposes of this clause:
(i) "disability" means long-term illness or disability within
the meaning of the Company's long-term disability plan; and
(ii) "retirement" means early or normal retirement within the
meaning of the applicable Company pension plans.
(e) If during the term of an unexercised option held by a director of Gulf
(who is not a full-time employee of the Company), the director ceases
to be a director of Gulf other than by reason of death or retirement
at normal retirement age, then the option must be exercised (if at
all) on or before the expiration of three (3) months immediately
following the date that person ceases to be a director, but only to
the extent that the director was entitled to exercise such option at
the date that he ceased to be a director and in no event later than
ten (10) years from the date of the grant of such option.
(f) If during the term of an unexercised option held by a director of Gulf
(who is not also a full-time employee of the Company), the director
ceases to be a director of Gulf by reason of retirement at normal
retirement age, then the option must be exercised (if at all) on or
before the expiration of five (5) years immediately following the date
of such retirement but in no event later than ten (10) years from the
date of the grant of the option and the vesting date for all options
held by such director shall automatically be deemed to be the date of
such retirement.
(g) If during the term of an unexercised option held by an employee, the
employee is terminated for just cause by the Company, then any option
that has vested at the date of such termination of employment may be
exercised by such employee immediately upon such termination of
employment but not otherwise.
(h) The unexercised portion of any option subject to this clause which is
not exercised as provided for in this clause 10 shall lapse and the
shares subject to such option shall be available for the granting of
other options under the 1994 Plan.
Notwithstanding the foregoing provisions in this clause 10, in no event may an
option be exercisable after the earlier of seven (7) years after the optionee
ceases to be an employee or a director and ten (10) years after the granting of
the option.
11. OPTION AGREEMENTS
Each option granted under the 1994 Plan shall be evidenced by written
agreement between Gulf and the optionee in such form and with such provisions
as the Committee from time to time shall consider appropriate, which provisions
shall be consistent with the provisions of the 1994 Plan. Option agreements
shall include the following provisions:
(a) The number of shares for which the option is granted.
(b) The timing and size of the installments in which the option may be
exercised.
(c) The price at which the option may be exercised.
(d) All vesting requirements for such option and the expiry date of such
option.
<PAGE> 4
- 3 -
12. LOANS TO FINANCE OPTIONS
The Company may make loans interest free to individual employees,
including officers, as authorized by the Committee and on such terms as may be
approved by the Committee for the purpose of financing the exercise of options
granted under the 1994 Plan and the payment of any taxes that may be due with
respect to such exercise. The maximum aggregate amount of a loan or loans to
any individual employee may not exceed the amount of that employee's current
year base salary. For greater certainty, loans under this clause 12 may not be
made to directors who are not full-time employees.
13. DILUTION ADJUSTMENTS
If the outstanding Ordinary Shares of Gulf are increased or decreased
or changed into or exchanged for a different number or kind of shares of stock
or other securities of Gulf whether through a stock dividend, stock split,
consolidation, merger, amalgamation, reorganization, recapitalization or other
transaction, then the Committee may make appropriate adjustments in the number
or kind of shares available for options pursuant to the 1994 Plan (if
applicable) and in the number or kind of shares that were the object of options
already granted pursuant to the 1994 Plan and to the purchase price thereof.
14. REORGANIZATION AND CHANGE OF CONTROL
Subject to the Committee determining otherwise in respect of a
particular option grant, if there is any merger, amalgamation, consolidation or
other reorganization of Gulf in which Gulf is not the surviving or continuing
corporation or there is a change of control of Gulf, then any unexercised
option may be exercised on or before the expiration of one (1) year following
the date of such merger, amalgamation, consolidation or other reorganization or
change of control and the vesting date for all options held by such optionee
shall automatically be deemed to be the date of such merger, amalgamation,
consolidation, reorganization or change of control. In no event shall any
option be exercisable later than ten (10) years from the date of the grant of
such option.
15. ACCELERATED EXERCISE OF OPTIONS
If an offer is made for the purchase of all the shares of Gulf, then
the Committee may, in its absolute discretion, require that all or some of the
options granted pursuant to the 1994 Plan must be exercised on or before the
effective date of such purchase.
16. TERMINATION OF PLAN
The Board of Directors may discontinue the 1994 Plan in whole or in
part but no such discontinuance shall, without the consent of the optionee,
alter or impair his right or rights previously granted under the 1994 Plan.
17. CONSTRUCTION
In the event any parts of the 1994 Plan are found to be void, the
remaining provisions of the 1994 Plan shall nevertheless be binding with the
same effect as though the void parts were deleted.
18. AMENDMENT
The 1994 Plan may, with the approval of the Committee and subject to
any necessary approval from stock exchanges upon which the Ordinary Shares are
then listed, be amended at any time, and from time to time, by a written
instrument duly executed by Gulf and any such amendment shall be communicated
to those optionees participating in the 1994 Plan.
19. EFFECTIVE DATE AND TRANSITIONAL PROVISIONS
The 1994 Plan shall become effective upon approval by the holders of
Ordinary Shares of Gulf. Upon receipt of such approval, the 1994 Plan shall
replace the 1990 Plan, and stock options granted under the 1990 Plan shall be
deemed to be options outstanding under the 1994 Plan; provided that the rights
of optionees under stock options originally granted under the 1990 Plan cannot
be altered or impaired without the consent of the optionee.
20. GENERAL
(a) The rights of all parties and the construction and effect of all
provisions of the 1994 Plan shall be construed and interpreted
according to the laws of the Province of Alberta.
(b) For the purposes of the 1994 Plan, unless the context otherwise
requires, words importing the singular include the plural and vice
versa, and words importing the masculine gender include the feminine
and neuter genders and vice versa.
I, Craig S. Glick, Senior Vice President, Law and Corporate Services
of Gulf Canada Resources Limited hereby confirm that the foregoing is the
definitive form of the Incentive Stock Option Plan (1994), which plan is
effective as of May 3, 1995.
_____________________________
CRAIG S. GLICK
