<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CANADIAN FOREST FOREST OIL
OIL LTD. CORPORATION
(Exact name of Registrant (Exact name of Registrant
as specified in its charter) as specified in its charter)
ALBERTA, CANADA NEW YORK
(State of other jurisdiction (State of other jurisdiction
of incorporation or organization) of incorporation or organization)
N/A 25-0484900
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
1311 1311
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
DANIEL L. MCNAMARA
CORPORATE COUNSEL AND SECRETARY
800 6TH AVENUE S.W., SUITE 600 FOREST OIL CORPORATION
CALGARY T2P3G3 1600 BROADWAY, SUITE 2200
CANADA DENVER, COLORADO 80202
(Address, including zip code, and (303) 812-1400
telephone number, (Name, Address, including zip code,
including area code, of Canadian and telephone number,
Forest Oil Ltd.'s principal executive including area code, of Forest Oil
offices) Corporation's principal
executive offices and agent for
service for each registrant)
--------------------------
COPY TO:
ALAN P. BADEN
VINSON & ELKINS L.L.P.
2300 FIRST CITY TOWER
HOUSTON, TEXAS 77002-6760
(713) 758-2430
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
--------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT TO AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED REGISTRATION FEE(1)
<S> <C> <C>
8 3/4% Senior Subordinated Notes due 2007........................................ $125,000,000 $37,879
Guarantee of Forest Oil Corporation (2).......................................... Not applicable Not applicable
</TABLE>
(1) Calculated in accordance with Rule 457.
(2) Represents separate guarantee of Forest Oil Corporation, parent of Canadian
Forest Oil Ltd., of 8 3/4% Senior Subordinated Notes due 2007 to be
registered hereunder.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
PROSPECTUS
CANADIAN FOREST OIL LTD.
OFFER TO EXCHANGE
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ALL OUTSTANDING 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007
PAYMENT UNCONDITIONALLY GUARANTEED ON A SENIOR SUBORDINATED BASIS BY
FOREST OIL CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED
Canadian Forest Oil Ltd., an Alberta, Canada corporation ("Canadian Forest" or
the "Issuer"), and Forest Oil Corporation, a New York corporation and the parent
of the Issuer ("Forest" or the "Company"), hereby offer, upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
letter of transmittal (the "Letter of Transmittal," and together with this
Prospectus, the "Exchange Offer"), to exchange $1,000 principal amount of the
8 3/4% Senior Subordinated Notes due 2007 of the Issuer and which are
unconditionally guaranteed on a senior subordinated basis by Forest (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement (as
defined herein) of which this Prospectus constitutes a part, for each $1,000
principal amount of the outstanding 8 3/4% Senior Subordinated Notes due 2007 of
the Issuer and which are unconditionally guaranteed on a senior subordinated
basis by Forest (the "Old Notes"), of which $125,000,000 principal amount is
outstanding. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Old Notes except for certain
transfer restrictions and registration rights relating to the Old Notes. The
Exchange Notes will evidence the same debt as the Old Notes and will be issued
under and be entitled to the benefits of the Indenture (as defined herein). The
Exchange Notes and the Old Notes are collectively referred to herein as the
"Notes."
The Notes are unsecured senior subordinated obligations of the Issuer. The
payment of the principal of, premium, if any, on and interest on the Notes is
subordinated in right of payment to the payment when due in cash of all Senior
Indebtedness (as defined herein) of the Issuer. The Notes rank subordinate in
right of payment to all existing and future Senior Indebtedness of the Issuer,
PARI PASSU with any future PARI PASSU Indebtedness (as defined herein) of the
Issuer and senior to any future Subordinated Indebtedness (as defined herein) of
the Issuer. The Notes are unconditionally guaranteed on a senior subordinated
basis (the "Company Guarantee") by the Company. The Company Guarantee ranks
subordinate in right of payment to all existing and future Senior Indebtedness
of the Company, PARI PASSU with any existing and future Pari Passu Indebtedness
of the Company and senior to any future Subordinated Indebtedness of the
Company.
(COVER CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE 20 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE
NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
<PAGE>
The Issuer and the Company will accept for exchange any and all Old Notes
that are validly tendered on or prior to 5:00 p.m., New York City time, on the
date the Exchange Offer expires, which will be , 1997, unless the
Exchange Offer is extended. See "The Exchange Offer -- Expiration Date;
Extensions; Amendments." Tenders of Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the business day prior to the Expiration
Date (as defined herein), unless previously accepted for exchange. The Exchange
Offer is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer is subject to certain
conditions which may be waived by the Issuer and the Company and to the terms
and provisions of the Registration Agreement (as defined herein). Old Notes may
be tendered only in denominations of $1,000 principal amount and integral
multiples thereof. The Issuer and the Company have agreed to pay the expenses of
the Exchange Offer. See "The Exchange Offer."
The Exchange Notes will bear interest at the rate of 8 3/4% per annum,
payable semi-annually on March 15 and September 15 of each year, commencing
March 15, 1998, to holders of record on the March 1 and September 1 immediately
preceding such interest payment date. Holders of Exchange Notes of record on
March 1, 1998 will receive interest on March 15, 1998 from the date of issuance
of the Exchange Notes, plus an amount equal to the accrued interest on the Old
Notes from the date of issuance of the Old Notes, September 29, 1997, to the
date of exchange thereof. Interest on the Old Notes accepted for exchange will
cease to accrue upon issuance of the Exchange Notes.
The Old Notes were sold by the Issuer and the Company on September 29, 1997
to the Initial Purchasers (as defined herein) in a transaction not registered
under the Securities Act in reliance upon Section 4(2) of the Securities Act.
The Old Notes were thereupon offered and sold by the Initial Purchasers only to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) and pursuant to offers and sales that occurred outside the United States
within the meaning of Regulation S under the Securities Act, each of whom agreed
to comply with certain transfer restrictions and other conditions. Accordingly,
the Old Notes may not be offered, resold or otherwise transferred unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange Notes
are being offered hereunder in order to satisfy the obligations of the Company
and the Issuer under the Registration Agreement entered into with the Initial
Purchasers in connection with the offering of the Old Notes. See "Exchange
Offer; Registration Rights."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission" or "SEC") to third parties, including
EXXON CAPITAL HOLDINGS CORPORATION, SEC No-Action Letter (available April 13,
1989), MORGAN STANLEY & CO. INC., SEC No-Action Letter (available June 5, 1991)
(the "Morgan Stanley Letter") and MARY KAY COSMETICS, INC., SEC No-Action Letter
(available June 5, 1991), the Issuer and the Company believe that the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by the respective holders thereof (other than a
"Restricted Holder," being (i) a broker-dealer who purchased Old Notes exchanged
for such Exchange Notes directly from the Company to resell pursuant to Rule
144A or any other available exemption under the Securities Act or (ii) a person
that is an affiliate of the Issuer or the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder is not participating in, and has no arrangement with any person to
participate in, the distribution (within the meaning of the Securities Act) of
such Exchange Notes. Eligible holders wishing to accept the Exchange Offer must
represent to the Issuer and the Company that such conditions have been met.
Holders who tender Old Notes in the Exchange Offer with the intention to
participate in a distribution of the Exchange Notes may not rely upon the Morgan
Stanley Letter or similar no-action letters. See "The Exchange Offer --
General." Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old Notes
2
<PAGE>
where such Exchange Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company and the Issuer
have agreed that, starting on the Expiration Date and ending on the close of
business 180 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
Neither the Issuer nor the Company will receive any proceeds from the
Exchange Offer.
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to the liquidity of
any markets that may develop for the Exchange Notes or as to the ability of the
holders of Exchange Notes to sell their Exchange Notes or the price at which
such holders would be able to sell their Exchange Notes. Future trading prices
of the Exchange Notes will depend on many factors, including, among others,
prevailing interest rates, the operating results of the Issuer and the Company
and the market for similar securities. The Issuer and the Company do not intend
to apply for listing of the Exchange Notes on any securities exchange. Salomon
Brothers Inc, Lehman Brothers, Chase Securities Inc. and Morgan Stanley Dean
Witter (the "Initial Purchasers") have informed the Issuer and the Company that
they currently intend to make a market for the Exchange Notes. However, they are
not so obligated, and any such market making may be discontinued at any time
without notice. Accordingly, no assurance can be given that an active public or
other market will develop for the Exchange Notes or as to the liquidity of or
the trading market for the Exchange Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY OR THE ISSUER
ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
Available Information.............................................................. 4
Incorporation of Certain Documents by Reference.................................... 5
Prospectus Summary................................................................. 6
Forward-Looking Statements......................................................... 20
Risk Factors....................................................................... 20
Private Placement.................................................................. 29
Use of Proceeds.................................................................... 29
Capitalization..................................................................... 30
Selected Financial and Operating Data.............................................. 31
Management's Discussion and Analysis of Financial Condition and Results of
Operations....................................................................... 35
Business and Properties............................................................ 47
Management......................................................................... 68
Beneficial Owners of Securities.................................................... 70
The Anschutz and JEDI Transactions................................................. 71
Description of Bank Credit Facilities.............................................. 72
The Exchange Offer................................................................. 74
Description of the Notes........................................................... 81
Certain United States and Canadian Federal Income Tax Considerations............... 119
Exchange Offer; Registration Rights................................................ 122
Plan of Distribution............................................................... 124
Transfer Restrictions on Old Notes................................................. 125
Legal Matters...................................................................... 128
Experts............................................................................ 128
Certain Definitions................................................................ 128
Index to Financial Statements...................................................... F-1
</TABLE>
AVAILABLE INFORMATION
The Company, but not the Issuer, is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files periodic reports, proxy and information
statements and other information with the Commission. Such reports and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and at the following regional offices
of the Commission: Seven World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained by mail from the
Public Reference Section of the Commission, at Judiciary Plaza, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, at prescribed rates. In
addition, the Commission maintains a site on the World Wide Web that contains
reports, proxy and information statements and other information filed
electronically by the Company with the Commission which can be accessed over the
Internet at http://www.sec.gov. While any Old Notes remain outstanding, the
Company and the Issuer will make available, upon request, to any holder and any
prospective purchaser of Old Notes, the information required pursuant to Rule
144A(d)(4) under the Securities Act during any period in which the Company is
not subject to Section 13 or 15(d) of the Exchange Act. Any such request should
be directed to Daniel L. McNamara, Corporate Counsel and Secretary, Forest Oil
Corporation at 1600 Broadway, Suite 2200, Denver Colorado 80202.
This Prospectus constitutes part of a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Issuer and the Company with the
Commission under the Securities Act. This Prospectus omits certain of the
information set forth in the Registration Statement. Reference is hereby made to
the Registration Statement and
4
<PAGE>
to the exhibits relating thereto for further information with respect to the
Issuer and the Company and the securities offered hereby. Statements contained
herein concerning the provisions of contracts or other documents are not
necessarily complete, and each such statement is qualified in its entirety by
reference to the copy of the applicable contract or other document filed with
the Commission. Copies of the Registration Statement and the exhibits thereto
are on file at the offices of the Commission and may be obtained upon payment of
the fee prescribed by the Commission, or may be examined without charge at the
public reference facilities of the Commission described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
pursuant to the Exchange Act (File No. 0-4597) and are incorporated herein by
reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997;
(3) the Company's Current Reports on Form 8-K dated February 7, March 7,
and May 9, 1997, and on Form 8-K/A filed January 28, 1997; and
(4) the Company's Proxy Statement for the Annual Meeting of Stockholders
held on May 14, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
thereof. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Issuer and the Company hereby undertake to provide without charge to
each person, including any beneficial owner to whom a copy of this Prospectus
has been delivered, upon the written or oral request of such person, a copy of
any or all of the information that has been incorporated by reference in this
Prospectus (not including exhibits to the information that is incorporated by
reference herein unless such exhibits are specifically incorporated by reference
in such information). Requests for such copies should be directed to Daniel L.
McNamara, Corporate Counsel and Secretary, Forest Oil Corporation at 1600
Broadway, Suite 2200, Denver, Colorado 80202.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER,
THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER OR THE COMPANY SINCE THE DATE
HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR
BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
5
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) INCLUDED
ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE. CERTAIN TERMS USED HEREIN ARE DEFINED UNDER "CERTAIN DEFINITIONS."
UNLESS THE CONTEXT REQUIRES OTHERWISE, REFERENCES IN THIS PROSPECTUS TO
(I)"CANADIAN FOREST" OR THE "ISSUER" ARE TO CANADIAN FOREST OIL LTD. (THE ISSUER
OF THE NOTES) AND ITS SUBSIDIARIES, AND (II) "FOREST" OR THE "COMPANY" ARE TO
FOREST OIL CORPORATION (THE CORPORATE PARENT OF THE ISSUER AND THE GUARANTOR OF
THE NOTES) AND ITS CONSOLIDATED SUBSIDIARIES.
THE COMPANY
Forest Oil Corporation is an independent oil and natural gas company engaged
in the exploration, exploitation, development and acquisition of oil and gas
properties and the production and marketing of oil and natural gas in North
America. The Company's reserves and producing properties are located primarily
in three core areas: (i) the Gulf of Mexico and Gulf Coast (the "Gulf Region");
(ii) West Texas, Oklahoma and the Rocky Mountain region of the United States
(the "Western Region"); and (iii) Canada (the "Canadian Region"). In 1996,
production from the United States and Canada accounted for approximately 60% and
40%, respectively, of the Company's production on an MCFE basis. The Company
currently operates 40 offshore platforms in the Gulf of Mexico, and 1996
production from the Gulf of Mexico accounted for approximately 42% of the
Company's production on an MCFE basis.
The Company's average daily production in the first six months of 1997 and
estimated proved reserves at December 31, 1996 are summarized below:
<TABLE>
<CAPTION>
ESTIMATED PROVED RESERVES AT DECEMBER
AVERAGE DAILY PRODUCTION
FIRST SIX MONTHS 1997 31, 1996
------------------------------------------------ -------------------------------------
TOTAL TOTAL
OIL (BBLS) GAS (MCF) (MCFE) % OF TOTAL OIL (MBBLS) GAS (MMCF) (MMCFE)
----------- --------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gulf Region..................... 2,713 81,199 97,477 55 4,313 157,448 183,326
Western Region.................. 320 7,370 9,290 5 1,485 76,877 85,787
Canadian Region................. 5,204 38,685 69,909 40 18,216 102,925 212,221
----- --------- ----------- --- ----------- ----------- -----------
Total....................... 8,237 127,254 176,676 100% 24,014 337,250 481,334
<CAPTION>
% OF TOTAL
-----------
<S> <C>
Gulf Region..................... 38
Western Region.................. 18
Canadian Region................. 44
---
Total....................... 100%
</TABLE>
At December 31, 1996, approximately 73% of the Company's estimated proved
reserves was classified as proved developed and approximately 70% was natural
gas. At such date, the Company owned interests in 1,403 gross (572 net)
producing wells in the United States and Canada. The Company currently operates
approximately 77% of its production in the United States and 48% of its
production in Canada.
Forest has been operating offshore in the Gulf Region since 1954 and
currently has interests in 75 lease blocks (approximately 330,000 gross acres)
in the Gulf of Mexico, of which 49 are held by production. The Company has
developed a significant gathering and processing infrastructure in the Gulf of
Mexico that facilitates production from its lease blocks. The Company has
interests in approximately 72,000 gross acres onshore in the Gulf Region, of
which 8% is undeveloped. The Company currently has an inventory of approximately
35 drilling projects in the Gulf Region.
The Company re-established its exploration efforts in the Western Region in
1996, focusing on the Rocky Mountain states. The Company's Western Region staff
is also responsible for development of the Company's producing properties in
Wyoming, Oklahoma and West Texas. The Company has interests in approximately
240,000 gross acres in the Western Region, of which 38% is undeveloped. The
Company currently has an inventory of approximately 18 drilling projects in the
Western Region.
The Company established a new core area in Canada in December 1995 with the
acquisition of a 56% economic interest (subsequently increased to 66%) in Saxon
Petroleum Inc. ("Saxon") and the January 1996 acquisition of Canadian Forest
(formerly ATCOR Resources Ltd.). The Company believes
6
<PAGE>
that the generally longer reserve life and lower aggregate cost nature of its
Canadian properties complements its Gulf of Mexico properties, which tend to
have shorter reserve lives and higher aggregate finding, development and
operating costs. The Company has interests in approximately 1,021,000 gross
acres in Canada, of which 70% is undeveloped. The Company currently has an
inventory of approximately 33 drilling projects in Canada.
The Company's 1997 planned capital expenditures of approximately $130
million are currently allocated as follows: $69 million to the Gulf Region, $12
million to the Western Region and $49 million to Canada. Approximately 68% of
the 1997 planned expenditures is allocated to drilling costs and 32% to lease
acquisition, seismic and other costs.
Since the first quarter of 1996, the Company has devoted most of its capital
spending program to exploratory, exploitation and development drilling, as well
as lease acquisition and seismic costs. This expanded drilling budget has
resulted in significant discoveries on Company-generated prospects including:
(i) a High Island Block 116 well in March 1996, which had initial daily gross
production of approximately 55 MMCFE (24 MMCFE net); (ii) a Eugene Island Block
53 well in the first quarter of 1997, which had initial daily gross production
of approximately 31 MMCFE (21 MMCFE net) and (iii) 27 BCFE of net estimated
proved reserves in the Bigoray Field in western central Alberta, Canada during
1996. The Company attributes this success to its high quality property base, as
well as to the integration of 3-D seismic with geological interpretations,
advanced drilling and production techniques and other technologies applied by
its experienced regional technical staff.
The Company's acquisition activity and drilling successes have resulted in
production growth and increased revenues and cash provided by operating
activities. The Company's average daily production increased from approximately
111 MMCFE per day in 1995, to approximately 162 MMCFE per day in 1996 and to
approximately 177 MMCFE per day during the first six months of 1997. For the
year ended December 31, 1996, the Company generated revenues of $317.5 million,
cash provided by operating activities of $67.8 million and EBITDA (as defined)
of $92.9 million. For the six months ended June 30, 1997, the Company generated
revenues of $172.4 million, cash provided by operating activities of $24.3
million and EBITDA of $51.2 million.
BUSINESS STRENGTHS
The Company believes it has certain strengths that provide it with
significant competitive advantages, including the following:
WELL POSITIONED IN PROSPECTIVE NORTH AMERICAN BASINS
Management believes that its core regions contain substantial reserve
potential and are among the most prospective areas in North America. Forest
holds interests in approximately 1.5 million total gross acres in its three core
regions and an interest in 22 Canadian frontier licenses in the Beaufort/North
McKenzie region of the Northwest Territories and Sable Island, Nova Scotia.
DIVERSIFIED NATURAL GAS MARKETS
The Company believes that through its acquisitions in Canada and its
operations in the Western Region, it has positioned itself to achieve greater
stability in its overall operating margin in the event of any narrowing of
natural gas pricing differentials between the United States and Canada.
Management believes that improvements in the infrastructure of the North
American gas transportation system have the potential to create a more efficient
transportation grid that may result in price differentials that are more closely
related to proximity to market rather than the availability of transportation.
EXPERTISE AND INFRASTRUCTURE IN THE GULF OF MEXICO
In over 40 years of operating in the Gulf Region, Forest has developed an
extensive proprietary database, including seismic, well logs, velocity surveys
and paleo and regional studies. The Company's
7
<PAGE>
exploration team integrates this data in evaluating drilling prospects. The
Company's senior operating personnel, as well as its geoscientists and
engineers, have substantial experience in the technical challenges arising from
exploitation and exploration of this region. During the period from 1992 through
1996, the Company drilled 39 offshore wells in this region, of which 77% were
completed as commercially productive. The Company has interests in 75 lease
blocks in the Gulf of Mexico of which 49 are held by production rather than
being subject to expiration by the passage of time. In addition, the Company has
developed an extensive production and transportation infrastructure to better
control costs and minimize the time interval between discoveries and production.
Forest owns interests in 50 platforms, 55 processing facilities, and an
estimated 325 miles of gathering systems in the Gulf Region.
APPLICATION OF TECHNOLOGY
The Company uses advanced technology in its exploration and development
activities to reduce drilling risks and finding costs and to more effectively
prioritize drilling prospects. As of June 30, 1997, the Company had acquired 3-D
seismic surveys on 85 offshore lease blocks and had 425,000 acres of 3-D seismic
data and 300,000 miles of 2-D seismic data. The ability to obtain 3-D seismic
data at reasonable costs and integrate such data into the Company's extensive
proprietary database has enabled the Company to identify multiple development
and exploratory prospects in mature producing fields which had not been
identified through earlier technologies.
In addition, the Company uses new drilling and completion technology to
stimulate production. For example, Saxon has utilized new production and
completion techniques to enhance production in the Pekisko formation in the
Bigoray field. These techniques included horizontal drilling into the formation
with a newly developed mud system, and subsequent artificial lifting of oil and
water with long-stroke pumps. Saxon's share of this field's current production
is 2,720 equivalent barrels of oil per day. The Company believes this drilling
and completion methodology can be used in other non-commercial properties in
Canada.
STRATEGY
The Company's strategy is to focus on exploration, exploitation, development
and acquisition of oil and gas producing properties located in selected areas in
North America where the Company has expertise and experience. The Company will
pursue this strategy through the following initiatives:
EXPAND EXPLORATION. The Company is expanding exploration as a source of
future growth, particularly opportunities that benefit from the selective use of
advanced technologies such as new 3-D seismic processing techniques and
production and completion methods. The Company is also seeking to apply proven
technologies to deeper water prospects in the Gulf of Mexico and to prospects in
the Northwest Territories in Canada. Since improving its capitalization, the
Company has accelerated the exploration and development of its inventory of
prospects and generally retained a larger working interest in such prospects. In
addition, the Company has continued to acquire additional prospects identified
by the Company's exploration teams. The Company seeks to maintain a balanced
exploration portfolio that includes higher risk exploration prospects that have
the potential for larger reserves, as well as lower risk projects.
INCREASE EXPLOITATION AND DEVELOPMENT OF EXISTING PROPERTIES. The Company
continually evalutates new imaging, drilling and completion technologies and
their potential application to the Company's existing properties in order to
identify additional exploitation and development opportunities. The Company
intends to increase exploitation and development expenditures and activities on
its existing properties in 1997 as compared to prior years. For example, the
Company is reprocessing and reshooting seismic data at Eugene Island Block 292
in order to identify additional drilling prospects at deeper horizons. Wells in
the Eugene Island Block 292 field in which the Company has an interest have
produced cumulative volumes of over 2,900 BCFE, primarily from shallow producing
formations. The Company also pursues workovers, recompletions, secondary
recovery operations and other production enhancement techniques on its
properties to increase production.
8
<PAGE>
CONTINUE TO PURSUE ACQUISITIONS. The Company continues to pursue
acquisitions of producing properties that meet selection criteria that include
(i) strategic location in a core area of operations or establishment of a new
core area through the acquisition of a significant property base, (ii) potential
for increasing reserves and production through lower risk exploitation and
development, (iii) attractive potential return on investment, and (iv)
opportunities for improved operating efficiencies. In Canada, Forest has an
additional criterion that natural gas properties include sufficient plant
processing capacity and adequate access to markets.
MAINTAIN FINANCIAL FLEXIBILITY. The Company is committed to maintaining
financial flexibility, which management believes is important for the successful
execution of its strategy. The Company has substantially reduced its debt as a
percentage of book capitalization from 98% as of December 31, 1994 to 47% as of
June 30, 1997. From 1995 through August 1997, the Company added a total of
approximately $300 million of common equity. Management seeks to continue to
reduce the Company's level of debt as a percentage of book capitalization.
Giving effect to (i) the issuance of the Old Notes, (ii) the exercise of the
warrant described below and (iii) additional borrowings under the Company's U.S.
Credit Facility (as defined), and the use of the aggregate proceeds from such
sources to repay the Canadian Credit Facility and to purchase all of the 11 1/4%
Notes in the Tender Offer, the Company would have had debt as a percentage of
pro forma as adjusted book capitalization of 45% as of June 30, 1997.
RECENT DEVELOPMENTS
ANSCHUTZ WARRANT EXERCISE. On August 28, 1997, The Anschutz Corporation
("Anschutz") purchased 3,500,000 shares of Common Stock, par value $0.10 per
share, of the Company (the "Common Stock") at an exercise price of $8.60 per
share by exercising a warrant (the "Anschutz Warrant"), resulting in cash
proceeds to Forest of $30.1 million. As a result of the exercise of the Anschutz
Warrant, outstanding shares of Common Stock increased from 32.6 million shares
to 36.1 million shares. See "Use of Proceeds," "Capitalization" and "The
Anschutz and JEDI Transactions."
TENDER OFFER FOR 11 1/4% SENIOR SUBORDINATED NOTES. On September 29, 1997,
the Company completed a tender offer and solicitation of consents to certain
amendments to the related indenture (the "Tender Offer") for approximately $90.2
million of its $100 million aggregate principal amount of 11 1/4% Senior
Subordinated Notes due 2003 (the "11 1/4% Notes"), in advance of the first call
date of September 1, 1998. The consideration for the 11 1/4% Notes was $1,096.96
for each $1,000 principal amount tendered (including the related consent fee),
based upon a fixed spread over the yield on the 6.125% U.S. Treasury Notes due
August 31, 1998, plus accrued and unpaid interest.
The Tender Offer was funded by (i) $72.0 million of the net proceeds from
the sale of the Old Notes, and (ii) a portion of the $30.1 million of proceeds
of the exercise of the Anschutz Warrant. The Company recorded an extraordinary
loss on early extinguishment of debt of approximately $12.4 million related to
the purchase of the 11 1/4% Notes and payment of the related consent fees.
SAXON. The board of directors of Saxon has created a special committee of
directors, which has engaged a third party to assess the asset base of Saxon and
to determine strategic alternatives to maximize shareholder value. The Company
anticipates that this assessment may result in a transaction in which Forest
would sell its entire interest in Saxon. No assurance can be given as to whether
any such transaction will occur or as to the terms thereof.
The Company acquired a 56% economic interest in Saxon on December 20, 1995
in exchange for cash, property and shares of Common Stock and, through a series
of additional transactions, increased its equity ownership to 66%. Saxon has
operated as a separate entity under its own management during this period.
Forest owns 89,840,316 common shares of Saxon and has the right to purchase
an additional 6,531,500 common shares of Saxon at an average cost CDN$0.54 per
share. On October 30, 1997, the closing price of the common shares of Saxon on
the Toronto Stock Exchange was CDN$0.82 per share.
9
<PAGE>
THE PRIVATE PLACEMENT AND USE OF PROCEEDS
The Old Notes were sold by the Issuer on September 29, 1997 to the Initial
Purchasers and were thereupon offered and sold by the Initial Purchasers only to
qualified institutional buyers and to purchasers outside the United States. The
net proceeds of $121.6 million received by the Issuer in connection with the
sale of the Old Notes were used as follows: $72.0 million was transferred to the
Company to be used to purchase a portion of the Company's 11 1/4% Notes and
$34.5 million was used to repay the outstanding balance under the Canadian
Credit Facility. It is anticipated that the remainder of the net proceeds will
be used for general corporate purposes. See "Private Placement" and
"Capitalization."
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $125,000,000 principal
amount of Exchange Notes for up to $125,000,000 principal amount of Old Notes.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Old Notes except that the Exchange Notes have been
registered under the Securities Act and will not contain certain transfer
restrictions and hence are not entitled to the benefits of the Registration
Agreement relating to the contingent increases in the interest rate provided for
pursuant thereto. See "Exchange Offer; Registration Rights." The Exchange Notes
will evidence the same debt as the Old Notes and will be issued under and be
entitled to the benefits of the Indenture governing the Old Notes. See
"Description of the Notes."
<TABLE>
<S> <C>
THE EXCHANGE OFFER................ Each $1,000 principal amount of Exchange Notes will be
issued in exchange for each $1,000 principal amount of
outstanding Old Notes. As of the date hereof,
$125,000,000 principal amount of Old Notes are issued
and outstanding. The Company will issue the Exchange
Notes to tendering holders of Old Notes on or promptly
after the Expiration Date.
RESALE............................ The Company believes that the Exchange Notes issued
pursuant to the Exchange Offer generally will be freely
transferable by the holders thereof without registration
or any prospectus delivery requirement under the
Securities Act, except for certain Restricted Holders
who may be required to deliver copies of this Prospectus
in connection with any resale of the Exchange Notes
issued in exchange for such Old Notes. See "The Exchange
Offer -- General" and "Plan of Distribution."
EXPIRATION DATE................... 5:00 p.m., New York City time, on , 1997,
unless the Exchange Offer is extended, in which case the
term "Expiration Date" means the latest date to which
the Exchange Offer is extended. See "The Exchange Offer
-- Expiration Date; Extensions; Amendments."
INTEREST ON THE NOTES............. The Exchange Notes will bear interest payable
semi-annually on March 15 and September 15 of each year,
commencing March 15, 1998. Holders of Exchange Notes of
record on March 1, 1998 will receive interest on March
15, 1998 from the date of issuance of the Exchange
Notes, plus an amount equal to the accrued interest on
the Old Notes from the date of issuance of the Old
Notes, September 29, 1997, to the date of exchange
thereof. Consequently, assuming the Exchange Offer is
consummated prior to the record date in respect of the
March 15, 1998 interest payment for the Old Notes,
holders
</TABLE>
10
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<TABLE>
<S> <C>
who exchange their Old Notes for Exchange Notes will
receive the same interest payment on March 15, 1998 that
they would have received had they not accepted the
Exchange Offer. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the
Exchange Notes. See "The Exchange Offer -- Interest on
the Exchange Notes."
PROCEDURES FOR TENDERING OLD
NOTES........................... Each holder of Old Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal, or such
facsimile, or an Agent's Message (as defined herein)
together with the Old Notes to be exchanged and any
other required documentation to the Exchange Agent at
the address set forth herein and therein or effect a
tender of Old Notes pursuant to the procedures for
book-entry transfer as provided for herein. See "The
Exchange Offer -- Procedures for Tendering."
SPECIAL PROCEDURES FOR BENEFICIAL
HOLDERS......................... Any beneficial holder whose Old Notes are registered in
the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender in the
Exchange Offer should contact such registered holder
promptly and instruct such registered holder to tender
on the beneficial holder's behalf. If such beneficial
holder wishes to tender directly, such beneficial holder
must, prior to completing and executing the Letter of
Transmittal and delivering the Old Notes, either make
appropriate arrangements to register ownership of the
Old Notes in such holder's name or obtain a properly
completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
See "The Exchange Offer -- Procedures for Tendering."
GUARANTEED DELIVERY PROCEDURES.... Holders of Old Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or who
cannot deliver their Old Notes and a properly completed
Letter of Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis and
deliver an Agent's Message, may tender their Old Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery
Procedures."
WITHDRAWAL RIGHTS................. Tenders of Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the business day
prior to the Expiration Date, unless previously accepted
for exchange. See "The Exchange Offer -- Withdrawal of
Tenders."
TERMINATION OF THE EXCHANGE
OFFER........................... The Issuer and the Company may terminate the Exchange
Offer if they determine that the Exchange Offer violates
any
</TABLE>
11
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<TABLE>
<S> <C>
applicable law or interpretation of the staff of the
SEC. Holders of Old Notes will have certain rights
against the Issuer and the Company under the
Registration Agreement should the Issuer and the Company
fail to consummate the Exchange Offer. See "Exchange
Offer; Registration Rights."
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF EXCHANGE NOTES...... Subject to certain conditions (as summarized above in
"Termination of the Exchange Offer" and described more
fully in "The Exchange Offer -- Termination"), the
Issuer and the Company will accept for exchange any and
all Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time,
on the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer -- General."
EXCHANGE AGENT.................... Marine Midland Bank is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange Offer.
The mailing address of the Exchange Agent is and hand
deliveries and deliveries by overnight courier should be
sent to: Marine Midland Bank, 140 Broadway -- Level A,
New York, New York 10005-1180, Attention: Corporate
Trust Services. For information with respect to the
Exchange Offer, the telephone number for the Exchange
Agent is (212) 658-5931 and the facsimile number for the
Exchange Agent is (212) 658-2292. See "The Exchange
Offer -- Exchange Agent."
USE OF PROCEEDS................... There will be no cash proceeds payable to the Issuer or
the Company from the issuance of the Exchange Notes
pursuant to the Exchange Offer. See "Use of Proceeds."
For a discussion of the use of the net proceeds received
by the Issuer and the Company from the sale of the Old
Notes, see "Private Placement."
TERMS OF THE NOTES
SECURITIES OFFERED................ $125,000,000 aggregate principal amount of 8 3/4% Senior
Subordinated Notes due 2007.
ISSUER............................ Canadian Forest Oil Ltd.
MATURITY DATE..................... September 15, 2007.
INTEREST PAYMENT DATES............ March 15 and September 15 of each year, and in the case
of the Old Notes and the Exchange Notes will commence on
March 15, 1998.
COMPANY GUARANTEE................. The Notes will be unconditionally guaranteed on a senior
subordinated basis by Forest Oil Corporation (the
"Company Guarantee").
SUBSIDIARY GUARANTEES............. Under certain circumstances, the Notes will in the
future be unconditionally guaranteed (the "Subsidiary
Guarantees") on a senior subordinated basis by
Restricted Subsidiaries of the Company (the "Subsidiary
Guarantors"). The terms of such
</TABLE>
12
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<TABLE>
<S> <C>
subordination will be the same as those for the Notes
and the Company Guarantee. See "Description of the Notes
-- Subsidiary Guarantees."
OPTIONAL REDEMPTION............... Except as otherwise described below, the Notes will not
be redeemable at the Issuer's option prior to September
15, 2002. Thereafter, the Notes will be subject to
redemption at the option of the Issuer, in whole or in
part, at the redemption prices set forth herein, plus
accrued and unpaid interest thereon to the applicable
redemption date. In addition, prior to September 15,
2000, the Issuer may, at its option, on any one or more
occasions, redeem up to 33 1/3% of the original
aggregate principal amount of the Notes at a redemption
price equal to 108.75% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the
redemption date with all or a portion of the net
proceeds of public sales of Common Stock of Forest;
provided that at least 66 2/3% of the original aggregate
principal amount of the Notes remains outstanding
immediately after the occurrence of such redemption. See
"Description of the Notes -- Optional Redemption."
ADDITIONAL AMOUNTS................ All payments made by the Issuer under or with respect to
the Notes, by the Company under or with respect to the
Company Guarantee and by any Subsidiary Guarantor under
or with respect to its Subsidiary Guarantee will be made
free and clear of, and without withholding or deduction
for Canadian taxes unless required by law or by the
interpretation or administration thereof by the relevant
government authority or agency, in which case the
Issuer, the Company and the Subsidiary Guarantors will
pay such additional amounts as may be necessary so that
the net amount received by holders of the Notes (other
than certain excluded holders of the Notes) after such
withholding or deduction will not be less than the
amount that would have been received in the absence of
such withholding or deduction. See "Description of the
Notes -- Additional Amounts."
OPTIONAL TAX REDEMPTION........... In the event of certain changes affecting Canadian
withholding taxes, the Notes will be subject to
redemption as a whole, but not in part, at the option of
the Issuer at any time, at 100% of the principal amount
thereof, plus accrued and unpaid interest thereon (if
any) to but excluding the redemption date. See
"Description of the Notes -- Redemption for Changes in
Canadian Withholding Taxes."
SUBORDINATION..................... The Notes are unsecured senior subordinated obligations
of the Issuer. The payment of the principal of, premium,
if any, on and interest on the Notes is subordinated in
right of payment to the payment when due in cash of all
Senior Indebtedness (as defined) of the Issuer. The
Notes rank subordinate in right of payment to all
existing and future Senior Indebtedness of the Issuer,
PARI PASSU with any future Pari Passu Indebtedness (as
defined) of the Issuer and senior to any future
Subordinated Indebtedness (as defined) of the Issuer.
The Company
</TABLE>
13
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<TABLE>
<S> <C>
Guarantee and the Subsidiary Guarantee of any Subsidiary
Guarantor will rank subordinate in right of payment to
all existing and future Senior Indebtedness, PARI PASSU
with any future Pari Passu Indebtedness and senior to
any future Subordinated Indebtedness of the Company of
such Subsidiary Guarantor, as applicable. At September
30, 1997, the Issuer had no outstanding Senior
Indebtedness and the Company had $78.0 million of
outstanding Senior Indebtedness (not including
approximately $48.0 million of aggregate borrowing
capacity available under the Bank Credit Facilities (as
defined) which, if borrowed, would be Senior
Indebtedness of the Issuer or the Company) and the
Issuer and the Company had no outstanding Pari Passu
Indebtedness or Subordinated Indebtedness other than the
Old Notes. Outstanding 11 1/4% Notes constitute Pari
Passu Indebtedness of the Company. See "Description of
the Notes -- Certain Covenants" and " -- Limitation on
Indebtedness", "Risk Factors -- Subordination" and "--
Possible Limitations on Enforceability of Subsidiary
Guarantees" and "Description of the Notes --
Subordination." The Indenture under which the Old Notes
were, and the Exchange Notes will be, issued permits the
Issuer, the Company and the Restricted Subsidiaries (as
defined) to incur additional indebtedness, including
Senior Indebtedness and Pari Passu Indebtedness.
CHANGE OF CONTROL................. Upon the occurrence of a Change of Control (as defined),
the Issuer will be required to offer to repurchase all
or a portion of each Holder's Notes, at an offer price
in cash equal to 101% of the aggregate principal amount
of such Notes plus accrued and unpaid interest, if any,
thereon to the date of repurchase, and to repurchase all
Notes tendered pursuant to such offer. The Bank Credit
Facilities prohibit the Issuer and the Company from
repurchasing any Notes pursuant to a Change of Control
offer prior to the repayment in full of the Senior
Indebtedness of the Issuer and the Company under the
Bank Credit Facilities. In the event of a Change of
Control, there can be no assurance that the Company and
the Issuer will have sufficient funds to repurchase any
of the Notes or be permitted under the terms of any
other indebtedness to repurchase or redeem the Notes.
See "Risk Factors -- Payment Upon a Change of Control,"
"Description of Other Debt" and "Description of the
Notes -- Repurchase at the Option of Holders Upon a
Change of Control."
CERTAIN COVENANTS................. The Old Notes were and the Exchange Notes will be issued
pursuant to an indenture (the "Indenture") that contains
certain covenants that, among other things, limit the
ability of the Company and its Restricted Subsidiaries,
including the Issuer, to incur additional indebtedness,
pay dividends, make distributions, make investments,
make certain other Restricted Payments (as defined),
enter into certain transactions with affiliates, dispose
of certain assets, incur liens securing
</TABLE>
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<TABLE>
<S> <C>
Indebtedness (as defined) of any kind other than
Permitted Liens (as defined) and engage in mergers and
consolidations. See "Description of the Notes -- Certain
Covenants."
EXCHANGE OFFER; REGISTRATION
RIGHTS.......................... The Company agreed to use its reasonable best efforts to
file and cause to become effective the Exchange Offer
Registration Statement (as defined) relating to the
Exchange Offer for the Old Notes or, in lieu thereof, to
file and cause to become effective the Shelf
Registration Statement (as defined) for the resale of
the Old Notes. If (i) neither the Exchange Registration
Statement nor the Shelf Registration Statement has been
filed with the Commission on or prior to the 60th day
following the original issuance of the Old Notes, (ii)
neither the Exchange Offer Registration Statement nor
the Shelf Registration Statement has been declared
effective by the Commission on or prior to the 120th day
following the original issuance of the Old Notes, (iii)
neither the Exchange Offer has been consummated nor the
Shelf Registration Statement has been declared effective
on or prior to the 150th day following the original
issuance of the Old Notes or (iv) after either the
Exchange Offer Registration Statement or the Shelf
Registration Statement has been declared effective, such
registration statement thereafter ceases to be effective
or usable (subject to certain exceptions) in connection
with resales of Old Notes or Exchange Notes in
accordance with and during the periods specified in the
Registration Agreement (as defined), then Special
Interest (in addition to the stated interest on the Old
Notes and the Exchange Notes) will accrue on the Old
Notes and the Exchange Notes. Upon the consummation of
the Registered Exchange Offer or the declaration of
effectiveness of such Shelf Registration Statement with
respect to the Old Notes, the Special Interest will
cease accruing. See "Exchange Offer; Registration
Rights."
ABSENCE OF A PUBLIC MARKET FOR THE
NOTES........................... The Exchange Notes will be a new issue of securities for
which there is currently no market. The Issuer and the
Company do not intend to apply for listing of the Notes
on any securities exchange or stock market. Although the
Initial Purchasers have informed the Issuers and the
Company that they each currently intend to make a market
in the Notes and, if issued, the Exchange Notes, they
are not obligated to do so, and any such market making
may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the Notes.
The Old Notes currently trade in The Portal Market.
</TABLE>
RISK FACTORS
Prior to making an investment decision, prospective investors in the Notes
should consider all the information set forth in the Prospectus and should
carefully evaluate the considerations set forth in "Risk Factors."
15
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SUMMARY FINANCIAL DATA
The following table sets forth summary historical financial data for the
Company for the six months ended June 30, 1997 and 1996, and for each of the
years in the three-year period ended December 31, 1996. The data presented below
under the captions "Consolidated Statement of Operations Data" and "Consolidated
Balance Sheet Data" for, and as of the end of, each of the years in the
three-year period ended December 31, 1996 are derived from the Consolidated
Financial Statements of the Company which have been audited by KPMG Peat Marwick
LLP, independent certified public accountants. The Consolidated Financial
Statements as of December 31, 1996 and 1995, and for each of the years in the
three-year period ended December 31, 1996, and the Independent Auditors' Report
thereon, are included elsewhere in this Prospectus. The summary data for the six
months ended June 30, 1997 and 1996 have been derived from the unaudited
Condensed Consolidated Financial Statements included elsewhere in this
Prospectus. The summary financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Condensed Consolidated Financial Statements and
the Consolidated Financial Statements of the Company (including the Notes
thereto).
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30, YEARS ENDED DECEMBER 31,
---------------------- ----------------------------------
1997 1996 1996(1) 1995 1994(1)
---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue(2):
Marketing and processing............................ $ 98,209 83,589 187,374 -- --
Oil and gas sales................................... 72,509 56,522 128,713 82,275 114,541
Miscellaneous, net.................................. 1,650 303 1,387 181 1,406
---------- ---------- ---------- ---------- ----------
Total revenue..................................... 172,368 140,414 317,474 82,456 115,947
Expenses:
Marketing and processing............................ 93,906 79,165 178,706 -- --
Oil and gas production.............................. 18,671 15,856 32,199 22,463 22,384
General and administrative.......................... 8,547 6,337 13,623 9,081 11,166
Interest (2)........................................ 10,033 12,220 23,307 25,323 26,773
Depreciation and depletion.......................... 36,756 26,989 63,068 43,592 65,468
Minority interest in earnings (loss) of
subsidiary........................................ 161 (171) (19) -- --
Provision for impairment of oil and gas
properties........................................ -- -- -- -- 58,000
---------- ---------- ---------- ---------- ----------
Total expenses.................................... 168,074 140,396 310,884 100,459 183,791
---------- ---------- ---------- ---------- ----------
Earnings (loss) before income taxes, cumulative effect
of change in accounting principle and extraordinary
item................................................ $ 4,294 18 6,590 (18,003) (67,844)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Earnings (loss) before cumulative effect of change in
accounting principle and extraordinary item......... $ 1,326 (3,287) 1,139 (17,996) (67,853)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net earnings (loss)................................... $ 1,326 (3,287) 3,305 (17,996) (81,843)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
CONSOLIDATED BALANCE SHEET DATA (AT END OF PERIOD):
Net property and equipment............................ $ 497,030 418,278 458,242 277,599 276,609
Total assets.......................................... $ 592,012 520,834 563,458 321,043 324,832
Long-term debt (2).................................... $ 223,884 201,886 168,859 193,879 207,054
Shareholders' equity.................................. $ 241,646 178,537 242,443 44,297 6,086
(SEE FOOTNOTES ON FOLLOWING PAGE)
</TABLE>
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<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30, YEARS ENDED DECEMBER 31,
---------------------- ----------------------------------
1997 1996 1996(1) 1995 1994(1)
---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED FINANCIAL DATA:
EBITDA (2)(3)......................................... $ 51,244 39,056 92,946 50,912 82,397
Cash provided (used) by operating activities (2)...... $ 24,290 21,953 67,815 (3,062) 42,441
Cash used by investing activities..................... $ 73,832 161,227 226,867 17,219 32,307
Cash provided (used) by financing activities.......... $ 46,583 140,200 164,500 20,698 (14,126)
Total capital expenditures............................ $ 82,647 163,815 244,118 52,744 42,544
Historical credit ratios:
Ratio of earnings to fixed charges (4).............. 1.4 -- 1.3 -- --
Ratio of EBITDA to interest expense................. 5.1 3.2 4.0 2.0 3.1
Ratio of debt to EBITDA (5)......................... 2.2 2.7 1.9 4.1 3.0
Pro forma credit ratios:
Pro forma ratio of earnings to fixed charges (6).... 1.3 1.2
Pro forma as adjusted ratio of earnings to fixed
charges (7)....................................... 1.6 1.4
Pro forma as adjusted ratio of EBITDA to interest
expense (7)....................................... 5.7 4.4
Pro forma as adjusted ratio of debt to
EBITDA (5)(7)..................................... 2.2 1.8
</TABLE>
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(1) In 1996, the Company realized a gain on extinguishment of debt of $2,166,000
as a result of the extinguishment of nonrecourse secured debt. The Company
changed its method of accounting for oil and gas sales from the sales method
to the entitlements method effective January 1, 1994.
(2) The following table sets forth certain financial data for Saxon, a
consolidated subsidiary in which the Company holds a 66% economic interest.
Saxon will not initially be a Restricted Subsidiary under the Indenture. See
"-- Recent Developments" and Note 2 of Notes to the Consolidated Financial
Statements:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ ---------------------
<S> <C> <C>
(IN THOUSANDS)
Revenue.............................................. $ 7,336 9,722
Interest expense..................................... $ 256 741
Long-term debt....................................... $ 22,104 --
EBITDA............................................... $ 3,544 5,155
Cash provided (used) by operating activities......... $ (1,583) 9,541
</TABLE>
(3) EBITDA represents earnings before income taxes, cumulative effect of changes
in accounting principles, extraordinary items, interest, depreciation and
depletion, and impairment of proved oil and gas properties. EBITDA is
included as supplemental disclosure because it is commonly accepted as
providing useful information regarding a company's ability to incur and
service debt and to fund capital expenditures and because certain covenants
contained in the Indenture are based in part on EBITDA. In evaluating
EBITDA, the Company believes that investors should consider, among other
things, the amount by which EBITDA exceeds interest costs for the period,
how EBITDA compares to principal repayments on debt for the period and how
EBITDA compares to capital expenditures for the period. To evaluate EBITDA,
the components of EBITDA, such as revenue and operating expenses, and the
variability of such components over time, should be also be considered.
Investors should be cautioned, however, that EBITDA should not be construed
as an alternative to operating income (as determined in accordance with
GAAP) as an indicator of the Company's operating performance, or to cash
provided by operating activities (as determined in
17
<PAGE>
accordance with GAAP) as a measure of liquidity. The Company's method of
calculating EBITDA may differ from the methods used by other companies, and
as a result the EBITDA measures disclosed herein may not be comparable to
other similarly titled measures disclosed by other companies.
(4) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of net earnings before income taxes and fixed charges. Fixed charges
consist of interest expense (which includes amortization of debt discount)
and that portion of rental cost equivalent to interest (estimated to be
one-third of rental cost).
The historical earnings for the six months ended June 30, 1996 and the years
ended December 31, 1995 and 1994 were inadequate to cover fixed charges. The
coverage deficiencies were $324,000, $18,327,000 and $68,127,000,
respectively.
(5) The historical ratio of debt to EBITDA and the pro forma as adjusted ratio
of debt to EBITDA represent the ratio of debt (consisting of long-term debt,
other long-term liabilities that are interest-bearing and deferred revenue)
at the end of the period to the amount of EBITDA for the period (annualized
in the case of EBITDA for the six months ended June 30, 1997).
(6) The pro forma ratio of earnings to fixed charges gives effect to the
application of $72.0 million of the proceeds from the sale of the Old Notes
to purchase $64.8 million of the $100 million principal amount outstanding
on the 11 1/4% Notes in the Tender Offer, the application of $32.9 million
of the proceeds of the Old Notes to repay outstanding borrowings under the
Canadian Credit Facility, and the retention of $16.5 million by the Issuer
for working capital and to fund capital expenditures.
(7) The pro forma as adjusted ratios of earnings to fixed charges, EBITDA to
interest expense and debt to EBITDA give effect to (i) the issuance of the
Old Notes for net proceeds of $121.6 million, and (ii) the exercise of the
Anschutz Warrant for proceeds of $30.1 million, and the use of the aggregate
proceeds from such sources to repay the outstanding balance of $32.9 million
under the Canadian Credit Facility, to purchase approximately $90.2 million
principal amount of the 11 1/4% Notes in the Tender Offer for approximately
$99.0 million plus approximately $375,000 of related expenses and to retain
the balance of the proceeds for working capital and to fund capital
expenditures.
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<PAGE>
SUMMARY RESERVE AND OPERATING DATA
The following table sets forth summary information with respect to the
Company's estimates of its proved oil and gas reserves and the discounted future
net cash flows from these reserves as of December 31, 1996 and certain
production information for the six months ended June 30, 1997. The Company's
U.S. reserves have been reviewed by Ryder Scott Company ("Ryder Scott"). A
report on Canadian Forest's reserves has been prepared by McDaniel & Associates
Consultants Ltd. ("McDaniel"). A report on Saxon's reserves has been prepared by
Fekete Associates Inc. ("Fekete"). The Ryder Scott review and the McDaniel and
Fekete reports are collectively referred to as the "Reserve Engineer Reports."
For additional information relating to reserves, see "Risk Factors -- Ceiling
Limitation Writedowns" and "-- Uncertainty of Estimates of Oil and Gas
Reserves," "Business and Properties -- Oil and Gas Reserves" and Note 18 of
Notes to Consolidated Financial Statements of the Company.
<TABLE>
<CAPTION>
UNITED CANADIAN TOTAL
STATES FOREST SAXON (1) CONSOLIDATED
---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Proved Developed
Natural Gas (MMCF).......................................... 165,629 58,162 12,694 236,485
Liquids (MBBLS) (2)......................................... 5,311 9,223 4,037 18,571
Total (MMCFE)............................................. 197,495 113,500 36,916 347,911
Proved Undeveloped
Natural Gas (MMCF).......................................... 65,626 21,507 10,562 97,695
Liquids (MBBLS) (2)......................................... 487 202 4,754 5,443
Total (MMCFE)............................................. 68,548 22,719 39,086 130,353
---------- ----------- ----------- -------------
Total Proved (MMCFE).......................................... 266,043 136,219 76,002 478,264
Proved reserves attributable to volumetric production
payments, all of which are proved developed:
Natural gas (MMCF)........................................ 3,070 -- -- 3,070
Liquids (MBBLS) (2)....................................... -- -- -- --
Total proved reserves attributable to volumetric production
payments (MMCFE)............................................ 3,070 -- -- 3,070
---------- ----------- ----------- -------------
Total proved reserves including amounts attributable to
volumetric payments (MMCFE)................................. 269,113 136,219 76,002 481,334
---------- ----------- ----------- -------------
---------- ----------- ----------- -------------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves (in thousands)...... $ 384,211 106,183 69,475 559,869
---------- ----------- ----------- -------------
---------- ----------- ----------- -------------
Total discounted future net cash flows relating to proved oil
and gas reserves, including amounts attributable to
volumetric production payments (in thousands)............... $ 387,337 106,183 69,475 562,995
---------- ----------- ----------- -------------
---------- ----------- ----------- -------------
Weighted average price used to calculate discounted future net
cash flows relating to proved oil and gas reserves at
December 31, 1996:
Natural gas (per Mcf)..................................... $ 3.52 1.73 1.55 2.88
---------- ----------- ----------- -------------
---------- ----------- ----------- -------------
Liquids (per Bbl) (2)..................................... $ 23.82 18.03 22.02 20.63
---------- ----------- ----------- -------------
---------- ----------- ----------- -------------
Average daily production for the six months ended June 30,
1997:
Natural gas (MCF)........................................... 88,569 33,276 5,409 127,254
Liquids (BBLS) (2).......................................... 3,033 3,552 1,652 8,237
Total (MCFE)................................................ 106,767 54,588 15,321 176,676
---------- ----------- ----------- -------------
---------- ----------- ----------- -------------
</TABLE>
- --------------------------
(1) Includes 100% of the reserves owned by Saxon, a consolidated subsidiary in
which the Company holds a 66% economic interest. Saxon will not initially be
a Restricted Subsidiary under the Indenture. See "-- Recent Developments"
and Note 2 to the Consolidated Financial Statements.
(2) Includes oil, condensate and natural gas liquids.
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<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical facts included in this Prospectus and in the documents
incorporated herein by reference, including without limitation statements under
"Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" regarding planned capital
expenditures, the availability of capital resources to fund capital
expenditures, estimates of proved reserves, the number of anticipated wells to
be drilled in 1997 and thereafter, the Company's financial position, business
strategy and other plans and objectives for future operations, are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. There are
numerous uncertainties inherent in estimating quantities of proved oil and
natural gas reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
Company. Reserve engineering is a subjective process of estimating underground
accumulations of oil and natural gas that cannot be measured in an exact way,
and the accuracy of any reserve estimate is a function of the quality of
available data and of engineering and geological interpretation and judgment. As
a result, estimates made by different engineers often vary from one another. In
addition, results of drilling, testing and production subsequent to the date of
an estimate may justify revisions of such estimate and such revisions, if
significant, would change the schedule of any further production and development
drilling. Accordingly, reserve estimates are generally different from the
quantities of oil and natural gas that are ultimately recovered. Additional
important factors that could cause actual results to differ materially from the
Company's expectations are disclosed under "Risk Factors" and elsewhere in this
Prospectus. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by such factors.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS,
THE FOLLOWING FACTORS RELATING TO THE COMPANY AND THE EXCHANGE OFFER SHOULD BE
CAREFULLY CONSIDERED WHEN EVALUATING AN INVESTMENT IN THE NOTES.
VOLATILITY OF OIL AND NATURAL GAS PRICES
The Company's revenue, profitability and future rate of growth are
substantially dependent upon the prevailing prices of, and demand for, oil and
natural gas. Prices for oil and natural gas are subject to wide fluctuation in
response to relatively minor changes in the supply of and demand for oil and
natural gas, market uncertainty and a variety of additional factors that are
beyond the control of the Company. These factors include the level of consumer
product demand, weather conditions, domestic and foreign governmental
regulations, the price and availability of alternative fuels, political
conditions in the Middle East, the foreign supply of oil and natural gas, the
price of oil and gas imports and overall economic conditions. From time to time,
oil and gas prices have been depressed by excess domestic and imported supplies.
There can be no assurance that current price levels will be sustained. It is
impossible to predict future oil and natural gas price movements with any
certainty. Declines in oil and natural gas prices will adversely affect the
Company's financial condition, liquidity and results of operations and may
reduce the amount of the Company's oil and natural gas that can be produced
economically.
The Company is impacted more by natural gas prices than by oil prices,
because the majority of its production and reserves are natural gas. At December
31, 1996, 70% of the Company's estimated proved reserves consisted of natural
gas on an MCFE basis. During 1996, 72% of the Company's total production
consisted of natural gas. The average Gulf Coast spot price received by the
Company for natural gas decreased from $3.89 per MCF at December 31, 1996 to
approximately $3.24 per MCF at
20
<PAGE>
October 1, 1997. During the same period, the West Texas Intermediate price for
crude oil decreased from $23.75 per barrel to $18.75 per barrel.
In order to attempt to minimize the product price volatility to which the
Company is subject, the Company, from time to time, enters into energy swap
agreements and other financial arrangements with third parties to attempt to
reduce the Company's short-term exposure to fluctuations in future oil and
natural gas prices. There can be no assurance, however, that such hedging
transactions will reduce risk or mitigate the effect of any substantial or
extended decline in oil or natural gas prices. Any substantial or extended
decline in the prices of oil or natural gas would have a material adverse effect
on the Company's financial condition, liquidity and results of operation. For
further information concerning market conditions, long-term contracts,
production payments and energy swap agreements, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
UNCERTAINTY OF ESTIMATES OF OIL AND GAS RESERVES
This Prospectus contains estimates of the Company's proved oil and gas
reserves and the estimated future net revenues therefrom that rely upon various
assumptions, including assumptions required by the Commission as to oil and gas
prices, drilling and operating expenses, capital expenditures, taxes and
availability of funds. The process of estimating oil and gas reserves is
complex, requiring significant decisions and assumptions in the evaluation of
available geological, geophysical, engineering and economic data for each
reservoir. As a result, such estimates are inherently imprecise. Actual future
production, oil and gas prices, revenues, taxes, development expenditures,
operating expenses and quantities of recoverable oil and gas reserves may vary
substantially from those estimated in the Reserve Engineer Reports. Any
significant variance in these assumptions could materially affect the estimated
quantities and present value of reserves set forth in this Prospectus. In
addition, the Company's proved reserves may be subject to downward or upward
revision based upon production history, results of future exploration and
development, prevailing oil and gas prices and other factors, many of which are
beyond the Company's control. Actual production, revenues, taxes, development
expenditures and operating expenses with respect to the Company's reserves will
likely vary from the estimates used, and such variances may be material.
Approximately 27% of the Company's total estimated proved reserves at
December 31, 1996 were undeveloped, which are by their nature less certain.
Recovery of such reserves will require significant capital expenditures and
successful drilling operations. The reserve data set forth in the Reserve
Engineer Reports assumes that substantial capital expenditures by the Company
will be required to develop such reserves. Although cost and reserve estimates
attributable to the Company's oil and gas reserves have been prepared in
accordance with industry standards, no assurance can be given that the estimated
costs are accurate, that development will occur as scheduled or that the results
will be as estimated. See "Business and Properties -- Oil and Gas Reserves."
The present value of future net revenues referred to in this Prospectus
should not be construed as the current market value of the estimated oil and gas
reserves attributable to the Company's properties. In accordance with applicable
requirements of the Commission, the estimated discounted future net cash flows
from proved reserves are generally based on prices and costs as of the date of
the estimate, whereas actual future prices and costs may be materially higher or
lower. Actual future net cash flows will also be affected by increases or
decreases in consumption by gas purchasers and changes in governmental
regulations or taxation. The timing of actual future net cash flows from proved
reserves, and thus their actual present value, will be affected by the timing of
both the production and the incurrence of expenses in connection with
development and production of oil and gas properties. In addition, the 10%
discount factor, which is required by the Commission to be used in calculating
discounted future net cash flows for reporting purposes, is not necessarily the
most appropriate discount factor based on interest rates in effect from time to
time and risks associated with the Company or the oil and gas industry in
general.
21
<PAGE>
EFFECTS OF LEVERAGE
As of June 30, 1997, on a pro forma as adjusted basis, the Company's
long-term debt would have been $224.0 million and the Company estimates that it
would have had approximately $70.0 million of aggregate borrowing capacity under
the Bank Credit Facilities, subject to the borrowing base formula at the time.
In addition, the Indenture will allow the Company to incur additional
Indebtedness on a secured basis. See "Use of Proceeds" and "Capitalization."
The Company's level of indebtedness will have several important effects on
its operations, including (i) a substantial portion of the Company's cash flow
from operations will be dedicated to the payment of interest on its indebtedness
and will not be available for other purposes, (ii) the covenants contained in
the Bank Credit Facilities and Indenture limit its ability to borrow additional
funds or to dispose of assets and may affect the Company's flexibility in
planning for, and reacting to, changes in business conditions, (iii) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or other
purposes may be impaired, and (iv) the terms of certain of the Company's
indebtedness permit its creditors to accelerate payments upon certain events of
default or a change of control of the Company. Moreover, future acquisition or
development activities may require the Company to alter its capitalization
significantly. These changes in capitalization may significantly alter the
leverage of the Company. The Company's ability to meet its debt service
obligations and to reduce its total indebtedness will be dependent upon the
Company's future performance, which will be subject to general economic
conditions and to financial, business and other factors affecting the operations
of the Company, many of which are beyond its control. There can be no assurance
that the Company's future performance will not be adversely affected by such
economic conditions and financial, business and other factors or that the
Company will be able to meet its debt service obligations, including its
obligations under the Notes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Furthermore, to the extent that the Company is unable to repay its
indebtedness at maturity out of cash on hand, it could attempt to refinance such
indebtedness, or repay such indebtedness with the proceeds of an equity
offering, at or prior to their maturity. There can be no assurance that the
Company will be able to generate sufficient cash flow to service its interest
payment obligations under its indebtedness or that future borrowings or equity
financing will be available for the payment or refinancing of the Company's
indebtedness. To the extent that the Company is not successful in negotiating
renewals of its borrowings or in arranging new financing, it may have to sell
significant assets which would have a material adverse effect on the Company's
business and results of operations. Among the factors that will affect the
Company's ability to effect an offering of its capital stock or refinance the
Notes are financial market conditions and the value and performance of the
Company at the time of such offering or refinancing. There can be no assurance
that any such offering or refinancing can be successfully completed. Any failure
by the Company to satisfy its obligations with respect to its indebtedness at
maturity or prior thereto would constitute a default under such indebtedness and
could cause a default under agreements governing other indebtedness, if any, of
the Company. Such defaults could result in a default on the Notes and could
delay or preclude payment of interest or principal thereon. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" and "Description of Bank Credit Facilities."
SUBORDINATION OF NOTES
The Indenture governing the Notes limits, but does not prohibit, the
incurrence by the Company of additional indebtedness that is senior in right of
payment to the Notes. In the event of bankruptcy, liquidation, reorganization or
other winding up of the Company, the assets of the Company will be available to
pay the Company's obligations on the Notes only after all Senior Indebtedness
(as defined herein) has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on the Notes. In addition, under certain
circumstances, no payments may be made with respect to principal of,
22
<PAGE>
premium, if any, or interest on the Notes if a default exists with respect to
any Senior Indebtedness. See "Description of the Notes -- Subordination."
In addition, the Notes are effectively subordinated to any indebtedness and
liabilities (including trade payables) of the Company's Subsidiaries that are
not Subsidiary Guarantors.
The Indenture imposes limits on the ability of the Company and its future
Restricted Subsidiaries (as defined herein) to incur additional indebtedness and
liens and to enter into agreements that would restrict the ability of such
future Restricted Subsidiaries to make distributions, loans or other payments to
the Company. These limitations are subject to various qualifications. Subject to
certain limitations, the Company and its Subsidiaries may incur additional
secured indebtedness. For additional details of these provisions and the
applicable qualifications, see "Description of the Notes -- Subordination" and
"-- Certain Covenants."
AVAILABILITY OF FINANCING
The Company has historically addressed its long-term liquidity needs through
the issuance of debt and equity securities when market conditions permit, and
through the use of credit facilities and cash provided by operating activities.
The Company continues to examine alternative sources of long-term capital,
including bank borrowings or the issuance of debt instruments, the sale of
common stock, preferred stock or other equity securities of the Company, the
issuance of nonrecourse production-based financing or net profits interests,
sales of non-strategic properties, prospects and technical information, or joint
venture financing. Availability of these sources of capital and, therefore, the
Company's ability to execute its operating strategy will depend upon a number of
factors, including general economic and financial market conditions, oil and
natural gas prices and the value and performance of the Company, some of which
are beyond the control of the Company.
REPLACEMENT OF RESERVES
In general, the volume of production from oil and gas properties declines as
reserves are depleted. The decline rates depend on reservoir characteristics and
vary from the steep declines characteristic of Gulf of Mexico reservoirs, where
the Company has a significant portion of its production, to the relatively slow
declines characteristic of long-lived fields in other regions. Except to the
extent the Company acquires properties containing proved reserves or conducts
successful development and exploration activities, or both, the proved reserves
of the Company will decline as reserves are produced. The Company's future
natural gas and oil production is, therefore, highly dependent upon its level of
success in finding or acquiring additional reserves. The business of exploring
for, developing or acquiring reserves is capital intensive. To the extent cash
flow from operations is reduced and external sources of capital become limited
or unavailable, the Company's ability to make the necessary capital investment
to maintain or expand its asset base of oil and gas reserves would be impaired.
In addition, there can be no assurance that the Company's future development,
acquisition and exploration activities will result in additional proved reserves
or that the Company will be able to drill productive wells at acceptable costs.
INDUSTRY RISKS
Oil and gas drilling and production activities are subject to numerous
risks, many of which are beyond the Company's control. These risks include the
risk that no commercially productive oil or natural gas reservoirs will be
encountered, that operations may be curtailed, delayed or canceled and that
title problems, weather conditions, compliance with governmental requirements,
mechanical difficulties or shortages or delays in the delivery of drilling rigs,
work boats and other equipment may limit the Company's ability to develop,
produce and market its reserves. The Company has encountered particular
difficulties in securing drilling equipment in certain of its core areas in the
past 12 months. There can be no assurance that new wells drilled by the Company
will be productive or that the Company will recover all or any portion of its
investment. Drilling for oil and natural gas may involve unprofitable efforts,
not only from dry wells but also from wells that are productive but do not
produce
23
<PAGE>
sufficient net revenues to return a profit after drilling, operating and other
costs. In addition, the Company's properties may be susceptible to hydrocarbon
drainage from production by other operators on adjacent properties.
Industry operating risks include the risk of fire, explosions, blow-outs,
pipe failure, abnormally pressured formations and environmental hazards such as
oil spills, gas leaks, ruptures or discharges of toxic gases, the occurrence of
any of which could result in substantial losses to the Company due to injury or
loss of life, severe damage to or destruction of property, natural resources and
equipment, pollution or other environmental damage, clean-up responsibilities,
regulatory investigation and penalties and suspension of operations.
Additionally, a substantial portion of the Company's oil and gas operations are
located in the Gulf of Mexico, an area that is subject to tropical weather
disturbances, some of which can be severe enough to cause substantial damage to
facilities and possibly interrupt production. In accordance with customary
industry practice, the Company maintains insurance against some, but not all, of
the risks described above. There can be no assurance that any insurance will be
adequate to cover losses or liabilities. The Company cannot predict the
continued availability of insurance at premium levels that justify its purchase.
CONCENTRATION OF ASSETS
At October 1, 1997, the Company had three offshore Gulf of Mexico
properties, the combined production from which represented approximately 30% of
the Company's daily deliverability. The Company's production, revenue and cash
flow could be adversely affected if production from these properties decreases
to a significant degree.
GAS MARKETING -- TRADING AND CREDIT RISK
The Company's operations include gas marketing through its subsidiary,
Producers Marketing Ltd. ("ProMark"). ProMark's gas marketing operations consist
of the marketing of Canadian Forest's gas production, the purchase and direct
sale of third parties' natural gas, the handling of transportation and
operations of third party gas and spot purchasing and selling of natural gas.
The profitability of such natural gas marketing operations depends in large part
on the ability of the Company to assess and respond to changing market
conditions, including credit risk. Profitability of such natural gas marketing
operations also depends in large part on the ability of the Company to maximize
the volume of third party natural gas which the Company purchases and resells
and on the ability of the Company to obtain a satisfactory margin between the
purchase price and the sales price for such volumes. The inability of the
Company to respond appropriately to changing conditions in the gas marketing
business could materially adversely affect the Company's results of operations.
In addition, a significant portion of the volumes sold by ProMark are sold at
fixed prices under long-term contracts. The loss of one or more such long term
buyers could have a material adverse effect on the Company. ProMark buys and
sells gas in its trading operation for terms as short as one day and as long as
one to two years. Profits generated by trading are derived from the spread
between the prices of gas purchased and sold. ProMark endeavors to offset its
gas purchase or sales commitments with other gas purchase or sales contracts,
thereby limiting its exposure to price risk. The Company is, however, exposed to
credit risk in that there exists the possibility that the counterparties to
agreements will fail to perform their contractual obligations.
INTERNATIONAL OPERATIONS
A substantial portion of the Company's operations is located in Canada. The
expenses of such operations are payable in Canadian dollars and most of the
revenue derived from natural gas and oil sales is based upon U.S. dollar prices.
As a result, the Company's Canadian operations are subject to the risk of
fluctuations in the relative value of the Canadian and U.S. dollar. The
Company's Canadian operations may also be adversely affected by Canadian local
political and economic developments, royalty and tax increases and other
Canadian laws or policies, as well as U.S. policies affecting trade,
24
<PAGE>
taxation and investment in Canada. To the extent that the Company pursues
opportunities in other countries, similar risks will apply.
COMPETITION
The Company operates in a highly competitive environment. The Company
competes with major and independent oil and gas companies for the acquisition of
desirable oil and gas properties, as well as the equipment and labor required to
develop and operate such properties. The Company also competes with major and
independent oil and gas companies in the marketing and sale of oil and natural
gas to marketers and end-users. Many of these competitors have financial and
other resources substantially greater than those of the Company.
DRILLING RISKS
Drilling involves numerous risks, including the risk that no commercially
productive oil or gas reservoirs will be encountered. The cost of drilling and
completing wells is often unpredictable, and drilling operations may be
curtailed, delayed or cancelled as a result of a variety of factors, including
unexpected drilling conditions, pressure or irregularities in formations,
equipment failures or accidents, weather conditions and shortages or delays in
delivery of equipment. There can be no assurance as to the success of the
Company's future drilling activities. The Company's current inventory of 2-D and
3-D seismic surveys will not necessarily increase the likelihood that the
Company will drill or complete commercially productive wells or that the volumes
of reserves discovered, if any, would necessarily be greater than the Company
would have discovered without its current inventory of seismic surveys.
ACQUISITION RISKS
The Company's recent growth has been attributable in part to acquisitions of
producing properties. The successful acquisition of producing properties
requires an assessment of recoverable reserves, future oil and gas prices,
operating costs, potential environmental and other liabilities and other factors
beyond the Company's control. Such assessments are necessarily inexact and their
accuracy inherently uncertain. In connection with such an assessment, the
Company performs a review of the subject properties that it believes to be
generally consistent with industry practices. Such a review, however, will not
reveal all existing or potential problems nor will it permit a buyer to become
sufficiently familiar with the properties to fully assess their deficiencies and
capabilities. Inspections may not always be performed on every platform or well,
and structural and environmental problems are not necessarily observable even
when an inspection is undertaken. The Company is generally not entitled to
contractual indemnification for pre-closing liabilities, including environmental
liabilities, and generally acquires interests in the properties on an "as is"
basis with limited remedies for breaches of representations and warranties. In
addition, competition for producing oil and gas properties is intense and many
of the Company's competitors have financial and other resources which are
substantially greater than those available to the Company. Therefore, no
assurance can be given that the Company will be able to acquire producing oil
and gas properties which contain economically recoverable reserves or that it
will make such acquisitions at acceptable prices.
MARKETABILITY OF OIL AND GAS PRODUCTION
The marketability of the Company's production depends in part upon the
availability, proximity and capacity of gas gathering systems, pipelines and
processing facilities. U.S. federal and state regulation and Canadian regulation
of oil and gas production and transportation, general economic conditions, and
changes in supply and demand all could adversely affect the Company's ability to
produce and market its oil and natural gas. If market factors were to change
dramatically, the financial impact on the Company could be substantial. The
availability of markets is beyond the control of the Company and thus represents
a significant risk.
25
<PAGE>
GOVERNMENT REGULATION
The Company's oil and gas operations are subject to various U.S. federal,
state and local and Canadian federal and provincial governmental regulations.
Matters subject to regulation include discharge permits for drilling operations,
drilling and abandonment bonds, reports concerning operations, the spacing of
wells, and unitization and pooling of properties and taxation. From time to
time, regulatory agencies have imposed price controls and limitations on
production by restricting the rate of flow of oil and gas wells below actual
production capacity in order to conserve supplies of oil and gas. In addition,
the Oil Pollution Act of 1990 ("OPA") requires operators of offshore facilities
to establish evidence of financial responsibility to address potential oil
spills. OPA, together with other federal and state environmental statutes, also
imposes strict liability on owners and operators of certain defined facilities
for such spills, subject to certain limitations. A substantial spill from one of
the Company's facilities could have a material adverse effect on the Company's
results of operations, competitive position or financial condition. The
production, handling, storage, transportation and disposal of oil and gas,
by-products thereof and other substances and materials produced or used in
connection with oil and gas operations are also subject to regulation under
federal, state, provincial and local laws and regulations primarily relating to
the protection of human health and the environment. To date, expenditures
related to complying with these laws and for remediation of existing
environmental contamination have not been significant in relation to the results
of operations of the Company. Although the Company believes it is in substantial
compliance with all applicable laws and regulations, the requirements imposed by
such laws and regulations are frequently changed and subject to interpretation,
and the Company is unable to predict the ultimate cost of compliance with these
requirements or their effect on its operations. See "Business and Properties --
Regulation."
CEILING LIMITATION WRITEDOWNS
The Company reports its operations using the full cost method of accounting
for oil and gas properties. The Company capitalizes the cost to acquire, explore
for and develop oil and gas properties. Under full cost accounting rules, the
net capitalized costs of oil and gas properties may not exceed a "ceiling limit"
which is based upon the present value of estimated future net cash flows from
proved reserves, discounted at 10%, plus the lower of cost or fair market value
of unproved properties. If net capitalized costs of oil and gas properties
exceed the ceiling limit, the Company is subject to a ceiling limitation
writedown to the extent of such excess. A ceiling limitation writedown is a
charge to earnings which does not impact cash flow from operating activities.
However, such writedowns impact the amount of the Company's shareholders'
equity. The risk that the Company will be required to write down the carrying
value of its oil and gas properties increases when oil and gas prices are
depressed or volatile. In addition, writedowns may occur if the Company has
substantial downward revisions in its estimated proved reserves or if purchasers
abrogate long-term contracts for its natural gas production. Although the
Company did not have a ceiling test writedown in 1996 or 1995, the Company had a
writedown of $58,000,000 in 1994. No assurance can be given that the Company
will not experience additional ceiling limitation writedowns in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
PAYMENT UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes may
require the Issuer to purchase all or a portion of such holder's Notes at 101%
of the principal amount of the Notes, together with accrued and unpaid interest,
if any, to the date of purchase. Prior to any such repurchase of the Notes, the
Company may be required to (i) repay or cause to be repaid all or a portion of
the outstanding indebtedness under the Bank Credit Facilities or other
indebtedness of the Company and its subsidiaries which ranks senior to or PARI
PASSU with the Notes, the Company Guarantee or any Subsidiary Guarantee
containing similar change of control provisions, or (ii) obtain any requisite
consent to permit the repurchase of the Notes. If the Company is unable to repay
or cause to be repaid all of such
26
<PAGE>
indebtedness or is unable to obtain the necessary consents, the Issuer would be
unable to offer to repurchase the Notes, which would constitute an Event of
Default under the Indenture. There can be no assurance that the Company and the
Issuer will have sufficient funds available at the time of any Change of Control
to make any debt payment (including repurchase of Notes) as described above. The
definition of "Change of Control" in the Indenture includes a sale, lease,
conveyance or other disposition of "all or substantially all" of the assets of
the Company and the Restricted Subsidiaries, taken as a whole, to a person or
group of persons. There is little case law interpreting the phrase "all or
substantially all" in the context of an indenture. Because there is no precise
established definition of this phrase, the ability of a holder of the Notes to
require the Issuer to repurchase such Notes as a result of a sale, lease,
conveyance or transfer of all or substantially all of the Company's assets to a
person or group of persons may be uncertain. See "Description of the Notes --
Certain Covenants -- Repurchase at the Option of Holders Upon a Change of
Control."
The events that constitute a Change of Control under the Indenture may also
be events of default under the Bank Credit Facilities or other senior
indebtedness of the Company and its subsidiaries. Such events may permit the
lenders under the Bank Credit Facilities to reduce the borrowing base thereunder
or permit such lenders or other holders of indebtedness to accelerate such
indebtedness and, if the indebtedness is not paid, to enforce security interests
in, or commence litigation that could ultimately result in a sale of,
substantially all of the assets of the Company, thereby limiting the Issuer's
ability to raise cash to repurchase the Notes.
POSSIBLE LIMITATIONS ON ENFORCEABILITY OF SUBSIDIARY GUARANTEES
The Issuer's obligations under the Notes may under certain circumstances be
guaranteed on an unsecured senior subordinated basis by the Subsidiary
Guarantors. Various fraudulent conveyance laws have been enacted for the
protection of creditors and may be utilized by a court of competent jurisdiction
to subordinate or void any Subsidiary Guarantee issued by a Subsidiary
Guarantor. It is also possible that under certain circumstances a court could
hold that the direct obligations of a Subsidiary Guarantor could be superior to
the obligations under its Subsidiary Guarantee.
To the extent that a court were to find that at the time a Subsidiary
Guarantor entered into a Subsidiary Guarantee either (x) the Subsidiary
Guarantee was incurred by the Subsidiary Guarantor with the intent to hinder,
delay or defraud any present or future creditor or that the Subsidiary Guarantor
contemplated insolvency with a design to favor one or more creditors to the
exclusion in whole or in part of others or (y) the Subsidiary Guarantor did not
receive fair consideration or reasonably equivalent value for issuing the
Subsidiary Guarantee and, at the time it issued the Subsidiary Guarantee, the
Subsidiary Guarantor (i) was insolvent or rendered insolvent by reason of the
issuance of the Subsidiary Guarantee, (ii) was engaged or about to engage in a
business or transaction for which the remaining assets of the Subsidiary
Guarantor constituted unreasonably small capital or (iii) intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
matured, the court could void or subordinate the Subsidiary Guarantee in favor
of the Subsidiary Guarantor's other creditors. Among other things, a legal
challenge of a Subsidiary Guarantee issued by a Subsidiary Guarantor on
fraudulent conveyance grounds may focus on the benefits, if any, realized by the
Subsidiary Guarantor as a result of the issuance by the Company of the Notes. To
the extent that proceeds from the Offering are used to refinance the
indebtedness of the Company, a court might find that the Subsidiary Guarantors
did not benefit from incurrence of the indebtedness represented by the Notes.
The measure of insolvency for purposes of determining whether a transfer is
voidable as a fraudulent transfer varies depending upon the law of the
jurisdiction that is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its debts, including contingent
liabilities, was greater than the value of all its assets at a fair valuation or
if the present fair saleable value of the debtor's assets was less than the
amount required to repay its probable liability on its debts, including
contingent liabilities, as they become absolute and mature.
27
<PAGE>
To the extent that a Subsidiary Guarantee is voided as a fraudulent
conveyance or found unenforceable for any other reason, holders of the Notes
would cease to have any claim in respect of the applicable Subsidiary Guarantor.
In such event, the claims of the holders of the Notes against such Subsidiary
Guarantor would be subject to the prior payment of all liabilities and preferred
stock claims of such Subsidiary Guarantor. There can be no assurance that, after
providing for all prior claims and preferred stock interests, if any, there
would be sufficient assets to satisfy the claims of the holders of the Notes
relating to any voided portion of such Subsidiary Guarantee.
ENFORCEABILITY OF JUDGMENTS
Since substantially all of the assets of the Issuer are outside the United
States, any judgments obtained in the United States against the Issuer,
including judgments with respect to the payments of principal, interest,
redemption price, Change of Control Payment or other amounts payable under the
Notes, may not be collectible within the United States.
The Issuer has been informed by its Canadian counsel, Bennett Jones
Verchere, that the laws of the Province of Alberta and the federal laws of
Canada applicable therein permit an action to be brought in a court of competent
jurisdiction in the Province of Alberta (a "Canadian Court") on any final and
conclusive judgment in personam of any federal or state court located in the
Borough of Manhattan in the City of New York (a "New York Court") that is not
impeachable as void or voidable under the internal laws of the State of New York
for a sum certain in respect of the enforcement of the Indenture or the Notes if
(i) the court rendering such judgment had jurisdiction over the judgment debtor,
as recognized by the Canadian Court (and submission by the Issuer in the
Indenture to the jurisdiction of the New York Court will be sufficient for the
purpose), (ii) the judgment debtor was properly served in connection with any
action leading to final judgment, (iii) such judgment was not obtained by fraud
or in a manner contrary to natural justice and the enforcement thereof would not
be inconsistent with public policy, as that term is applied by a Canadian Court,
or contrary to any order made by the Attorney General of Canada under the
FOREIGN EXTRATERRITORIAL MEASURE ACT (Canada) or the Competition Tribunal under
the Competition Act (Canada), (iv) the enforcement of such judgment does not
constitute, directly or indirectly, the enforcement of foreign revenue,
expropriatory or penal laws and (v) the action to enforce such judgment is
commenced within the applicable limitation period. The Issuer has been advised
by Bennett Jones Verchere that it knows of no reason, based upon public policy
under the laws of the Province of Alberta and the federal laws of Canada
applicable therein for avoiding recognition of a judgment of a New York Court to
enforce the Indenture or the Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESTRICTIONS ON RESALE OF OLD NOTES
The Old Notes not exchanged for Exchange Notes have not been registered
under the Securities Act or any state securities laws and, unless so registered,
may not be offered or sold except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws. See "Transfer Restrictions on Old Notes."
Because the Issuer and the Company anticipated that most holders of Old Notes
will elect to exchange such Old Notes for Exchange Notes due to the general lack
of restrictions on the resale of Exchange Notes under the Securities Act, the
Issuer and the Company anticipate that the liquidity of the market for any Old
Notes remaining after the consummation of the Exchange Offer may be
substantially limited. Additionally, holders (other than Restricted Holders) of
any Old Notes not tendered in the Exchange Offer prior to the Expiration Date
will not be entitled to require the Issuer and the Company to file the Shelf
Registration Statement and the stated interest rate on such Old Notes will
remain at its initial level of 8 3/4%. See "Exchange Offer; Registration
Rights."
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes will be new securities for which currently there is no
trading market. The Company does not intend to apply for listing of the Exchange
Notes on any securities exchange or stock
28
<PAGE>
market. Although the Initial Purchasers have informed the Company that they
currently intend to make a market in the Exchange Notes, the Initial Purchasers
are not obligated to do so, and any such market making may be discontinued at
any time without notice. The liquidity of any market for the Exchange Notes will
depend upon the number of Holders of the Exchange Notes, the interest of
securities dealers in making a market in the Exchange Notes and other factors.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Exchange Notes, and even if a market does develop, the price at
which the holders of Exchange Notes will be able to sell such Exchange Notes is
not assured and the Exchange Notes could trade at a price above or below either
their purchase price or face value.
OWNERSHIP POSITION OF ANSCHUTZ
Based on the number of shares outstanding on September 30, 1997, Anschutz
owned approximately 31% of the outstanding shares of Common Stock. Pursuant to a
shareholders agreement between Anschutz and the Company (the "Anschutz
Agreement"), Anschutz may designate three of the Company's 11 directors.
Therefore, Anschutz has the ability to exert substantial influence with respect
to matters considered by the Company's Board of Directors. The Anschutz
Agreement prohibits Anschutz from acquiring in excess of 40% of the outstanding
shares of Common Stock. The Anschutz Agreement terminates on July 27, 2000.
Under certain circumstances Anschutz could have a veto power over proposed
transactions between the Company and third parties such as a merger, which,
under applicable law, requires the approval of the holders of two-thirds of the
outstanding shares of Common Stock. It is unlikely that control of the Company
could be transferred to a third party without Anschutz's consent and agreement.
It is also unlikely that a third party would offer to pay a premium to acquire
the Company without the prior agreement of Anschutz, even if if the Board of
Directors should choose to attempt to sell the Company in the future.
PRIVATE PLACEMENT
On September 29, 1997, the Company completed the private sale to the Initial
Purchasers of $125,000,000 principal amount of the Old Notes at a price of
99.245% of the principal amount thereof in a transaction not registered under
the Securities Act in reliance upon Section 4(2) of the Securities Act. The
Initial Purchasers thereupon offered and resold the Old Notes only to "Qualified
Institutional Buyers" (as defined in Rule 144A under the Securities Act) in
compliance with Rule 144A and pursuant to offers and sales that occur outside
the United States within the meaning of Regulation S under the Securities Act at
an initial price to such purchasers of 99.745% of the principal amount thereof.
The net proceeds of $121.6 million received by the Issuer in connection with the
sale of the Old Notes were used as follows: $72.0 million was transferred to the
Company to be used to purchase a portion of the 11 1/4% Notes and $34.5 million
was used to repay the outstanding balance under the Canadian Credit Facility. It
is anticipated that the remainder of the net proceeds will be used for general
corporate purposes.
USE OF PROCEEDS
Neither the Issuer nor the Company will receive any cash proceeds from the
issuance of the Exchange Notes offered hereby. In consideration for issuing the
Exchange Notes as contemplated in this Prospectus, the Issuer and the Company
will receive in exchange a like principal amount of Old Notes, the terms of
which are identical in all material respects to the Exchange Notes. The Old
Notes surrendered in exchange for the Exchange Notes will be retired and
canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in any change in capitalization of the Company.
29
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of June 30, 1997 and the pro forma as adjusted capitalization of the Company as
of June 30, 1997 after giving effect to (i) the issuance of the Old Notes, (ii)
the exercise of the Anschutz Warrant and (iii) additional borrowings under the
Company's U.S. Credit Facility, and the use of the aggregate proceeds from such
sources to repay the Canadian Credit Facility and to purchase all of the 11 1/4%
Notes in the Tender Offer. See "Use of Proceeds" and "Prospectus Summary --
Recent Developments."
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------
<S> <C> <C>
PRO FORMA
HISTORICAL AS ADJUSTED
------------ ------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Long-term debt:
U.S. Credit Facility............................................ $ 58,500 56,433
Canadian Credit Facility........................................ 32,948 --
Saxon Credit Facility........................................... 22,104 22,104
8 3/4% Senior Subordinated Notes offered hereby................. -- 124,681
11 1/4% Senior Subordinated Notes............................... 99,452 9,713
Production payment obligation................................... 10,880 10,880
------------ ------------
Total long-term debt.......................................... 223,884 223,812
Minority interest (1)............................................. 12,985 12,985
Shareholders' equity:
Common stock, par value $.10 per share, 32,787,664 shares issued
and 36,287,664 shares issued pro forma as adjusted (2)........ 3,279 3,629
Capital surplus................................................. 456,617 486,367
Accumulated deficit............................................. (212,861) (225,313)
Foreign currency translation.................................... (2,572) (2,572)
Treasury stock (196,856 shares)................................. (2,817) (2,817)
------------ ------------
Total shareholders' equity.................................... 241,646 259,294
------------ ------------
Total capitalization.............................................. $ 478,515 496,091
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) Represents a 34% minority economic interest in Saxon.
(2) Does not include a total of 1,415,080 shares reserved for issuance upon
exercise of outstanding stock options.
30
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following table sets forth selected historical financial and operating
data for the Company for the six months ended June 30, 1997 and 1996, and for
each of the years in the five-year period ended December 31, 1996. The selected
data presented below under the captions "Consolidated Statement of Operations
Data" and "Consolidated Balance Sheet Data" for, and as of the end of, each of
the years in the five-year period ended December 31, 1996 are derived from the
Consolidated Financial Statements of the Company which have been audited by KPMG
Peat Marwick LLP, independent certified public accountants. The Consolidated
Financial Statements as of December 31, 1996 and 1995, and for each of the years
in the three-year period ended December 31, 1996, and the Independent Auditors'
Report thereon, are included elsewhere in this Prospectus. The financial
information for the six months ended June 30, 1997 and 1996 has been derived
from the unaudited Condensed Consolidated Financial Statements included
elsewhere in this Prospectus. The selected financial and operating data set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business and
Properties," the Condensed Consolidated Financial Statements and the
Consolidated Financial Statements of the Company (including the Notes thereto).
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
--------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993 1992(1)
---------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue (2):
Marketing and processing................. $ 98,209 83,589 187,374 -- -- -- --
Oil and gas sales........................ 72,509 56,522 128,713 82,275 114,541 102,883 99,239
Miscellaneous, net....................... 1,650 303 1,387 181 1,406 2,265 13,947
---------- --------- --------- --------- --------- --------- ---------
Total revenue.......................... $ 172,368 140,414 317,474 82,456 115,947 105,148 113,186
Earnings (loss) before income taxes,
cumulative effects of changes in
accounting principles and extraordinary
items.................................... $ 4,294 18 6,590 (18,003) (67,844) (10,705) 11,286
Earnings (loss) before cumulative effects
of changes in accounting principles and
extraordinary items...................... $ 1,326 (3,287) 1,139 (17,996) (67,853) (9,355) 7,298
Net earnings (loss)........................ $ 1,326 (3,287) 3,305 (17,996) (81,843) (21,213) 7,298
Weighted average number of shares
outstanding.............................. 33,353 22,477 27,163 7,360 5,619 4,399 2,755
Net earnings (loss) attributable to common
stock.................................... $ 1,137 (4,367) 1,147 (20,156) (84,004) (23,463) 4,950
Primary earnings (loss) per share (3):
Earnings (loss) attributable to common
stock before cumulative effects of
changes in accounting principles and
extraordinary items.................... $ .03 (.19) (.04) (2.74) (12.46) (2.64) 1.80
Cumulative effect of changes in
accounting principles (4).............. -- -- -- -- (2.49) (.26) --
Extraordinary items (4).................. -- -- .08 -- -- (2.44) --
---------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) attributable to
common stock........................... $ .03 (.19) .04 (2.74) (14.95) (5.34) 1.80
---------- --------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- --------- ---------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993 1992(1)
---------- --------- ---------- --------- --------- --------- ---------
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SALES PRICES)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets.............................. $ 592,012 520,834 563,458 321,043 324,832 426,755 378,532
Long-term debt (2)........................ $ 223,884 201,886 168,859 193,879 207,054 194,307 168,321
Other long-term liabilities............... $ 53,018 60,818 53,560 27,139 28,166 27,053 25,161
Deferred revenue.......................... $ -- 9,985 7,591 15,137 35,908 67,228 67,066
Shareholders' equity...................... $ 241,646 178,537 242,443 44,297 6,086 88,156 59,881
OPERATING DATA:
Production (5):
Gas (MMCF).............................. 23,033 19,444 42,496 33,342 48,048 41,114 29,174
Liquids (MBBLS)......................... 1,491 1,233 2,749 1,173 1,543 1,493 1,450
Average sales price (5):
Gas (per MCF) (6)....................... $ 1.98 1.82 1.89 1.77 1.90 1.88 1.70
Liquids (per BBL)....................... $ 17.98 17.01 17.59 15.86 14.83 16.97 18.14
Proved Reserves (5) (7):
Gas (MMCF).............................. 337,250 238,128 246,996 273,382 194,655
Liquids (MBBLS)......................... 24,014 10,541 7,532 8,198 7,560
Total (MMCFE)........................... 481,334 301,374 292,188 322,570 240,015
Standardized measure of discounted future
net cash flows relating to proved oil
and gas reserves (7).................... $ 559,869 256,917 207,549 262,176 190,971
Total discounted future net cash flows
relating to proved oil and gas reserves,
including amounts attributable to
volumetric production payments (7)...... $ 562,995 265,393 230,149 299,053 227,009
Weighted Average price used to calculate
discounted future net cash flows
relating to proved oil and gas reserves
at end of period:
Natural gas (per MCF)................. $ 2.88 1.94 1.63 2.22 2.14
Liquids (per BBL)..................... 20.63 17.37 16.33 13.21 17.67
OTHER FINANCIAL DATA:
EBITDA (2) (8)............................ $ 51,244 39,056 92,946 50,912 82,397 73,605 85,710
Cash provided (used) by operating
activities (2).......................... $ 24,290 21,953 67,815 (3,062) 42,441 41,722 97,241
Cash used by investing activities......... $ 73,832 161,227 226,867 17,219 32,307 170,134 83,354
Cash provided (used) by financing
activities.............................. $ 46,583 140,200 164,500 20,698 (14,126) 71,886 30,846
Capital expenditures:
Property acquisitions................... $ 6,135 139,800 158,955 26,807 9,762 144,916 88,772
Exploration............................. 45,957 10,909 43,439 12,739 15,693 5,433 2,297
Development............................. 30,555 13,106 41,724 13,198 17,089 20,472 15,558
---------- --------- ---------- --------- --------- --------- ---------
Total capital expenditures............ $ 82,647 163,815 244,118 52,744 42,544 170,821 106,627
---------- --------- ---------- --------- --------- --------- ---------
---------- --------- ---------- --------- --------- --------- ---------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992(1)
---------- --------- ---------- --------- --------- --------- ---------
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SALES PRICES)
<S> <C> <C> <C> <C> <C> <C> <C>
Historical credit ratios:
Ratio of earnings to fixed charges
(9)................................... 1.4 -- 1.3 -- -- -- 1.4
Ratio of EBITDA to interest
expense............................... 5.1 3.2 4.0 2.0 3.1 3.1 3.1
Ratio of debt to EBITDA (10)............ 2.2 2.7 1.9 4.1 3.0 3.6 2.8
Pro forma credit ratios:
Pro forma ratio of earnings to fixed
charges (11).......................... 1.3 1.2
Pro forma as adjusted ratio of earnings
to fixed
charges (11) (12)..................... 1.6 1.4
Pro forma as adjusted ratio of
EBITDA to interest expense (12)....... 5.7 4.4
Pro forma as adjusted ratio of
debt to EBITDA (10)(12)............... 2.2 1.8
</TABLE>
- --------------------------
(1) Consolidated statement of operations data, consolidated balance sheet data
and other financial data for the year ended December 31, 1992 include the
effects of a natural gas contract settlement which increased total revenue
by $37,541,000 and net earnings by $24,043,000 or $8.73 per share. Operating
data for the year ended December 31, 1992 exclude the effects of the ONEOK
Settlement.
(2) The following table sets forth certain financial data for Saxon, a
consolidated subsidiary in which the Company holds a 66% economic interest.
Saxon will not initially be a Restricted Subsidiary under the Indenture. See
"Offering Memorandum Summary--Recent Developments" and Note 2 of Notes to
Consolidated Financial Statements.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ ---------------------
<S> <C> <C>
(IN THOUSANDS)
Revenue....................................................... $ 7,336 9,722
Long-term debt............................................... $ 22,104 --
EBITDA....................................................... $ 3,544 5,155
Cash provided (used) by operating activities................. $ (1,583) 9,541
</TABLE>
(3) Fully diluted earnings (loss) per share was the same as primary earnings
(loss) per share in all years except 1992. In 1992, fully diluted earnings
per share was $1.45.
(4) In 1996, the Company realized a gain on extinguishment of debt as a result
of the extinguishment of nonrecourse secured debt. The Company changed its
method of accounting for oil and gas sales from the sales method to the
entitlements method effective January 1, 1994. The Company adopted the
provisions of Statements of Financial Accounting Standards No. 106 and No.
109 effective January 1, 1993. These statements required the Company to
accrue the expected cost of postretirement benefits and to adopt the
liability method of accounting for income taxes, respectively. In 1993, the
Company realized a loss on extinguishment of debt of $10,735,000 as a result
of the redemption of its outstanding Senior Secured Notes and long-term
subordinated debentures. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Notes 1, 3, 5 and 10 of
Notes to Consolidated Financial Statements.
(5) Includes amounts attributable to required deliveries under volumetric
production payments. See Notes 6 and 18 of Notes to Consolidated Financial
Statements.
(6) Amounts shown for 1995 exclude the effects of a gas contract settlement.
Including such amount, the average sales price for 1995 was $1.90 per MCF.
For further information, regarding the gas contract settlement see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 15 of Notes to Consolidated Financial Statements.
33
<PAGE>
(7) The 1996 and 1995 amounts include 100% of the reserves owned by Saxon, a
consolidated subsidiary in which the Company holds a 66% economic interest.
Saxon will not initially be a Restricted Subsidiary under the Indenture. See
"Prospectus Summary--Recent Developments" and Note 2 of Notes to
Consolidated Financial Statements.
(8) EBITDA represents earnings before income taxes, cumulative effect of changes
in accounting principles, extraordinary items, interest, depreciation and
depletion, and impairment of proved oil and gas properties. EBITDA is
included as supplemental disclosure because it is commonly accepted as
providing useful information regarding a company's ability to incur and
service debt and to fund capital expenditures and because certain covenants
contained in the Indenture are based in part on EBITDA. In evaluating
EBITDA, the Company believes that investors should consider, among other
things, the amount by which EBITDA exceeds interest costs for the period,
how EBITDA compares to principal repayments on debt for the period and how
EBITDA compares to capital expenditures for the period. To evaluate EBITDA,
the components of EBITDA, such as revenue and operating expenses, and the
variability of such components over time, should be also be considered.
Investors should be cautioned, however, that EBITDA should not be construed
as an alternative to operating income (as determined in accordance with
GAAP) as an indicator of the Company's operating performance, or to cash
provided by operating activities (as determined in accordance with GAAP) as
a measure of liquidity. The Company's method of calculating EBITDA may
differ from the methods used by other companies, and as a result the EBITDA
measures disclosed herein may not be comparable to other similarly titled
measures disclosed by other companies.
(9) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of net earnings before income taxes and fixed charges. Fixed charges
consist of interest expense (which includes amortization of debt discount)
and that portion of rental cost equivalent to interest (estimated to be
one-third of rental cost).
The historical earnings for the six months ended June 30, 1996 and the years
ended December 31, 1995, 1994 and 1993 were inadequate to cover fixed
charges. The coverage deficiencies were $324,000, $18,327,000, $68,127,000
and $10,934,000, respectively. Excluding the effects of the gas contract
settlement discussed in Note 1 above, the historical earnings for the year
ended December 31, 1992 were inadequate to cover fixed charges by
$25,434,000.
(10) The historical ratio of debt to EBITDA and the pro forma as adjusted ratio
of debt to EBITDA represent the ratio of debt (consisting of long-term debt,
other long-term liabilities that are interest-bearing and deferred revenue)
at the end of the period to the amount of EBITDA for the period (annualized
in the case of EBITDA for the six months ended June 30, 1997).
(11) The pro forma ratio of earnings to fixed charges gives effect to the
application of $72.0 million of the proceeds from the sale of the Old Notes
to purchase $64.8 million of the $100 million principal amount outstanding
on the 11 1/4% Notes in the Tender Offer, the application of $32.9 million
of the proceeds of the Old Notes to repay outstanding borrowings under the
Canadian Credit Facility, and the retention of $16.5 million by the Issuer
for working capital and to fund capital expenditures.
(12) The pro forma as adjusted ratios of earnings to fixed charges, EBITDA to
interest expense and debt to EBITDA give effect to (i) the issuance of the
Old Notes for net proceeds of $121.6 million, and (ii) the exercise of the
Anschutz Warrant for proceeds of $30.1 million, and the use of the aggregate
proceeds from such sources to repay the outstanding balance of $32.9 million
under the Canadian Credit Facility, to purchase approximately $90.2 million
principal amount of the 11 1/4% Notes in the Tender Offer for approximately
$99.0 million plus approximately $375,000 of related expenses and to retain
the balance of the proceeds for working capital and to fund capital
expenditures.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Net earnings for the first six months of 1997 were $1,326,000 or $.03 per
common share compared to a net loss of $3,287,000 or $.19 per common share in
the first six months of 1996. The improved results for the first six months of
1997 were attributable primarily to increased production as well as higher
natural gas and liquids prices.
The Company's marketing and processing revenue increased 17% to $98,209,000
in the first six months of 1997 from $83,589,000 in the five months of
operations of ProMark subsequent to its purchase on January 31, 1996. The
related marketing and processing expense increased by 19% to $93,906,000 in the
1997 period from $79,165,000 in the 1996 period. The gross margin reported for
marketing and processing activities of $4,303,000 in the first six months of
1997 was slightly lower than the gross margin of $4,424,000 in the first six
months of 1996 because the 1996 period included a non-recurring income item of
approximately $350,000 and also had higher third party contract processing
volumes.
The Company's oil and gas sales revenue increased by 28% to $72,509,000 in
the first six months of 1997 compared to $56,522,000 in the first six months of
1996. The 1996 period includes five months of operations of Canadian Forest
subsequent to its purchase on January 31, 1996. The increase in 1997 is also
attributable to increased production in the U.S. as well as higher natural gas
and liquids prices. Production volumes for natural gas in the first six months
of 1997 increased 18% from the comparable 1996 period due primarily to new
production from Gulf of Mexico properties and to recording six months of
activity for Canadian Forest in 1997 compared to only five months in 1996. The
average sales price for natural gas in the first six months of 1997 increased 9%
compared to the average sales price in the corresponding 1996 period. Production
volumes for liquids (consisting of oil, condensate and natural gas liquids) were
21% higher in the first six months of 1997 than in the first six months of 1996,
due primarily to new production from Gulf of Mexico and Canadian properties. The
average sales price for liquids production during the first six months of 1997
increased 6% compared to the average sales price during the comparable 1996
period.
Oil and gas production expense of $18,671,000 in the first six months of
1997 increased 18% from $15,856,000 in the comparable period of 1996 due
primarily to expenses relating to use of a mobile production unit at High Island
274 and temporary transportation expenses associated with the Bigoray field. On
an MCFE basis, production expense decreased approximately 2% in the first six
months of 1997 to $.58 per MCFE from $.59 per MCFE in the first six months of
1996.
35
<PAGE>
Production volumes, weighted average sales prices and production expenses
during the periods were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------------------------------------------
JUNE 30, 1997 JUNE 30, 1996
------------------------------- -------------------------------
UNITED UNITED
STATES CANADA TOTAL STATES CANADA TOTAL
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NATURAL GAS
Total production (MMCF) (1)................ 16,090 6,943 23,033 13,092 6,352 19,444
Sales price received (per MCF)............. $ 2.37 1.54 2.12 2.27 1.43 1.99
Effects of energy swaps (per MCF) (2)...... (.19) (.01) (.14) (.24) (.03) (.17)
--------- --------- --------- --------- --------- ---------
Average sales price (per MCF).............. $ 2.18 1.53 1.98 2.03 1.40 1.82
LIQUIDS
Oil and condensate:
Total production (MBBLS)................... 498 748 1,246 435 621 1,056
Sales price received (per BBL)............. $ 19.41 19.32 19.35 18.20 19.83 19.16
Effects of energy swaps (per BBL) (2)...... (.61) (.35) (.45) (1.61) (1.58) (1.59)
--------- --------- --------- --------- --------- ---------
Average sales price (per BBL).............. $ 18.80 18.97 18.90 16.59 18.25 17.57
Natural gas liquids:
Total production (MBBLS)................... 53 192 245 46 131 177
Average sales price (per BBL).............. $ 9.00 13.28 14.46 9.31 15.20 13.66
Total liquids production (MBBLS)............. 551 940 1,491 481 752 1,233
Average sales price (per BBL)................ $ 17.86 18.05 17.98 15.90 17.72 17.01
Total production (MMCFE)..................... 19,396 12,583 31,979 15,978 10,864 26,842
Operating expense (per MCFE)................. $ .55 .64 .58 .63 .54 .59
</TABLE>
- ------------------------
(1) Total natural gas production includes scheduled deliveries under volumetric
production payments, net of royalties, of 801 MMCF and 2,082 MMCF in the
1997 and 1996 periods, respectively. Natural gas delivered pursuant to
volumetric production payment agreements represented approximately 4% and
11% of total natural gas production in the 1997 and 1996 periods,
respectively. On June 30, 1997, the Company repurchased its last remaining
volumetric production payment.
(2) Energy swaps were entered into to hedge the price of spot market volumes
against price fluctuations. Hedged natural gas volumes were 5,919 MMCF and
5,525 MMCF for the 1997 and 1996 periods, respectively. Hedged oil and
condensate volumes were 437,000 barrels and 597,000 barrels for the 1997 and
1996 periods, respectively. Aggregate losses under energy swap agreements
were $3,741,000 and $5,009,000 in the 1997 and 1996 periods, respectively,
which were accounted for as reductions of revenue.
General and administrative expense was $8,547,000 in the first six months of
1997 compared to $6,337,000 in the comparable period of 1996. Total overhead
costs (capitalized and expensed general and administrative costs) were
$12,612,000 in the first six months of 1997 compared to $10,171,000 in the
comparable period of 1996. The increase is primarily attributable to the
inclusion of six months of costs for Canadian Forest and ProMark in 1997 versus
only five months in 1996, as well as to a larger number of technical and
operating employees who were hired in support of the Company's expanded capital
budget for exploration and development. Direct exploration and development
expenditures in the first six months of 1997 were approximately $72,000,000
compared to approximately $20,000,000 in the first six months of 1996.
36
<PAGE>
The following table summarizes the total overhead costs incurred during the
periods:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Overhead costs capitalized................................ $ 4,065 3,834
General and administrative costs expensed (1)............. 8,547 6,337
--------- ---------
Total overhead costs.................................... $ 12,612 10,171
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) Includes $1,462,000 and $1,457,000 related to marketing and processing
operations for the six month periods ended June 30, 1997 and 1996,
respectively.
Interest expense decreased 18% to $10,033,000 in the first six months of
1997 compared to $12,220,000 in the corresponding 1996 period, due primarily to
the extinguishment of the nonrecourse secured loan with JEDI in the fourth
quarter of 1996, offset in part by increased interest charges on higher
outstanding balances under bank credit facilities.
Depreciation and depletion expense increased 36% to $36,756,000 in the first
six months of 1997 from $26,989,000 in the first six months of 1996 due to
higher production and higher per-unit expense. On a per-unit basis, depletion
expense was approximately $1.09 per MCFE in the first six months of 1997
compared to $.94 per MCFE in the corresponding 1996 period. The increase in
per-unit depletion results primarily from higher estimated future development
costs in the U.S. due to expected increased costs for services. At June 30, 1997
the Company had undeveloped properties with a cost basis of approximately
$64,000,000 which were excluded from depletion, compared to approximately
$49,000,000 at June 30, 1996. The increase is attributable primarily to costs of
acquiring undeveloped acreage.
The Company was not required to record a writedown of the carrying value of
its United States or Canadian oil and gas properties in the first half of 1997
or 1996. Writedowns of the full cost pools in the United States and Canada may
be required, however, if prices decline, undeveloped property values decrease,
estimated proved reserve volumes are revised downward or costs incurred in
exploration, development, or acquisition activities in the respective full cost
pools exceed the discounted future net cash flows from the additional reserves,
if any, attributable to each of the cost pools.
CHANGES IN ACCOUNTING. In February 1997, the Financial Accounting Standards
Board issued Statement No. 128, "Earnings Per Share" (SFAS No. 128), which
revises the calculation and presentation provisions of Accounting Principles
Board Opinion 15 and related interpretations. SFAS No. 128 is effective for the
Company's fiscal year ending December 31, 1997. Retroactive application will be
required but early adoption is not permitted. The Company believes the adoption
of SFAS No. 128 will not have a significant effect on its reported earnings per
share.
RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1996
NET EARNINGS (LOSS). Net earnings for 1996 were $3,305,000 compared to a
net loss of $17,996,000 in 1995. Earnings for the 1996 period include an
extraordinary gain on extinguishment of debt of $2,166,000. The improved
earnings from continuing operations in 1996 were attributable primarily to
increased natural gas and liquids prices as well as increased natural gas and
liquids production as a result of the acquisitions of Saxon Petroleum Inc.
("Saxon") and Canadian Forest Oil Ltd. ("Canadian Forest"), which were completed
in December 1995 and January 1996, respectively, and to the contribution made by
Forest's Canadian marketing and processing subsidiary ("ProMark"), which was
also acquired in January 1996. The net loss for 1995 was $17,996,000 compared to
a net loss of $81,843,000 in 1994. The 1995 loss was primarily due to decreased
oil and natural gas volumes and lower natural gas prices, offset by $4,263,000
of income associated with a gas contract settlement. The 1994 loss included
37
<PAGE>
a $58,000,000 writedown of the book value of the Company's oil and gas
properties due to a ceiling test limitation and a charge of $13,990,000 relating
to the change in the method of accounting for oil and gas sales from the sales
method to the entitlements method. See "Accounting Policies".
REVENUE. Total revenue increased 285% to $317,474,000 in 1996 from
$82,456,000 in 1995 and decreased 29% in 1995 from $115,947,000 in 1994. The
significant increase in total revenue in 1996 is due primarily to the
acquisitions of ProMark, Canadian Forest and Saxon.
Marketing and processing revenue attributable to the marketing activities of
ProMark subsequent to its purchase on January 31, 1996 was $187,374,000. For the
eleven months ended December 31, 1996 ProMark marketed approximately 851 MMCF of
natural gas per day.
Oil and gas sales revenue increased to $128,713,000 in 1996 from $82,275,000
in 1995, or by approximately 56%. Oil and gas sales in 1995 included $4,263,000
of income associated with a gas contract settlement with Columbia Gas
Transmission ("Columbia"). The Company had entered into gas sales contracts with
Columbia which were rejected by Columbia in connection with its bankruptcy
proceedings. The income related to the settlement with Columbia represented
approximately 5% of total oil and gas sales in 1995. Natural gas and liquids
volumes increased 27% and 134% in 1996, respectively, primarily as a result of
the Canadian acquisitions and new production from the Company's offshore Gulf of
Mexico platform at High Island 116, partially offset by anticipated production
declines in the United States. The average sales price for natural gas in 1996
increased 7% compared to 1995, exclusive of the effects of income associated
with the gas contract settlement. The average sales price for liquids production
in 1996 increased 11% compared to 1995.
Oil and gas sales revenue decreased to $82,275,000 in 1995 from $114,541,000
in 1994, or by approximately 28%. In 1995, natural gas and oil production
volumes were down 31% and 24%, respectively, compared to 1994. These decreases
resulted primarily from limited capital expenditures in 1994 and 1995 that did
not allow the Company to replace existing production through acquisitions and
drilling. The average sales price for natural gas in 1995 decreased 7% compared
to 1994, exclusive of the effects of the income associated with the gas contract
settlement. The average sales price for oil in 1995 increased 7% compared to
1994.
Oil and gas sales to Enron and certain of its affiliates ("Enron
Affiliates"), the Company's largest customer, represented approximately 25% of
oil and gas sales in 1996, compared to 38% in 1995 and 51% in 1994. The
decreases during these periods are attributable primarily to the decreases in
delivery requirements pursuant to volumetric production payments. In addition,
the Company's spot market sales to Enron Affiliates increased to approximately
11 BCFE in 1996 from approximately 8 BCFE in 1995 as a result of higher
production volumes available for sale. Spot market sales to Enron Affiliates in
1994 were approximately 16 BCFE.
38
<PAGE>
The production volumes and average sales prices for the years ended December
31, 1996, 1995 and 1994 for Forest and its subsidiaries were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996(5) 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
NATURAL GAS
Total production (MMCF)(1)....................... 42,496 33,342 48,048
Sales price received (per MCF)(2)................ $ 2.06 1.65 1.86
Effects of energy swaps (per MCF)(3)............. (.17) .12 .04
--------- --------- ---------
Average sales price (per MCF)(2)................. $ 1.89 1.77 1.90
LIQUIDS
Oil and condensate:
Total production (MBBLS)(4).................... 2,272 1,121 1,482
Sales price received (per BBL)................. $ 20.38 16.36 14.97
Effects of energy swaps (per BBL)(3)........... (1.50) (.50) (.14)
--------- --------- ---------
Average sales price (per BBL).................. $ 18.88 15.86 14.83
Natural gas liquids:
Total production (MBBLS)....................... 477 52 61
Average sales price (per BBL).................. $ 11.46 15.81 14.79
Total liquids production (MBBLS)................. 2,749 1,173 1,543
Average sales price (per BBL).................... $ 17.59 15.86 14.83
</TABLE>
- ------------------------
(1) Total natural gas production includes scheduled deliveries under volumetric
production payments, net of royalties, of 3,168 MMCF, 9,120 MMCF and 16,005
MMCF in 1996, 1995 and 1994, respectively. Natural gas delivered pursuant to
volumetric production payment agreements represented approximately 7%, 27%
and 33% of total natural gas production in 1996, 1995 and 1994,
respectively. For further information concerning volumes and prices recorded
under volumetric production payments, see Notes 6 and 18 of Notes to
Consolidated Financial Statements.
(2) Amounts shown for 1995 exclude the effects of a gas contract settlement.
Including such amount, the sales price received and average sales price for
natural gas in 1995 were $1.78 and $1.90 per MCF, respectively. For further
information regarding the gas contract settlement, see Note 15 of Notes to
Consolidated Financial Statements.
(3) Energy swaps were entered into to hedge the price of spot market volumes
against price fluctuation. Hedged natural gas volumes were 12,741 MMCF,
10,146 MMCF and 12,184 MMCF for the years ended December 31, 1996, 1995 and
1994, respectively. Hedged oil and condensate volumes were 895,600 barrels,
498,000 barrels and 370,000 barrels for the years ended December 31, 1996,
1995 and 1994, respectively. The aggregate gains (losses) under energy swap
agreements were $(10,422,000), $3,536,000 and $1,810,000, respectively, for
the years ended December 31, 1996, 1995 and 1994, which were accounted for
as additions to (reductions of) revenue.
(4) An immaterial amount of oil production is covered by scheduled deliveries
under volumetric production payments.
(5) Alberta's royalty program was restructured in 1994 and remained uncertain
throughout much of 1995 and 1996. Production of natural gas liquids for the
year ended December 31, 1996 was reduced by 79,000 barrels as a result of
royalty adjustments, resulting in an increase in the reported average sales
price for natural gas liquids to $11.46 per barrel from $9.70 or by
approximately 18%. The royalty adjustments did not have a significant effect
on reported volumes or average sales prices for natural gas or oil and
condensate. Canadian Forest continues to receive additional information with
respect to royalty calculations and anticipates that revisions to such
calculations will continue to occur throughout 1997. The effects of future
royalty adjustments cannot be predicted at this time.
39
<PAGE>
Miscellaneous net revenue of $1,387,000 in 1996 included the reversal of a
$1,136,000 liability for royalties on the proceeds from the gas contract
settlement with Columbia. Miscellaneous net revenue was $181,000 in 1995.
Miscellaneous net revenue of $1,406,000 in 1994 included income from the sale of
miscellaneous pipeline systems and equipment and the reversal of an accounts
receivable reserve, partially offset by a reserve for settlement of a royalty
dispute and a payment of deferred maintenance costs of a real estate complex
formerly used for general business purposes.
MARKETING AND PROCESSING EXPENSE. In 1996, marketing and processing expense
of $178,706,000 was recorded which relates primarily to the marketing activities
of ProMark subsequent to its purchase on January 31, 1996.
OIL AND GAS PRODUCTION EXPENSE. Oil and gas production expense increased
43% to $32,199,000 in 1996 from $22,463,000 in 1995 due primarily to production
expense associated with the newly-acquired Canadian properties. On an MCFE
basis, production expense was $.55 per MCFE in 1996 compared to $.56 in 1995.
Oil and gas production expense increased slightly to $22,463,000 in 1995 from
$22,384,000 in 1994. On an MCFE basis, however, production expense increased to
$.56 per MCFE in 1995 from $.39 per MCFE in 1994. The increased cost per MCFE
from 1994 to 1995 is directly attributable to fixed components of oil and gas
production expense being allocated over a smaller production base.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased 50% to $13,623,000 in 1996 compared to $9,081,000 in 1995 due
primarily to the effect of Canadian acquisitions. General and administrative
expense decreased 19% to $9,081,000 in 1995 compared to $11,166,000 in 1994 due
primarily to a reduction in the size of the Company's workforce on March 1,
1995. The capitalization rate was approximately 36% of total overhead costs in
1996 compared to 43% in 1995 and 40% in 1994. Changes in the capitalization rate
result from changes in the percentage of employees' time spent working directly
on exploration and development projects.
Total overhead costs (capitalized and expensed general and administrative
costs) were $21,396,000 in 1996, $15,857,000 in 1995 and $18,719,000 in 1994.
Total overhead costs were approximately 35% higher in 1996 compared to 1995 due
primarily to the addition of the Canadian operations, which increased Forest's
salaried workforce to 179 at December 31, 1996 compared to 115 at December 31,
1995. Total overhead costs were approximately 15% lower in 1995 than in 1994.
The Company's salaried workforce in the United States was 115 at December 31,
1995 compared to 143 at December 31, 1994. The decreases in total overhead costs
and personnel in 1995 were due primarily to a reduction in the size of the
Company's workforce effective March 1, 1995. The following table summarizes the
total overhead costs incurred during the periods:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Overhead costs capitalized....................... $ 7,773 6,776 7,553
General and administrative costs expensed (1).... 13,623 9,081 11,166
--------- --------- ---------
Total overhead costs........................... $ 21,396 15,857 18,719
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------
(1) Includes $2,555,000 in 1996 related to marketing and processing operations.
INTEREST EXPENSE. Interest expense of $23,307,000 in 1996 decreased
$2,016,000 or 8% compared to 1995 due primarily to the restructuring and
extinguishment of a nonrecourse secured loan and lower effective interest on a
dollar denominated production payment. Interest expense of $25,323,000 in 1995
decreased $1,450,000 or 5% compared to 1994 due primarily to lower effective
interest rates related to such nonrecourse secured loan and dollar denominated
production payment.
40
<PAGE>
DEPRECIATION AND DEPLETION EXPENSE. Depreciation and depletion expense
increased 45% to $63,068,000 in 1996 from $43,592,000 in 1995 due to the
increase in production, offset by a decrease in the depletion rate per unit of
production. The depletion rate decreased to $1.01 per MCFE in 1996 compared to
$1.06 per MCFE in 1995, resulting from the addition of lower cost Canadian
production, partially offset by higher anticipated future costs in the United
States due to expected increased costs for services. Depreciation and depletion
expense decreased 33% to $43,592,000 in 1995 from $65,468,000 in 1994 due to
decreased production, as well as a decrease in the depletion rate per unit of
production. The depletion rate decreased to $1.06 per MCFE for United States
production in 1995 compared to $1.13 in 1994 due to writedowns of the Company's
oil and gas properties taken in the third and fourth quarters of 1994.
At December 31, 1996 the Company had undeveloped properties with a cost
basis of approximately $30,046,000 in the U.S. and $13,870,000 in Canada which
were excluded from depletion compared to $28,380,000 in the U.S. at December 31,
1995 and $30,441,000 in the U.S. at December 31, 1994. The increase in 1996
compared to 1995 is due primarily to the acquisition of undeveloped properties
in the Canadian Forest purchase.
IMPAIRMENT OF OIL AND GAS PROPERTIES. The Company was not required to
record a writedown of the carrying value of its oil and gas properties in 1996
or 1995. The Company recorded a writedown of its oil and gas properties of
$58,000,000 in 1994 due primarily to a decrease in spot market prices for
natural gas.
The average Gulf Coast spot price received by the Company for natural gas
decreased from $3.89 per MCF at December 31, 1996 to approximately $2.63 per MCF
at September 1, 1997. The West Texas Intermediate price for crude oil decreased
from $23.75 per barrel at December 31, 1996 to approximately $16.50 per barrel
at September 1, 1997. The average spot price received for Canadian natural gas
production decreased from CDN$2.76 per MMBTU at December 31, 1996 to
approximately CDN$1.60 per MMBTU at September 1, 1997. The Canadian spot price
received for crude oil decreased from CDN$25.92 per barrel at December 31, 1996
to approximately CDN$24.23 per barrel at September 1, 1997.
Writedowns of the full cost pools in the United States and Canada may be
required if a depressed price environment persists, undeveloped property values
decrease, estimated proved reserve volumes are revised downward or costs
incurred in exploration, development, or acquisition activities exceed the
discounted future net cash flows from the additional reserves, if any.
ACCOUNTING POLICIES. The Company changed its method of accounting for oil
and gas sales from the sales method to the entitlements method effective January
1, 1994. Under the sales method previously used by the Company, all proceeds
from production credited to the Company were recorded as revenue until such time
as the Company had produced its share of related reserves. Under the
entitlements method, revenue is recorded based upon the Company's share of
volumes sold, regardless of whether the Company has taken its proportionate
share of volumes produced. Under the entitlements method, the Company records a
receivable or payable to the extent it receives less or more than its
proportionate share of the related revenue. The Company believes that the
entitlements method is preferable because it allows for recognition of revenue
based on the Company's actual share of jointly owned production and provides a
better matching of revenue and related expenses. The cumulative effect of the
change for the periods through December 31, 1993, was a charge of $13,990,000.
The effect of this change on 1994 was an increase in earnings from operations of
$3,584,000 and an increase in production volumes of 1,555 MMCF. There were no
related income tax effects in 1994.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets to Be Disposed Of" ("SFAS No. 121"). Oil and gas properties
accounted for under the full cost method of accounting are excluded from the
scope of SFAS No. 121, but will continue to be subject to the ceiling test
limitation.
41
<PAGE>
SFAS No. 121 requires that impairment losses be recorded on other long-lived
assets used in operations when indicators of impairment are present and either
the undiscounted future cash flows estimated to be generated by those assets or
the fair market value are less than the assets' carrying amount. SFAS No. 121
also addresses the accounting for long-lived assets that are expected to be
disposed of. The Company adopted SFAS No. 121 effective January 1, 1996. The
adoption of SFAS No. 121 had no effect on the Company's financial statements.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation" ("SFAS No. 123"), was issued by the Financial Accounting
Standards Board in October 1995. SFAS No. 123 establishes financial accounting
and reporting standards for stock-based employee compensation plans as well as
transactions in which an entity issues its equity instruments to acquire goods
or services from non-employees. The Company adopted SFAS No. 123 effective
January 1, 1996, and will continue to use the measurement method prescribed by
APB Opinion 25, as permitted under SFAS No. 123. The Company has included the
pro forma disclosures required by SFAS No. 123 in Note 9 of Notes to
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically addressed its long-term liquidity needs through
the issuance of debt and equity securities, when market conditions permit, and
through use of bank credit facilities and cash provided by operating activities.
From 1995 through August 1997, the Company completed several transactions
that improved its financial position considerably and increased common equity by
approximately $300,000,000.
In 1995 the Company completed transactions with Anschutz and JEDI which
raised a total of approximately $59,000,000 of equity. (See "The Anschutz and
JEDI Transactions").
On January 31, 1996 the Company and Saxon sold 13,200,000 shares of Common
Stock for $11.00 per share in a public offering (the 1996 Public Offering). Of
this amount, 1,060,000 shares were sold by Saxon and 12,140,000 shares were sold
by Forest. The net proceeds to Forest from the issuance of the shares totaled
approximately $125,000,000 after deducting issuance costs and underwriting fees,
and were used, along with an additional approximately $8,300,000 drawn under the
Company's Credit Facility, to complete the purchase of Canadian Forest and
ProMark. The net proceeds to Saxon of approximately $11,000,000 were used to
reduce its bank debt.
On August 1, 1996 Anschutz exercised an option to purchase 2,250,000 shares
of Common Stock for $26,200,000 or approximately $11.64 per share. Proceeds
received by Forest were used primarily to fund a portion of 1996 capital
expenditures.
On November 5, 1996 the Company exchanged 2,000,000 shares of Common Stock
plus approximately $13,500,000 in cash to extinguish approximately $43,000,000
of nonrecourse secured debt owed to JEDI. In connection with this transaction,
Anschutz acquired 1,628,888 shares of Common Stock by exercising warrants to
purchase 388,888 shares of Common Stock at $10.50 per share and by converting
620,000 shares of Forest's Second Series Preferred Stock into 1,240,000 shares
of Common Stock.
On November 14, 1996 the Company filed a shelf registration (the "Shelf
Registration Statement") with the Securities and Exchange Commission to issue up
to $250,000,000 in one or more forms of debt or equity securities. Except as
otherwise provided in an applicable prospectus supplement, the net proceeds from
the sale of the securities will be used for the acquisition of oil and gas
properties, capital expenditures, the repayment of subordinated debentures or
other debt, repayments of borrowings under revolving credit agreements, or for
other general corporate purposes.
On February 7, 1997, the Company called for redemption all 2,877,673 shares
of its $.75 Convertible Preferred Stock. In response to its call for redemption,
2,783,945 shares or 96.7% of the shares
42
<PAGE>
outstanding were tendered for conversion into Common Stock on or before the
February 21, 1996 deadline. The remaining 93,728 preferred shares were redeemed
by the Company at the redemption price of $10.06 per share (at a total cost of
$942,904) on February 28, 1997. Lehman Brothers Inc. purchased 65,616 shares of
Common Stock issued pursuant to the Shelf Registration Statement to fund the
cash requirement of the redemption in accordance with the terms of its standby
purchase agreement with Forest. This conversion and redemption eliminated all
outstanding preferred stock from the Company's capital structure and eliminates
approximately $2,200,000 of annual preferred dividend payments.
On August 28, 1997, The Anschutz Corporation purchased 3,500,000 shares of
Common Stock through the exercise of the Anschutz Warrant for $8.60 per share,
resulting in cash proceeds to Forest of $30,100,000. Proceeds from the exercise
were used to reduce borrowings under the Credit Facilities.
Many of the factors which may affect the Company's future operating
performance and long-term liquidity are beyond the Company's control, including,
but not limited to, oil and natural gas prices, governmental actions and taxes,
the availability and attractiveness of properties for acquisition, the adequacy
and attractiveness of financing and operational results. The Company continues
to examine alternative sources of long-term capital, including bank borrowings,
the issuance of debt instruments, the sale of common stock, preferred stock or
other equity securities of the Company, the issuance of net profits interests,
sales of non-strategic assets, prospects and technical information, or joint
venture financing. Availability of these sources of capital and, therefore, the
Company's ability to execute its operating strategy will depend upon a number of
factors, some of which are beyond the control of the Company. In addition, the
prices the Company receives for its future oil and natural gas production and
the level of the Company's production will significantly impact future operating
cash flows. No prediction can be made as to the prices the Company will receive
for its future oil and gas production. At September 1, 1997, the Company has
three offshore Gulf of Mexico properties whose combined production represents
approximately 29% of the Company's daily deliverability. The Company's
production, revenue and cash flow could be adversely affected if production from
these properties decreases to a significant degree.
BANK CREDIT FACILITIES. The Company has a credit agreement with a syndicate
of banks led by The Chase Manhattan Bank (the "U.S. Credit Facility"). The U.S.
Credit Facility is secured by a lien on, and a security interest in, a majority
of the Company's U.S. proved oil and gas properties and related assets, pledges
of accounts receivable and a pledge of 66% of the capital stock of Canadian
Forest. Funds under the U.S. Credit Facility can be used for general corporate
purposes. Under the terms of the U.S. Credit Facility, the Company is subject to
certain covenants and financial tests, including restrictions or requirements
with respect to working capital, cash flow, additional debt, liens, asset sales,
investments, mergers, cash dividends and reporting responsibilities.
A Canadian finance subsidiary of Forest has a credit agreement (the
"Canadian Credit Facility," together with the U.S. Credit Facility, the "Bank
Credit Facilities") with a syndicate of Canadian banks led by The Chase
Manhattan Bank of Canada for the benefit of Canadian Forest and ProMark. The
Canadian Credit Facility is indirectly secured by substantially all the assets
of Canadian Forest. Funds drawn under the Canadian Credit Facility can be used
for general corporate purposes. Under the terms of the Canadian Credit Facility,
the three Canadian subsidiaries are subject to certain covenants and financial
tests, including restrictions or requirements with respect to working capital,
cash flow, additional debt, liens, asset sales, investments, mergers, cash
dividends and reporting responsibilities.
On August 29, 1997, the Company amended both its U.S. Credit Facility and
its Canadian Credit Facility. The primary purpose of the amendments was to
create one Global Borrowing Base for both facilities. The initial Global
Borrowing Base is $130,000,000, representing an increase of approximately
$20,000,000 from the combined borrowing bases under the previous facilities.
Under the Bank Credit Facilities as amended, the Company will be able to
allocate the Global Borrowing base between the United States and Canada, subject
to the limitation that borrowings in either the United States or Canada
43
<PAGE>
cannot exceed $100,000,000. In addition to increasing the Company's global
borrowing capability, the amendments provide for a much less restricted ability
to move funds between the United States and Canada, extend the maturity date for
both facilities to August 2001 and require the Company to guarantee the Canadian
Credit Facility. Other major provisions of the credit facilities remain largely
unchanged.
At September 30, 1997, the outstanding borrowings under the U.S. Credit
Facility were $78,000,000 and there were no outstanding borrowings under the
Canadian Credit Facility. The Company has used the U.S. Credit Facility for a
$1,500,000 Letter of Credit. The Company has also used the Canadian Credit
Facility for a Letter of Credit in the amount of $2,184,000.
In addition to the credit facilities described above, Saxon has a demand
credit facility (the "Saxon Credit Facility") with a borrowing base of
$35,000,000 CDN. The loan is subject to semi-annual review and has demand
features; however, repayments are not required provided that borrowings are not
in excess of the borrowing base and Saxon complies with other existing
covenants. At September 30, 1997, the outstanding balance under this facility
was $31,055,000 CDN.
For a description of these facilities, see "Description of Bank Credit
Facilities."
WORKING CAPITAL. The Company had a working capital deficit of approximately
$1,242,000 at June 30, 1997 compared to a deficit of approximately $12,649,000
at December 31, 1996. The decrease in the deficit was funded by borrowings under
the Company's bank credit facilities.
The Company generally reports a working capital deficit at the end of a
period. The working capital deficit is principally the result of accounts
payable for capitalized exploration and development costs. Settlement of these
payables is funded by cash flow from the Company's operations or, if necessary,
by drawdowns on the Company's long-term bank credit facilities. For cash
management purposes, drawdowns on the credit facilities are not made until the
due dates of the payables.
At June 30, 1997, the Company had available borrowing capacity of
approximately $16,000,000 under its existing bank credit facilities. The
Company's available credit at June 30, 1997 was adequate to fund the working
capital deficit at that date.
CASH FLOW. Historically, one of the Company's primary sources of short-term
capital has been net cash provided by operating activities. The following
summary table reflects comparative cash flow data for the Company for the six
months ended June 30, 1997 and 1996 and the three years ended December 31, 1996.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided (used) by operating
activities...................................... $ 24,290 21,953 67,815 (3,062) 42,441
Net cash used by investing activities............. 73,832 161,227 226,867 17,219 32,307
Net cash provided (used) by financing
activities...................................... 46,583 140,200 164,500 20,698 (14,126)
</TABLE>
Net cash provided by operating activities increased to $24,290,000 in the
first six months of 1997 compared to $21,953,000 in the first six months of
1996, due primarily to increased production as well as higher natural gas and
liquids prices. The 1997 amount is net of $6,832,000 used to settle the
Company's remaining volumetric production payment obligation. The Company used
$73,832,000 for investing activities in the first six months of 1997 compared to
$161,227,000 in the first six months of 1996. The 1996 outlays included
$136,191,000 for the acquisition of Canadian Forest, whereas the 1997 outlays
consisted primarily of exploration and development costs. Cash provided by
financing activities was $46,583,000 in the first six months of 1997 compared to
$140,200,000 in the first six months of 1996. The 1996 period included
$136,591,000 of net proceeds from a common stock offering.
44
<PAGE>
Net cash provided by operating activities increased to $67,815,000 in 1996
compared to a net use of cash for operating activities of $3,062,000 in 1995,
due to higher natural gas and liquids prices, increased natural gas and liquids
production as a result of the Saxon and Canadian Forest acquisitions and the
contribution made by ProMark and an increase in accounts payable during 1996.
The Company used $226,867,000 for investing activities in 1996 compared to
$17,219,000 in 1995. The increase is due primarily to the use of funds to
acquire Canadian Forest and higher capital expenditures. Cash provided by
financing activities was $164,500,000 in 1996 compared to $20,698,000 in 1995.
The increase is due primarily to the net proceeds received from the 1996 Public
Offering and the exercise by Anschutz of options and warrants.
CAPITAL EXPENDITURES. The Company's expenditures for property acquisition,
exploration and development for the first six months of 1997 and 1996 and the
three years ended December 31, 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Property acquisition costs:
Proved properties........... $ 3,048 121,992 140,875 26,487 9,553
Undeveloped properties...... 3,087 17,808 18,080 320 209
--------- --------- --------- --------- ---------
6,135 139,800 158,955 26,807 9,762
Exploration costs:
Direct costs................ 44,181 9,713 40,831 11,528 15,229
Overhead capitalized........ 1,776 1,196 2,608 1,211 464
--------- --------- --------- --------- ---------
45,957 10,909 43,439 12,739 15,693
Development costs:
Direct costs................ 28,266 10,468 36,559 7,633 10,000
Overhead capitalized........ 2,289 2,638 5,165 5,565 7,089
--------- --------- --------- --------- ---------
30,555 13,106 41,724 13,198 17,089
--------- --------- --------- --------- ---------
$ 82,647 163,815 244,118 52,744 42,544
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Property acquisition costs for the six months ended June 30, 1996 and the
year ended December 31, 1996 consist primarily of the allocation of purchase
price to the oil and gas properties acquired in the purchase of Canadian Forest.
1995 amounts consist primarily of the allocation of purchase price to the oil
and gas properties acquired in the purchase of Saxon.
Direct exploration costs of $44,181,000 incurred in the six months ended
June 30, 1997 includes approximately $15,000,000 of land and seismic costs,
primarily for acquisition of leases in the Gulf of Mexico, as well as
approximately $29,000,000 expended for drilling, completion and production
facilities on exploratory wells, of which a significant portion (approximately
50%) relates to work at the Company's Eugene Island 53 field.
Direct development spending of $28,266,000 in the first six months of 1997
includes approximately $16,000,000 for wells and plant facilities at the Bigoray
field in Alberta operated by Saxon, approximately $3,000,000 in the Western
Region of U.S. operations and approximately $3,000,000 in the Gulf of Mexico.
The Company's planned 1997 expenditures for exploration and development are
approximately $130,000,000. The Company expects to be able to meet its 1997
capital expenditure financing requirements using cash flows generated by
operations, sales of non-strategic assets and borrowings under
45
<PAGE>
existing lines of credit. However, there can be no assurance that the Company
will have access to sufficient capital to meet its capital requirements. The
planned levels of capital expenditures could be reduced if the Company
experiences lower than anticipated net cash provided by operations or other
liquidity needs or could be increased if the Company experiences increased cash
flow or accesses additional sources of capital.
In addition, while the Company intends to continue a strategy of acquiring
reserves that meet its investment criteria, no assurance can be given that the
Company can locate or finance any property acquisitions.
LONG-TERM SALES CONTRACTS. A significant portion of Canadian Forest's
natural gas production is sold through the ProMark Netback Pool (the "Netback
Pool"). The operations of the Netback Pool are described in "Business and
Properties -- Sales and Markets." At June 30, 1997, the ProMark Netback Pool had
entered into fixed price contracts to sell approximately 4.8 BCF of natural gas
through the remainder of 1997 at an average price of $1.64 CDN per MCF and
approximately 5.4 BCF of natural gas in 1998 at an average price of
approximately $1.90 CDN per MCF. Canadian Forest is obligated to deliver
approximately 27% of the volumes of natural gas subject to these contracts.
HEDGING PROGRAM. In addition to the volumes of natural gas and oil sold
under long-term sales contracts, the Company also uses energy swaps and other
financial agreements to hedge against the effects of fluctuations in the sales
prices for oil and natural gas produced. In a typical swap agreement, the
Company receives the difference between a fixed price per unit of production and
a price based on an agreed upon third-party index if the index price is lower.
If the index price is higher, the Company pays the difference. The Company's
current swaps are settled on a monthly basis. At June 30, 1997, the Company had
natural gas swaps and collars for an aggregate of approximately 33,000 MMBTU per
day of natural gas during the remainder of 1997 at fixed prices ranging from
$1.16 per MMBTU on an Alberta Energy Company "C" (AECO "C") basis to $2.54 per
MMBTU on a New York Mercantile Exchange (NYMEX) basis and an aggregate of
approximately 10,000 MMBTU per day of natural gas during 1998 at fixed prices
ranging from $1.16 (AECO "C" basis) to $2.62 (NYMEX basis) per MMBTU. The
weighted average hedged price for natural gas under such agreements is $2.15 and
$2.13 per MMBTU in 1997 and 1998, respectively. At June 30, 1997, the Company
had oil swaps for an aggregate of 2,534 barrels per day of oil during the
remainder of 1997 at fixed prices ranging from $18.65 to $23.67 (NYMEX basis)
and an aggregate of 547 barrels per day during 1998 at fixed prices of $20.00
and $20.52 (NYMEX basis). The weighted average hedged price for oil under such
agreements is $20.21 and $20.29 per barrel in 1997 and 1998, respectively.
Subsequent to June 30, 1997, the Company entered into three natural gas
swaps. One hedges 10,000 MMBTU of natural gas per day from March 1998 through
October 1998 at a fixed price of $2.15 per MMBTU (NYMEX basis). Another hedges
7,500 MMBTU of natural gas per day for September 1997 and October 1997 at a
fixed price of $2.465 per MMBTU (NYMEX basis). Another hedges 7,500 MMBTU of
natural gas per day for September 1997 and October 1997 at a fixed price of
$2.50 per MMBTU (NYMEX basis).
GAS BALANCING. It is customary in the industry for various working interest
partners to produce more or less than their entitlement share of natural gas
from time to time. The Company's net overproduced position decreased in the
first six months of 1997 to approximately 2.5 BCF from approximately 2.6 BCF at
December 31, 1996. At June 30, 1997, the undiscounted value of this imbalance is
approximately $5,065,000, of which $500,000 is recorded as a short-term
liability and the remaining $4,565,000 is included in other long-term
liabilities. In the absence of a gas balancing agreement, the Company is unable
to determine when its partners will make up their share of production. If and
when the Company's partners do make up their share of production, the Company's
deliverable natural gas volumes could decrease, adversely affecting cash flow.
46
<PAGE>
BUSINESS AND PROPERTIES
THE COMPANY
Forest Oil Corporation is an independent oil and natural gas company engaged
in the exploration, exploitation, development and acquisition of oil and gas
properties and the production and marketing of oil and natural gas in North
America. The Company's reserves and producing properties are located primarily
in three core areas: (i) the Gulf of Mexico and Gulf Coast (the "Gulf Region");
(ii) West Texas, Oklahoma and the Rocky Mountain region of the United States
(the "Western Region"); and (iii) Canada (the "Canadian Region"). In 1996,
production from the United States and Canada accounted for approximately 60% and
40%, respectively, of the Company's production on an MCFE basis. The Company
currently operates 40 offshore platforms in the Gulf of Mexico, and 1996
production from the Gulf of Mexico accounted for approximately 42% of the
Company's production on an MCFE basis.
The Company's average daily production in the first six months of 1997 and
estimated proved reserves at December 31, 1996 are summarized below:
<TABLE>
<CAPTION>
ESTIMATED PROVED RESERVES AT DECEMBER
AVERAGE DAILY PRODUCTION
FIRST SIX MONTHS 1997 31, 1996
------------------------------------------------ -------------------------------------
TOTAL TOTAL
OIL (BBLS) GAS (MCF) (MCFE) % OF TOTAL OIL (MBBLS) GAS (MMCF) (MMCFE)
----------- --------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gulf Region..................... 2,713 81,199 97,477 55 4,313 157,448 183,326
Western Region.................. 320 7,370 9,290 5 1,485 76,877 85,787
Canadian Region................. 5,204 38,685 69,909 40 18,216 102,925 212,221
----- --------- ----------- --- ----------- ----------- -----------
Total....................... 8,237 127,254 176,676 100% 24,014 337,250 481,334
<CAPTION>
% OF TOTAL
-----------
<S> <C>
Gulf Region..................... 38
Western Region.................. 18
Canadian Region................. 44
---
Total....................... 100%
</TABLE>
At December 31, 1996, approximately 73% of the Company's estimated proved
reserves was classified as proved developed and approximately 70% was natural
gas. At such date, the Company owned interests in 1,403 gross (572 net)
producing wells in the United States and Canada. The Company currently operates
approximately 77% of its production in the United States and 48% of its
production in Canada.
Forest has been operating offshore in the Gulf Region since 1954 and
currently has interests in 75 lease blocks (approximately 330,000 acres) in the
Gulf of Mexico, of which 49 are held by production. The Company has developed a
significant gathering and processing infrastructure in the Gulf of Mexico that
facilitates production from its lease blocks. The Company has interests in
approximately 72,000 gross acres onshore in the Gulf Region, of which 8% is
undeveloped. The Company currently has an inventory of approximately 35 drilling
projects in the Gulf Region.
The Company re-established its exploration efforts in the Western Region in
1996, focusing on the Rocky Mountain states. The Company's Western Region staff
is also responsible for development of the Company's producing properties in
Wyoming, Oklahoma and West Texas. The Company has interests in approximately
240,000 gross acres in the Western Region, of which 38% is undeveloped. The
Company currently has an inventory of approximately 18 drilling projects in the
Western Region.
The Company established a new core area in Canada in December 1995 with the
acquisition of a 56% economic interest (subsequently increased to 66%) in Saxon
and the January 1996 acquisition of Canadian Forest (formerly ATCOR Resources
Ltd.). The Company believes that the generally longer reserve life and lower
aggregate cost nature of its Canadian properties complements its Gulf of Mexico
properties, which tend to have shorter reserve lives and higher aggregate
finding, development and operating costs. The Company has interests in
approximately 1,021,000 gross acres in Canada, of which 70% is undeveloped. The
Company currently has an inventory of approximately 33 drilling projects in
Canada.
The Company's 1997 planned capital expenditures of approximately $130
million are currently allocated as follows: $69 million to the Gulf Region, $12
million to the Western Region and $49 million to
47
<PAGE>
Canada. Approximately 68% of the 1997 planned expenditures is allocated to
drilling costs and 32% to lease acquisition, seismic and other costs.
Since the first quarter of 1996, the Company has devoted most of its capital
spending program to exploratory, exploitation and development drilling, as well
as lease acquisition and seismic costs. This expanded drilling budget has
resulted in significant discoveries on Company-generated prospects including:
(i) a High Island Block 116 well in March 1996, which had initial daily gross
production of approximately 55 MMCFE (24 MMCFE net); (ii) a Eugene Island Block
53 well in the first quarter of 1997, which had initial daily gross production
of approximately 31 MMCFE (21 MMCFE net) and (iii) 27 BCFE of net estimated
proved reserves in the Bigoray Field in western central Alberta, Canada during
1996. The Company attributes this success to its high quality property base, as
well as to the integration of 3-D seismic with geological interpretations,
advanced drilling and production techniques and other technologies applied by
its experienced regional technical staff.
The Company's acquisition activity and drilling successes have resulted in
production growth and increased revenues and cash provided by operating
activities. The Company's average daily production increased from approximately
111 MMCFE per day in 1995, to approximately 162 MMCFE per day in 1996 and to
approximately 177 MMCFE per day during the first six months of 1997. For the
year ended December 31, 1996, the Company generated revenues of $317.5 million,
cash provided by operating activities of $67.8 million and EBITDA (as defined)
of $92.9 million. For the six months ended June 30, 1997, the Company generated
revenues of $172.4 million, cash provided by operating activities of $24.3
million and EBITDA of $51.2 million.
BUSINESS STRENGTHS
The Company believes it has certain strengths that provide it with
significant competitive advantages, including the following:
WELL POSITIONED IN PROSPECTIVE NORTH AMERICAN BASINS
Management believes that its core regions contain substantial reserve
potential and are among the most prospective areas in North America. Forest
holds interests in approximately 1.5 million total gross acres in its three core
regions and an interest in 22 Canadian frontier licenses in the Beaufort/North
McKenzie region of the Northwest Territories and Sable Island, Nova Scotia.
DIVERSIFIED NATURAL GAS MARKETS
The Company believes that through its acquisitions in Canada and its
operations in the Western Region, it has positioned itself to achieve greater
stability in its overall operating margin in the event of any narrowing of
natural gas pricing differentials between the United States and Canada.
Management believes that improvements in the infrastructure of the North
American gas transportation system have the potential to create a more efficient
transportation grid that may result in price differentials that are more closely
related to proximity to market rather than the availability of transportation.
EXPERTISE AND INFRASTRUCTURE IN THE GULF OF MEXICO
In over 40 years of operating in the Gulf Region, Forest has developed an
extensive proprietary database, including seismic, well logs, velocity surveys
and paleo and regional studies. The Company's exploration team integrates this
data in evaluating drilling prospects. The Company's senior operating personnel,
as well as its geoscientists and engineers, have substantial experience in the
technical challenges arising from exploitation and exploration of this region.
During the period from 1992 through 1996, the Company drilled 39 offshore wells
in this region, of which 77% were completed as commercially productive. The
Company has interests in 75 lease blocks in the Gulf of Mexico of which 49 are
held by production rather than being subject to expiration by the passage of
time. In addition, the
48
<PAGE>
Company has developed an extensive production and transportation infrastructure
to better control costs and minimize the time interval between discoveries and
production. Forest owns interests in 50 platforms, 55 processing facilities, and
an estimated 325 miles of gathering systems in the Gulf Region.
APPLICATION OF TECHNOLOGY
The Company uses advanced technology in its exploration and development
activities to reduce drilling risks and finding costs and to more effectively
prioritize drilling prospects. As of June 30, 1997, the Company had acquired 3-D
seismic surveys on 85 offshore lease blocks and had 425,000 acres of 3-D seismic
data and 300,000 miles of 2-D seismic data. The ability to obtain 3-D seismic
data at reasonable costs and integrate such data into the Company's extensive
proprietary database has enabled the Company to identify multiple development
and exploratory prospects in mature producing fields which had not been
identified through earlier technologies.
In addition, the Company uses new drilling and completion technology to
stimulate production. For example, Saxon has utilized new production and
completion techniques to enhance production in the Pekisko formation in the
Bigoray field. These techniques included horizontal drilling into the formation
with a newly developed mud system, and subsequent artificial lifting of oil and
water with new long-stroke pumps. Saxon's share of the field's current
production is 2,720 equivalent barrels of oil per day. The Company believes this
drilling and completion methodology can be used in other non-commercial
properties in Canada.
STRATEGY
The Company's strategy is to focus on exploration, exploitation, development
and acquisition of oil and gas producing properties located in selected areas in
North America where the Company has expertise and experience. The Company will
pursue this strategy through the following initiatives:
EXPAND EXPLORATION. The Company is expanding exploration as a source of
future growth, particularly opportunities that benefit from the selective use of
advanced technologies such as new 3-D seismic processing techniques and
production and completion methods. The Company is also seeking to apply proven
technologies to deeper water prospects in the Gulf of Mexico and to prospects in
the Northwest Territories in Canada. Since improving its capitalization, the
Company has accelerated the exploration and development of its inventory of
prospects and generally retained a larger working interest in such prospects. In
addition, the Company has continued to acquire additional prospects identified
by the Company's exploration teams. The Company seeks to maintain a balanced
exploration portfolio that includes higher risk exploration prospects that have
the potential for larger reserves, as well as lower risk projects.
INCREASE EXPLOITATION AND DEVELOPMENT OF EXISTING PROPERTIES. The Company
continually evalutates new imaging, drilling and completion technologies and
their potential application to the Company's existing properties in order to
identify additional exploitation and development opportunities. The Company
intends to increase exploitation and development expenditures and activities on
its existing properties in 1997 as compared to prior years. For example, the
Company is reprocessing and reshooting seismic data at Eugene Island Block 292
in order to identify additional drilling prospects at deeper horizons. Wells in
the Eugene Island Block 292 field in which the Company has an interest have
produced cumulative volumes of over 2,900 BCFE, primarily from shallow producing
formations. The Company also pursues workovers, recompletions, secondary
recovery operations and other production enhancement techniques on its
properties to increase production.
CONTINUE TO PURSUE ACQUISITIONS. The Company continues to pursue
acquisitions of producing properties that meet selection criteria that include
(i) strategic location in a core area of operations or establishment of a new
core area through the acquisition of a significant property base, (ii) potential
for
49
<PAGE>
increasing reserves and production through lower risk exploitation and
development, (iii) attractive potential return on investment, and (iv)
opportunities for improved operating efficiencies. In Canada, Forest has an
additional criterion that natural gas properties include sufficient plant
processing capacity and adequate access to markets.
MAINTAIN FINANCIAL FLEXIBILITY. The Company is committed to maintaining
financial flexibility, which management believes is important for the successful
execution of its strategy. The Company has substantially reduced its debt as a
percentage of book capitalization from 98% as of December 31, 1994 to 47% as of
June 30, 1997. From 1995 through August 1997, the Company added a total of
approximately $300 million of common equity. Management seeks to continue to
reduce the Company's level of debt as a percentage of book capitalization.
Giving effect to (i) the issuance of the Old Notes, (ii) the exercise of the
Anschutz Warrant and (iii) additional borrowings under the Company's U.S. Credit
Facility, and the use of the aggregate proceeds from such sources to repay the
Canadian Credit Facility and to purchase all of the 11 1/4% Notes in the Tender
Offer, the Company would have had debt as a percentage of pro forma as adjusted
book capitalization of 45% as of June 30, 1997.
OPERATIONS
GULF REGION
The Company has been active in the Gulf Region both onshore and offshore
since 1954. At December 31, 1996, the Company had estimated proved reserves in
the Gulf Region of 157 BCF of gas and 4.3 MMBBLS of oil (189 BCFE). For the
first six months of 1997, average daily production from this region was
approximately 97 MMCFE.
The Company currently has interests in 75 blocks offshore, eight of which
are considered "deep water blocks" in depths greater than 400 feet. The Company
has 26 blocks that are unexplored and in their primary term and 49 blocks which
are held by production. In the past five years the Company has undertaken nine
3-D seismic surveys on its inventory of existing producing properties. This new
generation of 3-D seismic has enabled the Company to enhance its interpretation
of certain of these properties, resulting in new development and exploration
prospects.
The Company has a database consisting of 300,000 miles of 2-D seismic and
425,000 acres of 3-D seismic, along with 265,000 well logs, 6,000 velocity
surveys and numerous paleo and regional studies relating to the Gulf Region that
the Company has acquired throughout its history. The Company employs seven
geoscientists and has exclusive contracts with an additional eight geoscientists
dedicated to the Gulf Region, including both geologists and geophysicists as
well as three reservoir engineers. The Company has eleven UNIX workstations,
including three in Lafayette, Louisiana and eight in the Denver, Colorado
office.
The Company's primary offshore production comes from High Island Block 116,
Eugene Island Block 53 and Eugene Island Block 65, which combined currently
account for 29% of the Company's average daily production.
The Company intends to continue to increase its ownership of offshore blocks
in the Central and Western Gulf of Mexico both on the Continental Shelf and in
deep water through participation in future lease sales and farm-ins with
existing operators.
In 1996, the Company participated in 18 Gulf of Mexico wells, 14 of which
were successful. The preliminary 1997 Gulf of Mexico planned capital spending is
estimated at $70 million to drill 33 gross wells, acquire additional 3-D seismic
for prospect delineation, lease additional prospects and to put into production
four wells drilled in 1996. This amount represents 54% of the Company's 1997
planned capital spending.
HIGH ISLAND BLOCK 116. The High Island Block 116 B-1 well is the Company's
most prolific well and accounts for approximately 11% of the Company's average
daily production. The Company acquired High Island Block 116 in 1993. The
Company farmed-out a 45% interest in the well in exchange for a
50
<PAGE>
100% carry of the drilling costs of the B-1 well. The well was drilled in March
1996 to a true vertical depth of 11,013 feet and encountered 224 net feet of
pay. Initial production from the well was 50 MMCF per day of gas and 650 BBLS
per day of oil. Subsequent to the discovery, Forest increased its working
interest to 55% and became the operator of the block.
The Company periodically applies acid treatments to the B-1 well in order to
treat scale build-up and maintain high rates of production. The Company
successfully treated the B-1 well in June 1997, increasing gross production from
31 MMCF per day of gas and 600 BBLS per day of oil to 57 MMCF per day of gas and
1,011 BBLS per day of oil. The Company is currently evaluating 3-D seismic and
other data on the block for further exploratory and drilling potential.
EUGENE ISLAND BLOCK 53. Eugene Island Block 53 was acquired in 1993. In the
first quarter of 1997 the Company drilled the #10 exploratory well in which it
had a 100% working interest. The #10 well was logged with 115 feet of net gas
pay in the Cib Carst sands and is currently producing 25 MMCF per day of gas and
1,000 BBLS per day of oil (31 MMCFE per day). Subsequently, the Company drilled
the #11 well which failed due to mechanical problems. The cost of the #11 well
should be reimbursed to the Company with insurance proceeds. The Company
recently completed the #12 well and logged approximately 20 feet of net gas pay,
and is currently evaluating completion alternatives. The Company plans
additional drilling on this block in early 1998.
EUGENE ISLAND BLOCKS 64 & 65. The Company acquired a non-operated 25%
working interest (20% after payout) in Eugene Island Block 65 and the south half
of Eugene Island Block 64 through a farm-in in late 1996. These blocks are
adjacent to Eugene Island Block 53. Two wells drilled in early 1997 commenced
production from Eugene Island Block 65 at initial rates of 54 MMCF per day of
gas and 1,850 BBLS per day of oil (10 MMCF per day of gas and 350 BBL per day of
oil net to the Company).
The Eugene Island Block 65 #1 exploratory well was drilled in January 1997
to a true vertical depth of 13,221 feet and logged 111 net feet of natural gas
and condensate pay from two hydrocarbon-bearing zones. The Eugene Island Block
65 #2 delineation well, drilled in March 1997, logged 145 net feet of pay from
the same zones. Both wells were dual-completed. A used production platform was
refurbished and installed on the block to facilitate early production.
EUGENE ISLAND BLOCK 325. Eugene Island Block 325 was originally discovered
in 1987 by the Company and is currently producing 7.7 MMCF per day of gas and 93
BBLS per day of oil net to the Company's interest. The Company has a 66 2/3%
working interest and has now purchased and is currently evaluating enhanced 3-D
seismic data over a three block area that includes this block. It is anticipated
that this new 3-D will assist in the development of additional drilling
opportunities, which were not previously apparent using older 3-D seismic data
due to poor image quality below the producing shallow gas sands.
EUGENE ISLAND 292 COMPLEX. The Eugene Island 292 Complex consists of 13
blocks. This field was discovered by the Company in 1966. The Company has
working interests that range from 20% to 59% in the complex. To date the wells
in which the Company has an interest have produced 2.4 TCF of gas and 80 MMBBLS
of oil gross (420 BCF of gas and 14.1 MMBBLS of oil net to the Company).
The primary production is from Pleistocene sands which are at depths
shallower than 9,000 feet. In 1997, the Company initiated an enhanced 3-D survey
to be shot over this entire complex. Ocean bottom seismic cables will be used in
order to acquire data which is close to the existing structures which have
previously been identified on the complex. The new 3-D shoot is expected to
enhance the structural and stratigraphic interpretation and will be delivered in
the fourth quarter of 1997.
The Company anticipates that new shallow and deeper prospects may be
identified by the new 3-D seismic which could result in exploratory drilling in
the second quarter of 1998.
KATY FIELD. The Company acquired a working interest in the Katy field in
Texas in December 1993. The Company has exercised its preferential right to
purchase additional working interests, which has
51
<PAGE>
resulted in the Company having working interests ranging from 16% to 44% in the
units in this field. These additions make the Company the second largest working
interest owner in the Katy Field.
The Katy field covers approximately 50 sections and has gross cumulative
production of 6.7 TCF of gas and 168 MBBLS of oil. The Company views this
long-life field as having upside potential which the Company intends to exploit
through more efficient field operations, such as increased pressure maintenance.
The Company and the operator believe there is possible upside in the deeper
formations, such as the Wilcox, where only two penetrations have been drilled
below existing pay sands to date. The Company plans to continue its strategy of
aggressively pursuing unsolicited offers to purchase additional working
interests in the field and intends to pursue the deep potential within the
field.
EUGENE ISLAND BLOCK 43. Eugene Island Block 43 was acquired in the OCS
lease sale in March 1997 for $3.9 million. This block is located in 18 feet of
water and was acquired for three distinct prospects, identified as bright spots
in the 3-D seismic analysis. Two prospects are in the Cib Carst Interval and the
third prospect is deeper at the Cib-op level. The Company is seeking an industry
partner to participate in an exploratory well which is planned for the fourth
quarter of 1997.
WESTERN REGION
The Western Region's existing production and properties are located
primarily in West Texas, Oklahoma, North Dakota and Wyoming. In this region the
Company has 86 BCFE of estimated proved reserves, 28,000 net undeveloped acres
and currently produces approximately 10 MMCFE net daily. The Company has been
active in the Western Region since 1954, beginning with the discovery of the
Grieve Field in the Wind River Basin of Wyoming. The Company intends to focus
its exploration efforts on four to six lower risk plays in the region, where
Forest can control development by being the operator.
WYOMING
WIND RIVER BASIN. The Company's Wind River Basin project areas are the
Austin Creek and Grieve Unit fields. In August 1997, the Company drilled a field
extension well at Austin Creek, where it has a 36% working interest. The well
had an initial gross production rate of 170 BBLS per day of oil. Forest is
evaluating additional offsets to this field extension well.
At Grieve Field, where it has a 94% working interest, the Company will
attempt a shallow (3,000 feet) Cody formation recompletion in the fourth quarter
of 1997. If successful, the Company believes significant additional production
potential exists and approximately 24 additional recompletions may be available
in current well bores. The Grieve field, discovered by Forest, has cumulative
gross production of 52 BCF of gas and 30 MMBBLS of oil.
GREEN RIVER BASIN. The Whiskey Buttes Prospect is located in Lincoln
County, Wyoming, along the western margin of the Moxa Arch of the Green River
Basin. Production from the adjacent Whiskey Buttes Field is from the Second
Frontier, Muddy and Dakota sandstones. The Company has a 100% working interest
in the initial test well and will have a 75% working interest in all subsequent
wells drilled within the prospect.
The initial test well in Whiskey Buttes resulted in a discovery, which is
not yet completed. Pay thickness of approximately 40 feet was found, which is
comparable to, or in excess of, that observed in nearby offset wells. The
northeast offset to the well has cumulative gross production of over 3 BCF and
estimated ultimate recovery of 6 BCF of gas.
Based upon initial well test results, the Company plans three offset wells
in the field. Plans are in progress to secure a pipeline connection and complete
the initial well in the fourth quarter of 1997. An offset may be drilled in late
1997, and all three are anticipated to be drilled by late 1998.
52
<PAGE>
WEST TEXAS
The Company operates the Vermejo field, where it has a 75% working interest
which has current gross production of 3 MMCF per day of gas. Significant
opportunity remains at Vermejo to exploit the deep Ellenburger (21,000 feet),
Fusselman (19,000 feet), Atoka (16,000 feet), Wolfcamp (12,000 feet) and
Delaware (6,000 feet) reservoirs. The Company began a work program in 1997 to
recomplete existing wellbores in the Ellenberger formation, which will carry
through the majority of 1998.
NORTH DAKOTA
WILLISTON BASIN. The Company has acquired 48 square miles of 3-D seismic
data over the Bow Creek Project Area where the Company has interests in
approximately 20,000 gross and 6,000 net acres. Bow Creek is located along the
southwestern flank of the Williston Basin, within an area of significant
multi-pay production from the Lodgepole, Tyler, Mission Canyon, Red River and
Interlake formations. To date, interpretation of the 3-D seismic program has
generated seven drillable prospects. The Company expects to test the first of
these opportunities during the fourth quarter of 1997 and continue the program
into early 1998.
CANADIAN REGION
The Company has been active in Canada since the mid-1950s. Currently, the
Company's operations are located almost exclusively in the provinces of Alberta
and British Columbia. As of December 31, 1996, in Canada, the Company had
estimated proved reserves of 18 MMBBLS of liquids and 103 BCF of gas
representing 212 BCFE of estimated proved reserves.
CENTRAL ALBERTA
CAROLINE UNIT. Caroline Swan Hills Unit was discovered in the mid-1980s and
came into full production in 1993. Following a recent plant expansion, the
Company's net sales from the field have increased to 1,560 BBLS per day of
liquids and 3.1 MMCF per day of natural gas. This long life property forms a
strong producing base for the Company's Canadian operations.
BIGORAY. Saxon is continuing to develop the Pekisko formation in its
Bigoray oil field in central Alberta. Gross production in December 1996 averaged
about 275 BBLS of oil and 2 MMCF per day of natural gas. Current production has
increased to approximately 1,420 BBLS of oil and 7.8 MMCF per day of gas net to
Saxon's interest from three producing wells. Seven additional wells have been
drilled that are expected to be completed over the coming months as production
facilities are further expanded. Saxon has also commenced drilling in the
Ostracod formation in this field, where it has drilled five consecutive wells
that have been completed as commercially productive, and a sixth well that it
believes will also be commercially productive.
HERRONTON. This field is located in Southwestern Alberta, approximately 70
miles from Calgary. Current gross production averages 280 BBLS per day of
liquids and 2.3 MMCF per day of natural gas. A horizontal well is currently
being drilled to evaluate the potential for improved recovery. Should this prove
to be successful, potential exists for up to six additional horizontal
locations.
BRITISH COLUMBIA/PEACE RIVER ARCH. In British Columbia, the Company's
principal producing property is located in the Rigel/Doig area. Current gross
production averages 5 MMCF per day of gas. This total is expected to increase by
2 MMCF per day during the fourth quarter of 1997 with the addition of
compression, as well as the closing of a pending acquisition. Additional
drilling is also planned for this area during the fourth quarter of 1997.
In the Progress Doe Creek field, the Company currently produces 330 BBLS per
day of oil. A portion of this field is currently being water flooded and has
shown good response. Negotiations are under way to expand the flood into
adjacent leases in which a 33% working interest is held by the Company.
53
<PAGE>
The Company has an exploration project which is located in the Slave
Point/Keg River gas producing area of Northeast British Columbia. The Company
has a 30% working interest in 5,120 acres of land that has a 3-D seismically
defined pinnacle reef. The Company has identified an anomaly in this reef within
one mile of an existing pipeline and plans to spud a well on this prospect in
the fourth quarter of 1997.
NORTHWEST TERRITORIES
The Company is participating in a 10,500 foot exploratory well 12 miles from
Amoco's Pointed Mountain field in the southern Northwest Territories, 25 miles
north of the British Columbia/Northwest Territories border. The Company has a
15% working interest in this prospect (3,700 net acres). The Company can also
earn a similar interest on an adjacent 52,000 acre tract that has a similar
prospect.
OTHER FOREIGN OPERATIONS
Forest considers, and from time to time makes, investments in oil and gas
opportunities in other foreign countries. Foreign oil and natural gas operations
are subject to certain risks, such as nationalization, confiscation, terrorism,
renegotiation of existing contracts and currency fluctuations. Forest monitors
the political, regulatory and economic developments in any foreign countries in
which it operates.
54
<PAGE>
OIL AND GAS RESERVES
The following table sets forth summary information with respect to estimates
of proved oil and gas reserves of the Company and the discounted future net cash
flows for these reserves as of December 31, 1996. The Company's United States
Reserves have been reviewed by Ryder Scott. A report on Canadian Forest's
reserves has been prepared by McDaniel. A report on Saxon's reserves has been
prepared by Fekete. For additional information relating to reserves, see "Risk
Factors -- Ceiling Limitation Writedowns," "-- Uncertainty of Estimates of
Reserves," and Note 18 of Notes to Consolidated Financial Statements of the
Company.
<TABLE>
<CAPTION>
CANADIAN TOTAL
FOREST FOREST SAXON (1) CONSOLIDATED
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Proved Developed
Natural Gas (MMCF)......................................... 165,629 58,162 12,694 236,485
Liquids (MBBLS) (2)........................................ 5,311 9,223 4,037 18,571
Total (MMCFE)............................................ 197,495 113,500 36,916 347,911
Proved Undeveloped
Natural Gas (MMCF)......................................... 65,626 21,507 10,562 97,695
Liquids (MBBLS) (2)........................................ 487 202 4,754 5,443
Total (MMCFE)............................................ 68,548 22,719 39,086 130,353
----------- ----------- ----------- -------------
Total Proved (MMCFE)......................................... 266,043 136,219 76,002 478,264
Proved reserves attributable to volumetric production
payments, all of which are proved developed:
Natural gas (MMCF)......................................... 3,070 -- -- 3,070
Liquids (MBBLS) (2)........................................ -- -- -- --
----------- ----------- ----------- -------------
Total proved reserves attributable to volumetric production
payments (MMCFE)........................................... 3,070 -- -- 3,070
----------- ----------- ----------- -------------
Total proved reserves including amounts attributable to
volumetric production payments (MMCFE)..................... 269,113 136,219 76,002 481,334
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves (in thousands)..... $ 384,211 106,183 69,475 559,869
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Total discounted future net cash flows relating to proved oil
and gas reserves, including amounts attributable to
volumetric production payments (in thousands).............. $ 387,337 106,183 69,475 562,995
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Weighted average price used to calculate discounted future
net cash flows relating to proved oil and gas reserves at
December 31, 1996:
Natural gas (per MCF)...................................... $ 3.52 1.73 1.55 2.88
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Liquids (per BBL).......................................... $ 23.82 18.03 22.02 20.63
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
</TABLE>
- ------------------------
(1) Includes 100% of the reserves owned by Saxon, a consolidated subsidiary in
which the Company holds a 66% economic interest. Saxon will not initially be
a Restricted Subsidiary under the Indenture. See "Prospectus Summary --
Recent Developments" and Note 2 to the Consolidated Financial Statements.
(2) Includes crude oil, condensate and natural gas liquids.
55
<PAGE>
PRODUCTION
The following table shows net oil and natural gas production for Forest for
each of the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
NET NATURAL GAS AND LIQUIDS
PRODUCTION (1)(2)
---------------------------------
1996 1995 (3) 1994
--------- ----------- ---------
<S> <C> <C> <C>
United States:
Natural Gas (MMCF)..................................... 28,624 33,342 48,048
Liquids (MBBLS)........................................ 1,104 1,173 1,543
Total (MMCFE).......................................... 35,248 40,380 57,306
Canadian Forest:
Natural Gas (MMCF)..................................... 12,173 -- --
Liquids (MBBLS)........................................ 1,249 -- --
Total (MMCFE).......................................... 19,667 -- --
Saxon:
Natural Gas (MMCF)..................................... 1,699 -- --
Liquids (MBBLS)........................................ 396 -- --
Total (MMCFE).......................................... 4,075 -- --
Total Company:
Natural Gas (MMCF)..................................... 42,496 33,342 48,048
Liquids (MBBLS)........................................ 2,749 1,173 1,543
Total (MMCFE).......................................... 58,990 40,380 57,306
</TABLE>
- ------------------------
(1) Includes amounts delivered pursuant to volumetric production payments. See
Note 6 of Notes to Consolidated Financial Statements.
(2) Volumes reported for natural gas include immaterial amounts of sulfur
production on the basis that one long ton of sulfur is equivalent to 15 MCF
of natural gas. Liquids volumes include both oil and condensate and natural
gas liquids.
(3) Does not include any production relating to the acquisition of Saxon on
December 20, 1995 as the amounts involved were not significant.
56
<PAGE>
AVERAGE SALES PRICES AND PRODUCTION COSTS PER UNIT OF PRODUCTION
The following table sets forth the average sales prices per MCF of natural
gas and per barrel of liquids and the average production cost per equivalent
unit of production for the years ended December 31, 1996, 1995 and 1994 for
Forest:
<TABLE>
<CAPTION>
UNITED STATES CANADA (5)
------------------------------- -----------
1996 1995 1994 1996
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Average Sales Prices:
NATURAL GAS
Total production (MMCF)(1)................................... 28,624 33,342 48,048 13,872
Sales price received (per MCF)(2)............................ $ 2.36 1.65 1.86 1.41
Effects of energy swaps (per MCF) (3)........................ (.23) .12 .04 (.04)
--------- --------- --------- -----------
Average sales price (per MCF)(2)............................. $ 2.13 1.77 1.90 1.37
LIQUIDS
Oil and Condensate:
Total production (MBBLS)(4).................................. 964 1,121 1,482 1,308
Sales price received (per BBL)............................... $ 20.03 16.36 14.97 20.64
Effects of energy swaps (per BBL)(3)......................... (1.07) (.50) (.14) (1.82)
--------- --------- --------- -----------
Average sales price (per BBL)................................ $ 18.96 15.86 14.83 18.82
Natural gas liquids:
Total production (MBBLS)..................................... 140 52 61 337
Average sales price (per BBL)................................ $ 10.48 15.81 14.79 11.87
Total liquids production (MBBLS)............................... 1,104 1,173 1,543 1,645
Average sales price (per BBL).................................. $ 17.88 15.86 14.83 17.40
Average production cost (per MCFE)(6)............................ $ .56 .56 .39 .52
</TABLE>
- ------------------------
(1) Total natural gas production includes scheduled deliveries under volumetric
production payments, net of royalties, of 3,168 MMCF, 9,120 MMCF, and 16,005
MMCF in 1996, 1995 and 1994, respectively. Natural gas delivered pursuant to
volumetric production payment agreements represented approximately 7%, 27%
and 33% of total natural gas production in 1996, 1995 and 1994,
respectively. For further information concerning volumes and prices recorded
under volumetric production payments, see Notes 6 and 14 of Notes to
Consolidated Financial Statements.
(2) Amounts shown for 1995 exclude the effects of a gas contract settlement.
Including such amount, the sales price received and average sales price for
natural gas in 1995 were $1.78 and $1.90 per MCF, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 15 of Notes to Consolidated Financial Statements.
(3) Energy swaps were entered into to hedge the price of spot market volumes
against price fluctuations. Hedged natural gas volumes were 12,741 MMCF,
10,146 MMCF and 12,184 MMCF for the years ended December 31, 1996, 1995 and
1994, respectively. Hedged oil and condensate volumes were 895,600 barrels,
498,000 barrels and 370,000 barrels for 1996, 1995 and 1994, respectively.
The aggregate gains (losses) under energy swap agreements were
$(10,422,000), $3,536,000 and $1,810,000, respectively, for the years ended
December 31, 1996, 1995 and 1994 and were recorded as additions to
(reductions of) of revenue.
(4) An immaterial amount of oil production is covered by scheduled deliveries
under volumetric production payments.
57
<PAGE>
(5) Alberta's royalty program was restructured in 1994 and remained uncertain
throughout much of 1995 and 1996. Canadian production of natural gas liquids
for the year ended December 31, 1996 was reduced by 79,000 barrels as a
result of royalty adjustments, resulting in an increase in the reported
average sales price for natural gas liquids in Canada to $11.87 per barrel
from $9.44 or by approximately 26%. The royalty adjustments did not have a
significant effect on reported volumes or average sales prices for natural
gas or oil and condensate. Canadian Forest continues to receive additional
information with respect to royalty calculations and anticipates that
revisions to such calculations will continue to occur throughout 1997. The
effects of future royalty adjustments cannot be predicted at this time.
(6) Production costs were converted to common units of measure using a
conversion ratio of one barrel of oil to six MCF of natural gas and one long
ton of sulfur to 15 MCF of natural gas. Such production costs exclude all
depreciation, depletion and provision for impairment associated with
property and equipment.
PRODUCTIVE WELLS
The following summarizes total gross and net productive wells of the Company
at December 31, 1996:
<TABLE>
<CAPTION>
PRODUCTIVE WELLS (1)
----------------------------
UNITED STATES CANADA
--------------- -----------
<S> <C> <C>
Gross (2)
Gas............................................................... 278 379
Oil............................................................... 180 566
----- -----
Total (3)....................................................... 458 945
----- -----
----- -----
Net (4)
Gas............................................................... 100.7 127.0
Oil............................................................... 118.5 225.9
----- -----
Total........................................................... 219.2 352.9
----- -----
----- -----
</TABLE>
- ------------------------
(1) Productive wells are producing wells and wells capable of production,
including wells that are shut-in.
(2) A gross well is a well in which a working interest is owned. The number of
gross wells is the total number of wells in which a working interest is
owned.
(3) Includes 27 dual completions in the United States and 20 dual completions in
Canada. Dual completions are counted as one well. If one completion is an
oil completion, the well is classified as an oil well.
(4) A net well is deemed to exist when the sum of fractional ownership working
interests in gross wells equals one. The number of net wells is the sum of
the fractional working interests owned in gross wells expressed as whole
numbers and fractions thereof.
DEVELOPED AND UNDEVELOPED ACREAGE
Forest and its subsidiaries held acreage as set forth below at December 31,
1996. A majority of the developed acreage is subject to mortgage liens securing
either the bank indebtedness or nonrecourse secured debt of the Company. A
portion of the developed acreage is also subject to production
58
<PAGE>
payments. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Notes 5 and 6 of Notes to Consolidated Financial
Statements.
<TABLE>
<CAPTION>
UNDEVELOPED ACREAGE
DEVELOPED ACREAGE (1) (2)
---------------------- ----------------------
GROSS (3) NET (4) GROSS (3) NET (4)
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
United States:
Louisiana offshore.................................... 145,549 58,662 53,212 20,774
Oklahoma.............................................. 63,334 21,710 7,504 1,396
Texas onshore......................................... 123,959 61,529 15,813 8,394
Texas offshore........................................ 45,382 22,694 40,347 31,694
Wyoming............................................... 8,517 4,484 51,076 21,343
Other................................................. 26,304 10,959 6,114 1,773
----------- --------- ----------- ---------
413,045 180,038 174,066 85,374
Canada
Alberta............................................... 323,451 111,907 234,625 123,480
Other................................................. 61,301 41,191 283,124 43,731
----------- --------- ----------- ---------
384,752 153,098 517,749 167,211
----------- --------- ----------- ---------
Total acreage at December 31, 1996...................... 797,797 333,136 691,815 252,585
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>
- ------------------------
(1) Developed acres are those acres which are spaced or assigned to productive
wells.
(2) Undeveloped acres are those acres on which wells have not been drilled or
completed to a point that would permit the production of commercial
quantities of oil or natural gas, regardless of whether such acreage
contains proved reserves. It should not be confused with undrilled acreage
held by production under the terms of a lease.
(3) A gross acre is an acre in which a working interest is owned. The number of
gross acres is the total number of acres in which a working interest is
owned.
(4) A net acre is deemed to exist when the sum of the fractional ownership
working interests in gross acres equals one. The number of net acres is the
sum of the fractional working interests owned in gross acres expressed as
whole numbers and fractions thereof.
During 1996, the Company's gross and net developed acreage increased
approximately 61% and 57%, respectively, and gross and net undeveloped acreage
increased approximately 301% and 204%, respectively. The increases were due
primarily to the purchase of Canadian Forest. Approximately 29% of the Company's
total net undeveloped acreage is under leases that have terms expiring in 1997,
if not held by production, and another approximately 8% of net undeveloped
acreage will expire in 1998 if not also held by production.
59
<PAGE>
DRILLING ACTIVITY
Forest owned interests in gross and net exploratory and development wells
for the years ended December 31, 1996, 1995 and 1994 as set forth below. This
information does not include wells drilled by others under farmout agreements.
<TABLE>
<CAPTION>
UNITED STATES CANADA
------------------------------- -----------
1996 1995 1994 1996
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Gross Exploratory Wells:
Dry (1).............................................................. 4 3 2 4
Productive (2)....................................................... 9 1 2 2
--- --- --- ---
13 4 4 6
--- --- --- ---
--- --- --- ---
Net Exploratory Wells:(3)
Dry (1).............................................................. 2.0 1.3 2.0 2.9
Productive (2)....................................................... 3.5 0.3 1.3 1.4
--- --- --- ---
5.5 1.6 3.3 4.3
--- --- --- ---
--- --- --- ---
Gross Development Wells:
Dry (1).............................................................. 3 -- -- 4
Productive (2)....................................................... 15 6 5 70
--- --- --- ---
18 6 5 74
--- --- --- ---
--- --- --- ---
Net Development Wells:(3)
Dry (1).............................................................. 0.5 -- -- 0.9
Productive (2)....................................................... 1.9 0.6 2.1 19.9
--- --- --- ---
2.4 0.6 2.1 20.8
--- --- --- ---
--- --- --- ---
</TABLE>
- ------------------------
(1) A dry well (hole) is a well found to be incapable of producing either oil or
natural gas in sufficient quantities to justify completion as an oil or
natural gas well.
(2) Productive wells are producing wells and wells capable of production,
including wells that are shut-in.
(3) A net well is deemed to exist when the sum of fractional ownership working
interests in gross wells equals one. The number of net wells is the sum of
the fractional working interests owned in gross wells expressed as whole
numbers and fractions thereof.
SALES AND MARKETS
Forest's U.S. production is generally sold at the wellhead to oil and
natural gas purchasing companies in the areas where it is produced. Crude oil
and condensate are typically sold at prices which are based upon posted field
prices. Natural gas in the U.S. is generally sold month to month on the spot
market. For the month of March 1997, approximately 94% of the Company's U.S.
natural gas was sold at the wellhead at spot market prices. The term "spot
market" as used herein refers to contracts with a term of six months or less or
contracts which call for a redetermination of sales prices every six months or
earlier. The remainder of the Company's U.S. natural gas was committed to both
interstate and intrastate natural gas pipeline companies, primarily under
volumetric production payment agreements and long-term contracts. The Company
believes that the loss of one or more of its current natural gas spot purchasers
should not have a material adverse effect on the Company's business in the
United States because any individual spot purchaser could be readily replaced by
another spot purchaser who would pay approximately the same sales price.
60
<PAGE>
In Canada, Canadian Forest's natural gas production is sold primarily
through the ProMark Netback Pool. The Netback Pool matches major end users with
providers of gas supply through arranged transportation channels and uses a
netback pricing mechanism to establish the wellhead price paid to producers.
Under this netback arrangement, producers receive the blended market price less
related transportation and other direct costs. ProMark charges a marketing fee
for marketing and administering the gas supply pool.
Canadian Forest sold approximately 81% of its natural gas production through
the Netback Pool in 1996.
The Netback Pool gas sales in 1996 averaged 125 MMCF per day, of which
Canadian Forest supplied approximately 35 MMCF per day or 28%. Approximately 12%
of the volumes sold in the Netback Pool in 1996 were sold at fixed prices under
long-term contracts. The loss of one or more of such long-term buyers could have
a material adverse effect on ProMark and Canadian Forest.
In addition to operating the Netback Pool, ProMark provides two other
marketing services for producers and purchasers of natural gas. ProMark manages
long-term gas supply contracts for its industrial customers by providing
full-service purchasing, accounting and gas nomination services for these
customers on a fee-for-services basis. ProMark also buys and sells gas in its
trading operation for terms as short as one day and as long as one to two years.
Profits generated by trading are derived from the spread between the prices of
gas purchased and sold. ProMark endeavors to offset its gas purchase or sales
commitments with other gas purchase or sales contracts, thereby limiting its
exposure to price risk. The Company is, however, exposed to credit risk in that
there exists the possibility that the counterparties to agreements will fail to
perform their contractual obligations.
Substantially all of Forest's oil production in the United States and Canada
is sold under short-term contracts at prices which are based upon posted field
prices.
COMPETITION
The oil and natural gas industry is intensely competitive. Competition is
particularly intense in the acquisition of prospective oil and natural gas
properties and oil and gas reserves. Forest's competitive position depends on
its geological, geophysical and engineering expertise, on its financial
resources, its ability to develop its properties and its ability to select,
acquire and develop proved reserves. Forest competes with a substantial number
of other companies having larger technical staffs and greater financial and
operational resources. Many such companies not only engage in the acquisition,
exploration, development and production of oil and natural gas reserves, but
also carry on refining operations, generate electricity and market refined
products. The Company also competes with major and independent oil and gas
companies in the marketing and sale of oil and gas to transporters, distributors
and end users. There is also competition between the oil and natural gas
industry and other industries supplying energy and fuel to industrial,
commercial and individual consumers. Forest also competes with other oil and
natural gas companies in attempting to secure drilling rigs and other equipment
necessary for drilling and completion of wells. Such equipment may be in short
supply from time to time. Finally, companies not previously investing in oil and
natural gas may choose to acquire reserves to establish a firm supply or simply
as an investment. Such companies will also provide competition for Forest.
Forest's business is affected not only by such competition, but also by
general economic developments, governmental regulations and other factors that
affect its ability to market its oil and natural gas production. The prices of
oil and natural gas realized by Forest are highly volatile. The price of oil is
generally dependent on world supply and demand, while the price Forest receives
for its natural gas is tied to the specific markets in which such gas is sold.
Declines in crude oil prices or natural gas prices adversely impact Forest's
activities. The Company's financial position and resources may also adversely
affect the Company's competitive position. Lack of available funds or financing
alternatives will prevent the Company from executing its operating strategy and
from deriving the expected benefits therefrom.
61
<PAGE>
For further information concerning the Company's financial position, see
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
ProMark also faces significant competition from other gas marketers, some of
whom are significantly larger in size and have greater financial resources than
ProMark, Canadian Forest or the Company.
REGULATION
UNITED STATES. Various aspects of the Company's oil and natural gas
operations are regulated by administrative agencies under statutory provisions
of the states where such operations are conducted and by certain agencies of the
Federal government for operations on Federal leases. The Federal Energy
Regulatory Commission ("FERC") regulates the transportation and sale for resale
of natural gas in interstate commerce pursuant to the Natural Gas Act of 1938
("NGA") and the Natural Gas Policy Act of 1978 ("NGPA"). In the past, the
Federal government has regulated the prices at which oil and gas could be sold.
While sales by producers of natural gas, and all sales of crude oil, condensate
and natural gas liquids can currently be made at uncontrolled market prices,
Congress could reenact price controls in the future. Deregulation of wellhead
sales in the natural gas industry began with the enactment of the NGPA in 1978.
In 1989, Congress enacted the Natural Gas Wellhead Decontrol Act (the "Decontrol
Act"). The Decontrol Act removed all NGA and NGPA price and nonprice controls
affecting wellhead sales of natural gas effective January 1, 1993.
Commencing in April 1992, the FERC issued Order Nos. 636, 636-A, 636-B and
636-C (Order No. 636), which require interstate pipelines to provide
transportation separate, or "unbundled", from the pipelines' sales of gas. Also,
Order No. 636 requires pipelines to provide open-access transportation on a
basis that is equal for all gas supplies. Although Order No. 636 does not
directly regulate the Company's activities, the FERC has stated that it intends
for Order No. 636 to foster increased competition within all phases of the
natural gas industry. It is unclear what impact, if any, increased competition
within the natural gas industry under Order No. 636 will have on the Company's
activities. Although Order No. 636, assuming it is upheld in its entirety, could
provide the Company with additional market access and more fairly applied
transportation service rates, Order No. 636 could also subject the Company to
more restrictive pipeline imbalance tolerances and greater penalties for
violation of those tolerances. Order 636 and subsequent FERC orders issued in
individual pipeline restructuring proceedings have been the subject of appeals,
the results of which have generally supported the FERC's open-access policy.
Last year, the United States Court of Appeals for the District of Columbia
Circuit largely upheld Order No. 636. Because further review of certain of these
orders is still possible and other appeals remain pending, it is difficult to
predict the ultimate impact of the orders on the Company and its production
efforts.
The FERC has announced several important transportation-related policy
statements and proposed rule changes, including the appropriate manner in which
interstate pipelines release capacity under Order No. 636 and, more recently,
the price which shippers can charge for their released capacity. In addition, in
1995, FERC issued a policy statement on how interstate natural gas pipelines can
recover the costs of new pipeline facilities. In January 1996, the FERC issued a
policy statement and a request for comments concerning alternatives to its
traditional cost-of-service ratemaking methodology. A number of pipelines have
obtained FERC authorization to charge negotiated rates as one such alternative.
In February 1997, the FERC announced a broad inquiry into issues facing the
natural gas industry to assist the FERC in establishing regulatory goals and
priorities in the post-Order No. 636 environment. While these changes would
affect the Company only indirectly, they are intended to further enhance
competition in the natural gas markets. The Company cannot predict what action
the FERC will take on these matters, nor can it predict whether the FERC's
actions will achieve its stated goal of increasing competition in natural gas
markets. However, the Company does not believe that it will be treated
materially differently than other natural gas producers and markets with which
it competes.
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<PAGE>
Commencing in October 1993, the FERC issued a series of rules (Order Nos.
561 and 561-A) establishing an indexing system under which oil pipelines will be
able to change their transportation rates, subject to prescribed ceiling levels.
The indexing system, which allows or may require pipelines to make rate changes
to track changes in the Producer Price Index for Finished Goods, minus one
percent, became effective January 1, 1995. The Company is not able at this time
to predict the effects of Order Nos. 561 and 561-A, if any, on the
transportation costs associated with oil production from the Company's oil
producing operations.
The Outer Continental Shelf Lands Act ("OCSLA") requires that all pipelines
operating on or across the Outer Continental Shelf (the "OCS") provide
open-access, non-discriminatory service. Although the FERC has opted not to
impose the regulations of Order No. 509, in which the FERC implemented the
OCSLA, on gatherers and other non-jurisdictional entities, the FERC has retained
the authority to exercise jurisdiction over those entities if necessary to
permit non-discriminatory access to service or the OCS.
The Company owns certain natural gas pipeline facilities that it believes
meet the traditional tests the FERC has used to establish a pipeline's status as
a gatherer not subject to FERC jurisdiction. Whether on state or federal land or
in offshore waters subject to the OCSLA, natural gas gathering may receive
greater regulatory scrutiny in the post-Order No. 636 environment.
The Company conducts certain operations on federal oil and gas leases, which
the Minerals Management Service (the "MMS") administers. The MMS issues such
leases through competitive bidding. These leases contain relatively standardized
terms and require compliance with detailed MMS regulations and orders (which are
subject to change by the MMS) pursuant to the OCSLA. For offshore operations,
lessees must obtain MMS approval for exploration plans and development and
production plans prior to the commencement of such operations. In addition to
permits required from other agencies (such as the Coast Guard, the Army Corps of
Engineers and the Environmental Protection Agency), lessees must obtain a permit
from the MMS prior to the commencement of drilling. The MMS has promulgated
regulations requiring offshore production facilities located on the OCS to meet
stringent engineering and construction specifications. The MMS proposed
additional safety-related regulations concerning the design and operating
procedures for OCS production platforms and pipelines. These proposed
regulations were withdrawn pending further discussions among interested federal
agencies. The MMS also has regulations restricting the flaring or venting of
natural gas and has recently proposed to amend such regulations to prohibit the
flaring of liquid hydrocarbons and oil without prior authorization. Similarly,
the MMS has promulgated other regulations governing the plugging and abandonment
of wells located offshore and the removal of all production facilities. To cover
the various obligations of lessees on the OCS, the MMS generally requires that
lessees post substantial bonds or other acceptable assurances that such
obligations will be met. The cost of such bonds or other surety can be
substantial and there is no assurance that the Company can continue to obtain
bonds or other surety in all cases. Under certain circumstances, the MMS may
require any Company operations on federal leases to be suspended or terminated.
Any such suspension or termination could materially and adversely affect the
Company's financial condition and operations.
In addition, the MMS is conducting an inquiry into certain contract
agreements from which producers on MMS leases have received settlement proceeds
that are royalty bearing and the extent to which producers have paid the
appropriate royalties on those proceeds. The Company believes that this inquiry
will not have a material impact on its financial condition, liquidity or results
of operations.
The MMS issued a notice of proposed rulemaking in which it proposes to amend
its regulations governing the calculation of royalties and the valuation of
crude oil produced from federal leases. This proposed rule would modify the
valuation procedures for both arm's length and non-arm's length crude oil
transactions to decrease reliance on oil posted prices and assign a value to
crude oil that better reflects market value, establish a new MMS form for
collecting value differential data, and amend the
63
<PAGE>
valuation procedure for the sale of federal royalty oil. The Company cannot
predict what action the MMS will take on this matter, nor can it predict at this
stage of the rulemaking proceeding how the Company might be affected by this
amendment to the MMS' regulations.
In April 1997, after two years of study, the MMS withdrew proposed changes
to the way it values natural gas for royalty payments. These proposed changes
would have established an alternative market-based method to calculate royalties
on certain natural gas sold to affiliates or pursuant to non-arm's length sales
contracts.
Additional proposals and proceedings that might affect the oil and gas
industry are pending before the FERC and the courts. The Company cannot predict
when or whether any such proposals may become effective. In the past, the
natural gas industry has been heavily regulated. There is no assurance that the
regulatory approach currently pursued by the FERC will continue indefinitely.
Notwithstanding the foregoing, the Company does not anticipate that compliance
with existing federal, state and local laws, rules and regulations will have a
material or significantly adverse effect upon the capital expenditures, earnings
or competitive position of the Company or its subsidiaries. No material portion
of Forest's business is subject to renegotiation of profits or termination of
contracts or subcontracts at the election of the Federal government.
STATE REGULATION -- UNITED STATES. The Company's operations are also
subject to regulation at the state level. Such regulation includes requiring
permits for the drilling of wells, maintaining bonding requirements in order to
drill or operate wells and regulating the location of wells, the method of
drilling and casing wells, the surface use and restoration of properties upon
which wells are drilled, the plugging and abandoning of wells and the disposal
of fluids used in connection with operations. The Company's operations are also
subject to various conservation laws and regulations. These include the size of
drilling and spacing units or proration units and the density of wells which may
be drilled and the unitization or pooling of oil and gas properties. In
addition, state conservation laws establish maximum rates of production from oil
and gas wells, generally prohibit the venting or flaring of gas and impose
certain requirements regarding the ratability of production. To the extent any
of the Company's natural gas gathering facilities are subject to state
regulation, regulation of gathering facilities generally includes various
safety, environmental, and in some circumstances, nondiscriminatory take
requirements, but does not generally entail rate regulation. These regulatory
burdens may affect profitability, and the Company is unable to predict the
future cost or impact of complying with such regulations.
OIL SPILL FINANCIAL RESPONSIBILITY REQUIREMENTS -- UNITED STATES. As
originally enacted, the Oil Pollution Act of 1990 ("OPA") would have required
the Company to establish $150 million in financial responsibility to cover oil
spill related liabilities. Under recent amendments to OPA, the responsible
person for an offshore facility located seaward of state waters, including OCS
facilities, will be required to provide evidence of financial responsibility in
the amount of $35 million. Although the financial responsibility requirement for
offshore facilities located landward of the seaward boundary of state waters
(including certain facilities in coastal inland waters) is a lesser amount ($10
million), the Company currently has a number of offshore facilities located
beyond state waters and, thus, is subject to the $35 million financial
responsibility requirement. The amount of financial responsibility may be
increased, to a maximum of $150 million, if the MMS determines that a greater
amount is justified based on specific risks posed by the operations. Financial
responsibility may be established through insurance, guaranty, indemnity, surety
bond, letter of credit, qualification as a self insurer or a combination
thereof. On March 25, 1997, the MMS proposed regulations to implement these
financial assurance requirements, under the terms of which an offshore
facility's worst case oil spill discharge volume would be used to determine
whether the responsible party must demonstrate increased financial
responsibility. The Company cannot predict the final form of any financial
responsibility rule that may be adopted by the MMS under OPA, but in any event,
the impact of the rule is not expected to be any more burdensome to the Company
than it will be to other similarly situated companies involved in oil and gas
exploration and production. The Company currently satisfies similar requirements
for its OCS leases under OCSLA.
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<PAGE>
CANADA. The oil and natural gas industry in Canada is subject to extensive
controls and regulations imposed by various levels of government. It is not
expected that any of these controls or regulations will affect the operations of
the Company in a manner materially different than they would affect other oil
and gas companies of similar size.
In Canada, producers of oil negotiate sales contracts directly with oil
purchasers, with the result that the market determines the price of oil. The
price depends in part on oil quality, prices of competing fuels, distance to
market and the value of refined products. Oil exports may be made pursuant to
export contracts with terms not exceeding one year in the case of light crude,
and not exceeding two years in the case of heavy crude, provided that an order
approving any such export has been obtained from the National Energy Board
("NEB"). Any oil export to be made pursuant to a contract of longer duration
requires an exporter to obtain an export license from the NEB and the issue of
such a license requires the approval of the Canadian federal government.
In Canada, the price of natural gas sold in interprovincial and
international trade is determined by negotiation between buyers and sellers.
Natural gas exported from Canada is subject to regulation by the Government of
Canada through the NEB. Producers and exporters are free to negotiate prices and
other terms with purchasers, provided that the export contracts must continue to
meet certain criteria prescribed by the NEB. As is the case with oil, natural
gas exports for a term of less than two years must be made pursuant to an NEB
order, or, in the case of exports for a longer duration, pursuant to an NEB
license and Canadian federal government approval.
The provincial governments of Alberta, British Columbia and Saskatchewan
also regulate the volume of natural gas which may be removed from those
provinces for consumption elsewhere based on such factors as reserve
availability, transportation arrangements and market considerations.
On January 1, 1994, the North American Free Trade Agreement ("NAFTA") among
the governments of Canada, the United States and Mexico became effective. NAFTA
carries forward most of the material energy terms contained in the Canada-U.S.
Free Trade Agreement. In the context of energy resources, Canada continues to
remain free to determine whether exports to the United States or Mexico will be
allowed provided that any export restrictions do not: (i) reduce the proportion
of energy resource exported relative to domestic use (based upon the proportion
prevailing in the most recent 36 month period), (ii) impose an export price
higher than the domestic price, and (iii) disrupt normal channels of supply. All
three countries are prohibited from imposing minimum export or import price
requirements. NAFTA contemplates clearer disciplines on regulators to ensure
fair implementation of any regulatory changes and to minimize disruption of
contractual arrangements, which is important for Canadian natural gas exports.
In addition to federal regulation, each province has legislation and
regulations which govern land tenure, royalties, production rates, environmental
protection and other matters. The royalty regime is a significant factor in the
profitability of oil and natural gas production. Royalties payable on production
from lands other than Crown lands are determined by negotiations between the
mineral owner and the lessee. Crown royalties are determined by government
regulation and are generally calculated as a percentage of the value of the
gross production, and the rate of royalties payable generally depends in part on
prescribed reference prices, well productivity, geographical location, field
discovery date and the type or quality of the petroleum product produced.
From time to time the governments of Canada, Alberta, British Columbia and
Saskatchewan have established incentive programs which have included royalty
rate deductions, royalty holidays and tax credits for the purpose of encouraging
oil and natural gas exploration or enhanced recovery projects.
In Alberta, a producer of oil or natural gas is entitled to a credit against
the royalties payable to the Crown by virtue of the ARTC (Alberta royalty tax
credit) program. The ARTC program is based on a price sensitive formula, and the
ARTC rate varies between 75%, at prices for oil below $100 per cubic meter,
65
<PAGE>
and 25%, at prices above $210 per cubic meter. The ARTC rate is applied to a
maximum of $2,000,000 of Alberta Crown royalties payable for each producer or
associated group of producers. Crown royalties on production from producing
properties acquired from corporations claiming maximum entitlement to ARTC will
generally not be eligible for ARTC. The rate is established quarterly based on
the average "par price", as determined by the Alberta Department of Energy for
the previous quarterly period. Canadian Forest is eligible for ARTC credits only
on eligible properties acquired and wells drilled after the change of control.
Oil and natural gas royalty holidays and reductions for specific wells
reduce the amount of Crown royalties paid by the Company to the provincial
governments. The ARTC program provides a rebate on Crown royalties paid in
respect of eligible producing properties in Alberta.
ENVIRONMENTAL MATTERS. Extensive federal, state, provincial and local laws
affecting oil and natural gas operations, including those carried on by the
Company, regulate the discharge of materials into the environment or otherwise
protect the environment. Numerous governmental agencies issue rules and
regulations to implement and enforce such laws which are often difficult and
costly to comply with and which carry substantial penalties for failure to
comply. Some laws, rules and regulations relating to the protection of the
environment may, in certain circumstances, impose "strict liability" for
environmental contamination, rendering a person liable for environmental
damages, cleanup costs and, in the case of oil spills in certain states,
consequential damages without regard to negligence or fault on the part of such
person. Other laws, rules and regulations may restrict the rate of oil and
natural gas production below the rate that would otherwise exist or even
prohibit exploration or production activities in environmentally sensitive
areas. In addition, state and provincial laws often require some form of
remedial action to prevent pollution from former operations, such as closure of
inactive pits and plugging of abandoned wells. Legislation has been proposed in
Congress from time to time that would reclassify certain oil and gas exploration
and production wastes as "hazardous wastes," which would make the reclassified
wastes subject to much more stringent handling, disposal and clean-up
requirements. If such legislation were to be enacted, it could have a
significant impact on the operating costs of the Company, as well as the oil and
gas industry in general. Initiatives to further regulate the disposal of oil and
gas wastes are also pending in certain states, and these various initiatives
could have a similar impact on the Company. The regulatory burden on the oil and
natural gas industry increases its cost of doing business and consequently
affects its profitability. Compliance with these environmental requirements,
including financial assurance requirements and the costs associated with the
cleanup of any spill, could have a material adverse effect upon the capital
expenditures, earnings or competitive position of the Company and its
subsidiaries. The Company believes that it is in substantial compliance with
current applicable environmental laws and regulations and that continued
compliance with existing requirements will not have a material adverse impact on
the Company. Nevertheless, changes in environmental law have the potential to
adversely affect the Company's operations. For instance, at least two separate
courts have recently ruled that certain wastes associated with the production of
crude oil may be classified as hazardous substances under the Comprehensive
Environmental Response, Compensation, and Liability Act (commonly called
Superfund) and thus the Company could become subject to the burdensome cleanup
and liability standards established under the federal Superfund program if
significant concentrations of such wastes were determined to be present at the
Company's properties or to have been disposed of at another location as a result
of the Company's operations.
OPA and regulations thereunder impose a variety of requirements on
"responsible parties" related to the prevention of oil spills and liability for
damages resulting from such spills in U.S. waters. A "responsible party"
includes the owner or operator of a facility or vessel, or the lessee or
permittee of the area in which an offshore facility is located. OPA assigns
liability to each responsible party for oil clean-up costs and a variety of
public and private damages. While liability limits apply in some circumstances,
a party cannot take advantage of liability limits if the spill was caused by
gross negligence or willful misconduct or resulted from violation of a federal
safety, construction or operating regulation. If the party
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<PAGE>
fails to report a spill or to cooperate fully in the cleanup, liability limits
likewise do not apply. Even if applicable, the liability limits for offshore
facilities require the responsible party to pay all removal costs, plus up to
$75 million in other damages. Few defenses exist to the liability imposed by
OPA.
The Federal Water Pollution Control Act ("FWPCA") imposes restrictions and
strict controls regarding the discharge of produced waters and other oil and gas
wastes in navigable waters. Many state discharge regulations and the Federal
National Pollutant Discharge Elimination System generally prohibit the discharge
of produced water and sand, drilling fluids, drill cuttings and certain other
substances related to the oil and gas industry into coastal waters. Although the
costs to comply with these recently-enacted zero discharge mandates under
federal or state law may be significant, the entire industry is expected to
experience similar costs and the Company believes that these costs will not have
a material adverse impact on the Company's financial condition and operations.
In Canada, the oil and natural gas industry is currently subject to
environmental regulation pursuant to provincial and federal legislation.
Environmental legislation provides for restrictions and prohibitions on releases
or emissions of various substances produced or utilized in association with
certain oil and gas industry operations. In addition, legislation requires that
well and facility sites be abandoned and reclaimed so as to prevent pollution
from former operations, and to the satisfaction of provincial authorities. A
breach of such legislation may result in the imposition of fines and penalties,
in addition to the costs of abandonment and reclamation.
Environmental legislation in Alberta has undergone a major revision and has
been consolidated into the ENVIRONMENTAL PROTECTION AND ENHANCEMENT ACT. Under
the new Act, environmental standards and requirements applicable to compliance,
cleanup and reporting are stricter. Also, the range of enforcement actions
available and the severity of penalties have been significantly increased. These
changes will have an incremental increase in the cost of conducting operations
in Alberta.
British Columbia's ENVIRONMENTAL ASSESSMENT ACT became effective June 30,
1995. This legislation rolled the previous process for review of major energy
projects into a single environmental assessment process which contemplates
public participation in the review process.
Although the Company maintains insurance against some, but not all, of the
risks described above, including insuring the costs of clean-up operations,
public liability and physical damage, there is no assurance that such insurance
will be adequate to cover all such costs, that such insurance will continue to
be available in the future or that such insurance will be available at premium
levels that justify its purchase. The occurrence of a significant event not
fully insured or indemnified against could have a material adverse effect on the
Company's financial condition and operations.
The Company has established guidelines to be followed to comply with
environmental laws, rules and regulations. The Company has designated a
compliance officer whose responsibility is to monitor regulatory requirements
and their impacts on the Company and to implement appropriate compliance
procedures. The Company also employs an environmental manager whose
responsibilities include causing Forest's operations to be carried out in
accordance with applicable environmental guidelines and implementing adequate
safety precautions.
LEGAL PROCEEDINGS
The Company, in the ordinary course of business, is a party to various legal
actions. In the opinion of management, none of these actions, either
individually or in the aggregate, will have a material adverse effect on the
Company's financial condition, liquidity or results of operations.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names of the directors and executive officers of the Company and a
description of their experience and certain other information are listed below
(ages provided are as of September 30, 1997). Executive officers are appointed
by the Company's Board of Directors:
<TABLE>
<CAPTION>
AGE AND
YEARS OF
SERVICE
WITH PRINCIPAL OCCUPATION, POSITIONS WITH COMPANY AND
NAME COMPANY BUSINESS EXPERIENCE DURING LAST FIVE YEARS
- ------------------ -------- ------------------------------------------------
<S> <C> <C>
*William L. Dorn 48 -- 26 Chairman of the Board and Chairman of the
Company's Executive Committee. Chief Executive
Officer until December 1995. President until
November 1993. Chairman of the Company's
Nominating Committee. Chairman of the Board of
Directors of Saxon Petroleum Inc.
*Robert S. Boswell 48 -- 12 President since November 1993 and Chief
Executive Officer since December 1995. Vice
President until November 1993 and Chief
Financial Officer until December 1995. Member
of the Board of Directors since 1986. Employed
by the Company since October 1985. Member of
the Company's Executive Committee. Director of
C.E. Franklin Ltd. and Saxon Petroleum Inc.
David H. Keyte 41 -- 10 Vice President and Chief Financial Officer since
December 1995. Vice President and Chief
Accounting Officer from December 1993 until
December 1995. Prior thereto Corporate
Controller. Chairman of the Company's Employee
Benefits Committee. Director of Saxon
Petroleum Inc.
Forest D. Dorn 42 -- 20 Vice President-Gulf Coast Region since August
1996. Vice President from February 1991 and
General Business Manager from December 1993 to
August 1996. Prior thereto General Manager-
Operations since January 1992.
Kenton M. Scroggs 45 -- 14 Vice President and Treasurer since December 1993
and prior thereto Treasurer. Member of the
Company's Employee Benefits Committee.
Neal A. Stanley 50 -- 1 Vice President-Western Region since August 1996.
Prior thereto President of Teton Oil and Gas
Corporation.
Donald H. Stevens 45 -- 0 Vice President-Capital Markets and Strategic
Initiatives since August 1997. Prior thereto
Vice President of Corporate Relations for
Barrett Resources Corporation.
V. Bruce Thompson 50 -- 3 Vice President and General Counsel since August
1994. Vice President-Legal of Mid-America
Dairymen, Inc. from November 1993 to August
1994. Chief of Staff for U.S. Congressman
James M. Inhofe from February 1990 to November
1993.
Daniel L. McNamara 51 -- 26 Secretary and Corporate Counsel. Member of the
Company's Employee Benefits Committee.
Joan C. Sonnen 44 -- 8 Controller since December 1993. Prior thereto
Director of Financial Accounting and
Reporting.
*Philip F. 57 -- 2 Director and Chairman of the Board of Anschutz,
Anschutz and Anschutz Company, the corporate parent of
Anschutz, for more than five
</TABLE>
- ------------------------
* Director
68
<PAGE>
<TABLE>
<CAPTION>
AGE AND
YEARS OF
SERVICE
WITH PRINCIPAL OCCUPATION, POSITIONS WITH COMPANY AND
NAME COMPANY BUSINESS EXPERIENCE DURING LAST FIVE YEARS
- ------------------ -------- ------------------------------------------------
years, and President of Anschutz and Anschutz
Company until December 1996. Director and
Vice-Chairman of Union Pacific Corporation
since September 1996. Director and Chairman of
Southern Pacific Rail Corporation ("SPRC") to
September 1996, and President and Chief
Executive Officer of SPRC to 1993. Member of
the Company's Nominating Committee.
<S> <C> <C>
*William L. 62 -- 1 Partner in the law firm of Bennett Jones
Britton, Q.C. Verchere. Director of Akita Drilling Ltd.,
ATCO Ltd., Canadian Western Natural Gas Ltd.,
Canadian Utilities Limited, CanUtilities
Holdings Ltd. and Northwestern Utilities
Limited.
*Cortlandt S. 76 -- 1 Chairman and Chief Executive Officer of
Dietler TransMontaigne Oil Company since April 1995.
Prior thereto founder, Chairman and Chief
Executive Officer of Associated Natural Gas
prior to its 1994 merger with Panhandle
Eastern Corporation. Advisory Director of
PanEnergy Corporation. Director of Hallador
Petroleum Company, Key Production Company,
Inc. and Grease Monkey Holding Corporation.
Member of the Company's Compensation
Committee.
*Jordan L. Haines 70 -- 1 Chairman of the Board of Fourth Financial
Corporation, a Kansas based bank holding
company, and its subsidiary Bank IV Wichita,
N.A. from 1983 until his retirement in 1991.
Director of Coleman Company, Inc. and a
Director of KN Energy, Inc. Member of the
Company's Audit Committee.
*James H. Lee 49 -- 6 Managing Partner, Lee, Hite & Wisda Ltd., a
private oil and gas consulting firm. Member of
the Company's Executive Committee since
February 1994. Chairman of the Company's Audit
Committee.
*J. J. Simmons, 72 -- 0 President of The Simmons Company, a consulting
III firm. Mr. Simmons was Vice Chairman of the
Surface Transportation Board from 1995 to 1996
and prior thereto Commissioner-Vice Chairman
of the U.S. Interstate Commerce Commission.
*Craig D. Slater 40 -- 2 Vice President of Anschutz, and Anschutz
Company, the corporate parent of Anschutz,
since 1995. Corporate Secretary of Anschutz
and Anschutz Company from 1991 to 1996, and
other positions with Anschutz from 1988 to
1996. Director of Internet Communications
Corporation since September 1996. Member of
the Company's Executive Committee.
*Drake S. Tempest 44 -- 2 Partner in the law firm of O'Melveny & Myers
LLP. Member of the Company's Compensation
Committee.
*Michael B. Yanney 63 -- 5 Chairman and Chief Executive Officer of the
America First Companies, L.L.C. Director of
Burlington Northern Santa Fe Corporation,
C-Tec Corporation, WorldCom, Inc, and Mid-
America Apartment Communities, Inc. Chairman
of the Company's Compensation Committee.
Member of the Company's Nominating Committee.
</TABLE>
- ------------------------
* Director
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<PAGE>
BENEFICIAL OWNERS OF SECURITIES
The following table summarizes certain information as of September 30, 1997
with respect to the ownership by each person known by the Company to be the
beneficial owner of more than five percent of the Company's Common Stock:
<TABLE>
<CAPTION>
NAME/ADDRESS NUMBER OF SHARES PERCENT AS OF
OF BENEFICIAL OWNER (1) BENEFICIALLY OWNED (1) SEPTEMBER 30, 1997
- ------------------------------------------------ ---------------------- ---------------------
<S> <C> <C>
The Anschutz Corporation (2) 11,136,475 30.7
2400 Anaconda Tower
555 17th Street
Denver, CO 80202
Joint Energy Development 3,680,000 10.1
Investments Limited Partnership
P.O. Box 1188
Houston, TX 77251-1188
Heartland Advisors, Inc. 2,372,500 6.5
790 North Milwaukee Street
Milwaukee, WI 53202
The Crabbe Huson Group, Inc. 2,080,600 5.7
121 SW Morrison, Suite 1400
Portland, OR 97204
</TABLE>
- ------------------------
(1) Based on Schedules 13D, 13G and 13F and amendments thereto filed with the
SEC and/or the Company by the reporting person through September 30, 1997,
and the amount of Common Stock outstanding on September 30, 1997.
(2) Includes 1,587 shares owned by Philip F. Anschutz.
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<PAGE>
THE ANSCHUTZ AND JEDI TRANSACTIONS
During 1995 and 1996, the Company consummated transactions with Anschutz and
JEDI, a Delaware limited partnership the general partner of which is an
affiliate of Enron Corp. See Note 3 to the Consolidated Financial Statements.
Pursuant to a purchase agreement between the Company and Anschutz, Anschutz
purchased 3,760,000 shares of the Company's Common Stock and shares of preferred
stock which were convertible into 1,240,000 additional shares of Common Stock
for a total consideration of $45,000,000. In addition, Anschutz received a
warrant that entitled it to purchase 3,888,888 shares of the Company's Common
Stock for $10.50 per share (the "Anschutz Warrant"). The Anschutz Warrant was
scheduled to expire July 27, 1998.
Concurrent with the Anschutz investment, Forest and JEDI restructured JEDI's
existing loan which had a principal balance of approximately $62,368,000. As a
part of the restructuring, the existing JEDI loan balance was divided into two
tranches: a $40,000,000 tranche, which bore interest at the rate of 12.5% per
annum and was due and payable in full on December 31, 2000; and an approximately
$22,400,000 tranche, which did not bear interest and was due and payable in full
on December 31, 2002. JEDI also relinquished the net profits interest that it
held in certain properties of the Company. In consideration, JEDI received a
warrant (the "JEDI Warrant") that entitled it to purchase 2,250,000 shares of
the Company's Common Stock for $10.00 per share.
Also concurrent with the Anschutz investment, JEDI granted an option to
Anschutz (the "Anschutz Option"), pursuant to which Anschutz was entitled to
purchase from JEDI up to 2,250,000 shares of the Company's Common Stock at a
purchase price per share equal to the lesser of (a) $10.00 plus 18% per annum
from July 27, 1995 to the date of exercise of the option, or (b) $15.50. The
Anschutz Option was scheduled to terminate on July 27, 1998. JEDI was to satisfy
its obligations under the Anschutz Option by exercising the JEDI Warrant. The
Company also agreed to use the proceeds from the exercise of the Anschutz
Warrant to pay principal and interest on the $40,000,000 tranche of the JEDI
loan.
In December 1995, JEDI exchanged the $22,400,000 tranche and the JEDI
Warrant for 1,680,000 shares of Common Stock (the "1995 JEDI Exchange").
Pursuant to the 1995 JEDI Exchange, the Company assumed JEDI's obligations under
the Anschutz Option. Under the Anschutz Option, the Company was then obligated
to issue shares directly to Anschutz that previously would have been issued to
JEDI pursuant to the JEDI Warrant. On August 1, 1996, Anschutz exercised the
Anschutz Option to purchase 2,250,000 shares of Common Stock for $26,200,000 or
approximately $11.64 per share.
On November 5, 1996, the Company exchanged 2,000,000 shares of Common Stock
plus approximately $13,500,000 cash to extinguish approximately $43,000,000 of
nonrecourse secured debt then owed to JEDI. In connection with this transaction,
Anschutz acquired 1,628,888 shares of Common Stock by exercising a portion of
the Anschutz Warrant to purchase 388,888 shares of common stock at $10.50 per
share and by converting 620,000 shares of Forest's Second Series Preferred Stock
into 1,240,000 shares of Common Stock. The term of the remaining Anschutz
Warrant was extended to July 27, 1999.
On August 28, 1997, the Anschutz Corporation purchased 3,500,000 shares of
Common Stock through the exercise of the Anschutz Warrant at an exercise price
of $8.60 per share resulting in cash proceeds to Forest of $30,100,000. The
reduction in exercise price offered to Anschutz reflects an approximate 10%
present value discount computed to the warrants' expiration date of July 27,
1999. As a result of the exercise, outstanding shares of Common Stock increased
from approximately 32,600,000 shares to approximately 36,100,000 shares.
The Company intends to farm out to Anschutz a 50% interest in a prospect in
the Gulf of Mexico. Pursuant to the proposed farmout, Anschutz would pay 50% of
the Company's costs already incurred relating to the prospect and 66.67% of the
drilling costs of an exploratory well on the prospect.
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DESCRIPTION OF BANK CREDIT FACILITIES
GENERAL. The Bank Credit Facilities are comprised of two related
agreements, the U.S. Credit Facility and the Canadian Credit Facility. The U.S.
Credit Facility is among Forest, The Chase Manhattan Bank, as agent (the "U.S.
Agent"), and other lending institutions party thereto (the "U.S. Banks"). The
Canadian Credit Facility is among a Canadian subsidiary of Forest, The Chase
Manhattan Bank of Canada, as administrative agent (the "Canadian Agent"), and
other Canadian lending institutions party thereto (the "Canadian Banks") for the
benefit of Canadian Forest and its subsidiaries. The U.S. Agent, the U.S. Banks,
the Canadian Agent and Canadian Banks are collectively referred to as the
"Lender Group". The Bank Credit Facilities provide for an aggregate principal
amount of revolving loans and letters of credit of up to the lesser of $250
million or the borrowing base as in effect from time to time, which includes a
subfacility from the U.S. Agent for letters of credit of up to $10 million under
the U.S. Credit Facility and a subfacility from the Canadian Agent for letters
of credit of up to CDN $15 million under the Canadian Credit Facility. Loans
under the Canadian Credit Facility may be made in either U.S. or Canadian
dollars. A default under either credit facility would constitute a default under
the other credit facility.
Initially, the borrowing base is $130 million, which may be allocated
between the U.S. Credit Facility and the Canadian Credit Facility. Currently,
the allocated U.S. borrowing base is $100 million and the allocated Canadian
borrowing base is an amount equal to $30 million. The borrowing base may be
redetermined by the Lender Group at its discretion and may be reallocated
periodically by Forest, subject to the approval of the U.S. Banks or the
Canadian Banks, as applicable; PROVIDED that Forest and Canadian Forest may not
allocate more than $100,000,000 (or its equivalent in Canadian dollars) to
either credit facility.
SECURITY. Indebtedness under the U.S. Credit Facility is secured by Liens
on substantially all of the oil and gas properties and other assets of Forest in
the United States and a pledge of 66% of the outstanding capital stock of
Canadian Forest. Indebtedness under the Canadian Credit Facility is secured by
liens on substantially all of the oil and gas properties and other assets of
Forest and Canadian Forest and are guaranteed by Forest.
INTEREST. Indebtedness under the U.S. Credit Facility bears interest at a
floating rate based (at Forest's option) upon (i) the Base Rate with respect to
Base Rate loans, plus the Applicable Margin for Base Rate loans or (ii) the
London Interbank Offered Rate for one, two, three or six months, plus the
Applicable Margin for Eurodollar loans. The Base Rate is the greater of (i) the
Prime Rate or (ii) the Federal Funds Rate plus 1/2 of 1%. The Applicable Margin
for Base Rate loans varies from 0.00% to 0.50% depending on the Borrowing Base
Usage Ratio; and the Applicable Margin for Eurodollar loans varies from 1.00% to
1.50% depending on the Borrowing Base Usage Ratio. Borrowing Base Usage is a
ratio of (i) outstanding loans, letters of credit, swing-line loans and bankers'
acceptances under both the U.S. Credit Facility and the Canadian Credit Facility
to (ii) the then effective borrowing base. Interest on Base Rate loans is
payable quarterly in arrears and interest on Eurodollar loans is payable on the
last day of the interest period therefor and, if longer than three months, at
three month intervals.
Indebtedness under the Canadian Credit Facility bears interest at a floating
rate based (at Forest's option) upon (i) the Bankers' Acceptance rate for
bankers' acceptances having a maturity of 30, 60, 90 or 180 days, plus a
discount rate, (ii) the Canadian Prime Rate with respect to Canadian Prime Rate
loans, plus the Applicable Margin for Canadian Prime Rate loans, (iii) the Base
Rate with respect to Base Rate loans, plus the Applicable Margin for Base Rate
loans, or (iv) the London Interbank Offered Rate for one, two, three or six
months, plus the Applicable Margin for Eurodollar loans. The Applicable Margin
for Canadian Prime Rate loans and Base Rate loans will vary from 0.00% to 0.50%
depending on the Borrowing Base Usage Ratio; and the discount fee for Bankers'
Acceptances and Applicable Margin for Eurodollar loans will vary from 1.00% to
1.50% depending on the Borrowing Base Usage Ratio. Interest on Canadian Prime
Rate loans and Base Rate loans will be payable quarterly in arrears and interest
on
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Eurodollar loans will be payable on the last day of the interest period therefor
and, if longer than three months, at three month intervals.
MATURITY. The Bank Credit Facilities will terminate on August 19, 2001. The
Bank Credit Facilities provide that loans may be borrowed, repaid and reborrowed
from time to time until such termination date, subject to the satisfaction of
certain conditions on the date of any such borrowing and, in the case of
repayment of Eurodollar loans and Bankers' Acceptances, compliance with certain
yield protection provisions.
SCHEDULED PAYMENTS AND PREPAYMENTS. The Bank Credit Facilities do not
require any scheduled payments of principal. The Bank Credit Facilities provide
for mandatory repayments of loans (i) if, following any redetermination of the
Borrowing Base, the aggregate principal amount of the loans, the letters of
credit, swing-line loans and bankers' acceptances under the Bank Credit
Facilities exceed the Borrowing Base, (ii) with the net cash proceeds in excess
of $5,000,000 from any asset sale or sales, and (iii) with the net casualty
proceeds in excess of $2,500,000 from any casualty event. In the case of clause
(i), such prepayment must be within 90 days of the date such deficiency is
determined to exist.
Amounts under the Bank Credit Facilities may be voluntarily prepaid without
premium or penalty, subject to certain notice requirements, certain required
minimum prepayment amounts and, in the case of Eurodollar loans and Bankers'
Acceptances, certain yield protection provisions.
COMMITMENT AND LETTER OF CREDIT FEES. Commitment fees are due and payable
to the Lender Group based on the committed undrawn amount of the lesser of their
respective aggregate commitments or the then effective Allocated U.S. Borrowing
Base or Allocated Canadian Borrowing Base (as applicable) during the preceding
quarter equal to a percent which varies from 0.30% to 0.375% depending on the
Borrowing Base Usage Ratio. Such commitment fees will be payable in arrears on a
quarterly basis. Forest is also required to pay letter of credit fees as
follows: (i) to the Banks, an amount equal to the Applicable Margin for
Eurodollar loans for the daily aggregate amount available to be drawn under each
letter of credit outstanding; and (ii) to the U.S. Agent for the account of the
Issuing Bank, an issuance fee equal to the greater of $1,000 or 0.5% of the
stated amount of each letter of credit. Fees payable under clause (i) will be
payable quarterly in arrears and fees payable under clause (ii) will be payable
on the issuance date. Similar fees are payable under the Canadian Bank Facility
for letters of credit issued thereunder.
COVENANTS. The Bank Credit Facilities require Forest and its subsidiaries
to meet certain financial tests, including meeting a minimum interest coverage
ratio and current ratio. The Bank Credit Facilities also contain covenants
which, among other things, will limit the incurrence of additional indebtedness,
the nature of the business of Forest and its subsidiaries, investments, leases
of assets, ownership of subsidiaries, dividends, transactions with affiliates,
asset sales, acquisitions, mergers and consolidations, Liens and other matters
customarily restricted in such agreements. The Bank Credit Facilities contain
additional covenants which will require Forest to maintain its properties and
those of its subsidiaries, together with insurance thereon, to provide certain
information to the Lender Group, including financial statements, notices and
reports and to permit inspections of the books and records of Forest and its
subsidiaries, to comply with applicable laws, including environmental laws and
ERISA, to pay taxes and contractual obligations and to use the proceeds of the
loans for working capital and other general corporate purposes.
EVENTS OF DEFAULT. The Bank Credit Facilities contain customary events of
default, including payment defaults, breach of representations, warranties and
covenants (subject to certain cure periods), cross-defaults to certain other
indebtedness, certain events of bankruptcy and insolvency, judgment defaults in
excess of $1 million and the failure of any of the loan documents to be in full
force and effect.
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THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights under the Registration
Agreement. The Exchange Notes are being offered hereunder in order to satisfy
the obligations of the Issuer and the Company under the Registration Agreement.
See "-- Registration Rights."
For each $1,000 principal amount of Old Notes surrendered to the Issuer and
the Company pursuant to the Exchange Offer, the holder of such Old Notes will
receive $1,000 principal amount of Exchange Notes. Upon the terms and subject to
the conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal, the Company and the Issuer will accept all Old Notes properly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date. Holders
may tender some or all of their Old Notes pursuant to the Exchange Offer in
integral multiples of $1,000 principal amount.
Under existing interpretations of the staff of the SEC, including EXXON
CAPITAL HOLDINGS CORPORATION, SEC No-Action Letter (available April 13, 1989),
the Morgan Stanley Letter and MARY KAY COSMETICS, INC., SEC No-Action Letter
(available June 5, 1991), the Issuer and the Company believe that the Exchange
Notes would in general be freely transferable after the Exchange Offer without
further registration under the Securities Act by the respective holders thereof
(other than a "Restricted Holder," being (i) a broker-dealer who purchased Old
Notes exchanged for such Exchange Notes directly from the Company or the Issuer
to resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an affiliate of the Issuer or the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of such Exchange Notes. Eligible holders
wishing to accept the Exchange Offer must represent to the Issuer and the
Company that such conditions have been met. Any holder of Old Notes who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes could not rely on the interpretation by the staff of the SEC
enunciated in the Morgan Stanley Letter and similar no-action letters, and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange Notes
in the Exchange Offer will be required to make certain representations,
including that (i) it is not an affiliate of the Issuer or the Company nor a
broker-dealer tendering Old Notes acquired directly from the Issuer or the
Company for its own account, (ii) any Exchange Notes to be received by it are
being acquired in the ordinary course of its business and (iii) it is not
participating in, and it has no arrangement with any person to participate in,
the distribution (within the meaning of the Securities Act) of the Exchange
Notes. In addition, in connection with any resales of Exchange Notes, any
broker-dealer (a "Participating Broker-Dealer") who acquired Old Notes for its
own account as a result of market-making activities or other trading activities
must acknowledge that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such Exchange Notes. The
staff of the SEC has taken the position in no-action letters issued to third
parties including SHEARMAN & STERLING, SEC No-Action Letter (available July 2,
1993), that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the Exchange Notes (other than a resale of an
unsold allotment from the original sale of Old Notes) with this Prospectus, as
it may be amended or supplemented from time to time. Under the Registration
Agreement, the Issuer and the Company are required to allow Participating
Broker-Dealers to use this Prospectus, as it may be amended or supplemented from
time to time, in connection with the resale of such Exchange Notes. See "Plan of
Distribution."
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The Exchange Offer shall be deemed to have been consummated upon the earlier
to occur of (i) the Issuer and the Company having exchanged Exchange Notes for
all outstanding Old Notes (other than Old Notes held by a Restricted Holder)
pursuant to the Exchange Offer and (ii) the Issuer and the Company having
exchanged, pursuant to the Exchange Offer, Exchange Notes for all Old Notes that
have been tendered and not withdrawn on the Expiration Date. In such event,
holders of Old Notes seeking liquidity in their investment would have to rely on
exemptions to registration requirements under the securities laws, including the
Securities Act.
As of the date of this Prospectus, $125,000,000 aggregate principal amount
of Old Notes are issued and outstanding. In connection with the issuance of the
Old Notes, the Company arranged for the Old Notes to be eligible for trading in
the Private Offering, Resale and Trading through Automated Linkages (PORTAL)
Market, the National Association of Securities Dealers' screen based, automated
market trading of securities eligible for resale under Rule 144A.
The Issuer and the Company shall be deemed to have accepted for exchange
validly tendered Old Notes when, as and if the Issuer and the Company have given
oral or written notice thereof to the Exchange Agent. See "-- Exchange Agent."
The Exchange Agent will act as agent for the tendering holders of Old Notes for
the purpose of receiving Exchange Notes from the Company and the Issuer and
delivering Exchange Notes to such holders. If any tendered Old Notes are not
accepted for exchange because of an invalid tender or the occurrence of certain
other events set forth herein, certificates for any such unaccepted Old Notes
will be returned, without expense, to the tendering holder thereof as promptly
as practicable after the Expiration Date. Holders of Old Notes who tender in the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Old Notes pursuant to the Exchange Offer. The Company
and the Issuer will pay all charges and expenses, other than certain applicable
taxes, in connection with the Exchange Offer. See "-- Fees and Expenses."
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of the date of this Prospectus.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1997 unless the Issuer and
the Company, in their sole discretion, extend the Exchange Offer, in which case
the term "Expiration Date" shall mean the latest date to which the Exchange
Offer is extended. In order to extend the Expiration Date, the Issuer and the
Company will notify the Exchange Agent of any extension by oral or written
notice and will mail to the record holders of Old Notes an announcement thereof,
each prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Such announcement may state that the
Company and the Issuer are extending the Exchange Offer for a specified period
of time. The Issuer and the Company reserve the right (i) to delay acceptance of
any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer
and to refuse to accept Old Notes not previously accepted, if any of the
conditions set forth herein under "-- Termination" shall have occurred and shall
not have been waived by the Company (if permitted to be waived by the Issuer and
the Company), by giving oral or written notice of such delay, extension or
termination to the Exchange Agent, and (ii) to amend the terms of the Exchange
Offer in any manner deemed by it to be advantageous to the holders of the Old
Notes. Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof. If the
Exchange Offer is amended in a manner determined by the Issuer and the Company
to constitute a material change, the Issuer and the Company will promptly
disclose such amendment in a manner reasonably calculated to inform the holders
of the Old Notes of such amendment. Without limiting the manner in which the
Issuer and the Company may choose to make public announcements of any delay in
acceptance, extension, termination or amendment of the Exchange Offer, the
Issuer and the Company shall have no obligation to
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publish, advertise, or otherwise communicate any such public announcement, other
than by making a timely release to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest payable semi-annually on March 15 and
September 15 of each year, commencing March 15, 1998. Holders of Exchange Notes
of record on March 1, 1998 will receive interest on March 15, 1998 from the date
of issuance of the Exchange Notes, plus an amount equal to the accrued interest
on the Old Notes from the date of issuance of the Old Notes, September 29, 1997,
to the date of exchange thereof. Consequently, assuming the Exchange Offer is
consummated prior to the record date in respect of the March 15, 1998 interest
payment for the Old Notes, holders who exchange their Old Notes for Exchange
Notes will receive the same interest payment on March 15, 1998 that they would
have received had they not accepted the Exchange Offer. Interest on the Old
Notes accepted for exchange will cease to accrue upon issuance of the Exchange
Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or an Agent's Message,
together with the Old Notes and any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In
addition, either (i) the certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent along with an Agent's Message prior to the Expiration Date or
(iii) the Holder must comply with the guaranteed delivery procedures described
below. The tender by a holder of Old Notes will constitute an agreement between
such holder and the Issuer and the Company in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address set
forth herein. Holders may also request that their respective brokers, dealers,
commercial banks, trust companies or nominees effect such tender for such
holders.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Issuer and the Company may
enforce such agreement against such participant.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Issuer or the Company. Only a holder of Old Notes may tender such
Old Notes in the Exchange Offer. The term "holder" with respect to the Exchange
Offer means any person in whose name Old Notes are registered on the books of
the Issuer or any other person who has obtained a properly completed stock power
from the registered holder.
Any beneficial holder whose Old Notes are registered in the name of such
holder's broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on behalf of the registered
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holder. If such beneficial holder wishes to tender directly, such beneficial
holder must, prior to completing and executing the Letter of Transmittal and
delivering his Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such holder's name or obtain a properly completed
bond power from the registered holder. The transfer of record ownership may take
considerable time. If the Letter of Transmittal is signed by the record
holder(s) of the Old Notes tendered thereby, the signature must correspond with
the name(s) written on the face of the Old Notes without alteration, enlargement
or any change whatsoever. If the Letter of Transmittal is signed by a
participant in Depositary Trust Company ("DTC"), the signature must correspond
with the name as it appears on the security position listing as the holder of
the Old Notes. Signatures on a Letter of Transmittal or a notice of withdrawal,
as the case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder (or by a
participant in DTC whose name appears on a security position listing as the
owner) who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal and the Exchange
Notes are being issued directly to such registered holder (or deposited into the
participant's account at DTC) or (ii) for the account of an Eligible
Institution. If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Old Notes on behalf of the registered holder, in either case
signed as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Old Notes
(or a timely confirmation received of a book-entry transfer of Old Notes into
the Exchange Agent's account at DTC with an Agent's Message) or a Notice of
Guaranteed Delivery from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant
to a Notice of Guaranteed Delivery by an Eligible Institution will be made only
against delivery of the Letter of Transmittal (and any other required documents)
and the tendered Old Notes (or a timely confirmation received of a book-entry
transfer of Old Notes into the Exchange Agent's account at DTC with an Agent's
Message) with the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Issuer and the Company reserve the absolute right to reject any and
all Old Notes not properly tendered or any Old Notes the Company's acceptance of
which would, in the opinion of the Company or its counsel, be unlawful. The
Issuer and the Company also reserve the absolute right to waive any conditions
of the Exchange Offer or defects or irregularities in tender as to particular
Old Notes. The Issuer and the Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Issuer and the Company shall determine. Neither the
Issuer, the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange
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Agent to the tendering holder of such Old Notes unless otherwise provided in the
Letter of Transmittal, as soon as practicable following the Expiration Date. In
addition, the Company reserves the right in its sole discretion to (i) purchase
or make offers for any Old Notes that remain outstanding subsequent to the
Expiration Date, or, as set forth under "-- Termination," to terminate the
Exchange Offer and (ii) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the Old Notes
at DTC within two business days after the date of this Prospectus, and any
financial institution which is a participant in DTC may make book-entry delivery
of the Old Notes by causing DTC to transfer such Old Notes into the Exchange
Agent's account in accordance with DTC's procedure for such transfer. Although
delivery of Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, an Agent's Message must be transmitted to and
received by the Exchange Agent on or prior to the Expiration Date at one of its
addresses set forth below under "-- Exchange Agent", or the guaranteed delivery
procedure described below must be complied with. DELIVERY OF DOCUMENTS TO DTC
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. All references in this
Prospectus to deposit or delivery of Old Notes shall be deemed to include DTC's
book-entry delivery method.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or who cannot complete the procedure for book-entry transfer on
a timely basis and deliver an Agent's Message, may effect a tender if: (i) the
tender is made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder of the Old Notes, the registration number or numbers of such Old Notes
(if applicable), and the total principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
business days after the Expiration Date, the Letter of Transmittal, together
with the Old Notes in proper form for transfer (or a confirmation of a
book-entry transfer into the Exchange Agent's account at DTC with an Agent's
Message) and any other documents required by the Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed Letter of Transmittal, together with the
certificate(s) representing all tendered Old Notes in proper form for transfer
(or a confirmation of such a book-entry transfer) and all other documents
required by the Letter of Transmittal are received by the Exchange Agent within
five business days after the Expiration Date.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms and
conditions which are summarized below and are part of the Exchange Offer.
Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of the Exchange Notes, and that such holder
is not a Restricted Holder.
Old Notes tendered in exchange for Exchange Notes (or a timely confirmation
of a book-entry transfer of such Old Notes into the Exchange Agent's account at
DTC) must be received by the
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Exchange Agent, with the Letter of Transmittal or an Agent's Message and any
other required documents, by the Expiration Date or within the time periods set
forth above pursuant to a Notice of Guaranteed Delivery from an Eligible
Institution. Each holder tendering the Old Notes for exchange sells, assigns and
transfers the Old Notes to the Exchange Agent, as agent of the Company, and
irrevocably constitutes and appoints the Exchange Agent as the holder's agent
and attorney-in-fact to cause the Old Notes to be transferred and exchanged. The
holder warrants that it has full power and authority to tender, exchange, sell,
assign and transfer the Old Notes and to acquire the Exchange Notes issuable
upon the exchange of such tendered Old Notes, that the Exchange Agent, as agent
of the Issuer and the Company, will acquire good and unencumbered title to the
tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances, and that the Old Notes tendered for exchange are not subject to
any adverse claims when accepted by the Exchange Agent, as agent of the Company.
The holder also warrants and agrees that it will, upon request, execute and
deliver any additional documents deemed by the Issuer, the Company or the
Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment and transfer of the Old Notes. All authority conferred or agreed to
be conferred in the Letter of Transmittal by the holder will survive the death,
incapacity or dissolution of the holder and any obligation of the holder shall
be binding upon the heirs, personal representatives, successors and assigns of
such holder.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date, unless previously accepted for exchange. To withdraw a
tender of Old Notes in the Exchange Offer, a written or facsimile transmission
notice of withdrawal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including, if applicable, the registration number
or numbers and total principal amount of such Old Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Trustee with respect to the Old Notes to register the transfer of
such Old Notes into the name of the Depositor withdrawing the tender, (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor and (v) if applicable because the Old Notes have been
tendered pursuant to the book-entry procedures, specify the name and number of
the participant's account at DTC to be credited, if different than that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Issuer and
the Company, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes
which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company and the
Issuer will not be required to accept for exchange any Old Notes not theretofore
accepted for exchange, and may terminate the Exchange Offer if they determine
that the Exchange Offer violates any applicable law or interpretation of the
staff of the SEC.
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If the Issuer and the Company determine that they may terminate the Exchange
Offer, as set forth above, the Issuer and the Company may (i) refuse to accept
any Old Notes and return any Old Notes that have been tendered to the holders
thereof, (ii) extend the Exchange Offer and retain all Old Notes tendered prior
to the Expiration of the Exchange Offer, subject to the rights of such holders
of tendered Old Notes to withdraw their tendered Old Notes or (iii) waive such
termination event with respect to the Exchange Offer and accept all properly
tendered Old Notes that have not been withdrawn. If such waiver constitutes a
material change in the Exchange Offer, the Issuer and the Company will disclose
such change by means of a supplement to this Prospectus that will be distributed
to each registered holder of Old Notes, and the Company will extend the Exchange
Offer for a period of five to ten business days, depending upon the significance
of the waiver and the manner of disclosure to the registered holders of the Old
Notes, if the Exchange Offer would otherwise expire during such period. Holders
of Old Notes will have certain rights against the Company and the Issuer under
the Registration Agreement should the Issuer and the Company fail to consummate
the Exchange Offer.
EXCHANGE AGENT
Marine Midland Bank has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance and requests for additional copies
of this Prospectus or of the Letter of Transmittal should be directed to the
Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Mail: By Overnight Courier:
MARINE MIDLAND BANK MARINE MIDLAND BANK
140 Broadway -- Level A 140 Broadway -- Level A
New York, New York 10005-1180 New York, New York 10005-1180
Attention: Corporate Trust Services Attention: Corporate Trust Services
(registered or certified mail recommended)
By Hand: Facsimile Transmission:
MARINE MIDLAND BANK (212) 658-2292
140 Broadway -- Level A Confirm by Telephone:
New York, New York 10005-1180 (212) 658-5931
Attention: Corporate Trust Services
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Issuer and the Company. The principal solicitation for tenders
pursuant to the Exchange Offer is being made by mail. Additional solicitations
may be made by officers and regular employees of the Issuer and the Company and
their affiliates in person, by telegraph or telephone. The Issuer and the
Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Issuer and the Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse the Exchange Agent for its reasonable out-of-pocket
expenses in connection therewith. The Issuer and the Company may also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus,
Letters of Transmittal and related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for exchange.
The other expenses incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees, will be paid by the Issuer and the
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Company. The Issuer and the Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, Exchange Notes or Old Notes not tendered or accepted for exchange are
to be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Old Notes tendered, or if tendered Old
Notes are registered in the name of any person other than the person signing the
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Issuer or
the Company upon the consummation of the Exchange Offer. The expenses of the
Exchange Offer will be amortized by the Issuer over the term of the Exchange
Notes under generally accepted accounting principles.
DESCRIPTION OF THE NOTES
The Exchange Notes will be issued and the Old Notes were issued under an
indenture dated as of September 29, 1997 (the "Indenture") between the Company,
the Issuer, and State Street Bank and Trust Company, as trustee (the "Trustee").
A copy of the Indenture is available upon request. The following summary of the
material provisions of the Indenture does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the provisions
of the Indenture, including the definitions of certain terms contained therein.
The definitions of certain capitalized terms used in the following summary are
set forth below under "-- Certain Definitions."
It is expected that the Old Notes and the Exchange Notes will constitute a
single series of debt securities under the Indenture. If the Exchange Offer is
consummated, Holders of Old Notes who do not exchange their Old Notes for
Exchange Notes will vote together with Holders of the Exchange Notes for all
relevant purposes under the Indenture. In that regard, the Indenture requires
that certain actions by the Holders thereunder (including acceleration following
an Event of Default) must be taken, and certain rights must be exercised, by
specified minimum percentages of the aggregate principal amount of the
outstanding securities issued under the Indenture. In determining whether
Holders of requisite percentage in principal amount have given any notice,
consent or waiver or taken any other action permitted under the Indenture, any
Old Notes that remain outstanding after the Exchange Offer will be aggregated
with the Exchange Notes, and the Holders of the Old Notes and the Exchange Notes
will vote together as a single series for all such purposes. Accordingly, all
references herein to specified percentages in aggregate principal amount of the
outstanding Notes shall be deemed to mean, at any time after the Exchange Offer
is consummated, such percentages in aggregate principal amount of the Old Notes
and the Exchange Notes then outstanding.
The terms of the Notes will include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (the
"1939 Act"). The following summary of certain terms and provisions of the Notes
and the Indenture does not purport to be complete and is qualified in its
entirety by reference to the 1939 Act, the Notes and the Indenture. A copy of
the Indenture and the form of Notes is available upon request to the Issuer at
the address set forth above under "Available Information."
The Indenture provides for the issuance of up to $125.0 million of Old Notes
and Exchange Notes in the aggregate and, prior to September 15, 2002, additional
notes or additional series of notes in aggregate principal amount not to exceed
$75.0 million in the aggregate (the Old Notes, any additional notes or series of
notes issued under the Indenture and the Exchange Notes are collectively
referred to
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herein as the "Notes"). All the Notes are identical in all respects other than
purchase price and issuance date, except that the Old Notes contain terms with
respect to transfer restrictions.
The definitions of certain capitalized terms used in the following summary
are set forth below under "Certain Definitions." Capitalized terms used in this
summary and not otherwise defined below have the meanings assigned to them in
the Indenture. For purposes of this "Description of the Notes," references to
the "Issuer" shall mean Canadian Forest Oil Ltd., excluding its subsidiaries,
and references to the "Company" shall mean Forest Oil Corporation, excluding its
subsidiaries.
GENERAL
The Notes will mature on September 15, 2007, and will be limited to an
aggregate principal amount of $200.0 million. The Notes will bear interest at
the rate of 8 3/4% per annum from September 29, 1997, or from the most recent
interest payment date to which interest has been paid. Interest on the Notes
will be payable semiannually on March 15 and September 15 of each year, in the
case of the Old Notes beginning on March 15, 1998, to the Person in whose name
the Note (or any predecessor Note) is registered at the close of business on the
immediately preceding March 1 or September 1, as the case may be. See "The
Exchange Offer -- Interest on the Exchange Notes." Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
The obligations of the Issuer under the Notes will be unconditionally
guaranteed on a senior subordinated and unsecured basis by the Company and,
under the circumstances described below, certain Restricted Subsidiaries of the
Company. See "-- Company Guarantee" and "-- Subsidiary Guarantees."
Principal of, premium, if any, on and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at an office or agency of
the Issuer, one of which will be maintained for such purpose in The City of New
York (which initially will be an office of the Trustee) or such other office or
agency permitted under the Indenture. At the option of the Issuer, payment of
interest may be made by check mailed to the person entitled thereto as shown on
the Security Register. The Notes will be issued in denominations of $1,000 and
integral multiples thereof.
The interest rate on the Old Notes is subject to increase in certain
circumstances (such additional interest being referred to as "Special Interest")
if the Issuer and the Company do not file a registration statement relating to
the Registered Exchange Offer on a timely basis, if such registration statement
is not declared effective on a timely basis or if certain other conditions are
not satisfied, all as further described under "Exchange Offer; Registration
Rights." All references herein to interest shall include such Special Interest,
if appropriate.
COMPANY GUARANTEE
Pursuant to the Company Guarantee, the Company will unconditionally
guarantee, on an unsecured senior subordinated basis, to each Holder of Notes
and the Trustee, the full and prompt performance of the Issuer's obligations
under the Indenture and the Notes, including the payment of principal of and
interest, premium, if any, Special Interest, if any, and Additional Amounts, if
any, on the Notes. The Company Guarantee will be subordinated as described under
"-- Subordination."
SUBSIDIARY GUARANTEES
Under the circumstances described below under "-- Certain Covenants --
Future Subsidiary Guarantors," the Issuer's payment obligations under the Notes
will be jointly and severally guaranteed by one or more Subsidiary Guarantors.
The Subsidiary Guarantee of each Subsidiary Guarantor will be an unsecured
senior subordinated obligation of such Subsidiary Guarantor. See "--
Subordination."
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Certain mergers, consolidations and dispositions of Property may result in
the addition of additional Subsidiary Guarantors or the release of Subsidiary
Guarantors. See "-- Merger, Consolidation and Sale of Substantially All Assets."
Any Subsidiary Guarantor that is designated an Unrestricted Subsidiary in
accordance with the terms of the Indenture shall be released from and relieved
of its obligations under its Subsidiary Guarantee upon execution and delivery of
a supplemental indenture satisfactory to the Trustee.
Each of the Issuer, the Company and any Subsidiary Guarantor will agree to
contribute to the Company or any Subsidiary Guarantor which makes payments
pursuant to the Company Guarantee or its Subsidiary Guarantee, as applicable, an
amount equal to the Issuer's, the Company's or such Subsidiary Guarantor's
proportionate share of such payment, based on the net worth of the Issuer, the
Company or such Subsidiary Guarantor relative to the aggregate net worth of the
Issuer, the Company and the Subsidiary Guarantors.
SUBORDINATION
The Notes will be unsecured senior subordinated obligations of the Issuer.
The payment of the principal of, premium, if any, on and interest on the Notes
will be subordinated in right of payment, as set forth in the Indenture, to the
payment when due in cash of all Senior Indebtedness of the Issuer. The Notes
will rank subordinate in right of payment to all existing and future Senior
Indebtedness of the Issuer, PARI PASSU with any future Pari Passu Indebtedness
of the Issuer and senior to any future Subordinated Indebtedness of the Issuer.
The Company Guarantee and the Subsidiary Guarantee of any Subsidiary Guarantor
will rank subordinate in right of payment to all existing and future Senior
Indebtedness, PARI PASSU with any future Pari Passu Indebtedness and senior to
any future Subordinated Indebtedness of the Company or such Subsidiary
Guarantor, as applicable.
At September 30, 1997, the Issuer had no outstanding Senior Indebtedness and
the Company had outstanding Senior Indebtedness of $78.0 million (not including
approximately $48.0 million of aggregate borrowing capacity available to the
Company and the Issuer under the Bank Credit Facilities which, if borrowed,
would be Senior Indebtedness of either the Issuer or the Company). As of such
date, the Issuer had no outstanding Pari Passu Indebtedness or Subordinated
Indebtedness, other than the Notes. As of such date, the Company had no
outstanding Subordinated Indebtedness. The approximately $9.8 million principal
amount of 11 1/4% Notes which remains outstanding constitutes Pari Passu
Indebtedness of the Company. Although the Indenture contains limitations on the
amount of additional Indebtedness that the Company and its Restricted
Subsidiaries, including the Issuer, may Incur, the amounts of such Indebtedness
could be substantial and such Indebtedness may be Senior Indebtedness or Pari
Passu Indebtedness. In addition, any Subsidiary Guarantees could be effectively
subordinated to all the obligations of the Subsidiary Guarantors under certain
circumstances. The Notes, the Company Guarantee and any Subsidiary Guarantees
will also be effectively subordinated to any secured Indebtedness of the Issuer,
the Company and the Subsidiary Guarantors that is not otherwise Senior
Indebtedness. See "-- Certain Covenants -- Limitation on Indebtedness" and "Risk
Factors -- Subordination" and "-- Possible Limitations on Enforceability of
Guarantees."
Neither the Issuer nor the Company may pay principal of, premium, if any, on
or interest on, the Notes or the Company Guarantee or make any deposit pursuant
to the provisions of the Indenture described under "-- Defeasance and Covenant
Defeasance" or repurchase, redeem or otherwise retire any Notes (collectively,
"pay the Notes") if (i) any principal, premium, interest or other amounts due in
respect of any Senior Indebtedness of the Issuer or the Company is not paid
within any applicable grace period (including at maturity) or (ii) any other
default on Senior Indebtedness of the Issuer or the Company occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Senior Indebtedness has been paid in
full; PROVIDED, HOWEVER, that the Issuer or the Company, as applicable, may pay
the Notes without regard to the foregoing if the Issuer or the Company and the
Trustee receive written
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notice approving such payment from the Representative of each issue of
Designated Senior Indebtedness of the Issuer or the Company. During the
continuance of any default (other than a default described in clause (i) or
clause (ii) of the preceding sentence) with respect to any Designated Senior
Indebtedness of the Issuer or the Company pursuant to which the maturity thereof
may be accelerated immediately without further notice (except such notice as may
be required to effect such acceleration), neither the Issuer nor the Company, as
applicable, may pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Issuer or the Company and the Trustee of
written notice of such default from the Representative of the holders of such
Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period (a "Payment Blockage Notice") and ending 179 days after receipt
of such notice by the Issuer or the Company and the Trustee unless earlier
terminated (a) by written notice to the Issuer or the Company and the Trustee
from the Representative which gave such Payment Blockage Notice, (b) because
such default is no longer continuing or (c) because such Designated Senior
Indebtedness has been repaid in full in cash. Notwithstanding the provisions
described in the immediately preceding sentence, unless the holders of such
Designated Senior Indebtedness or the Representative of such holders have
accelerated the maturity of such Designated Senior Indebtedness and not
rescinded such acceleration, the Issuer or the Company, as applicable, may
(unless otherwise prohibited as described in the first sentence of this
paragraph) resume payments on the Notes after the end of such Payment Blockage
Period. No more than one Payment Blockage Notice may be given in any consecutive
360-day period regardless of the number of defaults with respect to one or more
issues of Senior Indebtedness of the Issuer or the Company.
Upon any payment or distribution of the assets of the Issuer or the Company
upon a total or partial liquidation, dissolution or winding up of the Issuer or
the Company or in a bankruptcy, reorganization, insolvency, receivership, or
similar proceeding relating to the Issuer or the Company or its property, the
holders of Senior Indebtedness of the Issuer or the Company will be entitled to
receive payment in full in cash before the Holders of the Notes are entitled to
receive any payment of principal of, or premium, if any, or interest on, the
Notes or the Company Guarantee. In addition, until the Senior Indebtedness of
the Issuer or the Company is paid in full, any distribution made by or on behalf
of the Issuer or the Company to which Holders of Notes would be entitled but for
the subordination provisions of the Indenture will be made to holders of the
Senior Indebtedness of the Issuer or the Company, except that Holders of Notes
may receive and retain shares of stock and any debt securities that are
subordinated to all Senior Indebtedness of the Issuer or the Company to at least
the same extent as the Notes or the Company Guarantee.
The Subsidiary Guarantee of any Subsidiary Guarantor will be subordinated to
Senior Indebtedness of such Subsidiary Guarantor to the same extent and in the
same manner as the Notes and the Company Guarantee are subordinated to Senior
Indebtedness of the Issuer and the Company.
The Indenture provides that the subordination provisions of the Indenture
applicable to the Notes, the Company Guarantee and any Subsidiary Guarantees may
not be amended, waived or modified in a manner that would adversely affect the
rights of the holders of any Designated Senior Indebtedness unless the holders
of such Indebtedness consent in writing (in accordance with the provisions of
such Indebtedness) to such amendment, waiver or modification.
OPTIONAL REDEMPTION
Except as provided in the next succeeding paragraph, the Notes are not
redeemable prior to September 15, 2002. At any time on or after September 15,
2002, the Notes are redeemable at the option of the Issuer, in whole or in part
(equal to $1,000 in principal amount or an integral multiple thereof), on not
less than 30 nor more than 60 days' prior notice, at the following redemption
prices (expressed as percentages of principal amount), plus accrued and unpaid
interest, if any, to the date of redemption (subject to the right of Holders of
record on the relevant record date to receive interest due on the
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relevant interest date), if redeemed during the 12-month period commencing on
September 15 of the years indicated below.
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---------------------------------------------------------------------- ------------
<S> <C>
2002.................................................................. 104.375%
2003.................................................................. 102.917%
2004.................................................................. 101.458%
2005 and thereafter................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to September 15, 2000 the Issuer may,
at any time or from time to time, redeem up to 33 1/3% of the aggregate
principal amount of the Notes originally issued at a redemption price of 108.75%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of redemption (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), with the net proceeds of one or more Equity Offerings of the Company,
PROVIDED that at least 66 2/3% of the aggregate principal amount of the Notes
originally issued remains outstanding after the occurrence of such redemption
and PROVIDED, FURTHER, that such redemption shall occur not later than 90 days
after the date of the closing of any such Equity Offering. The redemption shall
be made in accordance with procedures set forth in the Indenture.
If less than all the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate.
REDEMPTION FOR CHANGES IN CANADIAN WITHHOLDING TAXES
The Notes will be subject to redemption as a whole, but not in part, at the
option of the Issuer at any time, on not less than 30 nor more than 60 days'
prior written notice, at 100% of the principal amount thereof, plus accrued and
unpaid interest thereon (if any) to the redemption date, in the event that any
Obligor (as defined in "-- Additional Amounts") has become, or would become,
obligated to pay, on the next date on which any amount would be payable with
respect to the Notes, any Additional Amounts (as defined in "-- Additional
Amounts") as a result of a change in the laws (including any regulations
promulgated thereunder) of Canada (or any political subdivision or taxing
authority thereof or therein), or any change in any official position regarding
the application or interpretation of such laws or regulations, which change is
announced or becomes effective on or after the Issue Date; PROVIDED, HOWEVER,
that (a) no such notice of redemption shall be given earlier than 60 days prior
to the earliest date on which such Obligor would be obligated to pay such
Additional Amounts if a payment in respect of the Notes were then due, and (b)
at the time any such redemption notice is given, such obligation to pay
Additional Amounts must remain in effect. Prior to any redemption of the Notes,
the Issuer shall deliver to the Trustee or any paying agent an Officer's
Certificate stating that the Issuer is entitled to effect such redemption and
setting forth a statement of facts showing that the conditions precedent to the
right of redemption have occurred.
ADDITIONAL AMOUNTS
All payments made by the Issuer under or with respect to the Notes, by the
Company under or with respect to the Company Guarantee and by any Subsidiary
Guarantor under or with respect to its Subsidiary Guarantee (the Issuer, the
Company and any such Subsidiary Guarantor being referred to for purposes of this
section "Additional Amounts" individually as an "Obligor" and collectively as
the "Obligors") will be made free and clear of, and without withholding or
deduction for or on account of, any present or future tax, duty, levy, impost,
assessment or other governmental charge imposed or levied by or on behalf of the
Government of Canada or of any province or territory thereof or by any authority
or agency therein or thereof having power to tax (or the jurisdiction of
incorporation of any successor of any
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Obligor) (hereunder "Taxes"), unless the applicable Obligor or any successor, as
the case may be, is required to withhold or deduct Taxes by law or by the
interpretation or administration thereof by the relevant governmental authority
or agency. If any Obligor or any successor, as the case may be, is so required
to withhold or deduct any amount for or on account of Taxes from any payment
made under or with respect to the Notes, the Company Guarantee or any Subsidiary
Guarantee, such Obligor will pay such additional amounts ("Additional Amounts")
as may be necessary so that the net amount received by each Holder (including
Additional Amounts) after such withholding or deduction will not be less than
the amount the Holder would have received if such Taxes had not been withheld or
deducted; PROVIDED that no Additional Amounts will be payable with respect to a
payment made to a Holder (an "Excluded Holder") in respect of a beneficial owner
(i) with which the Issuer does not deal at arm's length (within the meaning of
the Income Tax Act (Canada)) at the time of making such payment or (ii) which is
subject to such Taxes by reason of its being connected with Canada or any
province or territory thereof otherwise than by the mere acquisition, holding or
disposition of Notes or the receipt of payments thereunder. The Obligors will
also (i) make such withholding or deduction and (ii) remit the full amount
deducted or withheld to the relevant government authority in accordance with
applicable law. The Obligors will furnish to the Holders, within 30 days after
the date the payment of any Taxes is due pursuant to applicable law, certified
copies of tax receipts evidencing such payment. The Obligors will, jointly and
severally, indemnify and hold harmless each Holder (other than an Excluded
Holder) and upon written request reimburse each such Holder for the amount of
(i) any Taxes so levied or imposed and paid by such Holder as a result of
payments made under or with respect to the Notes, the Company Guarantee or any
Subsidiary Guarantee, (ii) any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, and (iii) any Taxes imposed
with respect to any reimbursement under (i) or (ii) so that the net amount
received by such Holder after such reimbursement will not be less than the net
amount the Holder would have received if Taxes on such reimbursement had not
been imposed.
At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable, if the Issuer will be obligated to pay
Additional Amounts with respect to such payment, the Issuer will deliver to the
Trustee an Officers' Certificate stating the fact that such Additional Amounts
will be payable, the amounts so payable and will set forth such other
information necessary to enable the Trustee to pay such Additional Amounts to
Holders on the payment date. Whenever in the Indenture there is mentioned, in
any context, the payment of principal (and premium, if any), redemption price,
Change of Control Payment, Prepayment Offer, purchase price, interest or any
other amount payable under or with respect to any Note, such mention shall be
deemed to include mention of the payment of Additional Amounts to the extent
that, in such context, Additional Amounts are, were or would be payable in
respect thereof.
The Issuer will pay any present or future stamp, court or documentary taxes
or any other excise or property taxes, charges or similar levies that arise in
any jurisdiction from the execution, delivery, enforcement or registration of
the Notes or any other document or instrument in relation thereto, or the
receipt of any payments with respect to the Notes, excluding such taxes, charges
or similar levies imposed by any jurisdiction outside of Canada, the
jurisdiction of incorporation of any successor of the Issuer or any jurisdiction
in which a paying agent is located, and has agreed to indemnify the Holders for
any such taxes paid by such Holders.
The foregoing obligations shall survive any termination, defeasance or
discharge of the Indenture.
For a discussion of the exemption from Canadian withholding taxes applicable
to payments under or with respect to the Notes and the Subsidiary Guarantees,
see "Certain United States and Canadian Federal Income Tax Considerations --
Certain Canadian Federal Income Tax Considerations."
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
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REPURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes shall have
the right to require the Issuer to repurchase all or any part (equal to $1,000
in principal amount or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase, subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date (the "Change of Control Payment").
Within 30 days following any Change of Control, the Issuer shall mail a
notice to each Holder stating, among other things: (i) that a Change of Control
has occurred and a Change of Control Offer is being made pursuant to the
Indenture and that all Notes (or portions thereof) properly tendered will be
accepted for payment; (ii) the purchase price and the purchase date, which shall
be, subject to any contrary requirements of applicable law, no fewer than 30
days nor more than 60 days from the date the Issuer mails such notice (the
"Change of Control Payment Date"); (iii) that any Note (or portion thereof)
accepted for payment (and duly paid on the Change of Control Payment Date)
pursuant to the Change of Control Offer shall cease to accrue interest on the
Change of Control Payment Date; (iv) that any Notes (or portions thereof) not
properly tendered will continue to accrue interest; (v) a description of the
transaction or transactions constituting the Change of Control; (vi) the
procedures that Holders of Notes must follow in order to tender their Notes (or
portions thereof) for payment and the procedures that Holders of Notes must
follow in order to withdraw an election to tender Notes (or portions thereof)
for payment; and (vii) all other instructions and materials necessary to enable
Holders to tender Notes pursuant to the Change of Control Offer. Prior to the
mailing of the notice to Holders of Notes described above, but in any event
within 30 days following any Change of Control, the Company covenants to (i)
repay or cause to be repaid in full all Indebtedness of the Company, the Issuer
and any Subsidiary Guarantor that would prohibit the repurchase of the Notes
pursuant to such Change of Control Offer or (ii) obtain any requisite consents
under instruments governing any such Indebtedness of the Company, the Issuer and
any Subsidiary Guarantor to permit the repurchase of the Notes. The Company
shall first comply with the covenant in the preceding sentence before it shall
repurchase Notes pursuant to this "Repurchase at the Option of Holders Upon a
Change of Control" covenant.
If the Company is unable to repay or cause to be repaid all Indebtedness
that would prohibit the repurchase of the Notes or is unable to obtain the
consents of the Holders of Indebtedness, if any, outstanding at the time of a
Change of Control whose consent would be so required to permit the repurchase of
the Notes validly tendered, then the Company will have breached such covenant.
This breach will constitute an Event of Default under the Indenture if it
continues for a period of 30 consecutive days after written notice is given to
the Company by the Trustee or the Holders of at least 25% in aggregate principal
amounts of the Notes outstanding. In addition, the failure by the Issuer to
repurchase Notes at the conclusion of the Change of Control Offer will
constitute an Event of Default under the Indenture without any waiting period or
notice requirements. Such Event of Default would, in turn, constitute a default
under the existing Bank Credit Facilities and may constitute a default under the
terms of any other Indebtedness of the Issuer, the Company or any Subsidiary
Guarantor then outstanding. In such circumstances, the subordination provisions
in the Indenture would likely prohibit payments to Holders of Notes. See "--
Subordination."
The Company and the Issuer will comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the purchase of Notes in connection with a Change
of Control. To the extent that the provisions of any securities laws or
regulations conflict with the provisions relating to the Change of Control
Offer, the Company and the Issuer will comply with the applicable securities
laws and regulations and will not be deemed to have breached its obligations
described above by virtue thereof.
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The Issuer's obligation to repurchase the Notes upon a Change of Control
will be guaranteed on a senior subordinated basis by the Company pursuant to the
Company Guarantee and, to the extent any Restricted Subsidiary becomes a
Subsidiary Guarantor, by such Subsidiary Guarantor pursuant to its Subsidiary
Guarantee.
If a Change of Control were to occur, there can be no assurance that the
Issuer, the Company and the Subsidiary Guarantors, if any, would have sufficient
financial resources, or would be able to arrange financing, to repay any
Indebtedness that would prohibit the repurchase of the Notes and pay the
purchase price for all Notes tendered by the Holders thereof. In addition, as of
the Issue Date the existing Bank Credit Facilities will, and any future Bank
Credit Facilities or other agreements relating to indebtedness (including Senior
Indebtedness or Pari Passu Indebtedness) to which the Issuer, the Company or a
Subsidiary Guarantor becomes a party may, contain restrictions on the purchase
of Notes. The provisions under the Indenture related to the Issuer's obligation
to make an offer to repurchase the Notes as a result of a Change of Control may
be waived or modified (at any time prior to the occurrence of such Change of
Control) with the written consent of the Holders of a majority in principal
amount of the Notes, PROVIDED that the written consent of all the Holders of
outstanding Notes is required with respect to any such waiver or modification
that would result in the imposition of any Taxes or the payment of any
Additional Amounts.
The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party (including the Company or another Subsidiary
of the Company) makes the Change of Control Offer in the manner, at the times
and otherwise in compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Issuer and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
A "Change of Control" shall be deemed to occur if (i) any "person" or
"group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange
Act or any successor provision to either of the foregoing, including any group
acting for the purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13d-5(b)(1) under the Exchange Act), becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person will be deemed to have "beneficial ownership" of all shares that any
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time) of more than 50% of the total
voting power of all classes of the Voting Stock of the Company or, unless such
person is a Restricted Subsidiary, the Issuer or currently exercisable warrants
or options to acquire such Voting Stock, (ii) the sale, lease, conveyance or
transfer of all or substantially all the assets of the Company and the
Restricted Subsidiaries taken as a whole (other than to any Wholly Owned
Subsidiary) shall have occurred, (iii) the shareholders of the Company or the
Issuer shall have approved any plan of liquidation or dissolution of the Company
or the Issuer, (iv) the Company or the Issuer consolidates with or merges into
another Person or any Person consolidates with or merges into the Company or the
Issuer in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company or the Issuer is reclassified into or exchanged for
cash, securities or other property, other than any such transaction where the
outstanding Voting Stock of the Company or the Issuer is reclassified into or
exchanged for Voting Stock of the surviving corporation that is Capital Stock
and the holders of the Voting Stock of the Company or the Issuer immediately
prior to such transaction own, directly or indirectly, not less than a majority
of the Voting Stock of the surviving corporation immediately after such
transaction in substantially the same proportion as before the transaction or
(v) during any period of two consecutive years, individuals who at the beginning
of such period constituted the Company's or the Issuer's Board of Directors
(together with any new directors whose election or appointment by such Board or
whose nomination for election by the shareholders of the Company or the Issuer
was approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Company's or the Issuer's Board of Directors then
in office.
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The definition of Change of Control includes a phrase relating to the sale,
lease, conveyance or transfer of "all or substantially all" the Company's and
its Restricted Subsidiaries' assets taken as a whole. The Indenture will be
governed by New York law, and there is no established quantitative definition
under New York law of "substantially all" the assets of a corporation.
Accordingly, if the Company and its Restricted Subsidiaries were to engage in a
transaction in which they disposed of less than all the assets of the Company
and its Restricted Subsidiaries taken as a whole, a question of interpretation
could arise as to whether such disposition was of "substantially all" their
assets and whether the Issuer was required to make a Change of Control Offer.
Except as described above with respect to a Change of Control, the Indenture
does not contain any other provisions that permit the Holders of the Notes to
require that the Issuer repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar restructuring.
BOOK-ENTRY SYSTEM
The Notes will initially be issued in the form of one or more Global
Securities held in book-entry form. The Notes will be deposited with the Trustee
as custodian for the Depository, and the Depository or its nominee will
initially be the sole registered holder of the Notes for all purposes under the
Indenture. Except as set forth below, a Global Security may not be transferred
except as a whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository.
Upon the issuance of a Global Security, the Depository or its nominee will
credit, on its internal system, the accounts of persons holding through it with
the respective principal amounts of the individual beneficial interests
represented by such Global Security purchased by such persons in the Offering.
Such accounts shall initially be designated by the Initial Purchasers with
respect to Notes placed by the Initial Purchasers for the Issuer. Ownership of
beneficial interests in a Global Security will be limited to persons that have
accounts with the Depository ("participants") or persons that may hold interests
through participants. Any Person acquiring an interest in a Global Security
through an offshore transaction in reliance on Regulation S of the Securities
Act may hold such interest through Cedel or Euroclear. Ownership of beneficial
interests by participants in a Global Security will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depository or its nominee for such Global Security. Ownership
of beneficial interests in such Global Security by persons that hold through
participants will be shown on, and the transfer of that ownership interest
within such participant will be effected only through, records maintained by
such participant. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
Payment of principal of, premium, if any, on and interest on Notes
represented by any such Global Security will be made to the Depository or its
nominee, as the case may be, as the sole registered owner and the sole Holder of
the Notes represented thereby for all purposes under the Indenture. None of the
Issuer, the Company, the Trustee, any agent of the Issuer or the Company and the
Initial Purchasers will have any responsibility or liability for any aspect of
the Depository's reports relating to or payments made on account of beneficial
ownership interests in a Global Security representing any Notes or for
maintaining, supervising or reviewing any of the Depository's records relating
to such beneficial ownership interests.
The Issuer has been advised by the Depository that upon receipt of any
payment of principal of, premium, if any, on or interest on any Global Security,
the Depository will immediately credit, on its book-entry registration and
transfer system, the accounts of participants with payments in amounts
proportionate to their respective beneficial interests in the principal or face
amount of such Global Security, as shown on the records of the Depository. The
Issuer expects that payments by participants to owners of beneficial interests
in a Global Security held through such participants will be governed by standing
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instructions and customary practices as is now the case with securities held for
customer accounts registered in "street name" and will be the sole
responsibility of such participants.
So long as the Depository or its nominee is the registered owner or holder
of such Global Security, the Depository or such nominee, as the case may be,
will be considered the sole owner or holder of the Notes represented by such
Global Security for the purposes of receiving payment on the Notes, receiving
notices and for all other purposes under the Indenture and the Notes. Beneficial
interests in Notes will be evidenced only by, and transfers thereof will be
effected only through, records maintained by the Depository and its
participants. Except as provided above, owners of beneficial interests in a
Global Security will not be entitled to and will not be considered the holders
of such Global Security for any purposes under the Indenture. Accordingly, each
person owning a beneficial interest in a Global Security must rely on the
procedures of the Depository and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the Indenture. The Issuer understands that
under existing industry practices, if the Issuer requests any action of holders
or that an owner of a beneficial interest in a Global Security desires to give
or take any action that a Holder is entitled to give or take under the
Indenture, the Depository would authorize the participants holding the relevant
beneficial interest to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
The Depository has advised the Issuer that it will take any action permitted
to be taken by a Holder of Notes (including the presentation of Notes for
exchange as described below) only at the direction of one or more participants
to whose account with the Depository interests in a Global Security are credited
and only in respect of such portion of the aggregate principal amount of the
Notes as to which such participant or participants has or have given such
direction.
The Depository has advised the Issuer that the Depository is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a "banking organization" within the meaning of New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the Exchange Act. The Depository was created to hold the
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (including the
Initial Purchasers), banks, trust companies, clearing corporations and certain
other organizations some of whom (or their representatives) own the Depository.
Access to the Depository's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
CERTIFICATED NOTES
The Notes represented by a Global Security are exchangeable for certificated
Notes only if (i) the Depository notifies the Issuer that it is unwilling or
unable to continue as a depository for such Global Security or if at any time
the Depository ceases to be a clearing agency registered under the Exchange Act,
and a successor depository is not appointed by the Company within 90 days, (ii)
the Issuer executes and delivers to the Trustee a notice that such Global
Security shall be so transferable, registrable and exchangeable, and such
transfer shall be registrable, or (iii) there shall have occurred and be
continuing a Default or Event of Default with respect to the Notes represented
by such Global Security. Any Global Security that is exchangeable for
certificated Notes pursuant to the preceding sentence will be transferred to,
and registered and exchanged for, certificated Notes in authorized denominations
and registered in such names as the Depository or its nominee holding such
Global Security may direct. Subject to the foregoing, a Global Security is not
exchangeable, except for a Global Security of like denomination
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to be registered in the name of the Depository or its nominee. If a Global
Security becomes exchangeable for certificated Notes, (i) certificated Notes
will be issued only in fully registered form in denominations of $1,000 or an
integral multiple thereof, (ii) payment of principal of, and premium, any
repurchase price and interest on, the certificated Notes will be payable, and
the transfer of the certificated Notes will be registrable, at the office or
agency of the Issuer maintained for such purposes and (iii) no service charge
will be made for any issuance of the certificated Notes, although the Issuer may
require payment of a sum sufficient to cover any transfer tax, assessment or
similar governmental charge imposed in connection therewith. In addition,
certificates representing the Old Notes will bear the legend referred to under
"Notice to Investors" (unless the Issuer determines otherwise in accordance with
applicable law) subject, with respect to such Notes, to the provisions of such
legend.
CERTAIN COVENANTS
LIMITATION ON INDEBTEDNESS. The Indenture provides that the Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur any Indebtedness unless, after giving pro forma effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, no Default or Event of Default would occur as a consequence of, or be
continuing following, such Incurrence and application and either (a) after
giving pro forma effect to such Incurrence and application, the Consolidated
Interest Coverage Ratio would exceed 2.5 to 1.0 or (b) such Indebtedness is
Permitted Indebtedness.
"PERMITTED INDEBTEDNESS" means any and all of the following: (i)
Indebtedness arising under the Indenture with respect to the Old Notes and the
Exchange Notes and the Company Guarantee and any Subsidiary Guarantees relating
thereto; (ii) Indebtedness (including guarantees) under Bank Credit Facilities,
PROVIDED that the aggregate principal amount of all Indebtedness under Bank
Credit Facilities, together with all Indebtedness Incurred pursuant to clause
(x) of this paragraph in respect of Indebtedness previously Incurred under Bank
Credit Facilities, at any one time outstanding does not exceed the greater of
(a) $150.0 million, which amount shall be permanently reduced by the amount of
Net Available Cash from Asset Sales used to permanently repay Indebtedness under
Bank Credit Facilities and not subsequently reinvested in Additional Assets or
used to permanently reduce other Indebtedness to the extent permitted pursuant
to the provisions of the Indenture described under "-- Limitation on Asset
Sales" and (b) an amount equal to the sum of (1) $35.0 million and (2) 25% of
Adjusted Consolidated Net Tangible Assets determined as of the date of the
Incurrence of such Indebtedness; (iii) Indebtedness to the Company or any Wholly
Owned Subsidiary by any of its Restricted Subsidiaries or Indebtedness of the
Company to any of its Wholly Owned Subsidiaries (but only so long as such
Indebtedness is held by the Company or a Wholly Owned Subsidiary); (iv)
Indebtedness in respect of bid, performance, reimbursement or surety obligations
issued by or for the account of the Company or any Restricted Subsidiary in the
ordinary course of business, including Guarantees and letters of credit
functioning as or supporting such bid, performance, reimbursement or surety
obligations (in each case other than for an obligation for money borrowed); (v)
Indebtedness under Permitted Hedging Agreements; (vi) in-kind obligations
relating to oil or gas balancing positions arising in the ordinary course of
business; (vii) Indebtedness outstanding on the Issue Date not otherwise
permitted in clauses (i) through (vi) above; (viii) Non-recourse Purchase Money
Indebtedness; (ix) Indebtedness not otherwise permitted to be Incurred pursuant
to this paragraph (excluding any Indebtedness Incurred pursuant to clause (a) of
the immediately preceding paragraph), PROVIDED that the aggregate principal
amount of all Indebtedness Incurred pursuant to this clause (ix), together with
all Indebtedness Incurred pursuant to clause (x) of this paragraph in respect of
Indebtedness previously Incurred pursuant to this clause (ix), at any one time
outstanding does not exceed $30.0 million; (x) Indebtedness Incurred in exchange
for, or the proceeds of which are used to refinance, (a) Indebtedness referred
to in clauses (i), (ii), (vii), (viii) and (ix) of this paragraph (including
Indebtedness previously Incurred pursuant to this clause (x)) and (b)
Indebtedness Incurred pursuant to clause (a) of the immediately preceding
paragraph, PROVIDED that, in the case of each of the foregoing clauses (a) and
(b), such Indebtedness is Permitted Refinancing
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Indebtedness and (xi) Indebtedness consisting of obligations in respect of
purchase price adjustments, indemnities or Guarantees of the same or similar
matters in connection with the acquisition or disposition of Property.
LIMITATION ON LIENS. The Indenture provides that the Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter
into, create, Incur, assume or suffer to exist any Lien on or with respect to
any Property of the Company or such Restricted Subsidiary, whether owned on the
Issue Date or acquired after the Issue Date, or any interest therein or any
income or profits therefrom, unless the Notes, the Company Guarantee or any
Subsidiary Guarantee of such Restricted Subsidiary, as applicable, are secured
equally and ratably with (or prior to) any and all other obligations secured by
such Lien, except that the Company and its Restricted Subsidiaries may enter
into, create, incur, assume or suffer to exist Liens securing Senior
Indebtedness and Permitted Liens.
LIMITATION ON RESTRICTED PAYMENTS.
(a) The Indenture provides that the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, make any Restricted
Payment if, at the time of and after giving effect to the proposed Restricted
Payment, (i) any Default or Event of Default would have occurred and be
continuing, (ii) the Company could not Incur at least $1.00 of additional
Indebtedness pursuant to clause (a) of the first paragraph under "-- Limitation
on Indebtedness" or (iii) the aggregate amount expended or declared for all
Restricted Payments from the Issue Date would exceed the sum (without
duplication) of the following:
(A) 50% of the aggregate Consolidated Net Income of the Company accrued
on a cumulative basis commencing on the last day of the fiscal quarter
immediately preceding the Issue Date, and ending on the last day of the
fiscal quarter ending on or immediately preceding the date of such proposed
Restricted Payment (or, if such aggregate Consolidated Net Income shall be a
loss, minus 100% of such loss), plus
(B) the aggregate net cash proceeds, or the Fair Market Value of
Property other than cash, received by the Company on or after the Issue Date
from the issuance or sale (other than to a Subsidiary of the Company) of
Capital Stock of the Company or any options, warrants or rights to purchase
Capital Stock of the Company, plus
(C) the aggregate net cash proceeds, or the Fair Market Value of
Property other than cash, received by the Company as capital contributions
to the Company (other than from a Subsidiary of the Company) on or after the
Issue Date, plus
(D) the aggregate net cash proceeds received by the Company from the
issuance or sale (other than to any Subsidiary of the Company) on or after
the Issue Date of convertible Indebtedness that has been converted into or
exchanged for Capital Stock of the Company, together with the aggregate cash
received by the Company at the time of such conversion or exchange or
received by the Company from any such conversion or exchange of convertible
Indebtedness issued or sold (other than to any Subsidiary of the Company)
prior to the Issue Date, plus
(E) to the extent not otherwise included in the Company's Consolidated
Net Income, an amount equal to the net reduction in Investments made by the
Company and its Restricted Subsidiaries subsequent to the Issue Date in any
Person resulting from (1) payments of interest on debt, dividends,
repayments of loans or advances or other transfers or distributions of
Property, in each case to the Company or any Restricted Subsidiary from any
Person other than the Company or a Restricted Subsidiary, and in an amount
not to exceed the book value of such Investments previously made in such
Person that were treated as Restricted Payments, or (2) the designation of
any Unrestricted Subsidiary as a Restricted Subsidiary, and in an amount not
to exceed the lesser of
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(x) the book value of all Investments previously made in such Unrestricted
Subsidiary that were treated as Restricted Payments and (y) the Fair Market
Value of such Unrestricted Subsidiary, plus
(F) $25.0 million.
(b) The limitations set forth in paragraph (a) above will not prevent the
Company or any Restricted Subsidiary from making the following Restricted
Payments so long as, at the time thereof, no Default or Event of Default shall
have occurred and be continuing (except in the case of clause (i) below under
which the payment of a dividend is permitted):
(i) the payment of any dividend on Capital Stock or Redeemable Stock of
the Company or any Restricted Subsidiary within 60 days after the
declaration thereof, if at such declaration date such dividend could have
been paid in compliance with paragraph (a) above;
(ii) the repurchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any of its Subsidiaries held by
any current or former officers, directors or employees of the Company or any
of its Subsidiaries pursuant to the terms of agreements (including
employment agreements) or plans approved by the Company's Board of
Directors, including any such repurchase, redemption, acquisition or
retirement of shares of such Capital Stock that is deemed to occur upon the
exercise of stock options or similar rights if such shares represent all or
a portion of the exercise price or are surrendered in connection with
satisfying United States or Canadian Federal income tax obligations;
PROVIDED, HOWEVER, that the aggregate amount of such repurchases,
redemptions, acquisitions and retirements shall not exceed the sum of (a)
$1.0 million in any twelve-month period and (b) the aggregate net proceeds,
if any, received by the Company during such twelve-month period from any
issuance of such Capital Stock pursuant to such agreements or plans;
(iii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock or Redeemable Stock of the Company or any
Restricted Subsidiary, in exchange for, or out of the aggregate net cash
proceeds of, a substantially concurrent issuance and sale (other than to a
Subsidiary of the Company or an employee stock ownership plan or trust
established by the Company or any of its Subsidiaries, for the benefit of
their employees) of Capital Stock of the Company;
(iv) the making of any principal payment on or the repurchase,
redemption, legal defeasance or other acquisition or retirement for value,
prior to any scheduled principal payment, scheduled sinking fund payment or
maturity, of any Subordinated Indebtedness (other than Redeemable Stock) in
exchange for, or out of the aggregate net cash proceeds of, a substantially
concurrent issuance and sale (other than to a Subsidiary of the Company or
an employee stock ownership plan or trust established by the Company or any
of its Subsidiaries, for the benefit of their employees) of Capital Stock of
the Company;
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(v) the making of any principal payment on or the repurchase,
redemption, legal defeasance or other acquisition or retirement for value of
Subordinated Indebtedness in exchange for, or out of the aggregate net cash
proceeds of a substantially concurrent Incurrence (other than a sale to a
Subsidiary of the Company) of Subordinated Indebtedness so long as such new
Indebtedness is Permitted Refinancing Indebtedness and (A) has an Average
Life that is longer than the Average Life of the Notes and (B) has a Stated
Maturity for its final scheduled principal payment that is more than one
year after the Stated Maturity of the final scheduled principal payment of
the Notes; and
(vi) loans made to officers, directors or employees of the Company or
any Restricted Subsidiary approved by the Board of Directors (or a duly
authorized officer), the net cash proceeds of which are used solely (A) to
purchase common stock of the Company in connection with a restricted stock
or employee stock purchase plan, or to exercise stock options received
pursuant to an employee or director stock option plan or other incentive
plan, in a principal amount not to exceed the exercise price of such stock
options or (B) to refinance loans, together with accrued interest thereon,
made pursuant to item (A) of this clause (vi).
The actions described in clauses (i) and (ii) of this paragraph (b) shall be
included in the calculation of the amount of Restricted Payments. The actions
described in clauses (iii), (iv), (v) and (vi) of this paragraph (b) shall be
excluded in the calculation of the amount of Restricted Payments, PROVIDED that
the net cash proceeds from any issuance or sale of Capital Stock of the Company
pursuant to such clauses (iii), (iv) or (vi) shall be excluded from any
calculations pursuant to clauses (B) or (C) under the immediately preceding
paragraph (a).
LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Indenture provides that the Company will not (a) permit any
Restricted Subsidiary to issue any Capital Stock or Redeemable Stock other than
to the Company or one of its Wholly Owned Subsidiaries or (b) permit any Person
other than the Company or a Wholly-Owned Subsidiary to own any Capital Stock or
Redeemable Stock of any other Restricted Subsidiary (other than directors'
qualifying shares), except, in each case, for (i) the sale of the Capital Stock
or Redeemable Stock of a Restricted Subsidiary owned by the Company or any other
Restricted Subsidiary effected in accordance with the provisions of the
Indenture described under "-- Limitation on Asset Sales"; (ii) the issuance of
Capital Stock or Redeemable Stock by a Restricted Subsidiary to a Person other
than the Company or a Restricted Subsidiary and (iii) the Capital Stock or
Redeemable Stock of a Restricted Subsidiary owned by a Person at the time such
Restricted Subsidiary became a Restricted Subsidiary or acquired by such Person
in connection with the formation of the Restricted Subsidiary, or transfers
thereof; PROVIDED, that the Issuer shall at all times remain a Restricted
Subsidiary; PROVIDED FURTHER, that any sale or issuance of Capital Stock of a
Restricted Subsidiary shall be deemed to be an Asset Sale to the extent the
percentage of the total outstanding Voting Stock of such Restricted Subsidiary
owned directly and indirectly by the Company is reduced as a result of such sale
or issuance; PROVIDED, FURTHER that if a Person whose Capital Stock was issued
or sold in a transaction described in this paragraph is, as a result of such
transaction, no longer a Restricted Subsidiary, then the Fair Market Value of
Capital Stock of such Person retained by the Company and the other Restricted
Subsidiaries shall be treated as an Investment for purposes of the provisions of
the Indenture described under "-- Limitation on Restricted Payments". In the
event of the consummation of a sale of all the Capital Stock of a Restricted
Subsidiary pursuant to the foregoing clause (i) and the execution and delivery
of a supplemental indenture in form satisfactory to the Trustee, any such
Restricted Subsidiary that is also a Subsidiary Guarantor shall be released from
all its obligations under its Subsidiary Guaranty.
LIMITATION ON ASSET SALES. The Indenture provides that the Company will
not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale
unless (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the Property subject to such Asset Sale and (ii) all of the
consideration paid to the
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Company or such Restricted Subsidiary in connection with such Asset Sale is in
the form of cash, cash equivalents, Liquid Securities, Exchanged Properties or
the assumption by the purchaser of liabilities of the Company (other than
liabilities of the Company that are by their terms subordinated to the Company
Guarantee) or liabilities of any Restricted Subsidiary that made such Asset Sale
(other than liabilities of the Issuer that are by their terms subordinated to
the Notes or liabilities of any Subsidiary Guarantor that are by their terms
subordinated to such Subsidiary Guarantor's Subsidiary Guarantee), in each case
as a result of which the Company and its remaining Restricted Subsidiaries are
no longer liable for such liabilities ("Permitted Consideration"); PROVIDED,
HOWEVER, that the Company and its Restricted Subsidiaries shall be permitted to
receive Property other than Permitted Consideration, so long as the aggregate
Fair Market Value of all such Property other than Permitted Consideration
received from Asset Sales and held by the Company and the Restricted
Subsidiaries at any one time shall not exceed 10.0% of Adjusted Consolidated Net
Tangible Assets.
The Net Available Cash from Asset Sales by the Company or a Restricted
Subsidiary may be applied by the Company or such Restricted Subsidiary, to the
extent the Company or such Restricted Subsidiary elects (or is required by the
terms of any Senior Indebtedness of the Issuer, the Company or a Subsidiary
Guarantor), to (i) prepay, repay or purchase Senior Indebtedness of the Issuer,
the Company or a Subsidiary Guarantor (in each case excluding Indebtedness owed
to the Company or an Affiliate of the Company other than Indebtedness owed by
the Issuer to 611852 Saskatchewan Ltd. pursuant to the Canadian Credit
Facility), (ii) to reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net Available
Cash received by the Company or another Restricted Subsidiary) or (iii) purchase
Notes or purchase both Notes and one or more series or issues of other Pari
Passu Indebtedness on a pro rata basis (excluding Notes and Pari Passu
Indebtedness owned by the Company or an Affiliate of the Company).
Any Net Available Cash from an Asset Sale not applied in accordance with the
preceding paragraph within 365 days from the date of such Asset Sale shall
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, an offer to purchase Notes having an aggregate principal
amount equal to the aggregate amount of Excess Proceeds (the "Prepayment Offer")
must be made by the Issuer or the Company at a purchase price equal to 100% of
the principal amount of such Notes plus accrued and unpaid interest, if any, to
the Purchase Date (as defined) in accordance with the procedures (including
prorating in the event of oversubscription) set forth in the Indenture, but, if
the terms of any Pari Passu Indebtedness require that a Pari Passu Offer be made
contemporaneously with the Prepayment Offer, then the Excess Proceeds shall be
prorated between the Prepayment Offer and such Pari Passu Offer in accordance
with the aggregate outstanding principal amounts of the Notes and such Pari
Passu Indebtedness, and the aggregate principal amount of Notes for which the
Prepayment Offer is made shall be reduced accordingly. If the aggregate
principal amount of Notes tendered by Holders thereof exceeds the amount of
available Excess Proceeds, then such Excess Proceeds will be allocated pro rata
according to the principal amount of the Notes tendered and the Trustee will
select the Notes to be purchased in accordance with the Indenture. To the extent
that any portion of the amount of Excess Proceeds remains after compliance with
the second sentence of this paragraph and PROVIDED that all Holders of Notes
have been given the opportunity to tender their Notes for purchase as described
in the following paragraph in accordance with the Indenture, the Company and its
Restricted Subsidiaries may use such remaining amount for purposes permitted by
the Indenture and the amount of Excess Proceeds will be reset to zero.
Within 30 days after the 365th day following the date of an Asset Sale, the
Company or the Issuer shall, if it is obligated to make an offer to purchase the
Notes pursuant to the preceding paragraph, send a written Prepayment Offer
notice, by first-class mail, to the Holders of the Notes (the "Prepayment Offer
Notice"), accompanied by such information regarding the Company and its
Subsidiaries as the Company believes will enable such Holders of the Notes to
make an informed decision with respect to the Prepayment Offer. The Prepayment
Offer Notice will state, among other things, (i) that the Company or
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the Issuer is offering to purchase Notes pursuant to the provisions of the
Indenture, (ii) that any Note (or any portion thereof) accepted for payment (and
duly paid on the Purchase Date) pursuant to the Prepayment Offer shall cease to
accrue interest on the Purchase Date, (iii) that any Notes (or portions thereof)
not properly tendered will continue to accrue interest, (iv) the purchase price
and purchase date, which shall be, subject to any contrary requirements of
applicable law, no less than 30 days nor more than 60 days after the date the
Prepayment Offer Notice is mailed (the "Purchase Date"), (v) the aggregate
principal amount of Notes to be purchased, (vi) a description of the procedure
which Holders of Notes must follow in order to tender their Notes and the
procedures that Holders of Notes must follow in order to withdraw an election to
tender their Notes for payment and (vii) all other instructions and materials
necessary to enable Holders to tender Notes pursuant to the Prepayment Offer.
The Company and the Issuer will comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
or regulations thereunder to the extent such laws and regulations are applicable
in connection with the purchase of Notes as described above. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions relating to the Prepayment Offer, the Company or the Issuer will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations described above by virtue thereof.
INCURRENCE OF LAYERED INDEBTEDNESS. The Indenture provides that (i) the
Issuer will not Incur any Indebtedness which is subordinated or junior in right
of payment to any Senior Indebtedness of the Issuer unless such Indebtedness
constitutes Indebtedness junior to, or PARI PASSU with, the Notes in right of
payment, (ii) the Company will not Incur any Indebtedness which is subordinated
or junior in right of payment to any Senior Indebtedness of the Company unless
such Indebtedness constitutes Indebtedness which is junior to, or PARI PASSU
with, the Company Guarantee in right of payment and (iii) no Subsidiary
Guarantor will Incur any Indebtedness that is subordinated or junior in right of
payment to any Senior Indebtedness of such Subsidiary Guarantor unless such
Indebtedness constitutes Indebtedness which is junior to, or PARI PASSU with,
such Subsidiary Guarantor's Subsidiary Guarantee in right of payment.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture provides that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, conduct any business or enter into any transaction or
series of transactions (including the sale, transfer, disposition, purchase,
exchange or lease of Property, the making of any Investment, the giving of any
Guarantee or the rendering of any service) with or for the benefit of any
Affiliate of the Company (other than the Company or a Restricted Subsidiary),
unless (i) such transaction or series of transactions is on terms no less
favorable to the Company or such Restricted Subsidiary than those that could be
obtained in a comparable arm's-length transaction with a Person that is not an
Affiliate of the Company or such Restricted Subsidiary, and (ii) with respect to
a transaction or series of transactions involving aggregate payments by or to
the Company or such Restricted Subsidiary having a Fair Market Value equal to or
in excess of (a) $1.0 million but less than $7.5 million, an officer of the
Company or, in the case of any such transaction or series of transactions
involving the Issuer, an officer of the Issuer, certifies that such transaction
or series of transactions complies with clause (i) of this paragraph, as
evidenced by an Officer's Certificate delivered to the Trustee, (b) $7.5 million
but less than $30.0 million, the Board of Directors of the Company or, in the
case of any such transaction or series of transactions involving the Issuer, the
Board of Directors of the Issuer (including a majority of the disinterested
members of such Board of Directors) approves such transaction or series of
transactions and certifies that such transaction or series of transactions
complies with clause (i) of this paragraph, as evidenced by a certified
resolution delivered to the Trustee or (c) $30.0 million, (1) the Company or, in
the case of any such transaction or series of transactions involving the Issuer,
the Issuer receives from an independent, nationally recognized investment
banking firm or appraisal firm, in either case specializing or having a
specialty in the type and subject matter of the transaction (or series of
transactions) at issue, a written opinion that such transaction (or series of
transactions) is fair, from a financial point of view, to the Company or such
Restricted Subsidiary and (2) the Board of Directors of the
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Company or, in the case of any such transaction or series of transactions
involving the Issuer, the Board of Directors of the Issuer (including a majority
of the disinterested members of such Board of Directors) approves such
transaction or series of transactions and certifies that such transaction or
series of transactions complies with clause (i) of this paragraph, as evidenced
by a certified resolution delivered to the Trustee.
The limitations of the preceding paragraph do not apply to (i) the payment
of reasonable and customary regular fees to directors of the Company or any of
its Restricted Subsidiaries who are not employees of the Company or any of its
Restricted Subsidiaries, (ii) indemnities of officers and directors of the
Company or any Subsidiary consistent with such Person's charter, bylaws and
applicable statutory provisions, (iii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors of the Company, (iv) loans made (a) to
officers, directors or employees of the Company or any Restricted Subsidiary
approved by the Board of Directors (or by a duly authorized officer) of the
Company, the proceeds of which are used solely to purchase common stock of the
Company in connection with a restricted stock or employee stock purchase plan,
or to exercise stock options received pursuant to an employee or director stock
option plan or other incentive plan, in a principal amount not to exceed the
exercise price of such stock options, or (b) to refinance loans, together with
accrued interest thereon, made pursuant to this clause (iv), (v) advances and
loans to officers, directors and employees of the Company or any Subsidiary,
PROVIDED such loans and advances (excluding loans or advances made pursuant to
the preceding clause (iv)) do not exceed $5.0 million at any one time
outstanding, (vi) any Restricted Payment permitted to be paid pursuant to the
provisions of the Indenture described under "-- Limitations on Restricted
Payments," (vii) any transaction or series of transactions between the Company
and one or more Restricted Subsidiaries or between two or more Restricted
Subsidiaries in the ordinary course of business, PROVIDED that no more than 10%
of the total voting power of the Voting Stock of any such Restricted Subsidiary
is owned by an Affiliate of the Company (other than a Restricted Subsidiary),
(viii) the payment of Indebtedness outstanding under, or the extension,
revision, amendment or modification of, or any guarantee of, the Canadian Credit
Facility, or (ix) any transaction or series of transactions pursuant to any
agreement or obligation of the Company or any of its Restricted Subsidiaries in
effect on the Issue Date.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the legal right of any Restricted Subsidiary to
(i) pay dividends, in cash or otherwise, or make any other distributions on or
in respect of its Capital Stock or Redeemable Stock, or pay any Indebtedness or
other obligation owed, to the Company or any other Restricted Subsidiary, (ii)
make loans or advances to the Company or any other Restricted Subsidiary or
(iii) transfer any of its Property to the Company or any other Restricted
Subsidiary. Such limitation will not apply (a) with respect to clauses (i), (ii)
and (iii), to encumbrances and restrictions (1) in Bank Credit Facilities and
other agreements and instruments, in each case as in effect on the Issue Date,
(2) relating to Indebtedness of a Restricted Subsidiary and existing at the time
it became a Restricted Subsidiary if such encumbrance or restriction was not
created in anticipation of or in connection with the transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or (3) which
result from the renewal, refinancing, extension or amendment of an agreement
that is the subject of clause (a)(1) or (2) above or clause (b)(1) or (2) below,
PROVIDED that such encumbrance or restriction is not materially less favorable
to the Holders of Notes than those under or pursuant to the agreement so
renewed, refinanced, extended or amended, and (b) with respect to clause (iii)
only, to (1) any restriction on the sale, transfer or other disposition of
Property relating to Indebtedness that is permitted to be Incurred and secured
under the provisions of the Indenture described under "-- Limitation on
Indebtedness" and "-- Limitation on Liens," (2) any encumbrance or restriction
applicable to Property at the time it is acquired by the Company or a Restricted
Subsidiary, so long as such encumbrance or restriction relates solely to the
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Property so acquired and was not created in anticipation of or in connection
with such acquisition, (3) customary provisions restricting subletting or
assignment of leases and customary provisions in other agreements that restrict
assignment of such agreements or rights thereunder and (4) customary
restrictions contained in asset sale agreements limiting the transfer of such
assets pending the closing of such sale.
FUTURE SUBSIDIARY GUARANTORS. The Company shall cause each Restricted
Subsidiary having an aggregate of $10.0 million or more of Indebtedness and
Preferred Stock outstanding at any time to promptly execute and deliver to the
Trustee a Subsidiary Guarantee, PROVIDED that (i) Saxon Petroleum Inc. shall not
be required to execute and deliver a Subsidiary Guarantee until such time as it
becomes a Wholly Owned Subsidiary and (ii) in determining the outstanding
Indebtedness and Preferred Stock for purposes of this covenant of (a) Producers
Marketing Limited, Indebtedness described in clause (vii) of the definition of
Indebtedness shall be excluded and (b) Forest I Development Company ("Forest
Development"), Indebtedness pursuant to the Production Payment Agreement dated
February 1, 1992, as amended on April 30, 1995, between Forest Development and
Bank of America, National Association, as successor to Strake Jesuit College
Preparatory, Inc. shall be excluded.
RESTRICTED AND UNRESTRICTED SUBSIDIARIES. Unless defined or designated as
an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company
or any of its Restricted Subsidiaries shall be classified as a Restricted
Subsidiary subject to the provisions of the next paragraph. The Company may
designate a Subsidiary (other than the Issuer) (including a newly formed or
newly acquired Subsidiary) of the Company or any of its Restricted Subsidiaries
as an Unrestricted Subsidiary if (i) such Subsidiary does not at such time own
any Capital Stock or Indebtedness of, or own or hold any Lien on any Property
of, the Company or any other Restricted Subsidiary, (ii) such Subsidiary does
not at such time have any Indebtedness or other obligations which, if in
default, would result (with the passage of time or notice or otherwise) in a
default on any Indebtedness of the Company or any Restricted Subsidiary and
(iii)(a) such designation is effective immediately upon such Subsidiary becoming
a Subsidiary of the Company or of a Restricted Subsidiary, (b) the Subsidiary to
be so designated has total assets of $1,000 or less or (c) if such Subsidiary
has assets greater than $1,000, then such redesignation as an Unrestricted
Subsidiary is deemed to constitute a Restricted Payment in an amount equal to
the Fair Market Value of the Company's direct and indirect ownership interest in
such Subsidiary and such Restricted Payment would be permitted to be made at the
time of such designation under the provisions of the Indenture described under
"-- Limitation on Restricted Payments." Notwithstanding the foregoing, Saxon
Petroleum Inc. (i) may be designated as an Unrestricted Subsidiary until such
time as it becomes a Wholly Owned Subsidiary and (ii) shall be designated as a
Restricted Subsidiary at such time as it becomes a Wholly Owned Subsidiary.
Except as provided in the second sentence of this paragraph, no Restricted
Subsidiary may be redesignated as an Unrestricted Subsidiary. The designation of
an Unrestricted Subsidiary or removal of such designation shall be made by the
Board of Directors of the Company or a committee thereof pursuant to a certified
resolution delivered to the Trustee and shall be effective as of the date
specified in the applicable certified resolution, which shall not be prior to
the date such certified resolution is delivered to the Trustee.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, take any action or enter into any transaction or series of transactions that
would result in a Person becoming a Restricted Subsidiary (whether through an
acquisition or otherwise) unless, after giving effect to such action,
transaction or series of transactions, on a pro forma basis, (i) the Company
could Incur at least $1.00 of additional Indebtedness pursuant to clause (a) of
the first paragraph under "-- Limitation on Indebtedness" and (ii) no Default or
Event of Default would occur or be continuing.
THE ISSUER. The Company will ensure that the Issuer remains a Restricted
Subsidiary so long as any of the Notes remain outstanding.
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MERGER, CONSOLIDATION AND SALE OF SUBSTANTIALLY ALL ASSETS
The Company shall not consolidate with or merge with or into any Person, or
convey, transfer or lease, in one transaction or a series of transactions, all
or substantially all the Property of the Company and its Restricted
Subsidiaries, taken as a whole, unless: (i) the resulting, surviving or
transferee person (the "Successor Company") shall be a Person organized or
existing under the laws of (a) the United States of America, any State thereof
or the District of Columbia or (b) Canada or any province thereof; (ii) a
supplemental indenture is executed and delivered to the Trustee, in form
satisfactory to the Trustee, by the Successor Company expressly assuming, if the
Successor Company is neither the Company nor the Issuer, or confirming, if the
Successor Company is the Company, the obligations of the Company to pay the
principal of and interest on the Notes pursuant to the Company Guarantee and to
perform all the covenants of the Company under the Indenture; (iii) each
Subsidiary Guarantor shall execute and deliver to the Trustee a supplemental
indenture, in form satisfactory to the Trustee, confirming the obligation of
such Subsidiary Guarantor to pay the principal of and interest on the Notes
pursuant to such Subsidiary Guarantor's Subsidiary Guarantee; (iv) in the case
of a conveyance, transfer or lease of all or substantially all the Property of
the Company and its Restricted Subsidiairies, taken as a whole, such Property
shall have been so conveyed, transferred or leased as an entirety or virtually
as an entirety to one Person; (v) immediately after giving effect to such
transaction (and treating, for purposes of this clause (v) and clauses (vi) and
(vii) below, any Indebtedness which becomes or is anticipated to become an
obligation of the Successor Company or any Restricted Subsidiary as a result of
such transaction as having been Incurred by such Successor Company or such
Restricted Subsidiary at the time of such transaction), no Default or Event of
Default shall have occurred and be continuing; (vi) other than with respect to
the consolidation of the Company with or merger of the Company with or into, or
the conveyance, transfer or lease of all or substantially all the Property of
the Company and its Restricted Subsidiaries, taken as a whole, to, the Issuer or
a Wholly Owned Subsidiary, immediately after giving effect to such transaction,
the Successor Company would be able to Incur an additional $1.00 of Indebtedness
pursuant to clause (a) of the first paragraph under "-- Limitation on
Indebtedness;" (vii) other than with respect to the consolidation of the Company
with or merger of the Company with or into, or the conveyance, transfer or lease
of all or substantially all the Property of the Company and its Restricted
Subsidiaries, taken as a whole, to, the Issuer or a Wholly Owned Subsidiary,
immediately after giving effect to such transaction, the Successor Company shall
have Consolidated Net Worth in an amount that is not less than the Consolidated
Net Worth of the Company immediately prior to such transaction; (viii) the
Company shall have delivered to the Trustee an Officer's Certificate, stating
that such consolidation, merger or transfer and such supplemental indenture (if
any) comply with the Indenture; and (ix) the Trustee shall have received an
opinion of counsel to the effect that such consolidation, merger, conveyance,
transfer or lease will not result in the Company (or the Successor Company, if
the Company is not the Successor Company) being required to make any deduction
for or on account of Taxes (as defined under "Additional Amounts") from payments
made under or in respect of the Company Guarantee.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of
the Company under the Indenture, and, except in the case of the lease of all or
substantially all the Property of the Company and its Restricted Subsidiaries,
taken as a whole, the Company shall be released from its obligations under the
Company Guarantee and the Indenture.
The Issuer shall not consolidate with or merge with or into any Person,
except that the Issuer may consolidate with or merge into any Person so long as:
(i) the Successor Company shall be the Issuer, the Company or a Wholly Owned
Subsidiary; (ii) if the Company or a Wholly Owned Subsidiary is the Successor
Company, the Successor Company shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Issuer to pay the principal of and interest
on the Notes and to perform all the covenants of the Issuer under the
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Indenture (in which case the Successor Company shall be considered as the issuer
of the Notes); (iii) unless the Company shall be the Successor Company, the
Company shall have executed and delivered to the Trustee, in form satisfactory
to the Trustee, a supplemental indenture confirming the obligations of the
Company to pay the principal of and interest on the Notes pursuant to the
Company Guarantee and to perform all the covenants of the Company under the
Indenture; (iv) each Subsidiary Guarantor shall have executed and delivered to
the Trustee, in form satisfactory to the Trustee, a supplemental indenture
confirming such Subsidiary Guarantor's obligations to pay the principal of and
interest on the Notes pursuant to its Subsidiary Guarantee; (v) the Successor
Company (if not the Issuer) shall be a Person organized or existing under the
laws of (a) the United States of America, any State thereof or the District of
Columbia or (b) Canada or any province thereof; (vi) immediately after giving
effect to such transaction (and treating, for purposes of this clause (vi) and
clauses (vii) and (viii) below, any Indebtedness which becomes or is anticipated
to become an obligation of the Issuer or any Restricted Subsidiary as a result
of such transaction as having been Incurred by the Issuer or such Restricted
Subsidiary at the time of such transaction) no Default or Event of Default shall
have occurred or be continuing; (vii) other than with respect to the
consolidation of the Issuer with or the merger of the Issuer with or into the
Company or a Wholly Owned Subsidiary, immediately after giving effect to such
transaction the Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to clause (a) of the first paragraph under "Limitation on
Indebtedness;" (viii) other than with respect to the consolidation of the Issuer
with or the merger of the Issuer with or into the Company or a Wholly Owned
Subsidiary, immediately after giving effect to such transaction, the Company
shall have Consolidated Net Worth in an amount that is not less than the
Consolidated Net Worth of the Company immediately prior to such transaction;
(ix) the Issuer shall have delivered to the Trustee an Officer's Certificate
stating that such consolidation, merger or transfer complies with the Indenture;
and (x) the Trustee shall have received an opinion of counsel to the effect that
such consolidation, merger, conveyance, transfer or lease will not result in the
Issuer being required to make any deduction for or on account of Taxes from
payments made under or in respect of the Notes. The Issuer shall not convey,
transfer or lease, in one transaction or a series of transactions, any of its
Property other than in a transaction or series of transactions which comply with
the provisions of the Indenture described under "-- Limitation on Asset Sales,"
PROVIDED that a conveyance, transfer or lease of all or substantially all the
Property of the Issuer shall be subject to the provisions of the first paragraph
of this covenant to the extent that such transaction constitutes the conveyance,
transfer or lease of all or substantially all the Property of the Company and
its Restricted Subsidiaries, taken as a whole.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will file with the Commission and furnish to the Holders of Notes all quarterly
and annual financial information required to be contained in a filing with the
Commission on Forms 10-Q and 10-K, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual consolidated financial statements only, a report thereon by the
Company's independent auditors.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
"ADDITIONAL ASSETS" means (i) any Property (other than cash, Permitted
Short-Term Investments or securities) used in the Oil and Gas Business or any
business ancillary thereto, (ii) Investments in any other Person engaged in the
Oil and Gas Business or any business ancillary thereto (including the
acquisition from third parties of Capital Stock of such Person) as a result of
which such other Person
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becomes a Restricted Subsidiary in compliance with the provisions of the
Indenture described under "-- Certain Covenants -- Restricted and Unrestricted
Subsidiaries," (iii) the acquisition from third parties of Capital Stock of a
Restricted Subsidiary or (iv) Permitted Business Investments.
"ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS" means (without duplication), as
of the date of determination, the remainder of:
(i) the sum of (a) discounted future net revenues from proved oil and gas
reserves of the Company and its Restricted Subsidiaries calculated in accordance
with Commission guidelines before any provincial, territorial, state, federal or
foreign income taxes, as estimated by the Company and confirmed by a nationally
recognized firm of independent petroleum engineers in a reserve report prepared
as of the end of the Company's most recently completed fiscal year for which
audited financial statements are available, as increased by, as of the date of
determination, the estimated discounted future net revenues from (1) estimated
proved oil and gas reserves acquired since such year-end, which reserves were
not reflected in such year-end reserve report, and (2) estimated oil and gas
reserves attributable to upward revisions of estimates of proved oil and gas
reserves since such year-end due to exploration, development or exploitation
activities, in each case calculated in accordance with Commission guidelines
(utilizing the prices utilized in such year-end reserve report), and decreased
by, as of the date of determination, the estimated discounted future net
revenues from (3) estimated proved oil and gas reserves produced or disposed of
since such year-end and (4) estimated oil and gas reserves attributable to
downward revisions of estimates of proved oil and gas reserves since such
year-end due to changes in geological conditions or other factors which would,
in accordance with standard industry practice, cause such revisions, in each
case calculated in accordance with Commission guidelines (utilizing the prices
utilized in such year-end reserve report); PROVIDED that, in the case of each of
the determinations made pursuant to clauses (1) through (4), such increases and
decreases shall be as estimated by the Company's petroleum engineers, unless
there is a Material Change as a result of such acquisitions, dispositions or
revisions, in which event the discounted future net revenues utilized for
purposes of this clause (i)(a) shall be confirmed in writing by a nationally
recognized firm of independent petroleum engineers, (b) the capitalized costs
that are attributable to oil and gas properties of the Company and its
Restricted Subsidiaries to which no proved oil and gas reserves are
attributable, based on the Company's books and records as of a date no earlier
than the date of the Company's latest available annual or quarterly financial
statements, (c) the Net Working Capital on a date no earlier than the date of
the Company's latest annual or quarterly financial statements and (d) the
greater of (1) the net book value on a date no earlier than the date of the
Company's latest annual or quarterly financial statements and (2) the appraised
value, as estimated by independent appraisers, of other tangible assets
(including, without duplication, Investments in unconsolidated Restricted
Subsidiaries) of the Company and its Restricted Subsidiaries, as of the date no
earlier than the date of the Company's latest audited financial statements,
minus
(ii) the sum of (a) minority interests, (b) any net gas balancing
liabilities of the Company and its Restricted Subsidiaries reflected in the
Company's latest audited financial statements, (c) to the extent included in
(i)(a) above, the discounted future net revenues, calculated in accordance with
Commission guidelines (utilizing the prices utilized in the Company's year-end
reserve report), attributable to reserves which are required to be delivered to
third parties to fully satisfy the obligations of the Company and its Restricted
Subsidiaries with respect to Volumetric Production Payments (determined, if
applicable, using the schedules specified with respect thereto) and (d) the
discounted future net revenues, calculated in accordance with Commission
guidelines, attributable to reserves subject to Dollar-Denominated Production
Payments which, based on the estimates of production and price assumptions
included in determining the discounted future net revenues specified in (i)(a)
above, would be necessary to fully satisfy the payment obligations of the
Company and its Restricted Subsidiaries with respect to Dollar-Denominated
Production Payments (determined, if applicable, using the schedules specified
with respect thereto). If the Company changes its method of accounting from the
full cost method to the successful efforts method or
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a similar method of accounting, "Adjusted Consolidated Net Tangible Assets" will
continue to be calculated as if the Company were still using the full cost
method of accounting.
"AFFILIATE" of any specified Person means any other Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person or (ii)
which beneficially owns or holds directly or indirectly 10% or more of any class
of the Voting Stock of such specified Person or of any Subsidiary of such
specified Person. For the purposes of this definition, "control," when used with
respect to any specified Person, means the power to direct the management and
policies of such Person directly or indirectly, whether through the ownership of
Voting Stock, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"ASSET SALE" means, with respect to any Person, any transfer, conveyance,
sale, lease or other disposition (collectively, "dispositions," and including
dispositions pursuant to any consolidation or merger) by such Person in any
single transaction or series of transactions of (i) shares of Capital Stock or
other ownership interests of another Person (including Capital Stock of
Restricted Subsidiaries and Unrestricted Subsidiaries) or (ii) any other
Property of such Person; PROVIDED, HOWEVER, that the term "Asset Sale" shall not
include: (a) the disposition of Permitted Short-Term Investments, inventory,
accounts receivable, surplus or obsolete equipment or other Property (excluding
the disposition of oil and gas in place and other interests in real property
unless made in connection with a Permitted Business Investment) in the ordinary
course of business; (b) the abandonment, assignment, lease, sublease or farm-out
of oil and gas properties, or the forfeiture or other disposition of such
properties pursuant to standard form operating agreements, in each case in the
ordinary course of business in a manner that is customary in the Oil and Gas
Business; (c) the disposition of Property received in settlement of debts owing
to such Person as a result of foreclosure, perfection or enforcement of any Lien
or debt, which debts were owing to such Person in the ordinary course of its
business; (d) any disposition that constitutes a Restricted Payment made in
compliance with the provisions of the Indenture described under "-- Certain
Covenants -- Limitation on Restricted Payments;" (e) when used with respect to
the Company, any disposition of all or substantially all of the Property of such
Person permitted pursuant to the provisions of the Indenture described under "--
Merger, Consolidation and Sale of Substantially All Assets;" (f) the disposition
of any Property by such Person to the Company or a Wholly Owned Subsidiary; (g)
the disposition of any asset with a Fair Market Value of less than $2.0 million;
or (h) any Production Payments and Reserve Sales, PROVIDED that any such
Production Payments and Reserve Sales, other than incentive compensation
programs on terms that are reasonably customary in the Oil and Gas Business for
geologists, geophysicists and other providers of technical services to the
Company or a Restricted Subsidiary, shall have been created, Incurred, issued,
assumed or Guaranteed in connection with the financing of, and within 60 days
after the acquisition of, the Property that is subject thereto.
"AVERAGE LIFE" means, with respect to any Indebtedness, at any date of
determination, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years (and any portion thereof) from the date of determination
to the date or dates of each successive scheduled principal payment (including
any sinking fund or mandatory redemption payment requirements) of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"BANK CREDIT FACILITIES" means, with respect to any Person, one or more debt
facilities or commercial paper facilities with banks or other institutional
lenders (including pursuant to the Second Amended and Restated Credit Agreement
dated as of January 31, 1997, as amended on April 1, 1997, August 19, 1997 and
September 26, 1997, among the Company, the Lenders named therein and The Chase
Manhattan Bank, as agent, and the Second Amended and Restated Credit Agreement
dated as of April 1, 1997, as amended on August 19, 1997 and September 26, 1997,
among 611852 Saskatchewan Ltd., the Lenders named therein and The Chase
Manhattan Bank of Canada, as agent) providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to
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such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or trade letters of credit, together with any
extensions, revisions, amendments, modifications, refinancings or replacements
thereof by a lender or syndicate of lenders.
"CAPITAL LEASE OBLIGATION" means any obligation which is required to be
classified and accounted for as a capital lease obligation in accordance with
GAAP, and the amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligation determined in accordance with GAAP, and
the Stated Maturity thereof shall be the date of the last payment date of rent
or any other amount due in respect of such obligation.
"CAPITAL STOCK" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than debt securities convertible into an
equity interest), warrants or options to subscribe for or to acquire an equity
interest in such Person; PROVIDED, HOWEVER, that "Capital Stock" shall not
include Redeemable Stock.
"COMPANY GUARANTEE" means an unconditional, unsecured senior subordinated
Guarantee of the Notes given by the Company pursuant to the terms of the
Indenture.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate amount
of EBITDA of the Company and its consolidated Restricted Subsidiaries for the
four full fiscal quarters immediately prior to the Transaction Date for which
financial statements are available to (ii) the aggregate Consolidated Interest
Expense of the Company and its Restricted Subsidiaries that is anticipated to
accrue during a period consisting of the fiscal quarter in which the Transaction
Date occurs and the three fiscal quarters immediately subsequent thereto (based
upon the pro forma amount and maturity of, and interest payments in respect of,
Indebtedness of the Company and its Restricted Subsidiaries expected by the
Company to be outstanding on the Transaction Date), assuming for the purposes of
this measurement the continuation of market interest rates prevailing on the
Transaction Date and base interest rates in respect of floating interest rate
obligations equal to the base interest rates on such obligations in effect as of
the Transaction Date; PROVIDED, that if the Company or any of its Restricted
Subsidiaries is a party to any Interest Rate Protection Agreement which would
have the effect of changing the interest rate on any Indebtedness of the Company
or any of its Restricted Subsidiaries for such four quarter period (or a portion
thereof), the resulting rate shall be used for such four quarter period or
portion thereof; PROVIDED FURTHER that any Consolidated Interest Expense with
respect to Indebtedness Incurred or retired by the Company or any of its
Restricted Subsidiaries during the fiscal quarter in which the Transaction Date
occurs shall be calculated as if such Indebtedness was so Incurred or retired on
the first day of the fiscal quarter in which the Transaction Date occurs. In
addition, if since the beginning of the four full fiscal quarter period
preceding the Transaction Date, (a) the Company or any of its Restricted
Subsidiaries shall have engaged in any Asset Sale, EBITDA for such period shall
be reduced by an amount equal to the EBITDA (if positive), or increased by an
amount equal to the EBITDA (if negative), directly attributable to the assets
which are the subject of such Asset Sale for such period calculated on a pro
forma basis as if such Asset Sale and any related retirement of Indebtedness had
occurred on the first day of such period or (b) the Company or any of its
Restricted Subsidiaries shall have acquired any material assets, EBITDA shall be
calculated on a pro forma basis as if such asset acquisitions had occurred on
the first day of such four fiscal quarter period.
"CONSOLIDATED INTEREST EXPENSE" means with respect to any Person for any
period, without duplication, (i) the sum of (a) the aggregate amount of cash and
noncash interest expense (including capitalized interest) of such Person and its
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP in respect of Indebtedness (including (1) any amortization
of debt discount, (2) net costs associated with Interest Rate Protection
Agreements (including any amortization of discounts), (3) the interest portion
of any deferred payment obligation, (4) all accrued interest and (5) all
commissions, discounts, commitment fees, origination fees and other fees and
charges owed with
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respect to any Bank Credit Facilities and other Indebtedness) paid, accrued or
scheduled to be paid or accrued during such period; (b) Redeemable Stock
dividends of such Person (and of its Restricted Subsidiaries if paid to a Person
other than such Person or its Restricted Subsidiaries) and Preferred Stock
dividends of such Person's Restricted Subsidiaries if paid to a Person other
than such Person or its other Restricted Subsidiaries; (c) the portion of any
rental obligation of such Person or its Restricted Subsidiaries in respect of
any Capital Lease Obligation allocable to interest expense in accordance with
GAAP; (d) the portion of any rental obligation of such Person or its Restricted
Subsidiaries in respect of any Sale and Leaseback Transaction that is
Indebtedness allocable to interest expense (determined as if such obligation
were treated as a Capital Lease Obligation); and (e) to the extent any
Indebtedness of any other Person (other than Restricted Subsidiaries) is
Guaranteed by such Person or any of its Restricted Subsidiaries, the aggregate
amount of interest paid, accrued or scheduled to be paid or accrued by such
other Person during such period attributable to any such Indebtedness; less (ii)
to the extent included in (i) above, amortization or write-off of deferred
financing costs of such Person and its Restricted Subsidiaries during such
period; in the case of both (i) and (ii) above, after elimination of
intercompany accounts among such Person and its Restricted Subsidiaries and as
determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" of any Person means, for any period, the aggregate
net income (or net loss, as the case may be) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; PROVIDED that there shall be excluded therefrom, without duplication,
(i) items classified as extraordinary gains or losses net of taxes (less all
fees and expenses relating thereto), including, with respect to the Company, any
loss realized in connection with the purchase of the 11 1/4% Notes; (ii) any
gain or loss net of taxes (less all fees and expenses relating thereto),
realized on the sale or other disposition of Property, including the Capital
Stock of any other Person (but in no event shall this clause (ii) apply to any
gains or losses on the sale in the ordinary course of business of oil, gas or
other hydrocarbons produced or manufactured); (iii) the net income of any
Restricted Subsidiary of such specified person to the extent the transfer to
that Person of that income is restricted by contract or otherwise, except for
any cash dividends or cash distributions actually paid by such Restricted
Subsidiary to such Person during such period; (iv) the net income (or loss) of
any other Person in which such Person or any of its Restricted Subsidiaries has
an interest (which interest does not cause the net income of such other Person
to be consolidated with the net income of such Person in accordance with GAAP or
is an interest in a consolidated Unrestricted Subsidiary), except to the extent
of the amount of cash dividends or other cash distributions actually paid to
such Person or its consolidated Restricted Subsidiaries by such other Person
during such period; (v) for the purposes of "-- Certain Covenants -- Limitation
on Restricted Payments" only, the net income of any Person acquired by such
Person or any of its Restricted Subsidiaries in a pooling-of-interests
transaction for any period prior to the date of such acquisition; (vi) any gain
or loss, net of taxes, realized on the termination of any employee pension
benefit plan; (vii) any adjustments of a deferred tax liability or asset
pursuant to Statement of Financial Accounting Standards No. 109 which result
from changes in enacted tax laws or rates; (viii) the cumulative effect of a
change in accounting principles; (ix) any write-downs of non-current assets,
PROVIDED that any ceiling limitation write-downs under Commission guidelines
shall be treated as capitalized costs, as if such write-downs had not occurred;
and (x) any non-cash compensation expense realized for grants of performance
shares, stock options or stock awards to officers, directors and employees of
such Person or any of its Restricted Subsidiaries.
"CONSOLIDATED NET WORTH" of any Person means the stockholders' equity of
such Person and its Restricted Subsidiaries, as determined on a consolidated
basis in accordance with GAAP, less (to the extent included in stockholders'
equity) amounts attributable to Redeemable Stock of such Person or its
Restricted Subsidiaries.
"DEFAULT" means any event, act or condition the occurrence of which is, or
after notice or the passage of time or both would be, an Event of Default.
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"DESIGNATED SENIOR INDEBTEDNESS" means (i) Bank Credit Facilities of the
Company or the Issuer and (ii) any other Senior Indebtedness of the Company or
Senior Indebtedness of the Issuer which has, at the time of determination, an
aggregate principal amount outstanding of at least $10.0 million that is
specifically designated in the instrument evidencing such Indebtedness and is
designated in a notice delivered by the Company or the Issuer, as applicable, to
the holders or a Representative of the holders of such Senior Indebtedness of
the Company or the Issuer and the Trustee as "Designated Senior Indebtedness."
"DOLLAR-DENOMINATED PRODUCTION PAYMENTS" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"EBITDA" means, with respect to any Person for any period, an amount equal
to the Consolidated Net Income of such Person for such period, plus (i) the sum
of, to the extent reflected in the consolidated income statement of such Person
and its Restricted Subsidiaries for such period from which Consolidated Net
Income is determined and deducted in the determination of such Consolidated Net
Income, without duplication, (a) income tax expense (but excluding income tax
expense relating to sales or other dispositions of Property, including the
Capital Stock of any other Person, the gains from which are excluded in the
determination of such Consolidated Net Income), (b) Consolidated Interest
Expense, (c) depreciation and depletion expense, (d) amortization expense, (e)
exploration expense (if applicable), and (f) any other noncash charges including
unrealized foreign exchange losses (excluding, however, any such other noncash
charge which requires an accrual of or reserve for cash charges for any future
period); less (ii) the sum of, to the extent reflected in the consolidated
income statement of such Person and its Restricted Subsidiaries for such period
from which Consolidated Net Income is determined and added in the determination
of such Consolidated Net Income, without duplication (a) income tax recovery
(excluding, however, income tax recovery relating to sales or other dispositions
of Property, including the Capital Stock of any other Person, the losses from
which are excluded in the determination of such Consolidated Net Income) and (b)
unrealized foreign exchange gains.
"EQUITY OFFERING" means a bona fide underwritten sale to the public of
common stock of the Company pursuant to a registration statement (other than a
Form S-8 or any other form relating to securities issuable under any employee
benefit plan of the Company) that is declared effective by the Commission
following the Issue Date.
"EXCHANGED PROPERTIES" means properties used or useful in the Oil and Gas
Business received by the Company or a Restricted Subsidiary in trade or as a
portion of the total consideration for other such properties or assets.
"EXCHANGE RATE CONTRACT" means, with respect to any Person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or any combination thereof, entered into by such
Person in the ordinary course of its business for the purpose of limiting or
managing exchange rate risks to which such Person is subject.
"FAIR MARKET VALUE" means, with respect to any assets to be transferred
pursuant to any Asset Sale or Sale and Leaseback Transaction or any noncash
consideration or property transferred or received by any Person, the fair market
value of such consideration or other property as determined by (i) any officer
of the Company if such fair market value is less than $7.5 million and (ii) the
Board of Directors of the Company as evidenced by a certified resolution
delivered to the Trustee if such fair market value is equal to or in excess of
$7.5 million.
"GAAP" means United States generally accepted accounting principles as in
effect on the date of the Indenture, unless stated otherwise.
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"GOVERNMENT OBLIGATIONS" means securities that are (i) direct obligations of
the United States of America or Canada for the timely payment of which the full
faith and credit of the United States of America or Canada is pledged or (ii)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or Canada, the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or Canada which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act), as custodian, with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; PROVIDED, HOWEVER, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
principal of or interest on the Government Obligation evidenced by such
depository receipt.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including any Lien on the assets of such Person
securing obligations to pay Indebtedness of the primary obligor and any
obligation of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase or payment of) any security for the payment of
such Indebtedness, (ii) to purchase Property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness (and "Guaranteed",
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); PROVIDED, HOWEVER, that a Guarantee by any Person shall not include
(a) endorsements by such Person for collection or deposit, in either case, in
the ordinary course of business or (b) a contractual commitment by one Person to
invest in another Person for so long as such Investment is reasonably expected
to constitute a Permitted Investment under clause (ii) of the definition of
Permitted Investments.
"HOLDER" means the Person in whose name a Note is registered on the
Securities Register.
"INCUR" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or become liable in respect of such Indebtedness or other obligation
or the recording, as required pursuant to GAAP or otherwise, of any such
Indebtedness or obligation on the balance sheet of such Person (and
"Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); PROVIDED, HOWEVER, that a change in GAAP that
results in an obligation of such Person that exists at such time, and is not
theretofore classified as Indebtedness, becoming Indebtedness shall not be
deemed an Incurrence of such Indebtedness. For purposes of this definition,
Indebtedness of the Company or a Restricted Subsidiary held by a Wholly Owned
Subsidiary shall be deemed to be Incurred by the Company or such Restricted
Subsidiary in the event such Wholly Owned Subsidiary ceases to be a Wholly Owned
Subsidiary or in the event such Indebtedness is transferred to a Person other
than the Company or a Wholly Owned Subsidiary. For purposes of this definition,
any non-interest bearing or other discount Indebtedness shall be deemed to have
been Incurred (in an amount equal to its aggregate principal amount at its
Stated Maturity) only on the date of original issue thereof.
"INDEBTEDNESS" means at any time (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person,
and whether or not contingent, (i) any obligation of such Person for borrowed
money, (ii) any obligation of such Person evidenced by bonds, debentures, notes,
Guarantees or other similar instruments, including any such obligations Incurred
in connection with the acquisition of Property, assets or businesses, (iii) any
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the
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account of such Person, (iv) any obligation of such Person issued or assumed as
the deferred purchase price of Property or services (other than Trade Accounts
Payable), (v) any Capital Lease Obligation of such Person, (vi) the maximum
fixed redemption or repurchase price of Redeemable Stock of such Person at the
time of determination, (vii) any payment obligation of such Person under
Exchange Rate Contracts, Interest Rate Protection Agreements, Oil and Gas
Hedging Contracts or under any similar agreements or instruments, (viii) any
obligation to pay rent or other payment amounts of such Person with respect to
any Sale and Leaseback Transaction to which such Person is a party and (ix) any
obligation of the type referred to in clauses (i) through (viii) of this
paragraph of another Person and all dividends of another Person the payment of
which, in either case, such Person has Guaranteed or is responsible or liable,
directly or indirectly, as obligor, Guarantor or otherwise; PROVIDED, HOWEVER,
that Indebtedness shall not include Production Payments and Reserve Sales. For
purposes of this definition, the maximum fixed repurchase price of any
Redeemable Stock that does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Stock as if such Redeemable
Stock were repurchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture; PROVIDED, HOWEVER, that if such Redeemable
Stock is not then permitted to be repurchased, the repurchase price shall be the
book value of such Redeemable Stock. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability at such date in respect
of any contingent obligations described above.
"INTEREST RATE PROTECTION AGREEMENT" means, with respect to any Person, any
interest rate swap agreement, forward rate agreement, interest rate cap or
collar agreement or other financial agreement or arrangement entered into by
such Person in the ordinary course of its business for the purpose of limiting
or managing interest rate risks to which such Person is subject.
"INVESTMENT" means, with respect to any Person (i) any amount paid by such
Person, directly or indirectly, to any other Person for Capital Stock or other
Property of, or as a capital contribution to, any other Person or (ii) any
direct or indirect loan or advance to any other Person (other than accounts
receivable of such Person arising in the ordinary course of business); PROVIDED,
HOWEVER, that Investments shall not include (a) in the case of clause (i) as
used in the definition of "Restricted Payments" only, any such amount paid
through the issuance of Capital Stock of the Company and (b) in the case of
clause (i) or (ii), extensions of trade credit on commercially reasonable terms
in accordance with normal trade practices and any increase in the equity
ownership in any Person resulting from retained earnings of such Person.
"ISSUE DATE" means the date on which the Old Notes first were issued under
the Indenture.
"LIEN" means, with respect to any Property, any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, security interest, lien
(statutory or other), charge, easement, encumbrance, preference, priority or
other security or similar agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property (including any conditional
sale or other title retention agreement having substantially the same economic
effect as any of the foregoing). For purposes of the provisions of the Indenture
described under "-- Certain Covenants -- Limitation on Liens," a Capital Lease
Obligation shall be deemed to be secured by a Lien on the property being leased.
"LIQUID SECURITIES" means securities (i) of an issuer that is not an
Affiliate of the Company, (ii) that are publicly traded on the New York Stock
Exchange, the American Stock Exchange, the Toronto Stock Exchange or the Nasdaq
National Market and (iii) as to which the Company or the Restricted Subsidiary
holding such securities is not subject to any restrictions on sale or transfer
(including any volume restrictions under Rule 144 under the Securities Act or
any other restrictions imposed by the Securities Act) or as to which a
registration statement under the Securities Act covering the resale thereof is
in effect for as long as the securities are held; PROVIDED that securities
meeting the requirements of clauses (i),
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(ii) and (iii) above shall be treated as Liquid Securities from the date of
receipt thereof until and only until the earlier of (x) the date on which such
securities are sold or exchanged for cash or Permitted Short-Term Investments
and (y) 180 days following the date of receipt of such securities. If such
securities are not sold or exchanged for cash or Permitted Short-Term
Investments within 180 days of receipt thereof, for purposes of determining
whether the transaction pursuant to which the Company or a Restricted Subsidiary
received the securities was in compliance with the provisions of the Indenture
described under "--Certain Covenants--Limitation on Asset Sales," such
securities shall be deemed not to have been Liquid Securities at any time.
Notwithstanding the foregoing, securities meeting the requirements of clauses
(i) and (ii) above received by the Company or a Wholly Owned Subsidiary in
connection with the disposition, in whole or in part, of the capital stock of
Saxon Petroleum Inc. shall be treated as Liquid Securities from the date of
receipt thereof until the earlier of (1) the date on which such securities are
sold or exchanged for cash or Permitted Short-Term Investments and (2) 24 months
following the date of receipt of such securities.
"MATERIAL CHANGE" means an increase or decrease (except to the extent
resulting from changes in prices) of more than 30% during a fiscal quarter in
the estimated discounted future net revenues from proved oil and gas reserves of
the Company and its Restricted Subsidiaries, calculated in accordance with
clause (i)(a) of the definition of Adjusted Consolidated Net Tangible Assets;
PROVIDED, HOWEVER, that the following will be excluded from the calculation of
Material Change: (i) any acquisitions during the quarter of oil and gas reserves
with respect to which the Company's estimate of the discounted future net
revenues from proved oil and gas reserves has been confirmed by independent
petroleum engineers; and (ii) any dispositions of Properties during such quarter
that were disposed of in compliance with the provisions of the Indenture
described under "-- Certain Covenants -- Limitation on Asset Sales."
"NET WORKING CAPITAL" means (i) all current assets of the Company and its
Restricted Subsidiaries, less (ii) all current liabilities of the Company and
its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in consolidated financial statements of
the Company prepared in accordance with GAAP.
"NON-RECOURSE PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other than
Capital Lease Obligations) of the Company or any Restricted Subsidiary Incurred
in connection with the acquisition by the Company or such Restricted Subsidiary
in the ordinary course of business of fixed assets used in the Oil and Gas
Business (including office buildings and other real property used by the Company
or such Restricted Subsidiary in conducting its operations) with respect to
which (i) the holders of such Indebtedness agree that they will look solely to
the fixed assets so acquired which secure such Indebtedness, and neither the
Company nor any Restricted Subsidiary (a) is directly or indirectly liable for
such Indebtedness or (b) provides credit support, including any undertaking,
Guarantee, agreement or instrument that would constitute Indebtedness (other
than the grant of a Lien on such acquired fixed assets), and (ii) no default or
event of default with respect to such Indebtedness would cause, or permit (after
notice or passage of time or otherwise), any holder of any other Indebtedness of
the Company or a Restricted Subsidiary to declare a default or event of default
on such other Indebtedness or cause the payment, repurchase, redemption,
defeasance or other acquisition or retirement for value thereof to be
accelerated or payable prior to any scheduled principal payment, scheduled
sinking fund payment or maturity.
"OFFICERS' CERTIFICATE" means a certificate signed by (i) the President or
the Chief Executive Officer and (ii) the Chief Financial Officer, the Chief
Accounting Officer or the Treasurer, of the Issuer and delivered to the Trustee,
which shall comply with the Indenture.
"OIL AND GAS BUSINESS" means the business of exploiting, exploring for,
developing, acquiring, operating, producing, processing, gathering, marketing,
storing, selling, hedging, treating, swapping, refining and transporting
hydrocarbons and other related energy businesses.
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"OIL AND GAS HEDGING CONTRACT" means, with respect to any Person, any
agreement or arrangement, or any combination thereof, relating to oil and gas or
other hydrocarbon prices, transportation or basis costs or differentials or
other similar financial factors, that is customary in the Oil and Gas Business
and is entered into by such Person in the ordinary course of its business for
the purpose of limiting or managing risks associated with fluctuations in such
prices, costs, differentials or similar factors.
"OIL AND GAS LIENS" means (i) Liens on any specific property or any interest
therein, construction thereon or improvement thereto to secure all or any part
of the costs incurred for surveying, exploration, drilling, extraction,
development, operation, production, construction, alteration, repair or
improvement of, in, under or on such property and the plugging and abandonment
of wells located thereon (it being understood that, in the case of oil and gas
producing properties, or any interest therein, costs incurred for "development"
shall include costs incurred for all facilities relating to such properties or
to projects, ventures or other arrangements of which such properties form a part
or which relate to such properties or interests); (ii) Liens on an oil or gas
producing property to secure obligations Incurred or guarantees of obligations
Incurred in connection with or necessarily incidental to commitments for the
purchase or sale of, or the transportation or distribution of, the products
derived from such property; (iii) Liens arising under partnership agreements,
oil and gas leases, overriding royalty agreements, net profits agreements,
production payment agreements, royalty trust agreements, incentive compensation
programs on terms that are reasonably customary in the Oil and Gas Business for
geologists, geophysicists and other providers of technical services to the
Company or a Restricted Subsidiary, master limited partnership agreements,
farmout agreements, farmin agreements, division orders, contracts for the sale,
purchase, exchange, transportation, gathering or processing of oil, gas or other
hydrocarbons, unitizations and pooling designations, declarations, orders and
agreements, development agreements, operating agreements, production sales
contracts, area of mutual interest agreements, gas balancing or deferred
production agreements, injection, repressuring and recycling agreements, salt
water or other disposal agreements, seismic or geophysical permits or
agreements, and other agreements which are customary in the Oil and Gas
Business; PROVIDED, HOWEVER, in all instances that such Liens are limited to the
assets that are the subject of the relevant agreement, program, order or
contract; (iv) Liens arising in connection with Production Payments and Reserve
Sales; and (v) Liens on pipelines or pipeline facilities that arise by operation
of law.
"PARI PASSU INDEBTEDNESS" means any Indebtedness of the Issuer, the Company
or a Subsidiary Guarantor that is PARI PASSU in right of payment to the Notes,
the Company Guarantee or a Subsidiary Guarantee, as applicable.
"PARI PASSU OFFER" means an offer by the Issuer, the Company or a Subsidiary
Guarantor to purchase all or a portion of Pari Passu Indebtedness to the extent
required by the indenture or other agreement or instrument pursuant to which
such Pari Passu Indebtedness was issued.
"PERMITTED BUSINESS INVESTMENTS" means Investments and expenditures made in
the ordinary course of, and of a nature that is or shall have become customary
in, the Oil and Gas Business as a means of actively engaging therein through
agreements, transactions, interests or arrangements which permit one to share
risks or costs, comply with regulatory requirements regarding local ownership or
satisfy other objectives customarily achieved through the conduct of Oil and Gas
Business jointly with third parties, including (i) ownership interests in oil
and gas properties or gathering, transportation, processing, storage or related
systems and (ii) Investments and expenditures in the form of or pursuant to
operating agreements, processing agreements, farmin agreements, farmout
agreements, development agreements, area of mutual interest agreements,
unitization agreements, pooling arrangements, joint bidding agreements, service
contracts, joint venture agreements, partnership agreements (whether general or
limited), and other similar agreements (including for limited liability
companies) with third parties, excluding however, Investments in corporations
other than Restricted Subsidiaries.
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"PERMITTED HEDGING AGREEMENTS" means (i) Exchange Rate Contracts and Oil and
Gas Hedging Contracts and (ii) Interest Rate Protection Agreements but only to
the extent that the stated aggregate notional amount thereunder does not exceed
100% of the aggregate principal amount of the Indebtedness of the Company or a
Restricted Subsidiary covered by such Interest Rate Protection Agreements at the
time such agreements were entered into.
"PERMITTED INVESTMENTS" means any and all of the following: (i) Permitted
Short-Term Investments; (ii) Investments in property, plant and equipment used
in the ordinary course of business and Permitted Business Investments; (iii)
Investments by any Restricted Subsidiary in the Company; (iv) Investments by the
Company or any Restricted Subsidiary in any Restricted Subsidiary; (v)
Investments by the Company or any Restricted Subsidiary in (a) any Person that
will, upon the making of such Investment, become a Restricted Subsidiary or (b)
any Person if as a result of such Investment such Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
Property to, the Company or a Restricted Subsidiary; (vi) Investments in the
form of securities received from Asset Sales, PROVIDED that such Asset Sales are
made in compliance with the provisions of the Indenture described under "--
Certain Covenants -- Limitation on Asset Sales;" (vii) Investments in negotiable
instruments held for collection; lease, utility and other similar deposits; and
stock, obligations or other securities received in settlement of debts
(including under any bankruptcy or other similar proceeding) owing to the
Company or any of its Restricted Subsidiaries as a result of foreclosure,
perfection or enforcement of any Liens or Indebtedness, in each of the foregoing
cases in the ordinary course of business of the Company or such Restricted
Subsidiary; (viii) relocation allowances for, and advances and loans to,
officers, directors and employees of the Company or any of its Restricted
Subsidiaries; PROVIDED such items do not exceed in the aggregate $5.0 million at
any one time outstanding; (ix) Investments intended to promote the Company's
strategic objectives in the Oil and Gas Business in an aggregate amount not to
exceed 7.5% of Adjusted Consolidated Net Tangible Assets (determined as of the
date of the making of any such Investment) at any one time outstanding (which
Investments shall be deemed to be no longer outstanding only upon the return of
capital thereof); (x) Investments made for the purpose of acquiring gas
marketing contracts in an aggregate amount not to exceed $10.0 million at any
one time outstanding; (xi) Investments made pursuant to Permitted Hedging
Agreements of the Company and the Restricted Subsidiaries; and (xii) Investments
pursuant to any agreement or obligation of the Company or any of its Restricted
Subsidiaries as in effect on the Issue Date (other than Investments described in
clauses (i) through (x) above).
"PERMITTED LIENS" means any and all of the following: (i) Liens existing as
of the Issue Date; (ii) Liens securing the Notes, the Company Guarantee, any
Subsidiary Guarantees and other obligations arising under the Indenture; (iii)
any Lien existing on any Property of a Person at the time such Person is merged
or consolidated with or into the Issuer, the Company or a Restricted Subsidiary
or becomes a Restricted Subsidiary (and not incurred in anticipation of or in
connection with such transaction), PROVIDED that such Liens are not extended to
other Property of the Issuer, the Company or the Restricted Subsidiaries; (iv)
any Lien existing on any Property at the time of the acquisition thereof (and
not incurred in anticipation of or in connection with such transaction),
PROVIDED that such Liens are not extended to other Property of the Issuer, the
Company or the Restricted Subsidiaries; (v) any Lien incurred in the ordinary
course of business incidental to the conduct of the business of the Company or
the Restricted Subsidiaries or the ownership of their Property (including (a)
easements, rights of way and similar encumbrances, (b) rights or title of
lessors under leases (other than Capital Lease Obligations), (c) rights of
collecting banks having rights of setoff, revocation, refund or chargeback with
respect to money or instruments of the Company or the Restricted Subsidiaries on
deposit with or in the possession of such banks, (d) Liens imposed by law,
including Liens under workers' compensation or similar legislation and
mechanics', carriers', warehousemen's, materialmen's, suppliers' and vendors'
Liens, (e) Liens incurred to secure performance of obligations with respect to
statutory or regulatory requirements, performance or return-of-money bonds,
surety bonds or other obligations of a like nature and incurred in a manner
consistent with industry practice and (f) Oil and Gas Liens, in each case which
are not incurred in connection with the borrowing of money, the obtaining of
advances or credit or the payment of the
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deferred purchase price of Property (other than Trade Accounts Payable); (vi)
Liens for taxes, assessments and governmental charges not yet due or the
validity of which are being contested in good faith by appropriate proceedings,
promptly instituted and diligently conducted, and for which adequate reserves
have been established to the extent required by GAAP as in effect at such time;
(vii) Liens incurred to secure appeal bonds and judgment and attachment Liens,
in each case in connection with litigation or legal proceedings that are being
contested in good faith by appropriate proceedings so long as reserves have been
established to the extent required by GAAP as in effect at such time and so long
as such Liens do not encumber assets by an aggregate amount (together with the
amount of any unstayed judgments against the Company or any Restricted
Subsidiary but excluding any such Liens to the extent securing insured or
indemnified judgments or orders) in excess of $15.0 million; (viii) Liens
securing Permitted Hedging Agreements of the Company and its Restricted
Subsidiaries; (ix) Liens securing purchase money Indebtedness or Capital Lease
Obligations, PROVIDED that such Liens attach only to the Property acquired with
the proceeds of such purchase money Indebtedness or the Property which is the
subject of such Capital Lease Obligations; (x) Liens securing Non-recourse
Purchase Money Indebtedness granted in connection with the acquisition by the
Company or any Restricted Subsidiary in the ordinary course of business of fixed
assets used in the Oil and Gas Business (including office buildings and other
real property used by the Company or such Restricted Subsidiary in conducting
its operations), PROVIDED that (a) such Liens attach only to the fixed assets
acquired with the proceeds of such Non-recourse Purchase Money Indebtedness and
(b) such Non-recourse Purchase Money Indebtedness is not in excess of the
purchase price of such fixed assets; (xi) Liens resulting from the deposit of
funds or evidences of Indebtedness in trust for the purpose of decreasing or
legally defeasing Indebtedness of the Company or any Restricted Subsidiary so
long as such deposit of funds is permitted by the provisions of the Indenture
described under "-- Limitation on Restricted Payments;" (xii) Liens resulting
from a pledge of Capital Stock of a Person that is not a Restricted Subsidiary
to secure obligations of such Person and any refinancings thereof; (xiii) Liens
to secure any permitted extension, renewal, refinancing, refunding or exchange
(or successive extensions, renewals, refinancings, refundings or exchanges), in
whole or in part, of or for any Indebtedness secured by Liens referred to in
clauses (i), (ii), (iii), (iv), (ix) and (x) above; PROVIDED, HOWEVER, that (a)
such new Lien shall be limited to all or part of the same Property (including
future improvements thereon and accessions thereto) subject to the original Lien
and (b) the Indebtedness secured by such Lien at such time is not increased to
any amount greater than the sum of (1) the outstanding principal amount or, if
greater, the committed amount of the Indebtedness secured by such original Lien
immediately prior to such extension, renewal, refinancing, refunding or exchange
and (2) an amount necessary to pay any fees and expenses, including premiums,
related to such refinancing, refunding, extension, renewal or replacement; (xiv)
Liens in favor of the Company, the Issuer, or a Restricted Subsidiary; and (xv)
Liens not otherwise permitted by clauses (i) through (xiv) above incurred in the
ordinary course of business of the Company and its Restricted Subsidiaries and
encumbering Property having an aggregate Fair Market Value not in excess of $5.0
million at any one time. Notwithstanding anything in this paragraph to the
contrary, the term "Permitted Liens" shall not include Liens resulting from the
creation, incurrence, issuance, assumption or Guarantee of any Production
Payments and Reserve Sales other than (a) any such Liens existing as of the
Issue Date, (b) Production Payments and Reserve Sales in connection with the
acquisition of any Property after the Issue Date, PROVIDED that any such Lien
created in connection therewith is created, incurred, issued, assumed or
Guaranteed in connection with the financing of, and within 60 days after the
acquisition of, such Property and (c) Production Payments and Reserve Sales,
other than those described in clauses (a) and (b) of this sentence, to the
extent such Production Payments and Reserve Sales constitute Asset Sales made
pursuant to and in compliance with the provisions of the Indenture described
under "-- Limitation on Asset Sales" and (d) incentive compensation programs for
geologists, geophysicists and other providers of technical services to the
Company and any Restricted Subsidiary; PROVIDED, HOWEVER, that, in the case of
the immediately foregoing clauses (a), (b), (c) and (d), any Lien created in
connection with any such Production Payments and Reserve Sales shall be limited
to the Property that is the subject of such Production Payments and Reserve
Sales.
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"PERMITTED REFINANCING INDEBTEDNESS" means Indebtedness ("new Indebtedness")
Incurred in exchange for, or proceeds of which are used to refinance, other
Indebtedness ("old Indebtedness"); PROVIDED, HOWEVER, that (i) such new
Indebtedness is in an aggregate principal amount not in excess of the sum of (a)
the aggregate principal amount then outstanding of the old Indebtedness (or, if
such old Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration thereof, such
lesser amount as of the date of determination), and (b) an amount necessary to
pay any fees and expenses, including premiums, related to such exchange or
refinancing, (ii) such new Indebtedness has a Stated Maturity no earlier than
the Stated Maturity of the old Indebtedness, (iii) such new Indebtedness has an
Average Life at the time such new Indebtedness is Incurred that is equal to or
greater than the Average Life of the old Indebtedness at such time, (iv) such
new Indebtedness is subordinated in right of payment to the Notes (or, if
applicable, the Company Guarantee or the relevant Subsidiary Guarantee) to at
least the same extent, if any, as the old Indebtedness and (v) if such old
Indebtedness is Non-recourse Purchase Money Indebtedness or Indebtedness that
refinanced Non-recourse Purchase Money Indebtedness, such new Indebtedness
satisfies clauses (i) and (ii) of the definition of "Non-recourse Purchase Money
Indebtedness."
"PERMITTED SHORT-TERM INVESTMENTS" means (i) Investments in Government
Obligations maturing within one year of the date of acquisition thereof, (ii)
Investments in demand accounts, time deposit accounts, certificates of deposit,
bankers' acceptances and money market deposits maturing within one year of the
date of acquisition thereof issued by a bank or trust company which is organized
under the laws of the United States of America or any State thereof or the
District of Columbia or Canada or any province thereof that is a member of the
Federal Reserve System or comparable Canadian system and has capital, surplus
and undivided profits aggregating in excess of $500.0 million and whose
long-term Indebtedness is rated "A" (or such similar equivalent rating), or
higher, according to Moody's or Dominion Bond Rating Service Limited or Canadian
Bond Rating Service, Inc., (iii) Investments in deposits available for
withdrawal on demand with any commercial bank that is organized under the laws
of any country in which the Company or any Restricted Subsidiary maintains an
office or is engaged in the Oil and Gas Business, PROVIDED that (a) all such
deposits have been made in such accounts in the ordinary course of business and
(b) such deposits do not at any one time exceed $20.0 million in the aggregate,
(iv) repurchase and reverse repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i)
entered into with a bank meeting the qualifications described in clause (ii),
(v) Investments in commercial paper or notes, maturing not more than one year
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United States
of America or any State thereof or the District of Columbia, or Canada or any
Province thereof, with a short-term rating at the time as of which any
Investment therein is made of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P or "R-1" (or higher) by Dominion Bond Rating
Service Limited or Canadian Bond Rating Service, Inc. (in the case of a Canadian
issuer) or a long-term rating at the time as of which any Investment therein is
made of "A3" (or higher) according to Moody's or "A-" (or higher) according to
S&P or such similar equivalent rating (or higher) by Dominion Bond Rating
Service Limited or Canadian Bond Rating Service, Inc. (in the case of a Canadian
issuer), (vi) Investments in any money market mutual fund having assets in
excess of $250.0 million all of which consist of other obligations of the types
described in clauses (i), (ii), (iv) and (v) hereof and (vii) Investments in
asset-backed securities maturing within one year of the date of acquisition
thereof with a long-term rating at the time as of which any Investment therein
is made of "A3" (or higher) according to Moody's or "A-1" (or higher) according
to S&P or such similar equivalent rating (or higher) by Dominion Bond Rating
Service Limited or Canadian Bond Rating Service, Inc. (in the case of a Canadian
issuer).
"PERSON" means any individual, corporation, partnership, joint venture,
limited liability company, unlimited liability company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof.
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"PREFERRED STOCK" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person; PROVIDED, HOWEVER, that "Preferred
Stock" shall not include Redeemable Stock.
"PRINCIPAL" of any Indebtedness (including the Notes) means the principal
amount of such Indebtedness plus the premium, if any, on such Indebtedness.
"PRODUCTION PAYMENTS AND RESERVE SALES" means the grant or transfer by the
Company or a Restricted Subsidiary to any Person of a royalty, overriding
royalty, net profits interest, production payment (whether volumetric or dollar
denominated), partnership or other interest in oil and gas properties, reserves
or the right to receive all or a portion of the production or the proceeds from
the sale of production attributable to such properties where the holder of such
interest has recourse solely to such production or proceeds of production,
subject to the obligation of the grantor or transferor to operate and maintain,
or cause the subject interests to be operated and maintained, in a reasonably
prudent manner or other customary standard or subject to the obligation of the
grantor or transferor to indemnify for environmental, title or other matters
customary in the Oil and Gas Business, including any such grants or transfers
pursuant to incentive compensation programs on terms that are reasonably
customary in the Oil and Gas Business for geologists, geophysicists and other
providers of technical services to the Company or a Restricted Subsidiary.
"PROPERTY" means, with respect to any Person, any interest of such Person in
any kind of property or asset, whether real, personal or mixed, or tangible or
intangible, including Capital Stock and other securities issued by any other
Person (but excluding Capital Stock or other securities issued by such first
mentioned Person).
"REDEEMABLE STOCK" of any Person means any equity security of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or otherwise (including on the happening of an
event), is or could become required to be redeemed for cash or other Property or
is or could become redeemable for cash or other Property at the option of the
holder thereof, in whole or in part, on or prior to the first anniversary of the
Stated Maturity of the Notes; or is or could become exchangeable at the option
of the holder thereof for Indebtedness at any time in whole or in part, on or
prior to the first anniversary of the Stated Maturity of the Notes; PROVIDED,
HOWEVER, that Redeemable Stock shall not include any security by virtue of the
fact that it may be exchanged or converted at the option of the holder for
Capital Stock of the Company having no preference as to dividends or liquidation
over any other Capital Stock of the Company.
"REPRESENTATIVE" means the trustee, agent or representative expressly
authorized to act in such capacity, if any, for an issue of Senior Indebtedness
of the Issuer or the Company.
"RESTRICTED PAYMENT" means (i) a dividend or other distribution declared or
paid on the Capital Stock or Redeemable Stock of the Company or to the Company's
shareholders (other than dividends, distributions or payments made solely in
Capital Stock of the Company or in options, warrants or other rights to purchase
or acquire Capital Stock), or declared and paid to any Person other than the
Company or any of its Restricted Subsidiaries (and, if such Restricted
Subsidiary is not a Wholly Owned Subsidiary, to the other shareholders of such
Restricted Subsidiary on a pro rata basis) on the Capital Stock or Redeemable
Stock of any Restricted Subsidiary, (ii) a payment made by the Company or any of
its Restricted Subsidiaries (other than to the Company or any Restricted
Subsidiary) to purchase, redeem, acquire or retire any Capital Stock or
Redeemable Stock, or any options, warrants or other rights to acquire Capital
Stock or Redeemable Stock, of the Company or of a Restricted Subsidiary, (iii) a
payment made by the Company or any of its Restricted Subsidiaries to redeem,
repurchase, legally defease or otherwise acquire or retire for value (including
pursuant to mandatory repurchase covenants), prior to any scheduled maturity,
scheduled sinking fund or scheduled mandatory redemption, any Indebtedness of
the Company or a Restricted Subsidiary which is subordinate (whether pursuant to
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its terms or by operation of law) in right of payment to the Notes, the Company
Guarantee or the relevant Subsidiary Guarantee, as the case may be, PROVIDED
that this clause (iii) shall not include any such payment with respect to (a)
any such subordinated Indebtedness to the extent of Excess Proceeds remaining
after compliance with the provisions of the Indenture described under "--
Certain Covenants -- Limitation on Asset Sales" and to the extent required by
the indenture or other agreement or instrument pursuant to which such
subordinated Indebtedness was issued or (b) the purchase, repurchase or other
acquisition of any such subordinated Indebtedness purchased in anticipation of
satisfying a scheduled maturity, scheduled sinking fund or scheduled mandatory
redemption, in each case due within one year of the date of acquisition, or (iv)
an Investment (other than a Permitted Investment) by the Company or a Restricted
Subsidiary in any Person.
"RESTRICTED SUBSIDIARY" means (i) Canadian Forest Oil Ltd. and (ii) any
other Subsidiary of the Company that has not been designated an Unrestricted
Subsidiary pursuant to the provision of the Indenture described under "--
Certain Covenants -- Restricted and Unrestricted Subsidiaries."
"S&P" means Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc., and its successors.
"SALE AND LEASEBACK TRANSACTION" means, with respect to any Person, any
direct or indirect arrangement (excluding, however, any such arrangement between
such Person and a Wholly Owned Subsidiary of such Person or between one or more
Wholly Owned Subsidiaries of such Person) pursuant to which Property is sold or
transferred by such Person or a Restricted Subsidiary of such Person and is
thereafter leased back from the purchaser or transferee thereof by such Person
or one of its Restricted Subsidiaries.
"SENIOR INDEBTEDNESS OF THE COMPANY" means the obligations of the Company
with respect to Indebtedness of the Company, whether outstanding on the date of
the Indenture or thereafter created, Incurred or assumed, and any renewal,
refunding, refinancing, replacement or extension thereof, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Company Guarantee;
provided, however, that Senior Indebtedness of the Company shall not include (i)
Indebtedness of the Company to a Subsidiary of the Company (but only so long as
such Indebtedness is held by such Subsidiary), (ii) amounts owed for goods,
materials or services purchased in the ordinary course of business, (iii)
Indebtedness Incurred in violation of the Indenture, (iv) amounts payable or any
other Indebtedness to employees of the Company or any Subsidiary of the Company,
(v) any liability for federal, state, local or other taxes owed or owing by the
Company, (vi) any Indebtedness of the Company that, when Incurred and without
regard to any election under Section 1111(b) of the United States Bankruptcy
Code, was without recourse to the Company, (vii) Pari Passu or Subordinated
Indebtedness of the Company, (viii) Indebtedness of the Company that is
represented by Redeemable Stock, (ix) Indebtedness evidenced by the Company
Guarantee and (x) in-kind obligations relating to net oil and gas balancing
positions. "SENIOR INDEBTEDNESS OF ANY SUBSIDIARY GUARANTOR" has a correlative
meaning; provided that clause (i) above shall be deemed to refer to Indebtedness
of any Subsidiary Guarantor to the Company or any Subsidiary of the Company
(other than as described in the proviso to clause (i) of the definition of
"Senior Indebtedness of the Issuer").
"SENIOR INDEBTEDNESS OF THE ISSUER" means the obligations of the Issuer with
respect to Indebtedness of the Issuer, whether outstanding on the date of the
Indenture or thereafter created, Incurred or assumed, and any renewal,
refunding, refinancing, replacement or extension thereof, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes; PROVIDED,
HOWEVER, that Senior Indebtedness of the Issuer shall not include (i)
Indebtedness of the Issuer to the Company or any Subsidiary of the Company or
the Issuer; provided, that Indebtedness of the Issuer to 611852 Saskatchewan
Ltd. in an amount equal to the amount of Indebtedness outstanding at any time
under the Canadian Credit Facility shall constitute Senior Indebtedness of the
Issuer to the extent that such outstanding Indebtedness under the Canadian
Credit Facility is not
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guaranteed by the Issuer, (ii) amounts owed for goods, materials or services
purchased in the ordinary course of business, (iii) Indebtedness Incurred in
violation of the Indenture, (iv) amounts payable or any other Indebtedness to
employees of the Issuer or any Subsidiary of the Issuer, (v) any liability for
United States federal, state, local, or Canadian federal or provincial, or other
taxes owed or owing by the Issuer, (vi) any Indebtedness of the Issuer that,
when Incurred and without regard to any election under Section 1111(b) of the
United States Bankruptcy Code or corresponding provisions of the Bankruptcy and
Insolvency Act (Canada) and the Companies' Creditors Arrangements Act (Canada),
was without recourse to the Issuer, (vii) Pari Passu or Subordinated
Indebtedness of the Issuer, (viii) Indebtedness of the Issuer that is
represented by Redeemable Stock, (ix) Indebtedness evidenced by the Notes and
(x) in-kind obligations relating to net oil and gas balancing positions.
"SIGNIFICANT SUBSIDIARY," means, at any date of determination, (a) the
Issuer and (b) any other Restricted Subsidiary that would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the Commission.
"STATED MATURITY," when used with respect to any security or any installment
of principal thereof or interest thereon, means the date specified in such
security as the fixed date on which the principal of such security or such
installment of principal or interest is due and payable, including pursuant to
any mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Issuer, the Company or
a Subsidiary Guarantor that is subordinated or junior in right of payment to the
Notes, the Company Guarantee or the relevant Subsidiary Guarantee, as
applicable, pursuant to a written agreement to that effect.
"SUBSIDIARY" of a Person means (i) another Person which is a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned or
controlled by (a) the first Person, (b) the first Person and one or more of its
Subsidiaries or (c) one or more of the first Person's Subsidiaries or (ii)
another Person which is not a corporation (x) at least 50% of the ownership
interest of which and (y) the power to elect or direct the election of a
majority of the directors or other governing body of which are controlled by
Persons referred to in clause (a), (b) or (c) above.
"SUBSIDIARY GUARANTOR" means, unless released from its Subsidiary Guarantee
as permitted by the Indenture, any Restricted Subsidiary that becomes a
Guarantor of the Notes in compliance with the provisions of the Indenture and
executes a supplemental indenture agreeing to be bound by the terms of the
Indenture, until a successor replaces such Restricted Subsidiary pursuant to the
applicable provisions of the Indenture and, thereafter, means the successor.
"SUBSIDIARY GUARANTEE" means an unconditional, unsecured senior subordinated
Guarantee of the Notes given by any Restricted Subsidiary pursuant to the terms
of the Indenture.
"TRADE ACCOUNTS PAYABLE" means accounts payable or other obligations of the
Company or any Restricted Subsidiary to trade creditors created or assumed by
the Company or such Restricted Subsidiary in the ordinary course of business in
connection with the obtaining of goods or services.
"UNRESTRICTED SUBSIDIARY" means (i) each Subsidiary of the Company that the
Company has designated pursuant to the provision of the Indenture described
under "-- Certain Covenants -- Restricted and Unrestricted Subsidiaries" as an
Unrestricted Subsidiary and (ii) any Subsidiary of an Unrestricted Subsidiary.
"VOLUMETRIC PRODUCTION PAYMENTS" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"VOTING STOCK" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
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"WHOLLY OWNED SUBSIDIARY" means, at any time, a Restricted Subsidiary of the
Company all the Voting Stock of which (other than directors' qualifying shares)
is at such time owned, directly or indirectly, by the Company and its other
Wholly Owned Subsidiaries.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Issuer, the Company and the Subsidiary
Guarantors will be discharged from all their obligations with respect to the
Notes (except for certain obligations to exchange or register the transfer of
Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies
and to hold moneys for payment in trust and its obligations described under
"Additional Amounts") upon the deposit in trust for the benefit of the Holders
of the Notes of money or U.S. Government Obligations, or a combination thereof,
which, through the payment of principal, premium, if any, and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on the Notes at
Stated Maturity thereof or on earlier redemption in accordance with the terms of
the Indenture and the Notes. Such defeasance or discharge may occur only if,
among other things, the Issuer or the Company has delivered to the Trustee an
Opinion of United States or Canadian Counsel, as appropriate, to the effect that
(i) the Company or the Issuer has received from, or there has been published by,
the United States Internal Revenue Service a ruling or since the date of the
Indenture there has been a change in the applicable federal income tax law, in
either case to the effect that Holders of the Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge were not to occur; (ii) Holders of the
Notes will not recognize income, gain or loss for Canadian federal, provincial
or territorial income or other tax purposes and will be subject to Canadian
federal, provincial or territorial income or other tax on the same amounts, in
the same manner and at the same times as would have been the case had such
deposit, defeasance and discharge not occurred; and (iii) the resulting trust
will not be an "Investment Company" within the meaning of the Investment Company
Act of 1940 unless such trust is qualified thereunder or exempt from regulation
thereunder.
The Indenture provides that if the Issuer takes the actions described below,
it and the Company may omit to comply with certain covenants, including those
described under "-- Repurchase at the Option of Holders Upon a Change of
Control," "-- Certain Covenants" and in clauses (vi) and (vii) under the first
paragraph and clauses (vii) and (viii) under the third paragraph of "-- Merger,
Consolidation and Sale of Substantially All Assets," and the occurrence of the
Events of Default described below in clauses (iii) and (iv) (with respect to
such covenants) and clauses (v), (vi), (vii) (with respect to Significant
Subsidiaries) and (viii)), under "-- Events of Default and Notice" will be
deemed not to be or result in an Event of Default. In order to exercise such
option, the Issuer or the Company will be required to deposit, in trust for the
benefit of the Holders of the Notes, money or U.S. Government Obligations, or a
combination thereof, which, through the payment of principal, premium, if any,
and interest in respect thereof in accordance with their terms, will provide
money in an amount sufficient to pay the principal of and any premium and
interest on the Notes at Stated Maturity thereof or on earlier redemption in
accordance with the terms of the Indenture and the Notes. The Issuer will also
be required, among other things, to deliver to the Trustee an Opinion of United
States or Canadian Counsel, as appropriate, to the effect that (i) Holders of
the Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain obligations and
will be subject to federal income tax on the same amount, in the same manner and
at the same times as would have been the case if such deposit and defeasance
were not to occur; (ii) Holders of the Notes will not recognize income, gain or
loss for Canadian federal, provincial or territorial income or other tax
purposes and will be subject to Canadian federal, provincial or territorial
income or other tax on the same amounts, in the same manner and at the same
times as would have been the case had such deposit and defeasance not occurred;
and (iii) that the resulting trust will not be an "Investment Company" within
the meaning of the Investment Company Act of 1940 unless such trust is qualified
thereunder or exempt from regulation thereunder. If the Issuer
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were to exercise this option and the Notes were declared due and payable because
of the occurrence of any Event of Default, the amount of money and U.S.
Government Obligations so deposited in trust would be sufficient to pay amounts
due on the Notes at the time of their Stated Maturity but may not be sufficient
to pay amounts due on the Notes upon any acceleration resulting from such Event
of Default. In such case, the Issuer would remain liable for such payments.
If the Issuer exercises either of the options described above, each
Subsidiary Guarantor will be released from all its obligations under its
Subsidiary Guarantee.
EVENTS OF DEFAULT AND NOTICE
The following are summaries of Events of Default under the Indenture with
respect to the Notes: (i) failure to pay any interest on the Notes when due,
continued for 30 days; (ii) failure to pay principal of (or premium, if any, on)
the Notes when due; (iii) failure to comply with the provisions of the Indenture
described under "Merger, Consolidation and Sale of Substantially All Assets;"
(iv) failure to perform any other covenant of the Issuer, the Company or any
Subsidiary Guarantor in the Indenture, continued for 60 days after written
notice to the Issuer from the Trustee or the Holders of at least 25% in
aggregate principal amount of the outstanding Notes; (v) a default by the
Company or any Restricted Subsidiary under any Indebtedness for borrowed money
(other than Non-recourse Purchase Money Indebtedness) which results in
acceleration of the maturity of such Indebtedness, or failure to pay any such
Indebtedness at maturity, in an amount greater than $5.0 million if such
Indebtedness is not discharged or such acceleration is not rescinded or annulled
within 10 days after written notice as provided in the Indenture; (vi) one or
more final judgments or orders by a court of competent jurisdiction are entered
against the Company or any Restricted Subsidiary in an uninsured or
unindemnified aggregate amount outstanding at any time in excess of $5.0 million
and such judgments or orders are not discharged, waived, stayed, satisfied or
bonded for a period of 60 consecutive days; (vii) certain events of bankruptcy,
insolvency or reorganization with respect to the Company or any Significant
Subsidiary; (viii) the Company Guarantee ceases to be in full force and effect
(other than in accordance with the terms of the Indenture and the Company
Guarantee) or the Company denies or disaffirms its obligations under the Company
Guarantee; or (ix) a Subsidiary Guarantee ceases to be in full force and effect
(other than in accordance with the terms of the Indenture and such Subsidiary
Guarantee) or a Subsidiary Guarantor denies or disaffirms its obligations under
its Subsidiary Guarantee.
The Indenture provides that if an Event of Default (other than an Event of
Default described in clause (vii) above) with respect to the Notes at the time
outstanding shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the outstanding Notes by notice as
provided in the Indenture may declare the principal amount of the Notes to be
due and payable immediately. If an Event of Default described in clause (vii)
above with respect to the Notes at the time outstanding shall occur, the
principal amount of all the Notes will automatically, and without any action by
the Trustee or any Holder, become immediately due and payable. After any such
acceleration, but before a judgment or decree based on acceleration, the Holders
of at least a majority in aggregate principal amount of the outstanding Notes
may, under certain circumstances, rescind and annul such acceleration if all
Events of Default, other than the nonpayment of accelerated principal (or other
specified amount), have been cured or waived as provided in the Indenture.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of the Notes, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of at least
a majority in aggregate principal amount of the outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to the Notes.
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No Holder of Notes will have any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or a trustee, or
for any other remedy thereunder, unless (i) such Holder has previously given to
the Trustee written notice of a continuing Event of Default with respect to the
Notes, (ii) the Holders of at least 25% in aggregate principal amount of the
outstanding Notes have made written request, and such Holder or Holders have
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee and (iii) the Trustee has failed to institute such proceeding and has
not received from the Holders of at least a majority in aggregate principal
amount of the outstanding Notes a direction inconsistent with such request,
within 60 days after such notice, request and offer. However, such limitations
do not apply to a suit instituted by a Holder of Notes for the enforcement of
payment of the principal of or any premium or interest on such Notes on or after
the applicable due date specified in such Notes.
MODIFICATION OF THE INDENTURE; WAIVER
The Indenture provides that modifications and amendments of the Indenture
may be made by the Issuer, the Company, the Subsidiary Guarantors, if any, and
the Trustee without the consent of any Holders of Notes in certain limited
circumstances, including (i) to cure any ambiguity, omission, defect or
inconsistency, (ii) to provide for the assumption of the obligations of the
Company under the Indenture upon the merger, consolidation or sale or other
disposition of all or substantially all the assets of the Company and the
Restricted Subsidiaries taken as a whole and certain other events specified in
the provisions of the Indenture described under "-- Merger, Consolidation and
Sale of Substantially All Assets," (iii) to provide for uncertificated Notes in
addition to or in place of certificated Notes, (iv) to comply with any
requirement of the Commission in order to effect or maintain the qualification
of the Indenture under the 1939 Act, (v) to make any change that does not
adversely affect the rights of any Holder of Notes in any material respect, (vi)
to add or remove Subsidiary Guarantors pursuant to the procedure set forth in
the Indenture and (vii) certain other modifications and amendments as set forth
in the Indenture.
The Indenture contains provisions permitting the Issuer, Company, the
Subsidiary Guarantors and the Trustee, with the written consent of the Holders
of not less than a majority in aggregate principal amount of the outstanding
Notes, to execute supplemental indentures or amendments adding any provisions to
or changing or eliminating any of the provisions of the Indenture or modifying
the rights of the Holders of the Notes, except that no such supplemental
indenture, amendment or waiver may, without the consent of all the Holders of
outstanding Notes, among other things, (i) reduce the principal amount of Notes
whose Holders must consent to an amendment or waiver, (ii) reduce the rate of or
change the time for payment of interest on any Notes, (iii) change the currency
in which any amount due in respect of the Notes is payable, (iv) reduce the
principal of or any premium on or change the Stated Maturity of any Notes or
alter the redemption or repurchase provisions with respect thereto, (v) reduce
the relative ranking of any Notes, (vi) release any security that may have been
granted to the Trustee in respect of the Notes, (vii) at any time after a Change
of Control or an Asset Sale has occurred, change the time at which the Change of
Control Offer or Prepayment Offer relating thereto must be made or at which the
Notes must be repurchased pursuant to such Change of Control Offer or Prepayment
Offer, (viii) cause the Company, the Issuer or any Subsidiary Guarantor to be
required to make any deduction or withholding from payments made under or with
respect to the Notes, (ix) make any modification to the provisions of the
Indenture described under "-- Additional Amounts" that would adversely affect
the rights of the Holders to receive Additional Amounts as described thereunder,
or (x) make certain other significant amendments or modifications as specified
in the Indenture.
The Holders of at least a majority in principal amount of the outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture. The Holders of at least a majority in principal amount of the
outstanding Notes may waive any past default under the Indenture, except a
default in the payment of principal, premium or interest and certain covenants
and provisions of the Indenture which cannot be amended without the consent of
the Holders of each outstanding Note.
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NOTICES
Notices to Holders of the Notes will be given by mail to the addresses of
such Holders as they may appear in the Security Register.
GOVERNING LAW
The Indenture and the Notes are governed by and construed in accordance with
the internal laws of the State of New York without reference to principles of
conflicts of law.
CONSENT TO JURISDICTION AND SERVICE
The Indenture provides that each of the Issuer, the Company and each
Subsidiary Guarantor will irrevocably appoint CT Corporation System, 1633
Broadway, New York, New York 10019 as its agent for service of process in any
suit, action or proceeding with respect to the Indenture or the Notes and for
actions brought under federal or state securities laws brought in any federal or
state court located in the Borough of Manhattan in The City of New York and
submits to such jurisdiction.
TRUSTEE
State Street Bank & Trust Company is the Trustee under the Indenture. The
Trustee maintains normal banking relationships with the Company and its
Subsidiaries and may perform certain services for and transact other business
with the Company and its Subsidiaries from time to time in the ordinary course
of business.
CERTAIN UNITED STATES AND CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The information included in this Prospectus with respect to United States
Federal income tax considerations has been passed on for the Company by Ernst &
Young LLP, independent certified public accountants and with respect to Canadian
Federal income tax considerations has been passed on for the Company by Ernst &
Young Chartered Accountants.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the principal United States Federal
income tax consequences of the receipt, ownership and disposition of the
Exchange Notes to original purchasers thereof that, except as noted below, are
United States Holders (as defined below) and that receive the Exchange Notes by
tendering Old Notes and receiving Exchange Notes pursuant to the Exchange Offer.
This discussion is based on currently existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing, temporary and proposed
Treasury regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect or proposed on the date hereof and all
of which are subject to change, possibly with retroactive effect, or different
interpretations. This discussion does not address the tax consequences to
subsequent purchasers of Exchange Notes and is limited to initial purchasers who
hold the Exchange Notes as capital assets, within the meaning of section 1221 of
the Code. Moreover, this discussion is for general information only and does not
address all of the tax consequences that may be relevant to particular initial
purchasers in light of their personal circumstances or to certain types of
initial purchasers (such as certain financial institutions, insurance companies,
tax-exempt entities or dealers in securities) and also does not discuss Exchange
Notes held as a hedge against currency risks or as part of a straddle, as part
of a "synthetic security" or other integrated investment (including a
"conversion transaction") comprised of an Exchange Note and one or more other
investments, or held by a holder whose functional currency is not the US dollar.
INITIAL PURCHASERS OF OLD NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF THE OLD NOTES
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AND THE RECEIPT, OWNERSHIP AND DISPOSITION OF THE EXCHANGE NOTES, INCLUDING THE
APPLICABILITY OF ANY UNITED STATES FEDERAL TAX LAWS OR ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED CHANGES) IN APPLICABLE TAX LAWS
OR INTERPRETATIONS THEREOF.
UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a holder of an
Exchange Note who is an initial purchaser that is, for United States Federal
income tax purposes, (i) an individual who is a citizen or resident of the
United States, (ii) a corporation or other entity taxable as a corporation
created or organized in the United States or under the laws of the United States
or of any state thereof (including the District of Columbia), (iii) an estate
the income of which is includable in gross income for United States Federal
income tax purposes regardless of its source, or (iv) a trust if a United States
court is able to exercise primary supervision over the trust's administration
and one or more United States persons have authority to control all substantial
decisions of such trust.
TAXATION OF INTEREST. Interest paid or accrued on an Exchange Note,
including any Additional Amounts paid as a result of the imposition of Canadian
withholding taxes (see "Description of the Notes--Canadian Withholding Taxes"),
will be taxable to a United States Holder as ordinary interest income, generally
at the time it is received or accrued, in accordance with such United States
Holder's regular method of accounting for United States Federal income tax
purposes.
EXCHANGE OFFER. The exchange of Old Notes for Exchange Notes pursuant to
the Exchange Offer should not be a taxable exchange. Consequently, a United
States Holder should not recognize taxable income or loss as a result of
exchanging an Old Note for an Exchange Note pursuant to the Exchange Offer. The
holding period of an Exchange Note will include the holding period of the Old
Note and the basis of the Exchange Note will be the same as the basis of the Old
Note immediately before the exchange.
The Issuer will be required to pay additional cash interest on the Old Notes
and the Exchange Notes if it fails to comply with certain of its Obligations
under the Registration Agreement (see "Registered Exchange Offer; Registration
Rights"). Such additional interest should be taxable to a United States Holder
as ordinary income at the time it accrues or is received, in accordance with
each such United States Holder's method of tax accounting. It is possible,
however, that the Internal Revenue Service (the "IRS") may take a different
position, in which case United States Holders might be required to include such
additional interest in income prior to its receipt (regardless of their usual
method of tax accounting).
SALE, EXCHANGE OR RETIREMENT OF THE EXCHANGE NOTES. Upon the sale,
exchange, redemption, retirement at maturity or other taxable disposition of an
Exchange Note, a United States Holder generally will recognize gain or loss
equal to the difference between the sum of cash plus the fair market value of
all other property received on such disposition (except to the extent such cash
or property is attributable to accrued but unpaid interest, which will be
taxable as ordinary income) and such United States Holder's tax basis in the
Exchange Note.
Gain or loss recognized on the disposition of an Exchange Note generally
will be capital gain or loss. In the case of a United States Holder who is an
individual, such capital gain generally will be subject to tax at a 28% rate if
the Exchange Note (including the time period the Old Note was held) has been
held for more than 12 months but not more than 18 months, and a maximum capital
gains rate of 20% will apply if the Exchange Note (including the time period the
Old Note was held) has been held for more than 18 months.
FOREIGN TAX CREDIT CONSIDERATIONS. Interest (including Additional Amounts)
will constitute income from sources without the United States for United States
foreign tax credit purposes. Payment of interest on the Exchange Notes to a
United States Holder with whom the Issuer deals at arm's length will
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not be subject to Canadian withholding taxes (see "Certain Canadian Income Tax
Considerations"). If, however, the cash interest payments on the Exchange Notes
become subject to Canadian withholding taxes, United States Holders will be
treated as having actually received the amount of such taxes withheld and as
having paid such amount to the Canadian taxing authorities. As a result, the
amount of interest income included in gross income by a United States Holder
will generally be greater than the amount of cash actually received by the
United States Holder from the Issuer with respect to such interest income. A
United States Holder may be able, subject to generally applicable limitations,
to claim a foreign tax credit or take a deduction for Canadian withholding taxes
imposed on interest payments (including Additional Amounts). Interest income
(including Additional Amounts) generally will constitute "passive income" or
"financial services income" for foreign tax credit purposes. If, however,
Canadian withholding tax is imposed at a rate of 5% or more, such income will
constitute "high withholding tax interest."
Gain on the sale, redemption or other taxable disposition of an Exchange
Note will generally constitute United States source income for United States
foreign tax credit purposes. Present law is unclear regarding the allocation of
a loss recognized by a United States Holder on such a sale, redemption or other
taxable disposition. Under proposed Treasury regulations, any capital loss
recognized by a United States Holder would be allocated against foreign source
income and may thus reduce the United States Holder's ability to claim foreign
tax credits.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Backup withholding and
information reporting requirements may apply to certain payments of principal,
premium, if any, and interest on an Exchange Note and to proceeds from the sale
or other disposition of an Exchange Note before maturity. The Issuer, its agent
or a broker, as the case may be, will be required to withhold from any payment
that is subject to backup withholding a tax equal to 31% of such payment if a
United States Holder fails to furnish its taxpayer identification number (social
security or employer identification number), certify that such number is
correct, certify that such United States Holder is not subject to backup
withholding or otherwise comply with the applicable requirements of the backup
withholding rules. Certain United States Holders, including all corporations,
are not subject to backup withholding and information reporting requirements.
Any amounts withheld under the backup withholding rules from a payment to a
United States Holder will be allowed as a credit against such United States
Holder's United States Federal income tax and may entitle the United States
Holder to a refund, provided that the required information is furnished to the
IRS.
UNITED STATES FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
The following discussion is limited to the United States Federal income tax
consequences relevant to a holder of an Exchange Note that is not a United
States Holder (a "Non-U.S. Holder").
PAYMENT OF INTEREST ON EXCHANGE NOTES. Payment of interest (including
Additional Amounts) by the Issuer on the Exchange Notes will be exempt from
United States Federal income and withholding tax if paid to a Non-U.S. Holder
unless such Non-U.S. Holder has an office or other fixed place of business in
the United States to which the interest income is attributable and such income
is either derived in the active conduct of a banking, financing or similar
business within the United States or received by a corporation, the principal
business of which is the trading in stock or securities for its own account.
SALE, EXCHANGE OR RETIREMENT OF EXCHANGE NOTES. A Non-U.S. Holder generally
will not be subject to United States Federal income tax (and generally no tax
will be withheld) with respect to gain realized on the sale, exchange,
redemption, retirement at maturity or other disposition of an Exchange Note
unless (i) the gain is treated as effectively connected with a U.S. trade or
business conducted by the Non-U.S. Holder or (ii) the Non-U.S. Holder is an
individual who is present in the United States for 183 or more days in the
taxable year of the sale, redemption, retirement at maturity or other
disposition of the Exchange Note and certain other conditions are met.
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CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following is, as of the date hereof, a summary of the principal Canadian
federal income tax consequences to a holder (other than an Initial Purchaser) of
Exchange Notes who acquires such Exchange Notes pursuant to the Exchange Offer
and who, for purposes of the INCOME TAX ACT (Canada)(the "ITA") and at all
relevant times, is not resident in Canada. This summary is based on the current
provisions of the ITA and the regulations thereunder, the current published
administrative practices of Revenue Canada, and all specific proposals to amend
the ITA and the regulations announced by or on behalf of the Minister of Finance
prior to the date hereof. This summary does not otherwise take into account or
anticipate changes in the law, whether by judicial, governmental or legislative
decision or action, nor does it take into account tax legislation or
considerations of any province or territory of Canada or any jurisdiction other
than Canada. The provisions of provincial income tax legislation vary from
province to province in Canada and in some cases differ from federal income tax
legislation.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND
SHOULD NOT BE INTERPRETED AS, LEGAL OR TAX ADVICE TO ANY PARTICULAR HOLDER OF
EXCHANGE NOTES. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS
TO THE TAX CONSEQUENCES TO THEM OF THE ACQUISITION, HOLDING AND DISPOSITION OF
THE EXCHANGE NOTES, INCLUDING THE APPLICATION AND EFFECT OF CANADIAN FEDERAL,
PROVINCIAL, TERRITORIAL, AND LOCAL TAX LAWS.
The payment by the Issuer of interest, principal or premium, if any, on the
Exchange Notes to a holder who is not resident in Canada and with whom the
Issuer deals at arm's length within the meaning of the ITA will be exempt from
Canadian withholding tax. For the purposes of the ITA, related persons (as
therein defined) are deemed not to deal at arm's length, and it is a question of
fact whether persons not related to each other deal at arm's length.
No other taxes on income (including taxable capital gains) will be payable
under the ITA in respect of the holding, redemption or disposition of the
Exchange Notes by holders who are neither residents nor deemed to be residents
of Canada for the purposes of ITA and who do not use or hold and are not deemed
by such laws to use or hold the Exchange Notes in carrying on business in Canada
for the purposes of the ITA, except that in certain circumstances holders who
are non-resident insurers carrying on an insurance business in Canada and
elsewhere may be subject to such taxes.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company and the Issuer have agreed pursuant to a Registration Agreement
(the "Registration Agreement") with the Initial Purchasers, for the benefit of
the Holders of the Old Notes, that the Company and the Issuer will, at the
Company's cost, use their reasonable best efforts to (i) file a registration
statement (the "Exchange Offer Registration Statement") within 60 days after the
date of the original issuance of the Old Notes with the Commission with respect
to a registered offer to exchange the Old Notes for the Exchange Notes having
terms substantially identical in all material respects to the Old Notes (except
that the Exchange Notes will not contain terms with respect to transfer
restrictions) and (ii) cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act within 120 days after the date of
the original issuance of the Old Notes. Upon the effectiveness of the Exchange
Offer Registration Statement, the Issuer will offer the Exchange Notes in the
Exchange Offer. The Company and the Issuer will use their reasonable best
efforts to keep the Registered Exchange Offer open for not less than 30 days (or
longer if required by applicable law) after the date notice of the Exchange
Offer is mailed to the Holders of the Old Notes. For each Old Note surrendered
to the Issuer pursuant to the Registered Exchange Offer, the Holder of such Old
Note will receive an Exchange Note having a principal amount equal to that of
the surrendered Old Note. Interest on each Exchange Note will accrue from the
last interest payment date on which interest was paid on the Old Note
surrendered in exchange thereof or, if no interest has been paid on such Old
Note, from the date of its original issue.
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Under existing Commission interpretations, the Exchange Notes would be freely
transferable by Holders other than affiliates of the Issuer after the Registered
Exchange Offer without further registration under the Securities Act if the
Holder of the Exchange Notes represents that it is acquiring the Exchange Notes
in the ordinary course of its business, that it has no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes and that it is not an affiliate of the Issuer, as such terms are
interpreted by the Commission; PROVIDED that broker-dealers ("Participating
Broker-Dealers") receiving Exchange Notes in the Exchange Offer will have a
prospectus delivery requirement with respect to resales of such Exchange Notes.
The Commission has taken the position that Participating Broker-Dealers may
fulfill their prospectus delivery requirements with respect to Exchange Notes
(other than a resale of an unsold allotment from the original sale of the Old
Notes) with the prospectus contained in the Exchange Offer Registration
Statement. Under the Registration Agreement, the Company and the Issuer are
required to allow Participating Broker-Dealers and other persons, if any, with
similar prospectus delivery requirements to use the prospectus contained in the
Exchange Offer Registration Statement in connection with the resale of such
Exchange Notes.
A Holder of Old Notes (other than certain specified Holders) who wishes to
exchange such Notes for Exchange Notes in the Registered Exchange Offer will be
required to represent that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business and that at the time of the
commencement of the Registered Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and that it is not an
"affiliate" of the Issuer, as defined in Rule 405 of the Securities Act, or if
it is an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
In the event that (i) applicable interpretations of the staff of the
Commission do not permit the Company and the Issuer to effect such a Registered
Exchange Offer, (ii) for any other reason the Exchange Offer Registration
Statement is not declared effective within 120 days after the date of the
original issuance of the Old Notes or the Registered Exchange Offer is not
consummated within 150 days after the date of the original issuance of the Old
Notes, (iii) the Initial Purchasers so request with respect to Old Notes not
eligible to be exchanged for Exchange Notes in the Registered Exchange Offer or
the Initial Purchasers do not receive freely tradeable Exchange Notes in the
Registered Exchange Offer or (iv) any Holder (other than an Initial Purchaser)
is not eligible to participate in the Registered Exchange Offer or such Holder
does not receive freely tradeable Exchange Notes in the Registered Exchange
Offer other than by reason of such Holder being an affiliate of the Issuer (it
being understood that the requirement that a Participating Broker-Dealer deliver
the prospectus contained in the Exchange Offer Registration Statement in
connection with sales of Exchange Notes shall not result in such Exchange Notes
being not "freely tradeable"), the Company and the Issuer will, at the Company's
cost, use their reasonable best efforts to (a) as promptly as practicable, file
a Shelf Registration Statement covering resales of the Old Notes or the Exchange
Notes, as the case may be, (b) cause the Shelf Registration Statement to be
declared effective under the Securities Act and (c) keep the Shelf Registration
Statement effective until two years after its effective date (or until one year
after such effective date if such Shelf Registration Statement is filed at the
request of an Initial Purchaser). The Company and the Issuer will, in the event
a Shelf Registration Statement is filed, among other things, provide to each
Holder for whom such Shelf Registration Statement was filed copies of the
prospectus which is a part of the Shelf Registration Statement, notify each such
Holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted resales of the Old
Notes or the Exchange Notes, as the case may be. A Holder selling such Old Notes
or Exchange Notes pursuant to the Shelf Registration Statement generally would
be required to be named as a selling security Holder in the related prospectus
and to deliver a prospectus to purchasers, will be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the Registration Agreement which
are applicable to such Holder (including certain indemnification obligations).
123
<PAGE>
In the event that (a) neither the Exchange Offer Registration Statement nor
the Shelf Registration Statement has been filed with the Commission on or prior
to the 60th day following the date of the original issuance of the Old Notes,
(b) neither the Exchange Offer Registration Statement nor the Shelf Registration
Statement has been declared effective on or prior to the 120th day following the
date of the original issuance of the Old Notes, (c) either the Exchange Offer
has not been consummated or a Shelf Registration Statement has not been declared
effective on or prior to the 150th day following the date of the original
issuance of the Old Notes or (d) after either the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared effective, such
Registration Statement thereafter ceases to be effective or usable (subject to
certain exceptions) in connection with resales of Old Notes or Exchange Notes in
accordance with and during the periods specified in the Registration Agreement
(each such event referred to in clauses (a) through (d) a "Registration
Default"), interest ("Special Interest") will accrue on the Old Notes and the
Exchange Notes (in addition to the stated interest on the Old Notes and the
Exchange Notes) from and including the date on which any such Registration
Default shall occur to but excluding the date on which all Registration Defaults
have been cured. The Special Interest will accrue at a rate of 0.5% per annum
during the 90-day period immediately following the occurrence of any
Registration Default and shall increase by 0.25% per annum at the end of each
subsequent 90-day period, but in no event shall such rate exceed 1.5% per annum.
All accrued Special Interest shall be paid to Holders of the Old Notes in
the same manner in which payments of other interest are made pursuant to the
Indenture. See "Description of the Notes -- General."
The summary herein of certain provisions of the Registration Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Agreement, a copy of
which is available upon request to the Company.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. The Issuer and the Company have agreed that, starting
on the Expiration Date and ending on the close of business 180 days after the
Expiration Date, they will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. A
broker-dealer that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Registration
Agreement (including certain indemnification rights and obligations). In
addition, until , , all dealers effecting transactions in the
Exchange Notes may be required to deliver a prospectus.
Neither the Issuer nor the Company will receive any proceeds from any sale
of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed
124
<PAGE>
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus to any broker-dealer that
requests such documents in the Letter of Transmittal. The Company has agreed in
the Registration Agreement to pay all expenses incident to the Exchange Offer
other than commissions or concessions of any brokers or dealers and to indemnify
the holders of the Old Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
TRANSFER RESTRICTIONS ON OLD NOTES
OFFERS AND SALES BY THE INITIAL PURCHASERS
The Old Notes were not registered under the Securities Act and may not be
offered or sold in the United States or to, or for the account or benefit of,
U.S. persons except in accordance with an applicable exemption from the
registration requirements thereof. Accordingly, the Old Notes were offered and
sold only (i) in the United States to "Qualified Institutional Buyers" as
defined in Rule 144A under the Securities Act and (ii) outside the United States
to non-U.S. persons in reliance upon Regulation S under the Securities Act.
Each purchaser of the Old Notes was deemed to have represented and agreed as
follows:
(1) it is acquiring the Old Notes for its own account or for an account
with respect to which it exercises sole investment discretion, and that it
or such account is a QIB or a foreign purchaser outside the United States;
(2) it acknowledges that the Old Notes have not been registered under
the Securities Act and that a prospectus has not been and will not be filed
in any province or territory of Canada to qualify the sale of Old Notes in
such jurisdictions, and may not be sold, pledged or otherwise transferred
except as permitted below;
(3) it understands and agrees (x) that such Old Notes are being offered
only in a transaction not involving any public offering within the meaning
of the Securities Act, and (y) that (A) if within two years after the date
of original issuance of the Old Notes or if within three months after it
ceases to be an affiliate (within the meaning of Rule 144 under the
Securities Act) of the Issuer, it decides to resell, pledge or otherwise
transfer such Old Notes on which the legend set forth below appears, such
Old Notes may be resold, pledged or transferred only (i) to the Issuer, (ii)
so long as such security is eligible for resale pursuant to Rule 144A, to a
person whom the seller reasonably believes is a QIB that purchases for its
own account or for the account of a QIB to whom notice is given that the
resale, pledge or transfer is being made in reliance on Rule 144A (as
indicated by the box checked by the transferor on the Certificate of
Transfer on the reverse of the Old Note if such Old Note is not in
book-entry form), (iii) in an offshore transaction in accordance with
Regulation S (as indicated by the box checked by the transferor on the
Certificate of Transfer on the reverse of the Old Note if such Old Note is
not in book-entry form), other than in Canada or to or for the benefit of a
resident of Canada prior to 40 days following the original issue of the Old
Notes except pursuant to a prospectus qualifying the Old Notes for sale
under the securities law in any province or territory of Canada in which
such purchaser resides or an exemption from the prospectus requirements of
such laws, and, if such transfer is being effected by an Initial Foreign
Purchaser or any foreign purchaser who has purchased Old Notes from an
Initial Foreign Purchaser or from any person other than a QIB or an
institutional "accredited investor," as defined under Rule 501(a)(1), (2),
(3) or (7) under the Securities Act (an "Institutional Accredited Investor")
pursuant to this clause (iii) prior to the expiration of the "40-day
restricted period" (within the meaning of Rule 903(c)(3) of Regulation S
under the Securities Act), the transferee shall have certified to the Issuer
and the Trustee for the Old Notes that such transferee is a non-U.S. person
(within the meaning of Regulation S) and that such
125
<PAGE>
transferee is acquiring the Old Notes in an offshore transaction, (iv) to an
Institutional Accredited Investor (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the Old Note if
such Old Note is not in book-entry form) who has certified to the Issuer and
the Trustee for the Old Notes that such transferee is an Institutional
Accredited Investor and is acquiring the Old Notes for investment purposes
and not for distribution in violation of the Securities Act or applicable
Canadian securities laws or any other applicable securities laws (provided
that no Initial Foreign Purchaser or any foreign purchaser who has purchased
Old Notes from an Initial Foreign Purchaser or from any person other than a
QIB or an Institutional Accredited Investor pursuant to clause (iii) shall
be permitted to transfer any Old Notes so purchased by it to an
Institutional Accredited Investor pursuant to this clause (iv) prior to the
expiration of the "40-day restricted period" (within the meaning of Rule
903(c)(3) of Regulation S under the Securities Act), (v) pursuant to an
exemption from the registration requirements of the Securities Act provided
by Rule 144 (if applicable) under the Securities Act or (vi) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States, (B) the purchaser will, and each subsequent holder is required to,
notify any purchaser of Old Notes from it of the resale restrictions
referred to in (A) above, if then applicable, and (C) with respect to any
transfer of Old Notes by an Institutional Accredited Investor, such holder
will deliver to the Issuer and the Trustee such certificates and other
information as they may reasonably require to confirm that the transfer by
it complies with the foregoing restrictions.
(4) it understands that the notification requirement referred to in (3)
above will be satisfied, in the case only of transfer by physical delivery
of certificated Old Notes other than a Global Security, by virtue of the
fact that the following legend will be placed on the Old Notes unless
otherwise agreed by the Issuer:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER AND
THE INITIAL PURCHASERS OF THIS SECURITY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND
ANNIVERSARY OF THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO)
OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE ISSUER AT ANY TIME
DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN
EITHER CASE OTHER THAN (1) TO THE ISSUER, (2) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), OTHER
THAN IN CANADA OR TO OR FOR THE BENEFIT OF A RESIDENT OF CANADA PRIOR
TO 40 DAYS FOLLOWING THE ORIGINAL ISSUE OF THE OFFERED NOTES EXCEPT
PURSUANT TO A PROSPECTUS QUALIFYING THE OFFERED NOTES FOR SALE UNDER
THE SECURITIES LAWS OF ANY PROVINCE OR TERRITORY OF CANADA OR AN
EXEMPTION FROM THE PROSPECTUS REQUIREMENTS OF SUCH LAWS, AND, IF SUCH
TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE
INDENTURE (AS DEFINED BELOW) PRIOR TO THE EXPIRATION OF THE "40-DAY
RESTRICTED PERIOD"
126
<PAGE>
(WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE
SECURITIES ACT), A CERTIFICATE WHICH MAY BE OBTAINED FROM THE ISSUER
OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE ISSUER AND THE
TRUSTEE, (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR APPLICABLE CANADIAN SECURITIES
LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS, AND A CERTIFICATE IN
THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO
THE ISSUER AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED
IN THE INDENTURE MAY NOT TRANSFER THE SECURITY PURSUANT TO THIS
CLAUSE (4) PRIOR TO THE EXPIRATION OF "40-DAY RESTRICTED PERIOD"
(WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S OF THE
SECURITIES ACT)), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER
THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITES STATES. AN
INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT
WILL FURNISH TO THE ISSUER AND THE TRUSTEE SUCH CERTIFICATES AND
OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY
TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE ISSUER THAT IT IS (1) A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2)
AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS
HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF
PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES
ACT."
(5) it (i) is able to fend for itself in the transactions contemplated
by this Offering Memorandum; (ii) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its prospective investment in the Old Notes; and (iii) has the
ability to bear the economic risks of its prospective investment and can
afford the complete loss of such investment;
(6) it has received a copy of this Offering Memorandum and acknowledges
that it has had access to such financial and other information, and has been
afforded the opportunity to ask questions of the Company and the Issuer and
receive answers thereto, as it deemed necessary in connection with its
decision to purchase the Old Notes; and
(7) it understands that the Issuer, the Initial Purchasers and others
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and agrees that if any of the
acknowledgments, representations and agreements deemed to have been made by
its purchase of the Old Notes are no longer accurate, it shall promptly
notify the Issuer and the Initial Purchasers; and if it is acquiring the Old
Notes as a fiduciary or agent for one or more investor accounts, it
represents that it has sole investment discretion with respect to each such
account and it has full power to make the foregoing acknowledgments,
representations and agreements on behalf of such account.
Any Old Notes not exchanged in the Exchange Offer for Exchange Notes will
continue to be subject to the transfer restrictions described above.
127
<PAGE>
LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered hereby will be
passed on for the Company by Vinson & Elkins L.L.P., Houston, Texas and for the
Issuer by Bennett Jones Vechere, Calgary, Alberta.
EXPERTS
The consolidated financial statements of Forest Oil Corporation as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, which appear in the December 31, 1996 Annual Report on
Form 10-K of the Company, have been incorporated by reference and included
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The report of KPMG
Peat Marwick LLP refers to a change in the method of accounting for oil and gas
sales in 1994.
The consolidated financial statements of ATCOR Resources Ltd., which appear
in the Current Report of Form 8-K/A of Forest Oil Corporation dated January 28,
1997, have been incorporated by reference herein in reliance upon the report
dated February 1, 1996 of Price Waterhouse, independent auditors, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing. Price Waterhouse is a Canadian partnership, resident in
Canada.
Forest's U.S. reserve estimates set forth in this Prospectus have been
reviewed by Ryder Scott Company and are included herein in reliance upon the
authority of said firm as experts in petroleum engineering.
The reserve estimates of Canadian Forest Oil Ltd. set forth in this
Prospectus have been prepared by McDaniel & Associates Ltd. and are included
herein in reliance upon the authority of said firm as experts in petroleum
engineering.
The reserve estimates of Saxon set forth in this Prospectus have been
prepared by Fekete & Associates, Inc. and are included herein in reliance upon
the authority of said firm as experts in petroleum engineering.
CERTAIN DEFINITIONS
Unless otherwise indicated in this Prospectus, natural gas volumes are
stated at the legal pressure base of the state or area in which the reserves are
located at 60 Fahrenheit. Natural gas equivalents are determined using the ratio
of six MCF of natural gas to one barrel of crude oil, condensate or natural gas
liquids to that one barrel of oil is referred to as six MCF of natural gas
equivalent or "MCFE".
As used in this Prospectus, the following terms have the following specific
meanings: "MCF" means thousand cubic feet, "MMCF" means million cubic feet,
"BCF" means billion cubic feet, "MCFE" means thousand cubic feet equivalent,
"MMCFE" means million cubic feet equivalent, "BCFE" means billion cubic feet
equivalent, "MMBTU" means million British thermal units and "BBTU" means billion
British Thermal Units. "MCF/D" means thousand cubic feet per day, "MMCF/D" means
million cubic feet per day and "MMCFE/D" means million cubic feet equivalent per
day.
"BBLS" means barrels, "MBBLS" means thousand barrels and "MMBBLS" means
million barrels. "BBLS/D" means barrels per day.
The term "spot market" as used herein refers to natural gas sold under
contracts with a term of six months or less or contracts which call for a
redetermination of sales prices every six months or earlier.
With respect to information concerning the Company's working interests in
wells or drilling locations, "gross" oil and gas wells or "gross" acres is the
number of wells or acres in which the Company has an interest, and "net" oil and
gas wells or "net" acres are determined by multiplying "gross" wells or acres by
the Company's working interest in those wells or acres. A working interest in an
oil and gas
128
<PAGE>
lease is an interest that gives the owner the right to drill, produce, and
conduct operating activities on the property and to receive a share of
production of any hydrocarbons covered by the lease. A working interest in an
oil and gas lease also entitles its owner to a proportionate interest in any
well located on the lands covered by the lease, subject to all royalties,
overriding royalties and other burdens, to all costs and expenses of
exploration, development and operation of any well located on the lease, and to
all risks in connection therewith.
"Capital expenditures" means costs associated with exploratory and
development drilling (including exploratory dry holes); leasehold acquisitions;
seismic data acquisitions; geological, geophysical and land related overhead
expenditures; delay rentals; controlling interests in other independent oil and
natural gas companies; producing property acquisitions; and other miscellaneous
capital expenditures.
A "development well" is a well drilled as an additional well to the same
horizon or horizons as other producing wells on a prospect, or a well drilled on
a spacing unit adjacent to a spacing unit with an existing well capable of
commercial production and which is intended to extend the proven limits of a
prospect. An "exploratory well" is a well drilled to find commercially
productive hydrocarbons in a unproved area, or to extend significantly a known
prospect.
A "farmout" is an assignment to another party of an interest in a drilling
location and related acreage conditional upon performing future exploratory
efforts including the drilling of a well on that location.
"Reserves" means natural gas and crude oil, condensate and natural gas
liquids on a net revenue interest basis, found to be commercially recoverable.
"Proved developed reserves" includes proved developed producing reserves.
"Proved developed producing reserves" includes only those reserves expected to
be recovered from existing completion intervals in existing wells. "Proved
undeveloped reserves" includes those reserves expected to be recovered from new
wells on proved undrilled acreage or from existing wells where a relatively
major expenditure is required for recompletion.
129
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 (Unaudited).............. F-2
Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 1997 and 1996
(Unaudited)............................................................................................ F-3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1996
(Unaudited)............................................................................................ F-4
Notes to Condensed Consolidated Financial Statements (Unaudited)......................................... F-5
CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report............................................................................. F-10
Consolidated Balance Sheets as of December 31, 1996 and 1995............................................. F-11
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994............... F-12
Consolidated Statements of Shareholders' Equity.......................................................... F-13
Consolidated Statements of Cash Flows for the Years Ended December 1996, 1995 and 1994................... F-14
Notes to Consolidated Financial Statements............................................................... F-15
</TABLE>
F-1
<PAGE>
FOREST OIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ --------------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................................... $ 5,615 8,626
Accounts receivable............................................................... 48,944 55,462
Other current assets.............................................................. 4,678 4,996
------------ --------------
Total current assets............................................................ 59,237 69,084
Net property and equipment, at cost................................................. 497,030 458,242
Goodwill and other intangible assets, net........................................... 28,196 29,439
Other assets........................................................................ 7,549 6,693
------------ --------------
$ 592,012 563,458
------------ --------------
------------ --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft.................................................................... $ 903 4,682
Current portion of long-term debt................................................. -- 2,091
Accounts payable.................................................................. 51,174 64,811
Accrued interest.................................................................. 4,801 4,584
Other current liabilities......................................................... 3,601 5,565
------------ --------------
Total current liabilities....................................................... 60,479 81,733
Long-term debt...................................................................... 223,884 168,859
Other liabilities................................................................... 17,921 19,844
Deferred revenue.................................................................... -- 7,591
Deferred income taxes............................................................... 35,097 33,716
Minority interest................................................................... 12,985 9,272
Shareholders' equity:
Preferred stock................................................................... -- 15,827
Common stock...................................................................... 3,279 3,053
Capital surplus................................................................... 456,617 438,556
Accumulated deficit............................................................... (212,861) (214,190)
Foreign currency translation...................................................... (2,572) (803)
Treasury stock at cost............................................................ (2,817) --
------------ --------------
Total shareholders' equity...................................................... 241,646 242,443
------------ --------------
$ 592,012 563,458
------------ --------------
------------ --------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-2
<PAGE>
FOREST OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF PRODUCTION AND OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
JUNE 30, JUNE 30,
1997 1996
----------- ---------
(IN THOUSANDS EXCEPT
PRODUCTION AND PER
SHARE AMOUNTS)
<S> <C> <C>
PRODUCTION
Natural gas (mmcf)................................................................... 23,033 19,444
----------- ---------
----------- ---------
Oil, condensate and natural gas liquids (thousands of barrels)....................... 1,491 1,233
----------- ---------
----------- ---------
STATEMENTS OF CONSOLIDATED OPERATIONS
Revenue:
Marketing and processing........................................................... $ 98,209 83,589
Oil and gas sales:
Gas.............................................................................. 45,700 35,467
Oil, condensate and natural gas liquids.......................................... 26,809 21,055
----------- ---------
Total oil and gas sales........................................................ 72,509 56,522
Miscellaneous, net................................................................... 1,650 303
----------- ---------
Total revenue.................................................................. 172,368 140,414
Expenses:
Marketing and processing........................................................... 93,906 79,165
Oil and gas production............................................................. 18,671 15,856
General and administrative......................................................... 8,547 6,337
Interest........................................................................... 10,033 12,220
Depreciation and depletion......................................................... 36,756 26,989
Minority interest in earnings (loss) of subsidiary................................. 161 (171)
----------- ---------
Total expenses................................................................. 168,074 140,396
----------- ---------
Earnings (loss) before income taxes.................................................... 4,294 18
Income tax expense (benefit):
Current.............................................................................. 1,273 2,567
Deferred............................................................................. 1,695 738
----------- ---------
2,968 3,305
----------- ---------
Net earnings (loss).................................................................... $ 1,326 (3,287)
----------- ---------
----------- ---------
Weighted average number of common and common equivalent shares outstanding............. 33,353 22,477
----------- ---------
----------- ---------
Earnings (loss) attributable to common stock........................................... $ 1,137 (4,367)
----------- ---------
----------- ---------
Primary and fully diluted earnings (loss) per common and common equivalent share....... $ .03 (.19)
----------- ---------
----------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-3
<PAGE>
FOREST OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 30, JUNE 30,
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)....................................................................... $ 1,326 (3,287)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and depletion.............................................................. 36,756 26,989
Amortization of deferred debt costs..................................................... 349 481
Deferred income tax expense............................................................. 1,695 738
Minority interest in earnings (loss) of subsidiary...................................... 161 (171)
Other, net.............................................................................. (63) 1,075
(Increase) decrease in accounts receivable.............................................. 6,871 (5,771)
Decrease in other current assets........................................................ 103 488
Increase (decrease) in accounts payable................................................. (6,020) 5,764
Increase (decrease) in accrued interest and other current liabilities................... (8,532) 799
Settlement of volumetric production payment obligation.................................. (6,832) --
Amortization of deferred revenue........................................................ (1,524) (5,152)
--------- ---------
Net cash provided by operating activities........................................... 24,290 21,953
Cash flows from investing activities:
Acquisition of subsidiaries:
Current assets.......................................................................... -- (22,304)
Property and equipment.................................................................. -- (144,099)
Goodwill and other intangible assets.................................................... -- (31,163)
Current liabilities..................................................................... -- 23,562
Long-term debt.......................................................................... -- 696
Other liabilities....................................................................... -- 1,542
Deferred taxes.......................................................................... -- 35,575
--------- ---------
Cash paid for acquisitions of subsidiaries............................................ -- (136,191)
Capital expenditures for property and equipment........................................... (81,877) (27,490)
Proceeds from sales of assets............................................................. 8,096 2,965
Increase in other assets, net............................................................. (51) (511)
--------- ---------
Net cash used by investing activities............................................... (73,832) (161,227)
Cash flows from financing activities:
Proceeds from bank borrowings............................................................. 101,136 118,704
Repayments of bank borrowings............................................................. (46,464) (111,814)
Repayments of production payment obligation............................................... (1,716) (1,589)
Proceeds from common stock offering, net of offering costs................................ -- 136,591
Proceeds from the exercise of options..................................................... 1,589 --
Costs of preferred stock conversion....................................................... (800) --
Deferred debt costs....................................................................... (326) --
Payment of preferred stock dividends...................................................... (540) --
Decrease in cash overdraft................................................................ (3,779) (1,045)
Decrease in other liabilities, net........................................................ (2,517) (647)
--------- ---------
Net cash provided by financing activities........................................... 46,583 140,200
Effect of exchange rate changes on cash..................................................... (52) (37)
--------- ---------
Net increase (decrease) in cash and cash equivalents........................................ (3,011) 889
Cash and cash equivalents at beginning of period............................................ 8,626 3,287
--------- ---------
Cash and cash equivalents at end of period.................................................. $ 5,615 4,176
--------- ---------
--------- ---------
Cash paid during the period for:
Interest.................................................................................. $ 9,406 10,352
--------- ---------
--------- ---------
Income taxes.............................................................................. $ 4,288 1,492
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-4
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed consolidated financial statements included herein are
unaudited. In the opinion of management, all adjustments, consisting of normal
recurring accruals, have been made which are necessary for a fair presentation
of the financial position of the Company at June 30, 1997 and the results of
operations for the six month periods ended June 30, 1997 and 1996. Interim
results are not necessarily indicative of expected annual results because of the
impact of fluctuations in prices received for liquids and natural gas and other
factors. For a more complete understanding of the Company's operations and
financial position, reference is made to the consolidated financial statements
of the Company, and related notes thereto, filed with the Company's annual
report for the year ended December 31, 1996, included elsewhere herein.
(2) ACQUISITIONS
On December 20, 1995 the Company purchased a 56% economic (49% voting)
interest in Saxon Petroleum Inc. (Saxon) for approximately $22,000,000. Saxon is
a Canadian exploration and production company with headquarters in Calgary,
Alberta and operations concentrated in western Alberta. In the transaction,
Forest received from Saxon 40,800,000 voting common shares, 12,300,000 nonvoting
common shares which are convertible to voting common shares at any time,
15,500,000 convertible preferred shares and warrants to purchase 5,300,000
common shares. In exchange, Forest transferred to Saxon its preferred shares of
Archean Energy Ltd., issued to Saxon 1,060,000 common shares of Forest and paid
Saxon $1,500,000 CDN. The preferred shares of Archean Energy, Ltd. were recorded
at their historical carrying value of $11,301,000. The Forest common shares
issued to Saxon were recorded at their estimated fair value determined by
reference to the quoted market price of the shares immediately preceding the
announcement of the acquisition. In January 1996, Saxon sold these shares in a
public offering of Forest Common Stock and used the proceeds to reduce its bank
debt.
Since Forest has majority voting control over Saxon as a result of the
voting common shares that it owns and proxies that it holds, it has accounted
for Saxon as a consolidated subsidiary from the date of its acquisition.
In September 1996, the preferred shares of Archean were redeemed for cash at
their approximate carrying value.
On January 31, 1996 the Company acquired ATCOR Resources Ltd. of Calgary,
Alberta for approximately $136,000,000 including acquisition costs of
approximately $1,000,000. The purchase was funded by the net proceeds of a
Common Stock offering and approximately $8,300,000 drawn under the Company's
bank credit facility. The exploration and production business of ATCOR was
renamed Canadian Forest Oil Ltd. (Canadian Forest).
As part of the Canadian Forest acquisition, Forest also acquired ATCOR's
natural gas marketing business, which was renamed Producers Marketing Ltd.
(ProMark). ProMark is a wholly owned subsidiary of Canadian Forest. Goodwill and
other intangibles recorded in the acquisition included approximately $15,000,000
associated with certain natural gas marketing contracts, which is being
amortized over the average life of the contracts of 12 years and approximately
$17,000,000 of goodwill associated with the gas marketing business acquired
which is being amortized over 20 years.
F-5
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
(2) ACQUISITIONS (CONTINUED)
On January 21, 1997 Forest converted its preferred shares of Saxon into
27,192,983 nonvoting common shares. On March 13, 1997 Forest acquired 3,158,142
voting common shares and 2,380,608 nonvoting common shares of Saxon in exchange
for 131,489 common shares of Forest pursuant to an equity participation
agreement. These transactions increased Forest's economic interest in Saxon to
66%.
The consolidated balance sheet of Forest includes the accounts of Saxon and
Canadian Forest at December 31, 1996 and June 30, 1997. The consolidated
statements of operations include the results of operations of Saxon effective
January 1, 1996 and the results of operations of Canadian Forest effective
February 1, 1996. The following pro forma consolidated statement of operations
information for the six months ended June 30, 1996 assumes that the Common Stock
offering and the acquisition of Canadian Forest occurred as of January 1, 1996.
<TABLE>
<CAPTION>
Pro Forma Six Months
Ended June 30, 1996
----------------------
<S> <C> <C>
(In thousands, except
per share amounts)
Revenue:
Marketing and processing..................................................... $ 96,930
Oil and gas sales............................................................ 60,232
Miscellaneous, net........................................................... 303
-
----------
Total revenue.............................................................. $ 157,465
-
-
----------
----------
Net loss....................................................................... $ (2,905)
-
-
----------
----------
Primary and fully diluted loss per common share................................ $ (.18)
-
-
----------
----------
</TABLE>
Summarized consolidated financial information for Canadian Forest Oil Ltd.
as of June 30, 1997 and for the six months ended June 30, 1997 is as follows:
<TABLE>
<CAPTION>
1997
-----------
<S> <C>
SUMMARIZED CONSOLIDATED BALANCE SHEET INFORMATION:
ASSETS
Current assets................................................................. $ 20,458
Net property and equipment..................................................... 120,642
Intercompany receivable........................................................ 20,999
Goodwill and other intangible assets, net...................................... 28,196
-----------
$ 190,295
-----------
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities............................................................ $ 22,480
Intercompany payable........................................................... 32,948
Other liabilities.............................................................. 356
Deferred income taxes.......................................................... 37,383
Shareholders' equity........................................................... 97,128
-----------
$ 190,295
-----------
-----------
SUMMARIZED CONSOLIDATED STATEMENTS OF OPERATIONS:
Revenue........................................................................ $ 114,556
-----------
-----------
Earnings before income taxes................................................... $ 2,208
-----------
-----------
Net earnings................................................................... $ 106
-----------
-----------
</TABLE>
The Company prepares full cost ceiling test computations on a
country-by-country basis and, accordingly, has not prepared such computation for
Canadian Forest Oil Ltd. on a stand-alone basis.
F-6
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
(3) COMMON STOCK
On January 31, 1996, 13,200,000 shares of Common Stock were sold for $11.00
per share in a public offering. Of this amount 1,060,000 shares were sold by
Saxon and 12,140,000 shares were sold by Forest. The net proceeds to Forest and
Saxon from the issuance of shares totaled approximately $136,000,000 after
deducting issuance costs and underwriting fees.
On August 1, 1996 The Anschutz Corporation (Anschutz) exercised its option
to purchase 2,250,000 shares of Forest's Common Stock for $26,200,000 or
approximately $11.64 per share.
On November 5, 1996 the Company exchanged 2,000,000 shares of Common Stock
plus approximately $13,500,000 in cash to extinguish approximately $43,000,000
of nonrecourse secured debt owed to Joint Energy Development Investments Limited
Partnership (JEDI), a Delaware limited partnership whose general partner is an
affiliate of Enron Corp. (Enron). In connection with this transaction, Anschutz
acquired 1,628,888 shares of Common Stock by exercising warrants to purchase
388,888 shares of Common Stock at $10.50 per share and by converting 620,000
shares of Forest's Second Series Preferred Stock into 1,240,000 shares of Common
Stock.
On November 14, 1996 the Company filed a shelf registration with the
Securities and Exchange Commission to issue up to $250,000,000 in one or more
forms of debt or equity securities. Except as otherwise provided in an
applicable prospectus supplement, the net proceeds from the sale of the
securities will be used for the acquisition of oil and gas properties, capital
expenditures, the repayment of subordinated debentures or other debt, repayments
of borrowings under revolving credit agreements, or for other general corporate
purposes.
On February 7, 1997 the Company called for redemption all 2,877,673 shares
of its $.75 Convertible Preferred Stock. This conversion eliminated all
outstanding preferred stock from Forest's capital structure. In response to its
call for redemption, 2,783,945 shares or 96.7% of the shares outstanding were
tendered for conversion into Common Stock on or before the February 21, 1996
deadline. The remaining 93,728 preferred shares were redeemed by the Company at
the redemption price of $10.06 per share (at a total cost of $942,904) on
February 28, 1997. Lehman Brothers Inc. purchased 65,616 shares of Common Stock
to fund the cash requirement of the redemption in accordance with the terms of
its standby purchase agreement with Forest. Redemption of the $.75 Convertible
Preferred Stock eliminated approximately $2,200,000 of annual preferred dividend
payments.
F-7
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
(4) NET PROPERTY AND EQUIPMENT
The components of net property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, 1997 1996
------------- --------------
<S> <C> <C>
(IN THOUSANDS)
Oil and gas properties................................................... $ 1,532,501 1,457,212
Buildings, transportation and other equipment............................ 10,008 10,993
------------- --------------
1,542,509 1,468,205
Less accumulated depreciation, depletion and valuation allowance......... 1,045,479 1,009,963
------------- --------------
$ 497,030 458,242
------------- --------------
------------- --------------
</TABLE>
(5) GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets recorded in the acquisition of ProMark
consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
--------- --------------
<S> <C> <C>
(IN THOUSANDS)
Goodwill.................................................................... $ 16,599 16,728
Gas marketing contracts..................................................... 14,482 14,594
--------- -------
31,081 31,322
Less accumulated amortization............................................... 2,885 1,883
--------- -------
$ 28,196 29,439
--------- -------
--------- -------
</TABLE>
Goodwill is being amortized on a straight line basis over twenty years. The
amount attributed to the value of gas marketing contracts acquired is being
amortized on a straight line basis over the average life of such contracts of
twelve years.
F-8
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
(6) LONG-TERM DEBT
The components of long-term debt are as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- --------------
<S> <C> <C>
(IN THOUSANDS)
Credit Facility............................................................ $ 58,500 26,400
Canadian Credit Facility................................................... 32,948 32,500
Saxon Credit Facility...................................................... 22,104 --
Production payment obligation.............................................. 10,880 12,596
11 1/4% Senior Subordinated Notes.......................................... 99,452 99,421
----------- --------------
223,884 170,917
Less current portion....................................................... -- 2,058
----------- --------------
Long-term debt........................................................... $ 223,884 168,859
----------- --------------
----------- --------------
</TABLE>
(7) DEFERRED REVENUE
From 1991 to 1994, the Company sold volumetric production payments to Enron
to fund capital expenditures and property acquisitions. On June 30, 1997 the
Company purchased from Enron the obligation related to its last remaining
volumetric production payment. The purchase price of approximately $6,832,000
plus expenses was funded by the Company's bank credit facility. Reserves of
approximately 3.5 BCFE, which were dedicated to repayment of this volumetric
production payment, reverted to the Company's interest.
(8) EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share is computed by dividing net earnings
(loss) attributable to common stock by the weighted average number of common
shares and common share equivalents outstanding during each period, excluding
treasury shares. Net earnings (loss) attributable to common stock represents net
earnings (loss) less preferred stock dividend requirements. Common share
equivalents include, when applicable, dilutive stock options and warrants using
the treasury stock method.
Fully diluted earnings (loss) per share assumes, in addition to the above,
(i) that convertible preferred stock was converted at the beginning of each
period or date of issuance, if later, and (ii) any additional dilutive effect of
stock options and warrants. The assumed exercises and conversions were
antidilutive for the six months ended June 30, 1997 and 1996.
F-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Forest Oil Corporation:
We have audited the accompanying consolidated balance sheets of Forest Oil
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Forest Oil
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for oil and gas sales from the sales method to
the entitlements method effective January 1, 1994.
KPMG Peat Marwick LLP
Denver, Colorado
February 12, 1997
F-10
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................. $ 8,626 3,287
Accounts receivable................................................................... 55,462 17,395
Other current assets.................................................................. 4,996 2,557
----------- ----------
Total current assets.............................................................. 69,084 23,239
Net property and equipment, at cost, full cost method (Notes 5 and 6)................... 458,242 277,599
Investment in affiliate (Note 4)........................................................ -- 11,301
Goodwill and other intangible assets, net............................................... 29,439 --
Other assets............................................................................ 6,693 8,904
----------- ----------
$ 563,458 321,043
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft........................................................................ $ 4,682 2,055
Current portion of long-term debt (Note 5)............................................ 2,091 2,263
Accounts payable...................................................................... 64,811 17,456
Accrued interest...................................................................... 4,584 4,029
Other current liabilities............................................................. 5,565 6,617
----------- ----------
Total current liabilities......................................................... 81,733 32,420
Long-term debt (Notes 3 and 5).......................................................... 168,859 193,879
Other liabilities....................................................................... 19,844 27,139
Deferred revenue (Note 6)............................................................... 7,591 15,137
Deferred income taxes................................................................... 33,716 --
Commitments and contingencies (Notes 10, 12 and 13)
Minority interest (Note 2).............................................................. 9,272 8,171
Shareholders' equity (Notes 2, 3, 5, 8 and 9):
Preferred stock....................................................................... 15,827 24,359
Common stock, 30,541,105 shares in 1996 (10,660,291 shares in 1995)................... 3,053 1,066
Capital surplus....................................................................... 438,556 241,241
Common shares to be issued in debt restructuring...................................... -- 6,073
Accumulated deficit................................................................... (214,190) (217,495)
Foreign currency translation.......................................................... (803) (1,407)
Treasury stock, at cost, none in 1996 and 1,060,000 shares in 1995.................... -- (9,540)
----------- ----------
Total shareholders' equity........................................................ 242,443 44,297
----------- ----------
$ 563,458 321,043
----------- ----------
----------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-11
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
----------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenue:
Marketing and processing................................................... $ 187,374 -- --
Oil and gas sales:
Gas...................................................................... 80,111 59,084 91,309
Gas contract settlement (Note 15)........................................ -- 4,263 --
Oil, condensate and natural gas liquids.................................. 48,602 18,928 23,232
----------- --------- ---------
Total oil and gas sales................................................ 128,713 82,275 114,541
Miscellaneous, net......................................................... 1,387 181 1,406
----------- --------- ---------
Total revenue.......................................................... 317,474 82,456 115,947
Expenses:
Marketing and processing................................................... 178,706 -- --
Oil and gas production..................................................... 32,199 22,463 22,384
General and administrative................................................. 13,623 9,081 11,166
Interest................................................................... 23,307 25,323 26,773
Depreciation and depletion................................................. 63,068 43,592 65,468
Minority interest in loss of subsidiary.................................... (19) -- --
Provision for impairment of oil and gas properties......................... -- -- 58,000
----------- --------- ---------
Total expenses......................................................... 310,884 100,459 183,791
----------- --------- ---------
Earnings (loss) before income taxes, cumulative effect of change in
accounting principle and extraordinary item................................ 6,590 (18,003) (67,844)
Income tax expense (benefit) (Note 7):
Current.................................................................... 3,943 (7) 9
Deferred................................................................... 1,508 -- --
----------- --------- ---------
5,451 (7) 9
----------- --------- ---------
Earnings (loss) before cumulative effect of change in accounting principle
and extraordinary item..................................................... 1,139 (17,996) (67,853)
Cumulative effect of change in accounting principle for oil and gas sales
(Note 1)................................................................... -- -- (13,990)
----------- --------- ---------
Earnings (loss) before extraordinary item.................................... 1,139 (17,996) (81,843)
Extraordinary item -- gain on extinguishment of debt (Note 3)................ 2,166 -- --
----------- --------- ---------
Net earnings (loss).......................................................... $ 3,305 (17,996) (81,843)
----------- --------- ---------
----------- --------- ---------
Weighted average number of common shares outstanding......................... 27,163 7,360 5,619
----------- --------- ---------
----------- --------- ---------
Earnings (loss) attributable to common stock................................. $ 1,147 (20,156) (84,004)
----------- --------- ---------
----------- --------- ---------
Primary and fully diluted earnings (loss) per common share:
Loss attributable to common stock before cumulative effect of change in
accounting principle and extraordinary item.............................. $ (.04) (2.74) (12.46)
Cumulative effect of change in accounting principle........................ -- -- (2.49)
----------- --------- ---------
Loss attributable to common stock before extraordinary item................ (.04) (2.74) (14.95)
Extraordinary item -- gain on extinguishment of debt....................... .08 -- --
----------- --------- ---------
Earnings (loss) attributable to common stock............................... $ .04 (2.74) (14.95)
----------- --------- ---------
----------- --------- ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-12
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON SHARES TO ACCUMU-
PREFERRED COMMON CAPITAL BE ISSUED IN DEBT LATED
STOCK STOCK SURPLUS RESTRUCTURING DEFICIT
----------- ----------- ----------- ----------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance December 31, 1993......................... $ 15,845 565 195,977 -- (117,656)
Net loss........................................ -- -- -- -- (81,843)
Exercise of employee stock options (Note 9)..... -- 1 104 -- --
$.75 Convertible Preferred Stock dividends paid
in cash (Note 8).............................. -- -- (2,161) -- --
Treasury stock contributed to the Retirement
Savings Plan and other (Note 10).............. -- -- (1,583) -- --
Foreign currency translation.................... -- -- -- -- --
----------- ----------- ----------- ------ -----------
Balance December 31, 1994......................... 15,845 566 192,337 -- (199,499)
Net loss........................................ -- -- -- -- (17,996)
Issuance of Common Stock to Anschutz (Note 3)... -- 376 27,796 -- --
Issuance of Second Series Convertible Preferred
Stock to Anschutz (Notes 3 and 8)............. 8,518 -- -- -- --
Issuance of warrants to Anschutz (Notes 3 and
9)............................................ -- -- 8,310 -- --
Issuance of warrants to JEDI (Note 3)........... -- -- 12,117 -- --
Costs associated with equity issued to Anschutz
and JEDI (Note 3)............................. -- -- (3,940) -- --
Common Stock issued in acquisition of Saxon
(Notes 2 and 9)............................... -- 106 9,434 -- --
Common Stock issued and treasury stock
contributed to the Retirement Savings Plan
(Note 10)..................................... -- 2 (1,425) -- --
$.75 Convertible Preferred Stock dividends paid
in cash (Note 8).............................. -- -- (540) -- --
$.75 Convertible Preferred Stock dividends paid
in Common Stock (Note 8)...................... -- 16 (16) -- --
Conversion of $.75 Convertible Preferred Stock
to Common Stock (Note 8)...................... (4) -- 4 -- --
Common shares to be issued in JEDI Exchange
(Note 3)...................................... -- -- -- 6,073 --
Unfunded pension liability (Note 10)............ -- -- (2,836) -- --
Foreign currency translation.................... -- -- -- -- --
----------- ----------- ----------- ------ -----------
Balance December 31, 1995......................... 24,359 1,066 241,241 6,073 (217,495)
Net earnings.................................... -- -- -- -- 3,305
Issuance of Common Stock, net of offering costs
and minority interest effect of $706,000 (Note
9)............................................ -- 1,214 124,613 -- --
Common shares issued in JEDI Exchange (Note 3).. -- 168 5,905 (6,073) --
Exercise of Anschutz Option (Notes 3 and 9)..... -- 225 25,962 -- --
Exercise of Anschutz A Warrant (Notes 3 and
9)............................................ -- 39 4,044 -- --
Issuance of Common Stock to JEDI (Note 3)....... -- 200 26,736 -- --
Exercise of Public Warrants (Note 9)............ -- 2 334 -- --
Conversion of Second Series Preferred Stock to
Common Stock (Note 8)......................... (8,518) 124 8,394 -- --
Exercise of employee stock options (Note 9)..... -- 3 398 -- --
Common Stock issued and treasury stock
contributed to the Retirement Savings Plan and
other (Note 10)............................... -- 3 398 -- --
$.75 Convertible Preferred Stock dividends paid
in cash (Note 8).............................. -- -- (1,619) -- --
$.75 Convertible Preferred Stock dividends paid
in Common Stock (Note 8)...................... -- 9 (9) -- --
Conversion of $.75 Convertible Preferred Stock
to Common Stock (Note 8)...................... (14) -- 14 -- --
Unfunded pension liability (Note 10)............ -- -- 2,145 -- --
Foreign currency translation.................... -- -- -- -- --
----------- ----------- ----------- ------ -----------
Balance December 31, 1996......................... $ 15,827 3,053 438,556 -- (214,190)
----------- ----------- ----------- ------ -----------
----------- ----------- ----------- ------ -----------
<CAPTION>
FOREIGN
CURRENCY TREASURY
TRANSLATION STOCK
------------- -----------
<S> <C> <C>
Balance December 31, 1993......................... (785) (5,790)
Net loss........................................ -- --
Exercise of employee stock options (Note 9)..... -- --
$.75 Convertible Preferred Stock dividends paid
in cash (Note 8).............................. -- --
Treasury stock contributed to the Retirement
Savings Plan and other (Note 10).............. -- 3,964
Foreign currency translation.................... (552) --
------ -----------
Balance December 31, 1994......................... (1,337) (1,826)
Net loss........................................ -- --
Issuance of Common Stock to Anschutz (Note 3)... -- --
Issuance of Second Series Convertible Preferred
Stock to Anschutz (Notes 3 and 8)............. -- --
Issuance of warrants to Anschutz (Notes 3 and
9)............................................ -- --
Issuance of warrants to JEDI (Note 3)........... -- --
Costs associated with equity issued to Anschutz
and JEDI (Note 3)............................. -- --
Common Stock issued in acquisition of Saxon
(Notes 2 and 9)............................... -- (9,540)
Common Stock issued and treasury stock
contributed to the Retirement Savings Plan
(Note 10)..................................... -- 1,826
$.75 Convertible Preferred Stock dividends paid
in cash (Note 8).............................. -- --
$.75 Convertible Preferred Stock dividends paid
in Common Stock (Note 8)...................... -- --
Conversion of $.75 Convertible Preferred Stock
to Common Stock (Note 8)...................... -- --
Common shares to be issued in JEDI Exchange
(Note 3)...................................... -- --
Unfunded pension liability (Note 10)............ -- --
Foreign currency translation.................... (70) --
------ -----------
Balance December 31, 1995......................... (1,407) (9,540)
Net earnings.................................... -- --
Issuance of Common Stock, net of offering costs
and minority interest effect of $706,000 (Note
9)............................................ -- 9,540
Common shares issued in JEDI Exchange (Note 3).. -- --
Exercise of Anschutz Option (Notes 3 and 9)..... -- --
Exercise of Anschutz A Warrant (Notes 3 and
9)............................................ -- --
Issuance of Common Stock to JEDI (Note 3)....... -- --
Exercise of Public Warrants (Note 9)............ -- --
Conversion of Second Series Preferred Stock to
Common Stock (Note 8)......................... -- --
Exercise of employee stock options (Note 9)..... -- --
Common Stock issued and treasury stock
contributed to the Retirement Savings Plan and
other (Note 10)............................... -- --
$.75 Convertible Preferred Stock dividends paid
in cash (Note 8).............................. -- --
$.75 Convertible Preferred Stock dividends paid
in Common Stock (Note 8)...................... -- --
Conversion of $.75 Convertible Preferred Stock
to Common Stock (Note 8)...................... -- --
Unfunded pension liability (Note 10)............ -- --
Foreign currency translation.................... 604 --
------ -----------
Balance December 31, 1996......................... (803) --
------ -----------
------ -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-13
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Earnings (loss) before cumulative effect of change in accounting principle and
extraordinary item............................................................. $ 1,139 (17,996) (67,853)
Adjustments to reconcile loss before cumulative effect of change in accounting
principle and extraordinary item to net cash provided (used) by operating
activities:
Depreciation and depletion..................................................... 63,068 43,592 65,468
Amortization of deferred debt costs............................................ 1,253 1,015 1,029
Provision for impairment of oil and gas properties............................. -- -- 58,000
Deferred income tax expense.................................................... 1,508 -- --
Interest added to principal.................................................... 3,059 574 2,205
Minority interest in net loss of subsidiary.................................... (19) -- --
Other, net..................................................................... 792 1,714 2,033
(Increase) decrease in accounts receivable..................................... (17,441) 4,285 4,839
(Increase) decrease in other current assets.................................... (921) (152) 1,078
Increase (decrease) in accounts payable........................................ 19,417 (11,458) 4,021
Increase (decrease) in accrued interest and other current liabilities.......... 3,506 (3,865) 2,941
Proceeds from volumetric production payments................................... -- -- 4,353
Amortization of deferred revenue............................................... (7,546) (20,771) (35,673)
--------- --------- ---------
Net cash provided (used) by operating activities........................... 67,815 (3,062) 42,441
Cash flows from investing activities:
Acquisition of subsidiaries:
Current assets................................................................. (22,304) (1,437) --
Property and equipment......................................................... (144,099) (26,530) --
Goodwill and other intangible assets........................................... (31,163) -- --
Current liabilities............................................................ 23,562 2,139 --
Long-term debt................................................................. 701 16,183 --
Other liabilities.............................................................. 1,376 -- --
Deferred taxes................................................................. 35,575 353 --
Minority interest.............................................................. -- 8,171 --
--------- --------- ---------
Cash paid for acquisitions of subsidiaries................................. (136,352) (1,121) --
Capital expenditures for property and equipment.................................. (108,332) (27,098) (42,780)
Proceeds from sales of assets.................................................... 17,875 8,715 12,941
Increase (decrease) in other assets, net......................................... (58) 2,285 (2,468)
--------- --------- ---------
Net cash used by investing activities...................................... (226,867) (17,219) (32,307)
Cash flows from financing activities:
Proceeds from bank borrowings.................................................... 194,018 82,600 31,500
Repayments of bank borrowings.................................................... (176,641) (91,800) (23,500)
Proceeds from nonrecourse secured loan........................................... -- -- 1,400
Repayments of nonrecourse secured loan........................................... (13,881) (1,143) --
Repayments of production payment obligation...................................... (3,622) (2,316) (2,771)
Redemptions and repurchases of subordinated debentures and secured notes......... -- -- (7,171)
Proceeds from common stock offering, net of offering costs....................... 136,073 -- --
Proceeds from exercise of warrants and options................................... 31,945 -- 105
Proceeds from capital stock and warrants issued, net............................. -- 41,060 --
Payment of preferred stock dividends............................................. (1,079) (540) (2,161)
Debt issuance costs.............................................................. (3) (491) (772)
Increase (decrease) in cash overdraft............................................ 2,627 (2,390) 551
Decrease in other liabilities, net............................................... (4,937) (4,282) (11,307)
--------- --------- ---------
Net cash provided (used) by financing activities........................... 164,500 20,698 (14,126)
Effect of exchange rate changes on cash............................................ (109) 1 (88)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents............................... 5,339 418 (4,080)
Cash and cash equivalents at beginning of year..................................... 3,287 2,869 6,949
--------- --------- ---------
Cash and cash equivalents at end of year........................................... $ 8,626 3,287 2,869
--------- --------- ---------
--------- --------- ---------
Cash paid during the year for:
Interest......................................................................... $ 15,040 22,138 23,989
--------- --------- ---------
--------- --------- ---------
Income taxes..................................................................... $ 3,428 -- 9
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-14
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION -- Forest Oil
Corporation is engaged in the acquisition, exploration, development, production
and marketing of natural gas and crude oil in North America. The Company was
incorporated in New York in 1924, the successor to a company formed in 1916, and
has been publicly held since 1969. The Company is active in several of the major
exploration and producing areas in and offshore the United States and in Canada.
The consolidated financial statements include the accounts of Forest Oil
Corporation and its consolidated subsidiaries (Forest or the Company).
Significant intercompany balances and transactions are eliminated. The Company
generally consolidates all subsidiaries in which it controls over 50% of the
voting interests. Entities in which the Company does not have a direct or
indirect majority voting interest are generally accounted for using the equity
method.
In the course of preparing the consolidated financial statements, management
makes various assumptions and estimates to determine the reported amounts of
assets, liabilities, revenue and expenses, and in the disclosures of commitments
and contingencies. Changes in these assumptions and estimates will occur as a
result of the passage of time and the occurrence of future events and,
accordingly, actual results could differ from amounts estimated.
Unless otherwise indicated, all share amounts, share prices and per share
amounts have been adjusted to give effect to a 5 to 1 reverse stock split that
was effective on January 8, 1996.
CASH EQUIVALENTS -- For purposes of the statements of cash flows, the
Company considers all debt instruments with original maturities of three months
or less to be cash equivalents.
PROPERTY AND EQUIPMENT -- The Company uses the full cost method of
accounting for oil and gas properties. Separate cost centers are maintained for
each country in which the Company has operations. During 1996, the Company's oil
and gas operations were conducted in the United States and in Canada. During
1995 and 1994, the Company's oil and gas operations were conducted solely in the
United States. All costs incurred in the acquisition, exploration and
development of properties (including costs of surrendered and abandoned
leaseholds, delay lease rentals, dry holes and overhead related to exploration
and development activities) are capitalized. Capitalized costs applicable to
each cost center are depleted using the units of production method. A reserve is
provided for estimated future costs of site restoration, dismantlement and
abandonment activities as a component of depletion. Unusually significant
investments in unproved properties, including related capitalized interest
costs, are not depleted pending the determination of the existence of proved
reserves. As of December 31, 1996, 1995 and 1994, there were undeveloped
property costs of $30,046,000, $28,380,000 and $30,441,000, respectively, which
were not being depleted in the United States and costs of $13,870,000 which were
not being depleted in Canada. Of the undeveloped costs in the United States not
being depleted at December 31, 1996, approximately 46% were incurred in 1996, 9%
in 1995, 3% in 1994, 40% in 1993 and 2% in 1992. All of the undeveloped
properties in Canada not being depleted at December 31, 1996 were acquired in
1996.
F-15
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Depletion per unit of production was determined based on conversion to
common units of measure using one barrel of oil as an equivalent to six thousand
cubic feet (MCF) of natural gas. Depletion per unit of production (MCFE) for
each of the Company's cost centers was as follows:
<TABLE>
<CAPTION>
UNITED STATES CANADA
--------------- -----------
<S> <C> <C>
1994.......................................................................... $ 1.13 --
1995.......................................................................... 1.06 --
1996.......................................................................... 1.12 .85
</TABLE>
Pursuant to full cost accounting rules, capitalized costs less related
accumulated depletion and deferred income taxes for each cost center may not
exceed the sum of (1) the present value of future net revenue from estimated
production of proved oil and gas reserves; plus (2) the cost of properties not
being amortized, if any; plus (3) the lower of cost or estimated fair value of
unproved properties included in the costs being amortized, if any; less (4)
income tax effects related to differences in the book and tax basis of oil and
gas properties. As a result of this limitation on capitalized costs, the
accompanying financial statements include a provision for impairment of oil and
gas property costs of $58,000,000 in the United States in 1994.
Gain or loss is recognized only on the sale of oil and gas properties
involving significant reserves.
Buildings, transportation and other equipment are depreciated on the
straight-line method based upon estimated useful lives of the assets ranging
from five to forty-five years.
Net property and equipment at December 31 consists of the following:
<TABLE>
<CAPTION>
1996 1995
------------- -----------
<S> <C> <C>
(IN THOUSANDS)
Oil and gas properties..................................................... $ 1,457,212 1,216,027
Buildings, transportation and other equipment.............................. 10,993 10,502
------------- -----------
1,468,205 1,226,529
Less accumulated depreciation, depletion and valuation allowance........... 1,009,963 948,930
------------- -----------
$ 458,242 277,599
------------- -----------
------------- -----------
</TABLE>
GOODWILL AND OTHER INTANGIBLE ASSETS -- Goodwill and other intangible assets
recorded in the acquisition of the Company's gas marketing subsidiary consist of
the following at December 31, 1996:
<TABLE>
<CAPTION>
1996
--------------
<S> <C>
(IN THOUSANDS)
Goodwill................................................................................ $ 16,728
Gas marketing contracts................................................................. 14,594
--------------
31,322
Less accumulated amortization........................................................... 1,883
--------------
$ 29,439
--------------
--------------
</TABLE>
F-16
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Goodwill is being amortized on a straight line basis over twenty years. The
amount attributed to the value of gas marketing contracts acquired is being
amortized on a straight line basis over the average life of such contracts of
twelve years.
GAS MARKETING -- The Company's gas marketing subsidiary, ProMark, enters
into fixed price agreements to purchase and sell natural gas. ProMark's general
strategy for this business is to enter into offsetting purchase and sales
contracts. Net open positions relating to these contracts do occur, but have not
been significant to date. Revenue from the sale of the gas is recorded as
marketing revenue and the cost of the gas sold is recorded as marketing expense.
ProMark also provides natural gas marketing aggregation services for third
parties. Fees earned for such services are recorded as marketing revenue as the
services are performed.
OIL AND GAS SALES -- The Company changed its method of accounting for oil
and gas sales from the sales method to the entitlements method effective January
1, 1994. Under the sales method previously used by the Company, all proceeds
from production credited to the Company were recorded as revenue until such time
as the Company had produced its share of related reserves. Under the
entitlements method, revenue is recorded based upon the Company's share of
volumes sold, regardless of whether the Company has taken its proportionate
share of volumes produced.
Under the entitlements method, the Company records a receivable or payable
to the extent it receives less or more than its proportionate share of the
related revenue. The Company believes that the entitlements method is preferable
because it allows for recognition of revenue based on the Company's actual share
of jointly owned production and provides a better matching of revenue and
related expenses.
The cumulative effect of the change for the periods through December 31,
1993 was a charge of $13,990,000. The effect of this change on 1994 was an
increase in earnings from operations of $3,584,000 and an increase in production
volumes of 1,555,000 MCF. There were no related income tax effects in 1994.
As of December 31, 1996 the Company had produced approximately 2.6 BCF more
than its entitled share of production. The estimated value of this imbalance of
approximately $4,355,000 is included in the accompanying consolidated balance
sheet as a short-term liability of $1,650,000 and a long-term liability of
$2,705,000.
HEDGING TRANSACTIONS -- In order to minimize exposure to fluctuations in oil
and natural gas prices, the Company hedges the price of future oil and natural
gas production by entering into certain contracts and financial arrangements.
These instruments are accounted for as hedges when the instrument is designated
as a hedge of the related production and there exists a high degree of
correlation between the fair value of the instrument and the fair value of the
hedged production. The degree of correlation is assessed periodically. Gains and
losses related to these hedging transactions are recognized as adjustments to
therevenue recorded for the related production. Costs associated with the
purchase of certain hedging instruments are deferred and amortized against
revenue related to the hedged production.
F-17
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES -- The Company uses the asset and liability method of
accounting for income taxes which requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between financial accounting bases and tax bases of assets and
liabilities.
FOREIGN CURRENCY TRANSLATION -- The functional currency of the Company's
Canadian operations is the Canadian dollar. Assets and liabilities related to
the Company's Canadian operations are generally translated at current exchange
rates, and related translation adjustments are reported as a component of
shareholders' equity. Income statement accounts are translated at the average
rates during the period.
EARNINGS (LOSS) PER SHARE -- Primary earnings (loss) per share is computed
by dividing net earnings (loss) attributable to common stock by the weighted
average number of common shares and common share equivalents outstanding during
each period, excluding treasury shares. Net earnings (loss) attributable to
common stock represents net earnings (loss) less preferred stock dividend
requirements of $2,158,000 in 1996, $2,160,000 in 1995 and $2,161,000 in 1994.
Common share equivalents include, when applicable, dilutive stock options and
warrants using the treasury stock method.
Fully diluted earnings (loss) per share is computed assuming, in addition to
the above, (i) that convertible preferred stock was converted at the beginning
of each period or date of issuance, if later, and (ii) any additional dilutive
effect of stock options and warrants. The effects of these assumptions were
anti-dilutive in 1996, 1995 and 1994.
RECLASSIFICATIONS -- Certain amounts in prior years' financial statements
have been reclassified to conform to the 1996 financial statement presentation.
(2) ACQUISITIONS:
During 1995, the Company completed acquisitions totaling $26,807,000. The
most significant of these was the purchase on December 20, 1995 of a 56%
economic (49% voting) interest in Saxon Petroleum Inc. (Saxon) for approximately
$22,000,000. Saxon is a Canadian exploration and production company with
headquarters in Calgary, Alberta and operations concentrated in western Alberta.
In the transaction, Forest received from Saxon 40,800,000 voting common shares,
12,300,000 nonvoting common shares, 15,500,000 convertible preferred shares and
warrants to purchase 5,300,000 common shares. The preferred shares and the
nonvoting common shares of Saxon are convertible into voting common shares at
any time. In exchange, Forest transferred to Saxon its preferred shares of
Archean Energy, Ltd., issued to Saxon 1,060,000 common shares of Forest and paid
Saxon $1,500,000 CDN. The preferred shares of Archean Energy, Ltd. were recorded
at their historical carrying value of $11,301,000. The Forest common shares
issued to Saxon were recorded at their estimated fair value determined by
reference to the quoted market price of the shares immediately preceding the
announcement of the acquisition.
Since Forest has majority voting control over Saxon as a result of the
voting common shares that it owns and proxies that it holds, it has accounted
for Saxon as a consolidated subsidiary from the date of its acquisition. The
Company did not record any production or results of operations of Saxon for the
period from December 20 to December 31, 1995 as the results of operations for
such period were not significant.
F-18
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(2) ACQUISITIONS: (CONTINUED)
The Forest common shares held by Saxon were recorded as treasury stock on
Forest's consolidated balance sheet at December 31, 1995. In January 1996, Saxon
sold these shares in a public offering of Forest Common Stock and used the
proceeds to reduce its bank debt.
In September 1996, the preferred shares of Archean were redeemed for cash at
their approximate carrying value.
Subsequent to December 31, 1996 Forest converted its preferred shares of
Saxon into 27,192,983 nonvoting common shares and purchased 3,158,142 voting
common shares and 2,380,608 nonvoting common shares of Saxon pursuant to an
equity participation agreement. These transactions increased Forest's economic
interest in Saxon to 66%.
On January 31, 1996 the Company completed the acquisition of ATCOR Resources
Ltd. of Calgary, Alberta for approximately $136,000,000, including acquisition
costs of approximately $1,000,000. The purchase was funded by the net proceeds
of a Common Stock offering and approximately $8,300,000 drawn under the
Company's bank credit facility. The exploration and production business of ATCOR
was renamed Canadian Forest Oil Ltd. (Canadian Forest). Canadian Forest's
principal reserves and producing properties are located in Alberta and British
Columbia, Canada. As part of the Canadian Forest acquisition, Forest also
acquired ATCOR's natural gas marketing business which was renamed Producers
Marketing Ltd. (ProMark). ProMark is a wholly owned subsidiary of Canadian
Forest.
The consolidated balance sheet of Forest includes the accounts of Saxon and
Canadian Forest at December 31, 1996. The consolidated statements of operations
include the results of operations of Saxon effective January 1, 1996 and the
results of operations of Canadian Forest effective February 1, 1996.
The following unaudited pro forma consolidated statements of operations
information assumes that the Common Stock offering and the acquisitions of Saxon
and Canadian Forest occurred as of January 1, 1995:
<TABLE>
<CAPTION>
PRO FORMA YEAR ENDED
DECEMBER 31,
----------------------
1996 1995
----------- ---------
<S> <C> <C>
(IN THOUSANDS
EXCLUDING PER SHARE
AMOUNTS)
Revenue:
Marketing and processing..................................................... $ 200,715 139,444
Oil and gas sales............................................................ 132,423 129,326
Miscellaneous, net........................................................... 1,387 132
----------- ---------
Total revenue.............................................................. $ 334,525 268,902
----------- ---------
----------- ---------
Earnings (loss) before income taxes, and extraordinary item.................... $ 7,512 (9,680)
----------- ---------
----------- ---------
Net earnings (loss)............................................................ $ 3,687 (15,972)
----------- ---------
----------- ---------
Primary earnings (loss) per share.............................................. $ .06 (.81)
----------- ---------
----------- ---------
Fully diluted earnings (loss) per share........................................ $ .05 (.81)
----------- ---------
----------- ---------
</TABLE>
F-19
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(2) ACQUISITIONS: (CONTINUED)
Summarized consolidated financial information for Canadian Forest Oil Ltd.
as of December 31, 1996 and for the period from January 31, 1996 (acquisition
date) to December 31, 1996 is as follows:
<TABLE>
<CAPTION>
1996
-----------
<S> <C>
SUMMARIZED CONSOLIDATED BALANCE SHEET INFORMATION:
ASSETS
Current assets........................................................................... $ 29,511
Net property and equipment............................................................... 137,278
Goodwill and other intangible assets, net................................................ 29,439
-----------
$ 196,228
-----------
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities...................................................................... $ 29,880
Intercompany payable..................................................................... 32,500
Other liabilities........................................................................ 805
Deferred income taxes.................................................................... 32,912
Shareholders' equity..................................................................... 100,131
-----------
Total liabilities and equity........................................................... $ 196,228
-----------
-----------
SUMMARIZED CONSOLIDATED STATEMENTS OF OPERATIONS:
Revenue.................................................................................. $ 224,757
-----------
-----------
Earnings before income taxes............................................................. $ 9,685
-----------
-----------
Net earnings............................................................................. $ 4,739
-----------
-----------
</TABLE>
The Company prepares full cost ceiling test computations on a
country-by-country basis and, accordingly, has not prepared such computation for
Canadian Forest Oil Ltd. on a stand-alone basis.
F-20
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(3) ANSCHUTZ AND JEDI TRANSACTIONS:
During 1995 and 1996, the Company consummated transactions with The Anschutz
Corporation (Anschutz) and with Joint Energy Development Investments Limited
Partnership (JEDI), a Delaware limited partnership the general partner of which
is an affiliate of Enron Corp. (Enron).
Pursuant to a purchase agreement between the Company and Anschutz, Anschutz
purchased 3,760,000 shares of the Company's Common Stock and 620,000 shares of a
new series of preferred stock which were convertible into 1,240,000 additional
shares of Common Stock for a total consideration of $45,000,000. The preferred
stock had a liquidation preference of $18.00 per share and received dividends
ratably with the Common Stock. In addition, Anschutz received a warrant that
entitled it to purchase 3,888,888 shares of the Company's Common Stock for
$10.50 per share (the A Warrant). The A Warrant was scheduled to expire July 27,
1998.
The Anschutz investment was made in two closings. At the first closing,
which occurred on May 19, 1995, Anschutz loaned the Company $9,900,000. The loan
carried interest at 8% per annum. The loan was nonrecourse to the Company and
was secured by oil and gas properties owned by the Company, the preferred stock
of Archean Energy Ltd., and a cash collateral account with an initial balance of
$2,000,000. At the second closing, which occurred in July 1995, Anschutz
converted the loan into 1,100,000 shares of Common Stock and the shares issued
were recorded at the carrying amount of the loan ($9,900,000). At the second
closing, Anschutz purchased an additional 2,660,000 shares of Common Stock, the
convertible preferred stock and the A Warrant for $35,100,000. The total
proceeds received by the Company at the second closing were allocated based on
the relative fair market values of the Common Stock ($18,272,000), convertible
preferred stock ($8,518,000) and the A Warrant ($8,310,000) issued. The Company
also entered into a shareholders agreement with Anschutz pursuant to which
Anschutz agreed to certain voting, acquisition, and transfer limitations
regarding its shares of Common Stock for five years after the second closing.
At the second closing on July 27, 1995, Forest and JEDI restructured JEDI's
existing loan which had a principal balance of approximately $62,368,000 before
unamortized discount of $4,984,000. As a part of the restructuring, the existing
JEDI loan balance was divided into two tranches: a $40,000,000 tranche, which
bore interest at the rate of 12.5% per annum and was due and payable in full on
December 31, 2000; and an approximately $22,400,000 tranche, which did not bear
interest and was due and payable in full on December 31, 2002. JEDI also
relinquished the net profits interest that it held in certain properties of the
Company. In consideration, JEDI received a warrant (the B Warrant) that entitled
it to purchase 2,250,000 shares of the Company's Common Stock for $10.00 per
share. The B Warrant was recorded at its estimated fair value. The fair value of
the B warrant was estimated to be approximately $12,100,000, representing the
amount determined using the Black-Scholes Option Pricing Model, based on the
market value of the stock at the date of the transaction, less a discount of 10%
to reflect the size of the block of shares to be issued and the estimated
brokerage fees on the ultimate disposition of the shares.
Also at the second closing, JEDI granted an option to Anschutz (the Anschutz
Option), pursuant to which Anschutz was entitled to purchase from JEDI up to
2,250,000 shares of the Company's Common Stock at a purchase price per share
equal to the lesser of (a) $10.00 plus 18% per annum from July 27, 1995 to the
date of exercise of the option, or (b) $15.50. The Anschutz Option was scheduled
to terminate on July 27, 1998. JEDI was to satisfy its obligations under the
Anschutz Option by exercising
F-21
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(3) ANSCHUTZ AND JEDI TRANSACTIONS: (CONTINUED)
the B Warrant. The Company also agreed to use the proceeds from the exercise of
the A Warrant to pay principal and interest on the $40,000,000 tranche of the
JEDI loan.
As a result of the loan restructuring and the issuance of the B Warrant, the
Company reduced the recorded amount of the related liability to approximately
$45,493,000. No gain or loss was recorded on the loan restructuring since the
estimated fair value of the restructured loan and the B warrant was
approximately equal to the original loan balance.
In December 1995, JEDI exchanged the $22,400,000 tranche and the B Warrant
for 1,680,000 shares of Common Stock (the JEDI Exchange). The fair value of the
1,680,000 shares of Common Stock was estimated to be $15,400,000 based on the
quoted market price of the Common Stock at the date of the transaction, less a
discount of 35% to reflect the shareholder agreement with JEDI that limited
JEDI's ability to vote the shares or to transfer the shares before July 27,
1998, the size of the block of stock and the estimated brokerage fees on the
ultimate disposition of the shares. No gain or loss was recorded on the exchange
since the estimated fair value of the Common Stock issued less the estimated
fair value of the B warrant reacquired was approximately equal to the carrying
amount of the $22,400,000 tranche.
Pursuant to the JEDI Exchange, the Company assumed JEDI's obligations under
the Anschutz Option. Under the Anschutz Option, the Company was then obligated
to issue shares directly to Anschutz that previously would have been issued to
JEDI pursuant to the B Warrant.
On August 1, 1996 The Anschutz Corporation exercised the Anschutz Option to
purchase 2,250,000 shares of Common Stock for $26,200,000 or approximately
$11.64 per share. Proceeds received by Forest were used primarily to fund a
portion of 1996 capital expenditures.
On November 5, 1996 the Company exchanged 2,000,000 shares of Common Stock
plus approximately $13,500,000 cash to extinguish approximately $43,000,000 of
nonrecourse secured debt then owed to JEDI. In connection with this transaction,
Anschutz acquired 1,628,888 shares of Common Stock by exercising a portion of
the A Warrant to purchase 388,888 shares of common stock at $10.50 per share and
by converting 620,000 shares of Forest's Second Series Preferred Stock into
1,240,000 shares of Common Stock. The term of the remaining 3,500,000 warrants
held by Anschutz was extended to July 27, 1999. The fair value of the shares of
Common Stock issued to JEDI was estimated based on the quoted market price of
the Common Stock at the date of the transaction, less a discount of 7 1/2% to
reflect the lock-up agreement with JEDI that limited JEDI's ability to transfer
the shares before May 31, 1997, the size of the block of shares to be issued and
the estimated brokerage fees on the ultimate disposition of the shares. The fair
value of the Common Stock issued and the cash paid to JEDI, including related
expenses of the transaction, was less than the carrying amount of the debt
extinguished. Accordingly, the Company recorded an extraordinary gain on
extinguishment of debt in the fourth quarter of 1996 of approximately
$2,166,000.
(4) INVESTMENT IN AFFILIATE:
In 1992, the Company sold its Canadian assets and related operations to
CanEagle Resources Corporation (CanEagle) for approximately $51,250,000 in
Canadian funds ($41,000,000 U.S.). In the transaction, the Company received cash
of approximately $28,000,000 CDN ($22,400,000 U.S.), net of expenses, and
provided financing in the aggregate principal amount of $22,000,000 CDN
($17,600,000 U.S.). On June 24, 1994 CanEagle sold a significant portion of its
oil and gas properties to a third party. In
F-22
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(4) INVESTMENT IN AFFILIATE: (CONTINUED)
conjunction with this transaction, the Company received $6,124,000 CDN
($4,400,000 U.S.) and exchanged its investment in CanEagle for shares of
preferred stock of a newly formed entity, Archean Energy, Ltd. (Archean). The
Company accounted for the proceeds from the 1992 and 1994 transactions as
reductions in the carrying value of its investment in CanEagle. The preferred
shares of Archean were recorded at an amount equal to the remaining carrying
value of the Company's investment in CanEagle.
The Company accounted for its investment in Archean (and CanEagle prior to
June 24, 1994) in a manner analagous to equity accounting. Losses were
recognized to the extent that losses were attributable to the Company's
interest. Earnings were recognized only if realization was assured. Under this
method, no earnings or losses were recognized in 1996, 1995 or 1994.
In December 1995, in connection with the Saxon acquisition, the Company
transferred its Archean preferred stock to Saxon and the Company continued to
account for the investment in Archean at its historical carrying value. In
September 1996, the preferred shares of Archean were redeemed for cash at their
approximate carrying value.
(5) LONG-TERM DEBT:
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Credit facility................................................................ $ 26,400 23,800
Canadian Forest credit facility................................................ 32,500 --
Saxon credit facility.......................................................... -- 16,437
Nonrecourse secured loan....................................................... -- 40,322
Production payment obligation.................................................. 12,596 16,218
11 1/4% Senior Subordinated Notes.............................................. 99,421 99,365
----------- ---------
170,917 196,142
Less current portion........................................................... (2,058) (2,263)
----------- ---------
Long-term debt................................................................. $ 168,859 193,879
----------- ---------
----------- ---------
</TABLE>
CREDIT FACILITY:
The Company has a secured credit facility (the Credit Facility) with The
Chase Manhattan Bank, NA. (Chase) as agent for a group of banks. Under the
Credit Facility, as amended, the Company may borrow up to $60,000,000 for
working capital and/or general corporate purposes. Advances under this facility
bear interest at rates ranging from the banks' prime rate to prime plus 3/4% or,
alternatively, the London interbank offered rate (LIBOR) plus 1.0% to LIBOR plus
1 3/4% depending on the ratio of debt to total capitalization for the Company.
The borrowing base is subject to formal redetermination semi-annually, but may
be changed at the banks' discretion at any time. The Credit Facility is secured
by a lien on, and a security interest in, a majority of the Company's domestic
proved oil and gas properties and related assets (subject to prior security
interests granted to holders of volumetric production payment agreements) and a
pledge of accounts receivable. The maturity date of the Credit Facility is
January 31, 2000. Under the terms of the Credit Facility, the Company is subject
to certain covenants and financial tests, including restrictions or requirements
with respect to working capital, cash flow, additional debt, liens,
F-23
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(5) LONG-TERM DEBT: (CONTINUED)
asset sales, investments, mergers, cash dividends on capital stock and reporting
responsibilities. At December 31, 1996 notes payable of $26,400,000 were
outstanding under the Credit Facility with interest at rates ranging from 7.00%
to 8.75% per annum. The Company has also used the Credit Facility for a
$1,500,000 letter of credit.
CANADIAN FOREST CREDIT FACILITY:
On February 8, 1996 a newly-formed Canadian subsidiary of Forest entered
into a credit agreement (the Canadian Credit Facility) with The Chase Manhattan
Bank of Canada for the benefit of Canadian Forest and ProMark. The borrowing
base under the Canadian Credit Facility is $60,000,000 CDN. The borrowing base
is subject to formal redeterminations semi-annually, but may be changed by the
bank at its discretion at any time. The maturity date of the Canadian Credit
Facility is February 7, 1999. The Canadian Credit Facility is indirectly secured
by substantially all the assets of Canadian Forest. Funds drawn under the
Canadian Credit Facility can be used for general corporate purposes. Under the
terms of the Canadian Credit Facility, the three Canadian subsidiaries are
subject to certain covenants and financial tests including restrictions or
requirements with respect to working capital, cash flow, additional debt, liens,
asset sales, investments, mergers, cash dividends and reporting
responsibilities. At December 31, 1996 the outstanding balance under this
facility was $32,500,000 (US) with interest at rates ranging from 7.25% to
7.3125% per annum. Canadian Forest has entered into interest rate swaps which
fix the interest rate on approximately $22,000,000 of long-term debt at 10.055%
to 10.55% with terms expiring in 1998. The Company has also used this facility
for a letter of credit in the amount of $3,081,000 CDN.
SAXON CREDIT FACILITY:
Saxon has a revolving credit facility with a borrowing base of $20,000,000
CDN. The loan is subject to semi-annual review and has demand features; however,
repayments are not required provided that borrowings are not in excess of the
borrowing base and Saxon complies with other existing covenants. At December 31,
1996 there was no outstanding balance under this facility.
NONRECOURSE SECURED LOAN:
On December 30, 1993, the Company entered into a nonrecourse secured loan
agreement with JEDI. The terms of the JEDI loan were restructured in 1995 as
described in Note 3. Under the terms of the restructured JEDI loan, the Company
was required to make payments based on the net proceeds, as defined, from
certain subject properties. Payments under the JEDI loan were due monthly and
were equal to 90% of total net operating income from the secured properties,
reduced by 80% of allowable capital expenditures, as defined. On November 5,
1996 the Company exchanged 2,000,000 shares of Common Stock plus approximately
$13,500,000 cash to extinguish the remaining balance of the nonrecourse secured
debt owed to JEDI of approximately $43,000,000. See Note 3.
PRODUCTION PAYMENT OBLIGATION:
The dollar-denominated production payment was entered into in 1992 to
finance property acquisitions. The original amount of the dollar-denominated
production payment was $37,550,000, which was recorded as a liability of
$28,805,000 after a discount to reflect a market rate of interest of 15.5%. At
F-24
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(5) LONG-TERM DEBT: (CONTINUED)
December 31, 1996 the remaining principal amount was $16,981,000 and the
recorded liability was $12,596,000. Under the terms of this production payment,
the Company must make a monthly cash payment which is the greater of a base
amount or 85% of net proceeds from the subject properties located in the United
States, as defined, except that the amount required to be paid in any given
month shall not exceed 100% of the net proceeds from the subject properties. The
Company retains a management fee equal to 10% of sales from the properties,
which is deducted in the calculation of net proceeds. The Company's current
estimate, based on expected production and prices, budgeted capital expenditure
levels and expected discount amortization, is that 1997 payments will reduce the
recorded liability by approximately $2,058,000, which amount is included in
current liabilities, increase the recorded liability by approximately $1,022,000
in 1998, and reduce the recorded liability by $975,000 in 1999, $2,433,000 in
2000 and $2,038,000 in 2001. Properties to which approximately 3% of the
Company's estimated proved reserves are attributable, on an MCFE basis, are
dedicated to this production payment financing.
11 1/4% SENIOR SUBORDINATED NOTES:
On September 8, 1993 the Company completed a public offering of $100,000,000
aggregate principal amount of 11 1/4% Senior Subordinated Notes due September 1,
2003. The Senior Subordinated Notes were issued at a price of 99.259% yielding
11.375% to the holders. The Senior Subordinated Notes are redeemable at the
option of the Company, in whole or in part, at any time on or after September 1,
1998 initially at a redemption price of 105.688%, plus accrued interest to the
date of redemption, declining at the rate of 1.896% per year to September 1,
2000 and at 100% thereafter.
Under the terms of the Senior Subordinated Notes, the Company must meet
certain tests before it is able to pay cash dividends or make other restricted
payments, incur additional indebtedness, engage in transactions with its
affiliates, incur liens and engage in certain sale and leaseback arrangements.
The terms of the Senior Subordinated Notes also limit the Company's ability to
undertake a consolidation, merger or transfer of all or substantially all of its
assets. In addition, the Company is, subject to certain conditions, obligated to
offer to repurchase Senior Subordinated Notes at par value plus accrued and
unpaid interest to the date of repurchase, with the net cash proceeds of certain
sales or dispositions of assets. Upon a change of control, as defined, the
Company will be required to make an offer to purchase the Senior Subordinated
Notes at 101% of the principal amount thereof, plus accrued interest to the date
of purchase.
(6) DEFERRED REVENUE:
From April 1991 through July 1994, the Company entered into various
volumetric production payments with entities affiliated with Enron for net
proceeds of $139,058,000. Under the terms of these production payments, the
Company was required to deliver 80.1 BCF of natural gas and 770,000 barrels of
oil over periods ranging from three to eight years.
The Company is required to deliver the scheduled volumes from the subject
properties or to make a cash payment for volumes produced but not delivered, in
combination not to exceed a specified percentage of monthly production. If
production levels are not sufficient to meet scheduled delivery commitments, the
Company must account for and make up such shortages, at market-based prices,
from future production. The Company is responsible for royalties and for
production costs associated
F-25
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(6) DEFERRED REVENUE: (CONTINUED)
with operating the properties subject to the production payment agreements. The
Company may grant liens on properties subject to the production payment
agreements, but it must notify prospective lienholders that their rights are
subject to the prior rights of the production payment owner.
Amounts received under the production payments were recorded as deferred
revenue. Volumes associated with amortization of deferred revenue for the years
ended December 31, 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
NET SALES VOLUMES
ATTRIBUTABLE TO PRODUCTION
VOLUMES DELIVERED (1) PAYMENT DELIVERIES (2)
--------------------------- ---------------------------
NATURAL GAS NATURAL GAS
(MMCF) OIL (MBBLS) (MMCF) OIL (MBBLS)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
1996................................................. 3,721 87 3,168 74
1995................................................. 11,045 173 9,120 145
1994................................................. 19,985 218 16,005 182
</TABLE>
- ------------------------
(1) Amounts settled in cash in lieu of volumes were $1,641,000, $2,433,000 and
$5,742,000 for the years ended December 31, 1996, 1995, and 1994,
respectively.
(2) Represents volumes required to be delivered to Enron affiliates net of
estimated royalty volumes.
Future amortization of deferred revenue, based on the scheduled deliveries
under the production payment agreements, is as follows:
<TABLE>
<CAPTION>
NET SALES VOLUMES
VOLUMES REQUIRED TO BE ATTRIBUTABLE TO PRODUCTION
DELIVERED TO ENRON PAYMENT DELIVERIES (1)
ANNUAL ------------------------- ---------------------------
AMORTIZATION NATURAL GAS (MMCF) NATURAL GAS (MMCF)
--------------- ------------------------- ---------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
1997.............................. $ 2,439 1,410 1,008
1998.............................. 1,592 892 637
1999.............................. 1,352 757 541
Thereafter........................ 2,208 1,237 884
------- ----- -----
$ 7,591 4,296 3,070
------- ----- -----
------- ----- -----
</TABLE>
- ------------------------
(1) Represents volumes required to be delivered to Enron net of estimated
royalty volumes.
F-26
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(7) INCOME TAXES:
The income tax expense (benefit) is different from amounts computed by
applying the statutory Federal income tax rate for the following reasons:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Tax expense (benefit) at 35% of income (loss) before income taxes, cumulative
effects of changes in accounting principles and extraordinary item.............. $ 2,300 (6,367) (23,749)
Change in the valuation allowance for deferred tax assets attributable to income
(loss) before income taxes, cumulative effects of changes in accounting
principles and extraordinary item............................................... (367) 5,732 23,220
Canadian earnings taxed at a higher effective rate................................ 1,068 -- --
Canadian Crown payments (net of Alberta Royalty Tax Credit) not deductible for tax
purposes........................................................................ 2,799 -- --
Canadian resource allowance....................................................... (3,005) -- --
Non-deductible depletion and amortization......................................... 1,694 -- --
Expiration of tax carryforwards................................................... 643 535 455
Other............................................................................. 319 93 83
--------- --------- ---------
Total income tax expense (benefit)................................................ $ 5,451 (7) 9
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes generally result from recognizing income and expenses
at different times for financial and tax reporting. In the U.S., differences
result in part from capitalization of certain development, exploration and other
costs under the full cost method of accounting, recording proceeds from the sale
of properties in the full cost pool, and the provision for impairment of oil and
gas properties for financial accounting purposes. In Canada, differences result
in part from accelerated cost recovery of oil and gas capital expenditures for
tax purposes.
F-27
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(7) INCOME TAXES: (CONTINUED)
The components of the net deferred tax liability at December 31, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
(IN THOUSANDS)
Deferred tax assets:
Allowance for doubtful accounts........................................................ $ 296 283
Accrual for retirement benefits........................................................ 1,128 1,223
Accrual for medical benefits........................................................... 2,220 2,220
Accrual for sales recorded on the entitlement method................................... 1,499 2,920
Accrual for interest rate swaps........................................................ 509 --
Net operating loss carryforward........................................................ 46,828 39,264
Depletion carryforward................................................................. 6,958 6,958
Investment tax credit carryforward..................................................... 2,576 3,219
Alternative minimum tax credit carryforward............................................ 2,187 2,187
Other.................................................................................. 613 243
---------- ----------
Total gross deferred tax assets...................................................... 64,814 58,517
Less valuation allowance............................................................. (43,999) (45,124)
---------- ----------
Net deferred tax assets.............................................................. 20,815 13,393
Deferred tax liabilities:
Property and equipment................................................................. (48,475) (13,393)
Deferred income on long term contracts................................................. (6,014) --
Other.................................................................................. (42) --
---------- ----------
Total gross deferred tax liabilities................................................. (54,531) (13,393)
---------- ----------
Net deferred tax liability........................................................... $ (33,716) --
---------- ----------
---------- ----------
</TABLE>
The net change in the total valuation allowance for the year ended December
31, 1996 was a decrease of $1,125,000, which includes a decrease in the
valuation allowance of $758,000 attributable to the extraordinary gain.
The Alternative Minimum Tax (AMT) credit carryforward available to reduce
future U.S. Federal regular taxes aggregated $2,187,000 at December 31, 1996.
This amount may be carried forward
F-28
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(7) INCOME TAXES: (CONTINUED)
indefinitely. U.S. Federal regular and AMT net operating loss carryforwards at
December 31, 1996 were $133,795,000 and $130,142,000, respectively, and will
expire in the years indicated below:
<TABLE>
<CAPTION>
REGULAR AMT
----------- ---------
<S> <C> <C>
(IN THOUSANDS)
2000........................................................................... $ 3,590 4,975
2005........................................................................... 8,307 --
2008........................................................................... 28,999 31,799
2009........................................................................... 22,817 22,964
2010........................................................................... 45,736 46,058
2011........................................................................... 24,346 24,346
----------- ---------
$ 133,795 130,142
----------- ---------
----------- ---------
</TABLE>
AMT net operating loss carryforwards can be used to offset 90% of AMT income
in future years.
Investment tax credit carryforwards available to reduce future U.S. Federal
income taxes aggregated $2,576,000 at December 31, 1996 and expire at various
dates through the year 2001. Percentage depletion carryforwards available to
reduce future U.S. Federal taxable income aggregated $19,879,000 at December 31,
1996. This amount may be carried forward indefinitely.
Canadian tax pools available to reduce future Canadian Federal income taxes
aggregated approximately $78,000,000 at December 31, 1996. These tax pool
balances are deductible on a declining balance basis ranging from ten to one
hundred percent of the balance annually. These amounts may be carried forward
indefinitely.
The availability of some of these U.S. Federal tax attributes to reduce
current and future U.S. taxable income of the Company is subject to various
limitations under the Internal Revenue Code. In particular, the Company's
ability to utilize such tax attributes could be limited due to the occurrence of
an "ownership change" within the meaning of Section 382 of the Internal Revenue
Code resulting from the Anschutz transaction in 1995 and the public stock
issuance in 1996. Under the general provisions of Section 382 of the Code, the
Company's net operating loss carryforwards will be subject to an annual
limitation as to their use of approximately $5,700,000. Even though the Company
is limited in its ability to use the net operating loss carryovers under these
provisions of Section 382, it may be entitled to use these net operating loss
carryovers to offset (a) gains recognized in the five years following the
ownership change on the disposition of certain assets, to the extent that the
value of the assets disposed of exceeds their tax basis on the date of the
ownership change or (b) any item of income which is properly taken into account
in the five years following the ownership change but which is attributable to
periods before the ownership change ("built-in gain"). The ability of the
Company to use these net operating loss carryovers to offset built-in gain first
requires that the Company have total built-in gains at the time of the ownership
change which are greater than a threshold amount. In addition, the use of these
net operating loss carryforwards to offset built-in gain cannot exceed the
amount of the total built-in gain. The Company has not finalized its calculation
of the amount of built-in gains at the date of the ownership change, but
estimates that its ability to fully utilize its net operating loss carryforwards
may be limited by these provisions.
F-29
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(7) INCOME TAXES: (CONTINUED)
Due to limitations in the Internal Revenue Code, other than the Section 382
limitations discussed above, the Company believes it is unlikely that it will be
able to use any significant portion of its investment tax credit carryforwards
before they expire.
(8) PREFERRED STOCK:
$.75 CONVERTIBLE PREFERRED STOCK:
The Company had 10,000,000 shares of $.75 Convertible Preferred Stock
authorized, par value $.01 per share, of which there were 2,877,673 shares
outstanding at December 31, 1996 and 2,880,173 shares outstanding at December
31, 1995, with an aggregate liquidation preference of $28,776,730 at December
31, 1996 and $28,801,730 at December 31, 1995. This stock was convertible at any
time, at the option of the holder, at the rate of .7 shares of Common Stock for
each share of $.75 Convertible Preferred Stock, subject to adjustment upon
occurrence of certain events. During 1996, 2,500 shares of $.75 Convertible
Preferred Stock were converted into 1,750 shares of Common Stock; during 1995,
800 shares of $.75 Convertible Preferred Stock were converted into 560 shares of
Common Stock; there were no conversions in 1994. The $.75 Convertible Preferred
Stock was redeemable, in whole or in part, at the option of the Company, after
July 1, 1996 at $10.00 per share plus accumulated and unpaid dividends.
Cumulative annual dividends of $.75 per share were payable quarterly, in
arrears, on the first day of February, May, August and November, when and as
declared. Until December 31, 1993, the Company was required to pay such
dividends in shares of Common Stock. After such date, dividends could be paid in
cash or, at the Company's election, in shares of Common Stock or in a
combination of cash and Common Stock; however, the Company was prohibited from
paying cash dividends on its $.75 Convertible Preferred Stock from the February
1, 1995 dividend through the March 8, 1996 dividend due to restrictions
contained in the Credit Facility with its lending banks. After such date,
dividends could be paid in cash or at the Company's election, in shares of
Common Stock or in a combination of cash and Common Stock. Under the terms of
the $.75 Convertible Preferred stock, Common Stock delivered in payment of
dividends was valued for dividend payment purposes at between 75% and 90%,
depending on trading volume, of the average last reported sales price of the
Common Stock during a specified period prior to the record date for the dividend
payment. During any period in which dividends on preferred stock were in
arrears, no dividends or distributions, except for dividends paid in shares of
Common Stock, could be paid or declared on the Common Stock, nor could any
shares of Common Stock be acquired by the Company.
The Company called for redemption on February 28, 1997 all 2,877,673 shares
of its $.75 Convertible Preferred Stock. The redemption price was $10.00 per
share plus accumulated and unpaid dividends to and including the date of
redemption (for an aggregate redemption price of $10.06 per share). In lieu of
cash redemption, prior to the close of business on February 21, 1997 the holders
of the preferred shares had the right to convert each share into 0.7 share of
Forest's Common Stock. As of February 21, 1997 2,783,945 shares or 96.7% of the
shares outstanding were tendered for conversion into Common Stock. The remaining
93,728 shares that were not tendered for conversion were redeemed by the Company
at the redemption price of $10.06 per share on February 28, 1997.
F-30
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(8) PREFERRED STOCK: (CONTINUED)
SECOND SERIES PREFERRED STOCK:
At December 31, 1995 the Company had 620,000 shares of Second Series
Preferred Stock authorized, par value $.01 per share, of which there were
620,000 shares outstanding, with an aggregate liquidation preference of
$11,160,000. Each share of Second Series Preferred Stock (1) was convertible
into 2 shares of Common Stock, (2) had no right to vote, (3) had the right to
receive dividends on the dates and in the form that dividends were payable on
the Common Stock, and (4) had the right, upon any liquidation, dissolution or
winding up of the Company, before any distribution is made on any shares of
Common Stock, to be paid the amount of $18.00 and, after there shall have been
paid to each share of Common Stock the amount of $9.00, had the right to receive
distributions on the dates and in the form that distributions are payable on the
Common Stock. On November 5, 1996 all 620,000 shares of the Company's Second
Series Preferred Stock were converted into 1,240,000 shares of Common Stock.
(9) COMMON STOCK:
COMMON STOCK:
The Company has 200,000,000 shares of Common Stock authorized, par value
$.10 per share. On January 5, 1996 a 5-to-1 reverse stock split was approved by
the Company's shareholders. The reverse split became effective on January 8,
1996. Unless otherwise indicated, all share amounts have been adjusted to give
effect to the 5-to-1 reverse stock split.
On January 31, 1996 13,200,000 shares of Common Stock were sold for $11.00
per share in a public offering. Of this amount 1,060,000 shares were sold by
Saxon and 12,140,000 were sold by Forest. The net proceeds to Forest and Saxon
from the issuance of shares totaled approximately $136,000,000 after deducting
issuance costs and underwriting fees.
In October 1993, the Board of Directors adopted a shareholders' rights plan
(the Plan) and entered into the Rights Agreement. The Company paid a dividend
distribution of one Preferred Share Purchase Right (the Rights) on each
outstanding share of the Company's Common Stock. The Rights are exercisable only
if a person or group acquires 20% or more of the Company's Common Stock or
announces a tender offer which would result in ownership by a person or group of
20% or more of the Common Stock. Each Right initially entitles each shareholder
to buy 1/100th of a share of a new series of Preferred Stock at an exercise
price of $30.00, subject to adjustment upon certain occurrences. Each 1/100th of
a share of such new Preferred Stock that can be purchased upon exercise of a
Right has economic terms designed to approximate the value of one share of
Common Stock. The Rights will expire on October 29, 2003, unless extended or
terminated earlier. In connection with the Anschutz transaction, the Company
amended the Rights Agreement to exempt from the provisions of the Rights
Agreement shares of Common Stock acquired by Anschutz and JEDI in the Anschutz
and JEDI transactions, including shares later acquired pursuant to the
conversion of the Second Series Preferred Stock or the exercise of the A Warrant
and the Anschutz Option. The amendment to the Rights Agreement did not exempt
other shares of Common Stock acquired by Anschutz or JEDI from the provisions of
the Rights Agreement.
F-31
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(9) COMMON STOCK: (CONTINUED)
WARRANTS:
At December 31, 1995 the Company had outstanding 1,244,715 warrants to
purchase shares of its Common Stock (the Public Warrants). Each Public warrant
entitled the holder to purchase one-fifth share of Common Stock at a price of
$3.00 and was noncallable. During 1996, 112,185 warrants were exercised to
purchase 22,437 shares of Common Stock. On October 1, 1996 the remaining Public
Warrants expired.
In December 1995, the Company assumed JEDI's obligations under the Anschutz
Option. On August 1, 1996 Anschutz exercised the Anschutz Option for $26,200,000
or approximately $11.64 per share and Anschutz received 2,250,000 shares of
Common Stock.
At December 31, 1996 the Company has outstanding the A Warrant that is held
by Anschutz. At that date, the A Warrant entitled the holder to purchase
3,500,000 shares of Common Stock at a price of $10.50 per share. The Warrant
expires on July 27, 1999. On November 5, 1996 Anschutz exercised a portion of
the A Warrant and purchased 388,888 shares of Common Stock at $10.50 per share.
STOCK OPTIONS:
In March 1992, the Company adopted the 1992 Stock Option Plan under which
non-qualified stock options may be granted to key employees and non-employee
directors. The aggregate number of shares of Common Stock which the Company may
issue under options granted pursuant to this plan may not exceed 10% of the
total number of shares outstanding or issuable at the date of grant pursuant to
outstanding rights, warrants, convertible or exchangeable securities or other
options. The exercise price of an option may not be less than 85% of the fair
market value of one share of the Company's Common Stock on the date of grant.
The options vest 20% on the date of grant and an additional 20% on each grant
anniversary date thereafter.
The following table summarizes the activity in the Company's stock-based
compensation plan for the years ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE NUMBER OF
NUMBER OF EXERCISE SHARES
SHARES PRICE EXERCISABLE
----------- ----------- ------------
<S> <C> <C> <C>
Outstanding at December 31, 1993................................. 610,800 $ 19.99 155,320
Granted at fair value.......................................... 62,000 25.00
Exercised...................................................... (7,000) 15.00
Cancelled...................................................... (7,000) 25.00
----------- -----------
Outstanding at December 31, 1994................................. 658,800 20.46 372,080
Cancelled...................................................... (30,800) 20.52
----------- -----------
Outstanding at December 31, 1995................................. 628,000 20.46 461,200
Granted at fair value.......................................... 1,383,900 12.74
Exercised...................................................... (35,120) 11.42
Cancelled...................................................... (515,200) 20.47
----------- -----------
Outstanding at December 31, 1996................................. 1,461,580 $ 13.37 362,460
----------- -----------
----------- -----------
</TABLE>
F-32
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(9) COMMON STOCK: (CONTINUED)
The fair value of each option granted in 1996 was estimated using the
Black-Scholes option pricing model with the following assumptions: expected
option life of 5 years; risk free interest rates ranging from 5.261% to 6.022%;
estimated volatility of 59.95%; and dividend yield of zero percent. The weighted
average fair market value of options granted during 1996 was estimated to be
$7.22 per share based on these assumptions.
The following table summarizes information about options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ------------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
EXERCISE PRICE SHARES LIFE PRICE SHARES PRICE
- --------------- ----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 11.25-12.63 666,080 9.23 $ 11.53 107,360 $ 11.59
$ 14.00-15.00 737,500 9.45 14.17 197,100 14.34
$ 25.00 58,000 5.75 25.00 58,000 25.00
- --------------- ----------- --- ----------- ----------- -----------
$ 11.25-25.00 1,461,580 9.20 $ 13.37 362,460 $ 15.23
- --------------- ----------- --- ----------- ----------- -----------
- --------------- ----------- --- ----------- ----------- -----------
</TABLE>
The Company applies APB Opinion 25 and related Interpretations in accounting
for its plans. Accordingly, no compensation cost is recognized for options
granted at a price equal to the fair market value of the common stock. Had
compensation cost for the Company's stock-based compensation plan been
determined using the fair value of the options at the grant date, the Company's
net income for the year ended December 31, 1996 would have been $2,230,000 and
net earnings per share would have been less than $.01 per share. There were no
stock options granted in 1995; accordingly, no compensation cost would have been
recognized in that year.
(10) EMPLOYEE BENEFITS:
PENSION PLANS:
The Company has a qualified defined benefit pension plan which covers its
U.S. employees (Pension Plan). The Pension Plan has been curtailed and all
benefit accruals were suspended effective May 31, 1991.
The benefits under the Pension Plan are based on years of service and the
employee's average compensation during the highest consecutive sixty-month
period in the fifteen years prior to retirement. No contribution was made to the
Plan in 1996, 1995 or 1994.
F-33
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(10) EMPLOYEE BENEFITS: (CONTINUED)
The following table sets forth the Pension Plan's funded status and amounts
recognized in the Company's consolidated financial statements at December 31:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation (all benefits are
vested)....................................................................... $ (25,959) (27,485)
---------- ---------
---------- ---------
Projected benefit obligation for service rendered to date....................... $ (25,959) (27,485)
Plan assets at fair market value, consisting primarily of listed stocks, bonds
and other fixed income obligations............................................ 24,897 24,270
---------- ---------
Unfunded pension liability...................................................... (1,062) (3,215)
Unrecognized net loss from past experience different from that assumed and
effects of changes in assumptions............................................. 2,012 4,133
---------- ---------
Pension asset recognized in the balance sheet................................... $ 950 918
---------- ---------
---------- ---------
</TABLE>
For 1996, the discount rate used in determining the actuarial present value
of the projected benefit obligation was 7.75% and the expected long-term rate of
return on assets was 9%. For 1995, the discount rate used in determining the
actuarial present value of the projected benefit obligation was 7.25% and the
expected long-term rate of return on assets was 9%. For 1994 the discount rate
used in determining the actuarial present value of the projected benefit
obligation was 9% and the expected long-term rate of return on assets was 9%.
The components of net pension expense (benefit) for the years ended December
31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Net pension expense (benefit) included the following components:
Interest cost on projected benefit obligation.......................... $ 1,926 2,049 1,976
Actual return on plan assets........................................... (3,056) (3,243) (245)
Net amortization and deferral.......................................... 1,098 1,234 (1,955)
--------- --------- ---------
Net pension expense (benefit)............................................ $ (32) 40 (224)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company has a non-qualified unfunded supplementary retirement plan that
provides certain officers with defined retirement benefits in excess of
qualified plan limits imposed by Federal tax law. Benefit accruals under this
plan were suspended effective May 31, 1991 in connection with suspension of
benefit accruals under the Pension Plan. At December 31, 1996 the projected
benefit obligation under this plan totaled $604,000, which amount is included in
other liabilities in the accompanying balance sheet. The projected benefit
obligation is determined using the same discount rate as is used for
calculations for the Pension Plan.
F-34
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(10) EMPLOYEE BENEFITS: (CONTINUED)
In 1993, as a result of the change in the discount rate for the Pension Plan
and the supplementary retirement plan, the Company recorded a liability of
$3,038,000, representing the unfunded pension liability, and a corresponding
decrease in capital surplus. As a result of changes in the discount rate for the
Pension Plan and the supplementary retirement plan, the Company records
corresponding changes in the liability and capital surplus. In 1994, the Company
reduced the liability representing the unfunded pension liability by
approximately $1,570,000, with a corresponding increase in capital surplus. In
1995, the Company increased the unfunded pension liability by approximately
$2,836,000, with a corresponding decrease in capital surplus. In 1996, the
Company reduced the unfunded pension liability by approximately $2,145,000, with
a corresponding increase in capital surplus.
Canadian Forest's employees are members of a non-contributory defined
benefit pension plan (Canadian Pension Plan). The benefits under the Canadian
Pension Plan are based on years of service, the employee's average annual
compensation during the highest consecutive sixty month period of pensionable
service and the employee's age at retirement. Canadian Forest's contribution to
the Canadian Pension Plan was $47,000 in 1996.
The following table sets forth the Canadian Pension Plan's funded status and
amounts recognized in the Company's consolidated financial statements at
December 31:
<TABLE>
<CAPTION>
1996
--------------
(IN THOUSANDS)
<S> <C>
Actuarial present value of accumulated benefit obligation (all benefits are vested)..... $ (4,119)
-------
-------
Projected benefit obligation for service rendered to date............................... $ (4,119)
Plan assets at fair market value, consisting primarily of listed stocks, bonds and other
fixed income obligations.............................................................. 4,922
-------
Pension surplus......................................................................... 803
Unrecognized net gain from past experience different from that assumed and effects of
changes in assumptions................................................................ (915)
-------
Pension liability recognized in the balance sheet....................................... $ (112)
-------
-------
</TABLE>
For 1996, the discount rate used in determining the actuarial present value
of the projected benefit obligation was 7% and the expected long-term rate of
return on assets was 7%.
The components of net pension expense for the year ended December 31 is as
follows:
<TABLE>
<CAPTION>
1996
---------------
(IN THOUSANDS)
<S> <C>
Net pension expense included the following components:
Interest cost on projected benefit obligation......................................... $ 456
Actual return on plan assets.......................................................... (310)
Net amortization and deferral......................................................... (69)
------
Net pension expense..................................................................... $ 77
------
------
</TABLE>
F-35
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(10) EMPLOYEE BENEFITS: (CONTINUED)
RETIREMENT SAVINGS PLANS:
The Company sponsors a qualified tax deferred savings plan in accordance
with the provisions of Section 401(k) of the Internal Revenue Code for its U.S.
employees. Employees may defer up to 10% of their compensation, subject to
certain limitations. The Company matches the employee contributions up to 5% of
employee compensation. In the first six months of 1995 and in 1994, Company
contributions were made using treasury stock. In the last six months of 1995 and
in the first nine months of 1996, Company contributions were made by issuing
authorized but unissued shares of Common Stock. In the last three months of
1996, Company contributions were made in cash. The expense associated with the
Company's contribution was $399,000 in 1996, $423,000 in 1995 and $516,000 in
1994.
Canadian Forest also provides a savings plan which is available to all of
its employees. Employees may contribute up to 4% of their salary, subject to
certain limitations, with Canadian Forest matching the employee contribution in
full. Certain limitations are in effect with respect to withdrawals from the
plan. Canadian Forest's contribution to the plan was $95,000 in 1996.
EXECUTIVE RETIREMENT AGREEMENTS:
The Company entered into agreements in December 1990 (the Agreements) with
certain former executives and directors (the Retirees) whereby each executive
retired from the employ of the Company as of December 28, 1990. Pursuant to the
terms of the Agreements, the Retirees are entitled to receive supplemental
retirement payments from the Company in addition to the amounts to which they
are entitled under the Company's retirement plan. In addition, the Retirees and
their spouses are entitled to lifetime coverage under the Company's group
medical and dental plans, tax and other financial services, and payments by the
Company in connection with certain club membership dues. The Retirees also
continued to participate in the Company's royalty bonus program until December
31, 1995. The Company has also agreed to maintain certain life insurance
policies in effect at December 1990, for the benefit of each of the Retirees.
The Company's obligation to one retiree under a revised retirement agreement
is payable in Common Stock or cash, at the Company's option, in May of each year
from 1993 through 1996 at approximately $190,000 per year with the balance of
$149,000 payable in May 1997. The Agreements for the other six Retirees provide
for supplemental retirement payments totaling approximately $970,000 per year
through 1998 and approximately $770,000 per year in 1999 and 2000.
The $2,881,000 present value of the amounts due under the agreements,
discounted at 13%, is included in other current and long-term liabilities.
LIFE INSURANCE:
The Company provides life insurance benefits for certain key employees and
retirees under split dollar life insurance plans. The premiums for the life
insurance policies were $921,000, $921,000 and $916,000 in 1996, 1995 and 1994,
respectively, including $831,000 in each of the years 1996, 1995 and 1994 for
policies for retired executives. Under the life insurance plans, the Company is
assigned a portion of the benefits which is designed to recover the premiums
paid.
F-36
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(10) EMPLOYEE BENEFITS: (CONTINUED)
POSTRETIREMENT BENEFITS:
The Company accrues expected costs of providing postretirement benefits to
employees, their beneficiaries and covered dependents in accordance with
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," (SFAS No. 106).
The following table sets forth the status of the postretirement benefit plan
and the amounts recognized in the Company's consolidated financial statements at
December 31:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Retired participants................................................................. $ 4,522 4,803
Active participants fully eligible for benefits...................................... 256 201
Other active participants............................................................ 1,101 1,026
--------- ---------
Accumulated postretirement benefit obligation (APBO)................................. 5,879 6,030
Plan assets at fair market value..................................................... -- --
--------- ---------
APBO in excess of plan assets........................................................ 5,879 6,030
Unrecognized loss.................................................................... (166) (595)
--------- ---------
Accrued postretirement benefit liability............................................. $ 5,713 5,435
--------- ---------
--------- ---------
</TABLE>
The discount rates used in determining the actuarial present value of the
APBO at December 31, 1996, 1995 and 1994 were 7.75%, 7.25% and 9%, respectively.
The components of postretirement benefit expense for the years ended
December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost..................................................................... $ 131 83 103
Interest cost on APBO............................................................ 418 421 407
--------- --- ---
Postretirement benefit cost...................................................... $ 549 504 510
--------- --- ---
--------- --- ---
</TABLE>
For 1996, a 1% increase in health care cost trends would have increased the
APBO by $723,000 and the service and interest cost by $84,000.
(11) RELATED PARTY TRANSACTIONS:
Prior to 1995, the Company used a real estate complex owned directly or
indirectly by certain stockholders and members of the Board of Directors for
Company-sponsored seminars, the accommodation of business guests, the housing of
personnel attending corporate meetings and for other general business purposes.
In 1994, in connection with the Company's termination of usage, the Company paid
$662,000 on account of the business use of such property, and an additional
$300,000 as a partial reimbursement of deferred maintenance costs.
John F. Dorn resigned as an executive officer and director of the Company in
1993. The Company agreed to pay Mr. Dorn his salary at the time of his
resignation through September 30, 1996. In addition,
F-37
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(11) RELATED PARTY TRANSACTIONS: (CONTINUED)
the Company provided certain other benefits and services to Mr. Dorn. The
present value of the severance package was estimated at $500,000, which amount
was recorded as an expense and a liability at December 31, 1993. In March 1994,
the Company sold certain non-strategic oil and gas properties to an entity
controlled by Mr. Dorn and another former executive officer of the Company for
net proceeds, after costs of sale and purchase price adjustments, of $3,661,000.
The Company established the sales price based upon an opinion from an
independent third party.
(12) COMMITMENTS AND CONTINGENCIES:
Future rental payments for office facilities and equipment under the
remaining terms of noncancelable leases are $1,810,000, $1,810,000, $1,773,000,
$1,615,000 and $1,090,000 for the years ending December 31, 1997 through 2001,
respectively.
Net rental payments applicable to exploration and development activities and
capitalized in the oil and gas property accounts aggregated $1,050,000 in 1996,
$972,000 in 1995 and $851,000 in 1994. Net rental payments charged to expense
amounted to $3,336,000 in 1996, $3,529,000 in 1995 and $3,512,000 in 1994.
Rental payments include the short-term lease of vehicles. None of the leases are
accounted for as capital leases.
A significant portion of Canadian Forest's natural gas production is sold
through the ProMark Netback Pool. At December 31, 1996 the ProMark Netback Pool
had entered into fixed price contracts to sell approximately 10.7 BCF of natural
gas in 1997 at an average price of $1.66 per MCF and approximately 5.4 BCF of
natural gas in 1998 at an average price of approximately $1.88 per MCF. Canadian
Forest is obligated to deliver approximately 25% of the volumes of natural gas
subject to these contracts.
As part of ProMark's gas marketing activities, ProMark has entered into
fixed price contracts to purchase and to resell natural gas through 1998.
ProMark has commitments to purchase and commitments to resell approximately
300,000 MCF per day through October 31, 1997 and approximately 35,000 MCF per
day thereafter through October 31, 1998. The Company could be exposed to loss in
the event that a counterparty to these agreements failed to perform in
accordance with the terms of the agreements.
The Company, in the ordinary course of business, is a party to various legal
actions. In the opinion of management, none of these actions, either
individually or in the aggregate, will have a material adverse effect on the
Company's financial condition, liquidity or results of operations.
(13) FINANCIAL INSTRUMENTS:
ENERGY SWAPS AND COLLARS:
In order to hedge against the effects on the Company's future oil and gas
production of declines in oil and natural gas prices, the Company enters into
energy swap agreements with third parties and accounts for the agreements as
hedges based on analogy to the criteria set forth in Statement of Financial
Accounting Standards No. 80, "Accounting for Futures Contracts". In a typical
swap agreement, the Company receives the difference between a fixed price per
unit of production and a price based on an agreed-upon third party index if the
index price is lower. If the index price is higher, the Company pays the
difference. The Company's current swaps are settled on a monthly basis. For the
F-38
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(13) FINANCIAL INSTRUMENTS: (CONTINUED)
years ended December 31, 1996, 1995 and 1994, the Company's gains (losses) under
its swap agreements were $(10,422,000), $3,536,000 and $1,810,000, respectively.
The Company also enters into collar agreements with third parties that are
accounted for as hedges. A collar agreement is similar to a swap agreement,
except that the Company receives the difference between the floor price and the
index price only if the index price is below the floor price, and the Company
pays the difference between the ceiling price and the index price only if the
index price is above the ceiling price.
The following table indicates outstanding energy swaps at December 31, 1996:
<TABLE>
<CAPTION>
PRODUCT VOLUME FIXED PRICE DURATION
- --------------------------- ------------------------------- --------------------- --------------
<S> <C> <C> <C>
Natural Gas 441 to 5,671MMBTU/day $2.300 to $2.535 1/97 - 12/99
Natural Gas 100 to 250 MMBTU/day $2.2505 to $3.003 1/97 - 12/02
Natural Gas 5,000 MMBTU/day $1.9225 1/97 - 12/97
Natural Gas 3,000 MMBTU/day $2.42 1/97 - 12/97
Natural Gas 10,000 MMBTU/day $2.728 1/97 - 2/97
Natural Gas (1) 1,200 to 1,500 MMBTU/day $1.159 (2) 1/97 - 6/98
Oil 250 BBLS/day $18.85 1/97 - 12/97
Oil 332 BBLS/day $17.90 1/97 - 6/97
Oil 250 BBLS/day $20.05 1/97 - 12/97
Oil 250 BBLS/day $21.05 1/97 - 12/97
Oil (1) 350 BBLS/day $18.65 1/97 - 12/97
Oil (1) 350 BBLS/day $20.05 1/97 - 12/97
Oil (1) 350 BBLS/day $21.04 1/97 - 12/97
</TABLE>
- ------------------------
(1) Energy swaps related to the oil and gas operations of Canadian Forest and
Saxon.
(2) Based on Alberta Energy Company "C" (AECO "C", U.S. $) basis. All other
swaps are settled on the basis of New York Mercantile Exchange (NYMEX)
prices.
Subsequent to December 31, 1996 the Company entered into two additional oil
swaps. The first oil swap hedges 200 barrels of oil per day from February 1997
to July 1997 at a fixed price of $23.67 per barrel (NYMEX basis). The second oil
swap hedges 247 barrels of oil per day from January 1998 to December 1998 at a
fixed price of $20.00 per barrel (NYMEX basis).
The Company also uses basis swaps in connection with energy swaps to fix the
differential between the NYMEX price and the index price at which the hedged gas
is to be sold. At December 31, 1996 there are six basis swaps in place through
April 1998, for a weighted average volume of 22,000 MMBTU/day. Subsequent to
December 31, 1996, the Company entered into six additional basis swaps through
December 1997, for a weighted average volume of 18,000 MMBTU/day.
At December 31, 1996 the Company has an outstanding collar to hedge 10,000
MMBTU of natural gas per day from January 1997 through December 1997. The floor
and ceiling price of the collar are $2.00 and $2.37 per MMBTU (NYMEX basis),
respectively. Subsequent to December 31, 1996 the
F-39
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(13) FINANCIAL INSTRUMENTS: (CONTINUED)
Company entered into a collar to hedge 7,000 MMBTU of gas per day from April
1997 to September 1997. The floor and ceiling price of the collar are $2.10 and
$2.50 per MMBTU (NYMEX basis), respectively.
At December 31, 1996 the Company has an outstanding call which covers 10,000
MMBTU of natural gas per day from January 1997 through December 1997. In this
arrangement, the Company has effectively set a ceiling price of $2.00 per MMBTU
(NYMEX basis) in exchange for a premium of $.086 per MMBTU.
The Company is exposed to off-balance-sheet risks associated with swap or
collar agreements arising from movements in the prices of oil and natural gas
and from the unlikely event of non-performance by the counterparty to the swap
or collar agreements.
Set forth below is the estimated fair value of certain on- and off-balance
sheet financial instruments, along with the methods and assumptions used to
estimate such fair values as of December 31, 1996:
CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE: The
carrying amount of these instruments approximates fair value due to their short
maturity.
PRODUCTION PAYMENT OBLIGATION:
The fair value of the Company's production payment obligation has been
estimated as approximately $11,188,000 by discounting the projected future cash
payments required under the agreement by 9.7%.
11 1/4% SENIOR SUBORDINATED NOTES:
The fair value of the Company's 11 1/4% Senior Subordinated Notes was
approximately $107,500,000, based upon quoted market prices of the Notes.
INTEREST RATE SWAP AGREEMENTS:
The fair value of the Company's interest rate swap agreements was a loss of
approximately $1,751,000, of which approximately $1,168,000 has been recorded as
a liability at December 31, 1996.
ENERGY SWAP AGREEMENTS:
The fair value of the Company's energy swap agreements was a loss of
approximately $5,615,000, based upon the estimated net amount the Company would
have to pay to terminate the agreements.
BASIS SWAP AGREEMENTS:
The fair value of the Company's basis swap agreements was a gain of
approximately $173,000, based upon the estimated net amount the Company would
receive to terminate the agreements.
ENERGY COLLAR AGREEMENTS:
The fair value of the Company's energy collar agreements was a loss of
approximately $109,000, based upon the estimated net amount the Company would
have to pay to terminate the agreements.
F-40
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(14) MAJOR CUSTOMERS:
The Company's sales to individual customers which exceeded 10% of the
Company's total revenue in 1995 and 1994 (exclusive of the effects of energy
swaps and hedges) are shown below. No single customer accounted for more than
10% of total revenue in 1996.
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Enron Affiliates.................................................................. $ 30,916 58,805
Chevron USA Production Company.................................................... 11,893 12,829
</TABLE>
The amount shown for Enron Affiliates includes oil and natural gas sales to
Enron Gas Marketing Inc., Enron Oil & Gas Company, EOTT Energy Corporation,
Cactus Funding Corporation, Cactus Hydrocarbon III Limited Partnership, Enron
Gas Services Corporation and Enron Reserve Acquisition. Approximately
$6,272,000, $17,217,000 and $29,046,000 represent sales recorded for deliveries
under volumetric production payments in the years ended December 31, 1996, 1995
and 1994, respectively.
(15) GAS CONTRACT SETTLEMENT:
The Company had gas sales contracts with Columbia Gas Transmission
(Columbia) which were rejected by Columbia in 1991 in connection with its
bankruptcy proceedings. The Company had a secured claim of approximately
$1,600,000 relating to Columbia's failure to pay the contract price for a period
of time prior to the rejection of the contracts. This amount was recorded as
natural gas sales when the gas was delivered in 1991. The Company also had an
unsecured claim relating to the rejection of the gas purchase contracts.
The Company established a reserve of approximately $750,000 against the
secured portion of the bankruptcy claim in 1991. This reserve was reversed in
1994 when it became apparent that the amount the Company would receive in the
Columbia settlement would exceed the amount of the secured claim. The reversal
of the reserve was recorded as miscellaneous revenue in 1994.
In 1995, the creditors reached agreement with Columbia regarding settlement
of the various claims. The Company recorded approximately $4,263,000 of revenue
as a result of the settlement. This amount represents the Company's portion of
the settlement amount related to its unsecured claim, net of a provision for
royalties payable.
F-41
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(16) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1996
Revenue................................................................ $ 60,870 79,544 83,969 93,091
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings from operations............................................... $ 20,010 18,743 23,058 29,748
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings (loss) before extraordinary item.............................. $ (386) (2,901) 879 3,547
--------- --------- --------- ---------
--------- --------- --------- ---------
Net earnings (loss).................................................... $ (386) (2,901) 879 5,713
--------- --------- --------- ---------
--------- --------- --------- ---------
Net earnings (loss) attributable to common stock....................... $ (926) (3,441) 340 5,174
--------- --------- --------- ---------
--------- --------- --------- ---------
Primary and fully diluted loss per share before extraordinary item..... $ (.04) (.14) .01 .10
--------- --------- --------- ---------
--------- --------- --------- ---------
Primary and fully diluted loss per share............................... $ (.04) (.14) .01 .17
--------- --------- --------- ---------
--------- --------- --------- ---------
1995
Revenue................................................................ $ 22,361 20,550 17,617 21,928
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings from operations............................................... $ 14,900 12,740 10,177 12,914
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss............................................................... $ (3,144) (4,815) (6,574) (3,463)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss attributable to common stock.................................. $ (3,684) (5,355) (7,114) (4,003)
--------- --------- --------- ---------
--------- --------- --------- ---------
Primary and fully diluted loss per share............................... $ (.65) (.94) (.84) (.42)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
F-42
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(17) BUSINESS AND GEOGRAPHICAL SEGMENTS:
The Company operates in geographic segments in the United States and Canada,
and in two business segments as follows:
<TABLE>
<CAPTION>
UNITED
STATES CANADA TOTAL
----------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
1996
Gas marketing and processing:
Revenue.................................................................. $ 927 186,447 187,374
----------- --------- ---------
----------- --------- ---------
Depreciation and depletion expense....................................... $ -- 2,263 2,263
----------- --------- ---------
----------- --------- ---------
Operating profit......................................................... $ 927 5,478 6,405
----------- --------- ---------
----------- --------- ---------
Identifiable assets...................................................... $ 54,215 54,215
----------- --------- ---------
----------- --------- ---------
Capital expenditures..................................................... $ -- 6,183 6,183
----------- --------- ---------
----------- --------- ---------
Oil and gas operations:
Revenue.................................................................. $ 80,811 47,902 128,713
----------- --------- ---------
----------- --------- ---------
Depreciation and depletion expense....................................... $ 39,880 20,925 60,805
----------- --------- ---------
----------- --------- ---------
Operating profit......................................................... $ 21,142 14,567 35,709
----------- --------- ---------
----------- --------- ---------
Identifiable assets...................................................... $ 326,399 182,844 509,243
----------- --------- ---------
----------- --------- ---------
Capital expenditures..................................................... $ 74,734 169,384 244,118
----------- --------- ---------
----------- --------- ---------
</TABLE>
In 1995 and 1994, the Company's only business segment was oil and gas
operations, which were conducted entirely in the United States.
F-43
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(18) SUPPLEMENTAL FINANCIAL DATA -- OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED):
The following information is presented in accordance with Statement of
Financial Accounting Standards No. 69, "Disclosure about Oil and Gas Producing
Activities," (SFAS No. 69), except as noted.
(A) COSTS INCURRED IN OIL AND GAS EXPLORATION AND DEVELOPMENT ACTIVITIES --
The following costs were incurred in oil and gas exploration and development
activities during the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
UNITED
STATES CANADA TOTAL
--------- ------------ ---------
<S> <C> <C> <C>
(IN THOUSANDS)
1996
Property acquisition costs (undeveloped leases and proved properties)..... $ 16,122 142,833(1) 158,955
Exploration costs......................................................... 36,696 6,743 43,439
Development costs......................................................... 21,916 19,808 41,724
--------- ------------ ---------
Total................................................................... $ 74,734 169,384 244,118
--------- ------------ ---------
--------- ------------ ---------
1995
Property acquisition costs (undeveloped leases and proved properties)..... $ 844 25,963(2) 26,807
Exploration costs......................................................... 12,739 -- 12,739
Development costs......................................................... 13,198 -- 13,198
--------- ------------ ---------
Total................................................................... $ 26,781 25,963 52,744
--------- ------------ ---------
--------- ------------ ---------
1994
Property acquisition costs (undeveloped leases and proved properties)..... $ 9,762 -- 9,762
Exploration costs......................................................... 15,693 -- 15,693
Development costs......................................................... 17,089 -- 17,089
--------- ------------ ---------
Total..................................................................... $ 42,544 -- 42,544
--------- ------------ ---------
--------- ------------ ---------
</TABLE>
- ------------------------
(1) Consists primarily of the oil and gas properties acquired in the purchase of
Canadian Forest.
(2) Consists of the oil and gas properties acquired in the purchase of Saxon.
F-44
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(18) SUPPLEMENTAL FINANCIAL DATA -- OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED): (CONTINUED)
(B) AGGREGATE CAPITALIZED COSTS -- The aggregate capitalized costs relating
to oil and gas activities as of December 31 for the years indicated are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------- --------------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
Costs related to proved properties.................................. $ 1,381,289 1,169,636 1,109,158
Costs related to unproved properties:
Costs subject to depletion........................................ 32,007 18,011 32,288
Costs not subject to depletion.................................... 43,916 28,380 30,441
------------- --------------- -----------
1,457,212 1,216,027 1,171,887
Less accumulated depletion and valuation allowance.................. 1,001,604 941,482 895,335
------------- --------------- -----------
$ 455,608 274,545 276,552
------------- --------------- -----------
------------- --------------- -----------
</TABLE>
(C) RESULTS OF OPERATIONS FROM PRODUCING ACTIVITIES -- Results of
operations from producing activities for the years ended December 31, 1996, 1995
and 1994 are presented below. Income taxes are different from income taxes shown
in the Consolidated Statements of Operations because this table excludes general
and administrative and interest expense.
<TABLE>
<CAPTION>
UNITED
STATES CANADA TOTAL
----------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
1996
Oil and gas sales............................................................ $ 80,811 47,902 128,713
Production expense........................................................... 19,789 12,410 32,199
Depletion expense............................................................ 39,331 20,297 59,628
Income tax expense........................................................... -- 6,864 6,864
----------- --------- ---------
59,120 39,571 98,691
----------- --------- ---------
Results of operations from producing activities.............................. $ 21,691 8,331 30,022
----------- --------- ---------
----------- --------- ---------
1995
Oil and gas sales............................................................ $ 82,275 -- 82,275
Production expense........................................................... 22,463 -- 22,463
Depletion expense............................................................ 42,973 -- 42,973
----------- --------- ---------
65,436 -- 65,436
----------- --------- ---------
Results of operations from producing activities.............................. $ 16,839 -- 16,839
----------- --------- ---------
----------- --------- ---------
</TABLE>
F-45
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(18) SUPPLEMENTAL FINANCIAL DATA -- OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED): (CONTINUED)
<TABLE>
<CAPTION>
UNITED
STATES CANADA TOTAL
----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
1994
Oil and gas sales............................................................ $ 114,541 -- 114,541
Production expense........................................................... 22,384 -- 22,384
Depletion expense............................................................ 64,883 -- 64,883
Provision for impairment of oil and gas properties........................... 58,000 -- 58,000
----------- --------- ---------
145,267 -- 145,267
----------- --------- ---------
Results of operations from producing activities.............................. $ (30,726) -- (30,726)
----------- --------- ---------
----------- --------- ---------
</TABLE>
(D) ESTIMATED PROVED OIL AND GAS RESERVES -- The Company's estimate of its
proved and proved developed future net recoverable oil and gas reserves and
changes for 1994, 1995 and 1996 follows. The Canadian reserves at December 31,
1996 and 1995 include 100% of the reserves owned by Saxon, a consolidated
subsidiary in which the Company holds a majority interest.
Proved oil and gas reserves are the estimated quantities of crude oil,
natural gas and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions; i.e., prices
and costs as of the date the estimate is made. Prices include consideration of
changes in existing prices provided only by contractual arrangement, including
energy swap agreements (see Note 13), but not on escalations based on future
conditions.
Proved developed oil and gas reserves are reserves that can be expected to
be recovered through existing wells with existing equipment and operating
methods. Additional oil and gas expected to be obtained through the application
of fluid injection or other improved mechanisms of primary recovery are included
as "proved developed reserves" only after testing by a pilot project or after
the operation of an installed program has confirmed through production response
that increased recovery will be achieved.
The Company's presentation of estimated proved oil and gas reserves
excludes, for each of the years presented, those quantities attributable to
future deliveries required under volumetric production payments (see Note 6). In
order to calculate such amounts, the Company has assumed that deliveries under
volumetric production payments are made as scheduled at expected BTU factors,
and that delivery commitments are satisfied through delivery of actual volumes
as opposed to cash settlements.
The Company has also presented, as additional information, proved oil and
gas reserves including quantities attributable to future deliveries required
under volumetric production payments. The Company believes that this information
is informative to readers of its financial statements as the related oil and gas
property costs and deferred revenue are included on the Company's balance sheets
for each of the years presented. This additional information is not presented in
accordance with SFAS No. 69; however, the Company believes this additional
information is useful in assessing its reserve acquisitions and financial
position on a comprehensive basis.
F-46
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(18) SUPPLEMENTAL FINANCIAL DATA -- OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED): (CONTINUED)
<TABLE>
<CAPTION>
LIQUIDS GAS
--------------------------------- -------------------------------
(MBBLS) (MMCF)
UNITED UNITED
STATES CANADA TOTAL STATES CANADA TOTAL
--------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993................................. 7,797 -- 7,797 244,096 -- 244,096
Revisions of previous estimates............................ 989 -- 989 7,848 -- 7,848
Extensions and discoveries................................. 41 -- 41 9,894 -- 9,894
Production................................................. (1,361) -- (1,361) (32,043) -- (32,043)
Sales of reserves in place................................. (170) -- (170) (6,377) -- (6,377)
Purchases of reserves in place............................. 17 -- 17 8,220 -- 8,220
--------- ----------- --------- --------- --------- ---------
Balance at December 31, 1994................................. 7,313 -- 7,313 231,638 -- 231,638
Additional disclosures:
Volumes attributable to volumetric production payments..... 219 -- 219 15,358 -- 15,358
--------- ----------- --------- --------- --------- ---------
Balance at December 31, 1994, including volumes
attributable to volumetric production payments........... 7,532 -- 7,532 246,996 -- 246,996
--------- ----------- --------- --------- --------- ---------
--------- ----------- --------- --------- --------- ---------
Balance at December 31, 1994................................. 7,313 -- 7,313 231,638 -- 231,638
Revisions of previous estimates............................ (227) -- (227) 2,398 -- 2,398
Extensions and discoveries................................. 18 -- 18 6,861 -- 6,861
Production................................................. (1,028) -- (1,028) (24,222) -- (24,222)
Sales of reserves in place................................. (6) -- (6) (2,438) -- (2,438)
Purchases of reserves in place............................. 59 4,338 4,397 1,435 16,218 17,653
--------- ----------- --------- --------- --------- ---------
Balance at December 31, 1995................................. 6,129 4,338 10,467 215,672 16,218 231,890
Volumes attributable to volumetric production payments..... 74 -- 74 6,238 -- 6,238
--------- ----------- --------- --------- --------- ---------
Balance at December 31, 1995, including volumes
attributable to volumetric production payments........... 6,203 4,338 10,541 221,910 16,218 238,128
--------- ----------- --------- --------- --------- ---------
--------- ----------- --------- --------- --------- ---------
Balance at December 31, 1995................................. 6,129 4,338 10,467 215,672 16,218 231,890
Revisions of previous estimates............................ 335 (431) (96) (4,989) (3,446) (8,435)
Extensions and discoveries................................. 357 4,440 4,797 32,507 7,779 40,286
Production................................................. (1,030) (1,645) (2,675) (25,456) (13,872) (39,328)
Sales of reserves in place................................. (16) (612) (628) (1,132) (326) (1,458)
Purchases of reserves in place............................. 23 12,126 12,149 14,653 96,572 111,225
--------- ----------- --------- --------- --------- ---------
Balance at December 31, 1996................................. 5,798 18,216 24,014 231,255 102,925 334,180
Additional disclosures:
Volumes attributable to volumetric production payments..... -- -- -- 3,070 -- 3,070
--------- ----------- --------- --------- --------- ---------
Balance at December 31, 1996, including volumes
attributable to volumetric production payments........... 5,798 18,216 24,014 234,325 102,925 337,250
--------- ----------- --------- --------- --------- ---------
--------- ----------- --------- --------- --------- ---------
</TABLE>
Purchases of reserves in place represent volumes recorded on the closing
dates of the acquisitions for financial accounting purposes. The revisions of
previous estimates for natural gas in 1994 include
F-47
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(18) SUPPLEMENTAL FINANCIAL DATA -- OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED): (CONTINUED)
5,833 MMCF for an adjustment related to the change in accounting for oil and gas
sales from the sales method to the entitlements method.
<TABLE>
<CAPTION>
OIL AND CONDENSATE GAS
------------------------------- -------------------------------
(MBBLS) (MMCF)
UNITED UNITED
STATES CANADA TOTAL STATES CANADA TOTAL
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Proved developed reserves at:
December 31, 1993............................... 6,377 -- 6,377 187,534 -- 187,534
December 31, 1994............................... 6,775 -- 6,775 179,574 -- 179,574
December 31, 1995............................... 5,678 3,188 8,866 156,471 14,184 170,655
December 31, 1996............................... 5,311 13,260 18,571 165,629 70,856 236,485
</TABLE>
The Company's proved developed reserves, including amounts attributable to
volumetric production payments, are shown below. This disclosure is presented as
additional information and is not intended to represent required disclosure
pursuant to SFAS No. 69.
<TABLE>
<CAPTION>
OIL AND CONDENSATE GAS
------------------------------- -------------------------------
(MBBLS) (MMCF)
UNITED UNITED
STATES CANADA TOTAL STATES CANADA TOTAL
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Proved developed reserves, including amounts
attributable to volumetric production payments
at:
December 31, 1993............................... 6,778 -- 6,778 216,820 -- 216,820
December 31, 1994............................... 6,994 -- 6,994 194,932 -- 194,932
December 31, 1995............................... 5,752 3,188 8,940 162,709 14,184 176,893
December 31, 1996............................... 5,311 13,260 18,571 168,699 70,856 239,555
</TABLE>
(E) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS -- Future oil
and gas sales and production and development costs have been estimated using
prices and costs in effect at the end of the years indicated, except in those
instances where the sale of oil and natural gas is covered by contracts, energy
swap agreements or volumetric production payments. At December 31, 1996 and
1995, the Canadian amounts include 100% of amounts attributable to the reserves
owned by Saxon, a consolidated subsidiary in which the Company holds a majority
interest. In the case of contracts, the applicable contract prices, including
fixed and determinable escalations, were used for the duration of the contract.
Thereafter, the current spot price was used. Future oil and gas sales also
include the estimated effects of existing energy swap agreements as discussed in
Note 13.
Future income tax expenses are estimated using the statutory tax rate of 35%
in the United States and a combined Federal and Provincial rate of 44.62% in
Canada. Estimates for future general and administrative and interest expenses
have not been considered.
Changes in the demand for oil and natural gas, inflation and other factors
make such estimates inherently imprecise and subject to substantial revision.
This table should not be construed to be an
F-48
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(18) SUPPLEMENTAL FINANCIAL DATA -- OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED): (CONTINUED)
estimate of the current market value of the Company's proved reserves.
Management does not rely upon the information that follows in making investment
decisions.
The Company's presentation of the standardized measure of discounted future
net cash flows and changes therein excludes, for each of the years presented,
amounts attributable to future deliveries required under volumetric production
payments. In order to calculate such amounts, the Company has assumed that
deliveries under volumetric production payments are made as scheduled, that
production costs corresponding to the volumes delivered are incurred by the
Company at average rates for the properties subject to the production payments,
and that delivery commitments are satisfied through delivery of actual volumes
as opposed to cash settlements.
The Company has also presented, as additional information, the standardized
measure of discounted future net cash flows and changes therein including
amounts attributable to future deliveries required under volumetric production
payments. The Company believes that this information is informative to readers
of its financial statements because the related oil and gas property costs and
deferred revenue are shown on the Company's balance sheets for each of the years
presented. This additional information is not required to be presented in
accordance with SFAS No. 69; however, the Company believes this additional
information is useful in assessing its reserve acquisitions and financial
position on a comprehensive basis.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------
UNITED
STATES CANADA TOTAL
------------ ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Future oil and gas sales.................................................. $ 964,943 580,563 1,545,506
Future production and development costs................................... (258,866) (168,136) (427,002)
------------ ---------- -----------
Future net revenue........................................................ 706,077 412,427 1,118,504
10% annual discount for estimated timing of cash flows.................... (250,527) (165,788) (416,315)
------------ ---------- -----------
Present value of future net cash flows before income taxes................ 455,550 246,639 702,189
Present value of future income tax expense................................ (71,339) (70,981) (142,320)
------------ ---------- -----------
Standardized measure of discounted future net cash flows.................. 384,211 175,658 559,869
Additional disclosures:
Amounts attributable to volumetric production payments.................. 3,126 -- 3,126
------------ ---------- -----------
Total discounted future net cash flows, including amounts attributable
to volumetric production payments..................................... $ 387,337 175,658 562,995
------------ ---------- -----------
------------ ---------- -----------
</TABLE>
F-49
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(18) SUPPLEMENTAL FINANCIAL DATA -- OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED): (CONTINUED)
Undiscounted future income tax expense was $134,835,000 in the United States
and $127,833,000 in Canada at December 31, 1996.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------
UNITED
STATES CANADA TOTAL
------------ ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Future oil and gas sales.................................................. $ 554,609 93,021 647,630
Future production and development costs................................... (195,399) (43,060) (238,459)
------------ ---------- -----------
Future net revenue........................................................ 359,210 49,961 409,171
10% annual discount for estimated timing of cash flows.................... (122,528) (19,108) (141,636)
------------ ---------- -----------
Present value of future net cash flows before income taxes................ 236,682 30,853 267,535
Present value of future income tax expense................................ (8,855) (1,763) (10,618)
------------ ---------- -----------
Standardized measure of discounted future net cash flows.................. 227,827 29,090 256,917
Additional disclosures:
Amounts attributable to volumetric production payments.................. 8,476 -- 8,476
------------ ---------- -----------
Total discounted future net cash flows, including amounts attributable
to volumetric production payments..................................... $ 236,303 29,090 265,393
------------ ---------- -----------
------------ ---------- -----------
</TABLE>
Undiscounted future income tax expense was $22,316,000 in the United States
and $2,924,000 in Canada at December 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-------------------------------------
UNITED
STATES CANADA TOTAL
------------ ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Future oil and gas sales.................................................. $ 502,186 -- 502,186
Future production and development costs................................... (193,376) -- (193,376)
------------ ---------- -----------
Future net revenue........................................................ 308,810 -- 308,810
10% annual discount for estimated timing of cash flows.................... (100,480) -- (100,480)
------------ ---------- -----------
Present value of future net cash flows before income taxes................ 208,330 -- 208,330
Present value of future income tax expense................................ (781) -- (781)
------------ ---------- -----------
Standardized measure of discounted future net cash flows.................. 207,549 -- 207,549
Additional disclosures:
Amounts attributable to volumetric production payments.................. 22,600 -- 22,600
------------ ---------- -----------
Total discounted future net cash flows, including amounts attributable
to volumetric production payments..................................... $ 230,149 -- 230,149
------------ ---------- -----------
------------ ---------- -----------
</TABLE>
Undiscounted future income tax expense was $1,348,000 at December 31, 1994.
CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED OIL AND GAS RESERVES -- An analysis of the changes in the
standardized measure of discounted future net
F-50
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(18) SUPPLEMENTAL FINANCIAL DATA -- OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED): (CONTINUED)
cash flows during each of the last three years is as follows. At December 31,
1996 and 1995, the Canadian amounts include 100% of the reserves owned by Saxon,
a consolidated subsidiary in which the Company holds a majority interest.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------
UNITED
STATES CANADA TOTAL
----------- --------- ----------
<S> <C> <C> <C>
Standardized measure of discounted future net cash flows relating to proved
oil and gas reserves, at beginning of year................................. $ 227,827 29,090 256,917
Changes resulting from:
Sales of oil and gas, net of production costs.............................. (56,768) (35,492) (92,260)
Net changes in prices and future production costs.......................... 169,975 96,547 266,522
Net changes in future development costs.................................... (14,192) (8,256) (22,448)
Extensions, discoveries and improved recovery.............................. 60,423 37,491 97,914
Previously estimated development costs incurred during the period.......... 19,734 18,939 38,673
Revisions of previous quantity estimates................................... (4,396) (8,054) (12,450)
Sales of reserves in place................................................. (2,405) (3,993) (6,398)
Purchases of reserves in place............................................. 21,948 115,518 137,466
Accretion of discount on reserves at beginning of year before income
taxes.................................................................... 24,549 3,085 27,634
Net change in income taxes................................................. (62,484) (69,217) (131,701)
----------- --------- ----------
Standardized measure of discounted future net cash flows relating to proved
oil and gas reserves, at end of year....................................... 384,211 175,658 559,869
Additional disclosures:
Amounts attributable to volumetric production payments..................... 3,126 -- 3,126
----------- --------- ----------
Total discounted future net cash flows relating to proved oil and gas
reserves, including amounts attributable to volumetric production
payments, at end of year................................................. $ 387,337 175,658 562,995
----------- --------- ----------
----------- --------- ----------
</TABLE>
The computation of the standardized measure of discounted future net cash
flows relating to proved oil and gas reserves at December 31, 1996 was based on
average natural gas prices of approximately $3.50 per MCF in the U.S. and
approximately $2.10 per MCF in Canada and on average liquids prices of
approximately $26.25 per barrel in the U.S. and approximately $19.10 per barrel
in Canada. During March 1997, the Company was receiving average natural gas
prices of approximately $1.90 per MCF in the U.S. and approximately $1.70 per
MCF in Canada and was receiving average liquids prices of approximately $19.20
per barrel in the U.S. and approximately $17.00 per barrel in Canada. Had the
lower March 1997 prices been used, the Company's standardized measure of
discounted future net
F-51
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(18) SUPPLEMENTAL FINANCIAL DATA -- OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED): (CONTINUED)
cash flows relating to proved oil and gas reserves at December 31, 1996 would
have been significantly reduced.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------
UNITED
STATES CANADA TOTAL
----------- --------- ---------
<S> <C> <C> <C>
Standardized measure of discounted future net cash flows relating to proved oil
and gas reserves, at beginning of year....................................... $ 207,549 -- 207,549
Changes resulting from:
Sales of oil and gas, net of production costs................................ (48,090) -- (48,090)
Net changes in prices and future production costs............................ 43,991 -- 43,991
Net changes in future development costs...................................... (3,392) -- (3,392)
Extensions, discoveries and improved recovery................................ 7,231 -- 7,231
Previously estimated development costs incurred during the period............ 7,633 -- 7,633
Revisions of previous quantity estimates..................................... 127 -- 127
Sales of reserves in place................................................... (3,114) -- (3,114)
Purchases of reserves in place............................................... 865 30,853 31,718
Accretion of discount on reserves at beginning of year before income taxes... 23,102 -- 23,102
Net change in income taxes................................................... (8,075) (1,763) (9,838)
----------- --------- ---------
Standardized measure of discounted future net cash flows relating to proved oil
and gas reserves, at end of year............................................. 227,827 29,090 256,917
Additional disclosures:
Amounts attributable to volumetric production payments....................... 8,476 -- 8,476
----------- --------- ---------
Total discounted future net cash flows relating to proved oil and gas
reserves, including amounts attributable to volumetric production payments,
at end of year............................................................. $ 236,303 29,090 265,393
----------- --------- ---------
----------- --------- ---------
</TABLE>
F-52
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(18) SUPPLEMENTAL FINANCIAL DATA -- OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED): (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
1994
--------------
(IN THOUSANDS)
<S> <C>
Standardized measure of discounted future net cash flows relating to proved oil and gas reserves,
at beginning of year............................................................................ $ 262,176
Changes resulting from:
Sales of oil and gas, net of production costs................................................... (69,607)
Net changes in prices and future production costs............................................... (80,526)
Net changes in future development costs......................................................... 7,432
Extensions, discoveries and improved recovery................................................... 10,817
Previously estimated development costs incurred during the period............................... 10,000
Revisions of previous quantity estimates........................................................ 16,840
Sales of reserves in place...................................................................... (10,630)
Purchases of reserves in place.................................................................. 8,467
Accretion of discount on reserves at beginning of year before income taxes...................... 32,334
Net change in income taxes...................................................................... 20,246
--------------
Standardized measure of discounted future net cash flows relating to proved oil and gas reserves,
at end of year.................................................................................. 207,549
Additional disclosures:
Amounts attributable to volumetric production payments.......................................... 22,600
--------------
Total discounted future net cash flows relating to proved oil and gas reserves, including
amounts attributable to volumetric production payments, at end
of year....................................................................................... $ 230,149
--------------
--------------
</TABLE>
F-53
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
CANADIAN FOREST OIL LTD. The Board of Directors of Canadian Forest Oil Ltd.
("Canadian Forest") has enacted By-law No. 1 as confirmed by the shareholder of
Canadian Forest, which includes provision for the protection of directors and
officers subject to the provisions of the Business Corporations Act (Alberta).
The provisions of By-law No. 1 as affected by the Business Corporations Act
(Alberta) may be summarized as follows:
(a) except in respect of an action by or on behalf of Canadian Forest or of
a body corporate of which Canadian Forest is or was a shareholder to
procure a judgment in its favour, Canadian Forest may indemnify a
director or officer of Canadian Forest, a former director of officer of
Canadian Forest or a person who acts or acted at Canadian Forest's
request as a director or officer of a body corporate of which Canadian
Forest is or was a shareholder or creditor, from and against any
liability in respect of any civil, criminal or administrative action or
proceeding to which he is made a party by reason of being or having been
a director of officer, provided such director or officer acted honestly
and in good faith with a view to the best interests of Canadian Forest
and in the case of criminal or administrative action or proceedings that
is enforced by a monetary penalty he had reasonable grounds for believing
that his conduct was lawful;
(b) a director or officer or other person referred to in (a) above is
entitled to indemnity from Canadian Forest, (in certain circumstances,
only with the approval of the Court of Queen's Bench of Alberta) in
respect of all costs, charges and expenses reasonably incurred by him in
connection with the defense of any proceeding to which he is made a party
provided such person seeking indemnification is substantially successful
on the merits in his defense of such proceedings, he fulfills the
conditions set forth in (a) above and is fairly and reasonably entitled
to indemnity; and
(c) Canadian Forest may purchase and maintain insurance for the benefit of
each director and officer against any liability incurred by him in his
capacity as a director or officer of Canadian Forest or another body
corporate except when the liability relates to his failure to act
honestly and in good faith with a view to the best interests of Canadian
Forest or such other body corporate, as the case may be.
As permitted and for the purposes described in paragraph (c) above, Canadian
Forest has purchased and maintains insurance with such authorization. Directors
and officers of Canadian Forest are insured, subject to all the terms,
conditions and exclusions of the policy, against certain liabilities incurred by
them in their capacity as directors and officers of Canadian Forest and its
subsidiaries. This insurance provides for an annual limit for liability and
reimbursement of payments of US $25,000,000. The deductible applicable to
reimbursement of Canadian Forest is US $100,000, ($200,000 per occurrence in
respect of securities claims) and there is no deductible applicable to
individual directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
FOREST OIL CORPORATION. Sections 721 through 724 of the Business
Corporation Law of the State of New York (the "BCL"), in which Forest Oil
Corporation is incorporated, permit New York corporations, acting through their
boards of directors, to extend broad protection to their directors, officers and
other
II-1
<PAGE>
employees by way of indemnity and advancement of expenses. These sections (1)
provide that the statutory indemnification provisions of the BCL are not
exclusive, provided that no indemnification may be made to or on behalf of any
director or officer if a judgment or other final adjudication adverse to the
director or officer establishes that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained in fact a financial
profit or other advantage to which he was not entitled, (2) establish procedures
for indemnification and advancement of expenses that may be contained in the
certificate of incorporation or by-laws, or, when authorized by either of the
foregoing, set forth in a resolution of the shareholders or directors or an
agreement providing for indemnification and advancement of expenses, (3) apply a
single standard for statutory indemnification for third-party and derivative
suits by providing that indemnification is available if the director or officer
acted in good faith, for a purpose which he reasonably believed to be in the
best interests of the corporation, and, in criminal actions, had no reasonable
cause to believe that his conduct was unlawful, (4) eliminate the requirement
for mandatory statutory indemnification that the indemnified party be "wholly"
successful and (5) provide for the advancement of litigation expenses upon
receipt of an undertaking to repay such advance if the director or officer is
ultimately determined not to be entitled an undertaking to repay such advance if
the director or officer is ultimately determined not to be entitled to
indemnification. Section 726 of the BCL permits the purchase of insurance to
indemnify a corporation or its officers and directors to the extent permitted.
Essentially, the amended BCL allows corporations to provide for indemnification
of directors, officers and employees except in those cases where a judgment or
other final adjudication adverse to the indemnified party establishes that the
acts were committed in bad faith or were the result of active and deliberate
dishonesty or that the indemnified party personally gained a financial profit or
other advantage to which he was not legally entitled.
Article IX of the By-laws of Forest Oil Corporation contains very broad
indemnification provisions which permit the corporation to avail itself of the
amended BCL to extend broad protection to its directors, officers and employees
by way of indemnity and advancement of expenses. It sets out the standard under
which the Company will indemnify directors and officers, provides for
reimbursement in such instances, for the advancement or reimbursement for
expenses reasonably incurred in defending an action, and for the extension of
indemnity to persons other than directors and officers. It also establishes the
manner of handling indemnification when a lawsuit is settled. It is not intended
that this By-law is an exclusive method of indemnification.
Article IX of the By-laws may only be amended prospectively. In addition,
the Company cannot, except by elimination or amendment of such section of the
By-laws, limit the rights of any indemnified person to indemnity or advancement
of expenses provided in accordance with this By-law. It also permits the
indemnified person to sue the Company for indemnification, shifting the burden
of proof to the Company to prove that the indemnified person has not met the
standards of conduct required for indemnification and requires the Company to
pay the costs of such suit if the indemnified person is successful.
The Restated Certificate of Incorporation of the Company limits the personal
liability of the Company's directors to the fullest extent permitted under the
BCL.
Additionally, the BCL was amended in 1987 to allow New York corporations to
limit or eliminate director's liability for certain breaches of duty. The
Restated Certificate of Incorporation provides that a director of the Company
shall not be liable to the Company or its shareholders for damages for any
breach of duty in such a capacity unless a judgment or other final adjudication
adverse to the director establishes that:
(a) the director's acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law; or
II-2
<PAGE>
(b) the director personally gained in fact a financial profit or other
advantage to which the director was not legally entitled; or
(c) the director's act violated Section 719 of the BCL.
A director's liability for any act or omission prior to the adoption of the
amendment to the BCL to eliminate director's liability for certain breaches of
duty shall not be eliminated or limited by virtue thereof and any repeal or
modification of the foregoing provisions of, or the adoption of any provision
of, the Restated Certificate of Incorporation inconsistent with the BCL shall
not adversely affect any right, immunity or protection of director existing
thereunder with respect to any act or omission occurring prior to or at the time
of such repeal or modification or the adoption of such inconsistent provision.
If the BCL is subsequently amended to permit the further elimination or
limitation of the personal liability of a director, then the liability of the
director shall be eliminated or limited to the fullest extent permitted by the
BCL as so amended.
The Company has insurance coverage which protects directors and officers of
Forest Oil Corporation and its subsidiaries against judgments, settlements and
legal costs incurred because of actual or alleged errors or omissions in
connection with their activities as directors or officers of Forest Oil
Corporation and its subsidiaries. One of the policies is a Directors and
Officers Liability and Corporation Reimbursement Policy, which covers the period
July 25, 1997 to July 25, 1998. Where Forest Oil Corporation or its subsidiaries
indemnifies covered directors and officers, Forest Oil Corporation is
responsible for a $100,000 ($200,000 for securities claims) deductible per loss.
The maximum annual cumulative policy limit is $25 million.
The Company also has Pension Trust Liability coverage as respects Forest Oil
Corporation Pension Trust and the Retirement Savings Plan. It covers legal
liability and defense of Plan sponsors and fiduciaries for certain claims based
upon actual or alleged Breach of Fiduciary Duty (as defined in the policy) as
respects the covered benefit plans. The coverage limit is $10 million (annual
cumulative policy limit) and is subject to a deductible of $100,000 for each
loss when indemnifiable by Forest Oil Corporation and its subsidiaries.
These policies contain exclusions commonly found in such insurance policies
including, but not limited to, exclusions for claims based on fines and
penalties imposed by law or other matters deemed uninsurable by law, claims
brought by one insured against another insured, claims based upon or
attributable to an officer or director gaining any personal profit or advantage
to which he or she is not legally entitled, adjudicated acts of active or
deliberate dishonesty, and claims based upon attempts (whether alleged or
actual, successful or unsuccessful) by persons to acquire securities of the
Company against the opposition of the Company's Board of Directors and in
connection with which the Company acquires its securities from such persons at a
price not available to all other shareholders or gives consideration to such
persons to terminate such attempts. Also excluded are those attempts (whether
alleged or actual, successful or unsuccessful) by the Company to acquire its
securities at a premium over the then existing market price other than pursuant
to an offer to all of the holders of that class.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person thereof in connection with the
securities being registered (and the Securities and Exchange Commission is still
of the same opinion), the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of
II-3
<PAGE>
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following instruments and documents are included or incorporated by
reference as Exhibits to this Registration Statement.
<TABLE>
<CAPTION>
Exhibit 3(i) Restated Certificate of Incorporation of Forest Oil Corporation dated
October 14, 1993, incorporated herein by reference to Exhibit 3(i) to
Form 10-Q for Forest Oil Corporation for the quarter ended September 30,
1993 (File No. 0-4597).
<S> <C>
Exhibit 3(i)(a) Certificate of Amendment of the Restated Certificate of Incorporation
dated as of July 20, 1995, incorporated herein by reference to Exhibit
3(i)(a) to Form 10-Q for Forest Oil Corporation for the quarter ended
June 30, 1995 (File No. 0-4597).
Exhibit 3(i)(b) Certificate of Amendment of Restated Certificate of Incorporation dated
as of July 26, 1995, incorporated herein by reference to Exhibit 3(i)(b)
to Form 10-Q for Forest Oil Corporation for the quarter ended June 30,
1995 (File No. 0-4597).
Exhibit 3(i)(c) Certificate of Amendment of the Restated Certificate of Incorporation
dated as of January 5, 1996, incorporated herein by reference to Exhibit
3(i)(c) to Forest Oil Corporation's Registration Statement on Form S-2
(File No. 33-64949).
Exhibit 3(ii) Restated By-Laws of Forest Oil Corporation as of May 9, 1990, Amendment
No. 1 to By-Laws dated as of April 2, 1991, Amendment No. 2 to By-Laws
dated as of May 8, 1991, Amendment No. 3 to By-Laws dated as of July 30,
1991, Amendment No. 4 to By-Laws dated as of January 17, 1992, Amendment
No. 5 to By-Laws dated as of March 18, 1993 and Amendment No. 6 to
By-Laws dated as of September 14, 1993, incorporated herein by reference
to Exhibit 3(ii) to Form 10-Q for Forest Oil Corporation for the quarter
ended September 30, 1993 (File No. 0-4597).
Exhibit 3(ii)(a) Amendment No. 7 to By-Laws dated as of December 3, 1993, incorporated
herein by reference to Exhibit 3(ii)(a) to Form 10-K for Forest Oil
Corporation for the year ended December 31, 1993 (File No. 0-4597).
Exhibit 3(ii)(b) Amendment No. 8 to By-Laws dated as of February 24, 1994, incorporated
herein by reference to Exhibit 3(ii)(b) to Form 10-K for Forest Oil
Corporation for the year ended December 31, 1993 (File No. 0-4597).
Exhibit 3(ii)(c) Amendment No. 9 to By-Laws dated as of May 15, 1995, incorporated herein
by reference to Exhibit 3(ii)(c) to Form 10-Q for Forest Oil Corporation
for the quarter ended June 30, 1995 (File No. 0-4597).
Exhibit 3(ii)(d) Amendment No. 10 to By-Laws dated as of July 27, 1995, incorporated
herein by reference to Exhibit 3(ii)(d) to Form 10-Q for Forest Oil
Corporation for the quarter ended June 30, 1995 (File No. 0-4597).
*Exhibit 3(iii) Articles of Amalgamation of Canadian Forest Oil Ltd.
*Exhibit 3(iv) Bylaws of Canadian Forest Oil Ltd.
*Exhibit 4.1 Indenture dated as of September 29, 1997 among Canadian Forest Oil Ltd.,
as Issuer, Forest Oil Corporation, as Guarantor, and State Street Bank
and Trust, as Trustee.
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
*Exhibit 4.2 Registration Agreement dated September 23, 1997 by and among Canadian
Forest Oil Ltd., Forest Oil Corporation and Salomon Brothers Inc, Lehman
Brothers Inc., Chase Securities Inc., and Morgan Stanley & Co.
Incorporated.
Exhibit 4.3 Second Amended and Restated Credit Agreement dated as of January 31,
1997 between Forest Oil Corporation and Subsidiary Guarantors and The
Chase Manhattan Bank, as agent, incorporated herein by reference to
Exhibit 4.4 to Form 10-K for Forest Oil Corporation for the year ended
December 31, 1996 (File No. 0-4597).
*Exhibit 4.4.1 Amendment No. 1 to Second Amended and Restated Credit Agreement dated as
of April 1, 1997.
*Exhibit 4.4.2 Amendment No. 2 to Second Amended and Restated Credit Agreement dated as
of August 19, 1997.
*Exhibit 4.4.3 Amendment No. 3 to Second Amended and Restated Credit Agreement dated as
of September 26, 1997.
Exhibit 4.5 Deed of Trust, Mortgage, Security Agreement, Assignment of Production,
Financing Statement (Personal Property including Hydrocarbons), and
Fixture Filing dated as of December 1, 1993, incorporated herein by
reference to Exhibit 4.6 to Form 10-K for Forest Oil Corporation for the
year ended December 31, 1993 (File No. 0-4597).
Exhibit 4.6 Amendment No. 1 dated as of June 3, 1994 to the Deed of Trust, Mortgage,
Security Agreement, Assignment of Production, Financing Statement
(Personal Property including Hydrocarbons) and Fixture Filing dated as
of December 1, 1993 between Forest Oil Corporation and The Chase
Manhattan Bank (National Association), as agent, incorporated herein by
reference to Exhibit 4.9 of Form 10-K for Forest Oil Corporation for the
year ended December 31, 1994 (File No. 0-4597).
Exhibit 4.7 Amendment No. 2 dated as of August 31, 1995 to the Deed of Trust,
Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property including Hydrocarbons) and Fixture Filing
dated as of December 1, 1993 between Forest Oil Corporation and The
Chase Manhattan Bank (National Association), as agent, incorporated
herein by reference to Exhibit 4.14 to Form 10-K for Forest Oil
Corporation for the year ended December 31, 1995 (File No. 0-4597).
Exhibit 4.8 Amendment No. 2 dated as of January 31, 1997 to the Deed of Trust,
Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property including Hydrocarbons) and Fixture Filing
dated as of June 3, 1994 between Forest Oil Corporation and The Chase
Manhattan Bank, as agent, incorporated herein by reference to Exhibit
4.8 to Form 10-K for Forest Oil Corporation for the year ended December
31, 1996 (File No. 0-4597).
Exhibit 4.9 Amendment No. 3 dated as of January 31, 1997 to the Deed of Trust,
Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property including Hydrocarbons) and Fixture Filing
dated as of December 1, 1993 between Forest Oil Corporation and The
Chase Manhattan Bank, as agent, incorporated herein by reference to
Exhibit 4.9 to Form 10-K for Forest Oil Corporation for the year ended
December 31, 1996 (File No. 0-4597).
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
Exhibit 4.10 Deed of Trust, Mortgage, Security Agreement, Assignment of Production,
Financing Statement (Personal Property including Hydrocarbons) and
Fixture Filing dated as of June 3, 1994 between Forest Oil Corporation
and The Chase Manhattan Bank (National Association), as agent,
incorporated herein by reference to Exhibit 4.9 of Form 10-K for Forest
Oil Corporation for the year ended December 31, 1994 (File No. 0-4597).
Exhibit 4.11 Amendment No. 1 dated as of August 31, 1995 to Deed of Trust, Mortgage,
Security Agreement, Assignment of Production, Financing Statement
(Personal Property including Hydrocarbons), and Fixture Filing dated
June 3, 1994, incorporated herein by reference to Exhibit 4.16 on Form
10-K for Forest Oil Corporation for the year ended December 31, 1995
(File No. 0-4597).
*Exhibit 4.12 Amendment No. 4 dated as of August 19, 1997 to the Deed of Trust,
Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property including Hydrocarbons) and Fixture Filing
dated as of December 1, 1993 between Forest Oil Corporation and The
Chase Manhattan Bank, as agent.
*Exhibit 4.13 Amendment No. 3 dated as of August 19, 1997 to the Deed of Trust,
Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property including Hydrocarbons) and Fixture Filing
dated as of June 3, 1994 between Forest Oil Corporation and The Chase
Manhattan Bank, as agent.
*Exhibit 4.14 Second Amended and Restated Credit Agreement dated as of April 1, 1997
among 611852 Saskatchewan Ltd. and The Chase Manhattan Bank of Canada,
as Administrative Agent.
*Exhibit 4.14.1 Amendment No. 1 to Second Amended and Restated Credit Agreement dated as
of August 19, 1997.
*Exhibit 4.14.2 Amendment No. 2 to Second Amended and Restated Credit Agreement dated as
of September 26, 1997.
*Exhibit 4.15 Second Amended and Restated Credit Agreement dated as of April 1, 1997
among Canadian Forest Oil Ltd. and Subsidiary Borrowers and 611852
Saskatchewan Ltd.
*Exhibit 4.15.1 Amendment No. 1 to Second Amended and Restated Credit Agreement dated as
of August 19, 1997.
*Exhibit 4.15.2 Amendment No. 2 to Second Amended and Restated Credit Agreement dated as
of September 26, 1997.
*Exhibit 4.16 Second Amended and Restated Security Agreement dated as of January 31,
1997 between Forest Oil Corporation, the Subsidiary Guarantors named
therein and The Chase Manhattan Bank, as agent.
*Exhibit 4.17 Pledge Agreement dated as of August 19, 1997 between 3189503 Canada Ltd.
and The Chase Manhattan Bank.
*Exhibit 4.18 Guarantee dated as of August 19, 1997 by Forest Oil Corporation and The
Chase Manhattan Bank.
*Exhibit 4.19 Third Security Confirmation, Amendment and Supplemental Debenture
Agreement made as of August 19, 1997 among Canadian Forest Oil Ltd.,
Producers Marketing Ltd., 3189503 Canada Ltd., 611852 Saskatchewan Ltd.,
Forest Oil Corporation and The Chase Manhattan Bank.
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C>
*Exhibit 4.20 Second Security Confirmation, Amendment and Supplemental Debenture
Agreement made as of April 1, 1997 among Canadian Forest Oil Ltd.,
Producers Marketing Ltd., 3189503 Canada Ltd., 611852 Saskatchewan Ltd.,
Forest Oil Corporation and The Chase Manhattan Bank.
*Exhibit 4.21 Guarantee and Pledge Agreement dated as of April 1, 1997 between 3189503
Canada Ltd. and 611852 Saskatchewan Ltd.
*Exhibit 4.22 Limited Recourse Secured Guarantee dated as of April 1, 1997 between
Forest Oil Corporation and 611852 Saskatchewan Ltd.
*Exhibit 4.23 Limited Recourse Demand Debenture and Negative Pledge issued as of April
1, 1997 by Forest Oil Corporation to 611852 Saskatchewan Ltd.
*Exhibit 4.24 Deposit Agreement made as of April 1, 1997 by Forest Oil Corporation in
favor of 611852 Saskatchewan Ltd.
*Exhibit 5.1 Opinion of Bennett Jones Verchere
*Exhibit 5.2 Opinion of Vinson & Elkins L.L.P.
*Exhibit 5.3 Opinion of Ernst & Young as to tax matters
*Exhibit 5.4 Opinion of Ernst & Young, Chartered Accountants
*Exhibit 23.1 Consent of KPMG Peat Marwick LLP.
*Exhibit 23.2 Consent of Ryder Scott Company.
*Exhibit 23.3 Consent of McDaniel & Associates Ltd.
*Exhibit 23.4 Consent of Fekete & Associates, Inc.
*Exhibit 23.5 Consent of Bennett Jones Verchere (included in Exhibit 5.1 hereto).
*Exhibit 23.6 Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.2 hereto).
*Exhibit 23.7 Consent of Ernst & Young (included in Exhibit 5.3 hereto).
*Exhibit 23.8 Consent of Ernst & Young, Chartered Accountants (included in Exhibit 5.4
hereto).
*Exhibit 23.9 Consent of Price Waterhouse.
Exhibit 24.1 Powers of Attorney (included on the signature pages hereto).
*Exhibit 25.1 Statement of Eligibility of State Street Bank and Trust Company.
*Exhibit 99.1 Form of Letter of Transmittal.
</TABLE>
- ------------------------
* filed herewith.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions
II-7
<PAGE>
described under Item 15 above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final jurisdiction of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Canadian Forest Oil Ltd. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Calgary, Alberta, on October 31, 1997.
<TABLE>
<S> <C> <C>
CANADIAN FOREST OIL LTD.
By: /s/ ARTHUR C. EASTLY
------------------------------------------
Arthur C. Eastly
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David H. Keyte, V. Bruce Thompson and Daniel L.
McNamara, and each of them (with full power to each of them to act alone), his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitition, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf individually and in each capacity stated below
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents and either of them, of their substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ ARTHUR C. EASTLY
- ------------------------------ President and Chief October 31, 1997
Arthur C. Eastly Executive Officer
/s/ RONALD E. PRATT Vice President, Finance
- ------------------------------ (Principal Financial and October 31, 1997
Ronald E. Pratt Accounting Officer)
/s/ DANIEL L. BAXTER
- ------------------------------ Director October 31, 1997
Daniel L. Baxter
/s/ ROBERT S. BOSWELL
- ------------------------------ Director October 31, 1997
Robert S. Boswell
/s/ WILLIAM L. DORN
- ------------------------------ Director October 31, 1997
William L. Dorn
/s/ ARTHUR C. EASTLY
- ------------------------------ Director October 31, 1997
Arthur C. Eastly
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Forest Oil Corporation has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Denver, State of Colorado, on October 31, 1997.
<TABLE>
<S> <C> <C>
FOREST OIL CORPORATION
By: /s/ WILLIAM L. DORN
------------------------------------------
William L. Dorn
CHAIRMAN OF THE BOARD
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David H. Keyte, V. Bruce Thompson and Daniel L.
McNamara, and each of them (with full power to each of them to act alone), his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf individually and in each capacity stated below
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents and either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ ROBERT S. BOSWELL
- ------------------------------ President and Chief October 31, 1997
Robert S. Boswell Executive Officer
Vice President and Chief
/s/ DAVID H. KEYTE Financial Officer
- ------------------------------ (Principal Financial October 31, 1997
David H. Keyte Officer)
/s/ JOAN C. SONNEN
- ------------------------------ Controller (Principal October 31, 1997
Joan C. Sonnen Accounting Officer)
/s/ PHILIP F. ANSCHUTZ
- ------------------------------ Director October 31, 1997
Philip F. Anschutz
/s/ ROBERT S. BOSWELL
- ------------------------------ Director October 31, 1997
Robert S. Boswell
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ WILLIAM L. BRITTON
- ------------------------------ Director October 31, 1997
William L. Britton
/s/ CORTLANDT S. DIETLER
- ------------------------------ Director October 31, 1997
Cortlandt S. Dietler
/s/ WILLIAM L. DORN
- ------------------------------ Director October 31, 1997
William L. Dorn
/s/ JORDAN L. HAINES
- ------------------------------ Director October 31, 1997
Jordan L. Haines
/s/ JAMES H. LEE
- ------------------------------ Director October 31, 1997
James H. Lee
/s/ J. J. SIMMONS, III
- ------------------------------ Director October 31, 1997
J. J. Simmons, III
/s/ CRAIG D. SLATER
- ------------------------------ Director October 31, 1997
Craig D. Slater
/s/ DRAKE S. TEMPEST
- ------------------------------ Director October 31, 1997
Drake S. Tempest
/s/ MICHAEL B. YANNEY
- ------------------------------ Director October 31, 1997
Michael B. Yanney
</TABLE>
II-11
<PAGE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
CORPORATE ACCESS NUMBER
20721946
ALBERTA
GOVERNMENT OF ALBERTA
BUSINESS CORPORATIONS ACT
CERTIFICATE
OF
AMENDMENT
CANADIAN FOREST OIL LTD.
AMENDED ITS ARTICLES ON SEPTEMBER 23, 1997.
[SEAL]
REGISTRIES G. G. Boddez
GOVERNMENT OF ALBERTA ------------------------------
Registrar of Corporations
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
REG 3066 (98/01)
<PAGE>
BUSINESS CORPORATIONS ACT FORM 4
(SECTIONS 27 OR 171)
ALBERTA ARTICLES OF AMENDMENT
- ------------------------------------------------------------------------------
1. NAME OF CORPORATION: 2. ALBERTA CORPORATE ACCESS NUMBER:
CANADIAN FOREST OIL LTD. 20721946
- ------------------------------------------------------------------------------
3. ITEM NO.___ OF THE ARTICLES OF THE ABOVE NAMED CORPORATION ARE AMENDED IN
ACCORDANCE WITH SECTION ___ OF THE BUSINESS CORPORATION ACT.
Pursuant to Subsection 167(l)(m) of the BUSINESS CORPORATIONS ACT
(Alberta), Article 7 of the Articles of Amalgamation of the
Corporation be and it is hereby amended by deleting Item 2 of
Schedule A.
-------------------------
FILED
SEP 23 1997
Registrar of Corporations
Province of Alberta
-------------------------
- ------------------------------------------------------------------------------
4. DATE SIGNATURE TITLE
September 22, 1997 G.G. Boddez Director
- ------------------------------------------------------------------------------
FILED
<PAGE>
=============================================================================
CORPORATE ACCESS NUMBER
20721946
ALBERTA
GOVERNMENT OF ALBERTA
BUSINESS CORPORATIONS ACT
CERTIFICATE
OF
AMENDMENT
CANADIAN FOREST OIL LTD.
IS THE RESULT OF AN AMALGAMATION FILED ON
JANUARY 1, 1997.
[SEAL]
REGISTRIES G. G. Boddez
GOVERNMENT OF ALBERTA ------------------------------
Register of Corporations
=============================================================================
REG 3066 (9801)
<PAGE>
-----------------------------
FILED
JAN-1 1997
Registrar of Corporations
Province of Alberta
-----------------------------
ALBERTA CONSUMER AND CORPORATE AFFAIRS
BUSINESS CORPORATIONS ACT
(SECTION 179)
ARTICLES OF AMALGAMATION
FORM 9
1. NAME OF AMALGAMATED CORPORATION 2. CORPORATE ACCESS NO.
CANADIAN FOREST OIL LTD. 20721946
3. THE CLASSES AND ANY MAXIMUM NUMBER OF SHARES THAT THE CORPORATION IS
AUTHORIZED TO ISSUE
An unlimited number of one class of shares designated as common shares.
4. RESTRICTIONS IF ANY ON SHARE TRANSFERS
No shares of the corporation shall be transferred to any person
without the approval of the Board of Directors by resolution.
5. NUMBER (OR MINIMUM AND MAXIMUM NUMBER) OF DIRECTORS
The Corporation shall have a minimum of one (1) and a maximum of
nine (9) directors, with the number of directors to be set from time to
time by resolution of the shareholders or, in the absence of such
resolution, by resolution of the directors.
6. RESTRICTIONS IF ANY ON BUSINESSES THE CORPORATION MAY CARRY ON
There shall be no restrictions on the business that the corporation
may carry on.
7. OTHER PROVISIONS IF ANY
The attached Schedule A is incorporated into and forms a part of this
Form 9.
8. NAME OF AMALGAMATING CORPORATIONS 9. CORPORATE ACCESS NO.
721940 Alberta Ltd. 20721940
Canadian Forest Oil Ltd. 20549428
DATED this 31st day of December, 1996.
/s/ Art C. Eastly
--------------------------------
Position Held:
ART C. EASTLY, P.Eng.
PRESIDENT
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THIS IS SCHEDULE A
REFERRED TO IN THE FOREGOING ARTICLES OF AMALGAMATION
OF CANADIAN FOREST OIL LTD. (the "Corporation")
1. The number of shareholders, exclusive of persons who are in the
employment of the Corporation and are shareholders of the Corporation and
exclusive of persons who, having been formerly in the employment of the
Corporation, were, while in that employment, shareholders of the
Corporation and have continued to be shareholders of the Corporation after
the termination of that employment, is limited to not more than fifty (50)
persons, two or more persons who are the joint registered owners of one or
more shares being counted as one shareholder.
2. Any invitation to the public to subscribe for the Corporation's
securities is prohibited.
3. Without limiting the borrowing powers of the Corporation as set forth in
the BUSINESS CORPORATIONS ACT (Alberta), the board of directors of the
Corporation may from time to time, without authorization of the
shareholders,
(a) borrow money on the credit of the Corporation;
(b) issue, reissue, sell or pledge bonds, debentures, notes or other
evidences of indebtedness or guarantees of the Corporation, whether
secured or unsecured;
(c) subject to the BUSINESS CORPORATIONS ACT (Alberta), give a guarantee
on behalf of the Corporation to secure performance of an obligation of
any person; and
(d) mortgage, hypothecate, pledge or otherwise create a security interest
in all or any property of the Corporation, owned or subsequently
acquired, to secure any obligation of the Corporation.
Nothing in this clause 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.
4. Subject to the BUSINESS CORPORATIONS ACT (Alberta) and to item 5 of these
Articles, the board of directors may, between annual general meetings of
shareholders, appoint one or more additional directors of the Corporation
to serve until the next annual general meeting of shareholders.
<PAGE>
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FILED
JAN-1 1997
Registrar of Corporations
Province of Alberta
-------------------------
STATUTORY DECLARATION
C A N A D A ) IN THE MATTER of the BUSINESS CORPORATIONS
PROVINCE OF ALBERTA ) ACT (ALBERTA) and the articles of amalgamation
TO WIT: ) of 721940 Alberta Ltd. and Canadian Forest
Oil Ltd.
I, Arthur C. Eastly, of the City of Calgary, in the Province of
Alberta, businessman, do solemnly declare that:
1. I am a proposed director of the amalgamated corporation (hereinafter
called the "Corporation") and as such have personal knowledge of the
matters herein declared to.
2. I am of the opinion and do verily believe that the Corporation
will be able to pay its liabilities as they become due and that the
realizable value of the Corporation's assets will not be less than the
aggregate of its liabilities and the stated capital of all classes.
3. I am of the opinion and do verily believe that no creditor will
be prejudiced by the amalgamation.
And I make this solemn declaration conscientiously believing the
same to be true and knowing that it is of the same force and effect as
if made under oath and by virtue of the CANADA EVIDENCE ACT.
DECLARED before me at the City of )
Calgary in the Province of Alberta, )
this 19 day of December, 1996 ) ARTHUR C. EASTLY
) --------------------------
DARREN D. HUEPPELSHEUSER )
- ------------------------ )
A Commissioner for oaths/Notary
Public in and for the Province
of Alberta
DARREN D. HUEPPELSHEUSER
Student-at-Law
<PAGE>
BY-LAW NO. I
A By-Law relating generally to the transaction of
the business and affairs of 721940 ALBERTA LTD.
CONTENTS
SECTION SUBJECT
One Interpretation
Two Business of the Corporation
Three Directors
Four Committees
Five Protection of Directors and
Officers
Six Shares
Seven Dividends
Eight Meetings of Shareholders
Nine Notices
Ten Effective Date and Repeal
IT IS HEREBY ENACTED as By-law No. I of 721940 ALBERTA LTD.
(hereinafter called the "Corporation") as follows:
SECTION ONE
INTERPRETATION
1.01 DEFINITIONS
In the by-laws of the Corporation, unless the context otherwise
requires:
"Act" means the Business Corporations Act of Alberta, and any statute
that may be substituted therefor, as from time to time amended;
"appoint" includes selects and vice versa;
"articles" means the articles attached to the Certificate of
Incorporation of the Corporation as from time to time amended or
restated;
"board" means the board of directors of the Corporation;
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"by-laws" means this by-law and all other by-laws of the Corporation
from time to time in force and effect;
"Meeting of shareholders" means any meeting of shareholders, including
any meeting of one or more classes or series of shareholders;
"recorded address" means, in the case of a shareholder, his address as
recorded in the securities register; in the case of joint
shareholders, the address appearing in the securities register in
respect of such joint holding or the first address so appearing if
there are more than one; and, in the case of a director, officer,
auditor or member of a committee of the board, his latest address as
recorded in the records of the Corporation;
"signing officer" means, in relation to any instrument, any person
authorized to sign the same on behalf of the Corporation by Section
2.03 or by a resolution passed pursuant thereto.
Save as aforesaid, words and expressions defined in the Act have the same
meanings when used herein; and words importing the singular number include the
plural and vice versa; words importing gender include the masculine, feminine
and neuter genders; and words importing persons include individuals, bodies
corporate, partnerships, trusts and unincorporated organizations.
1.02 CONFLICT WITH THE ACT, THE ARTICLES OR ARTY UNANIMOUS SHAREHOLDER
AGREEMENT
To the extent of any conflict between the provisions of the by-laws
and the provisions of the Act, the articles or any unanimous shareholder
agreement relating to the Corporation, the provisions of the Act, the articles
or the unanimous shareholder agreement shall govern.
1.03 HEADINGS AND SECTIONS
The headings used throughout the by-laws are inserted for convenience
of reference only and are not to be used as an aid in the interpretation of the
by-laws, bisections followed by a number means or refers to the specified
section of this by-law.
1.04 INVALIDITY OF ANY PROVISION OF BY-LAWS
The invalidity or unenforceability of any provision of the by-laws
shall not affect the validity or enforceability of the remaining provisions of
the by-laws.
SECTION TWO
BUSINESS OF THE CORPORATION
2.01 CORPORATE SEAL
The corporate seal of the Corporation, if any, shall be in such form
as the board may from time to time by resolution approve.
2.02 FINANCIAL YEAR
The financial year of the Corporation shall end on such date in each
year as the board may from time to time by resolution determine.
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2.03 EXECUTION OF INSTRUMENTS
Deeds, transfers, assignments, contracts, obligations, certificates
and other instruments may be signed on behalf of the Corporation by two persons,
one of whom holds the office of chairman of the board, president, vice-president
or director and the other of whom holds one of the said of rices or the office
of secretary, treasurer, assistant secretary or assistant treasurer or any other
office created by by-law or by resolution of the board; provided that if the
Corporation only has one director, that director alone may sign any instruments
on behalf of the Corporation In addition, the board may from time to time direct
the manner in which and the person or persons by whom any instrument or
instruments may or shall be signed. Any signing officer may affix the corporate
seal to any instrument requiring the same.
2.04 BANKING ARRANGEMENTS
The banking business of the Corporation including, without limitation,
the borrowing of money and the giving of security therefor, shall be transacted
with such banks, trust companies or other bodies corporate or organizations as
may from time to time be authorized by the board. Such banking business or any
part thereof shall be transacted under such agreements, instructions and
delegations of powers as the board may from time to time prescribe or authorize.
2.05 VOTING RIGHTS IN OTHER BODIES CORPORATE
The signing officers may execute and deliver proxies and arrange for
the issuance of voting certificates or other evidence of the right to exercise
the voting rights attaching to any securities held by the Corporation. Such
instruments, certificates or other evidence shall be in favour of such person or
persons as may be determined by the persons executing such proxies or arranging
for the issuance of voting certificates or such other evidence of the right to
exercise such voting rights. In addition, the board or, failing the board, the
signing officers may from time to time direct the manner in which and the person
or persons by whom any particular voting rights or class of voting rights may or
shall be exercised.
2.06 INSIDER TRADING REPORTS AND OTHER FILINGS
Any one officer or director of the Corporation may execute and file on
behalf of the Corporation insider trading reports and other filings of any
nature whatsoever required under applicable corporate or securities laws.
2.07 DIVISIONS
The board may from time to time cause the business and operations of
the Corporation or any part thereof to be divided into one or more divisions
upon such basis, including without limitation, types of business or operations,
geographical territories, product lines or goods or services, as the board may
consider appropriate in each case. From time to time the board may authorize
upon such basis as may be considered appropriate in each case:
(a) the designation of any such division by, and the carrying on of
the business and operations of any such division under, a name
other than the name of the Corporation; provided that the
Corporation shall set out its name in legible characters in all
contracts, invoices, negotiable instruments and orders for goods
or services issued or made by or on behalf of the Corporation;
and
(b) the appointment of officers for any such division and the
determination of their powers and duties, provided that any such
officers shall not, as such, be officers of the Corporation.
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SECTION THREE
DIRECTORS
3.01 NUMBER OF DIRECTORS
If the articles provide for a minimum number and a maximum number of
directors, unless otherwise provided in the articles, the number of directors of
the Corporation shall be determined from time to time by resolution of the
shareholders.
3.02 CALLING AND NOTICE OF MEETING
Meetings of the board shall be called and held at such time and at
such place as the board, the chairman of the board, the president or any two
directors may determine, and the secretary or any other officer shall give
notice of meetings when directed or authorized by such persons. Notice of each
meeting of the board shall be given in the manner provided in the Act to each
director not less than forty-eight hours before the time when the meeting is to
be held, provided that, if a quorum of directors is present, the board may
without notice hold a meeting immediately following an annual meeting of
shareholders. Notice of a meeting of the board may be given verbally, in writing
or by telephone, telegraph or any other means of communication A notice of a
meeting of directors need not specify the purpose of or the business to be
transacted at the meeting, except where required by the Act. Notwithstanding the
foregoing, the board may from time to time full a day or days in any month or
months for regular meetings of the board at a place and hour to be named, in
which case, provided that a copy of any such resolution is sent to each director
forthwith after being passed and forthwith after each director's appointment, no
other notice shall be required for any such regular meeting except where the Act
requires specification of the purpose or the business to be transacted thereat.
3.03 PLACE OF MEETINGS
Meetings of the board may be held at any place in or outside Alberta.
A director who attends a meeting of directors, in person or by telephone, is
deemed to have consented to the location of the meeting except when he attends
the meeting for the express purpose of objecting to the transaction of any
business on the grounds that the meeting is not lawfully held.
3.04 MEETING BY TELEPHONE
With the consent of the chairman of the meeting or a majority of the
directors present at the meeting, a director may participate in a meeting of the
board or of a committee of the board by means of telephone or other
communication facilities that permit all persons participating in the meeting to
hear each other. A director participating in such a meeting in such manner shall
be considered present at the meeting and at the place of the meeting.
3.05 QUORUM
The quorum for the transaction of business at any meeting of the board
shall consist of two directors or such greater or lesser number of directors as
the board may from time to time determine, provided that, if the board consists
of only one director, the quorum for the transaction of business at any meeting
of the board shall consist of one director.
3.06 CHAIRMAN
The chairman of any meeting of the board shall be the director present
at the meeting who is the first mentioned of the following officers as have been
appointed: chairman of the board, president or a vice-president (in order
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of seniority). If no such officer is present, the directors present shall choose
one of their number to be chairman.
3.07 ACTION BY THE BOARD
At all meeting of the board every question shall be decided by a
majority of the votes cast on the question. In case of an equality of votes the
chairman of the meeting shall not be entitled to a second or casting vote. The
powers of the board may be exercised by resolution passed at a meeting at which
a quorum is present or by resolution in writing signed by all the directors who
would be entitled to vote on that resolution at a meeting of the board.
Resolutions in writing may be signed in counterparts.
3.08 ADJOURNED MEETING
Any meeting of directors may be adjourned from time to time by the
chairman of the meeting, with the consent of the meeting, to a fixed time and
place. The adjourned meeting shall be duly constituted if a quorum is present
and if it is held in accordance with the terms of the adjournment. If there is
no quorum present at the adjourned meeting, the original meeting shall be deemed
to have terminated forthwith after its adjournment.
3.09 REMUNERATION AND EXPENSES
The directors shall be paid such remuneration for their services as
the board may from time to time determine. The directors shall also be entitled
to be reimbursed for reasonable travailing and other expenses properly incurred
by them in attending meetings of the board or any committee thereof. Nothing
herein contained shall preclude any director from serving the Corporation in any
other capacity and receiving remuneration therefor.
3.10 OFFICERS
The board from time to time may appoint one or more officers of the
Corporation and, without prejudice to rights under any employment contract, may
remove any officer of the Corporation. The powers and duties of each officer of
the Corporation shall be those determined from time to time by the board and, in
the absence of such determination, shall be those usually incidental to the
office held.
3.11 AGENTS AND ATTORNEYS
The board shall have the power from time to time to appoint agents or
attorneys for the Corporation in or outside Canada with such powers of
management or otherwise (including the power to sub-delegate) as may be thought
fit.
SECTION FOUR
COMMITTEES
4.01 TRANSACTION OF BUSINESS
The powers of any committee of directors may be exercised by a meeting
at which a quorum is present or by resolution in writing signed by all the
members of such committee who would have been entitled to vote on that
resolution at a meeting of the committee. At all meetings of committees every
question shall be decided by a majority of the votes cast on the question. In
case of an equality of votes the chairman of the meeting shall not be entitled
to a second or casting vote. Resolutions in writing may be signed in
counterparts.
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4.02 PROCEDURE
Unless otherwise determined by the board, a quorum for meetings of any
committee shall be a majority of its members, each committee shall have the
power to appoint its chairman and the rules for calling, holding, conducting and
adjourning meetings of the committee shall be the same as those governing the
board. Each member of a committee shall serve during the pleasure of the board
of directors and, in any evens, only so long as he shall be a director. The
directors may fill vacancies in a committee by appointment from among their
members. Provided that a quorum is maintained, the committee may continue to
exercise its powers notwithstanding any vacancy among its members.
SECTION FIVE
PROTECTION OF DIRECTORS AND OFFICERS
5.01 LIMITATION OF LIABILITY
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 the
Corporation shall be placed or invested, or for any loss or damage arising from
the bankruptcy, insolvency or tortious act of any person, firm or corporation
including any person, firm or corporation with whom or with 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 of or belonging to the Corporation
or for any other loss, damage or misfortune whatsoever 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 exercise the powers
and to discharge the duties of his office honestly, in good faith and with a
view to the best interests of the Corporation and to exercise the care,
diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.
5.02 INDEMNITY
The Corporation shall, to the maximum extent permitted under the Act,
indemnify a director or officer, a former director or officer, and 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, against all costs, charges and expenses,
including any amount paid to settle an action or satisfy a judgment, reasonably
incurred by him in respect of any civil, criminal or administrative action or
proceeding to which he is made a party by reason of being or having been a
director or officer of the Corporation or such body corporate.
SECTION SIX
SHARES
6.01 NON-RECOGNITION OF TRUSTS
Subject to the provisions of the Act, the Corporation may treat as the
absolute owner of any share the person in whose name the share is registered in
the securities register as if that person had full legal capacity and authority
to exercise all rights of ownership, irrespective of any indication to the
contrary through knowledge or notice or description in the Corporation's records
or on the share certificate.
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6.02 JOINT SHAREHOLDERS
If two or more persons are registered as joint holders of any
share:
(a) the Corporation shall record only one address on its books for such
joint holders; and
(b) the address of such joint holders for all
purposes with respect to the Corporation shall be their recorded
address; any one of such persons may give effectual receipts for
the certificate issued in respect thereof or for any dividend,
bonus, return of capital or other money payable or warrant issuable
in respect of such share.
SECTION SEVEN
DIVIDENDS
7.01 DIVIDEND CHEQUES
A dividend payable in cash shall be paid by cheque of the
Corporation or of any dividend paying agent appointed by the board, to the order
of each registered holder of shares of the class or series in respect of which
it has been declared and mailed by prepaid ordinary mail to such registered
holder at his recorded address, unless such holder otherwise directs and the
Corporation agrees to follow such direction. In the case of joint holders the
cheque shall, unless such joint holders otherwise direct and the Corporation
agrees to follow such direction, be made payable to the order of all of such
joint holders and mailed to them at their recorded address. The mailing of such
cheque as aforesaid, unless the same is not paid on due presentation, shall
satisfy and discharge the liability for the dividend to the extent of the sum
represented thereby plus the amount of any tax which the Corporation is required
to and does withhold.
7.02 NON-RECEIPT OF CHEQUES
In the event of non-receipt of any dividend cheque by the person to
whom it is sent as aforesaid, the Corporation shall issue to such person a
replacement cheque for a like amount on such terms as to indemnity,
reimbursement of expenses and evidence of non-receipt and of title as the board
may from time to time prescribe, whether generally or in any particular case.
7.03 UNCLAIMED DIVIDENDS
Any dividend unclaimed after a period of six years from the date on
which the same has been declared to be payable shall be forfeited and shall
revert to the Corporation.
SECTION EIGHT
MEETINGS OF SHAREHOLDERS
8.01 CHAIRMAN, SECRETARY AND SCRUTINEERS
The chairman of any meeting of shareholders, who need not be a
shareholder of the Corporation, shall be the first mentioned of the following
officers as has been appointed and is present at the meeting: chairman of the
board, president or a vice-president (in order of seniority). If no such officer
is present and willing to act as chairman within fifteen
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minutes from the time fixed for holding the meeting, the persons present and
entitled to vote shall choose one of their number to be chairman. The chairman
shall conduct the proceedings at the meeting in all respects and his decision in
any matter or thing, including, but without in any way limiting the generality
of the foregoing, any question regarding the validity or invalidity of any
instruments of proxy and any question as to the admission or rejection of a
vote, shall be conclusive and binding upon the shareholders. The secretary of
any meeting of shareholders shall be the secretary of the Corporation, provided
that, if the Corporation does not have a secretary or if the secretary of the
Corporation is absent, the chairman shall appoint some person, who need not be a
shareholder, to act as secretary of the meeting. The board may from time to time
appoint in advance of any meeting of shareholders one or more persons to act as
scrutineers at such meeting and, in the absence of such appointment, the
chairman may appoint one or more persons to act as scrutineers at any meeting of
shareholders. Scrutineers so appointed may, but need not be, shareholders,
directors, officers or employees of the Corporation.
8.02 PERSONS ENTITLED TO BE PRESENT
The only persons entitled to be present at a meeting of shareholders
shall be; (a) those entitled to vote at such meeting, (b) the directors and
auditors of the Corporation; (c) others who, although not entitled to vote, are
entitled or required under any provision of the Act, the articles or the by-laws
to be present at the meeting; (d) legal counsel to the Corporation when invited
by the Corporation to attend the meeting, and (e) any other person on the
invitation of the chairman or with the consent of the meeting.
8.03 QUORUM
A quorum for the transaction of business at any meeting of shareholders
shall be at least two persons present in person, each being a shareholder
entitled to vote thereat or a duly appointed proxy or representative for an
absent shareholder so entitled, and representing in the aggregate not less than
ten percent (10%) of the outstanding shares of the Coronation carrying voting
rights at the meeting, provided that, if there should be only one shareholder of
the Corporation entitled to vote at any meeting of shareholders, the quorum for
the transaction of business at the meeting of shareholders shall consist of the
one shareholder.
8.04 REPRESENTATIVES
The authority of an individual to represent a body corporate or
association at a meeting of shareholders of the Corporation shall be established
by depositing with the Corporation a certified copy of the resolution of the
directors or governing body of the body corporate or association, as the case
may be, granting such authority, or in such other manner as may be satisfactory
to the chairman of the meeting.
8.05 ACTION BY SHAREHOLDERS
The shareholders shall act by ordinary resolution unless otherwise
required by the Act, articles, by-laws or any unanimous shareholder agreement.
In case of an equality of votes either upon a show of hand or upon a poll, the
chairman of the meeting shall not be entitled to a second or casting vote.
8.06 SHOW OF HANDS
Upon a show of hands every persons who is present and entitled to vote
shall have one vote. Whenever a vote by show of hands shall have been taken
upon a question, unless a ballot thereon is required or demanded, a declaration
by the chairman of the meeting that the vote upon the question has been carried
or carried by a particular majority or not carried and an entry to that effect
in the minutes of the meeting shall be prima facie evidence of the fact without
proof of the number or proportion of the votes recorded in favour of or against
any resolution or other proceeding in respect of the said question, and the
result of the vote so taken shall be the decision of the shareholders upon the
said question.
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8.07 BALLOTS
A ballot required or demanded shall be taken in such manner as the
chairman shall direct. A requirement or demand for a ballot may be withdrawn at
any time prior to the taking of the ballot. If a baud is taken each person
present shall be entitled, in respect of the shares which he is entitled to vote
at the meeting upon the question, to that number of votes provided by the Act or
the articles, and the result of the ballot so taken shall be the decision of the
shareholders upon the said question.
8.08 MEETING BY TELEPHONE
With the consent of the chairman of the meeting or the consent (as
evidenced by a resolution) of the persons present and entitled to vote at the
meeting, a shareholder or any other person entitled to attend a meeting of
shareholders may participate in the meeting by means of telephone or other
communication facilities that permit all persons participating in the meeting to
hear each other, and 8 person participating in such a meeting by those means
shall be considered present at the meeting and at the place of the meeting.
SECTION NINE
NOTICES
9.01 OMISSIONS AND ERRORS
The accidental omission to give any notice to any shareholder,
director, officer, auditor or member of a committee of the board or the
non-receipt of any notice by any such person or any error in any notice not
affecting the substance thereof shall not invalidate any action taken at any
meeting held pursuant to such notice or otherwise founded thereon.
9.02 PERSONS ENTITLED BY DEATH OR OPERATION OF LAW
Every person who, by operation of law, transfer, death of a shareholder
or any other means whatsoever shall become entitled to any share, shall be bound
by every notice in respect of such share which shall have been duly given to the
shareholder from whom he derives his title to such share prior to his name and
address being entered on the securities register (whether such notice was given
before or after the happening of the event upon which he became so entitled) and
prior to his furnishing to the Corporation the proof of authority or evidence of
his entitlement prescribed by the Act.
SECTION TEN
EFFECTIVE DATE AND REPEAL
10.01 EFFECTIVE DATE
This by-law shall come into force when made by the board in accordance
with the Act.
10.02 REPEAL
All previous by-laws of the Corporation are repealed as of the coming
into force of this by-law. Such repeal shall not affect the previous operation
of any by-law so repealed or affect the validity of any act done or right,
privilege, obligation or liability acquired or incurred under, or the validity
of any contract or agreement made pursuant to,
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or the validity of any articles (as defined in the Act) or predecessor charter
documents of the Corporation obtained pursuant to, any such by-law prior to its
repeal. All officers and persons acting under any such by-law so repealed shall
continue to act as if appointed under the provisions of this by-law and all
resolutions of the shareholders, the board or a committee of the board with
continuing effect passed under any repealed by-law shall continue to be good and
valid except to the extent inconsistent with this by-law and until amended or
repealed.
MADE by the board the 31st day of December , 1996.
Arthur C. Eastly
------------------------
President
CONFIRMED by the Shareholders in accordance with the Act the 31st
day of December , 1996.
Arthur C. Eastly
------------------------
President
<PAGE>
EXECUTION COPY
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CANADIAN FOREST OIL LTD.
8 3/4% Senior Subordinated Notes due 2007
Unconditionally Guaranteed by
FOREST OIL CORPORATION
---------------------------------------
INDENTURE
-------------------------------------
Dated as of September 29, 1997
State Street Bank and Trust Company,
Trustee
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<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . 33
SECTION 1.03. Incorporation by Reference
of Trust Indenture Act . . . . . . . . . . . . . . . 34
SECTION 1.04. Rules of Construction . . . . . . . . . . . . . . . . . 34
ARTICLE II
THE SECURITIES
SECTION 2.01. Amount of Securities; Issuable in
Series. . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.02. Form and Dating . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.03. Execution and Authentication . . . . . . . . . . . . . 37
SECTION 2.04. Registrar and Paying Agent . . . . . . . . . . . . . . 38
SECTION 2.05. Paying Agent To Hold Money in Trust . . . . . . . . . . 38
SECTION 2.06. Securityholder Lists . . . . . . . . . . . . . . . . . 39
SECTION 2.07. Replacement Securities . . . . . . . . . . . . . . . . 39
SECTION 2.08. Outstanding Securities . . . . . . . . . . . . . . . . 39
SECTION 2.09. Temporary Securities . . . . . . . . . . . . . . . . . 40
SECTION 2.10. Cancelation . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 2.11. Defaulted Interest . . . . . . . . . . . . . . . . . . 40
SECTION 2.12. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE III
REDEMPTION
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . 41
SECTION 3.02. Selection of Securities To Be
Redeemed . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . 42
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . 43
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . 43
SECTION 3.06. Securities Redeemed in Part . . . . . . . . . . . . . . 43
<PAGE>
Contents, p. 2
Page
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ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . . . 43
SECTION 4.02. SEC Reports . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.03. Limitation on Indebtedness . . . . . . . . . . . . . . 43
SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . . . 43
SECTION 4.05. Limitation on Restrictions on
Distributions from Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.06. Limitation on Asset Sales . . . . . . . . . . . . . . . 49
SECTION 4.07. Limitation on Transactions with Affiliates. . . . . . . 53
SECTION 4.08. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries . . . . . . . . . . . . . . . 54
SECTION 4.09. Change of Control . . . . . . . . . . . . . . . . . . . 55
SECTION 4.10. Limitation on Liens . . . . . . . . . . . . . . . . . . 57
SECTION 4.11. Compliance Certificate . . . . . . . . . . . . . . . . 58
SECTION 4.12. Further Instruments and Acts . . . . . . . . . . . . . 58
SECTION 4.13. Future Subsidiary Guarantors . . . . . . . . . . . . . 58
SECTION 4.14. Incurrence of Layered Indebtedness. . . . . . . . . . . 58
SECTION 4.15. Restricted and Unrestricted
Subsidiaries. . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.16. The Issuer. . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 4.17. Additional Amounts. . . . . . . . . . . . . . . . . . . 60
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.01. When Company May Merge or Transfer
Assets . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.02. When the Issuer May Merge or
Transfer Assets . . . . . . . . . . . . . . . . . . . 64
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . 65
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . 68
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . 69
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . 69
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . 69
<PAGE>
Contents, p. 3
Page
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SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . 69
SECTION 6.07. Rights of Holders To Receive
Payment . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . 70
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . 70
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . 71
SECTION 6.12. Waiver of Stay or Extension Laws . . . . . . . . . . . 72
ARTICLE VII
TRUSTEE
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . 72
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . 73
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . 74
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . 74
SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . 74
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . 75
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . 75
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . 76
SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . . . 77
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . 77
SECTION 7.11. Preferential Collection
of Claims Against Company . . . . . . . . . . . . . . 78
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Securi-
ties; Defeasance . . . . . . . . . . . . . . . . . . 78
SECTION 8.02. Conditions to Defeasance . . . . . . . . . . . . . . . 79
SECTION 8.03. Application of Trust Money . . . . . . . . . . . . . . 81
SECTION 8.04. Repayment to Issuer . . . . . . . . . . . . . . . . . . 81
SECTION 8.05. Indemnity for Government
Obligations . . . . . . . . . . . . . . . . . . . . . 81
SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . . . 81
<PAGE>
Contents, p. 4
Page
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ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . 82
SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . . . 83
SECTION 9.03. Compliance with Trust Indenture Act . . . . . . . . . . 84
SECTION 9.04. Revocation and Effect of
Consents and Waivers . . . . . . . . . . . . . . . . 85
SECTION 9.05. Notation on or Exchange of
Securities . . . . . . . . . . . . . . . . . . . . . 85
SECTION 9.06. Trustee To Sign Amendments . . . . . . . . . . . . . . 85
SECTION 9.07. Payment for Consent . . . . . . . . . . . . . . . . . . 86
ARTICLE X
SUBORDINATION
SECTION 10.01. Agreement To Subordinate . . . . . . . . . . . . . . . 86
SECTION 10.02. Liquidation, Dissolution, Bankruptcy . . . . . . . . . 86
SECTION 10.03. Default on Senior Indebtedness . . . . . . . . . . . . 87
SECTION 10.04. Acceleration of Payment of
Securities . . . . . . . . . . . . . . . . . . . . . 88
SECTION 10.05. When Distribution Must Be Paid Over . . . . . . . . . . 88
SECTION 10.06. Subrogation . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 10.07. Relative Rights . . . . . . . . . . . . . . . . . . . . 89
SECTION 10.08. Subordination May Not Be Impaired
by Issuer . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 10.09. Rights of Trustee and Paying Agent . . . . . . . . . . 89
SECTION 10.10. Distribution or Notice to
Representative . . . . . . . . . . . . . . . . . . . 90
SECTION 10.11. Article X Not To Prevent Events
of Default or Limit Right To
Accelerate . . . . . . . . . . . . . . . . . . . . . 90
SECTION 10.12. Trust Moneys Not Subordinated . . . . . . . . . . . . . 90
SECTION 10.13. Trustee Entitled To Rely . . . . . . . . . . . . . . . 90
SECTION 10.14. Trustee To Effectuate Subordination . . . . . . . . . . 91
SECTION 10.15. Trustee Not Fiduciary for Holders
of Senior Indebtedness . . . . . . . . . . . . . . . 91
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions . . . . . . . . . . . . . . . . . . . . . 92
<PAGE>
Contents, p. 5
Page
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ARTICLE XI
GUARANTEES
SECTION 11.01. Company Guarantee . . . . . . . . . . . . . . . . . . . 92
SECTION 11.02. Subsidiary Guarantee. . . . . . . . . . . . . . . . . . 94
SECTION 11.03. Contribution . . . . . . . . . . . . . . . . . . . . . 97
SECTION 11.04. Successors and Assigns. . . . . . . . . . . . . . . . . 97
SECTION 11.05. No Waiver . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 11.06. Modification . . . . . . . . . . . . . . . . . . . . . 97
SECTION 11.07. Execution of Supplemental
Indenture for Future Subsidiary
Guarantors . . . . . . . . . . . . . . . . . . . . . 98
ARTICLE XII
SUBORDINATION OF SUBSIDIARY GUARANTIES
SECTION 12.01. Agreement To Subordinate . . . . . . . . . . . . . . . 98
SECTION 12.02. Liquidation, Dissolution, Bankruptcy . . . . . . . . . 99
SECTION 12.03. Default on Senior Indebtedness . . . . . . . . . . . . 99
SECTION 12.04. Demand for Payment . . . . . . . . . . . . . . . . . . 100
SECTION 12.05. When Distribution Must Be Paid Over . . . . . . . . . . 100
SECTION 12.06. Subrogation . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 12.07. Relative Rights . . . . . . . . . . . . . . . . . . . . 101
SECTION 12.08. Subordination May Not Be Impaired
by Company . . . . . . . . . . . . . . . . . . . . . 101
SECTION 12.09. Rights of Trustee and Paying Agent . . . . . . . . . . 101
SECTION 12.10. Distribution or Notice to
Representative . . . . . . . . . . . . . . . . . . . 102
SECTION 12.11. Article XII Not To Prevent Defaults
Under a Guarantee or Limit Right
To Demand Payment . . . . . . . . . . . . . . . . . . 102
SECTION 12.12. Trustee Entitled To Rely . . . . . . . . . . . . . . . 102
SECTION 12.13. Trustee To Effectuate Subordination . . . . . . . . . . 103
SECTION 12.14. Trustee Not Fiduciary for Holders
of Senior Indebtedness . . . . . . . . . . . . . . . 104
SECTION 12.15. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions . . . . . . . . . . . . . . . . . . . . . 104
<PAGE>
Contents, p. 6
Page
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ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls . . . . . . . . . . . . . 104
SECTION 13.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 13.03. Communication by Holders with
Other Holders . . . . . . . . . . . . . . . . . . . . 105
SECTION 13.04. Certificate and Opinion as to
Conditions Precedent . . . . . . . . . . . . . . . . 105
SECTION 13.05. Statements Required in
Certificate or Opinion . . . . . . . . . . . . . . . 106
SECTION 13.06. When Securities Disregarded . . . . . . . . . . . . . . 106
SECTION 13.07. Rules by Trustee, Paying Agent and
Registrar . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 13.08. Legal Holidays . . . . . . . . . . . . . . . . . . . . 106
SECTION 13.09. Governing Law . . . . . . . . . . . . . . . . . . . . . 107
SECTION 13.10. No Recourse Against Others . . . . . . . . . . . . . . 107
SECTION 13.11. Successors . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 13.12. Multiple Originals . . . . . . . . . . . . . . . . . . 107
SECTION 13.13. Table of Contents; Headings . . . . . . . . . . . . . . 107
SECTION 13.14. Consent to Jurisdiction and Service . . . . . . . . . . 107
Appendix A Provisions Relating to Initial
Securities and Exchange Securities
Exhibit 1 to
Appendix A Form of Initial Security
Exhibit A Form of Exchange Security
Exhibit B Form of Supplemental Indenture
<PAGE>
CROSS-REFERENCE TABLE
TIA INDENTURE
SECTION SECTION
310(a)(1) . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . 7.08; 7.10
(c) . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . 2.06
(b) . . . . . . . . . . . . . . . . . . . . 13.03
(c) . . . . . . . . . . . . . . . . . . . . 13.03
313(a) . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . 13.02
(d) . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . 4.02; 4.11;
13.02
(b) . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . 13.04
(c)(2) . . . . . . . . . . . . . . . . . . . . 13.04
(c)(3) . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . 13.05
(f) . . . . . . . . . . . . . . . . . . . . 4.11
315(a) . . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . 7.05; 13.02
(c) . . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . . . . 6.11
316(a)
(last
sentence) . . . . . . . . . . . . . . . . . . . . 13.06
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . 6.07
317(a)(1) . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . 2.05
318(a) . . . . . . . . . . . . . . . . . . . . 13.01
N.A. Means Not Applicable.
- ---------------------
Note: This Cross-Reference Table shall not, for any purposes, be deemed to be
part of this Indenture.
<PAGE>
INDENTURE dated as of September 29, 1997, among CANADIAN
FOREST OIL LTD., an Alberta corporation (the "ISSUER"), FOREST
OIL CORPORATION, a New York corporation (the "COMPANY") and State
Street Bank and Trust Company, as Trustee (the "TRUSTEE").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Issuer's 8 3/4% Senior
Subordinated Securities due 2007, to be issued, from time to time, in one or
more series as in this Indenture provided (the "INITIAL SECURITIES") and, if and
when issued pursuant to a registered or private exchange for the Initial
Securities, the Issuer's 8 3/4% Senior Subordinated Securities due 2007 (the
"EXCHANGE SECURITIES" and, together with the Initial Securities, the
"SECURITIES"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ADDITIONAL ASSETS" means (a) any Property (other than cash, Permitted
Short-Term Investments or securities) used in the Oil and Gas Business or any
business ancillary thereto, (b) Investments in any other Person engaged in the
Oil and Gas Business or any business ancillary thereto (including the
acquisition from third parties of Capital Stock of such Person) as a result of
which such other Person becomes a Restricted Subsidiary in compliance with
Section 4.15, (c) the acquisition from third parties of Capital Stock of a
Restricted Subsidiary or (d) Permitted Business Investments.
"ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS" means (without
duplication), as of the date of determination, the remainder of:
(a) the sum of (i) discounted future net revenues from proved oil and
gas reserves of the Company and its Restricted Subsidiaries calculated in
accordance with Commission guidelines before any provincial, territorial,
state, Federal or foreign income taxes, as estimated by the Company and
confirmed by a nationally recognized firm of independent petroleum
engineers in a reserve report prepared as of the end of the Company's most
recently completed fiscal year for which audited
<PAGE>
2
financial statements are available, as increased by, as of the date of
determination, the estimated discounted future net revenues from
(A) estimated proved oil and gas reserves acquired since such year-end,
which reserves were not reflected in such year-end reserve report, and
(B) estimated oil and gas reserves attributable to upward revisions of
estimates of proved oil and gas reserves since such year-end due to
exploration, development or exploitation activities, in each case
calculated in accordance with Commission guidelines (utilizing the prices
utilized in such year-end reserve report), and decreased by, as of the date
of determination, the estimated discounted future net revenues from
(C) estimated proved oil and gas reserves produced or disposed of since
such year-end and (D) estimated oil and gas reserves attributable to
downward revisions of estimates of proved oil and gas reserves since such
year-end due to changes in geological conditions or other factors which
would, in accordance with standard industry practice, cause such revisions,
in each case calculated in accordance with Commission guidelines (utilizing
the prices utilized in such year-end reserve report); PROVIDED that, in the
case of each of the determinations made pursuant to clauses (A) through
(D), such increases and decreases shall be as estimated by the Company's
petroleum engineers, unless there is a Material Change as a result of such
acquisitions, dispositions or revisions, in which event the discounted
future net revenues utilized for purposes of this clause (a)(i) shall be
confirmed in writing by a nationally recognized firm of independent
petroleum engineers, (ii) the capitalized costs that are attributable to
oil and gas properties of the Company and its Restricted Subsidiaries to
which no proved oil and gas reserves are attributable, based on the
Company's books and records as of a date no earlier than the date of the
Company's latest available annual or quarterly financial statements,
(iii) the Net Working Capital on a date no earlier than the date of the
Company's latest annual or quarterly financial statements and (iv) the
greater of (A) the net book value on a date no earlier than the date of the
Company's latest annual or quarterly financial statements and (B) the
appraised value, as estimated by independent appraisers, of other tangible
assets (including, without duplication, Investments in unconsolidated
Restricted Subsidiaries) of the Company and its Restricted Subsidiaries, as
of the date no earlier than the date of the Company's latest audited
financial statements, minus (b) the sum of (i) minority interests, (ii) any
net gas balancing liabilities of
<PAGE>
3
the Company and its Restricted Subsidiaries reflected in the Company's
latest audited financial statements, (iii) to the extent included in (a)(i)
above, the discounted future net revenues, calculated in accordance with
Commission guidelines (utilizing the prices utilized in the Company's
year-end reserve report), attributable to reserves which are required to be
delivered to third parties to fully satisfy the obligations of the Company
and its Restricted Subsidiaries with respect to Volumetric Production
Payments (determined, if applicable, using the schedules specified with
respect thereto) and (iv) the discounted future net revenues, calculated in
accordance with Commission guidelines, attributable to reserves subject to
Dollar-Denominated Production Payments which, based on the estimates of
production and price assumptions included in determining the discounted
future net revenues specified in (a)(i) above, would be necessary to fully
satisfy the payment obligations of the Company and its Restricted
Subsidiaries with respect to Dollar-Denominated Production Payments
(determined, if applicable, using the schedules specified with respect
thereto). If the Company changes its method of accounting from the full
cost method to the successful efforts method or a similar method of
accounting, "Adjusted Consolidated Net Tangible Assets" will continue to be
calculated as ff the Company were still using the full cost method of
accounting.
"AFFILIATE" of any specified Person means any other Person (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person or
(b) which beneficially owns or holds directly or indirectly 10% or more of any
class of the Voting Stock of such specified Person or of any Subsidiary of such
specified Person. For the purposes of this definition, "control," when used
with respect to any specified Person, means the power to direct the management
and policies of such Person directly or indirectly, whether through the
ownership of Voting Stock, by contract or otherwise; and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"ASSET SALE" means, with respect to any Person, any transfer,
conveyance, sale, lease or other disposition (collectively, "dispositions," and
including dispositions pursuant to any consolidation or merger) by such Person
in any single transaction or series of transactions of (a) shares of Capital
Stock or other ownership interests of
<PAGE>
4
another Person (including Capital Stock of Restricted Subsidiaries and
Unrestricted Subsidiaries) or (b) any other Property of such Person; PROVIDED,
HOWEVER, that the term "Asset Sale" shall not include: (i) the disposition of
Permitted Short-Term Investments, inventory, accounts receivable, surplus or
obsolete equipment or other Property (excluding the disposition of oil and gas
in place and other interests in real property unless made in connection with a
Permitted Business Investment) in the ordinary course of business; (ii) the
abandonment, assignment, lease, sublease or farm-out of oil and gas properties,
or the forfeiture or other disposition of such properties pursuant to standard
form operating agreements, in each case in the ordinary course of business in a
manner that is customary in the Oil and Gas Business; (iii) the disposition of
Property received in settlement of debts owing to such Person as a result of
foreclosure, perfection or enforcement of any Lien or debt, which debts were
owing to such Person in the ordinary course of its business; (iv) any
disposition that constitutes a Restricted Payment made in compliance with
Section 4.04; (v) when used with respect to the Company, any disposition of all
or substantially all of the Property of the Company permitted pursuant to
Article V; (vi) the disposition of any Property by such Person to the Company or
a Wholly Owned Subsidiary; (vii) the disposition of any asset with a Fair Market
Value of less than $2,000,000; or (viii) any Production Payments and Reserve
Sales; PROVIDED that any such Production Payments and Reserve Sales, other than
incentive compensation programs on terms that are reasonably customary in the
Oil and Gas Business for geologists, geophysicists and other providers of
technical services to the Company or a Restricted Subsidiary, shall have been
created, Incurred, issued, assumed or Guaranteed in connection with the
financing of, and within 60 days after the acquisition of, the Property that is
subject thereto.
"AVERAGE LIFE" means, with respect to any Indebtedness, at any date of
determination, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years (and any portion thereof) from the date of determination
to the date or dates of each successive scheduled principal payment (including
any sinking fund or mandatory redemption payment requirements) of such
Indebtedness multiplied by (ii) the amount of each such principal payment by
(b) the sum of all such principal payments.
"BANK CREDIT FACILITIES" means, with respect to any Person, one or
more debt facilities or commercial paper facilities with banks or other
institutional lenders (including pursuant to the U.S. Bank Credit Facility, the
<PAGE>
5
Canadian Bank Credit Facility and the Canadian Forest Credit Facility) providing
for revolving credit loans, term loans receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or trade letters of credit,
together with any extensions, revisions, amendments, modifications, refinancings
or replacements thereof by a lender or syndicate of lenders.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
the Issuer, as applicable, or any committee thereof duly authorized to act on
behalf of such Board.
"BUSINESS DAY" means each day which is not a Legal Holiday.
"CANADIAN BANK CREDIT FACILITY" means the Second Amended and Restated
Credit Agreement dated as of April 1, 1997, as amended on August 19, 1997, and
September 26, 1997, among 611852 Saskatchewan Ltd., the Lenders named therein
and The Chase Manhattan Bank of Canada, as agent.
"CANADIAN FOREST CREDIT FACILITY" means the Second Amended and
Restated Credit Agreement dated as of April 1, 1997, as amended on August 19,
1997, and September 26, 1997, among the Issuer, the subsidiaries of the Issuer
party thereto and 611852 Saskatchewan Ltd., as lender, together with any
extensions, revisions, amendments or modifications thereof.
"CAPITAL LEASE OBLIGATION" means any obligation which is required to
be classified and accounted for as a capital lease obligation in accordance with
GAAP, and the amount of Indebtedness represented obligation shall be the
capitalized amount of such obligation determined in accordance with GAAP, and
the Stated Maturity thereof shall be the date of the last payment date of rent
or any other amount in respect of such obligation.
"CAPITAL STOCK" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than debt securities convertible into an
equity interest), warrants or options to subscribe for or to acquire an equity
in such Person; PROVIDED, HOWEVER, that "Capital Stock" shall not include
Redeemable Stock.
"CHANGE OF CONTROL" means the occurrence of any of the following
events:
<PAGE>
6
(a) any "person" or "group" (within the meaning of Sections 13(d)(3)
and 14(d)(2) of the Exchange Act or any successor provision to either of
the foregoing, including any group acting for the purpose of acquiring,
holding or disposing of securities within the meaning of Rule 13d-5(b)(1)
under the Exchange Act), becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person will be
deemed to have "beneficial ownership" of all shares that any such Person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time) of more than 50% of the total voting power
of all classes of the Voting Stock of the Company or, unless such person is
a Restricted Subsidiary, the Issuer or currently exercisable warrants or
options to acquire such Voting Stock;
(b) the sale, lease, conveyance or transfer of all or substantially
all the assets of the Company and the Restricted Subsidiaries taken as a
whole (other than to any Wholly Owned Subsidiary) shall have occurred;
(c) the shareholders of the Company or the Issuer shall have approved
any plan of liquidation or dissolution of the Company or the Issuer;
(d) the Company or the Issuer consolidates with or merges into another
Person or any Person consolidates with or merges into the Company or the
Issuer in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company or the Issuer is reclassified into or exchanged
for cash, securities or other property, other than any such transaction
where the outstanding Voting Stock of the Company or the Issuer is
reclassified into or exchanged for Voting Stock of the surviving
corporation that is Capital Stock and the holders of the Voting Stock of
the Company or the Issuer immediately prior to such transaction own,
directly or indirectly, not less than a majority of the Voting Stock of the
surviving corporation immediately after such transaction in substantially
the same proportion as before the transaction; or
(e) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Company's or the Issuer's Board of
Directors (together with any new directors whose election or appointment by
such Board or whose nomination for election by the shareholders of the
<PAGE>
7
Company or the Issuer was approved by a vote of a majority of the directors
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Company's or
the Issuer's Board of Directors then in office.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the Company Guarantee.
"COMPANY GUARANTEE" means an unconditional unsecured senior
subordinated Guarantee of the Securities given by the Company pursuant to the
terms of this Indenture.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of (a) the aggregate amount
of EBITDA of the Company and its consolidated Restricted Subsidiaries for the
four full fiscal quarters immediately prior to the Transaction Date for which
financial statements are available to (b) the aggregate Consolidated Interest
Expense of the Company and its Restricted Subsidiaries that is anticipated to
accrue during a period consisting of the fiscal quarter in which the Transaction
Date occurs and the three fiscal quarters immediately subsequent thereto (based
upon the pro forma amount and maturity of, and interest payments in respect of,
Indebtedness of the Company and its Restricted Subsidiaries expected by the
Company to be outstanding on the Transaction Date), assuming for the purposes of
this measurement the continuation of market interest rates prevailing on the
Transaction Date and base interest rates in respect of floating interest rate
obligations equal to the base interest rates on such obligations in effect as of
the Transaction Date; PROVIDED that if the Company or any of its Restricted
Subsidiaries is a party to any Interest Rate Protection Agreement which would
have the effect of changing the interest rate on any Indebtedness of the Company
or any of its Restricted Subsidiaries for such four quarter period (or a portion
thereof), the resulting rate shall be used for such four quarter period or
portion thereof; PROVIDED FURTHER that any Consolidated Interest Expense with
respect to Indebtedness
<PAGE>
8
Incurred or retired by the Company or any of its Restricted Subsidiaries during
the fiscal quarter in which the Transaction Date occurs shall be calculated as
if such Indebtedness was so Incurred or retired on the first day of the fiscal
quarter in which the Transaction Date occurs. In addition, if since the
beginning of the four full fiscal quarter period preceding the Transaction Date,
(i) the Company or any of its Restricted Subsidiaries shall have engaged in any
Asset Sale, EBITDA for such period shall be reduced by an amount equal to the
EBITDA (if positive), or increased by an amount equal to the EBITDA (if
negative), directly attributable to the assets which are the subject of such
Asset Sale for such period calculated on a pro forma basis as if such Asset Sale
and any related retirement of Indebtedness had occurred on the first day of such
period or (ii) the Company or any of its Restricted Subsidiaries shall have
acquired any material assets, EBITDA shall be calculated on a pro forma basis as
if such asset acquisitions had occurred on the first day of such four fiscal
quarter period.
"CONSOLIDATED INTEREST EXPENSE" means with respect to any Person for
any period, without duplication, (a) the sum of (i) the aggregate amount of cash
and noncash interest expense (including capitalized interest) of such Person and
its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP in respect of Indebtedness (including (A) any
amortization of debt discount, (B) net costs associated with Interest Rate
Protection Agreements (including any amortization of discounts), (C) the
interest portion of any deferred payment obligation, (D) all accrued interest
and (E) all commissions, discounts, commitment fees, origination fees and other
fees and charges owed with respect to any Bank Credit Facilities and other
Indebtedness) paid, accrued or scheduled to be paid or accrued during such
period; (ii) Redeemable Stock dividends of such Person (and of its Restricted
Subsidiaries if paid to a Person other than such Person or its Restricted
Subsidiaries) and Preferred Stock dividends of such Person's Restricted
Subsidiaries if paid to a Person other than such Person or its other Restricted
Subsidiaries; (iii) the portion of any rental obligation of such Person or its
Restricted Subsidiaries in respect of any Capital Lease Obligation allocable to
interest expense in accordance with GAAP; (iv) the portion of any rental
obligation of such Person or its Restricted Subsidiaries in respect of any Sale
and Leaseback Transaction that is Indebtedness allocable to interest expense
(determined as if such obligation were treated as a Capital Lease Obligation);
and (v) to the extent any Indebtedness of any other Person (other than
Restricted Subsidiaries) is Guaranteed by such
<PAGE>
9
Person or any of its Restricted Subsidiaries, the aggregate amount of interest
paid, accrued or scheduled to be paid or accrued by such other Person during
such period attributable to any such Indebtedness; less (b) to the extent
included in (a) above, amortization or write-off of deferred financing costs of
such Person and its Restricted Subsidiaries during such period; in the case of
both (a) and (b) above, after elimination of intercompany accounts among such
Person and its Restricted Subsidiaries and as determined in accordance with
GAAP.
"CONSOLIDATED NET INCOME" of any Person means, for any period, the
aggregate net income (or net loss, as the case may be) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; PROVIDED that there shall be excluded therefrom, without
duplication, (a) items classified as extraordinary gains or losses net of taxes
(less all fees and expenses relating thereto), including, with respect to the
Company, any loss realized in connection with the purchase of the 11-1/4% Notes;
(b) any gain or loss net of taxes (less all fees and expenses relating thereto),
realized on the sale or other disposition of Property, including the Capital
Stock of any other Person (but in no event shall this clause (b) apply to any
gains or losses on the sale in the ordinary course of business of oil, gas or
other hydrocarbons produced or manufactured); (c) the net income of any
Restricted Subsidiary of such specified person to the extent the transfer to
that Person of that income is restricted by contract or otherwise, except for
any cash dividends or cash distributions actually paid by such Restricted
Subsidiary to such Person during such period; (d) the net income (or loss) of
any other Person in which such Person or any of its Restricted Subsidiaries has
an interest (which interest does not cause the net income of such other Person
to be consolidated with the net income of such Person in accordance with GAAP or
is an interest in a consolidated Unrestricted Subsidiary), except to the extent
of the amount of cash dividends or other cash distributions actually paid to
such Person or its consolidated Restricted Subsidiaries by such other Person
during such period; (e) for the purposes of Section 4.04 only, the net income of
any Person acquired by such Person or any of its Restricted Subsidiaries in a
pooling-of-interests transaction for any period prior to the date of such
acquisition; (f) any gain or loss, net of taxes, realized on the termination of
any employee pension benefit plan; (g) any adjustments of a deferred tax
liability or asset pursuant to Statement of Financial Accounting Standards
No. 109 which result from changes in enacted tax laws or rates; (h) the
cumulative effect of a change in accounting principles; (i) any write-
<PAGE>
10
downs of noncurrent assets; PROVIDED that any ceiling limitation write-downs
under Commission guidelines shall be treated as capitalized costs, as if such
write-downs had not occurred; and (j) any noncash compensation expense realized
for grants of performance shares, stock options or stock awards to officers,
directors and employees of such Person or any of its Restricted Subsidiaries.
"CONSOLIDATED NET WORTH" of any Person means the stockholders' equity
of such Person and its Restricted Subsidiaries, as determined on a consolidated
basis in accordance with GAAP, less (to the extent included in stockholders'
equity) amounts attributable to Redeemable Stock of such Person or its
Restricted Subsidiaries.
"DEFAULT" means any event, act or condition the occurrence of which
is, or after notice or the passage of time or both would be, an Event of
Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (a) Bank Credit Facilities of
the Company or the Issuer and (b) any other Senior Indebtedness of the Company
or Senior Indebtedness of the Issuer which has, at the time of determination, an
aggregate principal amount outstanding of at least $10,000,000 that is
specifically designated in the instrument evidencing such Indebtedness and is
designated in a notice delivered by the Company or the Issuer, as applicable, to
the holders or a Representative of the holders of such Senior Indebtedness of
the Company or the Issuer and the Trustee as "Designated Senior Indebtedness."
"DOLLAR-DENOMINATED PRODUCTION PAYMENTS" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"EBITDA" means, with respect to any Person for any period, an amount
equal to the Consolidated Net Income of such Person for such period, plus
(a) the sum of, to the extent reflected in the consolidated income statement of
such Person and its Restricted Subsidiaries for such period from which
Consolidated Net Income is determined and deducted in the determination of such
Consolidated Net Income, without duplication, (i) income tax expense (but
excluding income tax expense relating to sales or other dispositions of
Property, including the Capital Stock of any other Person, the gains from which
are excluded in the determination of such Consolidated Net Income),
(ii) Consolidated Interest Expense, (iii) depreciation and depletion expense,
(iv) amortization expense, (v) exploration expense (if applicable), and (vi) any
other
<PAGE>
11
noncash charges including unrealized foreign exchange losses (excluding,
however, any such other noncash charge which requires an accrual of or reserve
for cash charges for any future period); less (b) the sum of, to the extent
reflected in the consolidated income statement of such Person and its Restricted
Subsidiaries for such period from which Consolidated Net Income is determined
and added in the determination of such Consolidated Net Income, without
duplication (i) income tax recovery (excluding, however, income tax recovery
relating to sales or other dispositions of Property, including the Capital Stock
of any other Person, the losses from which are excluded in the determination of
such Consolidated Net Income) and (ii) unrealized foreign exchange gains.
"11-1/4% NOTES" means the 11-1/4% Senior Subordinated Notes due 2003
of the Company.
"EQUITY OFFERING" means a bona fide underwritten sale to the public of
common stock of the Company pursuant to a registration statement (other than a
Form S-8 or any other form relating to securities issuable under any employee
benefit plan of the Company) that is declared effective by the Commission
following the Issue Date.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGED PROPERTIES" means properties used or useful in the Oil and
Gas Business received by the Company or a Restricted Subsidiary in trade or as a
portion of the total consideration for other such properties or assets.
"EXCHANGE RATE CONTRACT" means, with respect to any Person, any
currency swap agreements, forward exchange rate agreements, foreign currency
futures or options, exchange rate collar agreements, exchange rate insurance and
other agreements or arrangements, or any combination thereof, entered into by
such Person in the ordinary course of its business for the purpose of limiting
or managing exchange rate risks to which such Person is subject.
"EXCHANGE SECURITIES" has the meaning set forth in the introductory
paragraph to this Indenture.
"FAIR MARKET VALUE" means, with respect to any assets to be
transferred pursuant to any Asset Sale or Sale and Leaseback Transaction or any
noncash consideration or property transferred or received by any Person, the
fair market value of such consideration or other property as determined by
(a) any officer of the Company if such fair
<PAGE>
12
market value is less than $7,500,000 and (b) the Board of Directors of the
Company as evidenced by a certified resolution delivered to the Trustee if such
fair market value is equal to or in excess of $7,500,000.
"GAAP" means United States generally accepted accounting principles as
in effect on the date of this Indenture, unless stated otherwise.
"GOVERNMENT OBLIGATIONS" means securities that are (a) direct
obligations of the United States of America or Canada for the timely payment of
which the full faith and credit of the United States of America or Canada is
pledged or (b) obligations of a Person controlled or supervised by and acting as
an agency or instrumentality of the United States of America or Canada, the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or Canada which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian, with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; PROVIDED, HOWEVER, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
principal of or interest on the Government Obligation evidenced by such
depository receipt.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including any Lien on the assets of
such Person securing obligations to pay Indebtedness of the primary obligor and
any obligation of such Person (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase or payment of) any security for the payment of
such Indebtedness, (b) to purchase Property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness (and "GUARANTEED",
"GUARANTEEING" and "GUARANTOR" shall have
<PAGE>
13
meanings correlative to the foregoing); PROVIDED, HOWEVER, that a Guarantee by
any Person shall not include (i) endorsements by such Person for collection or
deposit, in either case, in the ordinary course of business or (ii) a
contractual commitment by one Person to invest in another Person for so long as
such Investment is reasonably expected to constitute a Permitted Investment
under clause (b) of the definition of Permitted Investments.
"HOLDER" means the Person in whose name a Note is registered on the
Securities Register.
"INCUR" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, Guarantee or become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or obligation on the balance sheet of such Person (and
"INCURRENCE", "INCURRED" "INCURRABLE" and "INCURRING" shall have meanings
correlative to the foregoing); PROVIDED, HOWEVER, that (a) change in GAAP that
results in an obligation of such Person that exists at such time, and is not
theretofore classified as Indebtedness, becoming Indebtedness shall not be
deemed an Incurrence of such Indebtedness. For purposes of this definition,
Indebtedness of the Company or a Restricted Subsidiary held by a Wholly Owned
Subsidiary shall be deemed to be Incurred by the Company or such Restricted
Subsidiary in the event such Wholly Owned Subsidiary ceases to be a Wholly Owned
Subsidiary or in the event such Indebtedness is transferred to a Person other
than the Company or a Wholly Owned Subsidiary. For purposes of this definition,
any noninterest bearing or other discount Indebtedness shall be deemed to have
been Incurred (in an amount equal to its aggregate principal amount at its
Stated Maturity) only on the date of original issue thereof.
"INDEBTEDNESS" means at any time (without duplication), with respect
to any Person, whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (a) any obligation of such Person for
borrowed money, (b) any obligation of such Person evidenced by bonds,
debentures, Securities, Guarantees or other similar instruments, including any
such obligations Incurred in connection with the acquisition of Property, assets
or businesses, (c) any reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person, (d) any obligation of such Person issued or assumed as
the deferred purchase price of Property or services (other than Trade Accounts
Payable), (e) any
<PAGE>
14
Capital Lease Obligation of such Person, (f) the maximum fixed redemption or
repurchase price of Redeemable Stock of such Person at the time of
determination, (g) any payment obligation of such Person Under Exchange Rate
Contracts, Interest Rate Protection Agreements, Oil and Gas Hedging Contracts or
under any similar agreements or instruments, (h) any obligation to pay rent or
other payment amounts of such Person with respect to any Sale and Leaseback
Transaction to which such Person is a party and (i) any obligation of the type
referred to in clauses (a) through (h) of this paragraph of another Person and
all dividends of another Person the payment of which, in either case, such
Person has Guaranteed or is responsible or liable, directly or indirectly, as
obligor, Guarantor or otherwise; PROVIDED, HOWEVER, that Indebtedness shall not
include Production Payments and Reserve Sales. For purposes of this definition,
the maximum fixed repurchase price of any Redeemable Stock that does not have a
fixed repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were repurchased on any date on
which Indebtedness shall be required to be determined pursuant to this
Indenture; PROVIDED, HOWEVER, that if such Redeemable Stock is not then
permitted to be repurchased, the repurchase price shall be the book value of
such Redeemable Stock. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and the maximum liability at such date in respect of any
contingent obligations described above.
"INDENTURE" means this Indenture as amended or supplemented from time
to time.
"INITIAL SECURITIES" has the meaning assigned thereto in the
introductory paragraph to this Indenture.
"INTEREST RATE PROTECTION AGREEMENT" means, with respect to any
Person, any interest rate swap agreement, forward rate agreement, interest rate
cap or collar agreement or other financial agreement or arrangement entered into
by such Person in the ordinary course of its business for the purpose of
limiting or managing interest rate risks to which such Person is subject.
"INVESTMENT" means, with respect to any Person (a) any amount paid by
such Person, directly or indirectly, to any other Person for Capital Stock or
other Property of, or as a capital contribution to, any other Person or (b) any
direct or indirect loan or advance to any other Person (other than accounts
receivable of such Person arising in
<PAGE>
15
the ordinary course of business); PROVIDED, HOWEVER, that Investments shall not
include (i) in the case of clause (a) as used in the definition of "Restricted
Payments" only, any such amount paid through the issuance of Capital Stock of
the Company and (ii) in the case of clause (a) or (b), extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices and any increase in the equity ownership in any Person resulting from
retained earnings of such Person.
"ISSUE DATE" means the date on which the Original Securities first
were issued under this Indenture.
"ISSUER" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"LIEN" means, with respect to any Property, any mortgage or deed of
trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien (statutory or other), charge, easement, encumbrance, preference,
priority or other security or similar agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such Property (including any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing). For purposes of Section 4.10, a
Capital Lease Obligation shall be deemed to be secured by a Lien on the property
being leased.
"LIQUID SECURITIES" means securities (a) of an issuer that is not an
Affiliate of the Company, (b) that are publicly traded on the New York Stock
Exchange, the American Stock Exchange, the Toronto Stock Exchange or the Nasdaq
National Market and (c) as to which the Company or the Restricted Subsidiary
holding such securities is not subject to any restrictions on sale or transfer
(including any volume restrictions under Rule 144 under the Securities Act or
any other restrictions imposed by the Securities Act) or as to which a
registration statement under the Securities Act covering the resale thereof is
in effect for as long as the securities are held; PROVIDED that securities
meeting the requirements of clauses (a), (b) and (c) above shall be treated as
Liquid Securities from the date of receipt thereof until and only until the
earlier of (i) the date on which such securities are sold or exchanged for cash
or Permitted Short Term Investments and (ii) 180 days following the date of
receipt of such securities. If such securities are not sold or exchanged for
cash or Permitted Short-Term
<PAGE>
16
Investments within 180 days of receipt thereof, for purposes of determining
whether the transaction pursuant to which the Company or a Restricted Subsidiary
received the securities was in compliance with Section 4.06, such securities
shall be deemed not to have been Liquid Securities at any time. Notwithstanding
the foregoing, securities meeting the requirements of clauses (a) and (b) above
received by the Company or a Wholly Owned Subsidiary in connection with the
disposition, in whole or in part, of the capital stock of Saxon Petroleum Inc.
shall be treated as Liquid Securities from the date of receipt thereof until the
earlier of (A) the date on which such securities are sold or exchanged for cash
or Permitted Short-Term Investments and (B) 24 months following the date of
receipt of such securities.
"MATERIAL CHANGE" means an increase or decrease (except to the extent
resulting from changes in prices) of more than 30% during a fiscal quarter in
the estimated discounted future net revenues from proved oil and gas reserves of
the Company and its Restricted Subsidiaries, calculated in accordance with
clause (a)(i) of the definition of Adjusted Consolidated Net Tangible Assets;
PROVIDED, HOWEVER, that the following will be excluded from the calculation of
Material Change: (a) any acquisitions during the quarter of oil and gas
reserves with respect to which the Company's estimate of the discounted future
net revenues from proved oil and gas reserves has been confirmed by independent
petroleum engineers; and (b) any dispositions of Properties during such quarter
that were disposed of in compliance with Section 4.06.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET AVAILABLE CASH" from an Asset Sale means cash proceeds received
therefrom (including (a) any cash proceeds received by way of deferred payment
of principal pursuant to a note or installment receivable or otherwise, but only
as and when received and (b) the Fair Market Value of Liquid Securities and
Permitted Short-Term Investments, and excluding (i) any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to the Property that is the subject of such Asset
Sale and (ii) except to the extent subsequently converted to cash, Liquid
Securities or Permitted Short-Term Investments within 240 days after such Asset
Sale, consideration constituting Exchanged Properties or consideration other
than as identified in the immediately preceding clauses (a) and (b)), in each
case net of (A) all legal, title and recording expenses, commissions and other
<PAGE>
17
fees and expenses incurred, and all Federal, state, foreign and local taxes
required to be paid or accrued as a liability under GAAP as a consequence of
such Asset Sale, (B) all payments made on any Indebtedness (but specifically
excluding Indebtedness of the Company and its Restricted Subsidiaries assumed in
connection with or in anticipation of such Asset Sale) which is secured by any
assets subject to such Asset Sale, in accordance with the terms of any Lien upon
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Sale or by applicable law, be repaid out of the proceeds
from such Asset Sale; PROVIDED that such payments are made in a manner that
results in the permanent reduction in the balance of such Indebtedness and, if
applicable, a permanent reduction in any outstanding commitment for future
incurrences of Indebtedness thereunder, (C) all distributions and other payments
required to be made to minority interest holders in Subsidiaries or joint
ventures as a result of such Asset Sale and (D) the deduction of appropriate
amounts to be provided by the seller as a reserve, in accordance with GAAP,
against any liabilities associated with the assets disposed of in such Asset
Sale and retained by the Company or any Restricted Subsidiary after such Asset
Sale; PROVIDED, HOWEVER, that if any consideration for an Asset Sale (which
would otherwise constitute Net Available Cash) is required to be held in escrow
pending determination of whether a purchase price adjustment will be made, such
consideration (or any portion thereof) shall become Net Available Cash only at
such time as it is released to the Company or any Restricted Subsidiary from
escrow.
"NET WORKING CAPITAL" means (a) all current assets of the Company and
its Restricted Subsidiaries, less (b) all current liabilities of the Company and
its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in consolidated financial statements of
the Company prepared in accordance with GAAP.
"NONRECOURSE PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other
than Capital Lease Obligations) of the Company or any Restricted Subsidiary
Incurred in connection with the acquisition by the Company or such Restricted
Subsidiary in the ordinary course of business of fixed assets used in the Oil
and Gas Business (including office buildings and other real property used by the
Company or such Restricted Subsidiary in conducting its operations) with respect
to which (a) the holders of such Indebtedness agree that they will look solely
to the fixed assets so acquired which secure such Indebtedness, and neither the
Company nor any Restricted Subsidiary (i) is directly or
<PAGE>
18
indirectly liable for such Indebtedness or (ii) provides credit support,
including any undertaking, Guarantee, agreement or instrument that would
constitute Indebtedness (other than the grant of a Lien on such acquired fixed
assets), and (b) no default or event of default with respect to such
Indebtedness would cause, or permit (after notice or passage of time or
otherwise), any holder of any other Indebtedness of the Company or a Restricted
Subsidiary to declare a default or event of default on such other Indebtedness
or cause the payment, repurchase, redemption, defeasance or other acquisition or
retirement for value thereof to be accelerated or payable prior to any scheduled
principal payment, scheduled sinking fund payment or maturity.
"OFFICER" means the President, the Chief Executive Officer, the Chief
Financial Officer, the Chief Accounting Officer or the Treasurer or the
Secretary of the Issuer or the Company, as applicable.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers at
least one of whom shall be the principal executive officer, principal accounting
officer or principal financial officer of the Issuer or the Company, as
applicable.
"OIL AND GAS BUSINESS" means the business of exploiting, exploring
for, developing, acquiring, operating, producing, processing, gathering,
marketing, storing, selling, hedging, treating, swapping, refining and
transporting hydrocarbons and other related energy businesses.
"OIL AND GAS HEDGING CONTRACT" means, with respect to any Person, any
agreement or arrangement, or any combination thereof, relating to oil and gas or
other hydrocarbon prices, transportation or basis costs or differentials or
other similar financial factors, that is customary in the Oil and Gas Business
and is entered into by such Person in the ordinary course of its business for
the purpose of limiting or managing risks associated with fluctuations in such
prices, costs, differentials or similar factors.
"OIL AND GAS LIENS" means (a) Liens on any specific property or any
interest therein, construction thereon or improvement thereto to secure all or
any part of the costs incurred for surveying, exploration, drilling, extraction,
development, operation, production, construction, alteration, repair or
improvement of, in, under or on such property and the plugging and abandonment
<PAGE>
19
of wells located thereon (it being understood that, in the case of oil and gas
producing properties, or any interest therein, costs incurred for "development"
shall include costs incurred for all facilities relating to such properties or
to projects, ventures or other arrangements of which such properties form a part
or which relate to such properties or interests); (b) Liens on an oil or gas
producing property to secure obligations Incurred or guarantees of obligations
Incurred in connection with or necessarily incidental to commitments for the
purchase or sale of, or the transportation or distribution of, the products
derived from such property; (c) Liens arising under partnership agreements, oil
and gas leases, overriding royalty agreements, net profits agreements,
production payment agreements, royalty trust agreements, incentive compensation
programs on terms that are reasonably customary in the Oil and Gas Business for
geologists, geophysicists and other providers of technical services to the
Company or a Restricted Subsidiary, master limited partnership agreements,
farmout agreements, farmin agreements, division orders, contracts for the sale,
purchase, exchange, transportation, gathering or processing of oil, gas or other
hydrocarbons, unitizations and pooling designations, declarations, orders and
agreements, development agreements, operating agreements, production sales
contracts, area of mutual interest agreements, gas balancing or deferred
production agreements, injection, repressuring and recycling agreements, salt
water or other disposal agreements, seismic or geophysical permits or
agreements, and other agreements which are customary in the Oil and Gas
Business; PROVIDED, HOWEVER, in all instances that such Liens are limited to the
assets that are the subject of the relevant agreement, program, order or
contract; (d) Liens arising in connection with Production Payments and Reserve
Sales; and (e) Liens on pipelines or pipeline facilities that arise by operation
of law.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Issuer or the Company.
"PARI PASSU INDEBTEDNESS" means any indebtedness of the Issuer, the
Company or a Subsidiary Guarantor that is PARI PASSU in right of payment to the
Securities, the Company Guarantee or a Subsidiary Guarantee, as applicable.
"PARI PASSU OFFER" means an offer by the Issuer, the Company or a
Subsidiary Guarantor to purchase all or a portion of Pari Passu Indebtedness to
the extent required by
<PAGE>
20
the indenture or other agreement or instrument pursuant to which such Pari Passu
Indebtedness was issued.
"PERMITTED BUSINESS INVESTMENTS" means Investments and expenditures
made in the ordinary course of, and of a nature that is or shall have become
customary in, the Oil and Gas Business as a means of actively engaging therein
through agreements, transactions, interests or arrangements which permit one to
share risks or costs, comply with regulatory requirements regarding local
ownership or satisfy other objectives customarily achieved through the conduct
of Oil and Gas Business jointly with third parties, including (a) ownership
interests in oil and gas properties or gathering, transportation, processing,
storage or related systems and (b) Investments and expenditures in the form of
or pursuant to operating agreements, processing agreements, farmin agreements,
farmout agreements, development agreements, area of mutual interest agreements,
unitization agreements, pooling arrangements, joint bidding agreements, service
contracts, joint venture agreements, partnership agreements (whether general or
limited), and other similar agreements (including for limited liability
companies) with third parties, excluding however, Investments in corporations
other than Restricted Subsidiaries.
"PERMITTED HEDGING AGREEMENTS" means (a) Exchange Rate Contracts and
Oil and Gas Hedging Contracts and (b) Interest Rate Protection Agreements but
only to the extent that the stated aggregate notional amount thereunder does not
exceed 100% of the aggregate principal amount of the Indebtedness of the Company
or a Restricted Subsidiary covered by such Interest Rate Protection Agreements
at the time such agreements were entered into.
"PERMITTED INDEBTEDNESS" means any and all of the following:
(i) Indebtedness arising under this Indenture with respect to the Original
Securities and the Company Guarantee and any Subsidiary Guarantees relating
thereto; (ii) Indebtedness (including Guarantees) under Bank Credit Facilities;
PROVIDED that the aggregate principal amount of all Indebtedness under Bank
Credit Facilities, together with all Indebtedness Incurred pursuant to
clause (x) of this paragraph in respect of Indebtedness previously Incurred
under Bank Credit Facilities, at any one time outstanding does not exceed the
greater of (a) $150,000,000, which amount shall be permanently reduced by the
amount of Net Available Cash from Asset Sales used to permanently repay
Indebtedness under Bank Credit Facilities and not subsequently reinvested in
Additional Assets or used to permanently reduce other Indebtedness to the extent
permitted pursuant to Section 4.06 and (b) an amount equal
<PAGE>
21
to the sum of (1) $35,000,000 and (2) 25% of Adjusted Consolidated Net Tangible
Assets determined as of the date of the Incurrence of such Indebtedness;
(iii) Indebtedness to the Company or any Wholly Owned Subsidiary by any of its
Restricted Subsidiaries or Indebtedness of the Company to any of its Wholly
Owned Subsidiaries (but only so long as such Indebtedness is held by the Company
or a Wholly Owned Subsidiary); (iv) Indebtedness in respect of bid, performance,
reimbursement or surety obligations issued by or for the account of the Company
or any Restricted Subsidiary in the ordinary course of business, including
Guarantees and letters of credit functioning as or supporting such bid,
performance, reimbursement or surety obligations (in each case other than for an
obligation for money borrowed); (v) Indebtedness under Permitted Hedging
Agreements; (vi) in-kind obligations relating to oil or gas balancing positions
arising in the ordinary course of business; (vii) Indebtedness outstanding on
the Issue Date not otherwise permitted in clauses (i) through (vi) above;
(viii) Nonrecourse Purchase Money Indebtedness; (ix) Indebtedness not otherwise
permitted to be Incurred pursuant to this paragraph (excluding any Indebtedness
Incurred pursuant to clause (a) of the immediately preceding paragraph);
PROVIDED that the aggregate principal amount of all Indebtedness Incurred
pursuant to this clause (ix), together with all Indebtedness Incurred pursuant
to clause (x) of this paragraph in respect of Indebtedness previously Incurred
pursuant to this clause (ix), at any one time outstanding does not exceed
$30,000,000; (x) Indebtedness Incurred in exchange for, or the proceeds of which
are used to refinance, (a) Indebtedness referred to in clauses (i), (ii), (vii),
(viii) and (ix) of this paragraph (including Indebtedness previously Incurred
pursuant to this clause (x)) and (b) Indebtedness Incurred pursuant to
clause (a) of the immediately preceding paragraph; PROVIDED that, in the case of
each of the foregoing clauses (a) and (b), such Indebtedness is Permitted
Refinancing Indebtedness and; (xi) Indebtedness consisting of obligations in
respect of purchase price adjustments, indemnities or Guarantees of the same or
similar matters in connection with the acquisition or disposition of Property.
"PERMITTED INVESTMENTS" means any and all of the
following: (a) Permitted Short-Term Investments; (b) Investments in property,
plant and equipment used in the ordinary course of business and Permitted
Business Investments; (c) Investments by any Restricted Subsidiary in the
Company; (d) Investments by the Company or any Restricted Subsidiary in any
Restricted Subsidiary; (e) Investments by the Company or any Restricted
Subsidiary in (i) any Person that will, upon the making of such
<PAGE>
22
Investment, become a Restricted Subsidiary or (ii) any Person if as a result of
such Investment such Person is merged or consolidated with or into, or transfers
or conveys all or substantially all its Property to, the Company or a Restricted
Subsidiary; (f) Investments in the form of securities received from Asset Sales;
PROVIDED that such Asset Sales are made in compliance with Section 4.06;
(g) Investments in negotiable instruments held for collection; lease, utility
and other similar deposits; and stock, obligations or other securities received
in settlement of debts (including under any bankruptcy or other similar
proceeding) owing to the Company or any of its Restricted Subsidiaries as a
result of foreclosure, perfection or enforcement of any Liens or Indebtedness,
in each of the foregoing cases in the ordinary course of business of the Company
or such Restricted Subsidiary; (h) relocation allowances for, and advances and
loans to, officers, directors and employees of the Company or any of its
Restricted Subsidiaries; PROVIDED such items do not exceed in the aggregate
$5,000,000 at any one time outstanding; (i) Investments intended to promote the
Company's strategic objectives in the Oil and Gas Business in an aggregate
amount not to exceed 7.5% of Adjusted Consolidated Net Tangible Assets
(determined as of the date of the making of any such Investment) at any one time
outstanding (which Investments shall be deemed to be no longer outstanding only
upon the return of capital thereof; (j) Investments made for the purpose of
acquiring gas marketing contracts in an aggregate amount not to exceed
$10,000,000 at any one time outstanding; (k) Investments made pursuant to
Permitted Hedging Agreements of the Company and the Restricted Subsidiaries; and
(l) Investments pursuant to any agreement or obligation of the Company or any of
its Restricted Subsidiaries as in effect on the Issue Date (other than
Investments described in clauses (a) through (k) above).
"PERMITTED LIENS" means any and all of the following: (a) Liens
existing as of the Issue Date; (b) Liens securing the Securities, the Company
Guarantee, any Subsidiary Guarantees and other obligations arising under this
Indenture; (c) any Lien existing on any Property of a Person at the time such
Person is merged or consolidated with or into the Issuer, the Company or a
Restricted Subsidiary or becomes a Restricted Subsidiary (and not incurred in
anticipation of or in connection with such transaction); PROVIDED that such
Liens are not extended to other Property of the Issuer, the Company or the
Restricted Subsidiaries; (d) any Lien existing on any Property at the time of
the acquisition thereof (and not incurred in anticipation of or in connection
with such
<PAGE>
23
transaction); PROVIDED that such Liens are not extended to other Property of the
Issuer, the Company or the Restricted Subsidiaries; (e) any Lien incurred in the
ordinary course of business incidental to the conduct of the business of the
Company or the Restricted Subsidiaries or the ownership of their Property
(including (i) easements, rights of way and similar encumbrances, (ii) rights or
title of lessors under leases (other than Capital Lease Obligations),
(iii) rights of collecting banks having rights of setoff, revocation, refund or
chargeback with respect to money or instruments of the Company or the Restricted
Subsidiaries on deposit with or in the possession of such banks, (iv) Liens
imposed by law, including Liens under workers' compensation or similar
legislation and mechanics', carriers', warehousemen's, materialmen's, suppliers'
and vendors' Liens, (v) Liens incurred to secure performance of obligations with
respect to statutory or regulatory requirements, performance or return-of-money
bonds, surety bonds or other obligations of a like nature and incurred in a
manner consistent with industry practice and (vi) Oil and Gas Liens, in each
case which are not incurred in connection with the borrowing of money, the
obtaining of advances or credit or the payment of the deferred purchase price of
Property (other than Trade Accounts Payable); (f) Liens for taxes, assessments
and governmental charges not yet due or the validity of which are being
contested in good faith by appropriate proceedings, promptly instituted and
diligently conducted, and for which adequate reserves have been established to
the extent required by GAAP as in effect at such time; (g) Liens incurred to
secure appeal bonds and judgment and attachment Liens, in each case in
connection with litigation or legal proceedings that are being contested in good
faith by appropriate proceedings so long as reserves have been established to
the extent required by GAAP as in effect at such time and so long as such Liens
do not encumber assets by an aggregate amount (together with the amount of any
unstayed judgments against the Company or any Restricted Subsidiary but
excluding any such Liens to the extent securing insured or indemnified judgments
or orders) in excess of $15,000,000; (h) Liens securing Permitted Hedging
Agreements of the Company and its Restricted Subsidiaries; (i) Liens securing
purchase money Indebtedness or Capital Lease Obligations; PROVIDED that such
Liens attach only to the Property acquired with the proceeds of such purchase
money Indebtedness or the Property which is the subject of such Capital Lease
Obligations; (j) Liens securing Nonrecourse Purchase Money Indebtedness granted
in connection with the acquisition by the Company or any Restricted Subsidiary
in the ordinary course of business of fixed assets used in the Oil and Gas
Business (including office buildings and other real property used by the Company
<PAGE>
24
or such Restricted Subsidiary in conducting its operations); PROVIDED that
(i) such Liens attach only to the fixed assets acquired with the proceeds of
such Nonrecourse Purchase Money Indebtedness and (b) such Nonrecourse Purchase
Money Indebtedness is not in excess of the purchase price of such fixed assets;
(k) Liens resulting from the deposit of funds or evidences of Indebtedness in
trust for the purpose of decreasing or legally defeasing Indebtedness of the
Company or any Restricted Subsidiary so long as such deposit of funds is
permitted under Section 4.04; (l) Liens resulting from a pledge of Capital Stock
of a Person that is not a Restricted Subsidiary to secure obligations of such
Person and any refinancings thereof; (m) Liens to secure any permitted
extension, renewal, refinancing, refunding or exchange (or successive
extensions, renewals, refinancings, refundings or exchanges) in whole or in
part, of or for any Indebtedness secured by Liens referred to in clauses (a),
(b), (c), (d), (i) and (j) above; PROVIDED, HOWEVER, that (i) such new Lien
shall be limited to all or part of the same Property (including future
improvements thereon and accessions thereto) subject to the original Lien and
(ii) the Indebtedness secured by such Lien at such time is not increased to any
amount greater than the sum of (A) the outstanding principal amount or, if
greater, the committed amount of the Indebtedness secured by such original Lien
immediately prior to such extension, renewal, refinancing, refunding or exchange
and (B) an amount necessary to pay any fees and expenses, including premiums,
related to such refinancing, refunding, extension, renewal or replacement;
(n) Liens in favor of the Company, the Issuer, or a Restricted Subsidiary; and
(o) Liens not otherwise permitted by clauses (a) through (n) above incurred in
the ordinary course of business of the Company and its Restricted Subsidiaries
and encumbering Property having an aggregate Fair Market Value not in excess of
$5,000,000 at any one time. Notwithstanding anything in this paragraph to the
contrary, the term "Permitted Liens" shall not include Liens resulting from the
creation, incurrence, issuance, assumption or Guarantee of any Production
Payments and Reserve Sales other than (i) any such Liens existing as of the
Issue Date, (ii) Production Payments and Reserve Sales in connection with the
acquisition of any Property after the Issue Date; PROVIDED that any such Lien
created in connection therewith is created, incurred, issued, assumed or
Guaranteed in connection with the financing of, and within 60 days after the
acquisition of, such Property and (iii) Production Payments and Reserve Sales,
other than those described in clauses (i) and (ii) of this sentence, to the
extent such Production Payments and Reserve Sales constitute Asset Sales made
pursuant to and in compliance with Section 4.06 and (iv) incentive compensation
programs
<PAGE>
25
for geologists, geophysicists and other providers of technical services to the
Company and any Restricted Subsidiary; PROVIDED, HOWEVER, that, in the case of
the immediately foregoing clauses (i), (ii), (iii) and (iv), any Lien created in
connection with any such Production Payments and Reserve Sales shall be limited
to the Property that is the subject of such Production Payments and Reserve
Sales.
"PERMITTED REFINANCING INDEBTEDNESS" means Indebtedness ("new
Indebtedness") Incurred in exchange for, or proceeds of which are used to
refinance, other Indebtedness ("old Indebtedness"); PROVIDED, HOWEVER, that
(a) such new Indebtedness is in an aggregate principal amount not in excess of
the sum of (i) the aggregate principal amount then outstanding of the old
Indebtedness (or, if such old Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination), and
(ii) an amount necessary to pay any fees and expenses, including premiums,
related to such exchange or refinancing, (b) such new Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of the old Indebtedness, (c) such
new Indebtedness has an Average Life at the time such new Indebtedness is
Incurred that is equal to or greater than the Average Life of the old
Indebtedness at such time, (d) such new Indebtedness is subordinated in right of
payment to the Securities (or, if applicable, the Company Guarantee or the
relevant Subsidiary Guarantee) to at least the same extent, if any, as the old
Indebtedness and (e) if such old Indebtedness is Nonrecourse Purchase Money
Indebtedness or Indebtedness that refinanced Nonrecourse Purchase Money
Indebtedness, such new Indebtedness satisfies clauses (a) and (b) of the
definition of "Nonrecourse Purchase Money Indebtedness."
"PERMITTED SHORT-TERM INVESTMENTS" means (a) Investments in Government
Obligations maturing within one year of the date of acquisition thereof;
(b) Investments in demand accounts, time deposit accounts, certificates of
deposit, bankers' acceptances and money market deposits maturing within one year
of the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America or any State thereof or
the District of Columbia or Canada or any province thereof that is a member of
the Federal Reserve System or comparable Canadian system and has capital,
surplus and undivided profits aggregating in excess of $500,000,000 and whose
long-term Indebtedness is rated "A" (or such similar equivalent rating), or
higher, according to Moody's or Dominion Bond Rating Service Limited or Canadian
Bond Rating Service, Inc.; (c) Investments in deposits
<PAGE>
26
available for withdrawal on demand with any commercial bank that is organized
under the laws of any country in which the Company or any Restricted Subsidiary
maintains an office or is engaged in the Oil and Gas Business; PROVIDED that
(i) all such deposits have been made in such accounts in the ordinary course of
business and (ii) such deposits do not at any one time exceed $20,000,000 in the
aggregate, (d) repurchase and reverse repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clause
(a) entered into with a bank meeting the qualifications described in clause (b),
(e) Investments in commercial paper or Securities, maturing not more than one
year after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any State thereof or the District of Columbia, or
Canada or any Province thereof, with a short-term rating at the time as of which
any Investment therein is made of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P or "R-1" (or higher) by Dominion Bond Rating
Service Limited or Canadian Bond Rating Service, Inc. (in the case of a Canadian
issuer) or a long-term rating at the time as of which any Investment therein is
made of "A3" (or higher) according to Moody's or "A-" (or higher) according to
S&P or such similar equivalent rating (or higher) by Dominion Bond Rating
Service Limited or Canadian Bond Rating Service, Inc. (in the case of a Canadian
issuer), (f) Investments in any money market mutual fund having assets in excess
of $250,000,000 all of which consist of other obligations of the types described
in clauses (a), (b), (d) and (e) hereof and (g) Investments in asset-backed
securities maturing within one year of the date of acquisition thereof with a
long-term rating at the time as of which any Investment therein is made of "A3"
(or higher) according to Moody's or "A-1" (or higher) according to S&P or such
similar equivalent rating (or higher) by Dominion Bond Rating Service Limited or
Canadian Bond Rating Service, Inc. (in the case of a Canadian issuer).
"PERSON" means any individual, corporation, partnership, joint
venture, limited liability company, unlimited liability company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof.
"PREFERRED STOCK" of any Person means Capital Stock of such Person of
any class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of
<PAGE>
27
such Person; PROVIDED, HOWEVER, that "Preferred Stock" shall not include
Redeemable Stock.
"PRINCIPAL" of any Indebtedness (including the Securities) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"PRODUCTION PAYMENTS AND RESERVE SALES" means the grant or transfer by
the Company or a Restricted Subsidiary to any Person of a royalty, overriding
royalty, net profits interest, production payment (whether volumetric or dollar
denominated), partnership or other interest in oil and gas properties, reserves
or the right to receive all or a portion of the production or the proceeds from
the sale of production attributable to such properties where the holder of such
interest has recourse solely to such production or proceeds of production,
subject to the obligation of the grantor or transferor to operate and maintain,
or cause the subject interests to be operated and maintained, in a reasonably
prudent manner or other customary standard or subject to the obligation of the
grantor or transferor to indemnify for environmental, title or other matters
customary in the Oil and Gas Business, including any such grants or transfers
pursuant to incentive compensation programs on terms that are reasonably
customary in the Oil and Gas Business for geologists, geophysicists and other
providers of technical services to the Company or a Restricted Subsidiary.
"PROPERTY" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including Capital Stock and other securities issued by
any other Person (but excluding Capital Stock or other securities issued by such
first mentioned Person).
"REDEEMABLE STOCK" of any Person means any equity security of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including on the
happening of an event), is or could become required to be redeemed for cash or
other Property or is or could become redeemable for cash or other Property at
the option of the holder thereof, in whole or in part, on or prior to the first
anniversary of the Stated Maturity of the Securities; or is or could become
exchangeable at the option of the holder thereof for Indebtedness at any time in
whole or in part, on or prior to the first anniversary of the Stated Maturity of
the Securities; PROVIDED, HOWEVER, that Redeemable Stock shall not include any
security by virtue of the fact that it may be exchanged or converted at the
option of the holder for
<PAGE>
28
Capital Stock of the Company having no preference as to dividends or liquidation
over any other Capital Stock of the Company.
"REPRESENTATIVE" means the trustee, agent or representative expressly
authorized to act in such capacity, if any, for an issue of Senior Indebtedness
of the Issuer or the Company.
"RESTRICTED PAYMENT" means (a) a dividend or other distribution
declared or paid on the Capital Stock or Redeemable Stock of the Company or to
the Company's shareholders (other than dividends, distributions or payments made
solely in Capital Stock of the Company or in options, warrants or other rights
to purchase or acquire Capital Stock), or declared and paid to any Person other
than the Company or any of its Restricted Subsidiaries (and, if such Restricted
Subsidiary is not a Wholly Owned Subsidiary, to the other shareholders of such
Restricted Subsidiary on a pro rata basis) on the Capital Stock or Redeemable
Stock of any Restricted Subsidiary, (b) a payment made by the Company or any of
its Restricted Subsidiaries (other than to the Company or any Restricted
Subsidiary) to purchase, redeem, acquire or retire any Capital Stock or
Redeemable Stock, or any options, warrants or other rights to acquire Capital
Stock or Redeemable Stock, of the Company or of a Restricted Subsidiary, (c) a
payment made by the Company or any of its Restricted Subsidiaries to redeem,
repurchase, legally defease or otherwise acquire or retire for value (including
pursuant to mandatory repurchase covenants), prior to any scheduled maturity,
scheduled sinking fund or scheduled mandatory redemption, any Indebtedness of
the Company or a Restricted Subsidiary which is subordinate (whether pursuant to
its terms or by operation of law) in right of payment to the Securities, the
Company Guarantee or the relevant Subsidiary Guarantee, as the case may be;
PROVIDED that this clause (c) shall not include any such payment with respect to
(i) any such subordinated Indebtedness to the extent of Excess Proceeds
remaining after compliance with Section 4.06 and to the extent required by the
indenture or other agreement or instrument pursuant to which such subordinated
Indebtedness was issued or (ii) the purchase, repurchase or other acquisition of
any such subordinated Indebtedness purchased in anticipation of satisfying a
scheduled maturity, scheduled sinking fund or scheduled mandatory redemption, in
each case due within one year of the date of acquisition, or (d) an Investment
(other than a Permitted Investment) by the Company or a Restricted Subsidiary in
any Person.
<PAGE>
29
"RESTRICTED SUBSIDIARY" means (a) Canadian Forest Oil Ltd. and (b) any
other Subsidiary of the Company that has not been designated an Unrestricted
Subsidiary pursuant to Section 4.15.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc., and its successors.
"SALE AND LEASEBACK TRANSACTION" means, with respect to any Person,
any direct or indirect arrangement (excluding, however, any such arrangement
between such Person and a Wholly Owned Subsidiary of such Person or between one
or more Wholly Owned Subsidiaries of such Person) pursuant to which Property is
sold or transferred by such Person or a Restricted Subsidiary of such Person and
is thereafter leased back from the purchaser or transferee thereof by such
Person or one of its Restricted Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" has the meaning assigned thereto in the introductory
paragraph to this Indenture.
"SENIOR INDEBTEDNESS OF THE COMPANY" means the obligations of the
Company with respect to Indebtedness of the Company, whether outstanding on the
date hereof or thereafter created, Incurred or assumed, and any renewal,
refunding, refinancing, replacement or extension thereof, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Company Guarantee;
PROVIDED, HOWEVER, that Senior Indebtedness of the Company shall not include
(a) Indebtedness of the Company to a Subsidiary of the Company (but only so long
as such Indebtedness is held by such Subsidiary), (b) amounts owed for goods,
materials or services purchased in the ordinary course of business,
(c) Indebtedness Incurred in violation of this Indenture, (d) amounts payable or
any other Indebtedness to employees of the Company or any Subsidiary of the
Company, (e) any liability for Federal, state, local or other taxes owed or
owing by the Company, (f) any Indebtedness of the Company that, when Incurred
and without regard to any election under Section 1111(b) of the United States
Bankruptcy Code, was without recourse to the Company, (g) Pari Passu or
Subordinated Indebtedness of the Company, (h) Indebtedness of the Company that
is represented by Redeemable Stock,
<PAGE>
30
(i) Indebtedness evidenced by the Company Guarantee and (j) in-kind obligations
relating to net oil and gas balancing positions. "SENIOR INDEBTEDNESS OF ANY
SUBSIDIARY GUARANTOR" has a correlative meaning; PROVIDED that clause (a) above
shall be deemed to refer to Indebtedness of any Subsidiary Guarantor to the
Company or any Subsidiary of the Company (other than as described in the proviso
to clause (a) of the definition of "Senior Indebtedness of the Issuer").
"SENIOR INDEBTEDNESS OF THE ISSUER" means the obligations of the
Issuer with respect to Indebtedness of the Issuer, whether outstanding on the
date hereof or thereafter created, Incurred or assumed, and any renewal,
refunding, refinancing, replacement or extension thereof, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Securities;
PROVIDED, HOWEVER, that Senior Indebtedness of the Issuer shall not include
(a) Indebtedness of the Issuer to the Company or any Subsidiary of the Company
or the Issuer; PROVIDED, that Indebtedness of the Issuer to 611852 Saskatchewan
Ltd. pursuant to the Canadian Forest Credit Facility in an amount equal to the
amount of Indebtedness outstanding at any time under the Canadian Bank Credit
Facility shall constitute Senior Indebtedness of the Issuer to the extent that
such outstanding Indebtedness under the Canadian Bank Credit Facility is not
Guaranteed by the Issuer, (b) amounts owed for goods, materials or services
purchased in the ordinary course of business, (c) Indebtedness Incurred in
violation of this Indenture, (d) amounts payable or any other Indebtedness to
employees of the Issuer or any Subsidiary of the Issuer, (e) any liability for
United States Federal, state, local, or Canadian Federal or provincial, or other
taxes owed or owing by the Issuer, (f) any Indebtedness of the Issuer that, when
Incurred and without regard to any election under Section 1111(b) of the United
States Bankruptcy Code or corresponding provisions of the Bankruptcy and
Insolvency Act (Canada) and the Companies' Creditors Arrangements Act (Canada),
was without recourse to the Issuer, (g) Pari Passu or Subordinated Indebtedness
of the Issuer, (h) Indebtedness of the Issuer that is represented by Redeemable
Stock, (i) Indebtedness evidenced by the Securities and (j) in-kind obligations
relating to net oil and gas balancing positions.
"SIGNIFICANT SUBSIDIARY" means, at any date of determination, (a) the
Issuer and (b) any other Restricted Subsidiary that would be a "Significant
Subsidiary" of the
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31
Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the
Commission.
"STATED MATURITY", when used with respect to any security or any
installment of principal thereof or interest thereon, means the date specified
in such security as the fixed date on which the principal of such security or
such installment of principal or interest is due and payable, including pursuant
to any mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Issuer, the
Company or a Subsidiary Guarantor that is subordinated or junior in right of
payment to the Securities, the Company Guarantee or the relevant Subsidiary
Guarantee, as applicable, pursuant to a written agreement to that effect.
"SUBSIDIARY" of a Person means (a) another Person which is a
corporation a majority of whose Voting Stock is at the time, directly or
indirectly, owned or controlled by (i) the first Person, (ii) the first Person
and one or more of its Subsidiaries or (iii) one or more of the first Person's
Subsidiaries or (b) another Person which is not a corporation (x) at least 50%
of the ownership interest of which and (y) the power to elect or direct the
election of a majority of the directors or other governing body of which are
controlled by Persons referred to in clause (i), (ii) or (iii) above.
"SUBSIDIARY GUARANTOR" means, unless released from its Subsidiary
Guarantee as permitted by this Indenture, any Restricted Subsidiary that becomes
a Guarantor of the Securities in compliance with the provisions of this
Indenture and executes a supplemental indenture agreeing to be bound by the
terms of this Indenture, until a successor replaces such Restricted Subsidiary
pursuant to the applicable provisions hereof and, thereafter, means the
successor.
"SUBSIDIARY GUARANTEE" means an unconditional, unsecured senior
subordinated Guarantee of Securities given by any Restricted Subsidiary pursuant
to the terms of this Indenture.
"TAXES" means any tax, duty, levy, impost, assessment or other
governmental charge imposed or levied by or on behalf of the Government of
Canada or any province or
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32
territory thereof or by any authority or agency therein or thereof having power
to tax (or the jurisdiction of incorporation of any successor of the Issuer or,
if applicable, the Company or any Subsidiary Guarantor).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of this Indenture except as required by
Section 9.03 hereof; PROVIDED that in the event the Trust Indenture Act of 1939
is amended after such date, "TRUST INDENTURE ACT" means, to the extent required
by any such amendment, the Trust Indenture Act of 1939, as so amended.
"TRADE ACCOUNTS PAYABLE" means accounts payable or other obligations
of the Company or any Restricted Subsidiary to trade creditors created or
assumed by the Company or such Restricted Subsidiary in the ordinary course of
business in connection with the obtaining of goods or services.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"TRUST OFFICER" means any officer in the Corporate Trust Division of
the Trustee or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code
as in effect from time to time.
"UNRESTRICTED SUBSIDIARY" means (a) each Subsidiary of the Company
that the Company has designated pursuant to Section 4.15 as an Unrestricted
Subsidiary and (b) any Subsidiary of an Unrestricted Subsidiary.
"U.S. BANK CREDIT FACILITY" means the Second Amended and Restated
Credit Agreement dated as of January 31, 1997, as amended on April 1, 1997,
August 19, 1997, and September 26, 1997, among the Company, the Lenders named
therein and The Chase Manhattan Bank, as agent.
"VOLUMETRIC PRODUCTION PAYMENTS" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"VOTING STOCK" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar
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33
functions) of such Person whether at all times or only so long as no senior
class of securities has such voting power by reason of any contingency.
"WHOLLY OWNED SUBSIDIARY" means, at any time, a Restricted Subsidiary
of the Company all the Voting Stock of which (other than directors' qualifying
shares) is at such time owned, directly or indirectly, by the Company and its
other Wholly Owned Subsidiaries.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- ----------
"Additional Amounts" . . . . . . . . . . . . . . . . . . . 4.17
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . 6.01
"Change of Control Offer". . . . . . . . . . . . . . . . . 4.09
"Change of Control Payment". . . . . . . . . . . . . . . . 4.09
"Change of Control Payment Date" . . . . . . . . . . . . . 4.09
"Claiming Guarantor" . . . . . . . . . . . . . . . . . . . 11.02
"Contributing Party" . . . . . . . . . . . . . . . . . . . 11.02
"covenant defeasance option" . . . . . . . . . . . . . . . 8.01(b)
"Custodian". . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Event of Default" . . . . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds". . . . . . . . . . . . . . . . . . . . . 4.06
"Global Security". . . . . . . . . . . . . . . . . . . . . Appendix A
"legal defeasance option". . . . . . . . . . . . . . . . . 8.01(b)
"Legal Holiday". . . . . . . . . . . . . . . . . . . . . . 13.08
"Obligations". . . . . . . . . . . . . . . . . . . . . . . 11.01
"Offer Amount" . . . . . . . . . . . . . . . . . . . . . . 4.06
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . 4.06
"OID". . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"Original Securities". . . . . . . . . . . . . . . . . . . 2.01
"pay its Subsidiary Guaranty". . . . . . . . . . . . . . . 12.03
"pay the Securities" . . . . . . . . . . . . . . . . . . . 10.03
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . 2.04
"Payment Blockage Notice". . . . . . . . . . . . . . . . . 10.03
"Payment Blockage Period". . . . . . . . . . . . . . . . . 10.03
"Permitted Consideration". . . . . . . . . . . . . . . . . 4.06
"Prepayment Offer" . . . . . . . . . . . . . . . . . . . . 4.06
"Prepayment Offer Notice". . . . . . . . . . . . . . . . . 4.06
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34
Defined in
Term Section
---- ----------
"Purchase Date". . . . . . . . . . . . . . . . . . . . . . 4.06
"Registrar". . . . . . . . . . . . . . . . . . . . . . . . 2.04
"Successor Company". . . . . . . . . . . . . . . . . . . . 5.01
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer, the Company,
each Subsidiary Guarantor and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural
include the singular;
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35
(f) unsecured Indebtedness shall not be deemed to be subordinate or
junior to secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(g) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP; and
(h) the principal amount of any Preferred Stock shall be the greater
of (i) the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with respect to
such Preferred Stock.
ARTICLE II
THE SECURITIES
SECTION 2.01. AMOUNT OF SECURITIES; ISSUABLE IN SERIES. The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is $200,000,000. All Securities shall be
identical in all respects other than issue price and issuance dates. The
Securities may be issued in one or more series; PROVIDED, HOWEVER, that any
Securities issued with original issue discount ("OID") for Federal income tax
purposes shall not be issued as part of the same series as any Securities that
are issued with a different amount of OID or are not issued with OID. All
Securities of any one series shall be substantially identical except as to
denomination.
Subject to Section 2.03, the Trustee shall authenticate Securities for
original issue on the Issue Date in the aggregate principal amount of
$125,000,000 (the "Original Securities"). With respect to any Securities issued
after the Issue Date (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A), there shall be
established in or pursuant to a resolution of the Board of Directors of the
Company and, subject to Section 2.03, set forth or determined in the manner
provided in an Officers' Certificate, or established in one or more
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36
indentures supplemental hereto, prior to the issuance of such Securities:
(a) whether such Securities shall be issued as part of a new or
existing series of Securities and the title of such Securities (which shall
distinguish the Securities of the series from Securities of any other
series);
(b) the aggregate principal amount of such Securities which may be
authenticated and delivered under this Indenture, which shall be in an
aggregate principal amount not to exceed $75,000,000 (except for Securities
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities of the same series pursuant
to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A and except for Securities
which, pursuant to Section 2.03, are deemed never to have been
authenticated and delivered hereunder);
(c) the issue price and issuance date of such Securities, including
the date from which interest on such Securities shall accrue;
(d) if applicable, that such Securities shall be issuable in whole or
in part in the form of one or more Global Securities and, in such case, the
respective depositories for such Global Securities, the form of any legend
or legends which shall be borne by any such Global Security in addition to
or in lieu of that set forth in Exhibit 1 to Appendix A and any
circumstances in addition to or in lieu of those set forth in Section 2.3
of Appendix A in which any such Global Security may be exchanged in whole
or in part for Securities registered, and any transfer of such Global
Security in whole or in part may be registered, in the name or names of
Persons other than the depository for such Global Security or a nominee
thereof; and
(e) if applicable, that such Securities shall not be issued in the
form of Initial Securities subject to Appendix A, but shall be issued in
the form of Exchange Securities as set forth in Exhibit A.
If any of the terms of any series are established by action taken
pursuant to a resolution of the Board of Directors of the Company, a copy of an
appropriate record of such action shall be certified by the Secretary or any
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Officers'
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37
Certificate or the trust indenture supplementary thereto setting forth the terms
of the series.
Notwithstanding anything to the contrary in this Section or otherwise
in this Indenture, there shall be allowed only one additional issuance of
Securities (other than Exchange Securities) after the Issue Date, whether such
Securities are of the same or a different series than the Original Securities,
and no such additional issuance shall be permitted after September 15, 2002.
SECTION 2.02. FORM AND DATING. Provisions relating to the Initial
Securities of each series and the Exchange Securities are set forth in Appendix
A, which is hereby incorporated in and expressly made a part of this Indenture.
The Initial Securities of each series, the Company Guarantee and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit 1 to
Appendix A which is hereby incorporated in and expressly made a part of this
Indenture. The Exchange Securities, the Company Guarantee and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is hereby incorporated in and expressly made a part of this Indenture.
The Securities of each series may have notations, legends or endorsements
required by law, stock exchange rule, agreements to which the Issuer or the
Company is subject, if any, or usage; PROVIDED that any such notation, legend or
endorsement is in a form reasonably acceptable to the Company. Each Security
shall be dated the date of its authentication. The terms of the Securities of
each series and the Company Guarantee set forth in Exhibit 1 to Appendix A and
Exhibit A are part of the terms of this Indenture.
SECTION 2.03. EXECUTION AND AUTHENTICATION. Two Officers shall sign
the Securities for the Issuer by manual or facsimile signature. The Issuer's
seal shall be impressed, affixed, imprinted or reproduced on the Securities and
may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Securities of any series (including the
Original Securities) executed by the Issuer to the Trustee for authentication,
together with a written order of the Issuer in the form of an Officers'
Certificate or an indenture
<PAGE>
38
supplemental hereto for the authentication and delivery of such Securities, and
the Trustee in accordance with such written order of the Issuer shall
authenticate and deliver such Securities.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Issuer to authenticate the Securities. Unless limited by the terms of
such appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as any Registrar, Paying Agent or agent for service of notices
and demands.
SECTION 2.04. REGISTRAR AND PAYING AGENT. The Issuer shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Issuer may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Issuer shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Issuer shall notify
the Trustee of the name and address of any such agent. If the Issuer fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Issuer, the Company or any domestically incorporated Wholly Owned Subsidiary may
act as Paying Agent, Registrar, co-registrar or transfer agent.
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to each due
date of the principal and interest on any Security, the Issuer or the Company
shall deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Issuer shall require each Paying Agent
(other than the Trustee) to agree in
<PAGE>
39
writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of, premium, if any, or interest on the Securities and
shall notify the Trustee of any default by the Issuer or the Company in making
any such payment. If the Issuer, the Company or a Wholly Owned Subsidiary acts
as Paying Agent, it shall segregate the money held by it as Paying Agent and
hold it as a separate trust fund. The Issuer at any time may require a Paying
Agent to pay all money held by it to the Trustee and to account for any funds
disbursed by the Paying Agent. Upon complying with this Section, the Paying
Agent shall have no further liability for the money delivered to the Trustee.
SECTION 2.06. SECURITYHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Issuer shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.07. REPLACEMENT SECURITIES. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that such
Security has been lost, destroyed or wrongfully taken, the Issuer shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Issuer, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Issuer and the Trustee to protect the Issuer, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Issuer and the Trustee may charge the
Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the Issuer.
SECTION 2.08. OUTSTANDING SECURITIES. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
as not outstanding. A Security does not cease to be outstanding because the
Issuer or an Affiliate of the Issuer holds
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40
the Security. All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Issuer, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Issuer receive proof satisfactory to them
that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal, premium, if any, and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. TEMPORARY SECURITIES. Until definitive Securities are
ready for delivery, the Issuer may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Issuer considers
appropriate for temporary Securities. Without unreasonable delay, the Issuer
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities.
SECTION 2.10. CANCELATION. The Issuer at any time may deliver
Securities to the Registrar for cancelation. The Trustee and the Paying Agent
shall forward to the Registrar any Securities surrendered to them for
registration of transfer, exchange or payment. The Registrar and no one else
shall cancel and destroy (subject to the record retention requirements of the
Exchange Act) all Securities surrendered for registration of transfer, exchange,
payment or cancelation and deliver a certificate of such destruction to the
Issuer unless the Issuer directs the Registrar to deliver canceled Securities to
the Issuer. The Issuer may not issue new Securities to replace Securities it
has redeemed, paid or delivered to the Registrar for cancelation.
SECTION 2.11. DEFAULTED INTEREST. If the Issuer or the Company
defaults in a payment of interest on the
<PAGE>
41
Securities, the Issuer or the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Issuer or the Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Issuer shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP NUMBERS. The Issuer in issuing the Securities
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
PROVIDED, HOWEVER, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE III
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE. If the Issuer elects to redeem
Securities pursuant to paragraph 6 or 7 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which such
redemption is being made.
The Issuer shall give each notice to the Trustee provided for in this
Section at least 45 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If less than
all the Securities are to be redeemed at any time, selection of Securities for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Securities are
listed, or, if the Securities are not so listed, on a pro rata basis, by lot or
<PAGE>
42
by such other method that the Trustee shall deem fair and appropriate. The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Issuer and the Company promptly of the
Securities or portions of Securities to be redeemed.
SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Issuer or the
Company shall mail a notice of redemption by first-class mail to each Holder of
Securities to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(e) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(f) that, unless the Issuer and the Company default in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date; and
(g) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Issuer's or the Company's request, the Trustee shall give the
notice of redemption in the Issuer's name and at the Issuer's expense. In such
event, the Issuer
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43
shall provide the Trustee with the information required by this Section.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of redemption). Failure to give notice or any defect in the notice
to any Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to the redemption
date, the Issuer or the Company shall deposit with the Paying Agent (or, if the
Issuer or the Company or a Wholly Owned Subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of and
accrued interest (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date that
is on or prior to the date of redemption) on all Securities to be redeemed on
that date other than Securities or portions of Securities called for redemption
which have been delivered by the Issuer to the Trustee for cancelation.
SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part, the Issuer shall execute and the Trustee
shall authenticate for the Holder (at the Issuer's expense) a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES. The Issuer or the Company shall
promptly pay the principal of and interest and Additional Amounts, if any, on
the Securities on the dates and in the manner provided in the Securities and in
this Indenture. Principal and interest shall be considered paid on the date due
if on such date the Trustee or the Paying Agent holds in accordance with this
Indenture money sufficient to pay timely all principal and interest then due and
the Trustee or the Paying Agent, as the case may be, is not prohibited from
paying such money to the
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44
Securityholders on that date pursuant to the terms of this Indenture.
The Issuer or the Company shall pay interest on overdue principal at
the rate specified therefor in the Securities, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC REPORTS. Notwithstanding that the Company may not
be required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall file with the SEC and provide the
Trustee and Holders of Securities with the annual reports and the information,
documents and other reports which are specified in Sections 13 and 15(d) of the
Exchange Act, and, with respect to the annual consolidated financial statements
only, a report thereon by the Company's independent auditors; PROVIDED, HOWEVER,
that the Company shall not be so obligated to file such information, documents
and reports with the SEC if the SEC does not permit such filings. The Issuer
and the Company shall comply with the other provisions of Section 314(a) of the
Trust Indenture Act.
SECTION 4.03. LIMITATION ON INDEBTEDNESS. The Company shall not, and
shall not permit any of its Restricted Subsidiaries to, directly or indirectly,
Incur any Indebtedness unless, after giving pro forma effect to the Incurrence
of such Indebtedness and the receipt and application of the proceeds thereof, no
Default or Event of Default would occur as a consequence of, or be continuing
following, such Incurrence and application and either (a) after giving pro forma
effect to such Incurrence and application, the Consolidated Interest Coverage
Ratio would exceed 2.5 to 1.0 or (b) such Indebtedness is Permitted
Indebtedness.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, make any Restricted Payment if, at the time of and after giving
effect to the proposed Restricted Payment, (i) any Default or Event of Default
would have occurred and be continuing, (ii) the Company could not Incur at least
$1.00 of additional Indebtedness pursuant to clause (a) of Section 4.03 or
(iii) the aggregate amount expended or
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45
declared for all Restricted Payments from the Issue Date would exceed the sum
(without duplication) of the following:
(A) 50% of the aggregate Consolidated Net Income of the Company
accrued on a cumulative basis commencing on the last day of the fiscal
quarter immediately preceding the Issue Date, and ending on the last day of
the fiscal quarter ending on or immediately preceding the date of such
proposed Restricted Payment (or, if such aggregate Consolidated Net Income
shall be a loss, minus 100% of such loss), plus
(B) the aggregate net cash proceeds, or the Fair Market Value of
Property other than cash, received by the Company on or after the Issue
Date from the issuance or sale (other than to a Subsidiary of the Company)
of Capital Stock of the Company or any options, warrants or rights to
purchase Capital Stock of the Company, plus
(C) the aggregate net cash proceeds, or the Fair Market Value of
Property other than cash, received by the Company as capital contributions
to the Company (other than from a Subsidiary of the Company) on or after
the Issue Date, plus
(D) the aggregate net cash proceeds received by the Company from the
issuance or sale (other than to any Subsidiary of the Company) on or after
the Issue Date of convertible Indebtedness that has been converted into or
exchanged for Capital Stock of the Company, together with the aggregate
cash received by the Company at the time of such conversion or exchange or
received by the Company from any such conversion or exchange of convertible
Indebtedness issued or sold (other than to any Subsidiary of the Company)
prior to the Issue Date, plus
(E) to the extent not otherwise included in the Company's Consolidated
Net Income, an amount equal to the net reduction in Investments made by the
Company and its Restricted Subsidiaries subsequent to the Issue Date in any
Person resulting from (1) payments of interest on debt, dividends,
repayments of loans or advances or other transfers or distributions of
Property, in each case to the Company or any Restricted Subsidiary from any
Person other than the Company or a Restricted Subsidiary, and in an amount
not to exceed the book value of such Investments previously made in such
Person that were treated as Restricted Payments, or (2) the designation of
any Unrestricted Subsidiary
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46
as a Restricted Subsidiary, and in an amount not to exceed the lesser of
(x) the book value of all Investments previously made in such Unrestricted
Subsidiary that were treated as Restricted Payments and (y) the Fair Market
Value of such Unrestricted Subsidiary, plus
(F) $25,000,000.
(b) The limitations set forth in paragraph (a) above will not prevent
the Company or any Restricted Subsidiary from making the following Restricted
Payments so long as, at the time thereof, no Default or Event of Default shall
have occurred and be continuing (except in the case of clause (i) below under
which the payment of a dividend is permitted):
(i) the payment of any dividend on Capital Stock or Redeemable Stock
of the Company or any Restricted Subsidiary within 60 days after the
declaration thereof, if at such declaration date such dividend could have
been paid in compliance with paragraph (a) above;
(ii) the repurchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any of its Subsidiaries held
by any current or former officers, directors or employees of the Company or
any of its Subsidiaries pursuant to the terms of agreements (including
employment agreements) or plans approved by the Company's Board of
Directors, including any such repurchase, redemption, acquisition or
retirement of shares of such Capital Stock that is deemed to occur upon the
exercise of stock options or similar rights if such shares represent all or
a portion of the exercise price or are surrendered in connection with
satisfying United States or Canadian Federal income tax obligations;
PROVIDED, HOWEVER, that the aggregate amount of such repurchases,
redemptions, acquisitions and retirements shall not exceed the sum of
(A) $1,000,000 in any 12-month period and (B) the aggregate net proceeds,
if any, received by the Company during such 12-month period from any
issuance of such Capital Stock pursuant to such agreements or plans;
(iii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock or Redeemable Stock of the Company or any
Restricted Subsidiary, in exchange for, or out of the aggregate net cash
proceeds of, a substantially concurrent
<PAGE>
47
issuance and sale (other than to a Subsidiary of the Company or an employee
stock ownership plan or trust established by the Company or any of its
Subsidiaries, for the benefit of their employees) of Capital Stock of the
Company;
(iv) the making of any principal payment on or the repurchase,
redemption, legal defeasance or other acquisition or retirement for value,
prior to any scheduled principal payment, scheduled sinking fund payment or
maturity, of any Subordinated Indebtedness (other than Redeemable Stock) in
exchange for, or out of the aggregate net cash proceeds of, a substantially
concurrent issuance and sale (other than to a Subsidiary of the Company or
an employee stock ownership plan or trust established by the Company or any
of its Subsidiaries, for the benefit of their employees) of Capital Stock
of the Company;
(v) the making of any principal payment on or the repurchase,
redemption, legal defeasance or other acquisition or retirement for value
of Subordinated Indebtedness in exchange for, or out of the aggregate net
cash proceeds of a substantially concurrent Incurrence (other than a sale
to a Subsidiary of the Company) of Subordinated Indebtedness so long as
such new Indebtedness is Permitted Refinancing Indebtedness and (A) has an
Average Life that is longer than the Average Life of the Securities and
(B) has a Stated Maturity for its final scheduled principal payment that is
more than one year after the Stated Maturity of the final scheduled
principal payment of the Securities; and
(vi) loans made to officers, directors or employees of the Company or
any Restricted Subsidiary approved by the Board of Directors (or a duly
authorized officer), the net cash proceeds of which are used solely (A) to
purchase common stock of the Company in connection with a restricted stock
or employee stock purchase plan, or to exercise stock options received
pursuant to an employee or director stock option plan or other incentive
plan, in a principal amount not to exceed the exercise price of such stock
options or (B) to refinance loans, together with accrued interest thereon,
made pursuant to item (A) of this clause (vi).
The actions described in clauses (i) and (ii) of this paragraph (b) shall be
included in the calculation of the amount of Restricted Payments. The actions
described in clauses (iii), (iv), (v) and (vi) of this paragraph (b)
<PAGE>
48
shall be excluded in the calculation of the amount of Restricted Payments;
PROVIDED that the net cash proceeds from any issuance or sale of Capital Stock
of the Company pursuant to such clauses (iii), (iv) or (vi) shall be excluded
from any calculations pursuant to clauses (B) or (C) under the immediately
preceding paragraph (a).
SECTION 4.05. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM
RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or restriction on
the legal right of any Restricted Subsidiary to (i) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Capital Stock
or Redeemable Stock, or pay any Indebtedness or other obligation owed, to the
Company or any other Restricted Subsidiary, (ii) make loans or advances to the
Company or any other Restricted Subsidiary or (iii) transfer any of its Property
to the Company or any other Restricted Subsidiary. Such limitation will not
apply (a) with respect to clauses (i), (ii) and (iii), to encumbrances and
restrictions (1) in Bank Credit Facilities and other agreements and instruments,
in each case as in effect on the Issue Date, (2) relating to Indebtedness of a
Restricted Subsidiary and existing at the time it became a Restricted Subsidiary
if such encumbrance or restriction was not created in anticipation of or in
connection with the transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or (3) which result from the renewal,
refinancing, extension or amendment of an agreement that is the subject of
clause (a) (1) or (2) above or clause (b) (1) or (2) below; PROVIDED that such
encumbrance or restriction is not materially less favorable to the Holders of
Securities than those under or pursuant to the agreement so renewed, refinanced,
extended or amended, and (b) with respect to clause (iii) only, to (1) any
restriction on the sale, transfer or other disposition of Property relating to
Indebtedness that is permitted to be Incurred and secured under Sections 4.03
and 4.10, (2) any encumbrance or restriction applicable to Property at the time
it is acquired by the Company or a Restricted Subsidiary, so long as such
encumbrance or restriction relates solely to the Property so acquired and was
not created in anticipation of or in connection with such acquisition,
(3) customary provisions restricting subletting or assignment of leases and
customary provisions in other agreements that restrict assignment of such
agreements or rights thereunder and (4) customary restrictions contained in
asset sale agreements limiting the transfer of such assets pending the closing
of such sale.
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49
SECTION 4.06. LIMITATION ON ASSET SALES. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, consummate any Asset Sale
unless (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the Property subject to such Asset Sale and (ii) all of the
consideration paid to the Company or such Restricted Subsidiary in connection
with such Asset Sale is in the form of cash, cash equivalents, Liquid
Securities, Exchanged Properties or the assumption by the purchaser of
liabilities of the Company (other than liabilities of the Company that are by
their terms subordinated to the Company Guarantee) or liabilities of any
Restricted Subsidiary that made such Asset Sale (other than liabilities of the
Issuer that are by their terms subordinated to the Securities or liabilities of
any Subsidiary Guarantor that are by their terms subordinated to such Subsidiary
Guarantor's Subsidiary Guarantee), in each case as a result of which the Company
and its remaining Restricted Subsidiaries are no longer liable for such
liabilities ("PERMITTED CONSIDERATION"); PROVIDED, HOWEVER, that the Company and
its Restricted Subsidiaries shall be permitted to receive Property other than
Permitted Consideration, so long as the aggregate Fair Market Value of all such
Property other than Permitted Consideration received from Asset Sales and held
by the Company and the Restricted Subsidiaries at any one time shall not exceed
10% of Adjusted Consolidated Net Tangible Assets.
The Net Available Cash from Asset Sales by the Company or a Restricted
Subsidiary may be applied by the Company or such Restricted Subsidiary, to the
extent the Company or such Restricted Subsidiary elects (or is required by the
terms of any Senior Indebtedness of the Issuer, the Company or a Subsidiary
Guarantor), to (i) prepay, repay or purchase Senior Indebtedness of the Issuer,
the Company or a Subsidiary Guarantor (in each case excluding Indebtedness owed
to the Company or an Affiliate of the Company other than Indebtedness owed by
the Issuer to 611852 Saskatchewan Ltd. pursuant to the Canadian Forest Credit
Facility), (ii) to reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net Available
Cash received by the Company or another Restricted Subsidiary) or (iii) purchase
Securities or purchase both Securities and one or more series or issues of other
Pari Passu Indebtedness on a pro rata basis (excluding Securities and Pari Passu
Indebtedness owned by the Company or an Affiliate of the Company).
(b) Any Net Available Cash from an Asset Sale not applied in
accordance with the preceding paragraph within
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50
365 days from the date of such Asset Sale shall constitute "Excess Proceeds".
When the aggregate amount of Excess Proceeds exceeds $10,000,000, an offer to
purchase Securities having an aggregate principal amount equal to the aggregate
amount of Excess Proceeds (the "PREPAYMENT OFFER") must be made by the Issuer or
the Company at a purchase price equal to 100% of the principal amount of such
Securities plus accrued and unpaid interest, if any, to the Purchase Date (as
defined) in accordance with the procedures (including prorating in the event of
oversubscription) set forth in this Indenture, but, if the terms of any Pari
Passu Indebtedness require that a Pari Passu Offer be made contemporaneously
with the Prepayment Offer, then the Excess Proceeds shall be prorated between
the Prepayment Offer and such Pari Passu Offer in accordance with the aggregate
outstanding principal amounts of the Securities and such Pari Passu
Indebtedness, and the aggregate principal amount of Securities for which the
Prepayment Offer is made shall be reduced accordingly. If the aggregate
principal amount of Securities tendered by Holders thereof exceeds the amount of
available Excess Proceeds, then such Excess Proceeds will be allocated pro rata
according to the principal amount of the Securities tendered and the Trustee
will select the Securities to be purchased in accordance with this Indenture.
To the extent that any portion of the amount of Excess Proceeds remains after
compliance with the second sentence of this paragraph and PROVIDED that all
Holders of Securities have been given the opportunity to tender their Securities
for purchase as described in the following paragraph in accordance with this
Indenture, the Company and its Restricted Subsidiaries may use such remaining
amount for purposes permitted by this Indenture and the amount of Excess
Proceeds will be reset to zero.
(c)(1) Within 30 days after the 365th day following the date of an
Asset Sale, the Company or the Issuer shall, if it is obligated to make an offer
to purchase the Securities pursuant to the preceding paragraph, send a written
Prepayment Offer notice, by first-class mail, to the Holders of the Securities
(the "PREPAYMENT OFFER NOTICE"), accompanied by such information regarding the
Company and its Subsidiaries as the Company believes will enable such Holders of
the Securities to make an informed decision with respect to the Prepayment Offer
(which at a minimum shall include (i) the most recently filed Annual Report on
Form 10-K (including audited consolidated financial statements) of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q of the Company
and any Current Report on Form 8-K of the Company filed subsequent to such
Quarterly Report, other than Current Reports describing Assets Sales otherwise
described
<PAGE>
51
in the offering materials, or corresponding successor reports (or, during any
time that the Company is not subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, corresponding reports prepared pursuant to
Section 4.02), (ii) a description of material developments in the Company's
business subsequent to the date of the latest such reports and (iii) if
material, appropriate pro forma financial information). The Prepayment Offer
Notice shall state, among other things, (i) that the Company or the Issuer is
offering to purchase Securities pursuant to the provisions of this Indenture,
(ii) that any Security (or any portion thereof) accepted for payment (and duly
paid on the Purchase Date) pursuant to the Prepayment Offer shall cease to
accrue interest on the Purchase Date, (iii) that any Securities (or portions
thereof) not properly tendered will continue to accrue interest, (iv) the
purchase price and purchase date, which shall be, subject to any contrary
requirements of applicable law, no less than 30 days nor more than 60 days after
the date the Prepayment Offer Notice is mailed (the "PURCHASE DATE"), (v) the
aggregate principal amount of Securities to be purchased, (vi) a description of
the procedures which Holders of Securities must follow in order to tender their
Securities and the procedures that Holders of Securities must follow in order to
withdraw an election to tender their Securities for payment and (vii) all other
instructions and materials necessary to enable Holders to tender Securities
pursuant to the Prepayment Offer.
(2) Not later than the date upon which written notice of a Prepayment
Offer is delivered to the Trustee as provided above, the Company shall deliver
to the Trustee an Officers' Certificate as to (i) the amount of the Prepayment
Offer (the "OFFER AMOUNT"), (ii) the allocation of the Net Available Cash from
the Asset Sales pursuant to which such Prepayment Offer is being made and
(iii) the compliance of such allocation with the provisions of Section 4.06(a).
On such date, the Issuer or the Company shall also irrevocably deposit with the
Trustee or with the Paying Agent (or, if the Issuer, the Company or a Wholly
Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) in
Permitted Short-Term Investments, maturing on the last day prior to the Purchase
Date or on the Purchase Date if funds are immediately available by open of
business, an amount equal to the Offer Amount to be held for payment in
accordance with the provisions of this Section. Upon the expiration of the
period for which the Prepayment Offer remains open (the "OFFER PERIOD"), the
Issuer or the Company shall deliver to the Trustee for cancelation the
Securities or portions thereof which have been properly tendered to and are to
be accepted by the Issuer or the Company. The
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52
Trustee shall, on or promptly after the Purchase Date, mail or deliver payment
to each tendering Holder in the amount of the purchase price. In the event that
the aggregate purchase price of the Securities delivered by the Issuer or the
Company to the Trustee is less than the Offer Amount, the Trustee shall deliver
the excess to the Issuer or the Company immediately after the expiration of the
Offer Period for application in accordance with this Section.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Issuer or the Company at the address specified in the notice at least three
Business Days prior to the Purchase Date. Holders shall be entitled to withdraw
their election if the Trustee, the Issuer or the Company receives not later than
one Business Day prior to the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Security
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Securities surrendered by Holders exceeds the Offer Amount, the Issuer
or the Company shall select the Securities to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000, or integral multiples thereof, shall be
purchased). Holders whose Securities are purchased only in part shall be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
(4) At the time the Issuer or the Company delivers Securities to the
Trustee which are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Issuer or the Company pursuant to and in accordance with the terms of this
Section 4.06. A Security shall be deemed to have been accepted for purchase at
the time the Trustee, directly or through an agent, mails or delivers payment
therefor to the surrendering Holder.
(d) The Company and the Issuer shall comply, to the extent
applicable, with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws or regulations thereunder to the extent such laws and
regulations are applicable in connection with the purchase of Securities as
described above. To the extent that the provisions of any securities laws or
regulations conflict with the provisions relating to the Prepayment Offer, the
Company or the Issuer shall comply with the applicable
<PAGE>
53
securities laws and regulations and shall not be deemed to have breached its
obligations described above by virtue thereof.
SECTION 4.07. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The
Company shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly, conduct any business or enter into any transaction or
series of transactions (including the sale, transfer, disposition, purchase,
exchange or lease of Property, the making of any Investment, the giving of any
Guarantee or the rendering of any service) with or for the benefit of any
Affiliate of the Company (other than the Company or a Restricted Subsidiary),
unless (i) such transaction or series of transactions is on terms no less
favorable to the Company or such Restricted Subsidiary than those that could be
obtained in a comparable arm's-length transaction with a Person that is not an
Affiliate of the Company or such Restricted Subsidiary, and (ii) with respect to
a transaction or series of transactions involving aggregate payments by or to
the Company or such Restricted Subsidiary having a Fair Market Value equal to or
in excess of (a) $1,000,000 but less than $7,5000,000, an Officer of the Company
or, in the case of any such transaction or series of transactions involving the
Issuer, an Officer of the Issuer, certifies that such transaction or series of
transactions complies with clause (i) of this paragraph, as evidenced by an
Officer's Certificate delivered to the Trustee, (b) $7,500,000 but less than
$30,000,000, the Board of Directors of the Company or, in the case of any such
transaction or series of transactions involving the Issuer, the Board of
Directors of the Issuer (including a majority of the disinterested members of
such Board of Directors) approves such transaction or series of transactions and
certifies that such transaction or series of transactions complies with
clause (i) of this paragraph, as evidenced by a certified resolution delivered
to the Trustee or (c) $30,000,000, (1) the Company or, in the case of any such
transaction or series of transactions involving the Issuer, the Issuer receives
from an independent, nationally recognized investment banking firm or appraisal
firm, in either case specializing or having a specialty in the type and subject
matter of the transaction (or series of transactions) at issue, a written
opinion that such transaction (or series of transactions) is fair, from a
financial point of view, to the Company or such Restricted Subsidiary and
(2) the Board of Directors of the Company or, in the case of any such
transaction or series of transactions involving the Issuer, the Board of
Directors of the Issuer (including a majority of the disinterested members of
such Board of Directors) approves such transaction or series of transactions and
certifies that
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54
such transaction or series of transactions complies with clause (i) of this
paragraph, as evidenced by a certified resolution delivered to the Trustee.
The limitations of the preceding paragraph do not apply to (i) the
payment of reasonable and customary regular fees to directors of the Company or
any of its Restricted Subsidiaries who are not employees of the Company or any
of its Restricted Subsidiaries, (ii) indemnities of officers and directors of
the Company or any Subsidiary consistent with such Person's charter, bylaws and
applicable statutory provisions, (iii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors of the Company, (iv) loans made (a) to
officers, directors or employees of the Company or any Restricted Subsidiary
approved by the Board of Directors (or by a duly authorized officer) of the
Company, the proceeds of which are used solely to purchase common stock of the
Company in connection with a restricted stock or employee stock purchase plan,
or to exercise stock options received pursuant to an employee or director stock
option plan or other incentive plan, in a principal amount not to exceed the
exercise price of such stock options, or (b) to refinance loans, together with
accrued interest thereon, made pursuant to this clause (iv), (v) advances and
loans to officers, directors and employees of the Company or any Subsidiary;
PROVIDED such loans and advances (excluding loans or advances made pursuant to
the preceding clause (iv)) do not exceed $5,000,000 at any one time outstanding,
(vi) any Restricted Payment permitted to be paid pursuant to Section 4.04,
(vii) any transaction or series of transactions between the Company and one or
more Restricted Subsidiaries or between two or more Restricted Subsidiaries in
the ordinary course of business; PROVIDED that no more than 10% of the total
voting power of the Voting Stock of any such Restricted Subsidiary is owned by
an Affiliate of the Company (other than a Restricted Subsidiary), (viii) the
payment of Indebtedness outstanding under, or the extension, revision, amendment
or modification of, or any Guarantee of, the Canadian Forest Credit Facility or
(ix) any transaction or series of transactions pursuant to any agreement or
obligation of the Company or any of its Restricted Subsidiaries in effect on the
Issue Date.
SECTION 4.08. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES. The Company shall not (a) permit any Restricted
Subsidiary to issue any Capital Stock or Redeemable Stock other than to the
Company or one of its Wholly Owned Subsidiaries or (b) permit any
<PAGE>
55
Person other than the Company or a Wholly Owned Subsidiary to own any Capital
Stock or Redeemable Stock of any other Restricted Subsidiary (other than
directors' qualifying shares), except, in each case, for (i) the sale of the
Capital Stock or Redeemable Stock of a Restricted Subsidiary owned by the
Company or any other Restricted Subsidiary effected in accordance with
Section 4.06; (ii) the issuance of Capital Stock or Redeemable Stock by a
Restricted Subsidiary to a Person other than the Company or a Restricted
Subsidiary and (iii) the Capital Stock or Redeemable Stock of a Restricted
Subsidiary owned by a Person at the time such Restricted Subsidiary became a
Restricted Subsidiary or acquired by such Person in connection with the
formation of the Restricted Subsidiary, or transfers thereof; PROVIDED that the
Issuer shall at all times remain a Restricted Subsidiary; PROVIDED FURTHER that
any sale or issuance of Capital Stock of a Restricted Subsidiary shall be deemed
to be an Asset Sale to the extent the percentage of the total outstanding Voting
Stock of such Restricted Subsidiary owned directly and indirectly by the Company
is reduced as a result of such sale or issuance; PROVIDED FURTHER that if a
Person whose Capital Stock was issued or sold in a transaction described in this
paragraph is, as a result of such transaction, no longer a Restricted
Subsidiary, then the Fair Market Value of Capital Stock of such Person retained
by the Company and the other Restricted Subsidiaries shall be treated as an
Investment for purposes of Section 4.04. In the event of the consummation of a
sale of all the Capital Stock of a Restricted Subsidiary pursuant to the
foregoing clause (i) and the execution and delivery of a supplemental indenture
in form satisfactory to the Trustee, any such Restricted Subsidiary that is also
a Subsidiary Guarantor shall be released from all its obligations under its
Subsidiary Guaranty.
SECTION 4.09. CHANGE OF CONTROL. (a) Upon the occurrence of a
Change of Control, each Holder of Securities shall have the right to require the
Issuer to repurchase all or any part (equal to $1,000 in principal amount or an
integral multiple thereof) of such Holder's Securities pursuant to the offer
described below (the "CHANGE OF CONTROL OFFER") at a purchase price in cash
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of purchase, subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date (the "CHANGE OF CONTROL PAYMENT").
(b) Within 30 days following any Change of Control, the Issuer shall
mail a notice to each Holder stating, among other things: (i) that a Change of
Control
<PAGE>
56
has occurred and a Change of Control Offer is being made pursuant to this
Indenture and that all Securities (or portions thereof) properly tendered will
be accepted for payment; (ii) the purchase price and the purchase date, which
shall be, subject to any contrary requirements of applicable law, no fewer than
30 days nor more than 60 days from the date the Issuer mails such notice (the
"CHANGE OF CONTROL PAYMENT DATE"); (iii) that any Security (or portion thereof)
accepted for payment (and duly paid on the Change of Control Payment Date)
pursuant to the Change of Control Offer shall cease to accrue interest on the
Change of Control Payment Date; (iv) that any Securities (or portions thereof)
not properly tendered will continue to accrue interest; (v) a description of the
transaction or transactions constituting the Change of Control; (vi) the
procedures that Holders of Securities must follow in order to tender their
Securities (or portions thereof) for payment and the procedures that Holders of
Securities must follow in order to withdraw an election to tender Securities (or
portions thereof) for payment; and (vii) all other instructions and materials
necessary to enable Holders to tender Securities pursuant to the Change of
Control Offer. Prior to the mailing of the notice to Holders of Securities
described above, but in any event within 30 days following any Change of
Control, the Company covenants to (A) repay or cause to be repaid in full all
Indebtedness of the Company, the Issuer and any Subsidiary Guarantor that would
prohibit the repurchase of the Securities pursuant to such Change of Control
Offer or (B) obtain any requisite consents under instruments governing any such
Indebtedness of the Company, the Issuer and any Subsidiary Guarantor to permit
the repurchase of the Securities. The Company shall first comply with the
covenant in the preceding sentence before it shall repurchase Securities
pursuant to this covenant.
(c) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Issuer at the address specified in the notice at least three Business Days prior
to the Change of Control Payment Date. Holders shall be entitled to withdraw
their election if the Trustee or the Issuer receives not later than one Business
Day prior to the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Security
purchased.
(d) On or prior to the Change of Control Payment Date, the Issuer
shall irrevocably deposit with the Trustee or with the Paying Agent (or, if the
Issuer, the Company or
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57
any Wholly Owned Subsidiary is acting as the Paying Agent, segregate and hold in
trust) in cash an amount equal to the Change of Control Payment payable to the
Holders entitled thereto, to be held for payment in accordance with the
provisions of this Section.
(e) On the Change of Control Payment Date, the Issuer shall deliver to
the Trustee the Securities or portions thereof which have been properly tendered
to and are to be accepted by the Issuer for payment. The Trustee shall, on or
promptly after the Change of Control Payment Date, mail or deliver payment to
each tendering Holder of the Change of Control Payment. In the event that the
aggregate Change of Control Payment delivered by the Issuer to the Trustee is
less than the amount deposited with the Trustee, the Trustee shall deliver the
excess to the Issuer immediately after the Change of Control Payment Date.
(f) The Issuer shall not be required to make a Change of Control
Offer upon a Change of Control if a third party (including the Company or
another Subsidiary of the Company) makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Indenture applicable to a Change of Control Offer made by the Issuer and
purchases all Securities validly tendered and not withdrawn under such Change of
Control Offer.
(g) The Company and the Issuer will comply, to the extent applicable,
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the purchase of Securities in
connection with a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the provisions relating to the
Change of Control Offer, the Company and the Issuer will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations described above by virtue thereof.
SECTION 4.10. LIMITATION ON LIENS. The Company shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, enter into,
create, Incur, assume or suffer to exist any Lien on or with respect to any
Property of the Company or such Restricted Subsidiary, whether owned on the
Issue Date or acquired after the Issue Date, or any interest therein or any
income or profits therefrom, unless the Securities, the Company Guarantee or any
Subsidiary Guarantee of such Restricted Subsidiary, as applicable, are secured
equally and ratably with (or prior
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to) any and all other obligations secured by such Lien, except that the Company
and its Restricted Subsidiaries may enter into, create, incur, assume or suffer
to exist Liens securing Senior Indebtedness and Permitted Liens.
SECTION 4.11. COMPLIANCE CERTIFICATE. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Issuer and the Company also shall comply with TIA
Section 314(a)(4).
SECTION 4.12. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Issuer and the Company shall execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Indenture.
SECTION 4.13. FUTURE SUBSIDIARY GUARANTORS. The Company shall cause
each Restricted Subsidiary having an aggregate of $10,000,000 or more of
Indebtedness and Preferred Stock outstanding at any time to promptly execute and
deliver to the Trustee a Subsidiary Guarantee, PROVIDED that (a) Saxon Petroleum
Inc. shall not be required to execute and deliver a Subsidiary Guarantee until
such time as it becomes a Wholly Owned Subsidiary and (b) in determining the
outstanding Indebtedness and Preferred Stock for purposes of this covenant of
(i) Producers Marketing Limited, Indebtedness described in clause (g) of the
definition of Indebtedness shall be excluded and (ii) Forest I Development
Company ("FOREST DEVELOPMENT"), Indebtedness pursuant to the Production Payment
Agreement dated February 1, 1992, as amended on April 30, 1995, between Forest
Development and Bank of America, National Association, as successor to Strake
Jesuit College Preparatory, Inc. shall be excluded.
SECTION 4.14. INCURRENCE OF LAYERED INDEBTEDNESS. (a) The Issuer
shall not Incur any Indebtedness which is subordinated or junior in right of
payment to any Senior Indebtedness of the Issuer unless such Indebtedness
constitutes Indebtedness junior to, or PARI PASSU with, the Securities in right
of payment, (b) the Company shall not Incur any Indebtedness which is
subordinated or junior in right of payment to any Senior Indebtedness of the
Company unless such Indebtedness constitutes Indebtedness which is
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59
junior to, or PARI PASSU with, the Company Guarantee in right of payment and
(c) no Subsidiary Guarantor shall Incur any Indebtedness that is subordinated
or junior in right of payment to any Senior Indebtedness of such Subsidiary
Guarantor unless such Indebtedness constitutes Indebtedness which isjunior
to, or PARI PASSU with, such Subsidiary Guarantor's Subsidiary Guarantee in
right of payment.
SECTION 4.15. RESTRICTED AND UNRESTRICTED SUBSIDIARIES. Unless
defined or designated as an Unrestricted Subsidiary, any Person that becomes a
Subsidiary of the Company or any of its Restricted Subsidiaries shall be
classified as a Restricted Subsidiary subject to the provisions of the next
paragraph. The Company may designate a Subsidiary (other than the Issuer)
(including a newly formed or newly acquired Subsidiary) of the Company or any of
its Restricted Subsidiaries as an Unrestricted Subsidiary if (a) such Subsidiary
does not at such time own any Capital Stock or Indebtedness of, or own or hold
any Lien on any Property of, the Company or any other Restricted Subsidiary,
(b) such Subsidiary does not at such time have any Indebtedness or other
obligations which, if in default, would result (with the passage of time or
notice or otherwise) in a default on any Indebtedness of the Company or any
Restricted Subsidiary and (c)(i) such designation is effective immediately upon
such Subsidiary becoming a Subsidiary of the Company or of a Restricted
Subsidiary, (ii) the Subsidiary to be so designated has total assets of $1,000
or less or (iii) if such Subsidiary has assets greater than $1,000, then such
redesignation as an Unrestricted Subsidiary is deemed to constitute a Restricted
Payment in an amount equal to the Fair Market Value of the Company's direct and
indirect ownership interest in such Subsidiary and such Restricted Payment would
be permitted to be made at the time of such designation under Section 4.04.
Notwithstanding the foregoing, Saxon Petroleum Inc. (A) may be designated as an
Unrestricted Subsidiary until such time as it becomes a Wholly Owned Subsidiary
and (B) shall be designated as a Restricted Subsidiary at such time as it
becomes a Wholly Owned Subsidiary. Except as provided in the second sentence of
this paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary. The designation of an Unrestricted Subsidiary or removal of such
designation shall be made by the Board of Directors of the Company or a
committee thereof pursuant to a certified resolution delivered to the Trustee
and shall be effective as of the date specified in the applicable certified
resolution, which shall not be prior to the date such certified resolution is
delivered to the Trustee.
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The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, take any action or enter into any transaction or series of
transactions that would result in a Person becoming a Restricted Subsidiary
(whether through an acquisition or otherwise) unless, after giving effect to
such action, transaction or series of transactions, on a pro forma basis,
(i) the Company could Incur at least $1.00 of additional Indebtedness pursuant
to clause (a) of Section 4.03 and (ii) no Default or Event of Default would
occur or be continuing.
SECTION 4.16. THE ISSUER. The Company will ensure that the Issuer
remains a Restricted Subsidiary so long as any of the Securities remain
outstanding.
SECTION 4.17. ADDITIONAL AMOUNTS. (a) All payments made by the
Issuer under or with respect to the Securities, by the Company under or with
respect to the Company Guarantee and by any Subsidiary Guarantor under or with
respect to its Subsidiary Guarantee (the Issuer, the Company and any such
Subsidiary Guarantor being referred to for purposes of this Section individually
as an "OBLIGOR" and collectively as the "OBLIGORS") will be made free and clear
of, and without withholding or deduction for or on account of, any present or
future Taxes, unless the applicable Obligor or any successor, as the case may
be, is required to withhold or deduct Taxes by law or by the interpretation or
administration thereof by the relevant governmental authority or agency. If any
Obligor or any successor, as the case may be, is so required to withhold or
deduct any amount for or on account of Taxes from any payment made under or with
respect to the Securities, the Company Guarantee or any Subsidiary Guarantee,
such Obligor will pay such additional amounts as may be necessary so that the
net amount received by each Holder (including Additional Amounts) after such
withholding or deduction will not be less than the amount the Holder would have
received if such Taxes had not been withheld or deducted; PROVIDED that no
Additional Amounts will be payable with respect to a payment made to a Holder
(an "EXCLUDED HOLDER") in respect of a beneficial owner (i) with which the
Issuer does not deal at arm's-length (within the meaning of the Income Tax Act
(Canada)) at the time of making such payment or (ii) which is subject to such
Taxes by reason of its being connected with Canada or any province or territory
thereof otherwise than by the mere acquisition, holding or disposition of
Securities or the receipt of payments thereunder. The Obligors will also
(A) make such withholding or deduction and (B) remit the full amount deducted or
withheld to the relevant government authority in accordance with applicable law.
The Obligors will furnish to the Holders, within
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30 days after the date the payment of any Taxes is due pursuant to applicable
law, certified copies of tax receipts evidencing such payment. The Obligors
will, jointly and severally, indemnify and hold harmless each Holder (other than
an Excluded Holder) and upon written request reimburse each such Holder for the
amount of (1) any Taxes so levied or imposed and paid by such Holder as a result
of payments made under or with respect to the Securities, the Company Guarantee
or any Subsidiary Guarantee, (2) any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto, and (3) any Taxes
imposed with respect to any reimbursement under (1) or (2) so that the net
amount received by such Holder after such reimbursement will not be less than
the net amount the Holder would have received if Taxes on such reimbursement had
not been imposed.
(b) At least 30 days prior to each date on which any payment under or
with respect to the Securities is due and payable, if the Issuer will be
obligated to pay Additional Amounts with respect to such payment, the Issuer
will deliver to the Trustee an Officers' Certificate stating the fact that such
Additional Amounts will be payable, the amounts so payable and will set forth
such other information necessary to enable the Trustee to pay such Additional
Amounts to Holders on the payment date. Whenever in this Indenture there is
mentioned, in any context, the payment of principal (and premium, if any),
redemption price, Change of Control Payment, Prepayment Offer, purchase price,
interest or any other amount payable under or with respect to any Security, such
mention shall be deemed to include mention of the payment of Additional Amounts
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof.
(c) The Issuer will pay any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise in any jurisdiction from the execution, delivery, enforcement
or registration of the Securities or any other document or instrument in
relation thereto, or the receipt of any payments with respect to the Securities,
excluding such taxes, charges or similar levies imposed by any jurisdiction
outside of Canada, the jurisdiction of incorporation of any successor of the
Issuer or any jurisdiction in which a paying agent is located, and has agreed to
indemnify the Holders for any such taxes paid by such Holders.
(d) The foregoing obligations shall survive any termination,
defeasance or discharge of this Indenture and
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the payment of all amounts owing under or with respect to the Securities, the
Guarantee and any Subsidiary Guarantee.
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.01. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The Company
shall not consolidate with or merge with or into any Person, or convey, transfer
or lease, in one transaction or a series of transactions, all or substantially
all the Property of the Company and its Restricted Subsidiaries, taken as a
whole, unless:
(a) the resulting, surviving or transferee person (the "SUCCESSOR
COMPANY") shall be a Person organized or existing under the laws of (i) the
United States of America, any State thereof or the District of Columbia or
(ii) Canada or any province thereof;
(b) a supplemental indenture is executed and delivered to the Trustee,
in form satisfactory to the Trustee, by the Successor Company expressly
assuming, if the Successor Company is neither the Company nor the Issuer,
or confirming, if the Successor Company is the Company, the obligations of
the Company to pay the principal of and interest on the Securities pursuant
to the Company Guarantee and to perform all the covenants of the Company
under this Indenture;
(c) each Subsidiary Guarantor shall execute and deliver to the Trustee
a supplemental indenture, in form satisfactory to the Trustee, confirming
the obligation of such Subsidiary Guarantor to pay the principal of and
interest on the Securities pursuant to such Subsidiary Guarantor's
Subsidiary Guarantee;
(d) in the case of a conveyance, transfer or lease of all or
substantially all the Property of the Company and its Restricted
Subsidiaries, taken as a whole, such Property shall have been so conveyed,
transferred or leased as an entirety or virtually as an entirety to one
Person;
(e) immediately after giving effect to such transaction (and treating,
for purposes of this clause (e) and clauses (f) and (g) below, any
Indebtedness which becomes or is anticipated to become an obligation of the
Successor Company or any Restricted Subsidiary as a result of such
transaction
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as having been Incurred by such Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default or Event of Default
shall have occurred and be continuing;
(f) other than with respect to the consolidation of the Company with
or merger of the Company with or into, or the conveyance, transfer or lease
of all or substantially all the Property of the Company and its Restricted
Subsidiaries, taken as a whole, to, the Issuer or a Wholly Owned
Subsidiary, immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to clause (a) of Section 4.03;
(g) other than with respect to the consolidation of the Company with
or merger of the Company with or into, or the conveyance, transfer or lease
of all or substantially all the Property of the Company and its Restricted
Subsidiaries, taken as a whole, to, the Issuer or a Wholly Owned
Subsidiary, immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount that is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction;
(h) the Company shall have delivered to the Trustee an Officer's
Certificate, stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with this Indenture; and
(i) the Trustee shall have received an Opinion of Counsel to the
Company to the effect that such consolidation, merger, conveyance, transfer
or lease will not result in the Company (or the Successor Company, if the
Company is not the Successor Company) being required to make any deduction
for or on account of Taxes from payments made under or in respect of the
Company Guarantee.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of
the Company under this Indenture, and, except in the case of the lease of all or
substantially all the Property of the Company and its Restricted Subsidiaries,
taken as a whole, the Company shall be released from its obligations under the
Company Guarantee and this Indenture.
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SECTION 5.02. WHEN THE ISSUER MAY MERGE OR TRANSFER ASSETS. The
Issuer shall not consolidate with or merge with or into any Person, except that
the Issuer may consolidate with or merge into any Person so long as:
(a) the Successor Company shall be the Issuer, the Company or a Wholly
Owned Subsidiary;
(b) if the Company or a Wholly Owned Subsidiary is the Successor
Company, the Successor Company shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to
the Trustee, all the obligations of the Issuer to pay the principal of and
interest on the Securities and to perform all the covenants of the Issuer
under this Indenture (in which case the Successor Company shall be
considered as the issuer of the Securities);
(c) unless the Company shall be the Successor Company, the Company
shall have executed and delivered to the Trustee, in form satisfactory to
the Trustee, a supplemental indenture confirming the obligations of the
Company to pay the principal of and interest on the Securities pursuant to
the Company Guarantee and to perform all the covenants of the Company under
this Indenture;
(d) each Subsidiary Guarantor shall have executed and delivered to the
Trustee, in form satisfactory to the Trustee, a supplemental indenture
confirming such Subsidiary Guarantor's obligations to pay the principal of
and interest on the Securities pursuant to its Subsidiary Guarantee;
(e) the Successor Company (if not the Issuer) shall be a Person
organized or existing under the laws of (i) the United States of America,
any State thereof or the District of Columbia or (ii) Canada or any
province thereof;
(f) immediately after giving effect to such transaction (and treating,
for purposes of this clause (f) and clauses (g) and (h) below, any
Indebtedness which becomes or is anticipated to become an obligation of the
Issuer or any Restricted Subsidiary as a result of such transaction as
having been Incurred by the Issuer or such Restricted Subsidiary at the
time of such transaction) no Default or Event of Default shall have
occurred or be continuing;
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(g) other than with respect to the consolidation of the Issuer with or
the merger of the Issuer with or into the Company or a Wholly Owned
Subsidiary, immediately after giving effect to such transaction the Company
would be able to Incur an additional $1.00 of Indebtedness pursuant to
clause (a) of Section 4.03;
(h) other than with respect to the consolidation of the Issuer with or
the merger of the Issuer with or into the Company or a Wholly Owned
Subsidiary, immediately after giving effect to such transaction, the
Company shall have Consolidated Net Worth in an amount that is not less
than the Consolidated Net Worth of the Company immediately prior to such
transaction;
(i) the Issuer shall have delivered to the Trustee an Officer's
Certificate stating that such consolidation, merger or transfer complies
with this Indenture; and
(j) the Trustee shall have received an Opinion of Counsel in Canada to
the Issuer to the effect that such consolidation, merger, conveyance,
transfer or lease will not result in the Issuer (or the Successor Company,
if the Issuer is not the Successor Company) being required to make any
deduction for or on account of Taxes from payments made under or in respect
of the Securities.
The Issuer shall not convey, transfer or lease, in one transaction or
a series of transactions, any of its Property other than in a transaction or
series of transactions which comply with Section 4.06, PROVIDED that a
conveyance, transfer or lease of all or substantially all the Property of the
Issuer shall be subject to the provisions of the first paragraph of this
covenant to the extent that such transaction constitutes the conveyance,
transfer or lease of all or substantially all the Property of the Company and
its Restricted Subsidiaries, taken as a whole.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. The following events shall be
"Events of Default":
(a) the Issuer and the Company default in any payment of interest on
any Security when the same
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becomes due and payable, whether or not such payment shall be prohibited by
Article X, and such default continues for a period of 30 days;
(b) the Issuer and the Company default in the payment of the principal
(and premium, if any) of any Security when the same becomes due and payable
at its Stated Maturity, upon optional redemption, upon required repurchase,
upon declaration or otherwise, whether or not such payment shall be
prohibited by Article X;
(c) the Issuer or the Company fails to comply with Article V;
(d) default in the performance, or breach, of any covenant or warranty
of the Issuer, the Company or any Subsidiary Guarantor in this Indenture
(other than a covenant or warranty addressed in clauses (a), (b) or (c)
above) and continuance of such default or breach for a period of 60 days
after the notice specified below;
(e) default by the Company or any Restricted Subsidiary under any
Indebtedness for borrowed money (other than Nonrecourse Purchase Money
Indebtedness) of the Company or any Restricted Subsidiary which results in
acceleration of the maturity of such Indebtedness, or the failure to pay
such Indebtedness at maturity, in an amount greater than $5,000,000 or its
foreign currency equivalent at the time if such Indebtedness is not
discharged or such acceleration is not rescinded or annulled within 10 days
after the notice specified below;
(f) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in
an involuntary case;
(iii) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(iv) makes a general assignment for the benefit of its creditors
or files a proposal or other
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scheme of arrangement involving the rescheduling or composition of its
indebtedness; or
(v) files a petition in bankruptcy or an answer or consent
seeking reorganization or relief or consents to the filing of such
petition in bankruptcy or the appointment of or taking possession by a
Custodian;
or takes any comparable action under any foreign laws relating to
insolvency;
(g) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property;
(iii) orders the winding up or liquidation of the Company or any
Significant Subsidiary; or
(iv) any similar relief is granted under any foreign laws;
and in each such case the order or decree remains unstayed and in effect
for 60 days;
(h) one or more final judgments or orders by a court of competent
jurisdiction are entered against the Company or any Restricted Subsidiary
in an uninsured or unindemnified aggregate amount outstanding at any time
in excess of $5,000,000 and such judgments or orders are not discharged,
waived, stayed, satisfied or bonded for a period of 60 consecutive days;
(i) the Company Guarantee ceases to be in full force and effect (other
than in accordance with the terms of this Indenture and the Company
Guarantee) or the Company denies or disaffirms its obligations under the
Company Guarantee; or
(j) a Subsidiary Guaranty ceases to be in full force and effect (other
than in accordance with the terms of this Indenture and such Subsidiary
Guaranty) or a Subsidiary Guarantor denies or disaffirms its obligations
under its Subsidiary Guaranty.
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The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "BANKRUPTCY LAW" means Title 11, UNITED STATES CODE, or any
similar Federal or state law for the relief of debtors, or the Bankruptcy and
Insolvency Act (Canada), the Companies' Creditors Arrangements Act (Canada) or
any similar federal or provincial law in Canada for the relief of debtors. The
term "CUSTODIAN" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (d) is not an Event of Default until the
Trustee or the Holders of at least 25% in aggregate principal amount of the
outstanding Securities notify the Company in writing of such Default and the
Company does not cure such Default within the time specified after receipt of
such notice. Such notice must specify the Default, demand that it be remedied
and state that such notice is a "Notice of Default."
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default and any event which with the giving of notice or the lapse
of time would become an Event of Default, its status and what action the Company
is taking or proposes to take with respect thereto.
SECTION 6.02. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 6.01(f) or (g) with respect to the Issuer
or the Company) occurs and is continuing, the Trustee by notice to the Company,
or the Holders of at least 25% in aggregate principal amount of the Securities
by notice to the Company and the Trustee, may declare the principal of the
Securities to be due and payable. Upon such a declaration, such principal shall
be due and payable immediately. If an Event of Default specified in
Section 6.01(f) or (g) with respect to the Issuer or the Company occurs, the
principal of the Securities shall automatically and without any action by the
Trustee or any Holder, become immediately due and payable. The Holders of a
majority in aggregate principal amount of the outstanding Securities by notice
to the Trustee and the Company may rescind any declaration of acceleration if
the rescission would not conflict with any judgment or decree, and if all
existing Events of Default have been cured or
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waived except nonpayment of principal or interest that has become due solely
because of the acceleration. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in
aggregate principal amount of the Securities by notice to the Trustee may waive
an existing Default and its consequences except (a) a Default in the payment of
the principal of or interest on a Security or (b) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
aggregate principal amount of the Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee with respect to the
Securities. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or, subject to Section 7.01, that the
Trustee determines is unduly prejudicial to the rights of other Securityholders
or would involve the Trustee in personal liability; PROVIDED, HOWEVER, that the
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction. Prior to taking any action hereunder, the
Trustee shall be entitled to reasonable indemnity against all losses and
expenses caused by taking or not taking such action.
SECTION 6.06. LIMITATION ON SUITS. A Securityholder may not pursue
any remedy with respect to this Indenture or the Securities unless:
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(a) such Holder shall have previously given to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding shall have made a written request, and such
Holder of or Holders shall have offered reasonable indemnity, to the
Trustee to pursue such proceeding as trustee; and
(c) the Trustee has failed to institute such proceeding and has not
received from the Holders of at least a majority in aggregate principal
amount of the Securities outstanding a direction inconsistent with such
request, within 60 days after such notice, request and offer.
The foregoing limitations on the pursuit of remedies by a
Securityholder shall not apply to a suit instituted by a Holder of Securities
for the enforcement of payment of the principal of or interest on such Security
on or after the applicable due date specified in such Security. A
Securityholder may not use this Indenture to prejudice the rights of another
Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in this Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Issuer or the Company for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.07.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Issuer or the Company, their
creditors or their property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
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bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. PRIORITIES. If the Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness of the Issuer and Senior
Indebtedness of the Company to the extent required by Article X and Article
XII;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Issuer.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in aggregate principal amount of the Securities.
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SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. The Issuer and the
Company (to the extent they may lawfully do so) shall not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Issuer and the Company (to the extent that they may lawfully
do so) hereby expressly waive all benefit or advantage of any such law, and
shall not hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE VII
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
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(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuer or the
Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require
the Issuer or the Company to deliver an Officers' Certificate or an Opinion of
Counsel. The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on the Officers' Certificate or Opinion of
Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
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(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar or
co-registrar may do the same with like rights. However, the Trustee must comply
with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Issuer's
or the Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Issuer or the Company in this Indenture or
in any document issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to a Trust Officer, the Trustee shall mail to each
Securityholder notice of the Default within 30 days after it is known to a Trust
Officer or written notice of it is received by a Trust Officer. Except in the
case of a Default in payment of principal of or interest on any Security, the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of Securityholders. Where notice of the occurrence of any Default is
given by the Trustee under this Section and the Default is thereafter cured, the
Trustee, within 30 days after the curing of the Default is known to a Trust
Officer, shall mail to all Securityholders notice that the Default is no longer
continuing.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. As promptly as
practicable after each May 15 beginning with May 15, 1998, and in any event
prior to June 15 in each year, the Trustee shall mail to each Securityholder a
brief report dated as of May 15 each year that complies with TIA Section
313(a). The Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Issuer or the Company
shall pay to the Trustee from time to time reasonable compensation for its
services. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuer or the Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Issuer and the Company shall, jointly and
severally, indemnify the Trustee against any and all loss, liability or expense
(including attorneys' fees) incurred by it in connection with the acceptance and
administration of this trust and the performance of its duties hereunder. The
Trustee shall notify the Issuer and the Company promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Issuer and the
Company shall not relieve the Issuer and the Company of their obligations
hereunder. The Issuer or the Company shall defend the claim and the Trustee may
have separate counsel and the Issuer or the Company shall pay the fees and
expenses of such counsel. The Issuer and the Company need not reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own wilful misconduct, negligence or bad faith.
The Issuer and the Company need not pay for any settlement made by the Trustee
without the Issuer's or the Company's consent, such consent not to be
unreasonably withheld.
To secure the Issuer's and the Company's payment obligations in this
Section, the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee other than money or property held in
trust to pay principal of and interest on particular Securities.
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The Issuer's and the Company's payment obligations pursuant to this
Section shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 6.01(f) or (g),
the expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in aggregate
principal amount of the Securities may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. The Issuer or the Company shall
remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Issuer or the Company, or by
the Holders of a majority in aggregate principal amount of the Securities and
such Holders do not reasonably promptly appoint a successor Trustee, or if a
vacancy exists in the office of Trustee for any reason (the Trustee in such
event being referred to herein as the retiring Trustee), the Issuer and the
Company shall promptly appoint a successor Trustee. No successor Trustee shall
accept its appointment unless, at the time of such acceptance such successor
Trustee shall be qualified and eligible under this Article VII.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer and the Company.
Thereupon the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. The successor Trustee shall mail a
notice of its succession to Securityholders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
subject to the lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in aggregate principal amount of the Securities may petition any court of
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competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Issuer's and the Company's obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in
its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b); PROVIDED, HOWEVER, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Issuer are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
If at any time the Trustee shall cease to be eligible in accordance with this
Section, it shall resign promptly in the manner and with the effect specified
in this Article VII.
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SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE.
(a) When (i) the Issuer delivers to the Trustee all outstanding Securities
(other than Securities replaced pursuant to Section 2.07) for cancelation or
(ii) all outstanding Securities have become due and payable, whether at maturity
or as a result of the mailing of a notice of redemption pursuant to Article III
and the Issuer or the Company irrevocably deposits with the Trustee funds
sufficient to pay at maturity or upon redemption all outstanding Securities,
including interest thereon to maturity or such redemption date (other than
Securities replaced pursuant to Section 2.07), and if in either case the Issuer
or the Company pays all other sums payable hereunder, then this Indenture shall,
subject to Section 8.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the Issuer
or the Company accompanied by an Officers' Certificate and an Opinion of Counsel
and at the cost and expense of the Issuer or the Company, as the case may be.
(b) Subject to Sections 8.01(c) and 8.02, the Issuer at any time may
terminate (i) all its obligations under the Securities and this Indenture and
the obligations of the Company under the Company Guarantee ("LEGAL DEFEASANCE
OPTION") or (ii) the respective obligations of the Issuer and the Company under
Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.13, 4.14, 4.15
and 4.16 the operation of Sections 6.01(d) (to the extent relating to such other
Sections), 6.01(e), 6.01(f), 6.01(g), 6.01(h), 6.01(i) and 6.01(j) (but, in the
case of Sections 6.01(f) and (g), with respect only to Significant Subsidiaries
other than the Issuer), the obligations under Sections 5.01(f), 5.01(g), 5.02(g)
and 5.02(h) and the related operation of Section 6.01(c) ("COVENANT DEFEASANCE
OPTION"). The Issuer may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option.
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If the Issuer exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Issuer
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Sections 6.01(c) and
6.01(d) (with respect to the provisions of Articles 4 and 5 referred to in the
immediately preceding paragraph) and Sections 6.01(e), 6.01(f), 6.01(g),
6.01(h), 6.01(i) and 6.01(j) (but, in the case of Sections 6.01(f) and (g), with
respect only to Significant Subsidiaries other than the Issuer). If the Issuer
exercises its legal defeasance option or its covenant defeasance option, each
Subsidiary Guarantor, if any, shall be released from all its obligations under
its Subsidiary Guaranty.
Upon satisfaction of the conditions set forth herein and upon request
of the Issuer, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuer terminates.
(c) Notwithstanding clauses (a) and (b) above, the Issuer's and the
Company's obligations in Sections 2.04, 2.05, 2.06, 2.07, 4.17, 7.07, 7.08, 8.05
and 8.06 shall survive until the Securities have been paid in full. Thereafter,
the Issuer's and the Company's obligations in Sections 4.17, 7.07 and 8.05 shall
survive.
SECTION 8.02. CONDITIONS TO DEFEASANCE. The Issuer may exercise its
legal defeasance option or its covenant defeasance option only if:
(a) the Issuer or the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations for the payment of principal
of and interest on the Securities to maturity or redemption, as the case
may be;
(b) the Issuer or the Company delivers to the Trustee a certificate
from a nationally recognized firm of independent accountants expressing
their opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(c) 123 days pass after the deposit is made and during the 123-day
period no Default specified in
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Section 6.01(f) or (g) with respect to the Company occurs which is
continuing at the end of the period;
(d) the deposit does not constitute a default under any other
agreement binding on the Issuer or the Company and is not prohibited by
Article X;
(e) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(f) in the case of the legal defeasance option, (i) either the Issuer
or the Company shall have delivered to the Trustee an Opinion of Counsel in
the United States stating that (A) either the Issuer or the Company has
received from, or there has been published by, the Internal Revenue Service
a ruling, or (B) since the date of this Indenture there has been a change
in the applicable United States Federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Securityholders will not recognize income, gain or loss for
United States Federal income tax purposes as a result of such defeasance
and will be subject to United States Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such defeasance had not occurred and (ii) either the Issuer or the
Company shall have delivered to the Trustee an Opinion of Counsel in Canada
stating that Holders of the Securities will not recognize income, gain or
loss for Canadian federal, provincial or territorial income or other tax
purposes and will be subject to Canadian federal, provincial or territorial
income or other tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred;
(g) in the case of the covenant defeasance option, (i) either the
Issuer or the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States to the effect that the Securityholders will
not recognize income, gain or loss for United States Federal income tax
purposes as a result of such covenant defeasance and will be subject to
United States Federal income tax on the same amount, in the same manner and
at the same times as would have been the case if such covenant defeasance
had not occurred and (ii) either the Issuer or the Company shall have
delivered to the Trustee an Opinion of Counsel in
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Canada stating that Holders of the Securities will not recognize income,
gain or loss for Canadian federal, provincial or territorial income or
other tax purposes and will be subject to Canadian federal, provincial or
territorial income or other tax on the same amounts, in the same manner and
at the same times as would have been the case if such covenant defeasance
had not occurred; and
(h) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. APPLICATION OF TRUST MONEY. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article X.
SECTION 8.04. REPAYMENT TO ISSUER. The Trustee and the Paying Agent
shall promptly turn over to the Issuer upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Issuer upon request any money held by them for the
payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Issuer for
payment as general creditors.
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS. The Issuer or
the Company shall pay and the Issuer and the Company shall, jointly and
severally, indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason
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of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Issuer's and the Company's obligations under this Indenture and
the Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article VIII until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with this Article VIII; PROVIDED, HOWEVER, that, if the Issuer or the Company
has made any payment of interest on or principal of any Securities because of
the reinstatement of its obligations, the Issuer or the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE IX
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Issuer, the Company
and the Trustee may amend this Indenture or the Securities without notice to or
consent of any Securityholder:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to comply with Article V;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(d) to make any change in Article X or Article XII that would limit or
terminate the benefits available to any holder of Senior Indebtedness of
the Issuer, the Company or any Subsidiary Guarantor (or Representatives
therefor) under Article X or Article XII, respectively;
(e) to add or to remove Subsidiary Guarantors when permitted by the
terms hereof, or to secure the Securities;
(f) to add to the covenants of the Issuer or the Company for the
benefit of the Holders or to surrender any right or power herein conferred
upon the Company;
(g) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA; or
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(h) to make any change that does not adversely affect the rights of
any Securityholder in any material respect.
An amendment under this Section may not make any change that adversely
affects the rights under Article X or Article XII of any holder of Designated
Senior Indebtedness then outstanding unless the holders of such Designated
Senior Indebtedness (or their Representative) consent in writing to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.02. WITH CONSENT OF HOLDERS. The Issuer, the Company and
the Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities. However, without the
consent of each Securityholder affected thereby an amendment or waiver may not:
(a) reduce the amount of Securities whose Holders must consent to an
amendment or waiver;
(b) reduce the rate of or change the time for payment of interest on
any Security;
(c) reduce the principal of or extend the Stated Maturity of any
Security;
(d) reduce the premium payable upon the redemption or repurchase of
any Security in accordance with Article III or Section 4.06 or 4.09;
(e) at any time after a Change of Control or an Asset Sale has
occurred, change the time at which the Change of Control Offer or
Prepayment Offer relating thereto must be made or at which the Securities
must be repurchased pursuant to such Change of Control Offer or Prepayment
Offer;
(f) make any Security payable in a currency other than that stated in
the Security;
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(g) make any change in Article X or Article XII that adversely affects
the rights of any Securityholder under Article X or Article XII;
(h) make any change in any Subsidiary Guaranty that would adversely
affect the Securityholders;
(i) impair the right of any Holder to institute suit for enforcement
of any payment on or with respect to such Holder's Securities or any
Subsidiary Guaranty;
(j) release any security that may have been granted to the Trustee in
respect of the Securities;
(k) make any change in Section 6.04 or 6.07 or the second sentence of
this Section;
(l) cause the Issuer, the Company or any Subsidiary Guarantor to be
required to make any deduction or withholding from payments made under or
with respect to the Securities, the Company Guarantee or any Subsidiary
Guarantee; and
(m) make any modification to Section 4.17 that would adversely affect
the rights of the Holders of the Securities to receive Additional Amounts.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that adversely
affects the rights under Article X or Article XII of any holder of Designated
Senior Indebtedness then outstanding unless the holders of such Designated
Senior Indebtedness (or their Representative) consent in writing to such change.
After an amendment under this Section becomes effective, the Issuer or
the Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
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SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
An amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.
The Issuer may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Issuer or the Trustee so determines, the Issuer
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if such amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of
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Counsel of the Company stating that such amendment is authorized or permitted by
this Indenture.
SECTION 9.07. PAYMENT FOR CONSENT. Neither the Issuer nor the
Company nor any Affiliate of the Issuer or the Company shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid to all Holders
that so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
ARTICLE X
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE. The Issuer agrees, and each
Securityholder by accepting a Security agrees, that the Indebtedness evidenced
by the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article X, to the payment when due of all Senior
Indebtedness of the Issuer and that the subordination is for the benefit of and
enforceable by the holders of such Senior Indebtedness of the Issuer. The
Securities shall in all respects rank PARI PASSU with any future Pari Passu
Indebtedness of the Issuer and senior to any future Subordinated Indebtedness of
the Issuer, and only Senior Indebtedness of the Issuer shall rank senior to the
Securities in accordance with the provisions set forth herein. All provisions
of this Article 10 shall be subject to Section 10.12.
SECTION 10.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any
payment or distribution of the assets of the Issuer to creditors upon a total or
partial liquidation or a total or partial dissolution of the Issuer (other than
an a voluntary dissolution of the Issuer or merger of the Issuer into the
Company or any Wholly Owned Subsidiary solely for the purpose of permitting the
Company or such Wholly Owned Subsidiary to assume all obligations in respect of
the Securities as if it were the direct obligor with respect thereto and in
which all the assets of the Issuer are transferred to the Company or such Wholly
Owned Subsidiary and no material payment or distribution is made to creditors)
or in a bankruptcy, reorganization,
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insolvency, receivership or similar proceeding relating to the Issuer or its
Property:
(a) holders of Senior Indebtedness of the Issuer shall be entitled to
receive payment in full in cash of such Senior Indebtedness before
Securityholders shall be entitled to receive any payment of principal of or
interest on the Securities; and
(b) until such Senior Indebtedness is paid in full in cash, any
distribution made by or on behalf of the Issuer to which Securityholders
would be entitled but for this Article X shall be made to holders of such
Senior Indebtedness as their interests may appear, except that all
Securityholders may receive and retain shares of stock and any debt
securities that are subordinated to all Senior Indebtedness of the Issuer
to at least the same extent as the Securities.
SECTION 10.03. DEFAULT ON SENIOR INDEBTEDNESS. The Issuer may not
pay the principal of or interest on the Securities or make any deposit pursuant
to Section 8.01 and may not repurchase, redeem or otherwise retire any
Securities (collectively, "pay the Securities") if (a) any principal, interest
or other amounts due in respect of any Senior Indebtedness of the Issuer is not
paid within any applicable grace period (including at maturity) or (b) any other
default on Senior Indebtedness of the Issuer occurs and the maturity of such
Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, (i) the default has been cured or waived and any such acceleration
has been rescinded or (ii) such Senior Indebtedness has been paid in full;
PROVIDED, HOWEVER, that the Issuer may pay the Securities without regard to the
foregoing if the Issuer and the Trustee receive written notice approving such
payment from the Representative of each issue of Designated Senior Indebtedness
of the Issuer. During the continuance of any default (other than a default
described in clause (a) or (b) of the preceding sentence) with respect to any
Designated Senior Indebtedness of the Issuer pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration), the Issuer may not pay
the Securities for a period (a "PAYMENT BLOCKAGE PERIOD") commencing upon the
receipt by the Issuer or the Company and the Trustee of written notice of such
default from the Representative of the holders of such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period (a
"PAYMENT BLOCKAGE NOTICE") and ending 179 days after receipt of such notice by
the Issuer or the Company and the Trustee unless earlier terminated (a) by
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written notice to the Trustee and the Issuer or the Company from the
Representative who gave such Payment Blockage Notice, (b) because such
Designated Senior Indebtedness has been repaid in full or (c) because the
default giving rise to such Payment Blockage Notice is no longer continuing.
Notwithstanding the provisions described in the immediately preceding sentence,
unless the holders of such Designated Senior Indebtedness or the Representative
of such holders shall have accelerated the maturity of such Designated Senior
Indebtedness and not rescinded such acceleration, the Issuer may (unless
otherwise prohibited as described in the first sentence of this paragraph)
resume payments on the Securities after such Payment Blockage Period. No more
than one Payment Blockage Notice may be given in any consecutive 360-day period
regardless of the number of defaults with respect to one or more issues of
Senior Indebtedness of the Issuer.
SECTION 10.04. ACCELERATION OF PAYMENT OF SECURITIES. If payment of
the Securities is accelerated because of an Event of Default, the Issuer or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
of the Issuer (or their Representatives) of the acceleration. Failure to give
such notice shall not affect the subordination of the Securities to Senior
Indebtedness of the Issuer or the application of the other provisions of this
Article X.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a
distribution or payment is made to Securityholders, the Trustee or any Paying
Agent that because of this Article X should not have been made to them, such
Securityholders, the Trustee or such Paying Agent, as applicable, shall hold it
in trust for holders of Senior Indebtedness of the Issuer and promptly pay it
over to them as their interests may appear.
SECTION 10.06. SUBROGATION. After all Senior Indebtedness of the
Issuer is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to such Senior Indebtedness. A
distribution made under this Article X to holders of such Senior Indebtedness of
the Issuer which otherwise would have been made to Securityholders is not, as
between the Issuer and Securityholders, a payment by the Issuer on such Senior
Indebtedness.
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SECTION 10.07. RELATIVE RIGHTS. This Article X defines the relative
rights of Securityholders and holders of Senior Indebtedness of the Issuer.
Nothing in this Indenture shall:
(a) impair, as between the Issuer and Securityholders, the obligation
of the Issuer, which is absolute and unconditional, to pay principal of and
interest on the Securities in accordance with their terms; or
(b) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default or an Event of Default, subject to the
rights of holders of Senior Indebtedness of the Issuer to receive
distributions otherwise payable to Securityholders.
SECTION 10.08. SUBORDINATION MAY NOT BE IMPAIRED BY ISSUER. No right
of any holder of Senior Indebtedness of the Issuer to enforce the subordination
of the Indebtedness evidenced by the Securities shall be impaired by any act or
failure to act by the Issuer or by its failure to comply with this Indenture.
The holders of Senior Indebtedness of the Issuer may extend, renew, modify or
amend the terms of such Senior Indebtedness or any security therefor and
release, sell or exchange such security and otherwise deal freely with the
Issuer, all without affecting the liabilities and obligations of the parties to
this Indenture or the Holders.
SECTION 10.09. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer receives notice
that payments may not be made under this Article X. The Issuer, the Company,
the Registrar or co-registrar, the Paying Agent, a Representative or a holder of
Senior Indebtedness of the Issuer may give the notice; PROVIDED, HOWEVER, that,
if an issue of Senior Indebtedness of the Issuer has a Representative, only the
Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Issuer with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article X with respect to any Senior Indebtedness of the Issuer which may
at any time be
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held by it, to the same extent as any other holder of such Senior Indebtedness;
and nothing in Article VII shall deprive the Trustee of any of its rights as
such holder. Nothing in this Article X shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Issuer, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. ARTICLE X NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE. The failure to make a payment pursuant to the Securities
by reason of any provision in this Article 10 shall not be construed as
preventing the occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Securityholders or the Trustee to accelerate the
maturity of the Securities.
SECTION 10.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article VIII by the Trustee
for the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness of the Issuer or
subject to the restrictions set forth in this Article X, and none of the
Securityholders shall be obligated to pay over any such amount to the Issuer or
any holder of Senior Indebtedness of the Issuer or any other creditor of the
Issuer.
SECTION 10.13. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (a) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (b) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the
Securityholders or (c) upon the Representatives for the holders of Senior
Indebtedness of the Issuer for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of such Senior
Indebtedness and other Indebtedness of the Issuer, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article X. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior
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Indebtedness of the Issuer to participate in any payment or distribution
pursuant to this Article X, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article X, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article X.
SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Issuer as provided in this Article X and appoints the
Trustee as attorney-in-fact for any and all such purposes, including in the
event of any bankruptcy, insolvency or similar proceeding with respect to the
Issuer, the timely filing of a claim for the unpaid balance of his Securities in
the form required in said proceeding and the causing of such claim to be
approved. If the Trustee shall not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Indebtedness
of the Issuer or their Representative shall have the right to file an
appropriate claim for and on behalf of the Holders. Nothing herein contained
shall be deemed to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder, or to authorize the
Trustee or any holder of Senior Indebtedness of the Issuer or their
Representative to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Issuer and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to Securityholders, the
Issuer, the Company or any other Person, money or assets to which any holders of
Senior Indebtedness of the Issuer shall be entitled by virtue of this Article X
or otherwise. Nothing in this Article X
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shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.07.
SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Issuer, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness and such holder of
such Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
ARTICLE XI
GUARANTEES
SECTION 11.01. COMPANY GUARANTEE. The Company hereby unconditionally
guarantees to each Holder and to the Trustee and its successors and assigns
(a) the full and punctual payment of principal of and interest on the Securities
when due, whether at maturity, by acceleration, by redemption or otherwise, and
all other monetary obligations of the Issuer under this Indenture and the
Securities and (b) the full and punctual performance within applicable grace
periods of all other obligations of the Issuer under this Indenture and the
Securities (all the foregoing being hereinafter collectively called the
"OBLIGATIONS"). The Company further agrees that the Obligations may be extended
or renewed, in whole or in part, without notice or further assent from the
Company and that will remain bound under this Article XI notwithstanding any
extension or renewal of any Obligation.
The Company waives presentation to, demand of, payment from and
protest to the Issuer of any of the Obligations and also waives notice of
protest for nonpayment. The Company waives notice of any default under the
Securities or the Obligations. The obligations of the Company hereunder shall
not be affected by (i) the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any right or remedy against the Issuer or any
other Person under this Indenture, the Securities or any other agreement or
otherwise; (ii) any extension or renewal of any thereof; (iii) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
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Indenture, the Securities or any other agreement; (iv) the release of any
security held by any Holder or the Trustee for the Obligations or any of them;
(v) the failure of any Holder or the Trustee to exercise any right or remedy
against any other guarantor of the Obligations; or (vi) any change in the
ownership of the Company Guarantee.
The Company further agrees that its Guarantee herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by any
Holder or the Trustee to any security held for payment of the Obligations.
The Company Guarantee is, to the extent and in the manner set forth in
Article XII, subordinated and subject in right of payment to the prior payment
in full in cash of all Senior Indebtedness of the Company and the Company
Guarantee is made subject to such provisions of this Indenture.
Except as expressly set forth in Sections 8.01(b), 11.03 and 11.07,
the obligations of the Company hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Obligations
or otherwise. Without limiting the generality of the foregoing, the obligations
of the Company herein shall not be discharged or impaired or otherwise affected
by the failure of any Holder or the Trustee to assert any claim or demand or to
enforce any remedy under this Indenture, the Securities or any other agreement,
by any waiver or modification of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the obligations, or by any other act
or thing or omission or delay to do any other act or thing which may or might in
any manner or to any extent vary the risk of the Company or would otherwise
operate as a discharge of the Company as a matter of law or equity.
The Company further agrees that its Guarantee herein shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation is rescinded or
must otherwise be restored by any Holder or the Trustee upon the bankruptcy or
reorganization of the Company or the Issuer or otherwise.
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In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against the
Company by virtue hereof, upon the failure of the Issuer to pay the principal of
or interest on any Obligation when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, or to perform or comply
with any other Obligation, the Company hereby promises to and will, upon receipt
of written demand by the Trustee, forthwith pay, or cause to be paid, in cash,
to the Holders or the Trustee an amount equal to the sum of (A) the unpaid
amount of such Obligations, (B) accrued and unpaid interest on such Obligations
(but only to the extent not prohibited by law) and (C) all other monetary
Obligations of the Issuer to the Holders and the Trustee.
The Company agrees that it shall not be entitled to any right of
subrogation in respect of any Obligations guaranteed hereby until payment in
full of all Obligations and all obligations to which the Obligations are
subordinated as provided in Article XII. The Company further agrees that, as
between it, on the one hand, and the Holders and the Trustee, on the other hand,
(1) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article VI for the purposes of the Company Guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (2) in the
event of any declaration of acceleration of such obligations as provided in
Article VI, such Obligations (whether or not due and payable) shall forthwith
become due and payable by the Company for the purposes of this Section.
The Company also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing any rights under this Section.
SECTION 11.02. SUBSIDIARY GUARANTEE. Each Subsidiary Guarantor
hereby unconditionally guarantees, jointly and severally, to each Holder and to
the Trustee and its successors and assigns, the full and punctual payment,
and the full and punctual performance, of all the Obligations of the Issuer.
Each Subsidiary Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under
this Article XI notwithstanding any extension or renewal of any Obligation.
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Each Subsidiary Guarantor waives presentation to, demand of, payment
from and protest to the Issuer of any of the Obligations and also waives notice
of protest for nonpayment. Each Subsidiary Guarantor waives notice of any
default under the Securities or the Obligations. The obligations of each
Subsidiary Guarantor hereunder shall not be affected by (i) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Issuer or any other Person under this Indenture, the
Securities or any other agreement or otherwise; (ii) any extension or renewal of
any thereof; (iii) any rescission, waiver, amendment or modification of any of
the terms or provisions of this Indenture, the Securities or any other
agreement; (iv) the release of any security held by any Holder or the Trustee
for the Obligations or any of them; (v) the failure of any Holder or the Trustee
to exercise any right or remedy against any other guarantor of the Obligations;
or (vi) any change in the ownership of such Subsidiary Guarantor.
Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee
herein constitutes a guarantee of payment, performance and compliance when due
(and not a guarantee of collection) and waives any right to require that any
resort be had by any Holder or the Trustee to any security held for payment of
the Obligations.
Each Subsidiary Guarantee is, to the extent and in the manner set
forth in Article XII, subordinated and subject in right of payment to the prior
payment in full of all Senior Indebtedness of the Subsidiary Guarantor giving
such Subsidiary Guaranty and each Subsidiary Guaranty is made subject to such
provisions of this Indenture.
Except as expressly set forth in Sections 8.01(b), 11.03 and 11.07,
the obligations of each Subsidiary Guarantor hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and shall not
be subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Subsidiary Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any remedy under this Indenture, the
Securities or any other agreement, by any waiver or modification of any thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the obligations, or by any other act or thing
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or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of such Subsidiary Guarantor or would
otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law
or equity.
Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee
herein shall continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of principal of or interest on any
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Issuer, the Company or
otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Issuer to pay the
principal of or interest on any Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Obligation, each Subsidiary Guarantor hereby
promises to and will, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (A) the unpaid amount of such Obligations, (B) accrued and unpaid
interest on such Obligations (but only to the extent not prohibited by law) and
(C) all other monetary Obligations of the Issuer to the Holders and the Trustee.
Each Subsidiary Guarantor agrees that it shall not be entitled to any
right of subrogation in respect of any Obligations guaranteed hereby until
payment in full in cash of all Obligations and all obligations to which the
Obligations are subordinated as provided in Article XII. Each Subsidiary
Guarantor further agrees that, as between it, on the one hand, and the Holders
and the Trustee, on the other hand, (1) the maturity of the Obligations
guaranteed hereby may be accelerated as provided in Article VI for the purposes
of such Subsidiary Guarantor's Subsidiary Guarantee herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Obligations guaranteed hereby, and (2) in the event of any declaration of
acceleration of such obligations as provided in Article VI, such Obligations
(whether or not due and payable) shall forthwith become due and payable by such
Subsidiary Guarantor for the purposes of this Section.
Each Subsidiary Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys'
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fees) incurred by the Trustee or any Holder in enforcing any rights under this
Section.
SECTION 11.03. CONTRIBUTION. Each of the Issuer, the Company and any
Subsidiary Guarantor (each a "CONTRIBUTING PARTY") agrees (subject to Articles X
and XII) that, in the event a payment shall be made by the Company or any
Subsidiary Guarantor under the Company Guarantee or any Subsidiary Guarantee
(the "CLAIMING GUARANTOR"), each Contributing Party shall indemnify the Claiming
Guarantor in an amount equal to the amount of such payment multiplied by a
fraction, the numerator of which shall be the net worth of the Contributing
Party on the date hereof and the denominator of which shall be the aggregate net
worth of the Issuer, the Company and all the Subsidiary Guarantors on the date
hereof (or, in the case of any Subsidiary Guarantor becoming a party hereto
pursuant to Section 9.01, the date of the amendment hereto executed and
delivered by such Subsidiary Guarantor).
SECTION 11.04. SUCCESSORS AND ASSIGNS. This Article XI shall be
binding upon the Company and each Subsidiary Guarantor and each of their
respective successors and assigns and shall enure to the benefit of the
successors and assigns of the Trustee and the Holders and, in the event of any
transfer or assignment of rights by any Holder or the Trustee, the rights and
privileges conferred upon that party in this Indenture and in the Securities
shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 11.05. NO WAIVER. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article XI shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article XI at law,
in equity, by statute or otherwise.
SECTION 11.06. MODIFICATION. No modification, amendment or waiver of
any provision of this Article XI, nor the consent to any departure by the
Company or any Subsidiary Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Trustee, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on the Company or
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any Subsidiary Guarantor in any case shall entitle the Company or such
Subsidiary Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 11.07. EXECUTION OF SUPPLEMENTAL INDENTURE FOR FUTURE
SUBSIDIARY GUARANTORS. Each Subsidiary which is required to become a Subsidiary
Guarantor pursuant to Section 4.13 shall promptly execute and deliver to the
Trustee a supplemental indenture in the form of Exhibit B hereto pursuant to
which such Subsidiary shall become a Subsidiary Guarantor under this Article XI
and shall guarantee the Obligations. Concurrently with the execution and
delivery of such supplemental indenture, the Company shall deliver to the
Trustee an Opinion of Counsel to the effect that such supplemental indenture has
been duly authorized, executed and delivered by such Subsidiary and that,
subject to the application of bankruptcy, insolvency, moratorium, fraudulent
conveyance or transfer and other similar laws relating to creditors' rights
generally and to the principles of equity, whether considered in a proceeding at
law or in equity, the Subsidiary Guarantee of such Subsidiary Guarantor is a
legal, valid and binding obligation of such Subsidiary Guarantor, enforceable
against such Subsidiary Guarantor in accordance with its terms.
ARTICLE XII
SUBORDINATION OF GUARANTEES
SECTION 12.01. AGREEMENT TO SUBORDINATE. Each of the Company and
each Subsidiary Guarantor agrees, and each Securityholder by accepting a
Security agrees, that the Obligations of the Company and such Subsidiary
Guarantor are subordinated in right of payment, to the extent and in the manner
provided in this Article XII, to the payment when due of all Senior Indebtedness
of the Company and such Subsidiary Guarantor, as applicable, and that the
subordination is for the benefit of and enforceable by the holders of such
Senior Indebtedness. The Obligations of the Company and any Subsidiary
Guarantor shall in all respects rank PARI PASSU with any future Pari Passu
Indebtedness of the Company or such Subsidiary Guarantor and senior to any
future Subordinated Indebtedness of the Company or such Subsidiary Guarantor, as
applicable, and only Senior Indebtedness of the Company or such Subsidiary
Guarantor, as applicable, (including the Company's or such Subsidiary
Guarantor's Guarantee of Senior Indebtedness of the Issuer) shall rank senior to
the Obligations of such Subsidiary
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Guarantor in accordance with the provisions set forth herein.
SECTION 12.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any
payment or distribution of the assets of the Company or any Subsidiary Guarantor
to creditors upon a total or partial liquidation or a total or partial
dissolution of the Company or such Subsidiary Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or such Subsidiary Guarantor or its property:
(a) holders of Senior Indebtedness of the Company or such Subsidiary
Guarantor shall be entitled to receive payment in full in cash of such
Senior Indebtedness before Securityholders shall be entitled to receive any
payment pursuant to any Obligations of the Company or such Subsidiary
Guarantor; and
(b) until the Senior Indebtedness of the Company or any Subsidiary
Guarantor is paid in full in cash, any distribution made by or on behalf of
the Company or such Subsidiary Guarantor to which Securityholders would be
entitled but for this Article XII shall be made to holders of such Senior
Indebtedness as their interests may appear, except that Securityholders may
receive shares of stock and any debt securities of the Company or such
Subsidiary Guarantor that are subordinated to Senior Indebtedness of the
Company or such Subsidiary Guarantor, as applicable, to at least the same
extent as the Obligations of the Company or such Subsidiary Guarantor are
subordinated to Senior Indebtedness of the Company or such Subsidiary
Guarantor.
SECTION 12.03. DEFAULT ON SENIOR INDEBTEDNESS. Neither the Company
nor any Subsidiary Guarantor may make any payment pursuant to any of its
Obligations or repurchase, redeem or otherwise retire or defease any Securities
or other Obligations (collectively, "pay its Guarantee") if (a) any Senior
Indebtedness of the Company or such Subsidiary Guarantor, as applicable, is not
paid within any applicable grace period (including at maturity) or (b) any other
default on Senior Indebtedness of the Company or such Subsidiary Guarantor
occurs and the maturity of such Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, (i) the default has been cured or waived
and any such acceleration has been rescinded or (ii) such Senior Indebtedness
has been paid in full; PROVIDED, HOWEVER, that the Company or any Subsidiary
Guarantor may pay its Guarantee without regard to the
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foregoing if the Company or such Subsidiary Guarantor and the Trustee receive
written notice approving such payment from the Representatives of each issue of
Senior Indebtedness of the Company or such Subsidiary Guarantor, as applicable.
Neither the Company nor any Subsidiary Guarantor may pay its Guarantee during
the continuance of any Payment Blockage Period after receipt by the Issuer or
the Company and the Trustee of a Payment Blockage Notice under Section 10.03.
Notwithstanding the provisions described in the immediately preceding sentence,
unless the holders of Designated Senior Indebtedness giving such Payment
Blockage Notice or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness and not rescinded such
acceleration, the Company or any Subsidiary Guarantor may resume (unless
otherwise prohibited as described in the first sentence of this paragraph)
payments pursuant to its Guarantee after such Payment Blockage Period.
SECTION 12.04. DEMAND FOR PAYMENT. If a demand for payment is made
on the Company or a Subsidiary Guarantor pursuant to Section 11.01 or 11.02, the
Issuer, the Company or, upon notice to a Trust Officer of such demand, the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
(or their Representatives) of such demand. Failure to give such notice shall
not affect the subordination of the Company Guarantee or any Subsidiary
Guarantee to Senior Indebtedness of the Company or the applicable Subsidiary
Guarantor or the application of the other provisions of this Article XII.
SECTION 12.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a
distribution or payment is made to Securityholders, the Trustee or any Paying
Agent that because of this Article XII should not have been made to them, such
Securityholders, the Trustee or such Paying Agent, as applicable, shall hold it
in trust for holders of the relevant Senior Indebtedness and promptly pay it
over to them or their Representatives as their interests may appear.
SECTION 12.06. SUBROGATION. After all Senior Indebtedness of the
Company or a Subsidiary Guarantor is paid in full and until the Securities are
paid in full, Securityholders shall be subrogated to the rights of holders of
such Senior Indebtedness to receive distributions applicable to such Senior
Indebtedness. A distribution made under this Article XII to holders of such
Senior Indebtedness which otherwise would have been made to Securityholders is
not, as between the Company or the relevant Subsidiary Guarantor and
Securityholders, a payment
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by the Company or such Subsidiary Guarantor on such Senior Indebtedness.
SECTION 12.07. RELATIVE RIGHTS. This Article XII defines the
relative rights of Securityholders and holders of Senior Indebtedness of the
Company or a Subsidiary Guarantor. Nothing in this Indenture shall:
(a) impair, as between the Company or a Subsidiary Guarantor and
Securityholders, the obligation of the Company or such Subsidiary
Guarantor, which is absolute and unconditional, to pay the Obligations to
the extent set forth in Article XI or the Company Guarantee or the relevant
Subsidiary Guarantee; or
(b) prevent the Trustee or any Securityholder from exercising its
available remedies upon a default by the Company or such Subsidiary
Guarantor under the Obligations, subject to the rights of holders of Senior
Indebtedness of the Company or such Subsidiary Guarantor to receive
distributions otherwise payable to Securityholders.
SECTION 12.08. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No
right of any holder of Senior Indebtedness of the Company or any Subsidiary
Guarantor to enforce the subordination of the Obligations of the Company or such
Subsidiary Guarantor shall be impaired by any act or failure to act by the
Company or such Subsidiary Guarantor or by its failure to comply with this
Indenture. The holders of Senior Indebtedness of the Company or any Subsidiary
Guarantor may extend, renew, modify or amend the terms of such Senior
Indebtedness or any security therefor and release, sell or exchange such
security and otherwise deal freely with the Company or such Subsidiary
Guarantor, all without affecting the liabilities and obligations of the parties
to this Indenture or the Holders.
SECTION 12.09. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding
Section 12.03, the Trustee or Paying Agent may continue to make payments on the
Company Guarantee or any Subsidiary Guarantee and shall not be charged with
knowledge of the existence of facts that would prohibit the making of any such
payments unless, not less than two Business Days prior to the date of such
payment, a Trust Officer receives written notice that payments may not be made
under this Article XII. The Issuer, the Company, the relevant Subsidiary
Guarantor, the Registrar or co-registrar, the Paying Agent, a Representative or
a holder of Senior Indebtedness of the Company or any Subsidiary Guarantor may
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give the notice; PROVIDED, HOWEVER, that, if an issue of Senior Indebtedness of
the Company or any Subsidiary Guarantor has a Representative, only the
Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Company or any Subsidiary Guarantor with the same rights it
would have if it were not the Trustee. The Registrar and co-registrar and the
Paying Agent may do the same with like rights. The Trustee shall be entitled to
all the rights set forth in this Article XII with respect to any Senior
Indebtedness of the Company or any Subsidiary Guarantor which may at any time be
held by it, to the same extent as any other holder of such Senior Indebtedness;
and nothing in Article VII shall deprive the Trustee of any of its rights as
such holder. Nothing in this Article XII shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 7.07.
SECTION 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Company or any Subsidiary Guarantor, the distribution may be made and the
notice given to their Representative (if any).
SECTION 12.11. ARTICLE XII NOT TO PREVENT DEFAULTS UNDER A GUARANTEE
OR LIMIT RIGHT TO DEMAND PAYMENT. The failure to make a payment pursuant to the
Company Guarantee or a Subsidiary Guarantee by reason of any provision in this
Article XII shall not be construed as preventing the occurrence of a default
under the Company Guarantee or such Subsidiary Guaranty. Nothing in this
Article XII shall have any effect on the right of the Securityholders or the
Trustee to make a demand for payment on the Company or any Subsidiary Guarantor
pursuant to Article XI, the Company Guarantee or the relevant Subsidiary
Guarantee.
SECTION 12.12. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article XII, the Trustee and the Securityholders
shall be entitled to rely (a) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (b) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the
Securityholders or (c) upon the Representatives for the holders of Senior
Indebtedness of the Company or any Subsidiary Guarantor for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the
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holders of such Senior Indebtedness and other indebtedness of the Company or
such Subsidiary Guarantor, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article XII. In the event that the Trustee determines, in good faith, that
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness of the Company or any Subsidiary Guarantor to participate in
any payment or distribution pursuant to this Article XII, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Indebtedness of the Company or such
Subsidiary Guarantor held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article XII, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article XII.
SECTION 12.13. TRUSTEE TO EFFECTUATE SUBORDINATION. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Company and any Subsidiary Guarantor as provided in
this Article XII and appoints the Trustee as attorney-in-fact for any and all
such purposes, including in the event of any bankruptcy, insolvency or similar
proceeding with respect to the Company or any Subsidiary Guarantor, the timely
filing of a claim for the unpaid balance of his Securities in the form required
in said proceeding and the causing of such claim to be approved. If the Trustee
shall not file a proper claim or proof of debt in the form required in such
proceeding prior to 30 days before the expiration of the time to file such claim
or claims, then the holders of the Senior Indebtedness of the Company or any
Subsidiary Guarantor or their Representative shall have the right to file an
appropriate claim for and on behalf of the Holders. Nothing herein contained
shall be deemed to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder, or to authorize the
Trustee or any holder of Senior Indebtedness of the Company or any Subsidiary
Guarantor or their Representative to vote in respect of the claim of any Holder
in any such proceeding.
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SECTION 12.14. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Company or any Subsidiary Guarantor and
shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Securityholders or the Issuer or any other Person, money or assets
to which any holders of such Senior Indebtedness shall be entitled by virtue of
this Article XII or otherwise.
SECTION 12.15. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Company and any Subsidiary Guarantor, whether such Senior
Indebtedness was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively
to have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Indebtedness.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. TRUST INDENTURE ACT CONTROLS. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. NOTICES. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail or sent by
facsimile (with a hard copy delivered in person or by mail promptly thereafter)
and addressed as follows:
if to the Issuer, the Company or any Subsidiary Guarantor:
Forest Oil Corporation
1600 Broadway
Denver, CO 80202
Telecopy No: (303) 812-1602
Attention of Daniel L. McNamara
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105
if to the Trustee:
State Street Bank and
Trust Company
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention of Corporate Trust Division
The Issuer, the Company or any Subsidiary Guarantor, on the one hand,
or the Trustee, on the other hand, by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Issuer, the Company, the Trustee, the Registrar and anyone else
shall have the protection of TIA Section 312(c).
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuer or the Company to the Trustee to
take or refrain from taking any action under this Indenture, the Issuer or the
Company, as the case may be, shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in
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106
the opinion of such counsel, all such conditions precedent have been
complied with.
SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(a) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. WHEN SECURITIES DISREGARDED. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Issuer, the Company or by
any Person directly or indirectly controlling or controlled by or under direct
or indirect common control with the Issuer or the Company shall be disregarded
and deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
SECTION 13.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar, the Paying Agent and any co-registrar may make reasonable rules
for their functions.
SECTION 13.08. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York
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107
or the city in which the Trustee's office which administers the Indenture is
located. If a payment date is a Legal Holiday, payment shall be made on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period. If a regular record date is a Legal Holiday, the
record date shall not be affected.
SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 13.10. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the Issuer, the Company or any Subsidiary
Guarantor shall not have any liability for any obligations of the Issuer or the
Company under the Securities or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder shall waive and release all such liability. The
waiver and release shall be part of the consideration for the issue of the
Securities.
SECTION 13.11. SUCCESSORS. All agreements of the Issuer and the
Company in this Indenture and the Securities shall bind their successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 13.12. MULTIPLE ORIGINALS. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 13.13. TABLE OF CONTENTS; HEADINGS. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION 13.14. CONSENT TO JURISDICTION AND SERVICE. (a) The Issuer
and the Company irrevocably submit to the jurisdiction of any United States
federal or state court located in the Borough of Manhattan in The City of New
York, New York over any suit, action or proceeding arising out of or relating to
this Indenture or any Security. The Issuer and the Company irrevocably waive,
to the fullest extent permitted by law, any objection which they may have
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108
to the laying of the venue of any such suit, action or proceeding brought in
such a court and any claim that any suit, action or proceeding brought in such a
court has been brought in an inconvenient forum. The Issuer agrees that final
judgment in any such suit, action or proceeding brought in such a court shall be
conclusive and binding upon the Issuer and may be enforced in the courts of
Canada (or any other courts to the jurisdiction of which the Issuer is subject)
by a suit upon such judgment, PROVIDED that service of process is effected upon
the Issuer in the manner specified in Section 13.14(b) hereof or as otherwise
permitted by law.
(b) As long as any of the Securities remain outstanding, the Issuer
and the Company will at all times have an authorized agent in the Borough of
Manhattan, The City of New York, New York upon whom process may be served in any
legal action or proceeding arising out of or relating to this Indenture or any
Security. Service of process upon such agent shall be deemed in every respect
effective service of process upon the Issuer or the Company in any such legal
action or proceeding. The Issuer and the Company each hereby irrevocably
appoints CT Corporation System, whose address is, as of the date hereof, 1633
Broadway, New York, New York 10019, as its agent for such purpose and covenants
and agrees that service of process in any such legal action or proceeding may be
made upon it at the office of such agent at said address (or at such other
address in the Borough of Manhattan, The City of New York, New York as the
Issuer or the Company may designate by written notice to the Trustee).
(c) The Issuer and the Company hereby consent to process being served
in any suit, action or proceeding of the nature referred to in Section 13.14(a)
and Section 13.14(b) hereof by service upon such agent. The Issuer and the
Company irrevocably waive, to the fullest extent permitted by law, all claim of
error by reason of any such service and agree that such service (i) shall be
deemed in every respect effective service of process upon the Issuer and the
Company in any such suit, action or proceeding and (ii) shall, to the fullest
extent permitted by law, be taken and held to be valid personal service.
(d) Nothing in this Section shall affect the right of the Trustee or
any Holder to serve process in any manner permitted by law or limit the right of
the Trustee to
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bring proceedings against the Issuer and the Company in the courts of any
jurisdiction or jurisdictions.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
CANADIAN FOREST OIL LTD.,
by /s/ Daniel L. McNamara
-------------------------------
Name: Daniel L. McNamara
Title: Vice President
FOREST OIL CORPORATION,
by /s/ Daniel L. McNamara
-------------------------------
Name: Daniel L. McNamara
Title: Secretary
STATE STREET BANK AND TRUST
COMPANY, as Trustee
by /s/ Kathy A. Larimore
-------------------------------
Name: Kathy A. Larimore
Title: Assistant Vice President
<PAGE>
APPENDIX A
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A, TO
CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S AND,
SUBJECT TO THE APPLICABLE PURCHASE AGREEMENT, TO INSTITUTIONAL ACCREDITED
INVESTORS.
PROVISIONS RELATING TO INITIAL SECURITIES
AND EXCHANGE SECURITIES
1. DEFINITIONS
1.1 DEFINITIONS
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Initial Security bearing,
if required, the restricted securities legend set forth in Section 2.3(d).
"Depository" means The Depository Trust Company, its nominees and
their respective successors.
"Exchange Securities" means the 8 3/4% Senior Subordinated Notes due
2007 to be issued pursuant to this Indenture in connection with a Registered
Exchange Offer or a Private Exchange pursuant to a Registration Agreement.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Salomon Brothers Inc; Lehman Brothers Inc.;
Chase Securities Inc.; and Morgan Stanley & Co. Incorporated.
"Initial Securities" means the 8 3/4% Senior Subordinated Notes due
2007, to be issued from time to time, in one or more series as provided for in
this Indenture.
"Original Securities" means Initial Securities in the aggregate
principal amount of $125,000,000 issued on September 29, 1997.
"Private Exchange" means the offer by the Issuer, pursuant to Section
2(f) of the Registration Agreement dated September 23, 1997, or pursuant to any
similar provision of any other Registration Agreement, to issue and deliver to
certain purchasers, in exchange for the Initial Securities held by such
purchasers as part of their initial distribution, a like aggregate principal
amount of Private Exchange Securities.
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2
"Private Exchange Securities" means the 8 3/4% Senior Subordinated
Notes due 2007 to be issued pursuant to this Indenture in connection with a
Private Exchange pursuant to a Registration Agreement.
"Purchase Agreement" means the Purchase Agreement dated September 23,
1997, between the Issuer, the Company and the Initial Purchasers relating to the
Original Securities, or any similar agreement relating to any future sale of
Initial Securities by the Issuer.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Issuer, pursuant to
a Registration Agreement, to certain Holders of Initial Securities, to issue and
deliver to such Holders, in exchange for the Initial Securities, a like
aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Registration Agreement" means the Registration Agreement dated
September 23, 1997, between the Issuer, the Company and the Initial Purchasers
relating to the Original Securities, or any similar agreement relating to any
additional Initial Securities.
"Securities" means the Initial Securities and the Exchange Securities,
treated as a single class.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depository), or any successor person thereto who
shall initially be the Trustee.
"Shelf Registration Statement" means a registration statement issued
by the Issuer in connection with the offer and sale of Initial Securities
pursuant to a Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities and any
other Securities that bear or are required to bear the legend set forth in
Section 2.3(d) hereto.
<PAGE>
3
1.2 OTHER DEFINITIONS
Defined in
Term SECTION
---- ----------
"Agent Members". . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
"Global Security". . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
"Regulation S" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Rule 144A". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
2. THE SECURITIES
2.1 FORM AND DATING
The Initial Securities will be offered and sold by the Issuer, from
time to time, pursuant to one or more Purchase Agreements. The Initial
Securities will be resold, initially only to QIBs in reliance on Rule 144A under
the Securities Act ("Rule 144A"), in reliance on Regulation S under the
Securities Act ("Regulation S") and, subject to the terms of the applicable
Purchase Agreement, to IAIs under Rule 501(a)(1),(2),(3) or (7) under the
Securities Act. Initial Securities may thereafter be transferred to, among
others, QIBs, purchasers in reliance on Regulation S and IAIs.
(a) GLOBAL SECURITIES. Initial Securities shall be issued initially
in the form of one or more permanent global Securities in definitive, fully
registered form without interest coupons with the global securities legend
and restricted securities legend set forth in Exhibit 1 hereto (each, a
"Global Security"), which shall be deposited on behalf of the purchasers of
the Initial Securities represented thereby with the Securities Custodian,
and registered in the name of the Depository or a nominee of the
Depository, duly executed by the Issuer and authenticated by the Trustee as
provided in this Indenture. The aggregate principal amount of the Global
Securities may from time to time be increased or decreased by adjustments
made on the records of the Trustee and the Depository or its nominee as
hereinafter provided.
(b) BOOK-ENTRY PROVISIONS. This Section 2.1(b) shall apply only to a
Global Security deposited with or on behalf of the Depository.
The Issuer shall execute and the Trustee shall, in accordance with
this Section 2.1(b) and pursuant to an order of the Issuer, authenticate
and deliver initially one or more Global Securities that (a) shall be
registered in the name of the Depository for such Global
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4
Security or Global Securities or the nominee of such Depository and
(b) shall be delivered by the Trustee to such Depository or pursuant to
such Depository's instructions or held by the Trustee as Securities
Custodian.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository or by the Trustee as Securities
Custodian or under such Global Security, and the Depository may be treated
by the Issuer, the Trustee and any agent of the Issuer or the Trustee as
the absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the
Trustee or any agent of the Issuer or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the
Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices of such Depository governing the exercise
of the rights of a holder of a beneficial interest in any Global Security.
(c) DEFINITIVE SECURITIES. Except as provided in Section 2.3 or 2.4,
owners of beneficial interests in Global Securities will not be entitled to
receive physical delivery of certificated Securities.
2.2 AUTHENTICATION. The Trustee shall authenticate and deliver:
(1) Original Securities for original issue in an aggregate principal amount of
$125,000,000, (2) additional Initial Securities, if and when issued, in an
aggregate principal amount of up to $75,000,000 and (3) Exchange Securities for
issue only in a Registered Exchange Offer or a Private Exchange pursuant to a
Registration Agreement, for a like principal amount of Initial Securities, upon
a written order of the Issuer signed by two Officers or by an Officer and either
an Assistant Treasurer or an Assistant Secretary of the Issuer. Such order
shall specify the amount of the Securities to be authenticated and the date on
which the original issue of Securities is to be authenticated and whether the
Securities are to be Initial Securities or Exchange Securities. The aggregate
principal amount of Securities outstanding at any time may not exceed
$200,000,000, except as provided in Section 2.08 of this Indenture.
Notwithstanding anything to the contrary in this Appendix or otherwise in this
Indenture, there shall be allowed only one additional issuance of Securities
after the Issue Date, whether such additional Securities are of the same or a
different series than the Original Securities.
<PAGE>
5
2.3 TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF DEFINITIVE
SECURITIES. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
PROVIDED, HOWEVER, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Issuer and the Registrar or
co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section 2.3(b)
or pursuant to clause (A), (B) or (C) below, and are accompanied by the
following additional information and documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse of the Security); or
(B) if such Definitive Securities are being transferred to the
Issuer, a certification to that effect (in the form set forth on the
reverse of the Security); or
(C) if such Definitive Securities are being transferred pursuant
to an exemption from registration in accordance with Rule 144 under
the Securities Act, (i) a certification to that effect (in the form
set forth on the reverse of the Security) and (ii) if the Issuer or
Registrar so requests, an opinion of counsel or other evidence
reasonably satisfactory to them as to the compliance with the
restrictions set forth in the legend set forth in Section 2.3(d)(i).
<PAGE>
6
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred (A) to a QIB
in accordance with Rule 144A, (B) to an IAI that has furnished to the
Trustee a signed letter containing certain representations and agreements
(the form of which letter can be obtained from the Trustee) or (C) outside
the United States in an offshore transaction within the meaning of
Regulation S and in compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an adjustment on its books and records
with respect to such Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security, such instructions to contain information regarding the Depositary
account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged pursuant to Section 2.4, the Issuer shall issue and the
Trustee shall authenticate, upon written order of the Issuer in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. (i) The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depository, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any)
<PAGE>
7
and the procedures of the Depository therefor. A transferor of a beneficial
interest in a Global Security shall deliver a written order given in accordance
with the Depository's procedures containing information regarding the
participant account of the Depository to be credited with a beneficial interest
in the Global Security and such account shall be credited in accordance with
such instructions with a beneficial interest in the Global Security and the
account of the Person making the transfer shall be debited by an amount equal to
the beneficial interest in the Global Security being transferred. In the case
of a transfer of a beneficial interest in a Global Security to an IAI, the
transferee must furnish a signed letter to the Trustee containing certain
representations and agreements (the form of which letter can be obtained from
the Trustee).
(ii) If the proposed transfer is a transfer of a beneficial interest
in one Global Security to a beneficial interest in another Global Security,
the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Security to which such
interest is being transferred in an amount equal to the principal amount of
the interest to be so transferred, and the Registrar shall reflect on its
books and records the date and a corresponding decrease in the principal
amount of Global Security from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix A (other
than the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(iv) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.4 prior to the
consummation of a Registered Exchange Offer or the effectiveness of a Shelf
Registration Statement with respect to such Securities, such Securities may
be exchanged only in accordance with such procedures as are substantially
consistent with the provisions of this Section 2.3 (including the
certification requirements set forth on the reverse of the Initial
Securities intended to ensure that such transfers comply with Rule 144A,
Regulation S or such other applicable exemption from registration under the
Securities Act, as the case may be) and such other
<PAGE>
8
procedures as may from time to time be adopted by the Issuer.
(d) LEGEND.
(i) Except as permitted by the following paragraphs (ii), (iii), (iv)
and (vi), each Security certificate evidencing the Global Securities and
the Definitive Securities (and all Securities issued in exchange therefor
or in substitution thereof) shall bear a legend in substantially the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER AND THE
INITIAL PURCHASERS OF THIS SECURITY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND
ANNIVERSARY OF THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO)
OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE ISSUER AT ANY TIME
DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER
CASE OTHER THAN (1) TO THE ISSUER, (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY
THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON
THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY
THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON
THE REVERSE OF THIS SECURITY), OTHER THAN IN CANADA OR TO OR FOR THE
BENEFIT OF A RESIDENT OF CANADA PRIOR TO 40 DAYS FOLLOWING THE
ORIGINAL ISSUE OF THE OFFERED NOTES EXCEPT PURSUANT TO A PROSPECTUS
QUALIFYING THE OFFERED NOTES FOR SALE UNDER THE SECURITIES LAWS OF ANY
PROVINCE OR TERRITORY OF CANADA OR AN EXEMPTION FROM THE PROSPECTUS
REQUIREMENTS OF SUCH LAWS, AND, IF SUCH TRANSFER IS BEING EFFECTED BY
CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW)
PRIOR TO THE EXPIRATION OF THE "40-DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A
<PAGE>
9
CERTIFICATE WHICH MAY BE OBTAINED FROM THE ISSUER OR THE TRUSTEE IS
DELIVERED BY THE TRANSFEREE TO THE ISSUER AND THE TRUSTEE, (4) TO AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY
THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON
THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR APPLICABLE CANADIAN SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS, AND A CERTIFICATE IN THE FORM ATTACHED TO
THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO THE ISSUER AND THE
TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY
NOT TRANSFER THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE
EXPIRATION OF THE "40-DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF
RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT)),
(5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR
(6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL
ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO
THE ISSUER AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS
THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS
SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF,
BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF
THE ISSUER THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT
PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER
THE SECURITIES ACT."
Each Definitive Security will also bear the following additional
legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION
AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM
<PAGE>
10
THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Security
that does not bear the legends set forth above and rescind any
restriction on the transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security that is
represented by a Global Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legends set forth above and
rescind any restriction on the transfer of such Transfer Restricted
Security,
in either case, if the Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144 (such certification
to be in the form set forth on the reverse of the Initial Security).
(iii) After a transfer of any Initial Securities during the period of
the effectiveness of a Shelf Registration Statement with respect to such
Initial Securities, all requirements pertaining to legends on such Initial
Security will cease to apply, the requirements requiring any such Initial
Security be issued in global form will cease to apply, and an Initial
Security in certificated or global form without legends will be available
to the transferee of the Holder of such Initial Securities upon exchange of
such transferring Holder's certificated Initial Security. Upon the
occurrence of any of the circumstances described in this paragraph, the
Issuer will deliver an Officers' Certificate to the Trustee instructing the
Trustee to issue Securities without legends.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which certain Holders of such
Initial Securities are offered Exchange Securities in exchange for their
Initial Securities, all requirements pertaining to such Initial Securities
that Initial Securities be issued in global
<PAGE>
11
form will cease to apply, and certificated Initial Securities with the
restricted securities legend set forth in Exhibit 1 hereto will be
available to Holders of such Initial Securities that do not exchange their
Initial Securities, and Exchange Securities in certificated or global form
will be available to Holders that exchange such Initial Securities in such
Registered Exchange Offer. Upon the occurrence of any of the circumstances
described in this paragraph, the Issuer will deliver an Officers'
Certificate to the Trustee instructing the Trustee to issue Securities
without legends.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities are
offered Private Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form will
continue to apply, and Private Exchange Securities in global form with the
Restricted Securities Legend set forth in Exhibit 1 hereto will be
available to Holders that exchange such Initial Securities in such Private
Exchange.
(vi) After the expiration of the "40-day restricted period" (within
the meaning of Rule 903(c)(3) of Regulation S), upon a sale or transfer of
any Initial Security acquired pursuant to Regulation S, all requirements
pertaining to legends on such Initial Security will cease to apply, the
requirements requiring any such Initial Security be issued in global form
will cease to apply, and an Initial Security in certificated or global form
without the Restricted Security Legend will be available to the transferee
of the Holder of such Initial Securities.
(e) CANCELATION OR ADJUSTMENT OF GLOBAL SECURITY. At such time as
all beneficial interests in a Global Security have either been exchanged for
certificated or Definitive Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to the Depository for cancelation or retained
and canceled by the Trustee. At any time prior to such cancelation, if any
beneficial interest in a Global Security is exchanged for certificated or
Definitive Securities, redeemed, repurchased or canceled, the principal amount
of Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
<PAGE>
12
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
(f) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
SECURITIES.
(i) To permit registrations of transfers and exchanges, the Issuer
shall execute and the Trustee shall authenticate certificated Securities,
Definitive Securities and Global Securities at the Registrar's or
co-registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge payable
in connection therewith (other than any such transfer taxes, assessments or
similar governmental charge payable upon exchange or transfer pursuant to
Section 3.06, 4.06, 4.09 and 9.05).
(iii) The Registrar or co-registrar shall not be required to register
the transfer of or exchange of any Security for a period beginning 15 days
before the mailing of a notice of an offer to repurchase Securities or 15
days before an interest payment date.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Issuer, the Company, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose name a
Security is registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and interest on such Security
and for all other purposes whatsoever, whether or not such Security is
overdue, and none of the Issuer, the Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar shall be affected by notice to the
contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(g) NO OBLIGATION OF THE TRUSTEE.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depository or other Person with respect to the accuracy of the records of
the
<PAGE>
13
Depository or its nominee or of any participant or member thereof, with
respect to any ownership interest in the Securities or with respect to the
delivery to any participant, member, beneficial owner or other Person
(other than the Depository) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or
made only to the registered Holders (which shall be the Depository or its
nominee in the case of a Global Security). The rights of beneficial owners
in any Global Security shall be exercised only through the Depository
subject to the applicable rules and procedures of the Depository. The
Trustee may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its members, participants and
any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depository participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 CERTIFICATED SECURITIES
(a) A Global Security deposited with the Depository or with the
Trustee as Securities Custodian pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount
of such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depository notifies the
Issuer and the Company that it is unwilling or unable to continue as a
Depository for such Global Security or if at any time Depository ceases to
be a "clearing agency" registered under the Exchange Act, and a successor
depositary is not appointed by the Issuer or the Company within 90 days of
such notice, or (ii) an Event of Default has occurred and is continuing or
(iii) the Issuer, in its sole discretion, notifies the Trustee in writing
that it
<PAGE>
14
elects to cause the issuance of certificated Securities under this
Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depository
to the Trustee, to be so transferred, in whole or from time to time in
part, without charge, and the Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Security, an equal aggregate
principal amount of certificated Initial Securities of authorized
denominations. Any portion of a Global Security transferred pursuant to
this Section shall be executed, authenticated and delivered only in
denominations of $1,000 and any integral multiple thereof and registered in
such names as the Depository shall direct. Any certificated Initial
Security delivered in exchange for an interest in the Global Security
shall, except as otherwise provided by Section 2.3(d), bear the restricted
securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under
this Indenture or the Securities.
(d) In the event of the occurrence of either of the events specified
in Section 2.4(a)(i), (ii) or (iii), the Issuer will promptly make
available to the Trustee a reasonable supply of certificated Securities in
definitive, fully registered form without interest coupons.
<PAGE>
EXHIBIT 1
to APPENDIX A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER AND THE INITIAL PURCHASERS OF
THIS SECURITY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR A
PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE
ISSUER AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER,
IN EITHER CASE OTHER THAN (1) TO THE ISSUER, (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), OTHER THAN IN CANADA OR TO OR FOR THE BENEFIT OF A RESIDENT OF CANADA
PRIOR TO 40 DAYS
<PAGE>
2
FOLLOWING THE ORIGINAL ISSUE OF THE OFFERED NOTES EXCEPT PURSUANT TO A
PROSPECTUS QUALIFYING THE OFFERED NOTES FOR SALE UNDER THE SECURITIES LAWS OF
ANY PROVINCE OR TERRITORY OF CANADA OR AN EXEMPTION FROM THE PROSPECTUS
REQUIREMENTS OF SUCH LAWS, AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN
TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE
EXPIRATION OF THE "40-DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF
RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH
MAY BE OBTAINED FROM THE ISSUER OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO
THE ISSUER AND THE TRUSTEE, (4) TO AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT
OR APPLICABLE CANADIAN SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS,
AND A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE
TRANSFEREE TO THE ISSUER AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS
SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS
CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40-DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT)),
(5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT
WILL FURNISH TO THE ISSUER AND THE TRUSTEE SUCH CERTIFICATES AND OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF
THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE ISSUER
THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S.
PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING
THE REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.]
<PAGE>
[FORM OF FACE OF SECURITY]
No. $__________
8 3/4% Senior Subordinated Note due 2007
CUSIP No. ______
Canadian Forest Oil Ltd., an Alberta corporation, promises to pay
to , or registered assigns, the principal sum
of Dollars on September 15, 2007.
Interest Payment Dates: March 15 and September 15.
Record Dates: March 1 and September 1.
<PAGE>
2
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
CANADIAN FOREST OIL LTD.,
by
--------------------------
Name:
Title:
by
--------------------------
Name:
Title:
[CORPORATE SEAL]
TRUSTEE'S CERTIFICATE OF Dated:
AUTHENTICATION
STATE STREET BANK AND
TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By:_________________________
Authorized Signatory
<PAGE>
3
[FORM OF REVERSE SIDE OF SECURITY]
8 3/4% Senior Subordinated Note due 2007
1. INTEREST
(a) Canadian Forest Oil Ltd., an Alberta corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Issuer"), promises to pay interest on
the principal amount of this Security at the rate per annum shown above.
The Issuer will pay interest semiannually on March 15 and September 15 of
each year. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
September 29, 1997. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. The Issuer shall pay interest on overdue
principal at the rate borne by the Securities plus 1% per annum, and it
shall pay interest on overdue installments of interest at the same rate to
the extent lawful.
(b) SPECIAL INTEREST. The holder of this Security is entitled to the
benefits of a Registration Agreement, dated as of September 23, 1997, among
the Issuer, the Company and the Initial Purchasers named therein (the
"Registration Agreement"). Capitalized terms used in this paragraph (b)
but not defined herein have the meanings assigned to them in the
Registration Agreement. In the event that (i) neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement has been filed
with the Commission on or prior to the 60th day following the issuance of
the Securities, (ii) neither the Exchange Offer Registration Statement nor
the Shelf Registration Statement has been declared effective on or prior to
the 120th day following the date of the original issuance of the
Securities, (iii) neither the Registered Exchange Offer has been
consummated nor the Shelf Registration Statement has been declared
effective on or prior to the 150th day following the date of the original
issuance of the Securities, or (iv) after the Shelf Registration Statement
has been declared effective, such Registration Statement thereafter ceases
to be effective or usable in connection with resales of the Securities at
any time that the Issuer and the Company are obligated to maintain the
effectiveness thereof pursuant to the Registration Agreement (each such
event referred to in clauses (i) through (iv) above being
<PAGE>
4
referred to herein as a "Registration Default"), interest (the
"Special Interest") shall accrue (in addition to stated interest on the
Securities) from and including the date on which the first such
Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured, at a rate per annum equal to 0.50%
of the principal amount of the Securities; PROVIDED, HOWEVER, that such
rate per annum shall increase by 0.25% per annum from and including the
91st day after the first such Registration Default (and each successive
91st day thereafter) unless and until all Registration Defaults have been
cured; PROVIDED FURTHER, HOWEVER, that in no event shall the Special
Interest accrue at a rate in excess of 1.50% per annum. The Special
Interest will be payable in cash semiannually in arrears each March 15 and
September 15.
2. ADDITIONAL AMOUNTS
All payments made by the Issuer under or with respect to the
Securities, by the Company under or with respect to the Company Guarantee and by
any Subsidiary Guarantor under or with respect to its Subsidiary Guarantee (the
Issuer, the Company and any such Subsidiary Guarantor being referred to for
purposes of this paragraph individually as an "Obligor" and collectively as the
"Obligors") will be made free and clear of, and without withholding or deduction
for or on account of, any present or future tax, duty, levy, impost, assessment
or other governmental charge imposed or levied by or on behalf of the Government
of Canada or of any province or territory thereof or by any authority or agency
therein or thereof having power to tax (or the jurisdiction of incorporation of
any successor of any Obligor) (hereunder "Taxes"), unless the applicable Obligor
or any successor, as the case may be, is required to withhold or deduct Taxes by
law or by the interpretation or administration thereof by the relevant
governmental authority or agency. If any Obligor or any successor, as the case
may be, is so required to withhold or deduct any amount for or on account of
Taxes from any payment made under or with respect to the Securities, the Company
Guarantee or any Subsidiary Guarantee, such Obligor will pay such additional
amounts ("Additional Amounts") as may be necessary so that the net amount
received by each Holder (including Additional Amounts) after such withholding or
deduction will not be less than the amount the Holder would have received if
such Taxes had not been withheld or deducted; PROVIDED that no Additional
Amounts will be payable with respect to a payment made to a Holder (an "Excluded
Holder") in respect of a beneficial owner (a) with which the Issuer does not
deal at arm's-length (within the meaning of the Income Tax Act (Canada)) at the
time of making such payment or
<PAGE>
5
(b) which is subject to such Taxes by reason of its being connected with Canada
or any province or territory thereof otherwise than by the mere acquisition,
holding or disposition of Securities or the receipt of payments thereunder. The
Obligors will also (i) make such withholding or deduction and (ii) remit the
full amount deducted or withheld to the relevant government authority in
accordance with applicable law. The Obligors will furnish to the Holders,
within 30 days after the date the payment of any Taxes is due pursuant to
applicable law, certified copies of tax receipts evidencing such payment. The
Obligors will, jointly and severally, indemnify and hold harmless each Holder
(other than an Excluded Holder) and upon written request reimburse each such
Holder for the amount of (A) any Taxes so levied or imposed and paid by such
Holder as a result of payments made under or with respect to the Securities, the
Company Guarantee or any Subsidiary Guarantee, (B) any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto, and
(C) any Taxes imposed with respect to any reimbursement under (A) or (B) so that
the net amount received by such Holder after such reimbursement will not be less
than the net amount the Holder would have received if Taxes on such
reimbursement had not been imposed. At least 30 days prior to each date on
which any payment under or with respect to the Securities is due and payable, if
the Issuer will be obligated to pay Additional Amounts with respect to such
payment, the Issuer will deliver to the Trustee an Officers' Certificate stating
the fact that such Additional Amounts will be payable, the amounts so payable
and will set forth such other information necessary to enable the Trustee to pay
such Additional Amounts to Holders on the payment date. Whenever in this
Indenture there is mentioned, in any context, the payment of principal (and
premium, if any), redemption price, Change of Control Payment, Prepayment Offer,
purchase price, interest or any other amount payable under or with respect to
any Security, such mention shall be deemed to include mention of the payment of
Additional Amounts to the extent that, in such context, Additional Amounts are,
were or would be payable in respect thereof. The Issuer will pay any present or
future stamp, court or documentary taxes or any other excise or property taxes,
charges or similar levies that arise in any jurisdiction from the execution,
delivery, enforcement or registration of the Securities or any other document or
instrument in relation thereto, or the receipt of any payments with respect to
the Securities, excluding such taxes, charges or similar levies imposed by any
jurisdiction outside of Canada, the jurisdiction of incorporation of any
successor of the Issuer or any jurisdiction in which a paying agent is located,
and has agreed to indemnify the Holders for any such taxes paid by such Holders.
The foregoing obligations shall survive any termination, defeasance or discharge
of this
<PAGE>
6
Indenture and the payment of all amounts owing under or with respect to the
Securities, the Company Guarantee and any Subsidiary Guarantee.
3. METHOD OF PAYMENT
The Issuer will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the March 1 or September 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Issuer will pay principal and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Issuer will make all payments in
respect of a certificated Security (including principal, premium and interest),
by mailing a check to the registered address of each Holder thereof; PROVIDED,
HOWEVER, that payments on the Securities may also be made, in the case of a
Holder of at least $1,000,000 aggregate principal amount of Securities, by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).
4. PAYING AGENT AND REGISTRAR
Initially, Marine Midland Bank will act as Paying Agent and Registrar.
The Issuer may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Issuer, the Company or any domestically incorporated Wholly
Owned Subsidiary may act as Paying Agent, Registrar or co-registrar.
5. INDENTURE
The Issuer issued the Securities under an Indenture dated as of
September 29, 1997 (the "Indenture"), among the Issuer, the Company and State
Street Bank and Trust Company (the "Trustee"). The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb)
as in effect on the date of the Indenture
<PAGE>
7
(the "TIA"). Terms defined in the Indenture and not defined herein have the
meanings ascribed thereto in the Indenture. The Securities are subject to all
such terms, and Securityholders are referred to the Indenture and the TIA for a
statement of those terms.
The Securities are general unsecured obligations of the Issuer limited
to $200,000,000 aggregate principal amount at any one time outstanding (subject
to Sections 2.01 and 2.08 of the Indenture). [This Security is one of the
Original Securities referred to in the Indenture issued in an aggregate
principal amount of $125,000,000. The Securities include the Original
Securities, up to $75,000,000 aggregate principal amount of additional Initial
Securities that may be issued under the Indenture and any Exchange Securities
issued in exchange for Initial Securities. The Original Securities, such
additional Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture.] [This Security is one of up to
$75,000,000 aggregate principal amount of additional Initial Securities that may
be issued under the Indenture. The Securities include such additional
Securities, the Original Securities in an aggregate principal amount of
$125,000,000 previously issued under the Indenture and any Exchange Securities
issued in exchange for Initial Securities. The additional Initial Securities,
the Original Securities and the Exchange Securities are treated as a single
class of securities under the Indenture.] The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, make certain Investments and other Restricted Payments, pay
dividends and other distributions, incur Indebtedness, enter into consensual
restrictions upon the payment of certain dividends and distributions by such
Restricted Subsidiaries, issue or sell shares of capital stock of such
Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or incur Liens and make Asset Sales. The Indenture also
imposes limitations on the ability of the Company or the Issuer to consolidate
or merge with or into any other Person or convey, transfer or lease all or
substantially all of the Property of the Company or the Issuer.
To guarantee the due and punctual payment of the principal and
interest, if any, on the Securities and all other amounts payable by the Issuer
under the Indenture and the Securities when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Company and the Subsidiary
Guarantors will unconditionally guarantee the Obligations on a senior
subordinated basis pursuant to the terms of the Indenture.
<PAGE>
8
6. OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to September 15, 2002. On and after that date, the Issuer may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued and unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date that is on or prior to the date of
redemption), if redeemed during the 12-month period beginning on or after
September 15 of the years set forth below:
Redemption
PERIOD PRICE
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.375%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.917%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.458%
2005 and thereafter. . . . . . . . . . . . . . . . . . . . . . . 100.000%
Notwithstanding the foregoing, prior to September 15, 2000, the Issuer
may redeem, at any time or from time to time, up to 331/3% of the aggregate
principal amount of Securities originally issued, at a redemption price of
108.750% of the principal amount thereof plus accrued and unpaid interest, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of redemption) with the net proceeds of one
or more Equity Offerings of the Company, PROVIDED that at least 662/3% of the
aggregate principal amount of the Securities originally issued remains
outstanding after the occurrence of such redemption and PROVIDED, FURTHER, that
such redemption shall occur not later than 90 days after the date of the closing
of any such Equity Offering.
7. REDEMPTION FOR CHANGES IN CANADIAN WITHHOLDING TAXES
The Securities will also be subject to redemption as a whole, but not
in part, at the option of the Issuer at any time, on not less than 30 nor more
than 60 days' prior written notice, at 100% of the principal amount thereof,
plus accrued and unpaid interest thereon (if any) to the redemption date, in the
event that any Obligor (as defined in paragraph 2 above) has become, or would
become, obligated to pay, on the next date on which any amount would be payable
with respect to the Securities, any Additional Amounts as a result of a change
in the laws (including any regulations promulgated thereunder)
<PAGE>
9
of Canada (or any political subdivision or taxing authority thereof or therein),
or any change in any official position regarding the application or
interpretation of such laws or regulations, which change is announced or becomes
effective on or after the Issue Date; PROVIDED, HOWEVER, that (a) no such notice
of redemption shall be given earlier than 60 days prior to the earliest date on
which such Obligor would be obligated to pay such Additional Amounts if a
payment in respect of the Securities were then due, and (b) at the time any such
redemption notice is given, such obligation to pay Additional Amounts must
remain in effect. Prior to any redemption of the Securities, the Issuer shall
deliver to the Trustee or any paying agent an Officer's Certificate stating that
the Issuer is entitled to effect such redemption and setting forth a statement
of facts showing that the conditions precedent to the right of redemption have
occurred.
8. SINKING FUND
The Securities are not subject to any sinking fund.
9. NOTICE OF REDEMPTION
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
10. SUBORDINATION
The Securities are subordinated to Senior Indebtedness of the Issuer.
To the extent provided in the Indenture, Senior Indebtedness of the Issuer must
be paid before the Securities may be paid. In addition, the Company Guarantee
and each Subsidiary Guarantee is subordinated to Senior Indebtedness of the
Company and relevant Subsidiary Guarantor. The Issuer, the Company and each
Subsidiary Guarantor agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
<PAGE>
10
11. REPURCHASE OF SECURITIES AT THE OPTION OF HOLDERS UPON CHANGE OF CONTROL
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Issuer to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of purchase) as provided in, and subject to the terms of, the
Indenture.
12. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed or 15 days before an interest payment
date.
13. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of
it for all purposes.
14. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Issuer at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuer and not to the Trustee for payment.
15. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Issuer at any time may terminate
some of or all its obligations under the Securities and the Indenture if the
Issuer or the Company
<PAGE>
11
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal and interest on the Securities to redemption or maturity, as the
case may be.
16. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities and
(ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Issuer, the
Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or
the Securities (i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article V of the Indenture; (iii) to provide for
uncertificated Securities in addition to or in place of certificated Securities;
(iv) to make certain changes in the subordination provisions; (v) to add
Subsidiary Guaranties with respect to the Securities and to remove such
Subsidiary Guaranties as provided by the terms thereof; (vi) to secure the
Securities; (vii) to add additional covenants or to surrender rights and powers
conferred on the Issuer or the Company; (viii) to comply with the requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the TIA; or (ix) to make any change that does not adversely
affect the rights of any Securityholder.
17. DEFAULTS AND REMEDIES
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.
Holders of Securities may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power under
the Indenture. The Holders of a majority in aggregate principal amount of the
<PAGE>
12
Securities, by written notice to the Trustee and the Company, may rescind any
declaration of acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration.
18. TRUSTEE DEALINGS WITH THE ISSUER
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Issuer or its Affiliates and may otherwise deal with the Issuer or
its Affiliates with the same rights it would have if it were not Trustee.
19. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Issuer,
the Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Issuer under the Securities or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. By
accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Securities.
20. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
21. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
<PAGE>
13
22. GOVERNING LAW
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
23. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE ISSUER OR THE COMPANY WILL FURNISH TO ANY HOLDER OF SECURITIES
UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE
WHICH HAS IN IT THE TEXT OF THIS SECURITY.
<PAGE>
14
COMPANY GUARANTEE
For value received, the Company, as principal obligor and not merely
as surety, hereby unconditionally and irrevocably guarantees on an unsecured
senior subordinated basis to the Holder of this Security and to the Trustee and
its successors and assigns (a) the full and punctual payment of principal of,
premium, if any, and interest on this Security when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Issuer under the Indenture (including, without limitation, obligations to
the Trustee and the obligations to pay Special Interest, if any, and Additional
Amounts, if any) and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Issuer under the
Indenture and the Securities (all the foregoing being hereinafter collectively
called the "Obligations"). The Company further agrees that the Obligations may
be extended or renewed, in whole or in part, without notice or further assent
from the Company, and that the Company will remain bound by Article XI of the
Indenture notwithstanding any extension or renewal of any Obligation.
The obligations of the Company to the Holder of this Security and to
the Trustee pursuant to this Company Guarantee and the Indenture are expressly
set forth in the Indenture to which reference is hereby made for the precise
terms of such obligations.
This Company Guarantee is dated the date of the Security upon which it
is endorsed.
IN WITNESS WHEREOF, the Company has caused this Company Guarantee to
be duly executed.
FOREST OIL CORPORATION,
by
--------------------------
Name:
Title:
by
--------------------------
Name:
Title:
<PAGE>
15
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Issuer. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in
Rule 144(k) under the Securities Act after the later of the date of original
issuance of such Securities and the last date, if any, on which such Securities
were owned by the Issuer or any Affiliate of the Issuer, the undersigned
confirms that such Securities are being transferred in accordance with its
terms:
CHECK ONE BOX BELOW
(1) / / to the Issuer; or
(2) / / pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) / / inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
<PAGE>
16
(4) / / outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
(5) / / to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that
has furnished to the trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(6) / / pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any person
other than the registered holder thereof; PROVIDED, HOWEVER, that if
box (4), (5) or (6) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Issuer has reasonably requested
to confirm that such transfer is being made pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of the
Securities Act of 1933.
________________________
Your Signature
Signature Guarantee:
Date: _____________________ __________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
____________________________________________________________
<PAGE>
17
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Issuer as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
18
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:
Date of Amount of Amount of Principal Signature of
Exchange decrease in increase in amount of this authorized
Principal Principal Global signatory of
Amount of this Amount of this Security Trustee or
Global Global following such Securities
Security Security decrease or Custodian
increase
<PAGE>
19
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY THE
ISSUER PURSUANT TO SECTION 4.06 OR 4.09 OF THE INDENTURE, CHECK THE BOX:
/ /
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED
BY THE ISSUER PURSUANT TO SECTION 4.06 OR 4.09 OF THE INDENTURE, STATE THE
AMOUNT:
$
DATE: __________________ YOUR SIGNATURE: __________________
(SIGN EXACTLY AS YOUR NAME APPEARS
ON THE OTHER SIDE OF THE SECURITY)
SIGNATURE GUARANTEE:_______________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER
SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE
<PAGE>
EXHIBIT A
[FORM OF FACE OF SECURITY]
No. $__________
8 3/4% Senior Subordinated Note due 2007
CUSIP No. ______
Canadian Forest Oil Ltd., an Alberta corporation, promises to pay
to , or registered assigns, the principal sum
of Dollars on September 15, 2007.
Interest Payment Dates: March 15 and September 15.
Record Dates: March 1 and September 1.
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
CANADIAN FOREST OIL LTD.,
by
--------------------------
Name:
Title:
by
--------------------------
Name:
Title:
[CORPORATE SEAL]
<PAGE>
2
TRUSTEE'S CERTIFICATE OF Dated:
AUTHENTICATION
STATE STREET BANK
AND TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By:_________________________
Authorized Signatory
<PAGE>
3
[FORM OF REVERSE SIDE OF SECURITY]
8 3/4% Senior Subordinated Note due 2007
1. INTEREST
(a) Canadian Forest Oil Ltd., an Alberta corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Issuer"), promises to pay interest on
the principal amount of this Security at the rate per annum shown above.
The Issuer will pay interest semiannually on March 15 and September 15 of
each year. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
September 29. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Issuer shall pay interest on overdue principal
at the rate borne by the Securities plus 1% per annum, and it shall pay
interest on overdue installments of interest at the same rate to the extent
lawful.
(b) SPECIAL INTEREST. The holder of this Security is entitled to the
benefits of a Registration Agreement, dated as of September 23, 1997, among
the Issuer, the Company and the Initial Purchasers named therein (the
"Registration Agreement"). Capitalized terms used in this paragraph (b)
but not defined herein have the meanings assigned to them in the
Registration Agreement. In the event that (i) neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement has been filed
with the Commission on or prior to the 60th day following the issuance of
the Securities, (ii) neither the Exchange Offer Registration Statement nor
the Shelf Registration Statement has been declared effective on or prior to
the 120th day following the date of the original issuance of the
Securities, (iii) neither the Registered Exchange Offer has been
consummated nor the Shelf Registration Statement has been declared
effective on or prior to the 150th day following the date of the original
issuance of the Securities, or (iv) after the Shelf Registration Statement
has been declared effective, such Registration Statement thereafter ceases
to be effective or usable in connection with resales of the Securities at
any time that the Issuer and the Company are obligated to maintain the
effectiveness thereof pursuant to the Registration Agreement (each such
event referred to in clauses (i) through (iv) above being referred to
herein as a "Registration Default"), interest (the "Special Interest")
shall accrue (in addition to stated interest on
<PAGE>
4
the Securities) from and including the date on which the first such
Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured, at a rate per annum equal to 0.50%
of the principal amount of the Securities; PROVIDED, HOWEVER, that such
rate per annum shall increase by 0.25% per annum from and including the
91st day after the first such Registration Default (and each successive
91st day thereafter) unless and until all Registration Defaults have been
cured; PROVIDED FURTHER, HOWEVER, that in no event shall the Special
Interest accrue at a rate in excess of 1.50% per annum. The Special
Interest will be payable in cash semiannually in arrears each March 15 and
September 15.
2. ADDITIONAL AMOUNTS
All payments made by the Issuer under or with respect to the
Securities, by the Company under or with respect to the Company Guarantee and by
any Subsidiary Guarantor under or with respect to its Subsidiary Guarantee (the
Issuer, the Company and any such Subsidiary Guarantor being referred to for
purposes of this paragraph individually as an "Obligor" and collectively as the
"Obligors") will be made free and clear of, and without withholding or deduction
for or on account of, any present or future tax, duty, levy, impost, assessment
or other governmental charge imposed or levied by or on behalf of the Government
of Canada or of any province or territory thereof or by any authority or agency
therein or thereof having power to tax (or the jurisdiction of incorporation of
any successor of any Obligor) (hereunder "Taxes"), unless the applicable Obligor
or any successor, as the case may be, is required to withhold or deduct Taxes by
law or by the interpretation or administration thereof by the relevant
governmental authority or agency. If any Obligor or any successor, as the case
may be, is so required to withhold or deduct any amount for or on account of
Taxes from any payment made under or with respect to the Securities, the Company
Guarantee or any Subsidiary Guarantee, such Obligor will pay such additional
amounts ("Additional Amounts") as may be necessary so that the net amount
received by each Holder (including Additional Amounts) after such withholding or
deduction will not be less than the amount the Holder would have received if
such Taxes had not been withheld or deducted; PROVIDED that no Additional
Amounts will be payable with respect to a payment made to a Holder (an "Excluded
Holder") in respect of a beneficial owner (a) with which the Issuer does not
deal at arm's-length (within the meaning of the Income Tax Act (Canada)) at the
time of making such payment or (b) which is subject to such Taxes by reason of
its being connected with Canada or any province or territory thereof
<PAGE>
5
otherwise than by the mere acquisition, holding or disposition of Securities or
the receipt of payments thereunder. The Obligors will also (i) make such
withholding or deduction and (ii) remit the full amount deducted or withheld to
the relevant government authority in accordance with applicable law. The
Obligors will furnish to the Holders, within 30 days after the date the payment
of any Taxes is due pursuant to applicable law, certified copies of tax receipts
evidencing such payment. The Obligors will, jointly and severally, indemnify
and hold harmless each Holder (other than an Excluded Holder) and upon written
request reimburse each such Holder for the amount of (A) any Taxes so levied or
imposed and paid by such Holder as a result of payments made under or with
respect to the Securities, the Company Guarantee or any Subsidiary Guarantee,
(B) any liability (including penalties, interest and expenses) arising therefrom
or with respect thereto, and (C) any Taxes imposed with respect to any
reimbursement under (A) or (B) so that the net amount received by such Holder
after such reimbursement will not be less than the net amount the Holder would
have received if Taxes on such reimbursement had not been imposed. At least
30 days prior to each date on which any payment under or with respect to the
Securities is due and payable, if the Issuer will be obligated to pay Additional
Amounts with respect to such payment, the Issuer will deliver to the Trustee an
Officers' Certificate stating the fact that such Additional Amounts will be
payable, the amounts so payable and will set forth such other information
necessary to enable the Trustee to pay such Additional Amounts to Holders on the
payment date. Whenever in this Indenture there is mentioned, in any context,
the payment of principal (and premium, if any), redemption price, Change of
Control Payment, Prepayment Offer, purchase price, interest or any other amount
payable under or with respect to any Security, such mention shall be deemed to
include mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
The Issuer will pay any present or future stamp, court or documentary taxes or
any other excise or property taxes, charges or similar levies that arise in any
jurisdiction from the execution, delivery, enforcement or registration of the
Securities or any other document or instrument in relation thereto, or the
receipt of any payments with respect to the Securities, excluding such taxes,
charges or similar levies imposed by any jurisdiction outside of Canada, the
jurisdiction of incorporation of any successor of the Issuer or any jurisdiction
in which a paying agent is located, and has agreed to indemnify the Holders for
any such taxes paid by such Holders. The foregoing obligations shall survive
any termination, defeasance or discharge of this Indenture and the payment of
all amounts owing under or with
<PAGE>
6
respect to the Securities, the Company Guarantee and any Subsidiary Guarantee.
3. METHOD OF PAYMENT
The Issuer will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the March 1 or September 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Issuer will pay principal and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and interest)
will be made by wire transfer of immediately available funds to the accounts
specified by The Depository Trust Company. The Issuer will make all payments in
respect of a certificated Security (including principal, premium and interest),
by mailing a check to the registered address of each Holder thereof; PROVIDED,
HOWEVER, that payments on the Securities may also be made, in the case of a
Holder of at least $1,000,000 aggregate principal amount of Securities, by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).
4. PAYING AGENT AND REGISTRAR
Initially, Marine Midland Bank will act as Paying Agent and Registrar.
The Issuer may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Issuer, the Company or any domestically incorporated Wholly
Owned Subsidiary may act as Paying Agent, Registrar or co-registrar.
5. INDENTURE
The Issuer issued the Securities under an Indenture dated as of
September 29, 1997 (the "Indenture"), among the Issuer, the Company and State
Street Bank and Trust Company (the "Trustee"). The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb)
as in effect on the date of the Indenture (the "TIA"). Terms defined in the
Indenture and not defined
<PAGE>
7
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the TIA for a statement of those terms.
The Securities are general unsecured obligations of the Issuer limited
to $200,000,000 aggregate principal amount at any one time outstanding (subject
to Sections 2.01 and 2.08 of the Indenture). [This Security is one of the
Original Securities referred to in the Indenture issued in an aggregate
principal amount of $125,000,000. The Securities include the Original
Securities, up to $75,000,000 aggregate principal amount of additional Initial
Securities that may be issued under the Indenture and any Exchange Securities
issued in exchange for Initial Securities. The Original Securities, such
additional Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture.] [This Security is one of up to
$75,000,000 aggregate principal amount of additional Initial Securities that may
be issued under the Indenture. The Securities include such additional
Securities, the Original Securities in an aggregate principal amount of
$125,000,000 previously issued under the Indenture and any Exchange Securities
issued in exchange for Initial Securities. The additional Initial Securities,
the Original Securities and the Exchange Securities are treated as a single
class of securities under the Indenture.] The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, make certain Investments and other Restricted Payments, pay
dividends and other distributions, incur Indebtedness, enter into consensual
restrictions upon the payment of certain dividends and distributions by such
Restricted Subsidiaries, issue or sell shares of capital stock of such
Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or incur Liens and make Asset Sales. The Indenture also
imposes limitations on the ability of the Company or the Issuer to consolidate
or merge with or into any other Person or convey, transfer or lease all or
substantially all of the Property of the Company or the Issuer.
To guarantee the due and punctual payment of the principal and
interest, if any, on the Securities and all other amounts payable by the Issuer
under the Indenture and the Securities when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Company and the Subsidiary
Guarantors will unconditionally guarantee the Obligations on a senior
subordinated basis pursuant to the terms of the Indenture.
<PAGE>
8
6. OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to September 15, 2002. On and after that date, the Issuer may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued and unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date that is on or prior to the date of
redemption), if redeemed during the 12-month period beginning on or after
September 15 of the years set forth below:
Redemption
Period Price
- ------ ----------
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.375%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.917%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.458%
2005 and thereafter. . . . . . . . . . . . . . . . . . . . . . . 100.000%
Notwithstanding the foregoing, prior to September 15, 2000, the Issuer
may redeem, at any time or from time to time, up to 331/3% of the aggregate
principal amount of Securities originally issued, at a redemption price of
108.750% of the principal amount thereof plus accrued and unpaid interest, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of redemption) with the net proceeds of one
or more Equity Offerings of the Company, PROVIDED that at least 662/3% of the
aggregate principal amount of the Securities originally issued remains
outstanding after the occurrence of such redemption and PROVIDED, FURTHER, that
such redemption shall occur not later than 90 days after the date of the closing
of any such Equity Offering.
7. REDEMPTION FOR CHANGES IN CANADIAN WITHHOLDING TAXES
The Securities will also be subject to redemption as a whole, but not
in part, at the option of the Issuer at any time, on not less than 30 nor more
than 60 days' prior written notice, at 100% of the principal amount thereof,
plus accrued and unpaid interest thereon (if any) to the redemption date, in the
event that any Obligor (as defined in paragraph 2 above) has become, or would
become, obligated to pay, on the next date on which any amount would be payable
with respect to the Securities, any Additional Amounts as a result of a change
in the laws (including any regulations promulgated thereunder)
<PAGE>
9
of Canada (or any political subdivision or taxing authority thereof or therein),
or any change in any official position regarding the application or
interpretation of such laws or regulations, which change is announced or becomes
effective on or after the Issue Date; PROVIDED, HOWEVER, that (a) no such notice
of redemption shall be given earlier than 60 days prior to the earliest date on
which such Obligor would be obligated to pay such Additional Amounts if a
payment in respect of the Securities were then due, and (b) at the time any such
redemption notice is given, such obligation to pay Additional Amounts must
remain in effect. Prior to any redemption of the Securities, the Issuer shall
deliver to the Trustee or any paying agent an Officer's Certificate stating that
the Issuer is entitled to effect such redemption and setting forth a statement
of facts showing that the conditions precedent to the right of redemption have
occurred.
8. SINKING FUND
The Securities are not subject to any sinking fund.
9. NOTICE OF REDEMPTION
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his or her registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
10. SUBORDINATION
The Securities are subordinated to Senior Indebtedness of the Issuer.
To the extent provided in the Indenture, Senior Indebtedness of the Issuer must
be paid before the Securities may be paid. In addition, the Company Guarantee
and each Subsidiary Guarantee is subordinated to Senior Indebtedness of the
Company and relevant Subsidiary Guarantor. The Issuer, the Company and each
Subsidiary Guarantor agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
<PAGE>
10
11. REPURCHASE OF SECURITIES AT THE OPTION OF HOLDERS UPON CHANGE OF CONTROL
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Issuer to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of purchase) as provided in, and subject to the terms of, the
Indenture.
12. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed or 15 days before an interest payment
date.
13. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of
it for all purposes.
14. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Issuer at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuer and not to the Trustee for payment.
15. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Issuer at any time may terminate
some of or all its obligations under the Securities and the Indenture if the
Issuer or the Company
<PAGE>
11
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal and interest on the Securities to redemption or maturity, as the
case may be.
16. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities and
(ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Holder of Securities, the Issuer, the
Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or
the Securities (i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article V of the Indenture; (iii) to provide for
uncertificated Securities in addition to or in place of certificated Securities;
(iv) to make certain changes in the subordination provisions; (v) to add
Subsidiary Guaranties with respect to the Securities and to remove such
Subsidiary Guaranties as provided by the terms thereof; (vi) to secure the
Securities; (vii) to add additional covenants or to surrender rights and powers
conferred on the Issuer or the Company; (viii) to comply with the requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the TIA; or (ix) to make any change that does not adversely
affect the rights of any Securityholder.
17. DEFAULTS AND REMEDIES
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities, subject to
certain limitations, may declare all the Securities to be immediately due and
payable. Certain events of bankruptcy or insolvency are Events of Default and
shall result in the Securities being immediately due and payable upon the
occurrence of such Events of Default without any further act of the Trustee or
any Holder.
Holders of Securities may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power under
the Indenture. The Holders of a majority in aggregate principal amount of the
<PAGE>
12
Securities, by written notice to the Trustee and the Company, may rescind any
declaration of acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration.
18. TRUSTEE DEALINGS WITH THE ISSUER
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Issuer or its Affiliates and may otherwise deal with the Issuer or
its Affiliates with the same rights it would have if it were not Trustee.
19. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Issuer,
the Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Issuer under the Securities or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. By
accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Securities.
20. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
21. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
<PAGE>
13
22. GOVERNING LAW
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
23. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE ISSUER OR THE COMPANY WILL FURNISH TO ANY HOLDER OF SECURITIES
UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE
WHICH HAS IN IT THE TEXT OF THIS SECURITY.
<PAGE>
14
COMPANY GUARANTEE
For value received, the Company, as principal obligor and not merely
as surety, hereby unconditionally and irrevocably guarantees on an unsecured
senior subordinated basis to the Holder of this Security and to the Trustee and
its successors and assigns (a) the full and punctual payment of principal of,
premium, if any, and interest on this Security when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Issuer under the Indenture (including, without limitation, obligations to
the Trustee and the obligations to pay Special Interest, if any, and Additional
Amounts, if any) and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Issuer under the
Indenture and the Securities (all the foregoing being hereinafter collectively
called the "Obligations"). The Company further agrees that the Obligations may
be extended or renewed, in whole or in part, without notice or further assent
from the Company, and that the Company will remain bound by Article XI of the
Indenture notwithstanding any extension or renewal of any Obligation.
The obligations of the Company to the Holder of this Security and to
the Trustee pursuant to this Company Guarantee and the Indenture are expressly
set forth in the Indenture to which reference is hereby made for the precise
terms of such obligations.
This Company Guarantee is dated the date of the Security upon which it
is endorsed.
IN WITNESS WHEREOF, the Company has caused this Company Guarantee to
be duly executed.
FOREST OIL CORPORATION,
by
--------------------------
Name:
Title:
by
--------------------------
Name:
Title:
<PAGE>
15
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Issuer. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in
Rule 144(k) under the Securities Act after the later of the date of original
issuance of such Securities and the last date, if any, on which such Securities
were owned by the Issuer or any Affiliate of the Issuer, the undersigned
confirms that such Securities are being transferred in accordance with its
terms:
CHECK ONE BOX BELOW
(1) / / to the Issuer; or
(2) / / pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) / / inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
<PAGE>
16
(4) / / outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
(5) / / to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that
has furnished to the trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(6) / / pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any person
other than the registered holder thereof; PROVIDED, HOWEVER, that if
box (4), (5) or (6) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Issuer has reasonably requested
to confirm that such transfer is being made pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of the
Securities Act of 1933.
________________________
Your Signature
Signature Guarantee:
Date: _____________________ __________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
____________________________________________________________
<PAGE>
17
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Issuer as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
18
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:
Date of Amount of Amount of Principal Signature of
Exchange decrease in increase in amount of this authorized
Principal Principal Global signatory of
Amount of this Amount of this Security Trustee or
Global Global following such Securities
Security Security decrease or Custodian
increase
<PAGE>
19
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY THE
ISSUER PURSUANT TO SECTION 4.06 OR 4.09 OF THE INDENTURE, CHECK THE BOX:
/ /
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED
BY THE ISSUER PURSUANT TO SECTION 4.06 OR 4.09 OF THE INDENTURE, STATE THE
AMOUNT:
$
DATE: __________________ YOUR SIGNATURE: __________________
(SIGN EXACTLY AS YOUR NAME APPEARS
ON THE OTHER SIDE OF THE SECURITY)
SIGNATURE GUARANTEE:_______________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER
SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE
<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated
as of , among [SUBSIDIARY GUARANTOR] (the
"New Subsidiary Guarantor"), a subsidiary of Forest Oil
Corporation (or its successor), a Delaware corporation (the
"Company"), CANADIAN FOREST OIL LTD., an Alberta corporation (the
"Issuer"), FOREST OIL CORPORATION, on behalf of itself and the
Subsidiary Guarantors (the "Existing Subsidiary Guarantors")
under the Indenture referred to below, and STATE STREET BANK AND
TRUST COMPANY, as trustee under the indenture referred to below
(the "Trustee").
W I T N E S S E T H :
WHEREAS the Issuer and the Company have heretofore executed and
delivered to the Trustee an Indenture (the "Indenture") dated as of September
29, 1997, providing for the issuance of an aggregate principal amount of up to
$200,000,000 of 8 3/4% Senior Subordinated Notes due 2007 (the "Securities");
WHEREAS Section 4.13 of the Indenture provides that under certain
circumstances the Company is required to cause the New Subsidiary Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Subsidiary Guarantor shall unconditionally guarantee all the Issuer's
obligations under the Securities pursuant to a Subsidiary Guarantee on the terms
and conditions set forth herein; and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Issuer, the Company and the Existing Subsidiary Guarantors are authorized to
execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor, the Issuer, the Company, the Existing Subsidiary
Guarantors and the Trustee mutually covenant and agree for the equal and ratable
benefit of the holders of the Securities as follows:
1. AGREEMENT TO GUARANTEE. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to
unconditionally guarantee the Issuer's obligations under the Securities on the
terms and subject to the conditions set
<PAGE>
2
forth in Article XI of the Indenture and to be bound by all other applicable
provisions of the Indenture.
2. RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES PART OF
INDENTURE. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
3. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
4. TRUSTEE MAKES NO REPRESENTATION. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
5. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW SUBSIDIARY GUARANTOR],
by
--------------------------
Name:
Title:
CANADIAN FOREST OIL LTD.,
by
--------------------------
Name:
Title:
<PAGE>
3
FOREST OIL CORPORATION,
by
--------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee,
by
--------------------------
Name:
Title:
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
CANADIAN FOREST OIL LTD.
U.S.$125,000,000
8 3/4% Senior Subordinated Notes due 2007
Unconditionally Guaranteed by
FOREST OIL CORPORATION
REGISTRATION AGREEMENT
New York, New York
September 23, 1997
SALOMON BROTHERS INC
LEHMAN BROTHERS INC.
CHASE SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Canadian Forest Oil Ltd., an Alberta corporation (the "Issuer"),
proposes to issue and sell to certain purchasers (the "Initial Purchasers"),
upon the terms set forth in a purchase agreement dated the date hereof (the
"Purchase Agreement"), $125,000,000 aggregate principal amount of its 8 3/4%
Senior Subordinated Notes due 2007 (the "Securities") (the "Initial Placement")
to be unconditionally guaranteed on a senior subordinated and unsecured basis by
Forest Oil Corporation, a New York corporation (the "Company"). As an
inducement to the Initial Purchasers to enter into the Purchase Agreement and in
satisfaction of a condition to your obligations thereunder, each of the Issuer
and the Company, jointly and severally, agrees with you, (i) for your benefit
and the benefit of the other Initial Purchasers and (ii) for the benefit of the
holders from time to time of the Securities (including you and the other Initial
Purchasers) (each of the foregoing a "Holder" and together the "Holders"), as
follows:
1. DEFINITIONS. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement,
<PAGE>
2
the following capitalized defined terms shall have the following meanings:
"ACT" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"AFFILIATE" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control
of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"COMMISSION" means the Securities and Exchange Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"EXCHANGE OFFER REGISTRATION PERIOD" means the one-year period
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement.
"EXCHANGE OFFER REGISTRATION STATEMENT" means a registration statement
of the Issuer on an appropriate form under the Act with respect to the
Registered Exchange Offer, all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"EXCHANGING DEALER" means any Holder (which may include any of the
Initial Purchasers) which is a broker-dealer, electing to exchange Securities
acquired for its own account as a result of market-making activities or other
trading activities, for New Securities.
"HOLDER" has the meaning set forth in the preamble hereto.
"INDENTURE" means the Indenture relating to the Securities and the New
Securities dated as of September 29, 1997, between the Issuer, the Company and
State Street Bank
<PAGE>
3
and Trust Company, as trustee, as the same may be amended from time to time in
accordance with the terms thereof.
"INITIAL PLACEMENT" has the meaning set forth in the preamble hereto.
"MAJORITY HOLDERS" means the Holders of a majority of the aggregate
principal amount of securities registered under a Registration Statement.
"MANAGING UNDERWRITERS" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.
"NEW SECURITIES" means debt securities of the Issuer identical in all
material respects to the Securities (except that the interest rate step-up
provisions and the transfer restrictions will be modified or eliminated, as
appropriate), to be issued under the Indenture.
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the New Securities, covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"REGISTERED EXCHANGE OFFER" means the proposed offer to the Holders to
issue and deliver to such Holders, in exchange for the Securities, a like
principal amount of the New Securities.
"REGISTRATION SECURITIES" has the meaning set forth in Section 3(a)
hereof.
"REGISTRATION STATEMENT" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the New Securities pursuant to the provisions of this Agreement, all amendments
and supplements to such registration statement, including, without limitation,
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"SECURITIES" has the meaning set forth in the preamble hereto.
<PAGE>
4
"SHELF REGISTRATION" means a registration effected pursuant to
Section 3 hereof.
"SHELF REGISTRATION PERIOD" has the meaning set forth in Section 3(b)
hereof.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration statement
of the Issuer pursuant to the provisions of Section 3 hereof which covers some
of or all the Securities or New Securities, as applicable, on an appropriate
form under Rule 415 under the Act, or any similar rule that may be adopted by
the Commission, all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"TRUSTEE" means the trustee with respect to the Securities and the New
Securities under the Indenture.
"UNDERWRITER" means any underwriter of securities in connection with
an offering thereof under a Shelf Registration Statement.
2. REGISTERED EXCHANGE OFFER; RESALES OF NEW SECURITIES BY EXCHANGING
DEALERS; PRIVATE EXCHANGE. (a) The Issuer and the Company shall prepare and
shall use their reasonable best efforts to file with the Commission, not later
than 60 days after the date of the original issuance of the Securities, the
Exchange Offer Registration Statement with respect to the Registered Exchange
Offer. The Issuer and the Company shall use their reasonable best efforts to
cause the Exchange Offer Registration Statement to become effective under the
Act within 120 days after the date of the original issuance of the Securities.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Issuer shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for New Securities (assuming that such Holder is
not an affiliate of the Issuer within the meaning of the Act, acquires the New
Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the New
Securities) to trade such New Securities from and after their receipt without
any limitations or restrictions under the registration provisions of the Act.
<PAGE>
5
(c) In connection with the Registered Exchange Offer, the Issuer and
the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) use their reasonable best efforts to keep the Registered
Exchange Offer open for not less than 30 days after the date notice thereof
is mailed to the Holders (or longer if required by applicable law);
(iii) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
and
(iv) comply in all respects with all applicable laws.
(d) As soon as practicable after the close of the Registered Exchange
Offer, the Issuer shall:
(i) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancelation all Securities so accepted
for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to each
Holder of Securities, New Securities equal in principal amount to the
Securities of such Holder so accepted for exchange.
(e) The Initial Purchasers, the Issuer and the Company acknowledge
that, pursuant to current interpretations by the Commission's staff of Section 5
of the Act, and in the absence of an applicable exemption therefrom, each
Exchanging Dealer is required to deliver a Prospectus in connection with a sale
of any New Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer in exchange for Securities acquired for its own
account as a result of market-making activities or other trading activities.
Accordingly, the Issuer and the Company shall:
(i) include the information set forth in Annex A hereto on the cover
of the Exchange Offer Registration Statement, in Annex B hereto in the
forepart of the Exchange Offer Registration Statement in a section
<PAGE>
6
setting forth details of the Exchange Offer, in Annex C hereto in the
underwriting or plan of distribution section of the Prospectus forming a
part of the Exchange Offer Registration Statement, and in Annex D hereto in
the Letter of Transmittal delivered pursuant to the Registered Exchange
Offer; and
(ii) use their reasonable best efforts to keep the Exchange Offer
Registration Statement continuously effective under the Act during the
Exchange Offer Registration Period for delivery by Exchanging Dealers in
connection with sales of New Securities received pursuant to the Registered
Exchange Offer, as contemplated by Section 4(h) below.
(f) In the event that any Initial Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Securities constituting any portion of an unsold allotment, at the
request of such Initial Purchaser, the Issuer shall issue and deliver to such
Initial Purchaser or the party purchasing New Securities registered under a
Shelf Registration Statement as contemplated by Section 3 hereof from such
Initial Purchaser, in exchange for such Securities, a like principal amount of
New Securities. The Issuer shall seek to cause the CUSIP Service Bureau to
issue the same CUSIP number for such New Securities as for New Securities issued
pursuant to the Registered Exchange Offer.
3. SHELF REGISTRATION. If, (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it and the Issuer are not
permitted to effect the Registered Exchange Offer as contemplated by Section 2
hereof, or (ii) for any other reason the Exchange Offer Registration Statement
is not declared effective within 120 days after the Closing Date or the
Registered Exchange Offer is not consummated within 150 days after the Closing
Date, or (iii) any Initial Purchaser so requests with respect to Securities (or
any New Securities received pursuant to Section 2(f)) not eligible to be
exchanged for New Securities in a Registered Exchange Offer or, in the case of
any Initial Purchaser that participates in any Registered Exchange Offer, such
Initial Purchaser does not receive freely tradable New Securities, or (iv) any
Holder (other than an Initial Purchaser) is not eligible to participate in the
Registered Exchange Offer or (v) in the case of any such Holder that
participates in the Registered Exchange Offer, such Holder does not receive
freely tradable New Securities in exchange for tendered securities, other than
by reason of such Holder being an affiliate of the
<PAGE>
7
Issuer within the meaning of the Act (it being understood that, for purposes of
this Section 3, (x) the requirement that an Initial Purchaser deliver a
Prospectus containing the information required by Items 507 and/or 508 of
Regulation S-K under the Act in connection with sales of New Securities acquired
in exchange for such Securities shall result in such New Securities being not
"freely tradeable" but (y) the requirement that an Exchanging Dealer deliver a
Prospectus in connection with sales of New Securities acquired in the Registered
Exchange Offer in exchange for Securities acquired as a result of market-making
activities or other trading activities shall not result in such New Securities
being not "freely tradeable"), the following provisions shall apply:
(a) The Issuer and the Company shall as promptly as practicable (but
in no event more than 30 days after so required or requested pursuant to
this Section 3), file with the Commission and thereafter shall use their
reasonable best efforts to cause to be declared effective under the Act a
Shelf Registration Statement relating to the offer and sale of the
Securities or the New Securities, as applicable, by the Holders from time
to time in accordance with the methods of distribution elected by such
Holders and set forth in such Shelf Registration Statement (such Securities
or New Securities, as applicable, to be sold by such Holders under such
Shelf Registration Statement being referred to herein as "Registration
Securities"); PROVIDED, HOWEVER, that, with respect to New Securities
received by an Initial Purchaser in exchange for Securities constituting
any portion of an unsold allotment, the Issuer and the Company may, if
permitted by current interpretations by the Commission's staff, file a
post-effective amendment to the Exchange Offer Registration Statement
containing the information required by Regulation S-K Items 507 and/or 508,
as applicable, in satisfaction of its obligations under this paragraph (a)
with respect thereto, and any such Exchange Offer Registration Statement,
as so amended, shall be referred to herein as, and governed by the
provisions herein applicable to, a Shelf Registration Statement.
(b) The Issuer and the Company shall use their reasonable best
efforts to keep the Shelf Registration Statement continuously effective in
order to permit the Prospectus forming part thereof to be usable by Holders
for a period of two years from the date the Shelf Registration Statement is
declared effective by the Commission or such shorter period that will
terminate when all the Securities or New Securities, as
<PAGE>
8
applicable, covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement (in any such case, such period
being called the "Shelf Registration Period").
4. REGISTRATION PROCEDURES. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Issuer and the Company shall furnish to you, prior to the
filing thereof with the Commission, a copy of any Shelf Registration
Statement and any Exchange Offer Registration Statement, and each amendment
thereof and each amendment or supplement, if any, to the Prospectus
included therein and shall use its best efforts to reflect in each such
document, when so filed with the Commission, such comments as you or any
Holder reasonably may propose.
(b) The Issuer and the Company shall ensure that (i) any Registration
Statement and any amendment thereto and any Prospectus forming part thereof
and any amendment or supplement thereto complies in all material respects
with the Act and the rules and regulations thereunder, (ii) any
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any Prospectus forming part of
any Registration Statement, and any amendment or supplement to such
Prospectus, does not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(c) (1) The Issuer and the Company shall advise you and, in the case
of a Shelf Registration Statement, the Holders of securities covered
thereby, and, if requested by you or any such Holder, confirm such advice
in writing:
(i) when a Registration Statement and any amendment thereto has
been filed with the Commission and when the Registration Statement or
any post-effective amendment thereto has become effective; and
<PAGE>
9
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included
therein or for additional information.
(2) The Issuer and the Company shall advise you and, in the case of a
Shelf Registration Statement, the Holders of securities covered thereby,
and, in the case of an Exchange Offer Registration Statement, any
Exchanging Dealer which has provided in writing to the Issuer a telephone
or facsimile number and address for notices, and, if requested by you or
any such Holder or Exchanging Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(ii) of the receipt by the Issuer of any notification with respect
to the suspension of the qualification of the securities included
therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(iii) of the happening of any event that requires the making of any
changes in the Registration Statement or the Prospectus so that, as of
such date, the statements therein are not misleading and do not omit
to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light
of the circumstances under which they were made) not misleading (which
advice shall be accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been made).
(d) The Issuer and the Company shall use their reasonable best
efforts to obtain the withdrawal of any order suspending the effectiveness
of any Registration Statement at the earliest possible time.
(e) The Issuer and the Company shall furnish to each Holder of
securities included within the coverage of any Shelf Registration
Statement, without charge, at least one copy of such Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing, any
documents incorporated by
<PAGE>
10
reference therein and all exhibits thereto (including those incorporated by
reference therein).
(f) The Issuer and the Company shall, during the Shelf Registration
Period, deliver to each Holder of securities included within the coverage
of any Shelf Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request; and the Issuer and the Company consent to
the use of the Prospectus or any amendment or supplement thereto by each of
the selling Holders of securities in connection with the offering and sale
of the securities covered by the Prospectus or any amendment or supplement
thereto.
(g) The Issuer and the Company shall furnish to each Exchanging
Dealer which so requests, without charge, at least one copy of the Exchange
Offer Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Exchanging Dealer
so requests in writing, any documents incorporated by reference therein and
all exhibits thereto (including those incorporated by reference therein).
(h) The Issuer and the Company shall, during the Exchange Offer
Registration Period, promptly deliver to each Exchanging Dealer, without
charge, as many copies of the Prospectus included in such Exchange Offer
Registration Statement and any amendment or supplement thereto as such
Exchanging Dealer may reasonably request for delivery by such Exchanging
Dealer in connection with a sale of New Securities received by it pursuant
to the Registered Exchange Offer; and the Company consents to the use of
the Prospectus or any amendment or supplement thereto by any such
Exchanging Dealer, as aforesaid.
(i) Prior to the Registered Exchange Offer or any other offering of
securities pursuant to any Registration Statement, the Issuer and the
Company shall register or qualify or cooperate with the Holders of
securities included therein and their respective counsel in connection with
the registration or qualification of such securities for offer and sale
under the securities or blue sky laws of such jurisdictions as any such
Holder reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in
<PAGE>
11
such jurisdictions of the securities covered by such Registration
Statement; PROVIDED, HOWEVER, that the Issuer and the Company will not be
required to qualify generally to do business in any jurisdiction where it
is not then so qualified or to take any action which would subject it to
general service of process or to taxation in any such jurisdiction where it
is not then so subject.
(j) The Issuer and the Company shall cooperate with the Holders of
Securities to facilitate the timely preparation and delivery of
certificates representing Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as Holders may request prior to
sales of securities pursuant to such Registration Statement.
(k) Upon the occurrence of any event contemplated by
paragraph (c)(2)(iii) above, the Issuer and the Company shall promptly
prepare a post-effective amendment to any Registration Statement or an
amendment or supplement to the related Prospectus or file any other
required document so that, as thereafter delivered to Initial Purchasers of
the securities included therein, the Prospectus will not include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Issuer shall provide a CUSIP number for the
Securities or New Securities, as the case may be, registered under such
Registration Statement, and provide the Trustee with printed certificates
for such Securities or New Securities, in a form, if requested by the
applicable Holder or Holder's Counsel, eligible for deposit with The
Depository Trust Company.
(m) The Issuer and the Company shall use their reasonable best
efforts to comply with all applicable rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make generally
available to their security holders a consolidated earnings statement
(which need not be audited) covering a twelve-month period commencing after
the effective date of the Registration Statement and ending not later than
15 months thereafter, as soon
<PAGE>
12
as practicable after the end of such period, which consolidated earnings
statement shall satisfy the provisions of Section 11(a) of the Securities
Act.
(n) The Issuer and the Company shall cause the Indenture to be
qualified under the Trust Indenture Act of 1939, as amended, on or prior to
the effective date of any Shelf Registration Statement or Exchange Offer
Registration Statement.
(o) The Issuer and the Company may require each Holder of securities
to be sold pursuant to any Shelf Registration Statement to furnish to the
Issuer and the Company such information regarding the Holder and the
distribution of such securities as the Issuer and the Company may from time
to time reasonably require for inclusion in such Registration Statement.
(p) The Issuer and the Company shall, if requested, promptly
incorporate in a Prospectus supplement or post-effective amendment to a
Shelf Registration Statement, such information as the Managing Underwriters
and Majority Holders reasonably agree should be included therein and shall
make all required filings of such Prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Issuer and
the Company shall enter into such agreements (including underwriting
agreements) and take all other appropriate actions in order to expedite or
facilitate the registration or the disposition of the Securities, and in
connection therewith, if an underwriting agreement is entered into, cause
the same to contain indemnification provisions and procedures no less
favorable than those set forth in Section 6 hereof (or such other
provisions and procedures acceptable to the Majority Holders and the
Managing Underwriters, if any), with respect to all parties to be
indemnified pursuant to Section 6 hereof from Holders of Securities to the
Issuer and the Company.
(r) In the case of any Shelf Registration Statement, the Issuer and
the Company shall (i) make reasonably available for inspection by the
Holders of securities to be registered thereunder, any underwriter
participating in any disposition pursuant to such Registration Statement,
and any attorney, accountant or other agent retained by the Holders or any
such
<PAGE>
13
underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries; (ii) cause
the Issuer's and the Company's officers, directors and employees to supply
all relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations; PROVIDED, HOWEVER, that any information that is designated in
writing by the Issuer or the Company, in good faith, as confidential at the
time of delivery of such information shall be kept confidential by the
Holders or any such underwriter, attorney, accountant or agent, unless such
disclosure is made in connection with a court proceeding or required by
law, or such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to the
Holders of securities registered thereunder and the underwriters, if any,
in form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings; (iv) obtain opinions of
counsel to the Issuer and the Company (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the Managing
Underwriters, if any) addressed to each selling Holder and the
underwriters, if any, covering such matters as are customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by such Holders and underwriters; (v) obtain "cold
comfort" letters (or, in the case of any person that does not satisfy the
conditions for receipt of a "cold comfort" letter specified in Statement on
Auditing Standards No. 72, an "agreed-upon procedures" letter) and updates
thereof from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of
any subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each selling
Holder of securities registered thereunder and the underwriters, if any, in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with primary underwritten offerings;
and (vi) deliver such documents and certificates as may be reasonably
requested by the Majority Holders and the Managing Underwriters, if any,
including those to evidence compliance with Section 4(k) and with any
<PAGE>
14
customary conditions contained in the underwriting agreement or other
agreement entered into by the Issuer and the Company. The foregoing
actions set forth in clauses (iii), (iv), (v) and (vi) of this Section 4(r)
shall be performed (A) on the effective date of such Registration Statement
and each post-effective amendment thereto and (B) at each closing under any
underwriting or similar agreement as and to the extent required thereunder.
(s) In the case of any Exchange Offer Registration Statement, the
Issuer and the Company shall (i) make reasonably available for inspection
by each Initial Purchaser, and any attorney, accountant or other agent
retained by such Initial Purchaser, all relevant financial and other
records, pertinent corporate documents and properties of the Company and
its subsidiaries; (ii) cause the Issuer's and the Company's officers,
directors and employees to supply all relevant information reasonably
requested by such Initial Purchaser or any such attorney, accountant or
agent in connection with any such Registration Statement as is customary
for similar due diligence examinations; PROVIDED, HOWEVER, that any
information that is designated in writing by the Issuer or the Company, in
good faith, as confidential at the time of delivery of such information
shall be kept confidential by such Initial Purchaser or any such attorney,
accountant or agent, unless such disclosure is made in connection with a
court proceeding or required by law, or such information becomes available
to the public generally or through a third party without an accompanying
obligation of confidentiality; (iii) make such representations and
warranties to such Initial Purchaser, in form, substance and scope as are
customarily made by issuers to underwriters in primary underwritten
offerings; (iv) obtain opinions of counsel to the Issuer and the Company
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to such Initial Purchaser and its counsel),
addressed to such Initial Purchaser, covering such matters as are
customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such Initial Purchaser
or its counsel; (v) obtain "cold comfort" letters and updates thereof from
the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are
<PAGE>
15
required to be, included in the Registration Statement), addressed to such
Initial Purchaser, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with primary
underwritten offerings, or if requested by such Initial Purchaser or its
counsel in lieu of a "cold comfort" letter, an agreed-upon procedures
letter under Statement on Auditing Standards No. 35, covering matters
requested by such Initial Purchaser or its counsel; and (vi) deliver such
documents and certificates as may be reasonably requested by such Initial
Purchaser or its counsel, including those to evidence compliance with
Section 4(k) and with conditions customarily contained in underwriting
agreements. The foregoing actions set forth in clauses (iii), (iv), (v)
and (vi) of this Section 4(s) shall be performed (A) at the close of the
Registered Exchange Offer and (B) on the effective date of any
post-effective amendment to the Exchange Offer Registration Statement.
5. REGISTRATION EXPENSES. The Company shall bear all expenses
incurred in connection with the performance of its obligations under Sections 2,
3 and 4 hereof.
6. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any
Registration Statement, each of the Issuer and the Company, jointly and
severally, agrees to indemnify and hold harmless each Holder of securities
covered thereby (including each Initial Purchaser and, with respect to any
Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging
Dealer), the directors, officers, employees and agents of each such Holder and
each other person, if any, who controls any such Holder within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement as originally filed or in
any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably
<PAGE>
16
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that neither the Issuer
nor the Company will be liable in any case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Issuer or the Company by or on behalf of any such Holder specifically for
inclusion therein. This indemnity agreement will be in addition to any
liability which the Issuer or the Company may otherwise have.
Each of the Issuer and the Company also agrees, jointly and severally,
to indemnify or contribute to Losses (as defined below) of, as provided in
Section 6(d), any underwriters of Securities registered under a Shelf
Registration Statement, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Initial Purchasers and the selling Holders provided in
this Section 6(a) and shall, if requested by any Holder, enter into an
underwriting agreement reflecting such agreement, as provided in Section 4(q)
hereof.
(b) Each Holder of securities covered by a Registration Statement
(including each Initial Purchaser and, with respect to any Prospectus delivery
as contemplated in Section 4(h) hereof, each Exchanging Dealer) severally and
not jointly agrees to indemnify and hold harmless the Issuer and the Company,
each of its directors and officers and each other person, if any, who controls
the Issuer or the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Issuer and the Company to each such Holder, but only with reference to
written information relating to such Holder furnished to the Issuer or the
Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 6, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such
<PAGE>
17
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and expenses
of any separate counsel retained by the indemnified party or parties except as
set forth below); PROVIDED, HOWEVER, that such counsel shall be satisfactory to
the indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the indemnified
party shall have the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and
<PAGE>
18
several obligation to contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses") to
which such indemnified party may be subject in such proportion as is appropriate
to reflect the relative benefits received by such indemnifying party, on the one
hand, and such indemnified party, on the other hand, from the Initial Placement
and the Registration Statement which resulted in such Losses; PROVIDED, HOWEVER,
that in no case shall any Initial Purchaser or any subsequent Holder of any
Security or New Security be responsible, in the aggregate, for any amount in
excess of the purchase discount or commission applicable to such Security, or in
the case of a New Security, applicable to the Security which was exchangeable
into such New Security, as set forth on the cover page of the Final Memorandum,
nor shall any underwriter be responsible for any amount in excess of the
underwriting discount or commission applicable to the securities purchased by
such underwriter under the Registration Statement which resulted in such
Losses. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the indemnifying party and the indemnified party
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of such indemnifying party, on the
one hand, and such indemnified party, on the other hand, in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Issuer and the
Company shall be deemed to be equal to the sum of (x) the total net proceeds
from the Initial Placement (before deducting expenses) as set forth on the cover
page of the Final Memorandum and (y) the total amount of additional interest
which the Issuer was not required to pay as a result of registering the
securities covered by the Registration Statement which resulted in such Losses.
Benefits received by the Initial Purchasers shall be deemed to be equal to the
total purchase discounts as set forth on the cover page of the Final Memorandum,
and benefits received by any other Holders shall be deemed to be equal to the
value of receiving Securities or New Securities, as applicable, registered under
the Act. Benefits received by any underwriter shall be deemed to be equal to
the total underwriting discounts and commissions, as set forth on the cover page
of the Prospectus forming a part of the Registration Statement which resulted in
such Losses. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
indemnifying party, on the one hand, or by the indemnified party, on the other
hand, the
<PAGE>
19
intent of the parties and their relative knowledge, access to information and
opportunity to prevent such untrue statement or omission. The parties agree
that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Initial
Purchasers' obligations to contribute as provided in this Section 6(d) are
several in proportion to their respective purchase obligations under the
Purchase Agreement and not joint. For purposes of this Section 6, each person
who controls a Holder within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of such Holder shall have the
same rights to contribution as such Holder, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, each officer
of the Issuer who shall have signed the Registration Statement and each director
of the Issuer or the Company shall have the same rights to contribution as the
Issuer or the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder, the
Issuer or the Company or any of the officers, directors or controlling persons
referred to in this Section 6, and will survive the sale by a Holder of
securities covered by a Registration Statement.
7. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. Neither the
Issuer nor the Company has, as of the date hereof, entered into, nor shall it,
on or after the date hereof, enter into, any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders herein or
otherwise conflicts with the provisions hereof.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Issuer and the Company have
obtained the written consent of the Holders of at least a majority of the then
outstanding aggregate principal amount of Securities (or, after the consummation
of any Exchange
<PAGE>
20
Offer in accordance with Section 2 hereof, of New Securities); PROVIDED that,
with respect to any matter that directly or indirectly affects the rights of any
Initial Purchaser hereunder, the Issuer and the Company shall obtain the written
consent of each such Initial Purchaser against which such amendment,
qualification, supplement, waiver or consent is to be effective.
Notwithstanding the foregoing (except the foregoing proviso), a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by the Majority Holders,
determined on the basis of securities being sold rather than registered under
such Registration Statement.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Issuer and the Company in accordance with the provisions of this
Section 7(c), which address initially is, with respect to each Holder, the
address of such Holder maintained by the registrar under the Indenture,
with a copy in like manner to Salomon Brothers Inc by fax (212-783-2823)
and confirmed by mail to it at Seven World Trade Center, New York, New York
10048;
(2) if to you, initially at the address set forth in the Purchase
Agreement; and
(3) if to the Issuer or the Company, initially at its address set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
The Initial Purchasers or the Company by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Issuer, the Company, subsequent Holders of Securities and/or New
Securities. Each of the Issuer and the Company hereby agrees to extend the
benefits of this Agreement to any
<PAGE>
21
Holder of Securities and/or New Securities and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.
(e) COUNTERPARTS. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) HEADINGS. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO
THE CONFLICT OF LAW PROVISIONS THEREOF).
(h) SEVERABILITY. In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all the rights and privileges of the
parties shall be enforceable to the fullest extent permitted by law.
(i) SECURITIES HELD BY THE ISSUER, ETC. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
or New Securities is required hereunder, Securities or New Securities, as
applicable, held by the Issuer or the Company or either of their respective
Affiliates (other than subsequent Holders of Securities or New Securities if
such subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such Securities or New Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
(j) JURISDICTION. Each of the Issuer and the Company agrees that any
suit, action or proceeding against the Issuer or the Company brought by any
Initial Purchaser, the directors, officers, employees and agents of any Initial
Purchaser, or by any person who controls any Initial Purchaser, arising out of
or based upon this Agreement or the transactions contemplated hereby may be
instituted in any State or Federal court in The City of New York, New York, and
waives any objection which it may now or hereafter have to the laying of venue
of any such proceeding, and irrevocably submits to the non-exclusive
jurisdiction of
<PAGE>
22
such courts in any suit, action or proceeding. Each of the Issuer and the
Company has appointed CT Corporation System, with offices on the date hereof at
1633 Broadway, New York, New York 10019 as its authorized agent (the "Authorized
Agent") upon whom process may be served in any suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
herein which may be instituted in any State or Federal court in The City of New
York, New York, by any Initial Purchaser, the directors, officers, employees and
agents of any Initial Purchaser, or by any person, if any, who controls any
Initial Purchaser, and expressly accepts the non-exclusive jurisdiction of any
such court in respect of any such suit, action or proceeding. Each of the
Issuer and the Company hereby represents and warrants that the Authorized Agent
has accepted such appointment and has agreed to act as said agent for service of
process, and each of the Issuer and the Company agrees to take any and all
action, including the filing of any and all documents that may be necessary to
continue such appointment in full force and effect as aforesaid. Service of
process upon the Authorized Agent shall be deemed, in every respect, effective
service of process upon the Issuer and the Company. Notwithstanding the
foregoing, any action arising out of or based upon this Agreement may be
instituted by any Initial Purchaser, the directors, officers, employees and
agents of any Initial Purchaser, or by any person who controls any Initial
Purchaser, in any court of competent jurisdiction in Canada.
<PAGE>
23
Please confirm that the foregoing correctly sets forth the agreement
between the Issuer, the Company and you.
Very truly yours,
CANADIAN FOREST OIL LTD.,
By: /s/ Ronald E. Pratt
--------------------------
Name: Ronald E. Pratt
Title: VP - Finance
FOREST OIL CORPORATION,
By: /s/ Daniel L. McNamara
--------------------------
Name: Daniel L. McNamara
Title: Corp. Secretary
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
SALOMON BROTHERS INC
LEHMAN BROTHERS INC.
CHASE SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
By: SALOMON BROTHERS INC,
By: /s/ Franklin D. McMahon
---------------------------
Name: Franklin D. McMahon
Title: Vice President
For themselves and the other
Initial Purchasers named in
Schedule I to the Purchase Agreement
<PAGE>
ANNEX A
Each broker-dealer that receives New Securities for its own account pursuant to
the Registered Exchange Offer must acknowledge that it will deliver a prospectus
in connection with any resale of such New Securities. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Act. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of New
Securities received in exchange for Securities where such New Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Issuer and the Company have agreed that, starting on
the date hereof (the "Expiration Date") and ending on the close of business
180 days after the Expiration Date, they will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives New Securities for its own account in exchange
for Securities, where such Securities were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Securities. The
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Issuer and the
Company have agreed that, starting on the Expiration Date and ending on the
close of business 180 days after the Expiration Date, they will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 199 , all
dealers effecting transactions in the Exchange Securities may be required to
deliver a prospectus.(*)
The Issuer will not receive any proceeds from any sale of New
Securities by broker-dealers. New Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Securities. Any broker-dealer that resells New Securities that were received by
it for its own account pursuant to the Registered Exchange Offer and any broker
or dealer that participates in a distribution of such New Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit of any such resale of New Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Act. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Act.
- --------------------
(*) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
2
For a period of 180 days after the Expiration Date, the Issuer
and the Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the holders of the Securities) other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Securities (including
any broker-dealers) against certain liabilities, including liabilities under the
Act.
[If applicable, add information required by Regulation S-K Items 507
and/or 508.]
<PAGE>
ANNEX D
RIDER A
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
---------------------------------------------------------
Address:
------------------------------------------------------
---------------------------------------------------------
RIDER B
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New
Securities. If the undersigned is a broker-dealer that will receive New
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Act.
<PAGE>
EXECUTION COPY
AMENDMENT NO. 1 AND WAIVER
AMENDMENT NO. 1 AND WAIVER dated as of April 1, 1997 between FOREST
OIL CORPORATION, a corporation duly organized and validly existing under the
laws of the State of New York (the "COMPANY"); each of the Subsidiaries of the
Company that becomes a guarantor pursuant to Section 9.16 of the Second Amended
and Restated Credit Agreement (as defined below) (individually, a "SUBSIDIARY
GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS" and, together with the
Company, the "OBLIGORS"); each of the lenders that is a signatory hereto
(individually, a "BANK" and, collectively, the "BANKS"); and THE CHASE MANHATTAN
BANK, a New York bank, as agent for the Banks (in such capacity, together with
its successors in such capacity, the "AGENT").
The Company, the Banks and the Agent are parties to a Second Amended
and Restated Credit Agreement dated as of January 31, 1997 (as heretofore
modified and supplemented and in effect on the date hereof, the "SECOND AMENDED
AND RESTATED CREDIT AGREEMENT"), providing, subject to the terms and conditions
thereof, for extensions of credit (by making of loans and issuing letters of
credit) to be made by said Banks to the Company in an aggregate principal or
face amount not exceeding $100,000,000. The Company, the Banks and the Agent
wish to amend the Second Amended and Restated Credit Agreement in certain
respects, and accordingly, the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 1 and Waiver, terms defined in the Second Amended and Restated
Credit Agreement are used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the conditions
precedent specified in Section 5 below, but effective as of the date hereof, the
Second Amended and Restated Credit Agreement shall be amended as follows:
2.01. References in the Second Amended and Restated Credit Agreement
(including references to the Second Amended and Restated Credit Agreement
amended hereby) to "this Agreement" (and indirect references such as
"hereunder", "hereby", "herein", and "hereof") shall be deemed to be references
to the Second Amended and Restated Credit Agreement as amended hereby.
2.02. The following definitions are hereby added in alphabetical
order in Section 1.01 of the Second Amended and Restated Credit Agreement:
"FOREST DEBENTURE" shall mean the Limited Recourse
<PAGE>
Demand Debenture and Negative Pledge, dated as of April 1, 1997, of
the Company in the original principal amount of C$80,000,000,
payable to Funding Co. and assigned to The Chase Manhattan Bank of
Canada, as administrative agent and its successors and assigns, as
the same shall be modified and supplemented and in effect from time
to time.
"FOREST GUARANTEE" shall mean the Limited Recourse Secured Guarantee
dated as of April 1, 1997 by Forest in favour of Funding Co. and assigned
to The Chase Manhattan Bank of Canada, as administrative agent and its
successors and assigns, as the same shall be modified and supplemented and
in effect from time to time.
"FOREST PLEDGED PROPERTIES" shall mean the property which is from time
to time the subject of the Lien created by the Forest Debenture.
"FOREST PURCHASE AGREEMENT" shall mean the Petroleum, Natural Gas and
General Rights Conveyance made effective as of April 1, 1997 between
Canadian Forest Oil, as seller, and the Company, as Purchaser.
2.02. Section 9.06 of the Second Amended and Restated Credit
Agreement is amended by inserting a new subsection, as follows:
"(ab) Liens created pursuant to the Forest Debenture or the Forest
Guarantee;".
Section 3. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Banks that the representations and warranties set forth in
Section 8 of the Second Amended and Restated Credit Agreement are true and
complete on the date hereof as if made on and as of the date hereof and as if
each reference in said Section 8 to "this Agreement" and "the Notes" included
reference to this Amendment No. 1 and Waiver.
Section 4. CONDITIONS PRECEDENT. As provided in Section 2 above, the
amendments to the Second Amended and Restated Credit Agreement set forth in said
Section 2 shall become effective, as of the date hereof, upon the satisfaction
of the following conditions precedent:
4.01. EXECUTION BY ALL PARTIES. This Amendment No. 1 and Waiver
shall have been executed and delivered by each of the parties hereto.
4.02. OTHER DOCUMENTS. The Agent shall have received such other
documents as the Agent or any Bank or special New York counsel to Chase may
reasonably request.
<PAGE>
Section 5. MISCELLANEOUS. Except as herein provided, the Second
Amended and Restated Credit Agreement shall remain unchanged and in full force
and effect. This Amendment No. 1 and Waiver may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
amendatory instrument and any of the parties hereto may execute this Amendment
No. 1 and Waiver by signing any such counterpart. This Amendment No. 1 and
Waiver shall be governed by, and construed in accordance with, the law of the
State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to be duly executed and delivered as of the day and year first above
written.
FOREST OIL CORPORATION
By
-------------------------
Title:
Address for Notices:
1600 Broadway
Suite 2200
Denver, Colorado 80202
Telecopier No.: (303) 812-1602
Telephone No.: (303) 812-1414
Attention: Kenton Scroggs
<PAGE>
BANKS
THE CHASE MANHATTAN BANK
By
-------------------------
Title:
<PAGE>
CHRISTIANIA BANK OG KREDITKASSE
By
-------------------------
Title:
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By
-------------------------
Title:
<PAGE>
BANK OF MONTREAL
By
-------------------------
Title:
<PAGE>
THE CHASE MANHATTAN BANK
as Agent
By
-------------------------
Title:
Address for Notices to
Chase as Agent:
The Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Agency Services,
Sandra Miklave
Telecopier No.: (212) 552-5658
Telephone No.: (212) 552-7953
<PAGE>
EXECUTION COPY
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of August 19, 1997 between FOREST OIL
CORPORATION, a corporation duly organized and validly existing under the laws
of the State of New York (the "COMPANY"); each of the Subsidiaries of the
Company that becomes a guarantor pursuant to Section 9.16 of the Second
Amended and Restated Credit Agreement (as defined below) (individually, a
"SUBSIDIARY GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS" and,
together with the Company, the "OBLIGORS"); each of the lenders that is a
signatory hereto (individually, a "BANK" and, collectively, the "BANKS"); and
THE CHASE MANHATTAN BANK, a New York bank, as agent for the Banks (in such
capacity, together with its successors in such capacity, the "AGENT").
The Company, the Banks and the Agent are parties to a Second Amended
and Restated Credit Agreement dated as of January 31, 1997, as amended by
Amendment No. 1 and Waiver dated April 1, 1997 (as heretofore further
modified and supplemented and in effect on the date hereof, the "SECOND
AMENDED AND RESTATED CREDIT AGREEMENT"), providing, subject to the terms and
conditions thereof, for extensions of credit (by making of loans and issuing
letters of credit) to be made by said Banks to the Company in an aggregate
principal or face amount not exceeding $100,000,000. Royal Bank of Canada
(the "NEW BANK") wishes to become a party to the Second Amended and Restated
Credit Agreement as a "Bank" thereunder, and Christiania Bank OG Kreditkasse
wishes to become the co-agent for the Banks under the Second Amended and
Restated Credit Agreement (the "CO-AGENT"), the Obligors, the Banks and the
Agent wish to increase the aggregate amount of Commitments under the Second
Amended and Restated Credit Agreement from $100,000,000 to $130,000,000, and
to amend the Second Amended and Restated Credit Agreement in certain
respects, and accordingly, the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 2, terms defined in the Second Amended and Restated Credit
Agreement are used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, but effective as of the
date hereof, the Second Amended and Restated Credit Agreement shall be
further amended as follows:
2.01. The New Bank shall be deemed to be a "Bank" under and for all
purposes of the Second Amended and Restated Credit Agreement and each
reference therein to "Bank" shall be deemed to include the New Bank. The
Co-Agent shall be deemed to be the "Co-Agent" under and for all purposes of
the Second Amended and Restated Credit Agreement. References in the Second
Amended and Restated Credit Agreement (including references to the Second
Amended and Restated Credit Agreement amended hereby) to "this Agreement"
(and indirect references such as "hereunder", "hereby", "herein", and
"hereof") shall be deemed to be references to the Second Amended and Restated
Credit Agreement as amended and as further
AMENDMENT NO. 2
<PAGE>
-2-
amended hereby.
2.02. The following definitions are hereby added in alphabetical
order in Section 1.01 of the Second Amended and Restated Credit Agreement:
"ALLOCATED CANADIAN BORROWING BASE" shall mean, as of any date, an
amount in Dollars designated as such from time to time by the Company
pursuant to Section 2.11 hereof.
"ALLOCATED U.S. BORROWING BASE" shall mean an amount equal to the
Borrowing Base then in effect MINUS the Allocated Canadian Borrowing Base.
"AMENDMENT NO. 2" shall mean Amendment No. 2 dated as of August 19,
1997 to this Agreement.
"BORROWING BASE REPORTS" shall mean collectively, (i) Reserve
Evaluation Reports, (ii) Canadian Forest Reserve Evaluation Reports and (iii)
Canadian Net Back Pool Reports and "BORROWING BASE REPORT" shall mean any
thereof.
"CANADIAN AGENT" means The Chase Manhattan Bank of Canada, as
administrative agent under the Funding Credit Agreement.
"CANADIAN GUARANTEE" shall mean the Guarantee dated as of August 19,
1997 executed by the Company in favor of the Canadian Agent and the Canadian
Lenders party to the Funding Credit Agreement.
"CANADIAN FOREST RESERVE EVALUATION REPORT" shall mean the report
defined in the Funding Credit Agreement as the "Reserve Evaluation Report"
prepared for Canadian Forest.
"CANADIAN LENDERS" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"CANADIAN LOAN DOCUMENTS" shall mean have the meaning ascribed
thereto in the Intercreditor Agreement.
"CANADIAN NET BACK POOL REPORT" shall mean the report defined in the
Funding Credit Agreement as the "Net Back Pool Report".
"COMBINED COMMITMENTS" shall have the meaning ascribed thereto in
the Intercreditor Agreement.
"COMBINED MAJORITY LENDERS" shall have the meaning ascribed thereto
in the Intercreditor Agreement.
"EQUIVALENT AMOUNT" shall have the meaning ascribed thereto in the
Funding
AMENDMENT NO. 2
<PAGE>
-3-
Credit Agreement.
"FUNDING CREDIT AGREEMENT OBLIGATIONS" shall mean (i) the Loans
provided for in Section 2.01 of the Funding Credit Agreement, (ii) the
Swingline Loans provided for in Section 2.05 of the Funding Credit Agreement,
(iii) the Letter of Credit Liabilities under the Funding Credit Agreement and
(iv) the Bankers' Acceptance Liabilities under the Funding Credit Agreement.
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement
dated as of August 19, 1997 between the Agent and the Canadian Agent as the
same may be modified, supplemented, amended and/or restated and in effect
from time to time."
"LENDER GROUP" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"USAGE RATIO" shall mean as of any date the ratio of (a) the
aggregate principal amount of all Loans and Letter of Credit Liabilities
outstanding on such date PLUS the aggregate principal amount of the Funding
Credit Agreement Obligations pursuant to the Funding Credit Agreement
outstanding on such date to (b) the lesser of the Borrowing Base or the
Combined Commitments on such date.
"3189503 PLEDGE AGREEMENT" shall mean the Pledge Agreement dated as
of August 19, 1997 between 3189503 and the Agent, as the same shall be
modified and supplemented and in effect from time to time.
2.03. Section 1.01 of the Second Amended and Restated Credit
Agreement is amended by deleting the existing definitions for the following
terms and inserting new definitions as follows:
"APPLICABLE COMMITMENT FEE RATE" shall mean for any period during
which the Usage Ratio is within the range specified under "Usage Ratio" in
Schedule IV to Amendment No. 2, the percentage per annum set forth opposite
the range in such Schedule IV.
"APPLICABLE MARGIN" shall mean, with respect to each Type of Loan
for any period during which the Usage Ratio is within the range specified
under "Usage Ratio" in Schedule V to Amendment No. 2, the percentage per
annum set forth opposite the range in such Schedule V, provided that the
"Applicable Margin" shall be increased or reduced, as applicable, on the date
of the borrowing of a Loan or the issuance of a Letter of Credit, or the
repayment of a Loan or expiration of a Letter of Credit, as the case may be,
which results in the Usage Ratio shifting from one range to another but that
the "Applicable Margin" for any Eurodollar Loan outstanding prior to such
date shall remain the same until the end of the Interest Period for such
Eurodollar Loan.
"BASIC DOCUMENTS" shall mean, collectively, this Agreement, the
Notes, the Letter
AMENDMENT NO. 2
<PAGE>
-4-
of Credit Documents, the Security Documents, the Intercreditor Agreement and
the Canadian Guarantee.
"COMMITMENT" shall mean, for each Bank, the obligation of such Bank
to make Loans in an aggregate principal amount up to but not exceeding (a) in
the case of a Bank that is a party to this Agreement as of the date of this
Amendment No. 2, the amount set opposite the name of such Bank on the
signature pages of this Amendment No. 2 under the caption "Commitment" or (b)
in the case of any other Bank, the aggregate amount of the Commitments of
other Banks acquired by it pursuant to Section 12.06(b) hereof (in each case,
as the same may be reduced from time to time pursuant to Section 2.04 hereof
or increased or reduced from time to time pursuant to said Section 12.06(b)).
"COMMITMENT TERMINATION DATE" shall mean August 19, 2001.
"FUNDING CREDIT AGREEMENT" shall mean the Second Amended and
Restated Credit Agreement dated as of April 1, 1997 among Funding Co., the
Canadian Lenders and the Canadian Agent, as amended by Amendment No. 1 dated
as of August 19, 1997 and the Intercreditor Agreement, and as the same may be
further modified, supplemented, amended and/or restated from time to time.
"FUTURE NET REVENUES" shall mean, for any period, the future gross
revenues attributable to all or a part (as specified herein) of Proved
Reserves constituting part of the Hydrocarbon Properties for such period less
the sum for such period of all projected Operating Expenses and Capital
Expenditures with respect thereto, as set forth in the related Borrowing Base
Report, and less (without duplication) all amounts projected to be applied to
the discharge of any Production Payment and to the unearned balance of any
advance payment received under any contract to be performed relating to such
Proved Reserves.
"INTEREST COVERAGE RATIO" shall mean, for any period, the ratio of
(a) the sum of Cash Flow PLUS Cash Flow under, and as defined in, the Funding
Credit Agreement on a consolidated basis for such period to (b) the sum of
Interest Expense PLUS Interest Expense under, and as defined in, the Funding
Credit Agreement on a consolidated basis for such period.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole, (b) the ability of any Obligor or Funding Co. to perform their
respective obligations under any of the Basic Documents or the Canadian Loan
Documents to which it is a party, (c) the validity or enforceability of any
of the Basic Documents or the Canadian Loan Documents, (d) the right and
remedies of any member of the Lender Group, the Canadian Agent and the Agent
under any of the Basic Documents or the Canadian Loan Documents, as the case
may be, or (e) the timely payment of the principal of or interest on the
Loans, Reimbursement Obligations or Funding Credit Agreement Obligations or
other amounts payable in connection therewith.
AMENDMENT NO. 2
<PAGE>
-5-
"RESERVE EVALUATION REPORT" shall mean an unsuperceded report that
(a) is (i) prepared, in the case of the report required to be delivered by
the Company pursuant to Section 9.01(f) hereof in connection with the
Determination Date occurring on May 1 of each year, by the Independent
Petroleum Engineer on the basis of assumptions and projections which the
Company believes in good faith to be reasonable or, in the case of the report
required to be delivered by the Company pursuant to Section 9.01(f) hereof in
connection with each other Determination Date, by the Independent Petroleum
Engineer on the basis of the most recently delivered Reserve Evaluation
Report delivered in connection with the Determination Date occurring on May 1
of each year as adjusted for reserve additions and production from the date
of such report, each as acceptable to the Independent Petroleum Engineer and
(ii) satisfactory in form and substance to the Combined Majority Lenders
(including as to assumptions) and (b) is prepared on the basis of findings
and material data as of a date not more than 90 days prior to the effective
date of such report, (i) identifies the Hydrocarbon Properties covered
thereby, (ii) as to each of the Hydrocarbon Properties, sets forth (A) the
Proved Reserves attributable to such Hydrocarbon Property, (B) the total
amount of such Proved Reserves attributable to such Hydrocarbon Property
that, in the opinion of the preparer of such report, the Company and its
Restricted Subsidiaries have the right to produce for their own account in
the current and each succeeding calendar year, (C) a projection of the rate
of production and the Future Net Revenues of the Company and its Restricted
Subsidiaries (including as additional information the data and assumptions
used to determine such Future Net Revenues) from such Proved Reserves for the
current and each succeeding calendar year, (D) the quantity and type of
hydrocarbons recoverable from such Proved Reserves in the current and each
succeeding calendar year, (E) an estimate of the projected revenues and
expenses attributable to such Proved Reserves in the current and each
succeeding calendar year, and (F) any reports or evaluations prepared by the
Company regarding the expediency of any change in methods of treatment or
operation of all or any wells drilled to produce any of such Proved Reserves
that are producing or capable of producing hydrocarbons, any new drilling or
development, any method of secondary recovery by repressuring or otherwise,
or any other action with respect to such Proved Reserves, the decision as to
which may increase or reduce the quantity of hydrocarbons ultimately
recoverable, or the rate of production thereof and (c) reconciles (i) the
total amount of Proved Reserves attributable to each Hydrocarbon Property and
(ii) any material changes in Operating Expenses or Capital Expenditures
contained in such Reserve Evaluation Report with the information contained in
the immediately preceding Reserve Evaluation Report, if any.
"SECURITY DOCUMENTS" shall mean, collectively, the Security
Agreement, the Pledge Agreement, the 3189503 Pledge Agreement, the Mortgages
and all Uniform Commercial Code financing statements required by this
Agreement, the Security Agreement, the Pledge Agreement or the Mortgages to
be filed with respect to the security interests in personal Property and
fixtures created pursuant to the Security Agreement, the Pledge Agreement or
the Mortgages.
2.04 The reference in Section 2.01(a) of the Second Amended and
Restated Credit Agreement to "$100,000,000" is amended to read "$130,000,000".
2.05. The definitions of "DETERMINATION DATE", "INDEPENDENT
PETROLEUM
AMENDMENT NO. 2
<PAGE>
-6-
ENGINEER", "PROVED RESERVES" and "REPORT DELIVERY DATE" in Section 1 of the
Second Amended and Restated Credit Agreement and Sections 2.03 and 9.01(f) of
the Second Amended and Restated Credit Agreement shall be amended by changing
the words "Reserve Evaluation Report" to "Borrowing Base Report" wherever
they appear.
2.06. Section 1 of the Second Amended and Restated Credit Agreement
shall be amended by deleting the existing Section 1.03 and inserting a new
Section 1.03 as follows:
"1.03 BORROWING BASE.
(a) BORROWING BASE REPORTS. The Company and Canadian Forest have
furnished to the Agent and the Lenders updated Borrowing Base Reports dated
January 1, 1997. On or before each Report Delivery Date, the Company and
Canadian Forest shall furnish to the Agent and the Lenders updated Borrowing
Base Reports.
(b) BORROWING BASE. During the period commencing on the date
hereof and ending on such date the first redetermination of the Borrowing
Base becomes effective as provided below in this Section 1.03(b), the
Borrowing Base shall be $130,000,000 (subject to any adjustments and
redeterminations provided for by Sections 1.03(c), 1.03(d), 1.03(e) and
2.10(c) hereof) which amount has been determined on the basis of the
Borrowing Base Reports referred to in the first sentence of Section 1.03(a)
hereof (with such adjustments to the rates, factors, values, estimates,
assumptions and computations set forth in such Borrowing Base Reports as are
acceptable to the Combined Majority Lenders). As promptly as reasonably
practicable after its receipt of the Borrowing Base Reports furnished to it
pursuant to the second sentence of Section 1.03(a) hereof, the Agent (in
consultation with the Combined Majority Lenders) shall endeavor to
redetermine the Borrowing Base as an amount in Dollars on the basis of such
Borrowing Base Reports in the manner provided in this clause (b), notify the
Lender Group of such redetermination and, if such redetermination is approved
by all of the Lender Group (in the case of an increase in the Borrowing Base)
or by the Combined Majority Lenders (in the case of (i) a decrease in the
Borrowing Base or (ii) no change in the Borrowing Base), as applicable,
notify the Company and Funding Co. of the Borrowing Base as so redetermined
and such redetermined Borrowing Base shall become effective on the
Determination Date next following each Report Delivery Date (or, if later, on
the date notified by the Agent to the Company and Funding Co.) and shall
remain effective until again redetermined as provided in this Section 1.03(b)
(subject to any adjustments and redeterminations provided for by Sections
1.03(c), 1.03(d) and 1.03(e) hereof, reductions pursuant to Section 2.10(b)
and (c) hereof or additions pursuant to Section 2.10(a) hereof). The
determination by the Agent and the Lender Group or the Combined Majority
Lenders, as the case may be, of the Borrowing Base for any Determination
Period shall be made on the basis of parameters which may include the Present
Value of Reserves attributable to Hydrocarbon Properties as set forth in the
applicable Borrowing Base Report for such Determination Period, subject,
however, to such adjustments as the Agent, with the concurrence of the Lender
Group or the Combined Majority Lenders, as the case may be, may make in its
and their sole discretion to the rates, factors, values, estimates,
assumptions and computations set forth in such Borrowing Base Report and any
other relevant
AMENDMENT NO. 2
<PAGE>
-7-
information or factors, including without limitation, any additional
Indebtedness or other obligations that may be incurred by the Company and its
Subsidiaries that the Combined Majority Lenders may deem appropriate.
As used herein, "BORROWING BASE" means the amount specified in the
first sentence of this Section 1.03(b) as determined from time to time as
provided in the second sentence of Section 1.03(b) and subject to
adjustments, redeterminations and principles provided in Sections 1.03(c),
1.03(d), 1.03(e) and 2.10 hereof.
(c) MATERIAL CHANGE. The Company agrees to notify the Agent
promptly of any material change of which the Company, Funding Co., Canadian
Forest or any of their respective Restricted Subsidiaries is aware which
reduces or may result in a reduction of the Borrowing Base by more than 10%.
Promptly upon receipt of such notice, the Agent (in consultation with the
Combined Majority Lenders,) shall endeavor to adjust the Borrowing Base
pursuant to the procedures set forth in Section 1.03(b) hereof.
(d) REDETERMINATION. If so requested by the Majority Banks or the
Majority Lenders under, and as defined in, the Funding Credit Agreement, or
the Company at any time, the Agent shall, as promptly as reasonably
practicable after the receipt of such request, endeavor to redetermine (in
consultation with the Lender Group or the Combined Majority Lenders, as
applicable) the Borrowing Base as then in effect on the basis of the then
most recent applicable Borrowing Base Reports (subject, however, to such
additional adjustments to the rates, factors, values, estimates, assumptions
and computations as set forth therein as the Agent, with the concurrence of
the Combined Majority Lenders, may determine to be appropriate) and any other
relevant information and factors, including, without limitation, any
additional Indebtedness or other obligations that have been or are reasonably
anticipated to be incurred by the Company and its Restricted Subsidiaries and
any Hydrocarbon Properties acquired by the Company and its Restricted
Subsidiaries which are not subject to any Lien other than Liens created
hereunder or under the Security Documents or Liens permitted by Section 9.06
hereof, that the Combined Majority Lenders may deem appropriate and as
otherwise provided in Section 1.03(b) hereof, PROVIDED that no Hydrocarbon
Properties acquired by any Subsidiary of the Company after the date hereof
shall be included in the calculation of the Borrowing Base unless such
Subsidiary is a Subsidiary Guarantor under this Agreement or is a Subsidiary
Borrower or otherwise liable as a surety under the Canadian Forest Credit
Agreement. As promptly as reasonably practical following its redetermination
of the Borrowing Base, the Agent shall notify the Lender Group of such
redetermination and, if such redetermination is approved by all of the Lender
Group (in the case of (i) an increase in the Borrowing Base or (ii) no change
in the Borrowing Base) or by the Combined Majority Lenders (in the case of a
decrease in the Borrowing Base), as applicable, notify the Company and the
Funding Co. of the Borrowing Base as so redetermined and such redetermined
Borrowing Base shall become effective immediately upon delivery to the
Company and Funding Co. of such notice of redetermination.
(e) DETERMINATIONS, ETC. All determinations and redeterminations
and adjustments by the Agent provided for above in this Section 1.03 or in
the definition of "Present
AMENDMENT NO. 2
<PAGE>
-8-
Value of Reserves" in Section 1.01 (and any determinations and decisions by
the Combined Majority Lenders in connection therewith, including any thereof
approving or disapproving a proposed redetermination or redetermination by
the Agent or effecting any adjustment to any element included in a Borrowing
Base Report or the determination or redetermination of the Borrowing Base)
shall be made on a reasonable basis, in good faith and in a manner reasonably
consistent with the basis on which the initial Borrowing Base was determined
to be acceptable to the Lender Group (but after giving effect to changes in
facts and circumstances occurring after the date of such initial
determination including, but not limited to, reserves and production,
operating expenses and economic assumptions with respect to price of
hydrocarbons and inflation), and any such determination, redetermination or
adjustment shall consider any other relevant information or factors,
including without limitation, any additional Indebtedness or other
obligations that may be incurred by the Company and its Subsidiaries that the
Combined Majority Lenders may deem appropriate, PROVIDED that no Hydrocarbon
Properties acquired by any Subsidiary of the Company after the date hereof
shall be included in the calculation of the Borrowing Base unless such
Subsidiary is a Subsidiary Guarantor under this Agreement or is a Subsidiary
Borrower or otherwise liable as a surety under the Canadian Forest Credit
Agreement."
2.07. Section 2.01 of the Second Amended and Restated Credit
Agreement is amended by deleting the existing paragraph (a) and inserting a
new paragraph (a) as follows:
"(a) Each Bank severally agrees, in accordance with the terms and
conditions of this Agreement, to make one or more loans to the Company in
Dollars during the period from and including the Closing Date to and
including the Commitment Termination Date, in an aggregate amount up to but
not exceeding the least of (x) the Commitment of such Bank and (y) an amount
equal to such Bank's Commitment Percentage multiplied by the then effective
Allocated U.S. Borrowing Base determined pursuant to the immediately
preceding Borrowing Base Reports; PROVIDED that (i) in no event shall the
aggregate principal amount of all Loans, together with the aggregate amount
of all Letter of Credit Liabilities, exceed the least of (x) the aggregate
amount of the Commitments as in effect from time to time, and (y) the then
effective Allocated U.S. Borrowing Base determined pursuant to Section 2.11
hereof and the immediately preceding Borrowing Base Reports and (ii) the
Company may not borrow Loans or obtain Letters of Credit under this Agreement
at any time while a Borrowing Base Deficiency exists. The aggregate of the
Commitments of the Banks on the date hereof is $130,000,000."
2.08. Section 2 of the Second Amended and Restated Credit Agreement
is amended by:
(i) deleting the existing Section 2.02 and inserting a new Section
2.02 as follows:
"2.02 BORROWINGS. The Company shall give the Agent (which
shall promptly notify the Banks) notice of each borrowing hereunder as
provided in Section 4.05 hereof. Not later than 1:00 p.m. New York time on
the date specified for each borrowing
AMENDMENT NO. 2
<PAGE>
-9-
hereunder, each Bank shall make available the amount of the Loan or Loans to
be made by it on such date to the Agent, at an account specified by the Agent
maintained by the Agent with Chase, in immediately available funds, for
account of the Company. The amount so received by the Agent shall, subject
to the terms and conditions of this Agreement, be made available to the
Company by depositing the same, in immediately available funds, in an account
of the Company maintained with Chase in New York, New York, designated by the
Company. At the time of each such notice of borrowing hereunder the Company
shall deliver a certificate of the Chief Financial Officer, the Treasurer or
an Assistant Treasurer of the Company which certificate shall indicate the
Usage Ratio on such date, of the Company and its Subsidiaries after giving
effect to such borrowing and shall show, in reasonable detail, the
calculations used to derive such Usage Ratio.";
(ii) deleting the existing Section 2.03 and inserting a new Section
2.03 as follows:
"2.03 LETTERS OF CREDIT. Subject to the terms and conditions of
this Agreement, the Commitments may be utilized, upon the request of the
Company, in addition to the Loans provided for by Section 2.01(a) hereof, for
the issuance by the Issuing Bank of letters of credit (collectively, "LETTERS
OF CREDIT") for account of the Company and its Restricted Subsidiaries,
PROVIDED that in no event shall (i) the aggregate amount of all Letter of
Credit Liabilities, together with the aggregate principal amount of the
Loans, exceed the lesser of (A) the aggregate of the Commitments and (B) the
then effective Allocated U.S. Borrowing Base as determined pursuant to
Section 2.11 hereof and the immediately preceding Borrowing Base Reports,
(ii) the outstanding aggregate amount of all Letter of Credit Liabilities
exceed $10,000,000 and (iii) the expiration date of any Letter of Credit
extend beyond the earlier of the Commitment Termination Date and the date 12
months following the issuance of such Letter of Credit. The following
additional provisions shall apply to Letters of Credit:"; and
(iii) deleting the existing Section 2.05 and inserting a new
Section 2.05 as follows:
"2.05 COMMITMENT FEE. The Company shall pay to the Agent for
account of each Bank a commitment fee for each day at a rate per annum equal
to the Applicable Commitment Fee Rate TIMES such Bank's PRO RATA share (based
on its respective Commitment) of the Allocated U.S. Borrowing Base LESS the
aggregate principal amount of all Loans and Letter of Credit Liabilities
outstanding on such day for the period from and including the date of
Amendment No. 2 to but not including the earlier of the date such Bank's
Commitment is terminated and the Commitment Termination Date. Accrued
Commitment Fees shall be payable on each Quarterly Date and on the earlier of
the date the Commitments are terminated and the Commitment Termination Date."
2.09. Section 2.10 of the Second Amended and Restated Credit
Agreement is amended by:
(i) deleting the existing paragraph (a) and inserting a new
paragraph (a) as
AMENDMENT NO. 2
<PAGE>
- 10 -
follows:
"(a) BORROWING BASE. The Agent shall notify the Company and Funding
Co. (in a "DEFICIENCY NOTICE") any time the Borrowing Base as then in effect is
less than the sum of (i) the aggregate principal amount of the Loans and Letter
of Credit Liabilities outstanding at such time and (ii) the aggregate principal
amount of the Funding Credit Agreement Obligations outstanding at such time (the
amount of such difference being called herein the "BORROWING BASE DEFICIENCY")
and within 30 days after the date of the Deficiency Notice the Company shall
notify the Agent of the Company's and Funding Co.'s intentions with respect to
compliance with the procedures set forth in this Section 2.10(a). As specified
in such notice from the Company, the Company shall or shall cause Funding Co. to
(within 90 days after the date of the Deficiency Notice) prepay, in accordance
with Section 3.02 of the Intercreditor Agreement or, provide cover in accordance
with Section 2.10(e) of this Agreement, the aggregate principal amount of all
Loans and Letter of Credit Liabilities outstanding at such time and the
aggregate principal amount of the Funding Credit Agreement Obligations
outstanding at such time, in an amount sufficient to eliminate such Borrowing
Base Deficiency.";
(ii) deleting the existing paragraph (b) and inserting a new
paragraph (b) as follows:
"(b) CASUALTY EVENTS. Upon the date 30 days following the receipt by
the Company or any of its Restricted Subsidiaries incorporated in the United
States of the proceeds of insurance, condemnation award or other compensation in
respect of any Casualty Event affecting any Hydrocarbon Property other than
Unrestricted Properties of any Restricted Subsidiary, the Company shall prepay
the Loans (and/or provide cover for Letter of Credit Liabilities as specified in
clause (e) below), and if such Casualty Event shall result in the receipt by the
Company or any of its Restricted Subsidiaries incorporated in the United States
of Net Available Proceeds in excess of $2,500,000, the Combined Majority
Lenders, in their sole discretion based on their review of such Casualty Event,
may reduce the Borrowing Base in an aggregate amount not in excess of 100% of
the Net Available Proceeds of such Casualty Event not theretofore applied to the
repair or replacement of such Hydrocarbon Property, or such lesser amount as is
specified in a written notice from the Combined Majority Lenders, such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in clause (d) of this Section 2.10. Nothing in this clause (b)
shall be deemed to limit any obligation of the Company and any of its Restricted
Subsidiaries incorporated in the United States pursuant to any of the Security
Documents to remit to a collateral or similar account (including, without
limitation, the Collateral Account) maintained by the Agent pursuant to any of
the Security Documents the proceeds of insurance, condemnation award or other
compensation received in respect of any Casualty Event";
(iii) deleting the existing paragraph (c) and inserting a new
paragraph (c) as follows:
"(c) SALE OF ASSETS. Without limiting the obligation of the Obligors
to obtain the
AMENDMENT NO. 2
<PAGE>
- 11 -
consent of the Combined Majority Lenders pursuant to Section 9.05
hereof to any Disposition not otherwise permitted hereunder, no later than five
Business Days prior to the occurrence of any Disposition, the Company, on behalf
of the applicable Obligor will deliver to the Lender Group a statement,
certified by the chief financial officer or treasurer of the Company, in form
and detail satisfactory to the Agent, of the amount of the Net Available
Proceeds of such Disposition and, if the Net Available Proceeds of such
Disposition together with the aggregate of all other Dispositions during the
current Determination Period is in excess of $5,000,000, the Combined Majority
Lenders, based on their review of the statement referred to in this
Section 2.10(c) may, in their sole discretion, reduce the Borrowing Base in an
aggregate amount not in excess of 100% of the Net Available Proceeds of such
Disposition, or such lesser amount as is specified in a written notice from the
Combined Majority Lenders. If a Borrowing Base Deficiency results from such
reduction, then the Company shall, notwithstanding Section 2.10(a) to the
contrary, immediately prepay the Loans (and/or provide cover for the Letter of
Credit Liabilities) with the Net Available Proceeds to cure such deficiency.
Notwithstanding the foregoing, the Company shall not be required to prepay the
Loans (and/or provide cover for the Letter of Credit Liabilities pursuant to
Section 2.10(e) hereof), and the Borrowing Base shall not be subject to
automatic reduction upon any sale of Property, other than any Hydrocarbon
Property, pursuant to Section 9.05 hereof."; and
(iv) deleting the existing paragraph (d) and inserting a new
paragraph (d) as follows:
"(d) APPLICATION. Prepayments and reductions of Commitments or the
Borrowing Base, as the case may be, described in the above clauses of this
Section 2.10 shall be effected as follows: the Commitments or the Borrowing
Base, as the case may be, shall be automatically reduced by an amount equal to
the amount specified in such clauses (and to the extent that, after giving
effect to such reduction, the aggregate principal amount of the Loans, together
with the aggregate amount of all Letter of Credit Liabilities, would exceed the
Commitments or the then effective Allocated U.S. Borrowing Base determined
pursuant to Section 2.11 hereof and the immediately preceding Borrowing Base
Reports, as applicable, the Company shall first, prepay the Loans and second,
provide cover for Letter of Credit Liabilities with respect to the Commitments
or the Borrowing Base, as applicable, as specified in clause (e) below, in an
aggregate amount equal to such excess)."
2.10 A new Section 2.11 of the Second Amended and Restated Credit
Agreement shall be added as follows:
"Section 2.11 ALLOCATION OF BORROWING BASE.
(a) The Borrowing Base may be allocated between the Company under
this Agreement and Funding Co. under the Funding Credit Agreement. The
Allocated U.S. Borrowing Base in effect from time to time shall represent the
maximum amount of credit in the form of Loans and Letters of Credit (subject to
the aggregate Commitments and the other provisions of this Agreement) that the
Banks will extend to the Company at any one time prior to
AMENDMENT NO. 2
<PAGE>
- 12 -
the Commitment Termination Date. The Allocated Canadian Borrowing Base in
effect from time to time shall represent the maximum amount of credit in the
form of Loans, Letters of Credit and Bankers' Acceptances (subject to the
aggregate Commitments and the other provisions of the Funding Credit
Agreement) that the Canadian Lenders will extend to Funding Co. at any one
time prior to the "Commitment Termination Date" specified in the Funding
Credit Agreement. On the date of Amendment No. 2, the Allocated Canadian
Borrowing Base shall be $100,000,000, resulting in an initial Allocated U.S.
Borrowing Base of $30,000,000.
(b) Funding Co. at any time shall have the right to request in
writing to the Agent, Canadian Agent and the Lender Group, in their sole
discretion, an increase in the Allocated Canadian Borrowing Base and a
corresponding decrease in the Allocated U.S. Borrowing Base; provided that any
such increase shall require the approval of all of the Canadian Lenders and at
no time shall the Allocated Canadian Borrowing Base exceed $100,000,000; and
provided further that Funding Co. may not make a request for an increase in the
Allocated Canadian Borrowing Base more than four (4) times during any twelve
(12) month period. Within ten (10) Business Days of the receipt by the Canadian
Lenders of such request, the Canadian Lenders shall give written notice to the
Company and the Agent of their approval or disapproval of such increase. The
revised Allocated U.S. Borrowing Base and Allocated Canadian Borrowing Base
shall become effective upon the distribution by the Agent to the Company, the
Canadian Agent and the Lender Group of written notice thereof which shall occur
not later than three (3) Business Days after its receipt of the notice of
increase.
(c) The Company at any time shall have the right to request in
writing to the Agent, the Canadian Agent and the Banks that such Banks, in their
sole discretion, permit the Company to increase the Allocated U.S. Borrowing
Base and decrease the Allocated Canadian Borrowing Base; provided that any such
change shall require the approval of all of such Banks and at no time shall the
Allocated U.S. Borrowing Base exceed $100,000,000; and provided further that the
Company may not make a request for an increase in the Allocated U.S. Borrowing
Base more than four (4) times during any twelve (12) month period. Within ten
(10) Business Days of the receipt by such Banks of such request, such Banks
shall give written notice to the Company and the Agent of their approval or
disapproval of such change. If such increase is approved, each such Bank shall
have its share of the Allocated U.S. Borrowing Base increased by an amount in
proportion to its Commitment Percentage. The revised Allocated U.S. Borrowing
Base and Allocated Canadian Borrowing Base shall become effective upon the
distribution by the Agent to the Company, the Canadian Agent and the Lender
Group of written notice thereof which shall occur not later than three (3)
Business Days after its receipt of the notice of increase.
(d) For purposes of the Funding Credit Agreement, the Allocated
Canadian Borrowing Base shall be the Equivalent Amount. The Equivalent Amount
shall be calculated (i) on the date a reallocation pursuant to this Section 2.11
between the Allocated U.S. Borrowing Base and the Allocated Canadian Borrowing
Base occurs, (ii) on each Determination Date, or (iii) in any event, at ninety
(90) day intervals following the most recent Determination Date."
AMENDMENT NO. 2
<PAGE>
- 13 -
2.11. The introduction to Section 9 of the Second Amended and
Restated Credit Agreement shall be amended by replacing the word "Banks" with
the words "Lender Group" on the second line.
2.12. Section 9.06 of the Second Amended and Restated Credit
Agreement shall be amended by deleting the existing paragraph (a) and inserting
a new paragraph (a) as follows:
"(a) Liens created pursuant to the Security Documents and the
Canadian Loan Documents;".
2.13. Section 9.07(a) of the Secod Amended and Restated Credit
Agreement shall be amended by deleting the existing paragraph (i) and inserting
a new paragraph (i) as follows:
"(i) Indebtedness to the Agent and the Banks hereunder or to the
Canadian Agent and the Canadian Lenders under the Canadian Guarantee;".
2.14. Section 9.10 of the Second Amended and Restated Credit
Agreement shall be amended in its entirety as follows:
"9.10 INTEREST COVERAGE RATIO.
The Company will not permit the Interest Coverage Ratio for any period
of four consecutive fiscal quarters (treated for this purpose as a single
accounting period) following March 31, 1997, to be less than 2.0:1.0 as of the
end of any fiscal quarter of the Company."
2.15. Section 9.11 of the Second Amended and Restated Credit
Agreement shall be amended in its entirety as follows:
"9.11 WORKING CAPITAL. The Company will not permit the current
assets of the Company and its Subsidiaries (determined on a consolidated basis
in accordance with GAAP) to be equal to or less than the current liabilities of
the Company and its Subsidiaries (so determined). For purposes hereof, the
terms "CURRENT ASSETS" and "CURRENT LIABILITIES" shall have the respective
meanings assigned to them by GAAP, PROVIDED that in any event there shall be (i)
included in current assets the aggregate amount of the unused Combined
Commitments (but only to the extent such unused Combined Commitments could then
be utilized as provided in Section 7.02 hereof and Section 6.02 of the Funding
Credit Agreement), (ii) excluded from current liabilities all Indebtedness
hereunder PLUS all Indebtedness under, and as defined in, the Funding Credit
Agreement PLUS all Indebtedness under, and as defined in, the Canadian Forest
Credit Agreement, (iii) excluded from current liabilities all Production
Payments and (iv) excluded from current liabilities the current portion of any
gas balancing liabilities hereunder and under the Funding Credit Agreement."
2.16. Section 9.17 of the Second Amended and Restated Credit
Agreement shall be amended in its entirety as follows:
AMENDMENT NO. 2
<PAGE>
- 14 -
"9.17 MODIFICATIONS AND PAYMENTS OF SUBORDINATED INDEBTEDNESS AND
PRODUCTION PAYMENTS INDEBTEDNESS. The Company will not, and will not permit any
of its Restricted Subsidiaries to, (a) agree to any amendment, supplement or
other modification of any of the Senior Subordinated Debt Documents or any other
documents providing for or evidencing any Subordinated Indebtedness or
Production Payments, or (b) pay, prepay, redeem, retire, purchase or otherwise
acquire for value, or defease, any Subordinated Indebtedness or Production
Payments except for (subject to the subordination provisions, if applicable,
relating thereto) regularly scheduled payments of principal thereof and interest
thereon or regularly scheduled redemptions thereof on the respective dates on
which such payments or redemptions are required to be made; PROVIDED that the
Company may (if no Default has occurred and is continuing or will result
therefrom): (i) apply the net cash proceeds received by the Company from any
Person other than a Subsidiary of the Company as a result of an Equity Issuance
to prepay, redeem or retire any Subordinated Indebtedness or Production
Payments; (ii) refinance such Senior Subordinated Debt provided that (w) the
subordination for such Indebtedness remains unchanged; (x) the interest rate
applicable to such Indebtedness is not increased; (y) the final maturity of such
Indebtedness is not accelerated; and (z) the covenants and other provisions
thereof are not modified in any respect determined by the Majority Banks to be
materially adverse to the Company, any such Restricted Subsidiary or the Banks;
and (iii) apply amounts that would be available for the Dividend Payments
pursuant to Section 9.09 hereof for the prepayment, redemption or retirement of
Subordinated Indebtedness or Production Payments."
2.17. Section 9.18 of the Second Amended and Restated Credit
Agreement is deleted in its entirety.
2.18. Section 10 of the Second Amended and Restated Credit Agreement
is amended by:
(i) inserting a new clause (k) as follows:
"Any Event of Default shall occur under the Funding Credit Agreement";
and
(ii) relettering clauses "(k)" and "(l)" as clauses "(l)" and "(m)",
respectively.
2.19 Section 11 of the Second Amended and Restated Credit Agreement
shall be amended by inserting a new Section 11.11 as follows:
"11.11 CO-AGENTS. If at any time the Banks shall appoint more than
one agent under this Agreement or the other Basic Documents all references to
"Agent" in this Section 11 shall be deemed to be a reference to "any Agent"."
2.20. Section 12 of the Second Amended and Restated Credit Agreement
is amended by inserting a new Section 12.14 as follows:
AMENDMENT NO. 2
<PAGE>
-15-
"12.14 INTERCREDITOR AGREEMENT. (a) Reference is hereby made to
the Intercreditor Agreement, which provides for certain matters relating to
this Agreement and the Funding Credit Agreement. To the extent of any
conflict between the terms of this Agreement and the terms of the
Intercreditor Agreement, the Intercreditor Agreement shall control. Each
Bank hereby authorizes the Agent to execute and deliver the Intercreditor
Agreement on its behalf and the execution and delivery by the Agent of the
Intercreditor Agreement on behalf of the Banks is hereby ratified and
confirmed by each of the Banks. Any Bank that becomes a party to this
Agreement after the date hereof agrees to be bound by the terms and
provisions of the Intercreditor Agreement.
(b) The Company acknowledges that certain financial institutions
including certain of the Banks are providing financing to Funding Co. The
Company consents to the disclosure of information provided by the Company to
the Banks to such other financial institutions. The Company also
acknowledges that the Banks may enter into participation arrangements and
payment sharing understandings with such financial institutions and consents
to such arrangements and understandings. To the extent any such arrangements
or undertakings give rise to any liability for any withholding tax payments
in connection with any payments made by the Funding Co., the Company or any
other Obligor under either this Agreement or the Funding Credit Agreement,
then (notwithstanding any provisions to the contrary set forth in this
Agreement or the Funding Credit Agreement), the Company shall indemnify each
of the applicable members of the Lender Group and shall hold each of the
applicable members of the Lender Group harmless from and against any such
liability; PROVIDED, HOWEVER, that each member of the Lender Group (if so
requested by the Company under this Agreement or Funding Co. under the
Funding Credit Agreement) will use good faith efforts to accommodate any
reasonable request by the Company or Funding Co. in order to avoid the need
for, or reduce the amount of, such compensation so long as the request will
not, in the sole opinion of the applicable member of the Lender Group, be
disadvantageous to such member of the Lender Group.
Section 3. COMMITMENT FEE. Notwithstanding that the increase of
the Commitments contemplated by Section 2 hereof shall not become effective
until the satisfaction of the conditions precedent specified in Section 5
hereof, for purposes of calculating the amount of commitment fee payable
under Section 2.05 of the Second Amended and Restated Credit Agreement, the
Allocated U.S. Borrowing Base of the Banks shall be deemed to have been
changed (and the Commitments of the New Bank shall be deemed to have become
effective) immediately upon the execution of Amendment No. 2 by each of the
Banks.
Section 4. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Banks that the representations and warranties set forth
in Section 8 of the Second Amended and Restated Credit Agreement are true and
complete on the date hereof (unless otherwise limited to an earlier date) as
if made on and as of the date hereof and as if each reference in said Section
8 to "this Agreement" and "the Notes" included reference to this Amendment
No. 2 and to the New Notes.
AMENDMENT NO. 2
<PAGE>
-16-
Section 5. CONDITIONS PRECEDENT. As provided in Section 2 above,
the amendments to the Second Amended and Restated Credit Agreement set forth
in said Section 2 shall become effective, as of the date hereof, upon the
satisfaction of the following conditions precedent:
5.01. EXECUTION BY ALL PARTIES. This Amendment No. 2 shall have
been executed and delivered by each of the parties hereto.
5.02. NOTES AND INITIAL LOANS. The Company shall deliver for the
Bank whose Commitment is increasing (the "INCREASING BANK"), a new promissory
note of the Company in substantially the form of Exhibit A to the Second
Amended and Restated Credit Agreement, dated the date hereof, payable to such
Bank in a principal amount equal to its Commitment and otherwise duly
completed and shall deliver for the New Bank a promissory note of the Company
in substantially the form of Exhibit A to the Second Amended and Restated
Credit Agreement, dated the date hereof, payable to the order of such Bank in
a principal amount equal to its Commitment and otherwise duly completed, and
each of such promissory notes (a "NEW NOTE") delivered to the Increasing Bank
and the New Bank shall constitute a "Note" under the Second Amended and
Restated Credit Agreement as amended hereby. In addition, the Company shall
have borrowed from, and the New Bank shall have made Loans to, the Company.
5.03. INTERCREDITOR AGREEMENT. The Intercreditor Agreement shall
have been executed and delivered by each of the parties thereto.
5.04. FUNDING AMENDMENT AGREEMENT. The Amendment No. 1 to the
Funding Credit Agreement shall have been executed and delivered by each of
the parties thereto.
5.05. OPINION OF COUNSEL TO THE OBLIGORS. An opinion of Daniel
McNamara, Corporate Counsel to the Obligors and Vinson & Elkins L.L.P.,
special New York counsel to the Obligors shall have been delivered to the
Agent.
5.06. OTHER DOCUMENTS. The Agent shall have received such other
documents as the Agent or any Bank or special New York counsel to Chase may
reasonably request.
Section 6. MISCELLANEOUS. Except as herein provided, the Second
Amended and Restated Credit Agreement shall remain unchanged and in full
force and effect. This Amendment No. 2 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
amendatory instrument and any of the parties hereto may execute this
Amendment No. 2 by signing any such counterpart. This Amendment No. 2 shall
be governed by, and construed in accordance with, the law of the State of New
York.
AMENDMENT NO. 2
<PAGE>
S-1
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed and delivered as of the day and year
first above written.
FOREST OIL CORPORATION
By /s/ Kenton M. Scroggs
-------------------------------
Title: Vice President & Treasurer
Address for Notices:
1600 Broadway
Suite 2200
Denver, Colorado 80202
Telecopier No.: (303) 812-1602
Telephone No.: (303) 812-1414
Attention: Kenton Scroggs
AMENDMENT NO. 2
<PAGE>
S-2
Banks
-----
Commitment THE CHASE MANHATTAN BANK
- ----------
$40,000,000
By /s/ Mary Jo Woodford
-------------------------------
Title: Vice President
AMENDMENT NO. 2
<PAGE>
S-3
Commitment CHRISTIANIA BANK OG KREDITKASSE
- ----------
$30,000,000
By /s/ William S. Phillips
-------------------------------
Title: Vice President
By /s/ Hans Chr. Kjelsrud
-------------------------------
Title: First Vice President
AMENDMENT NO. 2
<PAGE>
S-4
COMMITMENT CREDIT LYONNAIS NEW YORK BRANCH
-----------
$20,000,000
By /s/ Pascal Poupelle
-------------------------------
Title: Executive Vice President
AMENDMENT NO. 2
<PAGE>
S-5
COMMITMENT BANK OF MONTREAL
-----------
$20,000,000
By /s/ Robert L. Roberts
-------------------------------
Title: Director, U.S. Corporate Banking
AMENDMENT NO. 2
<PAGE>
S-6
COMMITMENT ROYAL BANK OF CANADA
-----------
$20,000,000
By /s/ illegible
-------------------------------
Title:
Address for Notices:
12450 Greenspoint Drive
Suite 1450
Houston, TX 77060
Attention: Gil Benard
Senior Manager
Telecopier No.: (281) 874-0081
Telephone No.: (281) 874-5662
AMENDMENT NO. 2
<PAGE>
S-7
THE CHASE MANHATTAN BANK
as Agent
By /s/ Mary Jo Woodford
-------------------------------
Title: Vice President
Address for Notices to
Chase as Agent:
The Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Agency Services,
Sandra Miklave
Telecopier No.: (212) 552-5658
Telephone No.: (212) 552-7953
AMENDMENT NO. 2
<PAGE>
S-8
CHRISTIANIA BANK OG KREDITKASSE,
as Co-Agent
By /s/ William S. Phillips /s/ Hans Chr. Kjelsrud
------------------------------- -------------------------------
Title: Vice President Title: First Vice President
Address for Notices to
Christiania as Co-Agent:
Christiania Bank OG Kreditkasse
11 West 42nd Street, 7th Floor
New York, New York 10036
Attention: First Vice President
Telecopier No.: (212) 827-4888
Telephone No.: (212) 827-4835
AMENDMENT NO. 2
<PAGE>
SCHEDULE IV
APPLICABLE COMMITMENT FEE RATE
RANGE OF APPLICABLE COMMITMENT
USAGE RATIO FEE RATE (BPS PER ANNUM)
- ----------- ------------------------
less than or equal to .330:1.00 30.0
greater than .330:1.00 but less than or equal to 0.660:1.00 35.0
greater than .660:1.00 37.5
<PAGE>
SCHEDULE V
APPLICABLE MARGIN
APPLICABLE MARGIN (bps)
RANGE OF -----------------------
USAGE RATIO BASE RATE LOANS EURODOLLAR LOANS
- ----------- --------------- ----------------
less than or equal to .330:1.00 0.0 100.0
greater than .330:1.00 but less than
or equal to .660:1.00 25.0 125.0
greater than .660:1.00 50.0 150.0
<PAGE>
Page 1
EXECUTION COPY
AMENDMENT NO. 3
AMENDMENT NO. 3 dated as of September 26, 1997 between FOREST OIL
CORPORATION, a corporation duly organized and validly existing under the laws of
the State of New York (the "COMPANY"); each of the Subsidiaries of the Company
that becomes a guarantor pursuant to Section 9.16 of the Second Amended and
Restated Credit Agreement (as defined below) (individually, a "SUBSIDIARY
GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS" and, together with the
Company, the "OBLIGORS"); each of the lenders that is a signatory hereto
(individually, a "BANK" and, collectively, the "BANKS"); CHRISTIANIA BANK OG
KREDITKASSE, as co-agent for the Banks (in such capacity together with its
successors in such capacity, the "CO-AGENT") and THE CHASE MANHATTAN BANK, a New
York bank, as agent for the Banks (in such capacity, together with its
successors in such capacity, the "AGENT").
The Company, the Banks, the Co-Agent and the Agent are parties to a
Second Amended and Restated Credit Agreement dated as of January 31, 1997, as
amended by Amendment No. 1 and Waiver dated April 1, 1997 and as further amended
by Amendment No. 2 dated as of August 19, 1997 (as heretofore further modified
and supplemented and in effect on the date hereof, the "SECOND AMENDED AND
RESTATED CREDIT AGREEMENT"), providing, subject to the terms and conditions
thereof, for extensions of credit (by making of loans and issuing letters of
credit) to be made by said Banks to the Company in an aggregate principal or
face amount not exceeding $130,000,000. The Obligors, the Banks, the Co-Agent
and the Agent wish to amend the Second Amended and Restated Credit Agreement in
certain respects, and accordingly, the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 3, terms defined in the Second Amended and Restated Credit
Agreement are used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the conditions
precedent specified in Section 5 below, but effective as of the date hereof, the
Second Amended and Restated Credit Agreement shall be further amended as
follows:
2.01. References in the Second Amended and Restated Credit Agreement
(including references to the Second Amended and Restated Credit Agreement
amended hereby) to "this Agreement" (and indirect references such as
"hereunder", "hereby", "herein", and "hereof") shall be deemed to be references
to the Second Amended and Restated Credit Agreement as amended and as further
<PAGE>
Page 2
amended hereby.
2.02. The following definitions are hereby added in alphabetical
order in Section 1.01 of the Second Amended and Restated Credit Agreement:
"AMENDMENT NO. 3" shall mean Amendment No. 3 dated as of
September 26, 1997 to this Agreement.
"CANADIAN FOREST SENIOR SUBORDINATED DEBT" shall mean the Indebtedness
of Canadian Forest evidenced by and in respect of the Canadian Forest Senior
Subordinated Notes issued pursuant to the Canadian Forest Senior Subordinated
Debt Documents.
"CANADIAN FOREST SENIOR SUBORDINATED DEBT DOCUMENTS" shall mean all
documents and agreements executed and delivered in connection with the original
issuance of the Canadian Forest Senior Subordinated Notes, including the
Indenture dated as of September 29, 1997 among the Company, as guarantor,
Canadian Forest, as issuer, and State Street Bank and Trust Company, as trustee,
as the same shall, subject to Section 9.17 hereof, be modified and supplemented
and in effect from time to time.
"CANADIAN FOREST SENIOR SUBORDINATED NOTES" shall mean Canadian
Forest's 8 3/4% Senior Subordinated Notes due 2007 in an aggregate principal
amount not to exceed $125,000,000.
2.03. Section 8.14(c) of the Second Amended and Restated Credit
Agreement is amended in its entirety as follows:
"(c) None of the Restricted Subsidiaries of the Company, other than
Forest I Development Company and Canadian Forest, is, on the date of
Amendment No. 3, subject to any indenture, agreement, instrument or
other arrangement of the type described in the last sentence of
Section 9.15 hereof other than, in the case of Canadian Forest, as
provided in the Canadian Forest Senior Subordinated Debt Documents."
2.04. Section 9.07(a) of the Second Amended and Restated Credit
Agreement is amended by (x) amending clause (iii) therein in its entirety as
follows:
"(iii) Subordinated Indebtedness; provided that on and after the 15th
Business Day following the issuance of the Canadian Forest Senior
Subordinated Notes, the aggregate principal amount of the Senior
Subordinated Debt outstanding shall not exceed $11,000,000,"
and (y) by adding a new paragraph (vii) therein as set forth below, changing the
existing paragraph "(vii)" to paragraph "(viii)" and deleting the word "and" at
the end of paragraph (vi) therein:
<PAGE>
Page 3
"(vii) the Canadian Forest Senior Subordinated Debt and the Guarantee
thereof as contemplated in the Canadian Forest Senior Subordinated Debt
Documents; and".
2.05. Section 9.15 of the Second Amended and Restated Credit
Agreement is amended by amending the last sentence therein in its entirety as
follows:
"The Company will not and will not permit any of its Restricted
Subsidiaries to enter into any indenture, agreement, instrument or
other arrangement (other than the Indenture included in the Senior
Subordinated Debt Documents as initially in effect, the Indenture
included in the Canadian Forest Senior Subordinated Debt Documents and
the Guarantee granted by Forest in relation thereto each as initially
in effect, the Funding Credit Agreement as initially in effect and the
other Loan Documents (as defined therein) and the Canadian Forest Oil
Credit Agreement as initially in effect and the other Loan Documents
(as defined therein)) that, directly or indirectly, prohibits or
restrains, or has the effect of prohibiting or restraining, or imposes
materially adverse conditions upon, the incurrence or payment of
Indebtedness of the Company and its Restricted Subsidiaries, the
granting of Liens, the declaration or payment of dividends, the making
of loans, advances or Investments or the sale, assignment, transfer or
other disposition of Property."
2.06. Section 9.17 of the Second Amended and Restated Credit
Agreement is amended by (x) adding the phrase "or Canadian Forest Senior
Subordinated Debt" after the phrase "Senior Subordinated Debt" in clause (ii)
therein and (y) adding a new clause "(v)" immediately preceding clause "(w)"
therein as follows:
"(v) the principal amount of the Indebtedness issued in exchange for
or the proceeds of which are used to repay, refund, refinance or discharge
or otherwise retire such Canadian Forest Senior Subordinated Debt does
exceed the principal amount of such Canadian Forest Senior Subordinated
Debt being refinanced;".
2.07. Section 12 of the Second Amended and Restated Credit
Agreement is amended by inserting a new Section 12.15 as follows:
"12.15. ACKNOWLEDGEMENT OF PRIORITY OF INDEBTEDNESS. The Company
represents and warrants to the Banks and the Agent that the
Indebtedness hereunder and under the other Basic Documents is (a)
"Senior Indebtedness of the Company" and "Senior Indebtedness of a
Subsidiary Guarantor", as applicable, for the purposes of the
Indenture
<PAGE>
Page 4
dated as of September 8, 1993 between the Company and State Street
Bank and Trust Company (as successor to Shawmut Bank Connecticut,
National Association), as supplemented and (b) "Designated Senior
Indebtedness" for the purposes of the Indenture dated as of
September 29, 1997 between Canadian Forest and State Street Bank
and Trust Company, as trustee, as both shall, subject to Section
9.17 hereof, be modified and supplemented and in effect from time
to time."
2.08. Schedule I of the Second Amended and Restated Credit Agreement,
as in effect prior to the effectiveness of this Amendment No. 3, shall be
replaced with Schedule I to this Amendment No. 3.
2.09. Schedule III of the Second Amended and Restated Credit
Agreement, as in effect prior to the effectiveness of this Amendment No. 3,
shall be replaced with Schedule III to this Amendment No. 3.
Section 3. WAIVER AND CONSENT. (a) The Company has informed the
Agent, the Co-Agent and the Banks that on August 28, 1997, the Company commenced
a tender offer for all $100,000,000 of the outstanding principal amount of the
Senior Subordinated Debt and a solicitation of consents to certain amendments to
the related Indenture (the "TENDER OFFER"). The Company has heretofore given
the Agent, the Co-Agent and the Banks notice of the Tender Offer and supplied to
the Agent true and complete copies of the documents evidencing the Tender Offer.
Subject to the satisfaction of the conditions precedent specified in Section 5
below, but with effect on and after the date hereof, the Agent, the Co-Agent and
each of the Banks party hereto hereby waive compliance by the Company with the
terms of Section 9.01(d) of the Second Amended and Restated Credit Agreement for
the sole purpose of the Tender Offer.
(b) The Company has informed the Agent, the Co-Agent and the Banks
that it intends to use some of the proceeds from the issuance of the Canadian
Forest Senior Subordinated Debt to fund the Tender Offer, which may constitute a
refinancing of the Senior Subordinated Debt. Subject to the satisfaction of the
conditions precedent specified in Section 5 below, but with effect on and after
the date hereof, the Agent, the Co-Agent and each of the Banks party hereto
hereby waive compliance by the Company with the terms of Section 9.07(a)(vii) of
the Second Amended and Restated Credit Agreement for the sole purpose of
allowing the Company to use some of the proceeds from the issuance of the
Canadian Forest Senior Subordinated Debt to fund the Tender Offer.
(c) Subject to the satisfaction of the conditions precedent specified
in Section 5 below, but with effect on and after the date hereof, the Agent, the
Co-Agent and each of the Banks party hereto hereby waive compliance by the
Company with the terms of Section 9.17 of the Second Amended and Restated Credit
Agreement for the
<PAGE>
Page 5
sole purpose of allowing the Company to perform the transactions described in
paragraphs (i) through (iv) below: (i) the Company's Tender Offer, (ii) the
Company's repurchase of the Senior Subordinated Debt pursuant to the Tender
Offer, (iii) the Company depositing amounts sufficient to repurchase all of
the Senior Subordinated Debt in an account held with the Trustee under the
Indenture dated as of September 8, 1993 for the Senior Subordinated Debt, and
(iv) amendment, supplement or modification by the Company of the Indenture
included in the Senior Subordinated Debt Documents as contemplated by the
documents evidencing the Tender Offer.
(d) The Agent, the Co-Agent and the Banks consent to the amendments,
waivers and consents contained in the Amendment No. 2 to the Canadian Forest
Credit Agreement and in the Amendment No. 2 to the Funding Credit Agreement.
Section 4. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Lender Group that the representations and warranties set
forth in Section 8 of the Second Amended and Restated Credit Agreement are true
and complete on the date hereof (unless otherwise limited to an earlier date) as
if made on and as of the date hereof and as if each reference in said Section 8
to "this Agreement" included reference to this Amendment No. 3.
Section 5. CONDITIONS PRECEDENT. As provided in Sections 2 and 3
above, the amendments to the Second Amended and Restated Credit Agreement set
forth in said Section 2 and waivers in said Section 3 shall become effective, as
of the date hereof, upon the satisfaction of the following conditions precedent:
5.01. EXECUTION BY ALL PARTIES. This Amendment No. 3 shall have been
executed and delivered by each of the parties hereto.
5.02. CANADIAN FOREST SENIOR SUBORDINATED NOTES. The indenture
pursuant to which the Canadian Forest Senior Subordinated Notes are to be issued
and the Guarantee granted by Forest in relation thereto shall be in form and
substance satisfactory to the Agent.
5.03. CANADIAN FOREST AMENDMENT AGREEMENT. The Amendment No. 2 to
the Canadian Forest Credit Agreement shall have been executed and delivered by
each of the parties thereto.
5.04. OPINION OF COUNSEL. Vinson & Elkins L.L.P., special New York
counsel to the Company shall have provided an opinion to the Agent, the Co-Agent
and the Banks, stating that each of the Canadian Forest Senior Subordinated Debt
Documents has been duly authorized, executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company and Canadian
Forest and is otherwise in form and substance satisfactory to the Agent.
<PAGE>
Page 6
5.05. OTHER DOCUMENTS. The Agent shall have received such other
documents as the Agent or any Bank or special New York counsel to Chase may
reasonably request.
Section 6. MISCELLANEOUS. Except as herein provided, the Second
Amended and Restated Credit Agreement shall remain unchanged and in full force
and effect. This Amendment No. 3 may be executed in any number of counterparts,
all of which taken together shall constitute one and the same amendatory
instrument and any of the parties hereto may execute this Amendment No. 3 by
signing any such counterpart. This Amendment No. 3 shall be governed by, and
construed in accordance with, the law of the State of New York.
<PAGE>
Page 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 3 to be duly executed and delivered as of the day and year first above
written.
FOREST OIL CORPORATION
By
-------------------------
Title:
Address for Notices:
1600 Broadway
Suite 2200
Denver, Colorado 80202
Telecopier No.: (303) 812-1602
Telephone No.: (303) 812-1414
Attention: Kenton Scroggs
<PAGE>
Page 8
BANKS
THE CHASE MANHATTAN BANK
By
-------------------------
Title:
<PAGE>
Page 9
CHRISTIANIA BANK OG KREDITKASSE
By
-------------------------
Title:
<PAGE>
Page 10
CREDIT LYONNAIS NEW YORK BRANCH
By
-------------------------
Title:
<PAGE>
Page 11
BANK OF MONTREAL
By
-------------------------
Title:
<PAGE>
Page 12
ROYAL BANK OF CANADA
By
-------------------------
Title:
<PAGE>
Page 13
THE CHASE MANHATTAN BANK
as Agent
By
-------------------------
Title:
Address for Notices to
Chase as Agent:
The Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Agency Services,
Sandra Miklave
Telecopier No.: (212) 552-5658
Telephone No.: (212) 552-7953
<PAGE>
Page 14
CHRISTIANIA BANK OG KREDITKASSE,
as Co-Agent
By
-------------------------
Title:
Address for Notices to
Christiania as Co-Agent:
Christiania Bank OG Kreditkasse
11 West 42nd Street, 7th Floor
New York, New York 10036
Attention: First Vice President
Telecopier No.: (212) 827-4888
Telephone No.: (212) 827-4835
<PAGE>
Page 15
SCHEDULE I
MATERIAL AGREEMENTS AND LIENS
(Sections 8.12 and 9.07(b))
<PAGE>
Page 16
SCHEDULE III
SUBSIDIARIES AND INVESTMENTS
(Sections 8.15 and 9.08(a))
<PAGE>
Page 1
EXECUTION COPY
AMENDMENT NO. 4 TO DEED OF TRUST, MORTGAGE, SECURITY
AGREEMENT, ASSIGNMENT OF PRODUCTION, FINANCING STATEMENT
(PERSONAL PROPERTY INCLUDING HYDROCARBONS),
AND FIXTURE FILING
THIS AMENDMENT NO. 4 TO DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF PRODUCTION, FINANCING STATEMENT (PERSONAL PROPERTY INCLUDING
HYDROCARBONS) AND FIXTURE FILING (this "AMENDMENT") is entered into as of August
19, 1997 at 9:00 a.m., Mountain Time (the "EFFECTIVE DATE") by and between
FOREST OIL CORPORATION, a New York corporation with an address for notice
hereunder of 1500 Colorado National Building, 950 17th Street, Denver, Colorado
80202 ("MORTGAGOR") to:
1. THE CHASE MANHATTAN BANK, with an address at One Chase Manhattan
Plaza, New York, New York 10081, as agent for each bank referred to
below and as agent for The Chase Manhattan Bank of Canada and the
Canadian Lenders (as defined below) in connection with the Canadian
Guarantee (as defined below) (in such capacity, the "AGENT") (the
Agent, together with its successors in such capacity, is hereinafter
referred to as the "SECURED PARTY"), as to any and all portions of the
Collateral EXCEPT those portions of the Collateral which (i) are
located in the State of Texas or in offshore waters adjacent to the
State of Texas and subject to the laws of the State of Texas and
(ii) constitute interests in or to real property under the law of the
State of Texas (the "DT COLLATERAL"); and
2. Mary Jo Woodford, with an address at One Chase Manhattan Plaza,
New York, New York 10081, as trustee (successor to Richard F. Betz)
(in such capacity, together with her successors and assigns in such
capacity, the "TRUSTEE"), but only as to the DT Collateral.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. IN CERTAIN STATES, A POWER
OF SALE MAY ALLOW THE SECURED PARTY TO TAKE THE COLLATERAL AND SELL IT WITHOUT
GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS
INSTRUMENT.
R E C I T A L S
<PAGE>
Page 2
A. Mortgagor, certain banks (collectively, the "ORIGINAL BANKS"),
and the Agent were parties to a Credit Agreement dated as of December 1, 1993
(as heretofore modified and supplemented and in effect on the date hereof (the
"ORIGINAL CREDIT AGREEMENT").
B. Mortgagor, certain banks (collectively, the "EXISTING BANKS"),
and the Agent amended and restated the Original Credit Agreement pursuant to an
Amended and Restated Credit Agreement dated as of August 31, 1995.
C. Mortgagor, the Existing Banks and the Agent further amended and
restated the Original Credit Agreement pursuant to a Second Amended and Restated
Credit Agreement dated as of January 31, 1997 (the "SECOND AMENDED AND RESTATED
CREDIT AGREEMENT").
D. Mortgagor, the Existing Banks and the Agent amended the Second
Amended and Restated Credit Agreement pursuant to an Amendment No. 1 and Waiver
dated April 1, 1997.
E. Mortgagor, certain banks (collectively, the "BANKS") and the
Agent have agreed to further amend the Second Amended and Restated Credit
Agreement pursuant to an Amendment No. 2 dated as of August 19, 1997 (the Second
Amended and Restated Credit Agreement as so amended and restated and as the same
may be further amended and restated and in effect from time to time, being
referred to herein as the "CREDIT AGREEMENT").
F. The Credit Agreement is secured by, among other things, that
certain Deed of Trust, Mortgage, Security Agreement, Assignment of Production,
Financing Statement (Personal Property Including Hydrocarbons), and Fixture
Filing dated as of December 1, 1993 from Mortgagor to Secured Party and Trustee
(as heretofore modified and supplemented, the "DEED OF TRUST").
G. The Deed of Trust was amended by Amendment No. 1 to Deed of
Trust, Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property Including Hydrocarbons), and Fixture Filing dated
as of June 3, 1994. The Deed of Trust was further amended by Amendment No. 2 to
Deed of Trust, Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property Including Hydrocarbons), and Fixture Filing dated
as of August 31, 1995 and by Amendment NO. 3 to Deed of Trust, Mortgage,
Security Agreement, Assignment of Production, Financing Statement (Personal
Property Including Hydrocarbons), and Fixture Filing dated as of January 31,
1997. The Deed of Trust, Amendment No. 1, Amendment No. 2 and Amendment No. 3
were duly recorded as set forth on Schedule 1 attached hereto.
H. Mortgagor and Secured Party now desire to further amend the Deed
of Trust to secure all indebtedness under the Credit Agreement, notwithstanding
any extensions or renewals of the Credit Agreement or any amendments to the
Credit Agreement at any time
<PAGE>
Page 3
maturing August 19, 2001 and secure all obligations arising pursuant to the
guarantee (the "CANADIAN GUARANTEE") among the Mortgagor and The Chase
Manhattan Bank of Canada, as administrative agent (the "CANADIAN AGENT") for
the lenders (the "CANADIAN LENDERS") party to the Second Amended and Restated
Credit Agreement dated as of April 1, 1997 among 611852 Saskatchewan Ltd.
(the "CANADIAN SUBSIDIARY"), the Canadian Lenders and the Canadian Agent, as
amended by Amendment No. 1 dated as of August 19, 1997 and as the same may be
amended, restated, modified and supplemented and in effect from time to time
(the "CANADIAN CREDIT AGREEMENT").
I. Mortgagor and Secured Party now desire to further amend the Deed
of Trust to provide for the continuation of the mortgage lien and security
interest provided under the Deed of Trust by Mortgagor to the Secured Party, for
the benefit of itself, the Banks and the Canadian Lenders.
NOW, THEREFORE, in view of the foregoing, Mortgagor and Secured Party
do hereby agree as follows:
1. All capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Deed of Trust.
2. All references in the Deed of Trust to "this Instrument", as
defined in the opening paragraph of the Deed of Trust shall mean the Deed of
Trust as amended hereby and as the same may from time to time be further amended
or supplemented.
3. The Deed of Trust is hereby amended: (i) by deleting Recital 1
in its entirety and substituting the following therefor:
"1. Pursuant to the terms of the Second Amended and Restated
Credit Agreement dated as of January 31, 1997, among Mortgagor,
certain banks (collectively, the "BANKS"), the Subsidiary Guarantors
and the Secured Party as amended by Amendment No. 1 and Waiver dated
as of April 1, 1997 and as further amended by Amendment No. 2 dated as
of August 19, 1997 (and as the same may be further amended,
supplemented and otherwise modified and in effect from time to time,
the "CREDIT AGREEMENT"), the Banks have agreed to make loans from time
to time under a revolving credit facility to the Mortgagor the
aggregate principal or stated amount of which shall not exceed
$130,000,000 at any one time (maturing August 19, 2001), and issue or
acquire participation interests in letters of credit for account of
Mortgagor the aggregate amount of the liabilities of the Banks under
which shall not exceed $10,000,000.00. Pursuant to the terms of the
Canadian Credit Agreement (as defined below), the Canadian Lenders
have agreed to make loans and issue or acquire participation interests
in bankers' acceptances from time to time under a revolving credit
facility to the Canadian Subsidiary (as defined below) the aggregate
principal or stated amount of which shall not exceed Canadian Dollars
<PAGE>
Page 4
$165,000,000 at any one time outstanding (maturing August 19, 2001),
and issue or acquire participations in letters of credit for the
account of the Canadian Subsidiary the aggregate amount of the
liabilities of the Canadian Lenders under which shall not exceed
Canadian dollars $15,000,000, provided that the Mortgagor provides the
Canadian Guarantee (as defined below) in favor of the Canadian Agent
(as defined below) and the Canadian Lenders (as defined below).";
(ii) by deleting Section 1.01A in its entirety and substituting the
following therefore:
"A. Payment in full when due (whether as stated maturity, by
acceleration or otherwise) of the principal of and interest on
the Loans made by the Banks, all amounts from time to time owing
to the Canadian Agent for itself and the Canadian Lenders
pursuant to the Canadian Guarantee (including, without
limitation, the Debt (as such term is defined in the Canadian
Guarantee)) and all other amounts (including, without limitation,
Reimbursement Obligations) from time to time owing to, and
obligations to be performed in favor of, the Secured Party, the
Banks and the Canadian Lenders by the Mortgagor under the Credit
Agreement, the Notes and under any of the other Basic Documents
(any reborrowings, future advances, readvances, modifications,
extensions, substitutions, exchanges and renewals shall enjoy the
same priority as the initial advances evidenced by the Notes),
the obligations to the Canadian Agent and the Canadian Lenders
under the Canadian Guarantee and the obligations to be performed
in favor of, the Secured Party and the Banks by the Mortgagor
under any Commodity Hedging Agreements or Interest Rate
Protection Agreements (as those terms are defined in the Credit
Agreement).";
(iii) by inserting the following definitions in alphabetical order in
Article VI:
"CANADIAN AGENT" shall have the meaning given to such term in
Recital H of Amendment No. 4 to Deed of Trust dated as of August 19, 1997.
"CANADIAN CREDIT AGREEMENT" shall have the meaning given such
term in Recital H of Amendment No. 4 to Deed of Trust dated as of August
19, 1997.
"CANADIAN GUARANTEE" shall have the meaning given to such term in
Recital H of Amendment No. 4 to Deed of Trust dated as of August 19, 1997.
"CANADIAN LENDERS" shall have the meaning given to such term in
Recital H of Amendment No. 4 to Deed of Trust dated as of August 19, 1997.
<PAGE>
Page 5
"CANADIAN SUBSIDIARY" shall have the meaning given such term in
Recital H of Amendment No. 4 to Deed of Trust dated as of August 19, 1997;
and
(iv) By deleting Section 9.01(ii) and substituting the following
therefor:
(ii) the maximum amount of the Obligations that may be
outstanding at any time and from time to time that this
Instrument secured is fixed at $150,000,000.
4. Mortgagor hereby confirms that pursuant to and subject to the
terms of the Deed of Trust, it has heretofore absolutely and unconditionally
granted, bargained, sold, assigned, transferred and conveyed the DT Collateral
to the Trustee and granted to the Secured Party a security interest in those
portions of the Collateral which (i) are located in the State of Texas or in
offshore waters adjacent to the State of Texas and subject to the laws of the
State of Texas and (ii) do not constitute DT Collateral.
5. Mortgagor hereby confirms that pursuant to and subject to the
Deed of Trust, it has heretofore absolutely and unconditionally granted,
bargained, sold, assigned, transferred, pledged, mortgaged, warranted and
conveyed to the Secured Party and granted the Secured Party a security interest
in all of the Collateral (except the DT Collateral), including, without
limitation, all severed and extracted Hydrocarbons and other minerals produced
from or attributable to the Mortgaged Property, including, without limitation,
all of the proceeds thereof.
6. Mortgagor hereby acknowledges the Obligations, whether now
existing or to arise hereafter, and confesses judgement thereon in favor of the
Secured Party if the Obligations are not paid when due.
7. The parties hereto hereby acknowledge and agree that except as
specifically amended, changed or modified hereby, the Deed of Trust shall remain
in full force and effect in accordance with its terms. None of the rights,
titles and interests existing and to exist under the Deed of Trust are hereby
released, diminished or impaired, and Mortgagor hereby reaffirms all agreements
and covenants and acknowledges and agrees that, except as previously disclosed
by Mortgagor under the Deed of Trust (except to the extent same relate to
Collateral that is no longer owned by Mortgagor and other than the
representation and warranty set forth in the first sentence of Section 2.02(c)
of the Deed of Trust) are true and correct in all material respects as of the
date hereof. Mortgagor also represents and warrants to the Banks that the
current net overproduced position of the Mortgagor with respect to Hydrocarbons
produced from the Mortgaged Properties (expressed in volumetric terms) is not
materially greater than the overproduced position of the Mortgagor with respect
to the Mortgaged Properties as of January 31, 1997.
8. INSOFAR AS PERMITTED BY OTHERWISE APPLICABLE LAW,
<PAGE>
Page 6
THIS AMENDMENT SHALL BE CONSTRUED UNDER AND GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK (EXCLUDING CHOICE OF LAW AND CONFLICT OF LAW RULES). MORTGAGOR
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NONEXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK AND EACH OTHER STATE WHERE
THE COLLATERAL IS LOCATED AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY
BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS AMENDMENT, THE BASIC
DOCUMENTS OR THE OBLIGATIONS IN THE CASE OF A PROCEEDING IN ANY OF SUCH
STATES, BY SERVING THE SECRETARY OF STATE OF SUCH STATE IN ACCORDANCE WITH
ANY APPLICABLE PROVISIONS OF SUCH STATE'S LAW GOVERNING SERVICE OF PROCESS
UPON FOREIGN CORPORATIONS OR ENTITIES.
9. This Amendment may be executed in two or more counterparts, and
it shall not be necessary that the signatures of all parties hereto be contained
on any one counterpart hereof.
10. Mortgagor and the Agent acknowledge that the execution of
Amendment No. 4 does not constitute a payment or prepayment of the Second
Amended and Restated Credit Agreement, but constitutes an amendment, extension,
increase, and modification of the terms thereof.
11. For purposes of executory process under Louisiana law, the
Mortgagor declares that on this ___ day of August, 1997, but effective for all
purposes as of the Effective Date, it has appeared in the presence of the
undersigned Notary Public and two witnesses and has executed this amendment
through Forest Dorn its Vice President, duly authorized pursuant to Resolutions
of the Board of Directors of the Mortgagor, a certified copy of which is annexed
hereto as Exhibit "A".
12. Mortgagor and the Secured Party acknowledges that none of the
Obligations have been presented to the undersigned Notary Public to be paraphed
for identification with this amendment.
13. Notwithstanding any reference herein to the Credit Agreement, the
Canadian Guarantee or any other Basic Document or the Canadian Guarantee, no
third party shall be obligated to inquire as to whether any term or condition
set forth therein has occurred but shall be entitled to rely upon the
certificate of the Secured Party as to all events, including but not limited to
the occurrence of an Event of Default.
14. For purposes of executory process, the Mortgagor acknowledges and
agrees that the existence, amount, terms, and maturity of the Obligations, may
be proven by affidavit or verified petition, in accordance with Louisiana law as
now existing or hereafter enacted.
<PAGE>
Page 7
THUS DONE AND PASSED on this day ___ day of __________, 1997, (the
"EFFECTIVE DATE") effective for all purposes as of the Effective Date, in my
presence and in the presence of the undersigned competent witnesses who hereunto
sign their names with Mortgagor and me, Notary, after reading of the whole.
MORTGAGOR:
FOREST OIL CORPORATION
By:
------------------------------
Name:
Title:
WITNESSES:
- ------------------------------
- ------------------------------
------------------------------
Notary Public
<PAGE>
Page 8
THUS DONE AND PASSED on this ___ day of __________, 1997, (the
"EFFECTIVE DATE") effective for all purposes as of the Effective Date in my
presence and in the presence of the undersigned competent witnesses who hereunto
sign their names with the Agent and the Trustee and me, Notary, after reading of
the whole.
AGENT:
THE CHASE MANHATTAN BANK
By:
------------------------------
Name:
Title:
TRUSTEE:
By:
------------------------------
Name:
Title:
WITNESSES:
- ------------------------------
- ------------------------------
------------------------------
Notary Public
<PAGE>
Page 9
EXHIBIT A
NOTARY'S CERTIFICATE
The undersigned Notary Public hereby certifies that attached hereto are
certified copies of Resolutions produced by the Mortgagor and attached by me to
this Amendment No. 4 to Deed of Trust, Mortgage, Security Agreement, Assignment
of Production, Financing Statement (Personal Property Including Hydrocarbons),
and Fixture Filing executed by Mortgagor this ___ day of __________, 1997 and
effective for all purposes as of ___________, 1997.
------------------------------
Notary Public
<PAGE>
Page 10
RESOLUTIONS OF THE BOARD OF DIRECTORS
<PAGE>
Page 11
ACKNOWLEDGEMENT
STATE OF COLORADO )
: ss.
COUNTY OF ______________ )
BE IT REMEMBERED that I, the undersigned Notary Public duly qualified,
commissioned, sworn and acting in and for the county and state aforesaid, hereby
certify that, on __________, 1997 there personally appeared before me, the
following person, being the designated officer of the corporation set opposite
his name, and such corporation being a party to the foregoing Amendment:
_____________________, the __________________ of Forest Oil
Corporation,
This Amendment was acknowledged before me on this ____ day of
__________, 1997 by _________________, of Forest Oil Corporation, a New York
corporation, on behalf of said corporation.
LOUISIANA
Who being by me duly sworn, deposed and said that he is the designated
officer of said corporation described in and which executed the foregoing
Amendment, that he signed his name thereto by order of the Board of Directors of
said corporation, and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the capacity therein stated,
and as the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official notarial
seal, in the County of _____________, State of ___________________, this ____
day of __________, 1997.
----------------------------------------
Notary Public, State of
----------------
Notary's Printed Name:
----------------
My Commission expires:
----------------
<PAGE>
Page 12
ACKNOWLEDGEMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
BE IT REMEMBERED that I, the undersigned Notary Public duly qualified,
commissioned, sworn and acting in and for the county and state aforesaid, hereby
certify that, on ____________, 1997 there personally appeared before me, the
following person, being the designated officer of the bank set opposite her
name, and such corporation being a party to the foregoing Amendment:
Mary Jo Woodford, a Vice President of The Chase Manhattan Bank.
This Amendment was acknowledged before me on this ___ day of
September, 1997 by Mary Jo Woodford, of The Chase Manhattan Bank, on behalf of
said bank.
LOUISIANA
Who being by me duly sworn, deposed and said that she is the
designated officer of said bank described in and which executed the foregoing
Amendment, that she signed her name thereto by order of the Board of Directors
of said bank, and acknowledged to me that she executed the same for the purposes
and consideration therein expressed, in the capacity therein stated, and as the
free act and deed of said bank.
IN WITNESS WHEREOF, I have hereunto set my hand and official notarial
seal, in the County of New York, State of New York, this ___ day of September,
1997.
----------------------------------------
Notary Public, State of New York
<PAGE>
Page 13
ACKNOWLEDGEMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
BE IT REMEMBERED that I, the undersigned Notary Public duly qualified,
commissioned, sworn and acting in and for the county and state aforesaid, hereby
certify that, on __________, 1997 there personally appeared before me, the
following person, being a party to the foregoing Amendment:
This Amendment was acknowledged before me on this ___ day of
September, 1997 by Mary Jo Woodford.
LOUISIANA
Who being by me duly sworn, deposed and said that she is the Trustee
described in the foregoing Amendment, that she signed her name thereto, and
acknowledged to me that she executed the same for the purposes and consideration
therein expressed, in the capacity therein stated, and as her free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and official notarial
seal, in the County of New York, State of New York, this ___ day of September,
1997.
----------------------------------------
Notary Public, State of New York
<PAGE>
Page 14
Schedule 1
SCHEDULE OF RECORDING INFORMATION
FOREST OIL CORPORATION
and
THE CHASE MANHATTAN BANK
as Agent
1. Deed of Trust, Mortgage, Security Agreement, Assignment of Production,
Financing Statement (Personal Property Including Hydrocarbons), and Fixture
Filing dated December 1, 1993 executed by Forest Oil Corporation ("Forest")
in favor of Bettylou J. Robert, as Trustee, for the benefit of The Chase
Manhattan Bank, as Agent and in favour of the Agent (all recording
references are to the Real Property Records):
RECORDED IN THE STATE OF TEXAS
County Date Filed Recording Information
------ ---------- ---------------------
Aransas 12/8/93 Recorded 12/10/93 as
#192065
Brazoria 12/8/93 Recorded 12/8/93 as
#93-044178
Calhoun 12/8/93 Recorded 12/8/93 in
Volume 116, Page 73
Chambers 12/8/93 Recorded 12/10/93 in
Volume 93-225, Page 522
Galveston 12/16/93 Recorded 12/16/93 as
#9353245
Hidalgo 12/8/93 Recorded 12/8/93 as
#357731
Jefferson 12/8/93 Recorded 12/8/93 as
#93-41412
Loving 12/8/93 Recorded 12/8/93 in
<PAGE>
Page 15
Volume 45, Page 688
Matagorda 12/8/93 Recorded 12/8/93 in
Volume 366, Page 787
Pecos 12/8/93 Recorded 12/8/93 in
Volume 272, Page 25
Reeves 12/8/93 Recorded 12/8/93 in
Volume 533, Page 315
Ward 12/8/93 Recorded 12/9/93 in
Volume 175, Page 524
RECORDED IN THE STATE OF OKLAHOMA
County Date Filed Recording Information
------ ---------- ---------------------
Caddo 12/8/93 Recorded 12/8/93 as
No. 93 9150
Oklahoma 12/8/93 Recorded 12/8/93 as
No. 03908
Washita 12/8/93 Recorded 12/8/93 as
E-1333
RECORDED IN THE STATE OF WYOMING
County Date Filed Recording Information
------ ---------- ---------------------
Natrona 12/8/93 Recorded 12/8/93 as
Instrument #535014
RECORDED IN THE STATE OF LOUISIANA
A. Parish Date Filed Recording Information
------ ---------- ---------------------
Iberia 12/7/93 Entry No. 93-8912
MOB A-633, folio _____
<PAGE>
Page 16
Vermilion 12/7/93 Mortgage Entry No. 9311419
St. Mary 12/7/93 Entry No. 206,342
MOB 677, folio 650
Cameron 12/7/93 Entry No. 233834
MOB 197, folio _____
Plaquemines 12/7/93 MOB 231, folio 1
Lafourche 12/7/93 Entry No. 759883
MOB 657, folio _____
Terrebonne 12/7/93 Entry No. 927906
MOB 959, folio _____
Jefferson 12/8/93 Entry No. 9368844
MOB 3629, folio 248
B. Minerals Management Service
Gulf of Mexico Region
December 7, 1993
Lease Files:
OCS-G 0900, OCS-G 0986, OCS-G 0987, OCS-G 0991,
OCS-G 0992, OCS-G 0993, OCS-G 0994, OCS-G 0995,
OCS-G 0996, OCS-G 0997, OCS-G 1216, OCS-G 1217,
OCS-G 1979, OCS-G 1980, OCS-G 1981, OCS-G 1982,
OCS-G 5517, OCS-G 5625, OCS-G 7793, OCS-G 8434,
OCS-G 8457, OCS-G 9627, OCS-G 9651, OCS-G 10742,
OCS-G 10785, OCS-G 6178, OCS-G 6156, OCS-G 9086,
OCS-G 5171, OCS-G 6048, OCS-G 6069, OCS-G 3738,
OCS-G 8553, OCS-G 12509, OCS-G 0479.
C. Financing Statement executed by Forest in connection with item # 1
above and filed as follows:
Location Date Filed Filing Information
-------- ---------- ------------------
Secretary of 12/8/93 #230027
<PAGE>
Page 17
State of Texas
2. UCC-1 Financing Statement by Forest Oil Corporation, as Debtor, and The
Chase Manhattan Bank, as Secured Party.
a. Orleans Parish, Louisiana
December 8, 1993
Under UCC Entry No. 36-79419.
b. Minerals Management Service
Gulf of Mexico Region
December 7, 1993
Lease Files:
OCS-G 0900, OCS-G 0986, OCS-G 0987,
OCS-G 0991, OCS-G 0992, OCS-G 0993, OCS-G 0994,
OCS-G 0995, OCS-G 0996, OCS-G 0997, OCS-G 1216,
OCS-G 1217, OCS-G 1979, OCS-G 1980, OCS-G 1981,
OCS-G 1982, OCS-G 5517, OCS-G 5625, OCS-G 7793,
OCS-G 8434, OCS-G 8457, OCS-G 9627, OCS-G 9651,
OCS-G 10742, OCS-G 10785, OCS-G 6178, OCS-G 6156,
OCS-G 9086, OCS-G 5171, OCS-G 6048, OCS-G 6069,
OCS-G 3738, OCS-G 8553, OCS-G 12509, OCS-G 0479.
3. Amendment No. 1 to Deed of Trust, Mortgage, Security Agreement, Assignment
of Production, Financing Statement (Personal Property Including
Hydrocarbons), and Fixture Filing dated June 3, 1994 executed by Forest Oil
Corporation ("Forest") in favor of Bettylou J. Robert, as Trustee, for the
benefit of The Chase Manhattan Bank, as Agent and in favour of the Agent:
RECORDED IN THE STATE OF TEXAS
County Date Filed Recording Information
------ ---------- ---------------------
Aransas 6/9/94 Recorded 6/13/94 as #195102
Brazoria 6/8/94 Recorded 6/8/94 as #94-021546
Calhoun 6/8/94 Recorded 6/9/94 in Volume 125,
Page 905-915 #35684
Chambers 6/8/94 Recorded 6/10/94 in
<PAGE>
Page 18
Volume 94-240, Page 214
Galveston 6/22/94 Recorded 6/22/94 as #9428381
Hidalgo 6/14/94 Recorded 6/14/94 as #392138
Jefferson 6/8/94 Recorded 6/8/94 as #94-9418637
Loving 6/9/94 Recorded 6/9/94 in Volume 46,
Page 231
Matagorda 6/8/94 Recorded 6/8/94 in Volume 381,
Page 504
Pecos 6/9/94 Recorded 6/9/94 in Volume 274,
Page 231
Reeves 6/9/94 Recorded 6/10/94 in
Volume 538, Page 228
Ward 6/23/94 Recorded 6/23/94 in
Volume 177, Page 41
RECORDED IN THE STATE OF LOUISIANA
A. County Date Filed Recording Information
------ ---------- ---------------------
Cameron 6/7/94 Recorded 6/7/94
Entry No. 236410
MOB 200, folio _____
Iberia 6/6/94 Recorded 6/6/94
Entry No. 94-4017
MOB A-641, folio _____
Jefferson 6/6/94 Recorded 6/6/94
Entry No. 938445
MOB 980, folio _____
Lafourche 6/6/94 Recorded 6/6/94
Entry No. 767362
MOB 670, page 682
Plaquemines 6/7/94 Recorded 6/7/94
<PAGE>
Page 19
MOB 235, folio 1083
St. Mary 6/6/94 Recorded 6/6/94
Entry No. 208,538
MOB 687, folio _____
Terrebonne 6/6/94 Recorded 6/6/94
Entry No. 938445
MOB 980, folio _____
Vermilion 6/6/94 Recorded 6/6/94
Mortgage Entry No. 9405602
B. Minerals Management Service, Gulf of Mexico Region, June 6, 1994.
Lease Files:
OCS-G 0900, OCS-G 0986, OCS-G 0987,
OCS-G 0991, OCS-G 0992, OCS-G 0993, OCS-G 0994,
OCS-G 0995, OCS-G 0996, OCS-G 0997, OCS-G 1216,
OCS-G 1217, OCS-G 1979, OCS-G 1980, OCS-G 1981,
OCS-G 1982, OCS-G 5517, OCS-G 5625, OCS-G 7793,
OCS-G 8434, OCS-G 8457, OCS-G 9627, OCS-G 9651,
OCS-G 10742, OCS-G 10785, OCS-G 6178, OCS-G 6156,
OCS-G 9086, OCS-G 5171, OCS-G 6048, OCS-G 6069,
OCS-G 3738, OCS-G 8553, OCS-G 12509, OCS-G 0479.
To cover Texas Deed of Trust also filed in OCS-G 6178, 6156, 9086,
5171, 6048, 6069, 3738, 8553 and 12509.
4. Amendment No. 2 to Deed of Trust, Mortgage, Security Agreement, Assignment
of Production, Financing Statement (Personal Property Including
Hydrocarbons), and Fixture Filing dated August 31, 1995 executed by Forest
Oil Corporation ("Forest") in favor of Ian G.P. Schottlaender, as Trustee,
for the benefit of The Chase Manhattan Bank, as Agent and in favour of the
Agent:
RECORDED IN THE STATE OF TEXAS
County Date Filed Recording Information
------ ---------- ---------------------
<PAGE>
Page 20
Aransas 9/28/95 Recorded 9/28/95 as
#202631
Brazoria 9/27/95 Recorded 9/27/95 as
#95-031805
Calhoun 9/27/95 Recorded 9/27/95 in
Volume 149, Page 818
Chambers 9/28/95 Recorded 9/29/95 in
Volume 95-277, Page 484
Galveston 10/11/95 Recorded 10/11/95 as
#9539437
Hidalgo 9/29/95 Recorded 9/29/95 as
#477853
Jefferson 9/27/95 Recorded 9/27/95 as
#95-9528748
Loving 9/28/95 Recorded 9/28/95 in
Volume 48, Page 602
Matagorda 9/27/95 Recorded 9/27/95 in
Volume 420, Page 675
Pecos 9/28/95 Recorded 9/28/95 in
Volume 280, Page 450
Reeves 9/29/95 Recorded 9/29/95 in
Volume 554, Page 415
Ward 9/29/95 Recorded 9/29/95 in
Volume 181, Page 615
RECORDED IN THE STATE OF OKLAHOMA
County Date Filed Recording Information
------ ---------- ---------------------
Caddo 9/21/95 Recorded 9/21/95 in
Book 2006, Page 63-85
as #95-07098
<PAGE>
Page 21
Oklahoma 9/21/95 Recorded 9/21/95 No. 3098
Washita 9/22/95 Recorded 9/22/95 in
Book 826, Page 410-486
RECORDED IN THE STATE OF WYOMING
County Date Filed Recording Information
------ ---------- ---------------------
Natrona 9/15/95 Recorded 9/15/95 as
Instrument #567140
Secretary
of State 9/19/95 Recorded 9/18/95
Current document ID:
9526112 1CO4
RECORDED IN THE STATE OF LOUISIANA
County Date Filed Recording Information
------ ---------- ---------------------
Cameron 9/19/95 File No: 242694
MOB 212
Iberia 9/19/95 Entry No: 95-7038
MOB A-665
Lafourche 9/19/95 Entry No: 787079
MOB 700, folio 23
Plaquemines 9/20/95 MOB 249, folio 856
St. Mary 9/19/95 Entry No. 214, 024
MOB 715
Terrebonne 9/19/95 Entry No. 962561
MOB 1031, page 402
Vermilion 9/19/95 MOB Entry No. 9509530
<PAGE>
Page 22
B. Minerals Management Service, Gulf of Mexico Region, October 10, 1995.
Lease Files:
OCS-G 0900, OCS-G 0986, OCS-G 0987, OCS-G 0991,
OCS-G 0992, OCS-G 0993, OCS-G 0994, OCS-G 0995,
OCS-G 0996, OCS-G 0997, OCS-G 1216, OCS-G 1217,
OCS-G 1979, OCS-G 1980, OCS-G 1981, OCS-G 1982,
OCS-G 5517, OCS-G 5625, OCS-G 7793, OCS-G 8434,
OCS-G 8457, OCS-G 9627, OCS-G 9651, OCS-G 10742,
OCS-G 10785, OCS-G 6178, OCS-G 6156, OCS-G 9086,
OCS-G 5171, OCS-G 6048, OCS-G 6069, OCS-G 3738,
OCS-G 8553, OCS-G 12509, OCS-G 0479.
5. Amendment No. 3 to Deed of Trust, Mortgage, Security Agreement, Assignment
of Production, Financing Statement (Personal Property Including
Hydrocarbons), and Fixture Filing dated January 31, 1997 executed by Forest
Oil Corporation ("FOREST") in favour of Mary Jo Woodford, as Trustee, for
the benefit of The Chase Manhattan Bank, as Agent and in favour of the
Agent:
RECORDED IN THE STATE OF OKLAHOMA
County Date Filed Recording Information
------ ---------- ---------------------
Washita 2/10/97 Recorded 2/10/97 as
Book 848, Pages 609-701,
#I-167
Oklahoma 2/11/97 Recorded 2/11/97 as
NO. N00612
Caddo 2/11/97 Recorded 2/11/97 as
Book 2103, Pages 18-56,
#9701091
RECORDED IN THE STATE OF WYOMING
County Date Filed Recording Information
------ ---------- ---------------------
Natrona 2/7/97 Recorded 2/7/97 as
Instrument #591287
RECORDED IN THE STATE OF LOUISIANA
<PAGE>
Page 23
Parish Date Filed Recording Information
------ ---------- ---------------------
Cameron 2/7/97 Recorded 2/7/97 as
MOB 223 File 249344
Iberia 2/7/97 Recorded 2/7/97 as
MOB A-695 Entry 97-1224
Jefferson 2/7/97 Recorded 2/7/97 as
MOB 3784/209 Entry 9706862
Lafourche 2/7/97 Recorded 2/7/97 as
MOB 733 Folio 862 Entry 809475
Plaquemines 2/7/97 Recorded 2/7/97 as
MOB 263 Folio 91
St. Mary 2/7/97 Recorded 2/7/97 as
MOB 748 Entry 221, 348
Terrebonne 2/7/97 Recorded 2/7/97 as
MOB 1090 Entry 991, 729
Vermilion 2/7/97 Recorded 2/7/97 as
MOB Entry 9701944
B. Minerals Management Service, Gulf of Mexico Region, October 10, 1995.
Lease Files:
OCS-G 0900, OCS-G 0986, OCS-G 0987, OCS-G 0991,
OCS-G 0992, OCS-G 0993, OCS-G 0994, OCS-G 0995,
OCS-G 0996, OCS-G 0997, OCS-G 1216, OCS-G 1217,
OCS-G 1979, OCS-G 1980, OCS-G 1981, OCS-G 1982,
OCS-G 5517, OCS-G 5625, OCS-G 7793, OCS-G 8434,
OCS-G 8457, OCS-G 9627, OCS-G 9651, OCS-G 10742,
OCS-G 10785, OCS-G 6178, OCS-G 6156, OCS-G 9086,
OCS-G 5171, OCS-G 6048, OCS-G 6069, OCS-G 3738,
OCS-G 8553, OCS-G 12509, OCS-G 0479.
RECORDED IN THE STATE OF TEXAS
County Date Filed Recording Information
------ ---------- ---------------------
<PAGE>
Page 24
A. Jefferson 2/12/97 Recorded 2/12/97 as
No. 97-9703920
B. UCC-3 Financing Statement Change (Amendment) by Forest Oil
Corporation, as Debtor, and The Chase Manhattan Bank, as Secured
Party.
a. Orleans Parish, Louisiana
February 9, 1997
Entry 36-114834
b. Secretary of State of Texas
December 8, 1993
Under Entry No. 230027
c. Secretary of State of Colorado
December 9, 1993
Under Entry No. 932089275
<PAGE>
Page 1
EXECUTION COPY
AMENDMENT NO. 3 TO DEED OF TRUST, MORTGAGE, SECURITY
AGREEMENT, ASSIGNMENT OF PRODUCTION, FINANCING STATEMENT
(PERSONAL PROPERTY INCLUDING HYDROCARBONS),
AND FIXTURE FILING
THIS AMENDMENT NO. 3 TO DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF PRODUCTION, FINANCING STATEMENT (PERSONAL PROPERTY INCLUDING
HYDROCARBONS) AND FIXTURE FILING (this "AMENDMENT") is entered into as of
August 19, 1997 at 9:00 a.m., Mountain Time (the "EFFECTIVE DATE") by and
between FOREST OIL CORPORATION, a New York corporation with an address for
notice hereunder of 1500 Colorado National Building, 950 17th Street, Denver,
Colorado 80202 ("MORTGAGOR") to:
1. THE CHASE MANHATTAN BANK, with an address at One Chase Manhattan
Plaza, New York, New York 10081, as agent for each bank referred to
below and as agent for The Chase Manhattan Bank of Canada and the
Canadian Lenders (as defined below) in connection with the Canadian
Guarantee (as defined below) (in such capacity, the "AGENT") (the
Agent, together with its successors in such capacity, is hereinafter
referred to as the "SECURED PARTY"), as to any and all portions of the
Collateral EXCEPT those portions of the Collateral which (i) are
located in the State of Texas or in offshore waters adjacent to the
State of Texas and subject to the laws of the State of Texas and
(ii) constitute interests in or to real property under the law of the
State of Texas (the "DT COLLATERAL"); and
2. Mary Jo Woodford, with an address at One Chase Manhattan Plaza,
New York, New York 10081, as trustee (successor to Richard F. Betz)
(in such capacity, together with her successors and assigns in such
capacity, the "TRUSTEE"), but only as to the DT Collateral.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. IN CERTAIN STATES, A
POWER OF SALE MAY ALLOW THE SECURED PARTY TO TAKE THE COLLATERAL AND SELL IT
WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR
UNDER THIS INSTRUMENT.
<PAGE>
Page 2
R E C I T A L S
A. Mortgagor, certain banks (collectively, the "ORIGINAL BANKS"),
and the Agent were parties to a Credit Agreement dated as of December 1, 1993
(as heretofore modified and supplemented and in effect on the date hereof
(the "ORIGINAL CREDIT AGREEMENT").
B. Mortgagor, certain banks (collectively, the "EXISTING BANKS"),
and the Agent amended and restated the Original Credit Agreement pursuant to
an Amended and Restated Credit Agreement dated as of August 31, 1995.
C. Mortgagor, the Existing Banks and the Agent further amended and
restated the Original Credit Agreement pursuant to a Second Amended and
Restated Credit Agreement dated as of January 31, 1997 (the "SECOND AMENDED
AND RESTATED CREDIT AGREEMENT").
D. Mortgagor, the Existing Banks and the Agent amended the Second
Amended and Restated Credit Agreement pursuant to an Amendment No. 1 and
Waiver dated April 1, 1997.
E. Mortgagor, certain banks (collectively, the "BANKS") and the
Agent have agreed to further amend the Second Amended and Restated Credit
Agreement pursuant to an Amendment No. 2 dated as of August 19, 1997 (the
Second Amended and Restated Credit Agreement as so amended and restated and
as the same may be further amended and restated and in effect from time to
time, being referred to herein as the "CREDIT AGREEMENT").
F. The Credit Agreement is secured by, among other things, that
certain Deed of Trust, Mortgage, Security Agreement, Assignment of
Production, Financing Statement (Personal Property Including Hydrocarbons),
and Fixture Filing dated as of June 3, 1994 from Mortgagor to Secured Party
and Trustee (as heretofore modified and supplemented, the "DEED OF TRUST").
G. The Deed of Trust was amended by Amendment No. 1 to Deed of
Trust, Mortgage, Security Agreement, Assignment of Production, Financing
Statement (Personal Property Including Hydrocarbons), and Fixture Filing
dated as of August 31, 1995. The Deed of Trust was further amended by
Amendment No. 2 to Deed of Trust, Mortgage, Security Agreement, Assignment of
Production, Financing Statement (Personal Property Including Hydrocarbons),
and Fixture Filing dated as of January 31, 1997. The Deed of Trust,
Amendment No. 1 and Amendment No. 2 were duly recorded as set forth on
Schedule 1 attached hereto.
H. Mortgagor and Secured Party now desire to further amend the
Deed of Trust to secure all indebtedness under the Credit Agreement,
notwithstanding any extensions or renewals of the Credit Agreement or any
amendments to the Credit Agreement at any time
<PAGE>
Page 3
maturing August 19, 2001 and secure all obligations arising pursuant to the
guarantee (the "CANADIAN GUARANTEE") among the Mortgagor and The Chase
Manhattan Bank of Canada, as administrative agent (the "CANADIAN AGENT") for
the lenders (the "CANADIAN LENDERS") party to the Second Amended and Restated
Credit Agreement dated as of April 1, 1997 among 611852 Saskatchewan Ltd.
(the "CANADIAN SUBSIDIARY"), the Canadian Lenders and the Canadian Agent, as
amended by Amendment No. 1 dated as of August 19, 1997 and as the same may be
amended, restated, modified and supplemented and in effect from time to time
(the "CANADIAN CREDIT AGREEMENT").
I. Mortgagor and Secured Party now desire to further amend the
Deed of Trust to provide for the continuation of the mortgage lien and
security interest provided under the Deed of Trust by Mortgagor to the
Secured Party, for the benefit of itself, the Banks and the Canadian Lenders.
NOW, THEREFORE, in view of the foregoing, Mortgagor and Secured
Party do hereby agree as follows:
1. All capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Deed of Trust.
2. All references in the Deed of Trust to "this Instrument", as
defined in the opening paragraph of the Deed of Trust shall mean the Deed of
Trust as amended hereby and as the same may from time to time be further
amended or supplemented.
3. The Deed of Trust is hereby amended: (i) by deleting Recital 1
in its entirety and substituting the following therefor:
"1. Pursuant to the terms of the Second Amended and Restated
Credit Agreement dated as of January 31, 1997, among Mortgagor,
certain banks (collectively, the "BANKS"), the Subsidiary Guarantors
and the Secured Party as amended by Amendment No. 1 and Waiver dated
as of April 1, 1997 and as further amended by Amendment No. 2 dated as
of August 19, 1997 (and as the same may be further amended,
supplemented and otherwise modified and in effect from time to time,
the "CREDIT AGREEMENT"), the Banks have agreed to make loans from time
to time under a revolving credit facility to the Mortgagor the
aggregate principal or stated amount of which shall not exceed
$130,000,000 at any one time (maturing August 19, 2001), and issue or
acquire participation interests in letters of credit for account of
Mortgagor the aggregate amount of the liabilities of the Banks under
which shall not exceed $10,000,000.00. Pursuant to the terms of the
Canadian Credit Agreement (as defined below), the Canadian Lenders
have agreed to make loans and issue bankers' acceptances from time to
time under a revolving credit facility to the Canadian Subsidiary (as
defined below) the aggregate principal or stated amount of which shall
not exceed Canadian Dollars $165,000,000 at any one time
<PAGE>
Page 4
outstanding (maturing August 19, 2001), and issue or acquire
participations in letters of credit for the account of the
Canadian Subsidiary the aggregate amount of the liabilities of
the Canadian Lenders under which shall not exceed Canadian
dollars $15,000,000, provided that the Mortgagor provides the
Canadian Guarantee (as defined below) in favor of the Canadian
Agent (as defined below) and the Canadian Lenders (as defined
below).";
(ii) by deleting Section 1.01A in its entirety and substituting the
following therefore:
"A. Payment in full when due (whether as stated maturity, by
acceleration or otherwise) of the principal of and interest on
the Loans made by the Banks, all amounts from time to time owing
to the Canadian Agent for itself and the Canadian Lenders
pursuant to the Canadian Guarantee (including, without
limitation, the Debt (as such term is defined in the Canadian
Guarantee)) and all other amounts (including, without limitation,
Reimbursement Obligations) from time to time owing to, and
obligations to be performed in favor of, the Secured Party, the
Banks and the Canadian Lenders by the Mortgagor under the Credit
Agreement, the Notes and under any of the other Basic Documents
(any reborrowings, future advances, readvances, modifications,
extensions, substitutions, exchanges and renewals shall enjoy the
same priority as the initial advances evidenced by the Notes),
the obligations to the Canadian Agent and the Canadian Lenders
under the Canadian Guarantee and the obligations to be performed
in favor of, the Secured Party and the Banks by the Mortgagor
under any Commodity Hedging Agreements or Interest Rate
Protection Agreements (as those terms are defined in the Credit
Agreement).";
(iii) by inserting the following definitions in alphabetical order
in Article VI:
"CANADIAN AGENT" shall have the meaning given to such term in
Recital H of Amendment No. 3 to Deed of Trust dated as of August 19, 1997.
"CANADIAN CREDIT AGREEMENT" shall have the meaning given such
term in Recital H of Amendment No. 3 to Deed of Trust dated as of August
19, 1997.
"CANADIAN GUARANTEE" shall have the meaning given to such term in
Recital H of Amendment No. 3 to Deed of Trust dated as of August 19, 1997.
"CANADIAN LENDERS" shall have the meaning given to such term in
Recital H of Amendment No. 3 to Deed of Trust dated as of August 19, 1997.
"CANADIAN SUBSIDIARY" shall have the meaning given such term in
<PAGE>
Page 5
Recital H of Amendment No. 3 to Deed of Trust dated as of August 19, 1997;
and
(iv) By deleting Section 9.01(ii) and substituting the following
therefor:
(ii) the maximum amount of the Obligations that may be
outstanding at any time and from time to time that this
Instrument secured is fixed at $150,000,000.
4. Mortgagor hereby confirms that pursuant to and subject to the
terms of the Deed of Trust, it has heretofore absolutely and unconditionally
granted, bargained, sold, assigned, transferred and conveyed the DT
Collateral to the Trustee and granted to the Secured Party a security
interest in those portions of the Collateral which (i) are located in the
State of Texas or in offshore waters adjacent to the State of Texas and
subject to the laws of the State of Texas and (ii) do not constitute DT
Collateral.
5. Mortgagor hereby confirms that pursuant to and subject to the
Deed of Trust, it has heretofore absolutely and unconditionally granted,
bargained, sold, assigned, transferred, pledged, mortgaged, warranted and
conveyed to the Secured Party and granted the Secured Party a security
interest in all of the Collateral (except the DT Collateral), including,
without limitation, all severed and extracted Hydrocarbons and other minerals
produced from or attributable to the Mortgaged Property, including, without
limitation, all of the proceeds thereof.
6. Mortgagor hereby acknowledges the Obligations, whether now
existing or to arise hereafter, and confesses judgement thereon in favor of
the Secured Party if the Obligations are not paid when due.
7. The parties hereto hereby acknowledge and agree that except as
specifically amended, changed or modified hereby, the Deed of Trust shall
remain in full force and effect in accordance with its terms. None of the
rights, titles and interests existing and to exist under the Deed of Trust
are hereby released, diminished or impaired, and Mortgagor hereby reaffirms
all agreements and covenants and acknowledges and agrees that, except as
previously disclosed by Mortgagor under the Deed of Trust (except to the
extent same relate to Collateral that is no longer owned by Mortgagor and
other than the representation and warranty set forth in the first sentence of
Section 2.02(c) of the Deed of Trust) are true and correct in all material
respects as of the date hereof. Mortgagor also represents and warrants to
the Banks that the current net overproduced position of the Mortgagor with
respect to Hydrocarbons produced from the Mortgaged Properties (expressed in
volumetric terms) is not materially greater than the overproduced position of
the Mortgagor with respect to the Mortgaged Properties as of January 31, 1997.
8. INSOFAR AS PERMITTED BY OTHERWISE APPLICABLE LAW, THIS
AMENDMENT SHALL BE CONSTRUED UNDER AND GOVERNED BY THE
<PAGE>
Page 6
LAWS OF THE STATE OF NEW YORK (EXCLUDING CHOICE OF LAW AND CONFLICT OF LAW
RULES). MORTGAGOR HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK AND
EACH OTHER STATE WHERE THE COLLATERAL IS LOCATED AND AGREES AND CONSENTS THAT
SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO
THIS AMENDMENT, THE BASIC DOCUMENTS OR THE OBLIGATIONS IN THE CASE OF A
PROCEEDING IN ANY OF SUCH STATES, BY SERVING THE SECRETARY OF STATE OF SUCH
STATE IN ACCORDANCE WITH ANY APPLICABLE PROVISIONS OF SUCH STATE'S LAW
GOVERNING SERVICE OF PROCESS UPON FOREIGN CORPORATIONS OR ENTITIES.
9. This Amendment may be executed in two or more counterparts, and
it shall not be necessary that the signatures of all parties hereto be
contained on any one counterpart hereof.
10. Mortgagor and the Agent acknowledge that the execution of
Amendment No. 3 does not constitute a payment or prepayment of the Second
Amended and Restated Credit Agreement, but constitutes an amendment,
extension, increase, and modification of the terms thereof.
11. For purposes of executory process under Louisiana law, the
Mortgagor declares that on this ___ day of August, 1997, but effective for
all purposes as of the Effective Date, it has appeared in the presence of the
undersigned Notary Public and two witnesses and has executed this amendment
through Forest Dorn its Vice President, duly authorized pursuant to
Resolutions of the Board of Directors of the Mortgagor, a certified copy of
which is annexed hereto as Exhibit "A".
12. Mortgagor and the Secured Party acknowledges that none of the
Obligations have been presented to the undersigned Notary Public to be
paraphed for identification with this amendment.
13. Notwithstanding any reference herein to the Credit Agreement,
the Canadian Guarantee or any other Basic Document or the Canadian Guarantee,
no third party shall be obligated to inquire as to whether any term or
condition set forth therein has occurred but shall be entitled to rely upon
the certificate of the Secured Party as to all events, including but not
limited to the occurrence of an Event of Default.
14. For purposes of executory process, the Mortgagor acknowledges
and agrees that the existence, amount, terms, and maturity of the
Obligations, may be proven by affidavit or verified petition, in accordance
with Louisiana law as now existing or hereafter enacted.
<PAGE>
Page 7
THUS DONE AND PASSED on this day ___ day of __________, 1997, (the
"EFFECTIVE DATE") effective for all purposes as of the Effective Date, in my
presence and in the presence of the undersigned competent witnesses who
hereunto sign their names with Mortgagor and me, Notary, after reading of the
whole.
MORTGAGOR:
FOREST OIL CORPORATION
By:
------------------------------
Name:
Title:
WITNESSES:
- ------------------------------
- ------------------------------
------------------------------
Notary Public
<PAGE>
Page 8
THUS DONE AND PASSED on this ___ day of __________, 1997, (the
"EFFECTIVE DATE") effective for all purposes as of the Effective Date in my
presence and in the presence of the undersigned competent witnesses who
hereunto sign their names with the Agent and the Trustee and me, Notary,
after reading of the whole.
AGENT:
THE CHASE MANHATTAN BANK
By:
------------------------------
Name:
Title:
TRUSTEE:
By:
------------------------------
Name:
Title:
WITNESSES:
- ------------------------------
- ------------------------------
------------------------------
Notary Public
<PAGE>
Page 9
EXHIBIT A
NOTARY'S CERTIFICATE
The undersigned Notary Public hereby certifies that attached hereto are
certified copies of Resolutions produced by the Mortgagor and attached by me
to this Amendment No. 3 to Deed of Trust, Mortgage, Security Agreement,
Assignment of Production, Financing Statement (Personal Property Including
Hydrocarbons), and Fixture Filing executed by Mortgagor this ___ day of
__________, 1997 and effective for all purposes as of ___________, 1997.
------------------------------
Notary Public
<PAGE>
Page 10
RESOLUTIONS OF THE BOARD OF DIRECTORS
<PAGE>
ACKNOWLEDGEMENT
STATE OF COLORADO )
: ss.
COUNTY OF ______________ )
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on __________, 1997 there personally appeared
before me, the following person, being the designated officer of the
corporation set opposite his name, and such corporation being a party to the
foregoing Amendment:
_____________________, the __________________ of Forest Oil
Corporation,
This Amendment was acknowledged before me on this ____ day of
__________, 1997 by _________________, of Forest Oil Corporation, a New York
corporation, on behalf of said corporation.
LOUISIANA
Who being by me duly sworn, deposed and said that he is the
designated officer of said corporation described in and which executed the
foregoing Amendment, that he signed his name thereto by order of the Board of
Directors of said corporation, and acknowledged to me that he executed the
same for the purposes and consideration therein expressed, in the capacity
therein stated, and as the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official
notarial seal, in the County of _____________, State of ___________________,
this ____ day of __________, 1997.
----------------------------------------
Notary Public, State of
----------------
Notary's Printed Name:
----------------
My Commission expires:
----------------
<PAGE>
Page 11
ACKNOWLEDGEMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on ____________, 1997 there personally
appeared before me, the following person, being the designated officer of the
bank set opposite her name, and such corporation being a party to the
foregoing Amendment:
Mary Jo Woodford, a Vice President of The Chase Manhattan Bank.
This Amendment was acknowledged before me on this ___ day of
September, 1997 by Mary Jo Woodford, of The Chase Manhattan Bank, on behalf
of said bank.
LOUISIANA
Who being by me duly sworn, deposed and said that she is the
designated officer of said bank described in and which executed the foregoing
Amendment, that she signed her name thereto by order of the Board of
Directors of said bank, and acknowledged to me that she executed the same for
the purposes and consideration therein expressed, in the capacity therein
stated, and as the free act and deed of said bank.
IN WITNESS WHEREOF, I have hereunto set my hand and official
notarial seal, in the County of New York, State of New York, this ___ day of
September, 1997.
----------------------------------------
Notary Public, State of New York
<PAGE>
Page 12
ACKNOWLEDGEMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on __________, 1997 there personally appeared
before me, the following person, being a party to the foregoing Amendment:
This Amendment was acknowledged before me on this ___ day of
September, 1997 by Mary Jo Woodford.
LOUISIANA
Who being by me duly sworn, deposed and said that she is the Trustee
described in the foregoing Amendment, that she signed her name thereto, and
acknowledged to me that she executed the same for the purposes and
consideration therein expressed, in the capacity therein stated, and as her
free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and official
notarial seal, in the County of New York, State of New York, this ___ day of
September, 1997.
----------------------------------------
Notary Public, State of New York
<PAGE>
Page 13
Schedule 1
SCHEDULE OF RECORDING INFORMATION
FOREST OIL CORPORATION
and
THE CHASE MANHATTAN BANK
as Agent
1. Deed of Trust, Mortgage, Security Agreement, Assignment of Production,
Financing Statement (Personal Property Including Hydrocarbons), and Fixture
Filing dated June 3, 1994 executed by Forest Oil Corporation ("FOREST") in
favor of Bettylou J. Robert, as Trustee, for the benefit of The Chase
Manhattan Bank, as Agent and in favour of the Agent (all recording
references are to the Real Property Records):
RECORDED IN THE STATE OF TEXAS
COUNTY DATE FILED RECORDING INFORMATION
Brazoria 6/8/94 Recorded 6/8/94 as
#94-021547
Chambers 6/10/94 Recorded 6/10/94 as
Volume 94-240, Page 215
Fort Bend 6/21/94 Recorded 6/21/94 as
Volume 2668, Page 1568
Harris 6/7/94 Recorded 6/7/94 as
#P899134
Matagorda 6/8/94 Recorded 6/8/94 as
Volume 381, Page 505
Waller 6/8/94 Recorded 6/8/94 as
Volume 496, Page 88
2. Financing Statement by Forest in connection with item #1 above and
filed as follows:
<PAGE>
Page 14
LOCATION DATE FILED FILING INFORMATION
Secretary of 6/7/94 Recorded 6/7/94 #110234
State of Texas
RECORDED IN THE STATE OF LOUISIANA
A. PARISH DATE FILED RECORDING INFORMATION
Cameron 6/7/94 Recorded 6/7/94 as
MOB 200, File No. 236409
Iberia 2/9/97 MOB A-695, Entry 97-1260
St. Bernard 6/6/94 Recorded 6/6/94 as
MOB 732, page 71
St. Mary 2/9/97 MOB 748, Entry 221, 376
Vermillion 6/6/94 Recorded 6/6/94 as
Entry No. 9405601
B. Mineral Management Service, Gulf of Mexico Region, June 6, 1994:
Lease Files:
OCS-G 1152, OCS-G 1153, OCS-G 1977, OCS-G 3393,
OCS-G 8645, OCS-G 10658, OCS-G 13301, OCS-G 0479, OCS-G 6156
2. UCC-1 Financing Statement by Forest Oil Corporation as Debtor, and The
Chase Manhattan Bank, as Secured Party.
A. PARISH DATE FILED RECORDING INFORMATION
Orleans 6/6/94 Recorded 6/6/94 as
Instrument No. 36-84158
B. Mineral Management Service, Gulf of Mexico Region,
June 6, 1994:
Lease Files:
<PAGE>
Page 15
OCS-G 1152, OCS-G 1153, OCS-G 1977, OCS-G 3393,
OCS-G 8645, OCS-G 10658 and OCS-G 13301
2. Amendment No. 1 to Deed of Trust, Mortgage, Security Agreement, Assignment
of Production, Financing Statement (Personal Property Including
Hydrocarbons), and Fixture Filing dated August 31,1995 executed by Forest
Oil Corporation ("FOREST") in favor of Bettylou J. Robert, as Trustee, for
the benefit of The Chase Manhattan Bank, as Agent and in favour of the
Agent:
RECORDED IN THE STATE OF TEXAS
COUNTY DATE FILED RECORDING INFORMATION
Brazoria 9/27/95 Recorded 9/27/95 as #95-031806
Chambers 9/28/95 Recorded 9/29/95 in
Volume 95-277, Page 473
Fort Bend 10/20/95 Recorded 10/20/95 as
#9563356
Harris 9/27/95 Recorded 9/27/95 as
#R598435
Matagorda 9/27/95 Recorded 9/27/95 in
Volume 420, Page 664
Waller 9/28/95 Recorded 9/28/95 in
Volume 525, Page 32
RECORDED IN THE STATE OF LOUISIANA
A. PARISH DATE FILED RECORDING INFORMATION
Vermilion 9/19/95 MOB Entry No. 9509529
Iberia 2/9/97 MOB A-695, Entry 97-1261
St. Bernard 9/19/95 Act No. 315858 MOB 773,
folio 105
St. Mary 2/9/97 MOB 748, Entry 221, 377
Cameron 9/19/95 File No. 242693 MOB 212
<PAGE>
Page 16
B. Minerals Management Service, Gulf of Mexico Region, September 19,
1995:
Lease Files:
OCS-G 1152, OCS-G 1153, OCS-G 1977, OCS-G 3393, OCS-G 8645,
OCS-G 10658, OCS-G 13301, OCS-G 0479, OCS-G 6156
3. Amendment No. 2 to Deed of Trust, Mortgage, Security Agreement, Assignment
of Production, Financing Statement (Personal Property Including
Hydrocarbons), and Fixture Filing dated January 31, 1997 executed by Forest
Oil Corporation ("FOREST") in favour of Mary Jo Woodford, as Trustee, for
the benefit of The Chase Manhattan Bank, as Agent:
RECORDED IN THE STATE OF LOUISIANA
A. PARISH DATE FILED RECORDING INFORMATION
Cameron 2/9/97 Recorded 2/9/97 as
MOB 223 File 249343
Iberia 2/9/97 Recorded 2/9/97 as
MOB A-695 Entry 97-1262
St. Bernard 2/9/97 Recorded 2/9/97 as
MOB 824 Page 1, ACT 332018
St. Mary 2/9/97 Recorded 2/9/97 as
MOB 748 Entry 221 378
Vermilion 2/9/97 Recorded 2/9/97 as
Entry 9701943
B. Minerals Management Service, Gulf of Mexico Region, September 19,
1995:
Lease Files:
OCS-G 1152, OCS-G 1153, OCS-G 1977, OCS-G 3393, OCS-G 8645,
OCS-G 10658, OCS-G 13301, OCS-G 0479, OCS-G 6156
RECORDED IN THE STATE OF TEXAS
<PAGE>
Page 17
A. COUNTY DATE FILED RECORDING INFORMATION
Fort Bend 2/17/97 Recorded 2/17/97 as
#9709520
Harris 2/12/97 Recorded 2/12/97 as
#S319107
Waller 2/13/97 Recorded 2/13/97 as
Volume 555, Page 267
B. UCC-3 Financing Statement Change (Amendment) by Forest Oil
Corporation, as Debtor, and The Chase Manhattan Bank, as Secured
Party.
a. Orleans Parish, Louisiana
February 7, 1997
Under UCC Entry No. 36-114842
b. Secretary of State of Texas
June 7, 1994
Under UCC Entry No. 110234
<PAGE>
Page 1
EXECUTION COPY
************************************************************
611852 SASKATCHEWAN LTD.
-----------------------------
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of April 1, 1997
------------------------------
THE CHASE MANHATTAN BANK OF CANADA,
as Administrative Agent
************************************************************
<PAGE>
Page 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Definitions, Accounting Matters and Borrowing Base............... 1
1.01 Certain Defined Terms.............................................. 1
1.02 Accounting Terms and Determinations................................ 26
1.03 Borrowing Base..................................................... 27
1.04 Types and Currency of Loans........................................ 28
Section 2. Commitments, Loans, Notes and Prepayments........................ 29
2.01 Loans.............................................................. 29
2.02 Borrowings......................................................... 30
2.03 Letters of Credit.................................................. 30
2.04 Bankers' Acceptances............................................... 35
2.05 Swingline Loans.................................................... 41
2.06 Changes of Commitments............................................. 43
2.07 Commitment Fee..................................................... 43
2.08 Several Obligations; Remedies Independent.......................... 43
2.09 Notes.............................................................. 44
2.10 Optional Prepayments and Conversions or Continuations.............. 44
2.11 Mandatory Prepayments.............................................. 45
Section 3. Payments of Principal and Interest............................... 49
3.01 Repayments......................................................... 49
3.02 Interest........................................................... 50
3.03 Currency........................................................... 50
3.04 Interest on Overdue Amounts........................................ 51
Section 4. Payments; Pro Rata Treatment; Computations; Etc.................. 51
4.01 Payments........................................................... 51
4.02 Pro Rata Treatment................................................. 52
4.03 Computations....................................................... 54
4.04 Minimum Amounts.................................................... 54
4.05 Interest Act (Canada).............................................. 54
4.06 Certain Notices.................................................... 54
4.07 Non-Receipt of Funds by the Administrative Agent................... 56
4.08 Sharing of Payments, Etc........................................... 57
Section 5. Yield Protection, Etc............................................ 58
5.01 Additional Costs................................................... 58
5.02 Limitation on Types of Loans....................................... 60
5.03 Illegality......................................................... 61
5.04 Treatment of Affected Extensions of Credit......................... 61
5.05 Compensation....................................................... 62
<PAGE>
Page 3
5.06 Additional Costs in Respect of Bankers' Acceptances................ 63
5.07 Additional Costs in Respect of Letters of Credit................... 64
5.08 Taxes.............................................................. 64
Section 6. Conditions Precedent............................................. 66
6.01 Effectiveness...................................................... 66
6.02 Effectiveness and Subsequent Extensions of Credit.................. 68
Section 7. Representations and Warranties................................... 70
7.01 Corporate Existence................................................ 70
7.02 Financial Condition................................................ 70
7.03 Litigation......................................................... 70
7.04 No Breach.......................................................... 70
7.05 Action............................................................. 71
7.06 Approvals.......................................................... 71
7.07 Use of Credit...................................................... 71
7.08 Taxes.............................................................. 71
7.09 Material Agreements and Liens...................................... 72
7.10 Subsidiaries, Etc.................................................. 72
7.11 True and Complete Disclosure....................................... 72
7.12 Capitalization..................................................... 73
Section 8. Covenants of the Company......................................... 73
8.01 Financial Statements Etc........................................... 73
8.02 Litigation......................................................... 75
8.03 Existence, Etc..................................................... 76
8.04 Governmental Approvals............................................. 76
8.05 Prohibition of Fundamental Changes................................. 77
8.06 Limitation on Liens................................................ 77
8.07 Indebtedness....................................................... 77
8.08 Investments........................................................ 77
8.09 Dividend Payments.................................................. 77
8.10 Debt Coverage Ratio; Interest Coverage Ratio....................... 77
8.11 Working Capital.................................................... 77
8.12 Lines of Business.................................................. 78
8.13 Transactions with Affiliates....................................... 78
8.14 Use of Proceeds.................................................... 78
8.15 Subsidiaries....................................................... 78
8.16 Ownership of the Company........................................... 78
8.17 Modifications of Certain Documents and Payments.................... 78
8.18 Incorporation by Reference......................................... 79
8.19 No Action to Affect Security Documents............................. 79
8.20 Further Assurances................................................. 79
8.21 Subsidiary Borrowers............................................... 79
Section 9. Events of Default; Remedies...................................... 79
<PAGE>
Page 4
9.01 Events of Default.................................................. 79
9.02 Remedies Cumulative................................................ 85
9.03 Lenders May Perform Covenants...................................... 85
Section 10. The Administrative Agent........................................ 86
10.01 Appointment, Powers and Immunities................................ 86
10.02 Reliance by Administrative Agent.................................. 87
10.03 Defaults.......................................................... 87
10.04 Rights as a Lender................................................ 87
10.05 Indemnification................................................... 88
10.06 Non-Reliance on Administrative Agent and Other Lenders............ 88
10.07 Failure to Act.................................................... 89
10.08 Resignation or Removal of Administrative Agent.................... 89
10.09 Consents under Other Loan Documents............................... 89
10.10 Consent to Permitted Dispositions................................. 90
Section 11. Miscellaneous................................................... 90
11.01 Waiver............................................................ 90
11.02 Notices........................................................... 91
11.03 Expenses, Etc..................................................... 91
11.04 Amendments, Etc................................................... 92
11.05 Successors and Assigns............................................ 93
11.06 Assignments and Participations.................................... 93
11.07 Survival.......................................................... 96
11.08 Captions.......................................................... 97
11.09 Counterparts...................................................... 97
11.10 Governing Law..................................................... 97
11.11 Jurisdiction, Service of Process and Venue........................ 97
11.12 Judgment Currency................................................. 97
11.13 Treatment of Certain Information; Confidentiality................. 98
11.14 Additional Provisions Relating to Interest and Fees............... 99
11.15 Severability...................................................... 100
11.16 Time of Essence................................................... 100
11.17 Acknowledgement of Priority of Indebtedness....................... 100
11.18 Conflict of Terms................................................. 100
11.19 Restatement of Original Credit Agreement.......................... 100
11.20 BOM Letters of Credit............................................. 101
11.21 Amendment of Certain Documents.................................... 101
EXHIBIT A-1 - Form of Note
EXHIBIT A-2 - Form of Swingline Note
EXHIBIT B - Form of Opinion of Counsel to the Company
<PAGE>
Page 5
EXHIBIT C - Form of Opinion of Canadian Counsel to Chase Canada
EXHIBIT D - Form of Bankers' Acceptance
EXHIBIT E - Form of Bankers' Acceptance Request
EXHIBIT F - Calculation of Net Proceeds of Bankers' Acceptance
EXHIBIT G - Details of Issue of Bankers' Acceptance
EXHIBIT H - Confidentiality Agreement
</TABLE>
<PAGE>
Page 6
SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 1,
1997 among: 611852 SASKATCHEWAN LTD., a corporation duly organized and
validly existing under the laws of the Province of Saskatchewan, Canada (the
"COMPANY"); each of the lenders that is a signatory hereto identified under
the caption "Lenders" on the signature pages hereto and each lender that
becomes a "Lender" after the date hereof pursuant to Section 11.06(b) hereof
(individually, a "LENDER" and, collectively, the "LENDERS"); and THE CHASE
MANHATTAN BANK OF CANADA, as administrative agent for the Lenders (in such
capacity, together with its successors in such capacity, the "ADMINISTRATIVE
AGENT").
The Company and The Chase Manhattan Bank of Canada are parties to a
Credit Agreement dated as of February 8, 1996 (as modified, amended and
restated on July 17, 1996 and supplemented and in effect immediately prior to
the Effective Date referred to below, the "ORIGINAL CREDIT AGREEMENT"). In
order to reflect, firstly, certain corporate changes affecting the Borrowers
under, and as defined in, the Canadian Forest Credit Agreement (namely, the
amalgamation of Acquisition Co. and Atcor Resources to form 721940 Alberta
Ltd. as the continuing corporation resulting therefrom, and the amalgamation
of 721940 Alberta Ltd. and Canadian Forest to form Canadian Forest as the
continuing corporation resulting therefrom), and secondly, certain asset
sales from Canadian Forest to Forest and the continued secured position of
the Company with respect to such assets, as well as the continued inclusion
of such assets in the Borrowing Base and financial covenants hereunder, the
Company has requested that the Lenders agree to amend and restate the
Original Credit Agreement, and the Lenders are willing to amend and restate
the Original Credit Agreement, all on the terms and conditions hereinafter
set forth. Accordingly, the parties hereto agree as follows:
Section 1. DEFINITIONS, ACCOUNTING MATTERS AND BORROWING BASE.
1.01 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or
in other provisions of this Agreement in the singular to have the same
meanings when used in the plural and VICE VERSA):
"ACQUISITION CO." shall mean 3189490 Canada Ltd., (as it existed
prior to its amalgamation with Atcor Resources).
"ACCEPTANCE DATE" shall mean any date, which must be a Business Day,
on which a Bankers' Acceptance is or is to be issued.
"ACCEPTING LENDER" shall mean any Lender which has issued a Bankers'
<PAGE>
Page 7
Acceptance of the Company under this Agreement.
"AFFILIATE" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Company
and, if such Person is an individual, any member of the immediate family
(including parents, spouse, children and siblings) of such individual and any
trust whose principal beneficiary is such individual or one or more members
of such immediate family and any Person who is controlled by any such member
or trust. As used in this definition, "CONTROL" (including, with its
correlative meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise),
PROVIDED that, in any event, any Person that owns directly or indirectly
securities having 10% or more of the voting power for the election of
directors or other governing body of a corporation or 10% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation or other Person. Notwithstanding the foregoing, no individual
shall be an Affiliate solely by reason of his or her being a director,
officer or employee of the Company.
"AGGREGATE BORROWINGS" has the meaning given to such term in Section
2.11(d).
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or
such other office of such Lender (or of an affiliate of such Lender) as such
Lender may from time to time specify to the Administrative Agent and the
Company as the office by which its Loans of such type are to be made and
maintained or Bankers' Acceptances are to be purchased.
"APPLICABLE MARGIN" shall mean, with respect to each Type of Loan,
for any period during which the Usage Ratio is within the range specified
below, the percentage per annum set forth opposite such range under the
appropriate heading, PROVIDED that the "Applicable Margin" shall be increased
or reduced, as applicable, on the date of the borrowing of a Loan or the
issuance of a Letter of Credit or the acceptance of a Bankers' Acceptance, or
the repayment of a Loan or expiration of a Letter of Credit or maturity of a
Bankers' Acceptance, as the case may be, which results in the Usage Ratio
shifting from one range to another but that the "Applicable Margin" for any
BA Loan, Bankers' Acceptance or Eurodollar Loan outstanding prior to such
date shall remain the same until the maturity of such Bankers' Acceptance or
the end of the Interest Period for such BA Loan or Eurodollar Loan,
respectively.
<PAGE>
Page 8
<TABLE>
<CAPTION>
Applicable Margin (%p.a.)
CANADIAN U.S. BASE EURODOLLAR
RANGE OF USAGE RATIO PRIME LOANS BA FEE RATE RATE LOANS LOANS
-------------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
0 - .500:1.00 0.000% 1.000% 0.000% 1.000%
.501:1.00 to .750:1.00 0.375% 1.375% 0.375% 1.375%
.751:1.00 to 1.000:1.00 .750% 1.750% 0.750% 1.750%
</TABLE>
"ASSIGNMENT OF PAYMENTS" shall mean the Assignment of Payments
relating to the Canadian Forest Credit Agreement dated February 8, 1996,
provided by the Company to the Administrative Agent.
"ASSIGNMENT OF SECURITY" shall mean the assignment of the Underlying
Loan Documents dated February 8, 1996 provided by the Company to the
Administrative Agent.
"ATCOR RESOURCES" shall mean Atcor Resources Ltd., (as it existed
prior to its amalgamation with Acquisition Co.).
"ATCOR RESOURCES PLEDGE AGREEMENT" shall mean the Guarantee and
Pledge Agreement dated February 8, 1996 between Atcor Resources and the
Company, as the same may be supplemented and amended up to the Effective Date.
"AVAILABLE BORROWING AMOUNT" has the meaning given to such term in
Section 2.07.
"AVAILABLE PROCEEDS" has the meaning given such term in Section
2.04(c) hereof.
"BA FEE RATE" shall mean the rate used in calculating Stamping Fees
as referred to in the definition of Applicable Margin.
"BA LOAN" has the meaning given to such term in Section 2.04(h)
hereof.
"BANKERS' ACCEPTANCE" shall mean a bill of exchange, duly completed
and accepted by a Lender pursuant to this Agreement, such bill of exchange to
be substantially in the form of Exhibit D hereto.
"BANKERS' ACCEPTANCE DOCUMENTS" shall mean, with respect to any
Bankers' Acceptance, collectively, any application therefor and any other
agreements, instruments, guarantees or other documents (whether general in
application or applicable only to such Bankers' Acceptance) governing or
providing for (a) the rights
<PAGE>
Page 9
and obligations of the parties concerned or at risk with respect to such
Bankers' Acceptance or (b) any collateral security for any of such
obligations, each as the same may be modified and supplemented and in effect
from time to time.
"BANKERS' ACCEPTANCE LIABILITY" shall mean, with respect to any
Bankers' Acceptance, the obligation of the Company to pay to the
Administrative Agent at the Principal Office the Principal Amount of any
Bankers' Acceptances for which the Company has not reimbursed the Accepting
Lender.
"BANKERS' ACCEPTANCE RATE" shall mean the average of the per annum
discount rates, computed on the basis of a year of 365 days, announced by
each Accepting Lender as its bankers' acceptance rate for a Bankers'
Acceptance having a Maturity Date of 30, 60, 90 or 180 days (whichever most
closely approximates the Maturity Date of the applicable Bankers'
Acceptance). Where there is only one Accepting Lender, the Bankers'
Acceptance Rate shall be that Accepting Lender's discount rate.
"BANKERS' ACCEPTANCE REQUEST" shall have the meaning ascribed to it
in Section 2.04(b) containing the information set forth in Exhibit E.
"BANKRUPTCY AND INSOLVENCY ACT (CANADA)" shall mean, collectively,
the Bankruptcy and Insolvency Act (Canada) and the Companies' Creditors
Arrangement Act (Canada), each as amended from time to time and any similar
statute of Canada or any province thereof.
"BIS GUIDELINES" shall mean the guidelines contained in the report
dated July 1988 by the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and
Capital Standards", encompassed in the October 1995 Guidelines issued by the
Office of the Superintendent of Financial Institutions Canada entitled
"Capital Adequacy Requirements" (or any guidelines issued in replacement
thereof).
"BOM" shall mean Bank of Montreal, a Canadian chartered bank.
"BOM AGREEMENT" shall mean the Amended and Restated Financial EDI
Agreement Accounts Payable Service between ProMark and BOM dated July 17,
1996 with respect to the electronic transfers of funds and related remittance
data, as the same may be supplemented and amended and in effect from time to
time, PROVIDED that any supplements or amendments thereto shall be made in
accordance with the provisions of Section 11.21 hereof.
"BOM PRIME RATE" shall mean the per annum floating rate of interest
established from time to time by BOM as the base rate it will use to
determine rates of interest on Canadian dollar demand loans to its customers
in Canada and which it
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Page 10
designates as its prime rate. Each change in any interest rate provided for
herein based upon the BOM Prime Rate resulting from a change in the BOM Prime
Rate shall take effect at the time of such change in the BOM Prime Rate.
"BORROWER" shall mean Canadian Forest or any Subsidiary Borrower.
"BORROWING BASE" has the meaning given to such term in Section 1.03
hereof.
"BORROWING BASE DEFICIENCY" has the meaning given to such term in
Section 2.11(a) hereof.
"BORROWING BASE REPORTS" shall mean collectively, (i) Net Back Pool
Reports and (ii) Reserve Evaluation Reports and "BORROWING BASE REPORT" shall
mean any thereof.
"BUSINESS DAY" shall mean (i) any day (other than a Saturday or
Sunday) on which commercial banks are not authorized or required to close in
Calgary or Toronto, Canada, (ii) if such day relates to U.S. Base Rate Loans
or any payments in connection therewith, any day (other than a Saturday or
Sunday) on which banks are open for business in New York City, Toronto and
Calgary and (iii) if such day relates to a borrowing of, a payment or
prepayment of principal of or interest on, a Conversion of or into, or an
Interest Period for, a Eurodollar Loan or a notice by the Company with
respect to any such borrowing, payment, prepayment, Conversion or Interest
Period, any day (other than a Saturday or Sunday) on which dealings in U.S.
Dollar deposits are carried out in the London interbank market which is also
a day which banks are open for business in New York City, Toronto and Calgary.
"CANADIAN DOLLARS" and "C$" shall mean lawful money of Canada.
"CANADIAN FOREST" shall mean Canadian Forest Oil Ltd., an Alberta
corporation as it exists both before and after the amalgamation of Canadian
Forest Oil Ltd. and 721940 Alberta Ltd.
"CANADIAN FOREST CREDIT AGREEMENT" shall mean the Second Amended and
Restated Credit Agreement dated as of April 1, 1997, among Canadian Forest,
ProMark and each of the other Subsidiary Borrowers, as borrowers and the
Company, as lender, as the same may be modified and supplemented and in
effect from time to time.
"CANADIAN FOREST DEBENTURE" shall mean the Demand Debenture and
Negative Pledge dated February 8, 1996 of Canadian Forest in the original
principal amount of C$80,000,000 payable to the Company and assigned to the
Administrative Agent and its successors and assigns, as the same shall be
modified and
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supplemented and in effect from time to time.
"CANADIAN FOREST GUARANTEE" shall mean the guarantee made February
20, 1996 by Canadian Forest in favor of BOM with respect to obligations and
liabilities of ProMark under the BOM Agreement, as confirmed and amended by a
Guarantee Confirmation and Amendment Agreement entered into between Canadian
Forest and BOM dated July 17, 1996.
"CANADIAN PRIME LOANS" shall mean loans that bear interest at rates
based upon the Chase Canada Prime Rate.
"CAPITAL EXPENDITURES" shall mean, for any period, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made (a) by Canadian Forest or any
of the Subsidiary Borrowers in connection with the acquisition and
exploitation of, or the exploration for or development or production of,
hydrocarbon reserves or to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements, but excluding
repairs) or (b) by Forest in connection with the acquisition and exploitation
of, or the exploration for or development or production of, the Forest
Pledged Properties or to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements, but excluding
repairs) in connection with the Forest Pledged Properties during such period,
in each case computed in accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"CASH COLLATERAL ACCOUNT" shall mean the cash collateral account
referred to in Section 13.4 of the Company Debenture.
"CASH FLOW" shall mean, for any period, for (a) Canadian Forest and
the Subsidiary Borrowers (determined on a combined basis in accordance with
GAAP), the sum, without duplication, of the following: (i) the total sales
revenue from natural gas, oil and other hydrocarbon products and revenues
from services related to natural gas, oil and other hydrocarbon products for
such period PLUS (ii) cash dividend payments, if any, by any Non-Borrowing
Subsidiary to Canadian Forest or a Subsidiary Borrower in an aggregate amount
in excess of the aggregate amount of the Investments in such Non-Borrowing
Subsidiaries by Canadian Forest and the Subsidiary Borrowers during such
period PLUS (iii) the total Net Cash Payments (excluding the fair market
value of non-cash consideration) received during such period PLUS (iv) the
total cash proceeds
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received by Canadian Forest as a result of any capital contribution by Atcor
Resources, Acquisition Co. or 3189503 that has been utilized to repay
indebtedness (to the extent permitted by the terms of this Agreement) MINUS
(v) the revenue attributable to the unearned balance of any advance payment
relating to hydrocarbons in place received during such period by Canadian
Forest or any of the Subsidiary Borrowers for such period, MINUS (vi)
Operating Expenses, plus (b) for Forest (determined in accordance with GAAP),
the lesser of (A) the sum, without duplication, of the following (determined
in respect only of the Forest Pledged Properties): (i) the total sales
revenue from natural gas, oil and other hydrocarbon products; plus (ii) the
total Net Cash Payments (excluding the fair market value of non-cash
consideration) received during such period; minus (iii) the revenue
attributable to the unearned balance of any advance payment received during
such period by Forest relating to hydrocarbons in place; minus (iv) Operating
Expenses, and (B) the amount contributed by 3189503 to Canadian Forest in
respect of the period for which the determination is made.
"CASUALTY EVENT" shall mean, with respect to any Property of any
Person, any loss of or damage to, or any condemnation or other taking of,
such Property for which such Person or any of its Subsidiaries receives
insurance proceeds, or proceeds of a condemnation award or other compensation.
"CHASE CANADA" shall mean The Chase Manhattan Bank of Canada or its
successors.
"CHASE CANADA PRIME RATE" shall mean the greater of (i) the per
annum floating rate of interest established from time to time by Chase Canada
as the base rate it will use to determine rates of interest on Canadian
dollar loans to its customers in Canada and (ii) the sum of (A) the discount
rate expressed as a rate of interest per annum payable by the purchasers of
30 day bills of exchange, duly completed and accepted by Chase Canada, as
established by Chase Canada, and (B) 100 basis points. Each change in any
interest rate provided for herein based upon the Chase Canada Prime Rate
resulting from a change in the Chase Canada Prime Rate shall take effect at
the time of such change in the Chase Canada Prime Rate.
"CHASE MANHATTAN" shall mean The Chase Manhattan Bank or its
successors.
"CHASE MANHATTAN PRIME RATE" shall mean the rate of interest from
time to time announced by Chase Manhattan at the Chase Manhattan Principal
Office as its prime commercial lending rate.
"CHASE MANHATTAN PRINCIPAL OFFICE" shall mean the principal office
of Chase Manhattan, located on the date hereof at 1 Chase Manhattan Plaza,
New York, New York 10081.
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Page 13
"CLOSING DATE" shall mean February 8, 1996.
"COMMITMENT" shall mean, as to each Lender, the obligation of such
Lender to make Loans, to issue or participate in Letters of Credit and
Swingline Loans pursuant to Sections 2.03 and 2.05 hereof, and to accept
Bankers' Acceptances pursuant to Section 2.04 hereof, in an aggregate
principal or face amount (expressed where applicable as the Equivalent Amount
of Canadian Dollars) at any one time outstanding up to but not exceeding the
amount set opposite the name of such Lender on the signature pages hereof
under the caption "Commitment" or, in the case of a Person that becomes a
Lender pursuant to an assignment permitted under Section 11.06(b) hereof, as
specified in the respective instrument of assignment pursuant to which such
assignment is effected (as the same may be reduced at any time or from time
to time pursuant to Section 2.06 or 11.06(b) hereof).
"COMMITMENT PERCENTAGE" shall mean, with respect to any Lender, the
ratio of (a) the amount of the Commitment of such Lender to (b) the aggregate
amount of the Commitments of all of the Lenders.
"COMMITMENT TERMINATION DATE" shall mean February 7, 1999.
"COMMODITY HEDGING AGREEMENT" shall mean, for any Person, a notional
amount agreement or arrangement between such Person and one or more financial
institutions or other entities providing for the transfer or mitigation of
risks of fluctuations in prices of hydrocarbons, either generally or under
specific circumstances.
"COMPANY ARRANGEMENT" shall have the meaning assigned to such term
in Section 2.04(c) hereof.
"COMPANY DEBENTURE" shall mean the Demand Debenture and Negative
Pledge dated as of February 8, 1996, in the original principal amount of
C$80,000,000, payable to the Administrative Agent and its successors and
assigns as the same shall be modified and supplemented and in effect from
time to time .
"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 2.10 hereof of a Eurodollar Loan or BA Loan
from one Interest Period to another Interest Period or the continuation of a
Letter of Credit or Bankers' Acceptance.
"CONSENT AND AGREEMENT" shall mean the agreement dated February 8,
1996 made by Canadian Forest and Atcor Resources in favor of the
Administrative Agent regarding the Assignment of Payments and the Assignment
of Security.
"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.10 hereof of all or a portion of one Type of Loan into
another
<PAGE>
Page 14
Type of Loan, or to or from Bankers Acceptances (and shall all include, if
applicable, the simultaneous conversion from one Currency into another
Currency), which may be accompanied by the transfer by a Lender (at its sole
discretion) of a Loan from one Applicable Lending Office to another.
"COVERED TAXES" shall mean all present and future income, stamp,
registration and other taxes and levies, imposts, deductions, charges,
compulsory loans and withholdings whatsoever, and all interest, penalties or
similar amounts with respect thereto, now or hereafter imposed, assessed,
levied or collected by any authority of or in any jurisdiction (including,
without limitation, Canada or any political subdivision or taxing authority
thereof or therein, or any federal or other association of or with which
Canada may be a member or associated) on or in respect of this Agreement, the
Loans, the Notes, Letters of Credit, Bankers' Acceptances, the other Loan
Documents, the Underlying Loan Documents (without duplication of any
provision for payment of such amounts contained in the Canadian Forest Credit
Agreement), the recording, registration, notarization or other formalization
of any thereof, the enforcement thereof or the introduction thereof in any
judicial proceedings, or on or in respect of any payments of principal,
interest, premium, charges, fees or other amounts made on, under or in
respect of any thereof (excluding, however, income or franchise taxes imposed
on a Lender by a jurisdiction as a result of such Lender being organized
under the laws of such jurisdiction or of its Applicable Lending Office being
located in such jurisdiction).
"CURRENCY" shall have the meaning assigned to such term in Section
1.04 hereof.
"DEBT COVERAGE RATIO" shall mean, for any period, the ratio of (a)
Cash Flow for such period to (b) Debt Service for such period.
"DEBT SERVICE" shall mean, for any period, the sum, without
duplication of the following: (a) all payments of principal of Indebtedness
scheduled to be made during such period by the Company (determined on a
consolidated basis in accordance with GAAP) PLUS (b) all payments of
principal of Indebtedness (other than Indebtedness to the Company under the
Canadian Forest Credit Agreement) scheduled to be made during such period by
Canadian Forest and the Subsidiary Borrowers (determined on a combined basis
in accordance with GAAP) PLUS (c) all Interest Expense for such period.
"DEFAULT" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"DEFICIENCY CURE PERIOD" shall have the meaning assigned to such
term in Section 2.11(a) hereof.
"DEFICIENCY NOTICE" shall have the meaning assigned to such term in
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Page 15
Section 2.11(a) hereof.
"DETERMINATION DATE" shall mean (a) each May 1 and October 15 of
each year prior to the Commitment Termination Date, commencing October 15,
1996 and (b) 45 days after each other date, if any, on which the Borrowing
Base Reports are delivered to the Administrative Agent as contemplated
pursuant to Section 1.03 hereof.
"DETERMINATION PERIOD" shall mean (a) with respect to any Reserve
Evaluation Report delivered by the Independent Petroleum Engineer, the
calendar year for which such report was prepared, (b) with respect to any
Reserve Evaluation Report prepared by Canadian Forest, the period from
January 1 to June 30 of each calendar year for which such report was prepared
and (c) with respect to the Net Back Pool Report delivered in connection with
the Determination Date occurring (x) on May 1 of each year, the preceding
fiscal year and (y) on October 15 of each year, the first two fiscal quarters
of such year.
"DISPOSITION" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by
Canadian Forest or any of the Subsidiary Borrowers, or of any Forest Pledged
Property by Forest, to any other Person excluding any sale, assignment,
transfer or other disposition of any Property sold or disposed of in the
ordinary course of business and on ordinary business terms, and also
excluding the sale of the Forest Pledged Properties by Canadian Forest to
Forest pursuant to the Forest Purchase Agreement.
"DIVIDEND PAYMENT" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Company or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom
stock" payments, where the amount thereof is calculated with reference to the
fair market or equity value of the Company), but excluding dividends payable
solely in shares of common stock of the Company.
"DOLLARS", "$" and "U.S. DOLLARS" shall mean lawful money of the
United States of America.
"EFFECTIVE DATE" shall mean April 1, 1997.
"ENVIRONMENTAL CLAIM" shall mean, with respect to any Person, any
written or oral notice, claim, demand or other communication (a "CLAIM") by
any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into
the environment, of any Hazardous Material at any location,
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Page 16
whether or not owned by such Person, or (ii) circumstances forming the basis
of any violation, or alleged violation, of any Environmental Law. The term
"Environmental Claim" shall include, without limitation, any claim by any
governmental authority for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
any claim by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from the presence
of Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"ENVIRONMENTAL LAWS" shall mean any and all present and future
Canadian federal, provincial, local and foreign laws, policies, guidelines,
rules or regulations, and any orders or decrees, in each case as now or
hereafter in effect, and including without limiting the foregoing both statutory
provisions and the common law, relating to the regulation or protection of human
health, safety or the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or toxic or Hazardous
Materials or wastes into the indoor or outdoor environment, including, without
limitation, ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or toxic or hazardous substances or wastes.
"EQUITY RIGHTS" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"EQUIVALENT AMOUNT" shall mean as at any date the amount of Canadian
Dollars into which an amount of U.S. Dollars may be converted, or the amount of
U.S. Dollars into which an amount of Canadian Dollars may be converted, in
either case at The Bank of Canada mid-point noon spot rate of exchange for such
date in Toronto at approximately 12:00 noon, Toronto time on such date.
"EURODOLLAR BASE RATE" shall mean, with respect to any Eurodollar Loan
for any Interest Period therefor (i) the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/10,000 of 1%) of the respective rates per annum
quoted on the Telerate Access Service (page 3750 or the relevant page at the
date of determination indicating such yields), as of 11:00 a.m., London time, on
the Business Day that is two Business Days prior to the first day of such
Interest Period, by commercial banks for the offering to leading banks in the
London interbank market of U.S. Dollar deposits having a term comparable to such
Interest Period; or (ii) in the event that no quotation referred to in clause
(i) is given on the Telerate Access Service, the arithmetic mean (rounded
upwards, if necessary, to the nearest 1/16 of 1%) of the respective rates per
annum
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quoted by the respective Reference Lenders at approximately 11:00 a.m.
London time (or as soon thereafter as practicable) on the date two Business Days
prior to the first day of such Interest Period for the offering by the
respective Reference Lenders to leading banks in the London interbank market of
U.S. Dollar deposits having a term comparable to such Interest Period and in
amounts comparable to the principal amount of the Eurodollar Loan to be made by
the respective Reference Lenders for such Interest Period. If any Reference
Lender is not participating in any Eurodollar Loan during any Interest Period
therefor, the Eurodollar Base Rate for such Loan for such Interest Period shall
be determined by reference to the amount of the Loan that such Reference Lender
would have made or had outstanding had it been participating in such Loan during
such Interest Period.
"EURODOLLAR LOANS" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "Eurodollar
Base Rate" in this Section 1.01.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 9 hereof.
"EXCHANGE RATE DEFICIENCY" shall have the meaning given to such term
in Section 2.11(d) hereof.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, PROVIDED that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate for such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase Manhattan on such Business Day on
such transactions as determined by the Administrative Agent.
"FEE LETTER" shall mean the letter dated February 7, 1996 from Chase
Manhattan and Chase Securities Inc. to Forest describing certain fees payable in
connection with the transactions contemplated by this Agreement.
"FOREST" shall mean Forest Oil Corporation, a New York corporation.
"FOREST DEBENTURE" shall mean the Limited Recourse Demand Debenture
and Negative Pledge, dated as of April 1, 1997, of Forest in the original
principal amount of C$80,000,000, payable to the Company and assigned to the
Administrative
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Agent and its successors and assigns, as the same shall be modified and
supplemented and in effect from time to time.
"FOREST GUARANTEE" shall mean the Limited Recourse Secured Guarantee
dated as of April 1, 1997 by Forest in favor of the Company and assigned to the
Administrative Agent and its successors and assigns, as the same shall be
modified and supplemented and in effect from time to time.
"FOREST INDENTURE" shall mean the Indenture dated as of September 8,
1993 between Forest and Shawmut Bank Connecticut, National Association, as
trustee, as amended from time to time prior to the date hereof and as the same
shall, subject to Section 8.17 hereof, be modified and supplemented and in
effect from time to time.
"FOREST INDENTURE GUARANTY" shall have the meaning assigned to such
term in Section 7.09 hereof.
"FOREST PLEDGED PROPERTIES" shall mean the property which is from time
to time the subject of the Lien created by the Forest Debenture.
"FOREST PURCHASE AGREEMENT" shall mean the Petroleum, Natural Gas and
General Rights Conveyance made effective as of April 1, 1997 between Canadian
Forest, as seller, and Forest, as purchaser.
"FUTURE NET REVENUES" shall mean, as of any date of determination for
any period, the projected gross revenues attributable to all or a part (as
specified herein) of Proved Reserves constituting part of the Hydrocarbon
Properties included in the Reserve Evaluation Report for such period less the
sum for such period of all projected Operating Expenses and Capital Expenditures
with respect thereto, as set forth in the related Reserve Evaluation Report, and
less (without duplication) all amounts projected to be applied to the discharge
of any advance payments on similar agreements with respect to hydrocarbons in
place and to the unearned balance of any advance payment received under any
contract to be performed relating to such Proved Reserves.
"GAAP" shall mean generally accepted accounting principles in the
United States applied on a basis consistent with those that, in accordance with
the last sentence of Section 1.02(a) hereof, are to be used in making the
calculations for purposes of determining compliance with this Agreement.
"GAS PAYMENT SETTLEMENT DAY" means the day of each calendar month on
which purchasers of natural gas produced in Alberta generally settle their
obligations (currently the 25th day of each month).
"GUARANTEE" shall mean a guarantee, an endorsement, a contingent
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agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "GUARANTEE" and "GUARANTEED" used as a verb shall
have a correlative meaning.
"HAZARDOUS MATERIAL" shall mean, collectively, (a) any petroleum or
petroleum products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Law and (c) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"HYDROCARBON PROPERTIES" shall mean interests which Canadian Forest or
any Subsidiary Borrower has from time to time in hydrocarbon reserves, and
interests which Forest has in the Forest Pledged Properties.
"INCOME TAX ACT (CANADA)" shall mean the Income Tax Act (Canada), as
amended from time to time.
"INDEBTEDNESS" shall mean, for any Person, without duplication: (a)
obligations created, issued or incurred by such Person for borrowed money
(whether by loan, the issuance and sale of debt securities or the sale of
Property to another Person subject to an understanding or agreement, contingent
or otherwise, to repurchase such Property from such Person); (b) obligations of
such Person to pay the deferred purchase or acquisition price of Property or
services, other than trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are paid within 90 days of the date the
respective goods are delivered or the respective services are rendered; (c)
Indebtedness of others secured by a Lien on the Property of such Person, whether
or not the respective indebtedness so secured has been assumed by such Person;
(d) obligations of such Person in respect of letters of credit or similar
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instruments issued or accepted by banks and other financial institutions for
account of such Person; (e) Capital Lease Obligations of such Person; (f)
obligations of such Person in respect of obligations of the types specified in
other clauses of this definition as a general partner or joint venturer of any
partnership or joint venture (other than in respect of obligations incurred in
the ordinary course of business); (g) the unearned balance of any advance
payments received by such Person under any contract to be performed in excess of
C$350,000 (or the equivalent in other currencies) in the aggregate (other than
as provided in clause (h) below); (h) the unearned balance of any advance
payments received by such Person under any contract to be performed in excess of
C$2,500,000 (or the equivalent in other currencies) in the aggregate resulting
from transactions in the ordinary course of such Person's business; and
(i) Indebtedness of others Guaranteed by such Person.
"INDEPENDENT PETROLEUM ENGINEER" shall mean (a) McDaniel & Associates
Consultants Ltd. or (b) such other firm of independent petroleum engineers
expert in the matters required to be performed in connection with the
preparation and delivery of a Reserve Evaluation Report and satisfactory to the
Majority Lenders.
"INTEREST COVERAGE RATIO" shall mean, for any period, the ratio of (a)
Cash Flow for such period to (b) Interest Expense for such period.
"INTEREST EXPENSE" shall mean, for any period, the sum without
duplication of the following: (a) interest expense for the Company for such
period (determined on a consolidated basis in accordance with GAAP) including,
without limitation, the following: all interest in respect of Indebtedness
accrued or capitalized during such period (whether or not actually paid during
such period) (other than interest paid in common stock of the Company) and the
net amounts payable (or minus the net amounts receivable) under Interest Rate
Protection Agreements accrued during such period (whether or not actually paid
or received during such period), but excluding the non-cash amortization of
deferred debt issuance costs and original issue discount for such period PLUS
(b) interest expense for Canadian Forest and the Subsidiary Borrowers (other
than interest expense of Canadian Forest and the Subsidiary Borrowers in respect
of Indebtedness to the Company under the Canadian Forest Credit Agreement) for
such period (determined on a combined basis in accordance with GAAP) including,
without limitation, the following: all interest in respect of Indebtedness
accrued or capitalized during such period (whether or not actually paid during
such period) (other than interest paid in common stock of Canadian Forest) and
the net amounts payable (or minus the net amounts receivable) under Interest
Rate Protection Agreements accrued during such period (whether or not actually
paid or received during such period), but excluding the non-cash amortization of
deferred debt issuance costs and original issue discount for such period.
"INTEREST PERIOD" shall mean, (a) with respect to any Eurodollar Loan,
each period commencing on the date such Eurodollar Loan is made or Converted
from
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another Type of Loan or the last day of the next preceding Interest Period
for such Loan and ending on the numerically corresponding day in the first,
second or third calendar month thereafter, as the Company may select as provided
in Section 4.06 hereof, except that each Interest Period that commences on the
last Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period would otherwise end
after the Commitment Termination Date, such Interest Period shall end on the
Commitment Termination Date; (ii) each Interest Period that would otherwise end
on a day which is not a Business Day shall end on the next succeeding Business
Day (or if the next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); and (iii) notwithstanding
clause (i) above, no Interest Period shall have a duration of less than one
month and, if the Interest Period for any Eurodollar Loan would otherwise be a
shorter period, such Loan shall not be available as a Eurodollar Loan hereunder
for such period and (b) with respect to any BA Loan, each period commencing on
the date such BA Loan is made or Converted from another Type of Loan or the last
day of the next preceding Interest Period for such BA Loan and ending on the
date not less than 30 days or more than 180 days thereafter, as the Company may
select as provided in Section 4.06 hereof. Notwithstanding the foregoing, no
Interest Period shall mature on a date after the Commitment Termination Date.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
"INVESTMENT" shall mean, for any Person: (a) the acquisition (whether
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including, without limitation, any "short sale" or any sale of any securities
at a time when such securities are not owned by the Person entering into such
short sale); (b) the making of any deposit with, or advance, loan or other
extension of credit to any other Person (including the purchase of Property from
another Person subject to an understanding or agreement, contingent or
otherwise, to resell such Property to such Person, but excluding any such
advance, loan or extension of credit having a term not exceeding 90 days
representing the purchase price of inventory or supplies sold by such Person in
the ordinary course of business); (c) the entering into of any Guarantee of, or
other contingent obligation with respect to, Indebtedness or other liability of
any other Person and (without duplication) any amount committed to be advanced,
lent or extended to such Person; or (d) the entering into of any Interest Rate
Protection Agreement or Commodity Hedging Agreement. The definition of
"INVESTMENT" shall not include expenditures made to acquire interests in joint
ventures in oil and gas properties and plants, facilities,
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pipelines and equipment reasonably related thereto.
"ISSUING BANK" shall mean BOM, as the issuer of Letters of Credit
under Section 2.03 hereof, together with its successors and assigns in such
capacity.
"LETTER OF CREDIT" shall have the meaning assigned to such term in
Section 2.03 hereof.
"LETTER OF CREDIT DOCUMENTS" shall mean, with respect to any Letter of
Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to such
Letter of Credit or (b) any collateral security for any of such obligations,
each as the same may be modified and supplemented and in effect from time to
time.
"LETTER OF CREDIT INTEREST" shall mean, for each Lender, such Lender's
participation interest (or, in the case of the Issuing Bank, the Issuing Bank's
retained interest) in the Issuing Bank's liability under Letters of Credit and
such Lender's rights and interests in Letter of Credit Reimbursement Obligations
and fees, interest and other amounts payable in connection with Letters of
Credit and Letter of Credit Reimbursement Obligations.
"LETTER OF CREDIT LIABILITY" shall mean, without duplication, at any
time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit PLUS (b) the aggregate unpaid principal amount
of all Letter of Credit Reimbursement Obligations of the Company at such time
due and payable in respect of all drawings made under such Letter of Credit.
For purposes of this Agreement, a Lender (other than the Issuing Bank) shall be
deemed to hold a Letter of Credit Liability in an amount equal to its
participation interest in the related Letter of Credit under Section 2.03
hereof, and the Issuing Bank shall be deemed to hold a Letter of Credit
Liability in an amount equal to its retained interest in the related Letter of
Credit after giving effect to the acquisition by the Lenders other than the
Issuing Bank of their participation interests under said Section 2.03.
"LETTER OF CREDIT REIMBURSEMENT OBLIGATIONS" shall mean, at any time,
the obligations of the Company then outstanding, or that may thereafter arise in
respect of all Letters of Credit then outstanding, to reimburse amounts paid by
the Issuing Bank in respect of any drawings under a Letter of Credit (to the
extent not converted to a Canadian Prime Loan or a U.S. Base Rate Loan
hereunder).
"LIEN" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property (including any advance payment or similar arrangements with respect to
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Page 23
minerals in place). For purposes of this Agreement and the other Loan
Documents, a Property shall be deemed to be subject to a Lien if a Person has
acquired or holds that Property subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement (other than an operating lease) relating to such Property.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Notes,
the Swingline Notes, the Letter of Credit Documents, the Bankers' Acceptance
Documents and the Security Documents.
"LOANS" shall mean the loans provided for in Section 2.01 hereof and
the Swingline Loans provided for in Section 2.05 hereof.
"MAJORITY LENDERS" shall mean (i) at any time when there are three or
more Lenders under this Agreement, Lenders having at least 66-2/3% of the
aggregate amount of the Commitments or, if the Commitments shall have
terminated, Lenders holding at least 66-2/3% of the aggregate unpaid Principal
Amount of the Loans, Letter of Credit Liabilities and Bankers' Acceptance
Liabilities; and (ii) at any other time, all of the Lenders.
"MARGIN STOCK" shall mean "Margin Stock" within the meaning of
Regulations U and X.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company taken as a whole or on the Forest
Pledged Properties, (b) the ability of the Company or Forest (as applicable) to
perform their respective obligations under any of the Loan Documents, (c) the
validity or enforceability of any of the Loan Documents, (d) the rights and
remedies of the Lenders and the Administrative Agent under any of the Loan
Documents or (e) the timely payment of the principal of or interest on the
Loans, Letter of Credit Reimbursement Obligations or Bankers' Acceptances or
Forest's obligations under the Forest Guarantee or other amounts payable in
connection therewith.
"MATURITY DATE" shall mean the date on which a Bankers' Acceptance is
payable.
"NET AVAILABLE PROCEEDS" shall mean:
(a) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition; PROVIDED that if 20% or less of
the total value of such Net Cash Payments consists of non-cash consideration,
and if such non-cash consideration is subjected to the Lien of the Security
Documents upon receipt by Canadian Forest, any Subsidiary Borrower or Forest (as
applicable), the amount of
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Page 24
such Net Cash Payments received shall be deemed to equal the amount of all
cash payments received in connection with such Disposition; and
(b) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received by
Canadian Forest, any Subsidiary Borrower or Forest (as applicable) in respect of
such Casualty Event net of (i) reasonable expenses incurred by Canadian Forest,
any Subsidiary Borrower or Forest (as applicable) in connection therewith and
(ii) contractually required repayments of Indebtedness to the extent secured by
a Lien on such Property and any income and transfer taxes payable by Canadian
Forest, any Subsidiary Borrower or Forest (as applicable) in respect of such
Casualty Event.
"NET BACK POOL REPORT" shall mean a report furnished to the
Administrative Agent and Lenders at the time of each delivery of the Reserve
Evaluation Report, in form and substance satisfactory to the Administrative
Agent and the Majority Lenders setting forth, in the case of the report to be
delivered in connection with the Determination Date occurring on May 1 of each
year, for the preceding fiscal year, and in the case of the report to be
delivered in connection with the Determination Date occurring on October 15 of
each year, for the first two calendar quarters of such fiscal year, the
following:
(i) the names of the buyers of hydrocarbons from Canadian Forest
and any Subsidiary Borrowers during the respective period;
(ii) the quantity of hydrocarbons sold to such buyer;
(iii) the unit price received from such buyer for such hydrocarbons
including the basis on which such price was calculated;
(iv) the payment terms of each sales contract with such buyer for
the remaining term of such contract and the basis upon which
the unit price under each such sales contract is to be
calculated; and
(v) the remaining term of each such contract.
"NET CASH PAYMENTS" shall mean, with respect to any Disposition, the
aggregate amount of all cash payments, and the fair market value of any non-cash
consideration, received by Canadian Forest or any Subsidiary Borrower (or by
Forest, in the case of any Disposition of any Forest Pledged Property) directly
or indirectly in connection with such Disposition; PROVIDED that (a) Net Cash
Payments shall be net of (i) the amount of any legal, title and recording tax
expenses, commissions and other fees and expenses paid by Canadian Forest or any
Subsidiary Borrower (or Forest, as applicable) in connection with such
Disposition and (ii) any Federal, provincial, state and local income or other
taxes estimated to be payable by Canadian Forest or any
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Page 25
Subsidiary Borrower (or Forest, as applicable) as a result of such
Disposition (but only to the extent that (x) such estimated taxes are in fact
paid to the relevant Federal, provincial, state or local governmental
authority within three months of the date of such Disposition or placed in
escrow for the payment of such taxes or (y) the amount of such estimated
taxes is less than C$1,000,000 and the payment of such taxes is being
contested in good faith and by appropriate proceedings) and (b) Net Cash
Payments shall be net of any repayments by Canadian Forest or any Subsidiary
Borrower of Indebtedness to the extent that (i) such Indebtedness is secured
by a Lien solely on the Property that is the subject of such Disposition and
(ii) such Indebtedness is required to be repaid as a condition to the
Disposition of such Property.
"NET PROCEEDS" shall mean, in respect of any Bankers' Acceptance,
the amount obtained by applying the Bankers' Acceptance Rate PLUS the BA Fee
Rate to the face amount of such Bankers' Acceptance in accordance with the
formula set forth in Exhibit F hereto.
"NON-BORROWING SUBSIDIARIES" shall mean Subsidiaries of Canadian
Forest other than the Subsidiary Borrowers.
"NOTES" shall mean the promissory notes provided for by Sections
2.09(a) and (b) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time.
"OPERATING EXPENSES" shall mean, for any period, the sum of the
following (a) for Canadian Forest and the Subsidiary Borrowers (determined on a
combined basis in accordance with GAAP) to the extent accrued or paid during
such period (without duplication): (i) lease operating expenses; (ii) Taxes;
(iii) general and administrative and other overhead expenditures; and (iv) all
other expenses paid or accrued related to or arising from the operations of
Canadian Forest and the Subsidiary Borrowers, and (b) for Forest (determined in
accordance with GAAP in respect only of the Forest Pledged Properties) to the
extent accrued or paid during such period (without duplication): (i) lease
operating expenses; (ii) Taxes; (iii) general and administrative and other
overhead expenditures; and (iv) all other expenses paid or accrued related to or
arising from the operations of Forest in connection with the Forest Pledged
Properties.
"ORIGINAL CREDIT AGREEMENT" shall have the meaning assigned to such
term in the second paragraph hereof.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
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Page 26
"PRESENT VALUE OF RESERVES" shall mean, on any date, estimated net
cash flow expressed in Canadian Dollars (after development expenses and
production taxes) in respect of Proved Reserves attributable to Hydrocarbon
Properties calculated in accordance with the risk factors, product pricing
models and discounted to present value at a discount rate for Proved Reserves in
each case acceptable to the Majority Lenders from time to time.
"PRINCIPAL AMOUNT" shall mean, for a Bankers' Acceptance, the face
amount thereof, for a BA Loan, the Principal Amount thereof determined in
accordance with Section 2.04(h) hereof, and for any other Loans, the outstanding
principal amount thereof.
"PRINCIPAL OFFICE" shall mean the principal office of Chase Canada,
located on the date of this Agreement at 1 First Canadian Place, 100 King Street
West, Suite 6900, P.O. Box 106, Toronto, Ontario, Canada M5X 1A4.
"PROMARK" shall mean Producers Marketing Ltd., an Alberta corporation
and a Wholly Owned Subsidiary of Canadian Forest.
"PROMARK DEBENTURE" shall mean the Demand Debenture and Negative
Pledge dated July 17, 1996 of ProMark in the original principal amount of
C$80,000,000 payable to the Company and assigned to the Administrative Agent and
its successors and assigns, as the same shall be modified and supplemented in
accordance with Section 11.21 hereof and in effect from time to time.
"PROMARK SECURITY AGREEMENT" shall mean the Joint Security Agreement
dated July 17, 1996 of ProMark (joined in by Canadian Forest to give full effect
thereto) in favor of BOM, as same shall be modified and supplemented from time
to time in accordance with Section 11.21 hereof.
"PROPERTY" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"PROVED RESERVES" shall mean reserves (to the extent of the net
interest of Canadian Forest and the Subsidiary Borrowers, and, in the case of
the Forest Pledged Properties, the net interest of Forest) comprised of
quantities of hydrocarbons that geologic and engineering data demonstrate with
reasonable certainty to be recoverable in the future from known reservoirs under
existing conditions, PROVIDED that such reserves are recoverable from
(a) existing wells, whether from completion intervals currently open and
producing to market, or completion intervals currently open but not currently
producing or zones behind casing of existing wells, or (b) new wells on
undrilled acreage. Proved Reserves on undrilled acreage shall be limited to
those drilling units offsetting productive units that are reasonably certain to
be productive
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Page 27
when drilled. Other undrilled units may also be credited with
Proved Reserves where continuity of production from existing productive
formations can be demonstrated with reasonable certainty. For purposes of
determining whether any Hydrocarbon Properties of Canadian Forest or any
Subsidiary Borrowers (and Forest, as applicable) (other than Hydrocarbon
Properties that have been acquired since the date of the most recent Reserve
Evaluation Report or other internal reserve reports prepared by Canadian Forest
all of which shall be considered Proved Reserves) contain Proved Reserves, the
Lenders and the Company agree that the most recent Reserve Evaluation Report or
other internal reserve reports prepared by Canadian Forest (including with
respect to the Forest Pledged Properties) shall be determinative.
"QUARTERLY DATES" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be the first such
day after the date hereof.
"REFERENCE LENDERS" shall mean Chase Canada, BOM and such other
Lenders as are agreed from time to time by the Administrative Agent (with the
consent of the Majority Lenders) and the Company (or their respective Applicable
Lending Offices, as the case may be).
"REGULATIONS A, D, U AND X" shall mean, respectively, Regulations A,
D, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
after the date of this Agreement in Canadian federal, provincial or foreign laws
or regulations or the adoption or making after such date of any interpretation,
directive or request applying to a class of lenders including such Lender, of or
under any Canadian federal, provincial or foreign law or regulations (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"RELEASE" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment, including, without limitation, the movement of Hazardous
Materials through ambient air, soil, surface water, ground water, wetlands, land
or subsurface strata.
"RELEVANT PARTIES" shall mean 3189503, Canadian Forest and the
Subsidiary Borrowers.
"REPORT DELIVERY DATE" shall mean, with respect to any Borrowing Base
Report, 45 days prior to the applicable Determination Date.
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Page 28
"RESERVE EVALUATION REPORT" shall mean an unsuperceded report that
(a) is (i) prepared, in the case of the report required to be delivered by
Canadian Forest, in connection with the Determination Date occurring on May 1 of
each year, by the Independent Petroleum Engineer on the basis of assumptions and
projections which Canadian Forest believes in good faith to be reasonable or, in
the case of the report required to be delivered by Canadian Forest, in
connection with the Determination Date occurring on October 15 of each year, by
Canadian Forest and (ii) satisfactory in form and substance to the Majority
Lenders (including as to assumptions) and (b) is prepared on the basis of
findings and material data (x) as of January 1 of such year, in the case of a
report prepared by the Independent Petroleum Engineer in connection with the
Determination Date occurring on May 1 of each year and (y) as of July 1 of such
year, in the case of a report prepared by Canadian Forest in connection with the
Determination Date occurring on October 15 of each year, and (i) identifies the
Hydrocarbon Properties covered thereby and (ii) as to each of the Hydrocarbon
Properties, sets forth (A) the Proved Reserves attributable to such Hydrocarbon
Property (in the case of the report prepared by the Independent Petroleum
Engineer) describing the producing and nonproducing Proved Reserves separately
for purposes of the following items (B) through (F), (B) the total amount of
such Proved Reserves attributable to such Hydrocarbon Property that, in the
opinion of the preparer of such report, Canadian Forest and the Subsidiary
Borrowers (and Forest, in the case of the Forest Pledged Properties) have the
right to produce for their own account in the current and each succeeding
calendar year, (C) a projection of the rate of production and the Future Net
Revenues of Canadian Forest, the Subsidiary Borrowers and Forest, as applicable
(including as additional information the data and assumptions used to determine
such Future Net Revenues), from such Proved Reserves for the current and each
succeeding calendar year, (D) the quantity and type of hydrocarbons recoverable
from such Proved Reserves in the current and each succeeding calendar year, (E)
an estimate of the projected revenues and expenses attributable to such Proved
Reserves in the current and each succeeding calendar year, and (F) any reports
or evaluations prepared by Canadian Forest regarding the expediency of any
change in methods of treatment or operation of all or any wells drilled to
produce any of such Proved Reserves that are producing or capable of producing
hydrocarbons, any new drilling or development, any method of secondary recovery
by repressuring or otherwise, or any other action with respect to such Proved
Reserves, the decision as to which may increase or reduce in any material
respect the quantity of hydrocarbons ultimately recoverable, or the rate of
production thereof.
"SECURITY DOCUMENTS" shall mean collectively, the Underlying Security
Documents, the Company Debenture, the deposit agreement in respect thereof, the
Assignment of Payments, the Assignment of Security, the Consent and Agreement,
the notes issued by the Borrowers under the Canadian Forest Credit Agreement,
including the Notes, Swingline Notes as defined in the Canadian Forest Credit
Agreement, and any other security that is now or is hereafter granted or held
with regard to the
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Page 29
Company's obligations hereunder or the Relevant Parties' obligations under
the Underlying Loan Documents and all amendments, modifications, additions
to, renewals of and substitutions and replacements for any of the foregoing
made in accordance with Section 11.21 hereof and all registrations filed with
respect to the Liens created pursuant to such documents and agreements and
without limiting the generality of the foregoing includes the foregoing
security and other documents as confirmed and amended as provided in the
Second Security Confirmation and Amendment Agreement described in Section
6.01(p) hereof.
"STAMPING FEE" shall mean, in respect of any Bankers' Acceptance or
BA Loan, the fee payable by the Company described in Section 2.04(c).
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"SUBSIDIARY BORROWER" shall mean (i) ProMark and (ii) each of the
other Wholly Owned Subsidiaries of Canadian Forest that becomes a borrower
pursuant to Section 8.27 of the Canadian Forest Credit Agreement and provides
security to the Company over its Property similar to the Canadian Forest
Debenture, deposits that security with the Company and which security is
assigned to the Administrative Agent.
"SWINGLINE LOAN LIABILITY" shall mean, with respect to any Swingline
Loan, the obligation of the Company to pay to BOM or the Administrative Agent at
the Principal Office, following the occurrence of actions taken by BOM pursuant
to Section 2.05(c), the Principal Amount of any Swingline Loan which the Company
has not repaid.
"SWINGLINE LOANS" shall mean the loans provided for by Section 2.05
hereof.
"SWINGLINE NOTE" shall mean the promissory note provided for by
Section 2.09(b) hereof and any promissory note delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"TAXES" shall mean all taxes, levies, imposts, stamp taxes, duties,
charges
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to tax, fees, deductions, withholdings, royalties, charges, compulsory
loans or restrictions or conditions resulting in a charge which are imposed,
levied, collected, withheld or assessed by any political subdivision or taxing
authority as of the date of this Agreement or at any time in the future together
with interest thereon and penalties with respect thereto, if any, and any
payments of principal, interest, charges, fees or other amounts made on or in
respect thereof, including without limitation, production and severance taxes
and windfall profit taxes, and "Tax" and "Taxation" shall be construed
accordingly provided that "Taxes" shall exclude taxes imposed on or measured by
the overall net income of a Person.
"3189503" shall mean 3189503 Canada Ltd., a Canadian corporation and a
Wholly Owned Subsidiary of Forest.
"3189503 GUARANTEE AND PLEDGE AGREEMENT" shall mean the Guarantee and
Pledge Agreement dated as of April 1, 1997 between 3189503 and the Company, as
the same may be supplemented and amended and in effect from time to time.
"TYPE" shall have the meaning assigned to such term in Section 1.04
hereof.
"UNDERLYING LOAN DOCUMENTS" shall mean, collectively, the Canadian
Forest Credit Agreement and the Underlying Security Documents.
"UNDERLYING LOANS" shall mean, collectively, the loans and other
extensions of credit provided for in the Canadian Forest Credit Agreement.
"UNDERLYING SECURITY DOCUMENTS" shall mean, collectively, the Canadian
Forest Debenture and the deposit agreement in respect thereof, the ProMark
Debenture and the deposit agreement in respect thereof, the 3189503 Guarantee
and Pledge Agreement, the Forest Guarantee, the Forest Debenture and the deposit
agreement in respect thereof, all instruments granting a Lien on any Property of
the Borrower or the Subsidiary Borrowers to the Company and all registrations
with respect to the Liens created by that security.
"UNRESTRICTED PROPERTIES" shall mean, at any time of determination,
the Hydrocarbon Properties of Canadian Forest and its Subsidiary Borrowers that
have not been given any value in the Borrowing Base as determined immediately
prior to such time of determination and that do not contain Proved Reserves.
"USAGE RATIO" shall mean as of any date the ratio of (a) Aggregate
Borrowings on such date to (b) the lesser of the Borrowing Base or the aggregate
of the Commitments on such date.
"U.S. BASE RATE" shall mean, for any day, a rate per annum equal to
the
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higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Chase Manhattan Prime Rate for such day. Each change in any interest rate
provided for herein based upon the U.S. Base Rate resulting from a change in the
U.S. Base Rate shall take effect at the time of such change in the U.S. Base
Rate.
"U.S. BASE RATE LOAN" shall mean a loan that bears interest at the
U.S. Base Rate.
"U.S. DOLLARS", "$" and U.S.$" shall mean lawful money of the United
States of America.
"WHOLLY OWNED SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are directly or indirectly owned or controlled by
such Person or one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
1.02 ACCOUNTING TERMS AND DETERMINATIONS.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with GAAP. All calculations made for the purposes of
determining compliance with this Agreement shall (except as otherwise expressly
provided herein) be made by application of GAAP applied on a basis consistent
with those used in the preparation of the latest annual or quarterly financial
statements furnished to the Lenders pursuant to Section 8.01 hereof unless
(i) the Company shall have objected to determining such compliance on such basis
at the time of delivery of such financial statements or (ii) the Majority
Lenders shall so object in writing within 30 days after delivery of such
financial statements, in either of which events such calculations shall be made
on a basis consistent with those used in the preparation of the latest financial
statements as to which such objection shall not have been made.
(b) The Company shall cause Canadian Forest to deliver to the Lenders
at the same time as the delivery of any annual or quarterly financial statements
under Section 8.01 hereof (i) a description in reasonable detail of any material
variation between the application of accounting principles employed in the
preparation of such statements and the application of accounting principles
employed in the preparation of the next preceding annual or quarterly financial
statements as to which no objection has been made in accordance with the last
sentence of subsection (a) above and (ii) reasonable estimates of the difference
between such statements arising as a
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consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, the Company will not permit
any Borrower to change the last day of its fiscal year from December 31, or the
last days of the first three fiscal quarters in each of its fiscal years from
March 31, June 30 and September 30 of each year, respectively.
1.03 BORROWING BASE.
(a) RESERVE EVALUATION REPORTS. Canadian Forest has, at the
request of the Company, furnished to the Administrative Agent and the Lenders
(i) a reserve report prepared by McDaniel & Associates Consultants Ltd. as of
January 1, 1996, which report shall be deemed to be the initial Reserve
Evaluation Report and (ii) the Net Back Pool Report for the fiscal year ending
December 31, 1995, which report shall be deemed to be initial Net Back Pool
Report. On or before each Report Delivery Date (commencing September 1, 1996),
the Company will cause Canadian Forest to furnish to the Administrative Agent
and the Lenders updated Borrowing Base Reports.
(b) BORROWING BASE. During the period commencing on the date
hereof and ending on such date the first redetermination of the Borrowing Base
becomes effective as provided below in this Section 1.03(b), the Borrowing Base
shall be C$60,000,000 (subject to any adjustments and redeterminations provided
for by Sections 1.03(c), 1.03(d) and 1.03(e) hereof) which amount has been
determined on the basis of the initial Borrowing Base Reports referred to in the
first sentence of Section 1.03(a) hereof (with such adjustments to the rates,
factors, values, estimates, assumptions and computations set forth in such
initial Reserve Evaluation Report and the initial Net Back Pool Report as are
acceptable to the Majority Lenders in their sole discretion). As promptly as
reasonably practicable after its receipt of the Borrowing Base Reports furnished
to it pursuant to the second sentence of Section 1.03(a) hereof, the
Administrative Agent (in consultation with the Majority Lenders) shall endeavor
to redetermine the Borrowing Base on the basis of such updated Borrowing Base
Reports in the manner provided in this clause (b), notify the Lenders of such
redetermination and, if such redetermination is approved by each of the Lenders
(in the case of an increase in the Borrowing Base or determination to maintain
the then existing Borrowing Base) or by the Majority Lenders (in the case of a
decrease in the Borrowing Base), as applicable, notify the Company of the
Borrowing Base as so redetermined and such redetermined Borrowing Base shall
become effective on the Determination Date next following each Report Delivery
Date (or, if later, on the date notified by the Administrative Agent to the
Company) and shall remain effective until again redetermined as provided in this
Section 1.03(b) (subject to any adjustments and redeterminations provided for by
Sections 1.03(c), 1.03(d) and 1.03(e) hereof, reductions pursuant to Section
2.11(e) and (f) hereof or additions pursuant to Section 2.11(a) hereof).
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As used herein, "BORROWING BASE" shall mean the amount specified in
the first sentence of this Section 1.03(b) as determined from time to time as
provided in the second sentence of Section 1.03(b) and subject to the
adjustments, redeterminations and principles provided in Sections 1.03(c),
1.03(d), 1.03(e) and 2.11 hereof.
(c) MATERIAL CHANGE. The Company agrees to notify the
Administrative Agent promptly of any material change of which the Company or
Forest is aware which reduces or may result in a reduction of the Borrowing
Base by more than 10%. Promptly upon receipt of such notice, the
Administrative Agent (in consultation with, and with the approval of, the
Majority Lenders) shall endeavor to adjust the Borrowing Base pursuant to the
procedures set forth in Section 1.03(b) hereof.
(d) REDETERMINATION. If so requested by the Majority Lenders or
the Company at any time, the Administrative Agent shall, as promptly as
reasonably practicable after the receipt of such request, endeavor to
redetermine (in consultation with the Company and the Lenders) the Borrowing
Base as then in effect on the basis of the then most recent Borrowing Base
Reports (subject, however, to such other factors and assumptions as the
Administrative Agent, with the concurrence of the Majority Lenders, may
determine to be appropriate) as provided in Section 1.03(b) hereof.
(e) DETERMINATIONS, ETC. All determinations and redeterminations
and adjustments of the Borrowing Base by the Administrative Agent or the
Majority Lenders provided for in this Section 1.03 or in the definition of
"Present Value of Reserves" in Section 1.01 hereof, including any approvals
or disapprovals of a determination or redetermination of the Borrowing Base
or any adjustment thereof shall be made on a reasonable basis, in good faith
and in a manner reasonably consistent with prevailing practice in connection
with borrowing base loans if then made by the Lenders to comparable borrowers.
(f) FOREST SALE. The Company and the Lenders agree that the sale
of the Forest Pledged Properties from Canadian Forest to Forest pursuant to
the Forest Purchase Agreement, and the subjecting of such Forest Pledged
Properties to the Forest Debenture, shall not result in a redetermination or
adjustment of the Borrowing Base, and that such Forest Pledged Properties
shall continue to be included in the Borrowing Base (so long as they are
owned by Forest and are not otherwise subjected to any Lien (other than the
Lien of the Forest Debenture) by Forest) to the same extent as if such sale
had not occurred.
1.04 TYPES AND CURRENCY OF LOANS. Loans hereunder are
distinguished by "Type" and "Currency". The "Type" of a Loan refers to
whether such Loan is a Canadian Prime Loan, a BA Loan, a U.S. Base Rate Loan
or a Eurodollar Loan, each of which constitutes a Type. The "Currency" of a
Loan refers to whether such Loan is
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denominated in Canadian Dollars or U.S. Dollars. Loans may be identified by
Type and Currency.
Section 2. COMMITMENTS, LOANS, NOTES AND PREPAYMENTS.
2.01 LOANS.
(a) LOANS. Each Lender severally agrees, in accordance with the
terms and conditions of this Agreement, to make one or more loans to the
Company in Canadian Dollars or U.S. Dollars during the period from and
including the Closing Date to and including the Commitment Termination Date,
in an aggregate amount up to but not exceeding the lesser of (x) the
Commitment of such Lender and (y) an amount equal to such Lender's Commitment
Percentage multiplied by the most recently determined Borrowing Base;
PROVIDED that in no event shall the aggregate Principal Amount of all Loans
including Swingline Loans (with the Principal Amount of U.S. Dollar Loans
expressed as an Equivalent Amount in Canadian Dollars), together with the
aggregate amount of all Letter of Credit Liabilities (with the Letter of
Credit Liabilities in U.S. Dollars expressed as an Equivalent Amount in
Canadian Dollars) and all Bankers' Acceptance Liabilities of the Company
exceed the lesser of (x) the aggregate amount of the Commitments as in effect
from time to time and (y) the most recently determined Borrowing Base.
(b) The Company may not borrow Loans (including Swingline Loans) or
obtain Letters of Credit or request the issuance of Bankers' Acceptances
under this Agreement at any time while a Borrowing Base Deficiency exists and
the Interest Period for any Loan that is converted to or continued as a
Eurodollar Loan or BA Loan and the Maturity Date for any Bankers' Acceptance
accepted at any time while a Borrowing Base Deficiency exists shall not end
after the Deficiency Cure Period.
(c) Subject to the terms and conditions of this Agreement, during
the period from and including the Closing Date to but not including the
Commitment Termination Date, the Company may request the issuance of Bankers'
Acceptances pursuant to Section 2.04 hereof and repay such Bankers'
Acceptances and may borrow, repay and reborrow the Loans by means of Canadian
Prime Loans, BA Loans (if applicable), U.S. Base Rate Loans and Eurodollar
Loans and may, subject to Section 4.04 hereof, Convert all or any portion of
any Loan of one Type into Loans of another Type (as provided in Section 2.10
hereof) or Continue all or any portion of any Loan of one Type as Loans of
the same Type (as provided in Section 2.10 hereof); PROVIDED that (i) no more
than three separate Interest Periods in respect of Eurodollar Loans from any
Lender may be outstanding at any one time and (ii) no more than 6 separate
tranches of Bankers' Acceptances with different Maturity Dates may be
outstanding at any one time.
(d) The aggregate of the Commitments of the Lenders on the date
hereof
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is C$80,000,000.
(e) LENDING OFFICES. The Loans of each Type made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
2.02 BORROWINGS. The Company shall give the Administrative Agent
(or in the case of Swingline Loans, BOM instead of the Administrative Agent)
notice of each borrowing hereunder as provided in Section 4.06 hereof. Not
later than 1:00 p.m. Toronto time on the date specified for each borrowing
hereunder (other than Swingline Loans), each Lender shall make available the
amount of the Loan or Loans to be made by it on such date to the
Administrative Agent, at the Administrative Agent's account for the Currency
in which such Loan is denominated that is maintained by the Administrative
Agent with Chase Canada at the Principal Office, in immediately available
funds, for account of the Company. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company either by depositing the same, in
immediately available funds, in an account of the Company designated by the
Company and maintained with Chase Canada at the Principal Office or by
transferring such funds to an account designated by the Company in writing.
Notwithstanding any provision of this Agreement to the contrary, Canadian
Prime Loans, BA Loans and Swingline Loans may only be denominated in Canadian
Dollars and U.S. Base Rate Loans and Eurodollar Loans may only be denominated
in U.S. Dollars.
2.03 LETTERS OF CREDIT. Subject to the terms and conditions of
this Agreement, the Commitments may be utilized, upon the request of the
Company, in addition to the Loans provided for by Section 2.01 hereof and the
issuance of Bankers' Acceptances provided for by Section 2.04 hereof, by the
issuance by the Issuing Bank of letters of credit (collectively, "LETTERS OF
CREDIT") in Canadian Dollars or U.S. Dollars for account of the Company,
PROVIDED that in no event shall (i) the aggregate amount of all Letter of
Credit Liabilities, together with the aggregate Principal Amount of the Loans
(including all Swingline Loans) and the aggregate amount of all Bankers'
Acceptance Liabilities (with the amounts of any Loans or Letter of Credit
Liabilities outstanding in U.S. Dollars expressed as an Equivalent Amount in
Canadian Dollars), exceed the lesser of (x) the aggregate amount of the
Commitments as in effect from time to time, and (y) the most recently
determined Borrowing Base, (ii) the aggregate outstanding amount of all
Letter of Credit Liabilities exceed C$15,000,000, (iii) the expiration date
of any Letter of Credit extend beyond the earlier of the Commitment
Termination Date and the date 12 months following the issuance of such Letter
of Credit and (iv) any Letter of Credit require payment against a conforming
draft to be made thereunder on the same Business Day on which that draft is
presented, if presentation is made after 1:00 p.m., Toronto time. The
following additional provisions shall apply to Letters of Credit:
(a) The Company shall give the Administrative Agent at least three
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Business Days' irrevocable prior notice (effective upon receipt) specifying
the Business Day (which shall be no later than 30 days preceding the
Commitment Termination Date) on which each Letter of Credit is to be
issued, the beneficiary thereof and describing in reasonable detail the
proposed terms of such Letter of Credit (including the Currency of such
Letter of Credit) and the nature of the transactions or obligations
proposed to be supported thereby (including whether such Letter of Credit
is to be a commercial letter of credit or a standby letter of credit).
Each such notice shall only be delivered following the receipt by the
Company of an identical notice from a Borrower pursuant to the Canadian
Forest Credit Agreement. The Company shall concurrently provide the
Administrative Agent with a copy of the notice from such Borrower. Each
such notice shall be irrevocable and binding on the Company. Upon receipt
of any such notices, the Administrative Agent shall on the same day advise
the Issuing Bank and each Lender of the contents thereof.
(b) On each day during the period commencing with the date on which
the Company obtains the issuance of any Letter of Credit and until such
Letter of Credit shall have expired or been terminated, the Commitment of
each Lender shall be deemed to be utilized for all purposes of this
Agreement in an amount equal to such Lender's Commitment Percentage of the
then undrawn face amount of such Letter of Credit. Each Lender (other than
the Issuing Bank) agrees that, upon the issuance of any Letter of Credit
hereunder, it shall automatically acquire a participation in the Issuing
Bank's liability under such Letter of Credit in an amount equal to such
Lender's Commitment Percentage of such liability, and each Lender (other
than the Issuing Bank) thereby shall absolutely, unconditionally and
irrevocably assume, as primary obligor and not as surety, and shall be
unconditionally obligated to the Issuing Bank to pay and discharge when
due, its Commitment Percentage of the Issuing Bank's liability under such
Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Bank shall
promptly notify the Company (through the Administrative Agent) of the
amount to be paid by the Issuing Bank as a result of such demand and the
date on which payment is to be made by the Issuing Bank to such beneficiary
in respect of such demand. Notwithstanding the identity of the account
party of any Letter of Credit, the Company hereby unconditionally agrees to
pay and reimburse the Administrative Agent for account of the Issuing Bank
for the amount of each demand for payment under such Letter of Credit that
is in substantial compliance with the provisions of such Letter of Credit
at or prior to the date on which payment is to be made by the Issuing Bank
to the beneficiary thereunder, without presentment, demand, protest or
other formalities of any kind. The Company's obligation to pay and
reimburse the Administrative Agent for the account of the Issuing Bank is
unconditional and irrevocable and shall be paid
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strictly in accordance with this Agreement under all circumstances.
(d) Forthwith upon its receipt of a notice referred to in
paragraph (c) of this Section 2.03, the Company shall advise the
Administrative Agent whether or not the Company intends to borrow hereunder
to finance its obligation to reimburse the Issuing Bank for the amount of
the related demand for payment and, if it does, submit a notice of such
borrowing as provided in Section 4.06 hereof.
(e) Each Lender (other than the Issuing Bank) shall pay to the
Administrative Agent for account of the Issuing Bank at the Principal
Office in Canadian Dollars or U.S. Dollars, as the case may be, and in
immediately available funds, the amount of such Lender's Commitment
Percentage of any payment made by the Issuing Bank under a Letter of Credit
upon notice by the Issuing Bank (through the Administrative Agent) to such
Lender requesting such payment and specifying such amount. Each such
Lender's obligation to make such payment to the Administrative Agent for
account of the Issuing Bank under this paragraph (e), and the Issuing
Bank's right to receive the same, shall be absolute and unconditional and
shall not be affected by any circumstance whatsoever, including, without
limitation, the failure of any other Lender to make its payment under this
paragraph (e), the financial condition of the Company (or any other account
party), the existence of any Default or the termination of the Commitments.
Each such payment to the Issuing Bank shall be made without any offset,
abatement, withholding or reduction whatsoever. If any Lender shall
default in its obligation to make any such payment to the Administrative
Agent for account of the Issuing Bank, for so long as such default shall
continue the Administrative Agent may at the request of the Issuing Bank
withhold from any payments received by the Administrative Agent under this
Agreement or any Note for account of such Lender the amount so in default
and, to the extent so withheld, pay the same to the Issuing Bank in
satisfaction of such defaulted obligation.
Any payment by the Issuing Bank of an amount due under a Letter of
Credit and each Lender's payment to the Issuing Bank of its Commitment
Percentage share of that amount shall be deemed to be a Canadian Prime Loan
or U.S. Base Rate Loan made to the Company depending on whether the amounts
paid are in Canadian Dollars or U.S. Dollars.
(f) Upon the making of each payment by a Lender to the Issuing Bank
pursuant to paragraph (e) above in respect of any Letter of Credit, such
Lender shall, automatically and without any further action on the part of
the Administrative Agent, the Issuing Bank or such Lender, acquire (i) a
participation in an amount equal to such payment in the Letter of Credit
Reimbursement Obligation owing to the Issuing Bank by the Company hereunder
and under the
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Letter of Credit Documents relating to such Letter of Credit and (ii)
a participation in a percentage equal to such Lender's Commitment
Percentage in any interest or other amounts payable by the Company
hereunder and under such Letter of Credit Documents in respect of such
Letter of Credit Reimbursement Obligation (other than the commissions,
charges, costs and expenses payable to the Issuing Bank pursuant to
paragraph (g) of this Section 2.03). Upon receipt by the Issuing Bank from
or for account of the Company of any payment in respect of any Letter of
Credit Reimbursement Obligation or any such interest or other amount
(including by way of setoff or application of proceeds of any collateral
security) the Issuing Bank shall promptly pay to the Administrative Agent
for account of each Lender entitled thereto, such Lender's Commitment
Percentage of such payment, each such payment by the Issuing Bank to be
made in the same currency and funds in which received by the Issuing Bank.
In the event any payment received by the Issuing Bank and so paid to the
Lenders hereunder is rescinded or must otherwise be returned by the Issuing
Bank, each Lender shall, upon the request of the Issuing Bank (through the
Administrative Agent), repay to the Issuing Bank (through the
Administrative Agent) the amount of such payment paid to such Lender, with
interest at the rate specified in paragraph (j) of this Section 2.03.
(g) The Company shall pay to the Administrative Agent for account of
each Lender (ratably in accordance with their respective Commitment
Percentages) a letter of credit fee in respect of each Letter of Credit,
payable in the Currency that such Letter of Credit is denominated, in an
amount equal to the Applicable Margin with respect to BA Fee Rates (for
Letters of Credit payable in Canadian Dollars) or the Applicable Margin
with respect to Eurodollar Loans (for Letters of Credit payable in U.S.
Dollars), in each case of the daily average undrawn face amount of such
Letter of Credit for the period from and including the date of issuance of
such Letter of Credit (i) in the case of a Letter of Credit that expires in
accordance with its terms, to and including such expiration date and (ii)
in the case of a Letter of Credit that is drawn in full or is otherwise
terminated other than on the stated expiration date of such Letter of
Credit, to but excluding the date such Letter of Credit is drawn in full or
is terminated (such fee to be non-refundable, to be paid in arrears on each
Quarterly Date and on the Commitment Termination Date and to be calculated
for any day after giving effect to any payments made under such Letter of
Credit on such day). In addition, the Company shall pay to the
Administrative Agent for account of the Issuing Bank a fronting fee in
respect of each Letter of Credit in an amount equal to the lesser of (y)
C$1,000 and (z) 1/2 of 1% per annum of the daily average undrawn face
amount of such Letter of Credit for the period from and including the date
of issuance of such Letter of Credit (i) in the case of a Letter of Credit
that expires in accordance with its terms, to and including such expiration
date and (ii) in the case of a Letter of Credit that is drawn in full or is
otherwise terminated other than on the stated expiration date of such
Letter of Credit, to
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but excluding the date such Letter of Credit is drawn in full or is
terminated (such fee to be non-refundable, to be paid in arrears on
each Quarterly Date and on the Commitment Termination Date and to be
calculated for any day after giving effect to any payments made under
such Letter of Credit on such day) and shall also pay the Issuing Bank on
demand (delivered through by the Administrative Agent) all commissions,
charges, costs and expenses in the amounts customarily charged by the
Issuing Bank from time to time in like circumstances with respect to the
issuance of each Letter of Credit and drawings and other transactions
relating thereto.
(h) Promptly following the end of each calendar month, the Issuing
Bank shall deliver (through the Administrative Agent) to each Lender and
the Company a notice describing the aggregate amount of all Letters of
Credit outstanding at the end of such month. Upon the request of any
Lender from time to time, the Issuing Bank shall deliver any other
information reasonably requested by such Lender with respect to each Letter
of Credit then outstanding.
(i) The issuance by the Issuing Bank of each Letter of Credit shall,
in addition to the conditions precedent set forth in Section 6 hereof, be
subject to the conditions precedent that (i) such Letter of Credit shall be
in such form, contain such terms and support such transactions as shall be
satisfactory to the Issuing Bank consistent with its then current practices
and procedures with respect to letters of credit of the same type and
(ii) the Company shall have executed and delivered such applications,
agreements and other instruments relating to such Letter of Credit as the
Issuing Bank shall have reasonably requested consistent with its then
current practices and procedures with respect to letters of credit of the
same type, PROVIDED that in the event of any conflict between any such
application, agreement or other instrument and the provisions of this
Agreement or any Security Document, the provisions of this Agreement and
the Security Documents shall control.
(j) To the extent that any Lender shall fail to pay any amount
required to be paid pursuant to paragraph (e) or (f) of this Section 2.03
on the due date therefor, such Lender shall pay interest to the Issuing
Bank (through the Administrative Agent) on such amount from and including
such due date to but excluding the date such payment is made at a rate per
annum equal to (x) the Chase Canada Prime Rate if the amount to be advanced
is in Canadian Dollars and (y) the U.S. Base Rate if the amount to be
advanced is in U.S. Dollars, PROVIDED that if such Lender shall fail to
make such payment to the Issuing Bank within three Business Days of such
due date, then, retroactively to the due date, such Lender shall be
obligated to pay interest on such amount at (p) the Chase Canada Prime Rate
PLUS the Applicable Margin for Canadian Prime Loans if the amount advanced
is in Canadian Dollars and (q) the U.S. Base Rate PLUS the Applicable
Margin for U.S. Base Rate Loans if the amount advanced is in
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U.S. Dollars.
(k) The issuance by the Issuing Bank of any modification or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions applicable under this Section 2.03 to the issuance of new
Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (i) the respective Letter of Credit affected
thereby would have complied with such conditions had it originally been
issued hereunder in such modified or supplemented form or (ii) each Lender
shall have consented thereto.
As between the Company and the Issuing Bank, the Company assumes all risks
for the acts and omissions of, or misuse of, the Letters of Credit issued by
the Issuing Bank, by the respective beneficiaries of such Letter of Credit.
The Company hereby indemnifies and holds harmless each Lender and the
Administrative Agent from and against any and all claims and damages, losses,
liabilities, costs or expenses that such Lender or the Administrative Agent
may incur (or that may be claimed against such Lender or the Administrative
Agent by any Person whatsoever) by reason of or in connection with (i) any
loss or expense incurred by any Lender as a result of the Company's failure
to honor or fulfill, before the date specified for the issuance of any Letter
of Credit, the applicable conditions set forth in Section 6 and this Section
2.03 if the Letter of Credit is not issued on that date because of that
failure; and (ii) the execution, delivery, issuance or transfer of or payment
or refusal to pay by the Issuing Bank under any Letter of Credit; PROVIDED
that the Company shall not be required to indemnify any Lender or the
Administrative Agent for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by (x) the willful
misconduct or gross negligence of the Issuing Bank in determining whether a
request presented under any Letter of Credit complied with the terms of such
Letter of Credit or (y) in the case of the Issuing Bank, such Lender's
failure to pay under any Letter of Credit after the presentation to it of a
request strictly complying with the terms and conditions of such Letter of
Credit. Nothing in this Section 2.03 is intended to limit the other
obligations of the Company, any Lender or the Administrative Agent under this
Agreement.
2.04 BANKERS' ACCEPTANCES. Subject to the terms and conditions of
this Agreement, the Commitments may be utilized, upon the request of the
Company, in addition to the Loans provided for by Section 2.01(a) hereof and
the issuance of Letters of Credit provided for by Section 2.03 hereof, for
the acceptance by the Lenders of bankers' acceptances (collectively,
"BANKERS' ACCEPTANCES") issued by the Company, PROVIDED that in no event
shall (i) the aggregate amount of all Bankers' Acceptance Liabilities,
together with the aggregate Principal Amount of the Loans (including all
Swingline Loans) and the aggregate amount of all Letter of Credit Liabilities
(with amounts of any Loans or Letter of Credit Liabilities outstanding in
U.S. Dollars expressed as an Equivalent Amount in Canadian Dollars) exceed
the lesser of (A) the aggregate of the Commitments and (B) the most recently
determined Borrowing Base and (ii) any Bankers' Acceptances have maturities
of less than 30 days or more than
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180 days from the Acceptance Date (and shall in no event mature on a date
after the Commitment Termination Date). The following additional provisions
shall apply to Bankers' Acceptances:
(a) The Company shall deliver to each Lender bills of exchange,
executed in blank by its authorized signatory substantially in the form in
Exhibit D in sufficient quantity and thereafter shall, from time to time
upon request from the Administrative Agent, deliver to each Lender further
quantities of such bills of exchange, so executed, and each Lender shall
hold the bills of exchange in safekeeping.
(b) When the Company wishes to make a borrowing by way of Bankers'
Acceptances, the Company shall give the Administrative Agent prior written
notice with respect to the issuance of the Bankers' Acceptances (such
written notice a "BANKERS' ACCEPTANCE REQUEST") by not later than 1:00 p.m.
Toronto time, two Business Days' prior to the Acceptance Date. Each
Bankers' Acceptance Request shall be irrevocable and binding on the
Company. The Company shall indemnify the Lender against any loss or
expense incurred by the Lender as a result of any failure by the Company to
fulfill or honor before the date specified as the Acceptance Date, the
applicable conditions set forth in Section 6, if, as a result of such
failure the requested Bankers' Acceptance is not made on such date. Unless
otherwise agreed among the Administrative Agent and the Lenders, the
aggregate amount of all Bankers' Acceptances issued on any Acceptance Date
hereunder shall be accepted pro rata by all Lenders relative to their
respective Commitment Percentage, rounded, upwards or downwards, as the
case may be, to the nearest C$100,000. Upon receipt of a Bankers'
Acceptance Request, the Administrative Agent shall advise each Lender of
the contents thereof.
(c) Unless the Company has notified the Administrative Agent in
the Bankers' Acceptance Request that the Company intends to arrange the
sale of the Bankers' Acceptances which are the subject of such Bankers'
Acceptance Request (a "COMPANY ARRANGEMENT"), on the Acceptance Date (i) at
10:30 a.m. Toronto time, the Administrative Agent shall determine the
Bankers' Acceptance Rate based upon the average of the bankers' acceptance
rates of each of the Accepting Lenders. That Bankers' Acceptance Rate will
be the discount rate used by each of the Lenders that is able to extend
credit by way of Bankers' Acceptances on such date (the "ACCEPTING LENDER")
and (ii) not later than 2:00 p.m. Toronto time, each such Accepting Lender
shall accept and purchase its share of the Bankers' Acceptances that are
issued and shall make available to the Administrative Agent, in accordance
with Section 2.02 hereof, the Net Proceeds of the purchase of Bankers'
Acceptances on such day by such Lender calculated in accordance with
Exhibit F. The Administrative Agent shall transfer to the Company those
Net Proceeds of the Bankers' Acceptances ("AVAILABLE
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PROCEEDS") and shall notify the Company and each such Lender by telex,
facsimile or telephone (if by telephone, to be confirmed subsequently in
writing) of the details of the issue, substantially in the form set out
in Exhibit G.
On the Acceptance Date the Company shall pay each Accepting Lender and
each Lender providing a BA Loan a stamping fee (the "STAMPING FEE") with
respect to each Bankers' Acceptance and each BA Loan.
For each Bankers' Acceptance or BA Loan, the Stamping Fee payable by
the Company shall be the product obtained by multiplying:
(i) the applicable BA Fee Rate specified in the definition of
Applicable Margin in effect from time to time; by
(ii) the Principal Amount of that Bankers' Acceptance or BA Loan;
and pro rating that product for the number of days in the term from and
including the Acceptance Date to but not including the Maturity Date of
that Bankers' Acceptance or the Interest Period for the BA Loan, as the
case may be, on the basis of a year of 365 days.
(d) Before giving value to the Administrative Agent for the account
of the Company (or in the case of a Company Arrangement, before delivering
the Bankers' Acceptance to or at the direction of the Company), on the
Acceptance Date each Accepting Lender shall, and is hereby authorized by
the Company to, accept the Bankers' Acceptances by inserting the
appropriate face amount, Acceptance Date and Maturity Date in accordance
with the Bankers' Acceptance Request relating thereto and affixing its
acceptance thereto and shall purchase the same or make them available for
sale in accordance with the Company Arrangement. Each such Lender shall
promptly send after the Maturity Date thereof, to the Company, each
original canceled Bankers' Acceptance it has accepted and purchased as
provided above.
Each Accepting Lender may at any time and from time to time hold,
sell, rediscount or otherwise dispose of any or all Bankers' Acceptances
accepted and purchased by it.
(e) On each day during the period commencing with the issuance by a
Lender of any Bankers' Acceptance and until such Bankers' Acceptance
Liability shall have been paid by the Company, the Commitment of each
Accepting Lender that is able to extend credit by way of Bankers'
Acceptances shall be deemed to be utilized for all purposes of this
Agreement in an amount equal to the Principal Amount of such Bankers'
Acceptance.
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The Commitment of any Lender providing a BA Loan rather than Bankers'
Acceptances shall be deemed utilized during this period in an amount equal
to its Commitment Percentage of the total amount of Bankers' Acceptances in
each Bankers' Acceptance Request.
(f) The Company shall pay on the Maturity Date for each Bankers'
Acceptance, to the Administrative Agent for account of each Accepting
Lender an amount equal to the Bankers' Acceptance Liability for such
Bankers' Acceptance.
The Company hereby waives presentment for payment of Bankers'
Acceptances by the Accepting Lenders and any defense to payment of amounts
due to an Accepting Lender in respect of a Bankers' Acceptance which might
exist by reason of such Bankers' Acceptance being held at maturity by the
Accepting Lender which accepted it and agrees not to claim from such
Lenders any days of grace for the payment at maturity of Bankers'
Acceptances.
(g) In the event the Company fails to notify the Administrative
Agent in writing not later than 1:00 p.m. Toronto time on the Business Day
prior to any Maturity Date, that the Company intends to pay with its own
funds the Bankers' Acceptance Liabilities due on such Maturity Date or
fails to make such payment, the Company shall be deemed, for all purposes
to have given the Administrative Agent notice of a borrowing of a Canadian
Prime Loan pursuant to Section 4.06 for an amount equal to the Principal
Amount of such Bankers' Acceptance; PROVIDED that:
(i) the Maturity Date for such Bankers' Acceptances shall be
considered to be the date of such borrowing;
(ii) the proceeds of such Canadian Prime Loan shall be used to
pay the amount of the Bankers' Acceptance Liability due on such
Maturity Date;
(iii) on such Maturity Date, the amount of such Canadian Prime
Loan shall first be directly applied to the Principal Amount of the
Bankers' Acceptance due on such date;
(iv) if after giving effect to such Canadian Prime Loan, a
Borrowing Base Deficiency would exist, the Administrative Agent shall
so advise the Company and the Company shall advise the Administrative
Agent on the Maturity Date of the manner in which it intends to comply
with the provisions of Section 2.11(a);
(v) each Lender which has made a maturing BA Loan (in
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accordance with Section 2.04(h) hereof) shall continue to extend
credit to the Company by way of a Canadian Prime Loan (without further
advance of funds to the Company) in the principal amount equal to its
Commitment Percentage of the total amount of credit requested to be
extended by Bankers' Acceptances when the BA Loan was made; and
(vi) the Administrative Agent shall promptly and in any event
within 3 Business Days following the Maturity Date of such Bankers'
Acceptances, notify the Company in writing of the making of such
Canadian Prime Loan pursuant to this Section 2.04(g).
(h) If, in the sole judgment of a Lender, such Lender is unable, as
a result of applicable law or customary market practice, to extend credit
by way of Bankers' Acceptance in accordance with this Agreement, such
Lender shall give notice to such effect to the Administrative Agent and the
Company prior to 1:00 p.m. (Toronto time) on the date of the requested
credit extension (which notice may, if so stated therein, remain in effect
with respect to subsequent requests for extension of credit by way of
Bankers' Acceptance until revoked by notice to the Administrative Agent and
the Company) and shall make available to the Administrative Agent, in
accordance with Section 2.02 hereof prior to 2:00 p.m. (Toronto time) on
the date of such requested credit extension a Canadian Dollar loan (a "BA
LOAN") in the Principal Amount equal to such Lender's Commitment Percentage
of the total amount of credit requested to be extended by way of Bankers'
Acceptances. The Stamping Fee for that BA Loan shall be calculated on that
Principal Amount. Such BA Loan shall have the same term as the Bankers'
Acceptances for which it is a substitute and shall bear interest throughout
the Interest Period applicable to that BA Loan at a rate per annum equal to
the Bankers' Acceptance Rate for such Bankers' Acceptances. The amount of
the proceeds of that BA Loan to be disbursed to the Company on the
Acceptance Date shall be the same amount as if that Lender had accepted and
purchased its Lender's Commitment Percentage of the requested Bankers'
Acceptances at a discount from the Principal Amount of that Bankers'
Acceptance calculated at a discount rate per annum equal to the Bankers'
Acceptance Rate for the term of such Bankers' Acceptances in the same
manner that Net Proceeds are calculated but excluding the BA Fee Rate
component of that calculation. For greater certainty, the amount to be
made available by each such Lender on any date in respect of a BA Loan made
by it on such date and, notwithstanding the Principal Amount of that BA
Loan, the amount of that BA Loan that interest will be calculated on, shall
be the same as the amount that such Lender would have been required to make
available to the Company as its Commitment Percentage of the total amount
of credit requested to be extended pursuant to the related Bankers'
Acceptance Request before deducting the Stamping Fee had such Lender been
able to extend credit by way of Bankers' Acceptance on such date. Such
Lender shall deduct the Stamping Fee from that
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amount.
(i) The Company may, if it so notifies the Administrative Agent in
the applicable Bankers' Acceptance Request, arrange the sale of any
particular issuance of Bankers' Acceptances to be accepted by the Lenders
hereunder. To that end, on the Acceptance Date:
(i) the Company shall obtain quotations from prospective
purchasers regarding the sale of the Bankers' Acceptances to be
accepted by the Lenders, and shall, on or before 11:00 a.m. (Toronto
time) on such date, provide each Lender (through the Administrative
Agent) with all necessary information required by such Lender to
enable such Lender to determine the Bankers' Acceptance discount rate
applicable to such issue, together with the identity of and the face
amount of Bankers' Acceptances to be purchased by each of the
purchaser(s) of the Bankers' Acceptances accepted by such Lender. In
obtaining such quotes, the Company shall offer each Lender the right
to bid on the Bankers' Acceptances accepted by it. The Lenders and
the Administrative Agent shall not be responsible for any losses
occasioned by the failure of the Company to comply with its
obligations under this paragraph and shall not be required to purchase
any Bankers' Acceptances on such Acceptance Date if the Company has
requested a Company Arrangement; and
(ii) on receipt from the Company of the information referred to
in paragraph (i), the Administrative Agent shall promptly notify each
Lender of:
(A) the Bankers' Acceptance discount rate to be applicable
to such issue;
(B) the minimum proceeds to be received by such Lender on
the sale of the Bankers' Acceptances accepted by such
Lender, based upon such Bankers' Acceptance discount
rate obtained by the Company for each such Lender; and
(C) the Stamping Fee payable to such Lender in connection
with such issue.
(j) The issuance by an Accepting Lender of each Bankers' Acceptance
shall, in addition to the conditions precedent set forth in Section 6
hereof, be subject to the conditions precedent that the Company shall have
executed and delivered all Bankers' Acceptance Documents as the Accepting
Lender shall have reasonably requested consistent with its then current
practices and
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procedures with respect to bankers' acceptances of the same type, PROVIDED
that in the event of any conflict between any such Bankers' Acceptance
Documents and the provisions of this Agreement or any Security Document,
the provisions of this Agreement and the Security Documents shall control.
(k) If a Lender determines in good faith, which determination shall
be final, conclusive and binding upon the Company, and notifies the Company
that, by reason of circumstances affecting the money market:
(i) there is no market for Bankers' Acceptances; or
(ii) the demand for Bankers' Acceptances is insufficient to
allow the sale or trading of the Bankers' Acceptances
created and purchased hereunder;
then:
(iii) the right of the Company to request Bankers'
Acceptances or a BA Loan from the Lenders shall be
suspended until that Lender determines that the
circumstances causing such suspension no longer exist
and that Lender so notifies the Company; and
(iv) any Bankers' Acceptance Request which is outstanding
shall be cancelled and the Bankers' Acceptances or BA
Loan requested therein shall not be made.
The Administrative Agent shall promptly notify the Company of the
suspension of the Company's right to request Bankers' Acceptances or a BA
Loan as a result of the foregoing and of the termination of any such
suspension.
2.05 SWINGLINE LOANS. (a) Subject to the terms and conditions of
this Agreement, BOM agrees to make loans ("SWINGLINE LOANS") to the Company from
time to time prior to the Commitment Termination Date in an aggregate principal
amount at any time outstanding that will not result in (i) the aggregate
Principal Amount of outstanding Swingline Loans exceeding C$5,000,000 or
(ii) the aggregate Principal Amount of all Loans including all Swingline Loans
(with the Principal Amount of U.S. Dollar Loans expressed as the Equivalent
Amount in Canadian Dollars), together with the aggregate amount of all Letter of
Credit Liabilities (with the Letter of Credit Liabilities in U.S. Dollars
expressed as the Equivalent Amount in Canadian Dollars) and all Bankers'
Acceptance Liabilities at any time exceeding the lesser of (x) the aggregate
amount of the Commitments and (y) the most recently determined Borrowing Base.
All Swingline Loans shall be denominated in Canadian Dollars. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Company may borrow,
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prepay and reborrow Swingline Loans. Swingline Loans shall constitute Loans
hereunder.
(b) In order to request a Swingline Loan, the Company shall notify
BOM of such request by telephone (confirmed by telecopy), not later than 2:00
p.m., Calgary time (or 4:00 p.m. Calgary time in the case of borrowings to
satisfy outstandings under the BOM Agreement), on the day of a proposed
Swingline Loan. Notwithstanding the foregoing, in the event that at any time
BOM makes demand for payment of any amounts to which it is entitled under the
BOM Agreement and such amounts are not paid by the close of business on the
date of demand, the Company shall be deemed to have notified BOM of a request
for a Swingline Loan in an amount equal to the lesser of (i) $5,000,000 less
the aggregate Principal Amount of any outstanding Swingline Loans and (ii)
the amounts demanded under the BOM Agreement. Each such notice provided by
the Company by telephone request shall be irrevocable and shall specify the
requested date (which shall be a Business Day) and amount of the requested
Swingline Loan. BOM will promptly advise the Administrative Agent of any
such notice received from the Company and of any such notice deemed to be
provided by the Company. BOM shall make each Swingline Loan available to the
Company by means of a credit to the general deposit account no. 1212-176 of
the Company at the BOM Main Branch Calgary, Alberta by 2:30 p.m., Calgary
time, on the requested date of such Swingline Loan, or in the case of a
deemed notice, on or before the next Business Day following the date BOM
provides the demand for payment.
(c) On each day during the period commencing with the making by BOM
of any Swingline Loan and until such Swingline Loan shall have been repaid,
the Commitment of each Lender shall be deemed to be utilized for all purposes
of this Agreement in an amount equal to such Lender's Commitment Percentage
of the then outstanding aggregate Principal Amount of such Swingline Loan.
Each Lender (other than BOM) agrees that, upon the making of any Swingline
Loan hereunder, it shall automatically acquire a participation in the BOM's
rights under such Swingline Loan in an amount equal to such Lender's
Commitment Percentage of the then outstanding aggregate Principal Amount of
such Swingline Loan. BOM shall promptly advise the Administrative Agent of
each Swingline Loan made by BOM and the Administrative Agent shall promptly
advise each of the Lenders of each of those Swingline Loans being made. In
furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees, upon receipt of notice from the Administrative Agent
that a Swingline Loan has been made, to pay to the Administrative Agent, for
the account of BOM, such Lender's Commitment Percentage of such Swingline
Loan or Loans. Each Lender acknowledges and agrees that its obligation to
acquire participations in, and make payments for, Swingline Loans pursuant to
this paragraph is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a
Default or reduction or termination of the Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Lender shall comply with its
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obligation under this paragraph by wire transfer of immediately available
funds, in the same manner as provided in Section 2.02 with respect to Loans
made by such Lender (and Section 2.02 shall apply, MUTATIS MUTANDIS, to the
payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to BOM the amounts so received by it from the Lenders. The
purchase of participations in a Swingline Loan pursuant to this paragraph
shall not relieve the Company of any default in the payment thereof.
2.06 CHANGES OF COMMITMENTS.
(a) The aggregate amount of the Commitments shall be automatically
reduced to zero on the Commitment Termination Date.
(b) The Company shall have the right at any time or from time to
time (i) so long as no Loans, Letter of Credit Liabilities or Bankers'
Acceptance Liabilities are outstanding, to terminate the Commitments and (ii)
to reduce the aggregate unused amount of the Commitments (for which purpose
the use of the Commitments shall be deemed to include aggregate amount of
Letter of Credit Liabilities and the Principal Amount of all outstanding
Bankers' Acceptances and Loans (with any amounts outstanding in U.S. Dollars
being expressed as an Equivalent Amount in Canadian Dollars)); PROVIDED that
(x) the Company shall give notice of each such termination or reduction as
provided in Section 4.06 hereof and (y) each partial reduction shall be in an
aggregate amount at least equal to C$1,000,000 (or a larger multiple of
C$100,000 in excess thereof).
(c) The Commitments once terminated or reduced may not be reinstated.
2.07 COMMITMENT FEE. The Company shall pay to the Administrative
Agent for account of each Lender a commitment fee on the daily average unused
amount of the difference (collectively, such difference for all the Lenders
being the "Available Borrowing Amount"), if any, between (x) the sum of each
Lender's outstanding Loans, Bankers' Acceptances and Letter of Credit
Liabilities (with any amounts outstanding in U.S. Dollars being expressed as
an Equivalent Amount in Canadian Dollars) and (y) an amount equal to such
Lender's Commitment Percentage multiplied by the lesser of (i) the most
recently determined Borrowing Base and (ii) the aggregate of the Commitments
for the period from and including the Closing Date to but not including the
earlier of the date such Lender's Commitment is terminated and the Commitment
Termination Date, at a rate per annum equal to 1/2 of 1%. Accrued commitment
fees shall be payable in arrears on each Quarterly Date and on the earlier of
the date the Commitments are terminated and the Commitment Termination Date.
2.08 SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The failure of any
Lender to make any Loan or provide proceeds in respect of a Bankers'
Acceptance to be made by it on the date specified therefor shall not relieve
any other Lender of its
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obligation to make its Loan or provide such proceeds on such date, but
neither any Lender nor the Administrative Agent shall be responsible for the
failure of any other Lender to make a Loan or provide such proceeds to be
made by such other Lender, and (except as otherwise provided in Section 4.07
hereof) no Lender shall have any obligation to the Administrative Agent or
any other Lender for the failure by such Lender to make any Loan or provide
such proceeds required to be made by such Lender. The amounts payable by the
Company at any time hereunder, under the Notes and under any Bankers'
Acceptances to each Lender shall be a separate and independent debt and each
Lender shall be entitled to protect and enforce its rights arising out of
this Agreement, the Notes and such Bankers' Acceptances, and it shall not be
necessary for any other Lender or the Administrative Agent to consent to, or
be joined as an additional party in, any proceedings for such purposes.
2.09 NOTES.
(a) The Loans made by each Lender (other than Swingline Loans) to the
Company shall be evidenced by the promissory note of the Company dated July 17,
1996, payable to such Lender in a principal amount equal to the amount of its
Commitment.
(b) The Swingline Loans made by BOM to the Company shall be evidenced
by the promissory note of the Company dated July 17, 1996, payable to BOM in a
principal amount equal to C$5,000,000.
(c) The date, amount, Type, Interest Period and Currency of each Loan
made by each Lender to the Company, and each payment made on account of the
principal thereof, shall be recorded by such Lender on its books and, prior to
any transfer of the Notes of the Company held by it, endorsed by such Lender on
the schedule attached to such Note or any continuation thereof; PROVIDED that
the failure of such Lender to make any such recordation or endorsement shall not
affect the obligations of the Company to make a payment when due of any amount
owing hereunder or under such Note in respect of the Loans.
(d) No Lender shall be entitled to have its Notes substituted or
exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any
portion of such Lender's Commitment, Loans and Notes pursuant to Section 11.06
hereof (and, if requested by any Lender, the Company agrees to so exchange any
Note).
2.10 OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS. Subject
to Section 4.04 hereof, the Company shall have the right to prepay Loans, or to
Convert all or a part of any Loan of one Type into Loans of another Type or
other form of borrowing hereunder (PROVIDED, that a Loan that is not a Swingline
Loan cannot be converted to a Swingline Loan and a Loan (including a Swingline
Loan) cannot be
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converted to a Letter of Credit) or Continue all or a part of any Loan of one
Type as Loans of the same Type, at any time or from time to time, including
without limitation, by way of requesting the issuance of Bankers' Acceptances
pursuant to Section 2.04 hereof and Convert Letters of Credit Liabilities,
Bankers' Acceptance Liabilities and Swingline Loan Liabilities into Loans
hereunder, and may Continue any Letter of Credit or Bankers' Acceptance,
PROVIDED that: (a) the Company shall give the Administrative Agent (or in
the case of Swingline Loans, shall give BOM in addition to the Administrative
Agent) notice of each such prepayment, Conversion or Continuation as provided
in Section 4.06 hereof or Section 2.04 if the Conversion is into Bankers'
Acceptances (and, upon the date specified in any such notice of prepayment,
the amount to be prepaid shall become due and payable hereunder); (b)
Eurodollar Loans, BA Loans and Bankers' Acceptances may be prepaid or
Converted only on the last day of an Interest Period for such Loans or
Bankers' Acceptances as applicable; (c) a prepayment, Conversion or
Continuation of an identical amount, Currency and, if applicable, Interest
Period, on the same or better terms occurs at the same time under the
Canadian Forest Credit Agreement; and (d) the Conversion of a Swingline Loan
to another Type of Loan shall satisfy the full amount of the related
Swingline Loan Liability. Notwithstanding the foregoing, and without
limiting the rights and remedies of the Lenders under Section 9 hereof, in
the event that any Event of Default shall have occurred and be continuing,
the Administrative Agent may (and at the request of the Majority Lenders
shall) by notice to the Company suspend the right of the Company to Convert
any Loan into a Eurodollar Loan, a U.S. Base Rate Loan or a BA Loan or to
Continue any Loan as a Eurodollar Loan, a U.S. Base Rate Loan or a BA Loan
(and suspend the right of the Company to request the issuance of Bankers'
Acceptances or Letters of Credit) in which event all Loans (and all Bankers'
Acceptances that are not paid on their Maturity Date) shall be Converted (on
the last day(s) of the respective Interest Periods therefor if applicable) or
Continued, as the case may be, as Canadian Prime Loans.
2.11 MANDATORY PREPAYMENTS.
(a) BORROWING BASE. The Administrative Agent shall notify the
Company (in a "DEFICIENCY NOTICE") if any time, following a redetermination of
the Borrowing Base, the Borrowing Base as then in effect is less than the
aggregate Principal Amount of the Loans and the Bankers' Acceptances and the
Letter of Credit Liabilities outstanding at such time (with any amounts
outstanding in U.S. Dollars being expressed as an Equivalent Amount in Canadian
Dollars) (the amount of such difference being called herein the "BORROWING BASE
DEFICIENCY"); and within 30 days after the date of the Deficiency Notice the
Company shall notify the Administrative Agent of the Company's intentions with
respect to compliance with the procedures set forth in this Section 2.11(a). As
specified in such notice from the Company, the Company shall (within 90 days
after the date of the Deficiency Notice (the "DEFICIENCY CURE PERIOD")) (i)
prepay (in accordance with the procedures of this Agreement) the outstanding
principal of the Loans (except BA Loans) and, if all of those Loans have been
prepaid and a Borrowing
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Base Deficiency still exists, provide cover for Letter of Credit Liabilities,
BA Loans and Bankers' Acceptance Liabilities in an amount equal to such
Borrowing Base Deficiency as specified in clause (h) below and/or (ii) cause
Canadian Forest or a Subsidiary Borrower to add to the Hydrocarbon Properties
(other than to the interests which Forest has in the Forest Pledged
Properties) additional Hydrocarbon Properties (other than Unrestricted
Properties) (each such additional Hydrocarbon Property to have a Present
Value of Reserves at least equal to C$1,000,000) having a loan value, as
determined by the Majority Lenders, in an amount sufficient so that the
aggregate amount of such prepayments and/or the loan value of such additional
Hydrocarbon Properties shall equal or exceed the Borrowing Base Deficiency
(any such additional Hydrocarbon Property to be deemed added to the
Hydrocarbon Properties on the date the Company delivers to the Administrative
Agent evidence of satisfactory title to those additional Hydrocarbon
Properties, a copy of a written confirmation of Canadian Forest or the
Subsidiary Borrower that such additional Hydrocarbon Properties are subject
to the Lien of the Canadian Forest Debenture, or the Lien of similar security
granted by a Subsidiary Borrower to the Company and an opinion of counsel
regarding such title and priority in form and substance satisfactory to the
Administrative Agent and the Majority Lenders).
(b) MONTHLY CLEAN.
(i) The Company will each month prior to the Commitment
Termination Date prepay the Swingline Loans and any other Loans or other
borrowings outstanding hereunder as required so that (x) for the period
from the earlier of the 22nd day of each month and two Business Days
preceding the Gas Payment Settlement Day for such month (the "Cleanup
Date") until the Gas Payment Settlement Day, the outstanding Principal
Amount of Swingline Loans shall be zero, and (y) for the period from the
Cleanup Date to the close of business in Calgary, Alberta on the second
Business Day immediately following the Gas Payment Settlement Day (the
"Cleanup Time"), the Available Borrowing Amount shall be not less than
C$5,000,000 less any borrowings of Swingline Loans permitted pursuant to
clause (ii) below.
(ii) During the period from the Cleanup Date to the Cleanup
Time, the Company shall not borrow any Swingline Loans other than for the
purposes of satisfying obligations under the BOM Agreement or as may be
required pursuant to any deemed notice of the Company pursuant to Section
2.05(b) hereof.
(iii) Promptly upon the request of BOM, the Administrative Agent
shall notify BOM of (x) the remaining amount available to the Company in
respect of Swingline Loans pursuant to Section 2.05(b) hereof and (y) the
Available Borrowing Amount.
(c) CANADIAN FOREST CREDIT AGREEMENT. Any and all payments made to
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the Company pursuant to the terms of the Canadian Forest Credit Agreement
shall be used by the Company to prepay the Lenders for outstanding Loans
hereunder or provide cover for Letters of Credit and BA Loans and Bankers'
Acceptance Liabilities as provided in Section 2.11(h) hereof.
(d) EXCESS RESULTING FROM EXCHANGE RATE CHANGE.
(i) Subject to Section 2.11(d)(ii), any time that, following one
or more fluctuations in the exchange rate of the U.S. Dollar against the
Canadian Dollar, the sum of the Equivalent Amount in Canadian Dollars of
the aggregate Principal Amount of Loans and Letter of Credit Liabilities
outstanding at such time denominated in U.S. Dollars PLUS the aggregate
Principal Amount of Canadian Dollar denominated Loans, Letter of Credit
Liabilities and Bankers' Acceptance Liabilities outstanding at such time
(the amount of such sum being called herein the "AGGREGATE BORROWINGS")
EXCEEDS by an amount equal to or in excess of 1% of the lesser of (x) the
aggregate amount of the Commitments of the Lenders on such date and (y) the
most recently determined Borrowing Base, the Company shall promptly after
receipt of notice from the Administrative Agent and, in any case, within 10
days after receipt of such notice, either (A) prepay the Loans (except BA
Loans) (and/or provide cover for the Letter of Credit Liabilities, BA Loans
and the Bankers' Acceptance Liabilities as specified in clause (h) below)
in an amount (such amount being called herein the "EXCHANGE RATE
DEFICIENCY") necessary to reduce the Aggregate Borrowings to an amount
equal to or less than the lesser of (x) the aggregate amount of the
Commitments of the Lenders on such date and (y) the most recently
determined Borrowing Base or (B) maintain or cause to be maintained with
the Administrative Agent deposits of Canadian Dollars in an amount equal to
the Exchange Rate Deficiency, such deposits to be maintained in such form
and upon such terms as are acceptable to the Administrative Agent. Without
in any way limiting the forgoing provisions, the Administrative Agent shall
on each Acceptance Date, Maturity Date, Quarterly Date and on the date of
any borrowing hereunder make any necessary exchange rate calculations to
determine whether any such excess exists on such date and, if such excess
exists on such date and if there is an excess, it shall so notify the
Company.
(ii) Notwithstanding Section 2.11(d)(i), the Majority Lenders
shall be entitled, in their sole discretion, to require that the Company,
at the Company's option, (A) make the payments or prepayments or maintain
the deposits required to be maintained under Section 2.11(d)(i) or (B)
fully hedge, to the reasonable satisfaction of the Majority Lenders, the
Exchange Rate Deficiency and assign the benefit of all hedging contracts to
the Administrative Agent, for the benefit of the Lenders, in any case where
an Exchange Rate Deficiency exists.
(e) CASUALTY EVENTS. Upon the date 30 days following the receipt by
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Canadian Forest or any of the Subsidiary Borrowers (or Forest, in the case of
the Forest Pledged Properties), of the proceeds of insurance, condemnation
award or other compensation in respect of any Casualty Event affecting any
Hydrocarbon Property (other than Unrestricted Properties) of Canadian Forest
or any Subsidiary Borrower or assets used in connection with the gas
marketing business of any of the Subsidiary Borrowers (or Forest, in the case
of the Forest Pledged Properties), the Borrowing Base shall be subject to
automatic reduction, in an aggregate amount, if any, equal to 100% of the Net
Available Proceeds of such Casualty Event not theretofore applied or
committed to be applied to the repair or replacement of such Hydrocarbon
Property or gas marketing assets, or such lesser amount as is specified in a
written notice from the Majority Lenders, such reduction to be effected in
the manner and to the extent specified in clause (g) of this Section 2.11.
Nothing in this clause (e) shall be deemed to limit any obligation of the
Company pursuant to any of the Security Documents to remit to a collateral or
similar account maintained by the Administrative Agent pursuant to any of the
Security Documents the proceeds of insurance, condemnation award or other
compensation received in respect of any Casualty Event.
(f) SALE OF ASSETS. No later than five Business Days prior to the
occurrence of any Disposition, the Company will cause Canadian Forest to
deliver to the Lenders a statement, certified by the chief financial officer
or treasurer of such company in form and detail satisfactory to the
Administrative Agent, of the amount of the Net Available Proceeds of such
Disposition and, to the extent such Net Available Proceeds (when taken
together with the Net Available Proceeds of all prior Dispositions as to
which a prepayment has not yet been made under this Section 2.11(f)) shall
exceed C$5,000,000, the Borrowing Base shall be subject to automatic
reduction and, if the amount of the Loans (including Swingline Loans),
Bankers' Acceptance Liabilities and Letter of Credit Liabilities (with the
amount of Loans and the Letter of Credit Liabilities in U.S. Dollars
expressed as an Equivalent Amount in Canadian Dollars) exceeds the Borrowing
Base (as reduced), such amount shall be applied as provided in clause (g)
below, in an aggregate amount equal to 100% of the Net Available Proceeds of
such Disposition, or such lesser amount as is specified in a written notice
from the Majority Lenders (together with 100%, or such lesser amount as is
specified in a written notice from the Majority Lenders, of the Net Available
Proceeds of all prior Dispositions as to which a prepayment has not yet been
made under this Section 2.11(f)), such reduction to be effected in the manner
and to the extent specified in clause (g) of this Section 2.11.
Notwithstanding the foregoing, the Company shall not be required to prepay
Loans (and/or provide cover for Letter of Credit Liabilities, BA Loans and
Bankers' Acceptance Liabilities pursuant to Section 2.11(h) hereof) and the
Borrowing Base shall not be subject to automatic reduction, upon any sale of
Property by Canadian Forest or any Subsidiary Borrower or sale of any of the
Forest Pledged Properties in the case of Forest permitted pursuant to Section
8.05 of the Canadian Forest Credit Agreement.
(g) APPLICATION. Prepayments and reductions of the Borrowing Base
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described in the above clauses of this Section 2.11 shall be effected as
follows: the Borrowing Base shall be automatically reduced by an amount equal
to the amount specified in such clauses and to the extent that, after giving
effect to such reduction, the aggregate Principal Amount of the Loans,
together with the aggregate amount of all Letter of Credit Liabilities and
Bankers' Acceptances (with the amount of Loans and the Letter of Credit
Liabilities in U.S. Dollars expressed as an Equivalent Amount in Canadian
Dollars), would exceed the Borrowing Base, the Company shall first, prepay
the Loans (except BA Loans) and second, provide cover for Letter of Credit
Liabilities, BA Loans and Bankers' Acceptance Liabilities as specified in
clause (h) below, in an aggregate amount equal to such excess. To the extent
possible, any prepayments required pursuant to this Section 2.11 shall be
applied FIRST to U.S. Base Rate Loans, SECOND to Canadian Prime Rate Loans
and THIRD to Eurodollar Loans.
(h) COVER FOR LETTER OF CREDIT AND BANKERS' ACCEPTANCE LIABILITIES.
In the event that the Company shall be required pursuant to this Section
2.11, or pursuant to Section 3.01 hereof, to provide cover for Letter of
Credit Liabilities and Bankers' Acceptance Liabilities and BA Loans, the
Company shall effect the same by paying to the Administrative Agent
immediately available funds in an amount equal to the required amount, which
funds shall be retained by the Administrative Agent in the Cash Collateral
Account (as provided in Section 13.4 of the Company Debenture) as collateral
security in the first instance PRO RATA for the Letter of Credit Liabilities,
BA Loans, and the Bankers' Acceptance Liabilities) until such time as the
Letters of Credit shall have been terminated, all of the Letter of Credit
Liabilities shall have been paid in full, the Bankers' Acceptances shall have
matured and all of the Bankers' Acceptance Liabilities and BA Loans have been
paid in full.
Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01 REPAYMENTS. The Company hereby promises to pay to the
Administrative Agent for account of each Lender the entire outstanding
Principal Amount of such Lender's Loans to the Company (or with respect to BA
Loans the amount made available by the applicable Lender to the Company as
determined in accordance with Section 2.04(h)hereof), and each Loan (other
than Swingline Loans) shall mature and be due and payable, on the earlier of
the stipulated maturity date or the Commitment Termination Date. All
Bankers' Acceptance Liabilities and Letter of Credit Liabilities shall also
be payable to the Administrative Agent for the account of each Lender on the
Commitment Termination Date. In addition, if following any reduction in the
Commitments, the aggregate Principal Amount of the Loans, together with the
aggregate amount of all Letter of Credit Liabilities and all Bankers'
Acceptance Liabilities (with the amounts of any Loans or Letter of Credit
Liabilities outstanding in U.S. Dollars expressed as an Equivalent Amount in
Canadian Dollars) shall exceed the Commitments, the Company shall pro rata,
based on the outstanding Loans, Letter of Credit Liabilities and Bankers'
Acceptance Liabilities of the Company, first, prepay Loans (except BA Loans
but including Swingline Loans) and second, provide cover for
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Letter of Credit Liabilities, BA Loans and Bankers' Acceptance Liabilities
with respect to the Commitments as specified in Section 2.11(h) above, in an
aggregate amount equal to such excess.
3.02 INTEREST. The Company hereby promises to pay to the
Administrative Agent for account of each Lender interest on the unpaid
Principal Amount of each Loan made by such Lender to the Company (or with
respect to BA Loans the amount made available by the applicable Lender to the
Company as determined in accordance with Section 2.04(h) hereof) for the
period from and including the date of such Loan to but excluding the date
such Loan shall be paid in full, at the following rates:
(a) during such periods as such Loan is a Canadian Prime Loan, the
Chase Canada Prime Rate (as in effect from time to time) PLUS the
Applicable Margin for such Loans,
(b) during such periods as such Loan is a U.S. Base Rate Loan, the
U.S. Base Rate (as in effect from time to time) PLUS the Applicable Margin
for such Loans,
(c) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Base Rate for such Loan
for such Interest Period PLUS the Applicable Margin for such Loans,
(d) during such periods as such Loan is a BA Loan, for each Interest
Period relating thereto, the Bankers' Acceptance Rate for such Loan for
such Interest Period, and
(e) during such periods as such Loan is a Swingline Loan the BOM
Prime Rate (as in effect from time to time) PLUS the Applicable Margin for
Canadian Prime Loans.
Accrued interest on each Loan shall be payable (i) quarterly on the Quarterly
Dates for Canadian Prime Loans and U.S. Base Rate Loans, (ii) at the end of
each Interest Period for Eurodollar Loans and BA Loans, (iii) monthly on the
last Business Day of each month for Swingline Loans and (iv) in the case of
any Loan, upon the payment or prepayment thereof (but only on the principal
amount so paid or prepaid). Promptly after the determination of any interest
rate provided for herein or any change therein, the Administrative Agent
shall give notice thereof to the Lenders to which such interest is payable
and to the Company, but failure to do so on a timely basis or at all shall
not effect the Company's obligation to pay interest for any period at the
applicable rate determined by the Administrative Agent or BOM, as applicable.
BOM shall promptly, upon the request of the Administrative Agent, notify the
Administrative Agent of the interest rate or any change therein that is
applicable to Swingline Loans.
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3.03 CURRENCY. Borrowings hereunder including Bankers' Acceptances
and Letters of Credit and any payments in respect thereof are payable by the
Company in the currency in which they are denominated.
3.04 INTEREST ON OVERDUE AMOUNTS. Except as otherwise provided in
this Agreement, all amounts owed by the Company to the Administrative Agent or
any Lender under this Agreement (including amounts of principal and interest)
which are not paid when due (whether at stated maturity, on demand, by
acceleration or otherwise) shall bear interest (both before and after judgment),
from the date on which such amount is due until such amount is paid in full,
payable on demand, at a rate per annum equal at all times to the rates
applicable to U.S. Base Rate Loans (if the amounts are due in U.S. Dollars) or
to Canadian Prime Loans (if the amounts are due in Canadian Dollars), with
interest on overdue interest at the same rate as well after as before maturity,
demand or judgment.
Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
4.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments in
Canadian Dollars of principal, interest, Letter of Credit Reimbursement
Obligations, in respect of Bankers' Acceptances and other amounts to be made
by the Company under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Company under any
other Loan Document, shall be made in immediately available funds, without
deduction, set-off or counterclaim, to the Administrative Agent at account
number 219-247-4 maintained by the Administrative Agent with Royal Bank of
Canada, Main Branch, Toronto, or at any other office or account designated by
the Administrative Agent, not later than 1:00 p.m. Toronto time on the date
on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made, on and applicable
interest shall be payable to, the next succeeding Business Day).
Payments in respect of Swingline Loans shall be made to the
Administrative Agent and not to BOM except as otherwise provided in Section
4.02 hereof.
(b) Except to the extent otherwise provided herein, all payments in
U.S. Dollars of principal, interest and other amounts to be made by the
Company under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Company under any
other Loan Document, shall be made in immediately available funds, without
deduction, set-off or counterclaim, to the Administrative Agent at account
number 001-1-150620 maintained by the Administrative Agent with Chase
Manhattan at the Chase Manhattan Principal Office, or
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at any other office or account designated by the Administrative Agent, not
later than 1:00 p.m. Toronto time on the date on which such payment shall
become due (each such payment made after such time on such due date to be
deemed to have been made on, and applicable interest shall be payable to, the
next succeeding Business Day).
(c) Any Lender for whose account any such payment is to be made may
(but shall not be obligated to) debit the amount of any such payment that is
not made by such time to any ordinary deposit account of the Company with
such Lender (with notice to the Company and the Administrative Agent),
PROVIDED that such Lender's failure to give such notice shall not affect the
validity thereof.
(d) The Company shall, at the time of making each payment under
this Agreement or any Note for account of any Lender, specify to the
Administrative Agent (which shall so notify the intended recipient(s)
thereof) the Loans, Letter of Credit Reimbursement Obligations, Bankers'
Acceptances or other amounts payable by the Company hereunder to which such
payment is to be applied (and in the event that the Company fails to so
specify, or if an Event of Default has occurred and is continuing, the
Administrative Agent may distribute such payment to the Lenders for
application in such manner as it or the Majority Lenders, subject to Section
4.02 hereof, may determine to be appropriate).
(e) Except to the extent otherwise provided in the last sentence of
the first paragraph of Section 2.03(e) hereof, each payment received by the
Administrative Agent under this Agreement, any Note or any Bankers'
Acceptance for account of any Lender shall be paid by the Administrative
Agent promptly to such Lender, in immediately available funds, for account of
such Lender's Applicable Lending Office for the Loan or other obligation in
respect of which such payment is made.
(f) Except as provided in clause (a)(ii) of the definition of
Interest Period, if the due date of any payment under this Agreement, any
Note or any Bankers' Acceptance would otherwise fall on a day that is not a
Business Day, such date shall be extended to the next succeeding Business
Day, and interest shall be payable for any principal so extended for the
period of such extension.
4.02 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each borrowing from the Lenders under Section 2.01 and 2.04
hereof shall be made from the Lenders, each payment of commitment fee under
Section 2.07 hereof shall be made for account of the Lenders, and each
termination or reduction of the amount of the Commitments under Section 2.06
hereof shall be applied to the respective Commitments of the Lenders, pro
rata according to the amounts of their respective Commitments; (b) the
making, Conversion and Continuation of Loans of a particular Type (including
by way of requests for the issuance of Bankers' Acceptances) (other than
Conversions provided for by Section 5.04 hereof) shall be made pro rata
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among the Lenders according to the amounts of their respective Commitments
(in the case of the making of Loans or issuing of Bankers' Acceptances) or
their respective Loans (in the case of Conversions and Continuations of Loans
or Bankers' Acceptances) and the then current Interest Period for each
Eurodollar Loan and each BA Loan or the Maturity Date for each such Bankers'
Acceptance, as the case may be, shall be coterminous; (c) each payment or
prepayment of principal of Loans or Bankers' Acceptances by the Company shall
be made for account of the Lenders pro rata in accordance with the respective
unpaid Principal Amounts of the Loans and Bankers' Acceptances held by them;
PROVIDED that if immediately prior to giving effect to any such payment in
respect of any Loans or Bankers' Acceptances the outstanding Principal Amount
of the Loans and Bankers' Acceptances shall not be held by the Lenders pro
rata in accordance with their respective Commitments in effect at the time
such Loans or Bankers' Acceptances were made then such payment shall be
applied to the Loans and Bankers' Acceptances in such manner as shall result,
as nearly as is practicable, in the outstanding Principal Amount of the Loans
and Bankers' Acceptances being held by the Lenders pro rata in accordance
with their respective Commitments; and (d) each payment of interest on Loans
and any payment of Bankers' Acceptances on the Maturity Date thereof by the
Company shall be made for account of the Lenders pro rata in accordance with
the amounts of interest on such Loans or Bankers' Acceptance, as the case may
be, then due and payable to the respective Lenders.
After delivery of a notice accelerating payment of the amounts due
hereunder:
(i) each Lender will at any time or from time to time upon the
request of the Administrative Agent as required by any Lender
purchase portions of the borrowings made available by the other
Lenders which remain outstanding and make any other adjustments
which may be necessary or appropriate, in order that the amount
of borrowings made available by each Lender which remain
outstanding, as adjusted pursuant to this Section 4.02, will be
in the same proportions as the Lenders' Commitments immediately
prior to that notice being sent; and
(ii) the amount of any repayment made by the Company under this
Agreement, and the amount of any proceeds of the exercise of any
rights or remedies of the Lenders under the Loan Documents, which
are to be applied against amounts owing hereunder, will be
applied in a manner so that to the extent possible the amount of
borrowings made available by each Lender which remain outstanding
after giving effect to such application will be in the same
proportions as the Lenders' Commitments immediately prior to that
notice being sent.
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The Company agrees to be bound by and to do all things necessary or
appropriate to give effect to any and all purchases and other adjustments
made by and between the Lenders pursuant to Section 4.08(b) and this Section
4.02. Notwithstanding the provisions of this Section 4.02, until BOM has
given notice of the advance of a Swingline Loan to the Administrative Agent
pursuant to Section 2.05(c) hereof, borrowings, payments and prepayments of
Swingline Loans shall be made without regard to the foregoing provisions of
this Section 4.02.
4.03 COMPUTATIONS. Interest on Eurodollar Loans and commitment
fees and letter of credit fees shall be computed on the basis of a year of
360 days and actual days elapsed (including the first day but, except as
otherwise provided in Section 2.03(g) hereof, excluding the last day)
occurring in the period for which that interest and those fees are payable.
Bankers' Acceptance Rates, interest on BA Loans and Stamping Fees shall be
computed on the basis of a year of 365 days and the actual days elapsed
(including the first day but excluding the last day) occurring during the
period for which that interest or those fees are payable. Interest on any
other Loans and Letter of Credit Reimbursement Obligations shall be computed
on the basis of a year of 365 or 366 days and actual days elapsed (including
the first day but excluding the last day) occurring in the period for which
that interest and those fees are payable.
4.04 MINIMUM AMOUNTS. Except for conversions of Swingline Loans
pursuant to Section 2.10 hereof, mandatory prepayments made pursuant to
Section 2.11 hereof or prepayments or Conversions made pursuant to Section
5.04 hereof, each borrowing, Conversion and partial prepayment of principal
of Loans (other than Swingline Loans) shall be in an aggregate amount at
least equal to C$1,000,000 (or the equivalent in U.S. Dollars) or a larger
multiple of C$100,000 (or the equivalent in U.S. Dollars) (borrowings,
Conversions or prepayments of Loans of different Currencies at the same time
hereunder to be deemed separate borrowings, Conversions and prepayments for
purposes of the foregoing, one for each Currency). Each borrowing, other
than a borrowing pursuant to a deemed notice by the Company pursuant to
Section 2.05(b) hereof, or partial prepayment by the Company, of Swingline
Loans shall be in an aggregate amount at least equal to C$250,000 or a larger
multiple of C$50,000 in excess thereof.
4.05 INTEREST ACT (CANADA).
(a) For purposes of the INTEREST ACT (Canada), (i) whenever any
interest or fee under this Agreement is calculated using a rate based on a
year of 360 days or 365 days, such rate determined pursuant to such
calculation, when expressed as an annual rate, is equivalent to (x) the
applicable rate based on a year of 360 days or 365 days, as the case may be,
(y) multiplied by the actual number of days in the calendar year in which the
period for which such interest or fee is payable (or compounded) ends, and
(z) divided by 360 or 365 as the case may be.
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(b) The principle of deemed reinvestment of interest shall not
apply to any interest calculation under this Agreement, and the rates of
interest stipulated in this Agreement are intended to be nominal rates and
not effective rates or yields.
4.06 CERTAIN NOTICES. Notices by the Company to the Administrative
Agent of terminations or reductions of the Commitments and of borrowings and
optional prepayments of Loans (other than Swingline Loans), and Conversions
and Continuations of Loans shall be irrevocable and shall be effective only
if received by the Administrative Agent not later than 1:00 p.m. Toronto time
on the number of Business Days prior to the date of the relevant termination,
reduction, borrowing or prepayment specified below:
Number of
Business
Notice Days Prior
------ ----------
Termination or reduction
of Commitments; borrowings
or prepayments of, Conversions
of or into, Continuations as,
or duration of Interest Period
for, BA Loans or acceptance of
Bankers' Acceptances 2
Borrowing or prepayment of or
Conversion of or into
Canadian Prime Loans or U.S.
Base Rate Loans 1
Borrowing or prepayment of,
Conversions of or into,
Continuations as, or duration
of Interest Period for, Eurodollar
Loans 3
Request for issuance of Letter of
Credit 3
Notices by the Company with respect to borrowings and optional prepayment of
Swingline Loans shall be irrevocable and shall be effective only if received
not later than 2:00 p.m. Calgary time (or 4:00 p.m. Calgary time in case of
borrowings to satisfy outstandings under the BOM Agreement) on the Business
Day of the relevant borrowing or prepayment.
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Each such notice of termination or reduction shall specify the
amount of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Loans to be borrowed, Converted, Continued or prepaid and the amount (subject
to Section 4.04 hereof) and Type and Currency of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day) and, if
applicable, the relevant Interest Period. Each such notice of the duration
of an Interest Period shall specify the Loans to which such Interest Period
is to relate. The Administrative Agent shall promptly notify the Lenders of
the contents of each such notice. In the event that the Company fails to
select the Type of Loan, or the duration of any Interest Period for any
Eurodollar Loan, within the time period and otherwise as provided in this
Section 4.05, such Loan (if outstanding as a Eurodollar Loan or U.S. Base
Rate Loan) will be automatically Converted into a Canadian Prime Loan on the
last day of the then current Interest Period for such Loan or (if outstanding
as a Canadian Prime Loan) will remain as, or (if not then outstanding) will
be made as, a Canadian Prime Loan.
4.07 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless the
Administrative Agent shall have been notified by a Lender or the Company (the
"PAYOR") prior to the date on which the Payor is to make payment to the
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to
be made by such Lender, or a Bankers' Acceptance to be purchased by such
Lender or a Lender's Commitment Percentage of (x) any payment made by the
Issuing Bank under a Letter of Credit or (y) any participation in a Swingline
Loan required to be purchased by such Lender, hereunder or (in the case of
the Company) a payment to the Administrative Agent for account of one or more
of the Lenders hereunder (such payment being herein called the "REQUIRED
PAYMENT"), which notice shall be effective upon receipt, that the Payor does
not intend to make the Required Payment to the Administrative Agent, the
Administrative Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make
the amount thereof available to the intended recipient(s) on such date; and,
if the Payor has not in fact made the Required Payment to the Administrative
Agent, the recipient(s) of such payment shall, on demand, repay to the
Administrative Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date (the
"ADVANCE DATE") such amount was so made available by the Administrative Agent
until the date the Administrative Agent recovers such amount at a rate per
annum equal to the Canadian Prime Rate PLUS the Applicable Margin for
Canadian Prime Loans, if the amounts made available are in Canadian Dollars,
or the U.S. Base Rate PLUS the Applicable Margin for U.S. Base Rate Loans, if
the amounts made available are in U.S. Dollars, for such day and, if such
recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, PROVIDED that if neither the
recipient(s) nor the Payor shall return the Required Payment to the
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Administrative Agent within three Business Days of the Advance Date, then,
retroactively to the Advance Date, the Payor and the recipient(s) shall each
be obligated to pay the Required Payment to the Administrative Agent together
with interest on the Required Payment at the applicable rate indicated above,
it being understood that the return by the recipient of the Required Payment
to the Administrative Agent shall not limit any claim the Company may have
against the Payor or the recipient in respect of such Required Payment.
4.08 SHARING OF PAYMENTS, ETC.
(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may
otherwise have, each Lender shall be entitled, at its option (to the fullest
extent permitted by law), to set off and apply any deposit (general or
special, time or demand, provisional or final), or other indebtedness, held
by it for the credit or account of the Company at any of its offices, in
Canadian Dollars, U.S. Dollars or in any other currency, against any
principal of or interest on any of such Lender's Loans, Letter of Credit
Reimbursement Obligations, Bankers' Acceptances or any other amount payable
to such Lender hereunder, that is not paid when due (regardless of whether
such deposit or other indebtedness is then due to the Company), in which case
it shall promptly notify the Company and the Administrative Agent thereof,
PROVIDED that such Lender's failure to give such notice shall not affect the
validity thereof.
(b) If any Lender shall obtain from the Company payment of any
principal of or interest on any Loan, Letter of Credit Liability or Bankers'
Acceptance owing to it or payment of any other amount under this Agreement or
any other Loan Document through the exercise of any right of set-off,
banker's lien or counterclaim or similar right or otherwise (other than from
the Administrative Agent as provided herein), and, as a result of such
payment, such Lender shall have received a greater percentage of the
principal of or interest on the Loans, Letter of Credit Liabilities or
Bankers' Acceptances or such other amounts then due hereunder or thereunder
by the Company to such Lender than the percentage received by any other
Lender, it shall promptly purchase from such other Lenders participations in
(or, if and to the extent specified by such Lender, direct interests in) the
Loans (including Swingline Loans), Letter of Credit Liabilities or Bankers'
Acceptances or such other amounts, respectively, owing to such other Lenders
(or in interest due thereon, as the case may be) in such amounts, and make
such other adjustments from time to time as shall be equitable, to the end
that all the Lenders shall share the benefit of such excess payment (net of
any expenses that may be incurred by such Lender in obtaining or preserving
such excess payment) pro rata in accordance with the unpaid principal of
and/or interest on the Loans (including Swingline Loans), Letter of Credit
Liabilities or Bankers' Acceptances or such other amounts, respectively,
owing to each of the Lenders. To such end all the Lenders shall make
appropriate adjustments among themselves (by the resale of participations
sold or otherwise) if such payment is rescinded or must otherwise be restored.
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(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off,
banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans or
other amounts (as the case may be) owing to such Lender in the amount of such
participation.
(d) Nothing contained herein shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Company. If, under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a set-off to which this Section 4.08 applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled
under this Section 4.08 to share in the benefits of any recovery on such
secured claim.
Section 5. YIELD PROTECTION, ETC.
5.01 ADDITIONAL COSTS.
(a) The Company shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its
making or maintaining of any Eurodollar Loans or its obligation to make any
Eurodollar Loans hereunder, or any reduction in any amount receivable by such
Lender hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"ADDITIONAL COSTS"), resulting from any Regulatory Change that:
(i) changes the basis of taxation of any amounts payable to such
Lender under this Agreement or its Notes in respect of any of such
extensions of credit (other than taxes imposed on or measured by the
overall net income of such Lender or of its Applicable Lending Office for
any of such extensions of credit by the jurisdiction in which such Lender
has its principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, such Lender (including, without
limitation, any of such Loans or any deposits referred to in the definition
of "Eurodollar Base Rate" in Section 1.01 hereof), or any commitment of
such Lender (including, without limitation, the Commitments of such Lender
hereunder); or
(iii) imposes any other condition affecting this Agreement or
its
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Note (or any of such extensions of credit or liabilities) or its
Commitment.
If any Lender requests compensation from the Company under this Section
5.01(a), the Company may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender thereafter to
make or Continue Eurodollar Loans, or to Convert Canadian Prime Loans, U.S.
Base Rate Loans or BA Rate Loans into Eurodollar Loans, until the Regulatory
Change giving rise to such request ceases to be in effect (in which case the
provisions of Section 5.04 hereof shall be applicable), PROVIDED that such
suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) Without limiting the effect of the provisions of paragraph (a)
of this Section 5.01, in the event that, by reason of any Regulatory Change,
any Lender either (i) incurs Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits or
other liabilities of such Lender that includes deposits by reference to which
the interest rate on Eurodollar Loans is determined as provided in this
Agreement or a category of extensions of credit or other assets of such
Lender that includes Eurodollar Loans or (ii) becomes subject to restrictions
on the amount of such a category of liabilities or assets that it may hold,
then, if such Lender so elects by notice to the Company (with a copy to the
Administrative Agent), the obligation of such Lender to make or Continue, or
to Convert Canadian Prime Loans, U.S. Base Rate Loans or BA Loans into,
Eurodollar Loans hereunder shall be suspended until such Regulatory Change
ceases to be in effect (in which case the provisions of Section 5.04 hereof
shall be applicable).
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to
each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender (or, without duplication,
the bank holding company of which such Lender is a Subsidiary) for (i) any
costs that it determines are attributable to the maintenance by such Lender
(or any Applicable Lending Office or such bank holding company), pursuant to
any law or regulation or any interpretation, directive or request (whether or
not having the force of law and whether or not failure to comply therewith
would be unlawful) of any court or governmental or monetary authority (A)
following any Regulatory Change or (B) implementing after the date hereof any
risk-based capital guideline or other requirement (whether or not having the
force of law and whether or not the failure to comply therewith would be
unlawful) heretofore or hereafter issued by any government or governmental or
supervisory authority implementing at the national level the BIS Guidelines,
of capital in respect of its Commitment or Loans (such compensation to
include, without limitation, an amount equal to any reduction of the rate of
return on assets or equity of such Lender (or any Applicable Lending Office
or such bank holding company) to a level below that which such Lender (or any
Applicable Lending Office or such banking holding company) could have
achieved but for such law, regulation, interpretation, directive or request);
or (ii) any reduction in amounts
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payable to it hereunder (other than a reduction resulting from a higher rate
of income tax or other special tax relating to the Lender's income in
general) or any payment required to be made or return that is foregone on or
calculated with reference to any amount received or receivable by the Lender
under this Agreement as a result of a Regulatory Change.
(d) Each Lender shall notify the Company of any event occurring
after the date of this Agreement entitling such Lender to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but in
any event within 45 days, after such Lender obtains actual knowledge thereof;
PROVIDED that (i) if any Lender fails to give such notice within 45 days
after it obtains actual knowledge of such an event, such Lender shall, with
respect to compensation payable pursuant to this Section 5.01 in respect of
any costs resulting from such event, only be entitled to payment under this
Section 5.01 for costs incurred from and after the date 45 days prior to the
date that such Lender does give such notice and (ii) each Lender will
designate a different Applicable Lender Office for the Loans of such Lender
affected by such event if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the sole opinion of such
Lender, be disadvantageous to such Lender, except that such Lender shall have
no obligation to designate an Applicable Lending Office located in Canada.
Each Lender will furnish to the Company a certificate setting forth the basis
and amount of each request by such Lender for compensation under paragraph
(a) or (c) of this Section 5.01. Determinations and allocations by any
Lender for purposes of this Section 5.01 of the effect of any Regulatory
Change pursuant to paragraph (a) or (b) of this Section 5.01, or of the
effect of capital maintained pursuant to paragraph (c) of this Section 5.01,
on its costs or rate of return of maintaining Loans or its obligations to
make Loans, or on amounts receivable by it in respect of Loans, and of the
amounts required to compensate such Lender under this Section 5.01, shall be
conclusive, PROVIDED that such determinations and allocations are made on a
reasonable basis.
5.02 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, if:
(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(b) the Majority Lenders determine, which determination shall be
conclusive, and notify the Administrative Agent that
(i) the relevant rates of interest referred to in the definition
of "Eurodollar Base Rate" in Section 1.01 hereof upon the basis
of
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which the rate of interest for Eurodollar Loans for such
Interest Period is to be determined are not likely to be adequate
to cover the cost to such Lender of making or maintaining
Eurodollar Loans for such Interest Period;
(ii) by reason of circumstances affecting financial markets
inside or outside Canada, deposits of U.S. Dollars are
unavailable to the Lenders in such markets; or
(iii) the making or continuation of any Eurodollar Loan has been
made impracticable:
(A) by the occurrence of a contingency (other than a mere
increase in rates payable by the Lender to fund such Loan) which
materially and adversely affects the funding of a Loan at any interest
rate computed on the basis of Eurodollar Base Rate, or
(B) by reason of:
(i) any law or the interpretation or application
thereof by any official body:
(ii) compliance by the Lender with any guideline,
official directive or request from any central bank or other
official body (whether or not having the force of law); or
(iii) a change since the date of this Agreement in any
relevant financial market, which results in the Eurodollar
Base Rate, as the case may be, no longer representing the
effective cost to the Lender of deposits in such market for
a relevant Interest Period or other applicable period;
then the Administrative Agent shall give the Company and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans or U.S. Base
Rate Loans, to Continue Eurodollar Loans or U.S. Base Rate Loans or to
Convert Canadian Prime Loans, U.S. Base Rate Loans, BA Loans or Bankers'
Acceptances into Eurodollar Loans or U.S. Base Rate Loans, depending upon
which of those Loans is affected by such condition, and the Company shall, on
the last day(s) of the then current Interest Period(s) for the outstanding
Eurodollar Loans, either prepay such Loans or Convert such Loans into U.S.
Base Rate Loans in accordance with Section 2.10 hereof if making U.S. Base
Rate Loans is not affected by such condition.
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5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain any
Type of U.S. Dollar Loan hereunder, then such Lender shall promptly notify
the Company thereof (with a copy to the Administrative Agent) and such
Lender's obligation to make or Continue, or to Convert Loans of any other
Type into, that Type of U.S. Dollar Loan shall be suspended until such time
as such Lender may again make and maintain that Type of U.S. Dollar Loan (in
which case the provisions of Section 5.04 hereof shall be applicable).
5.04 TREATMENT OF AFFECTED EXTENSIONS OF CREDIT. If the obligation
of any Lender to make Eurodollar Loans or to Continue, or Convert Canadian
Prime Loans, U.S. Base Rate Loans, BA Rate Loans or Bankers' Acceptances
into, Eurodollar Loans shall be suspended pursuant to Section 5.01, 5.02 or
5.03 hereof, such Lender's Eurodollar Loans shall be automatically Converted
into U.S. Base Rate Loans on the last day(s) of the then current Interest
Period(s) for Eurodollar Loans (or, in the case of a Conversion required by
Section 5.01(b) or 5.03 hereof, on such earlier date as such Lender may
specify to the Company with a copy to the Administrative Agent) and, unless
and until such Lender gives notice as provided below that the circumstances
specified in Section 5.01, 5.02 or 5.03 hereof that gave rise to such
Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Eurodollar Loans shall be applied instead to
its U.S. Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as U.S. Base
Rate Loans, and all U.S. Base Rate Loans of such Lender that would
otherwise be Converted into Eurodollar Loans shall remain U.S. Base Rate
Loans.
If any U.S. Base Rate Loans are outstanding at any time when the right of the
Company to select U.S. Base Rate Loans is suspended, all those outstanding
U.S. Base Rate Loans shall be Converted into Canadian Prime Loans.
If such Lender gives notice to the Company with a copy to the Administrative
Agent that the circumstances specified in Section 5.01, 5.02 or 5.03 hereof
no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) that Lender's Loans shall be Converted or
that Lender and the Company shall take such other actions, to the extent
necessary so that, after giving effect thereto, all Loans and other credit
utilizations hereunder are held by that Lender and by the other Lenders pro
rata (as to Principal Amounts, Types and Interest Periods) in accordance with
their respective Commitments.
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5.05 COMPENSATION. The Company shall pay to the Administrative Agent
for the account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost of
breakage, redeployment of funds or other cost or expense that such Lender
determines is attributable to:
(a) any payment being made by the Company in respect of a Eurodollar
Loan, BA Loan or a Bankers' Acceptance (due to acceleration hereunder or a
mandatory repayment or prepayment of principal or for any other reason) on
a day other than the last day of an Interest Period or the Maturity Date
applicable thereto;
(b) the Company's failure to give notice in the manner and at the
times required hereunder; or
(c) the failure of the Company to accept an extension of credit
hereunder after delivery of a notice given to the Lender in the manner and
at the time specified in such notice.
A certificate of the Lender submitted to the Company as to the amount necessary
to so compensate the Lender shall be conclusive evidence, absent demonstrated
error, of the amount due from the Company to the Lender.
Without limiting the effect of the preceding provisions of this Section 5.05,
such compensation for any Eurodollar Loan shall include an amount equal to
the excess, if any, of (i) the amount of interest that otherwise would have
accrued on the Principal Amount so paid, prepaid or Converted or not borrowed
for the period from the date of such payment, prepayment, Conversion or
failure to borrow to the last day of the then current Interest Period for
such Loan (or, in the case of a failure to borrow, the Interest Period for
such Loan that would have commenced on the date specified for such borrowing)
at the applicable rate of interest for such Loan provided for herein over
(ii) the amount of interest that otherwise would have accrued on such
Principal Amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such Principal Amount and
with maturities comparable to such period (as reasonably determined by such
Lender).
5.06 ADDITIONAL COSTS IN RESPECT OF BANKERS' ACCEPTANCES. Subject
to the limitations set forth in the first sentence of Section 5.01(d) hereof,
without limiting the obligations of the Company under Section 5.01 hereof
(but without duplication), if as a result of any change in any law,
regulations, rules or orders or in their interpretation or administration or
by reason of any compliance with any guideline, request or requirement from
any fiscal, monetary or other authority (whether or not having the
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force of law) announced after the date hereof which is customary for a bank
or other lending institution to comply with in respect of all its loans or
facilities of a similar type in Canada there shall be imposed, modified or
deemed applicable any tax, reserve, special deposit, capital adequacy or
similar requirement against or with respect to or measured by reference to
Bankers' Acceptances issued or to be issued hereunder and the result shall be
to increase the cost to any Lender or Lenders of issuing or maintaining its
obligation hereunder to issue any Bankers' Acceptance hereunder or reduce any
amount receivable by any Lender hereunder in respect of any Bankers'
Acceptance (which increases in cost, or reductions in amount receivable,
shall be the result of such Lender's or Lenders' reasonable allocation of the
aggregate of such increases or reductions resulting from such event), then,
upon demand by such Lender or Lenders (through the Administrative Agent), the
Company shall pay immediately to the Administrative Agent for account of such
Lender or Lenders, from time to time as specified by such Lender or Lenders
(through the Administrative Agent), such additional amounts as shall be
sufficient to compensate such Lender or Lenders (through the Administrative
Agent) for such increased costs or reductions in amount. A statement showing
calculations in reasonable detail of such increased costs or reductions in
amount incurred by any such Lender or Lenders, submitted by such Lender or
Lenders to the Company shall be conclusive in the absence of manifest error
as to the amount thereof.
5.07 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. Subject to
the provisions of the first sentence of Section 5.01(d) hereof, without
limiting the obligations of the Company under Section 5.01 hereof (but
without duplication), if as a result of any Regulatory Change or any
risk-based capital guideline or other requirement heretofore or hereafter
issued by any government or governmental or supervisory authority
implementing after the date hereof at the national level the BIS Guidelines
there shall be imposed, modified or deemed applicable any tax, reserve,
special deposit, capital adequacy or similar requirement against or with
respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender
or Lenders of issuing (or purchasing participations in) or maintaining its
obligation hereunder to issue (or purchase participations in) any Letter of
Credit hereunder or reduce any amount receivable by any Lender hereunder in
respect of any Letter of Credit (which increases in cost, or reductions in
amount receivable, shall be the result of such Lender's or Lenders'
reasonable allocation of the aggregate of such increases or reductions
resulting from such event), then, upon demand by such Lender or Lenders
(through the Administrative Agent), the Company shall pay immediately to the
Administrative Agent for account of such Lender or Lenders, from time to time
as specified by such Lender or Lenders (through the Administrative Agent),
such additional amounts as shall be sufficient to compensate such Lender or
Lenders (through the Administrative Agent) for such increased costs or
reductions in amount. A statement showing calculations in reasonable detail
of such increased costs or reductions in amount incurred by any such Lender
or Lenders, submitted by such Lender or Lenders to the Company shall be
conclusive in the absence of manifest error
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as to the amount thereof.
5.08 TAXES.
(a) All payments on account of the principal of and interest on the
Loans, fees and all other amounts payable hereunder by the Company to or for
the account of the Administrative Agent or any Lender, including, without
limitation, amounts payable under paragraph (b) of this Section 5.08, shall
be made free and clear of and without reduction or liability for Covered
Taxes. The Company will pay all Covered Taxes, without charge to or offset
against any amount due to the Administrative Agent or any Lender, prior to
the date on which penalties attach thereto, except for any Covered Taxes
(other than Covered Taxes imposed on or in respect of any amount payable
hereunder, under the Notes or under any other Loan Document) the payment of
which is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained, so long as no claim for such
Covered Taxes is made on the Administrative Agent or any Lender.
(b) The Company shall indemnify the Administrative Agent and each
Lender against, and reimburse the Administrative Agent and each Lender on
demand for, any Covered Taxes and any loss, liability, claim or expense,
including interest, penalties and legal fees, that the Administrative Agent
or such Lender may incur at any time arising out of or in connection with any
failure of the Company to make any payment of Covered Taxes when due.
(c) In the event that the Company is required by applicable law,
decree or regulation to deduct or withhold Covered Taxes from any amounts
payable on, under or in respect of this Agreement, the Loans, Bankers'
Acceptances or Letters of Credit, the Company shall promptly pay the Person
entitled to such amount such additional amounts as may be required, after the
deduction or withholding of Covered Taxes, to enable such Person to receive
from the Company on the due date thereof, an amount equal to the full amount
stated to be payable to such Person under this Agreement.
(d) The Company shall furnish to the Administrative Agent, upon the
request of any Lender (through the Administrative Agent), together with
sufficient certified copies for distribution to each Lender requesting the
same (identifying the Lenders that have so requested), original official tax
receipts in respect of each payment of Covered Taxes required under this
Section 5.08, within 30 days after the date such payment is made, and the
Company shall promptly furnish to the Administrative Agent at its request or
at the request of any Lender (through the Administrative Agent) any other
information, documents and receipts that the Administrative Agent or such
Lender may reasonably require to establish to its satisfaction that full and
timely payment has been made of all Covered Taxes required to be paid under
this Section 5.08.
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(e) The Company represents and warrants to the Administrative Agent
and each Lender that, on and as of the date hereof, none of this Agreement or
any of the other Loan Documents, or the execution or delivery by the Company
of this Agreement or any of the other Loan Documents, is subject to any
Covered Taxes, and no payment to be made by the Company under this Agreement
is subject to any Covered Taxes.
(f) The Administrative Agent and each Lender represents that it is
not a non-resident of Canada for any purpose of the Income Tax Act (Canada).
In making payments hereunder, the Company may rely upon such representation;
and each Lender agrees to indemnify and hold harmless the Company from its
respective obligations to make payments on account of Covered Taxes under
this Section 5.08 in the event its representation fails to be true.
Section 6. CONDITIONS PRECEDENT.
6.01 EFFECTIVENESS. The effectiveness of the amendment and
restatement of the Original Credit Agreement provided for hereby is subject
to the conditions precedent that the Administrative Agent shall have received
the following documents, to be held by the Administrative Agent for the
benefit of the Lenders (with, to the extent required, sufficient copies for
each Lender), each of which shall be satisfactory to the Administrative Agent
(and to the extent specified below, to each Lender) in form and substance:
(a) ORGANIZATIONAL DOCUMENTS. A certificate of a senior officer of
each Borrower and Forest dated the Effective Date certifying the articles
and by-laws for each Borrower and Forest, respectively, have not been
amended since December 31, 1996 and certifying the corporate authority for
each Borrower and Forest.
(b) EXISTENCE. A certificate from the Ministry of Consumer and
Corporate Affairs of Saskatchewan dated as of a recent date as to the
continuing existence of the Company.
(c) OFFICER'S CERTIFICATE. A certificate of a senior officer of the
Company, dated the Effective Date, to the effect set forth in the first
sentence of Section 6.02 hereof.
(d) OPINION OF COUNSEL TO THE COMPANY. An opinion, dated the
Effective Date, of Macleod Dixon, counsel to the Company, substantially in
the form of Exhibit B hereto and covering such other matters as the
Administrative Agent or any Lender may reasonably request (and the Company
hereby confirms that it has instructed such counsel to deliver such opinion
to the Lenders and the Administrative Agent).
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(e) OPINION OF CANADIAN COUNSEL TO CHASE CANADA. An opinion, dated
the Effective Date, of Stikeman, Elliott, Canadian counsel to Chase Canada,
substantially in the form of Exhibit C hereto (and Chase Canada hereby
instructs such counsel to deliver such opinion to the Lenders).
(f) NOTES AND SWINGLINE NOTES. The existing Notes, duly completed
and executed for each Lender and the existing Swingline Note duly completed
and executed for BOM.
(g) SECURITY DOCUMENTS. The existing Security Documents duly
executed and delivered by the Company, the Administrative Agent and other
Relevant Parties and registered, filed and recorded where required to
ensure the priority thereof against any other competing interests.
(h) FOREST GUARANTEE. The Forest Guarantee, duly completed and
executed.
(i) FOREST DEBENTURE. The Forest Debenture and a deposit agreement
in respect thereof duly executed and delivered by Forest, providing for a
Lien on the Properties acquired by Forest pursuant to the Forest Purchase
Agreement.
(j) 3189503 GUARANTEE AGREEMENT. The 3189503 Guarantee and Pledge
Agreement duly executed and delivered by 3189503 (as successor to Atcor
Resources' position as direct owner of all of the issued and outstanding
shares of Canadian Forest) and the Company, pledging all such shares to the
Company, and the certificates identified in Section 3.10 thereof
accompanied by undated stock powers in blank.
(k) FOREST SALE. The Forest Purchase Agreement duly completed and
executed.
(l) UNDERLYING LOANS. Evidence satisfactory to the Administrative
Agent and the Lenders that each of the conditions precedent to the
extension of credit contained in the Canadian Forest Credit Agreement have
been satisfied (and the Administrative Agent and each Lender shall have
received copies of all existing documents delivered pursuant to the
Canadian Forest Credit Agreement including but not limited to the
Underlying Security Documents and all registrations filed in respect
thereof).
(m) GOVERNMENTAL APPROVALS. Evidence satisfactory to the
Administrative Agent and the Lenders that all governmental and third-party
consents and approvals necessary in connection with the Acquisition, the
financing hereunder and the Loan Documents and under the Underlying Loan
Documents and the
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security therefor and the other transactions contemplated hereby and
thereby have been obtained (without the imposition of any conditions that
are not reasonably acceptable to the Lenders) and are in full force and
effect; all applicable waiting periods have expired without any action
being taken by any competent authority; and no law or regulation is
applicable (in the reasonable judgment of the Lenders) that restrains,
prevents or imposes materially adverse conditions upon the Acquisition, the
financing hereunder or thereunder, or any security therefor or any of the
other transactions contemplated hereby or thereby.
(n) NO MATERIAL ADVERSE CHANGE. Evidence satisfactory to the
Administrative Agent and the Lenders that: (i) since March 31, 1997, there
has been no material adverse change in the consolidated financial
condition, operations, business or prospects taken as a whole of Forest and
its Subsidiaries from that set forth in Forest's Form 10Q for the quarter
ended March 31, 1997 filed with the U.S. Securities and Exchange Commission
pursuant to the United States Securities and Exchange Act of 1934, as
amended; and
(ii) completion of the Forest Purchase Agreement will not result in
any termination, cancellation or other Material Adverse Effect in respect
of the Property included in the Forest Purchase Agreement or in Forest's
title to or interest in that property.
(o) NO CONFLICT. A certificate of a senior officer of Forest that
none of the transactions contemplated herein conflict with, violate or
result in a default under any indentures, agreements or other documents
providing for or relating to any indebtedness or other obligations
aggregating U.S.$500,000 or more of any of Forest, Canadian Forest or any
of their respective Subsidiaries or cause any of such Persons to be
required to prepay, purchase, redeem or acquire any of such Indebtedness or
obligation or any other securities issued by any of such Persons for an
aggregate cost exceeding U.S.$500,000.
(p) SECURITY CONFIRMATION. A Second Security Confirmation and
Amendment Agreement among the Administrative Agent, the Company, ProMark,
Canadian Forest, 3189503 and Forest relating to the security and guarantees
given in connection with the Original Credit Agreement and terminating the
Atcor Resources Pledge Agreement.
(q) OTHER DOCUMENTS. Such other documents (including without
limitation certificates from senior officers of 3189503 and Forest) as the
Administrative Agent or any Lender or special New York or Canadian counsel
to Chase Canada may reasonably request.
The effectiveness of the amendment and restatement of the Original
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Credit Agreement provided for hereby is also subject to the payment by or on
behalf of Forest of such fees as Forest shall have agreed to pay or deliver on
or prior to the Effective Date pursuant to the Fee Letter, including, without
limitation, the reasonable fees and expenses of Stikeman, Elliott, Canadian
counsel to Chase Canada and Milbank, Tweed, Hadley & McCloy, special New York
counsel to Chase Canada, in connection with the negotiation, preparation,
execution and delivery of this Agreement and the Notes and the other Loan
Documents and the extensions of credit hereunder (to the extent that statements
for such fees and expenses have been delivered to the Company).
6.02 EFFECTIVENESS AND SUBSEQUENT EXTENSIONS OF CREDIT. The
obligation of the Lenders to make any Loan or otherwise extend any credit to the
Company upon the occasion of each borrowing or other extension of credit
hereunder (including the initial extension of credit) is subject to the further
conditions precedent that, both immediately prior to the making of such Loan or
other extension of credit and also after giving effect thereto and to the
intended use thereof:
(a) no Default shall have occurred and be continuing PROVIDED that if
the only Default is a failure to make a payment when due on a Swingline
Loan, the Company shall have the ability to Convert such Swingline Loan to
a Canadian Prime Loan;
(b) the representations and warranties made by the Company in
Section 7 and Section 11.17 hereof, and in each of the other Loan Documents
to which it is a party, shall be true and complete on and as of the date of
the making of such Loan or other extension of credit with the same force
and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date);
(c) the aggregate Principal Amount of the Loans and Bankers'
Acceptances and of Letter of Credit Liabilities (with the amount of Loans
and Letter of Credit Liabilities in U.S. Dollars expressed as an Equivalent
Amount in Canadian Dollars) outstanding hereunder shall not exceed the
Borrowing Base as determined pursuant to Section 1.03 hereof;
(d) the aggregate Principal Amount of each Type of Loan (including
Swingline Loans) and all Bankers' Acceptances and of Letter of Credit
Liabilities outstanding hereunder shall not be respectively greater than
the sum of the corresponding aggregate Principal Amounts of the Types of
Loans (including Swingline Loans) and aggregate Letter of Credit
Liabilities (all such terms as being defined in the Canadian Forest Credit
Agreement) under the Canadian Forest Credit Agreement; and
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(e) the rates of interest, fees and other amounts payable in respect
of Loans, Bankers' Acceptances and Letters of Credit hereunder shall be the
same or less than the rates of interest, fees and other amounts payable in
respect of corresponding Types of Loans and Letters of Credit provided
under the Canadian Forest Credit Agreement.
Each notice of borrowing or request for the issuance of a Letter of Credit or
purchase of a Bankers' Acceptance by the Company hereunder shall constitute a
certification by the Company to the effect set forth in this Section 6.02 (both
as of the date of such notice or request and, unless the Company otherwise
notifies the Administrative Agent prior to the date of such borrowing or
issuance, as of the date of such borrowing or issuance).
Section 7. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Administrative Agent and the Lenders that:
7.01 CORPORATE EXISTENCE. The Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify could
(either individually or in the aggregate) have a Material Adverse Effect.
7.02 FINANCIAL CONDITION. The Company has heretofore caused Canadian
Forest to furnish to each of the Lenders consolidated balance sheets of Atcor
Resources as at December 31, 1996 and the related consolidated statements of
income, retained earnings and cash flows of Canadian Forest and its Subsidiaries
for the fiscal year ended on said date, with the opinion thereon (in the case of
said consolidated balance sheet and statements) of Price Waterhouse, and the
unaudited consolidated balance sheets of Canadian Forest and its Subsidiaries as
at March 31, 1997 and the related consolidated statements of income, retained
earnings and cash flows of Canadian Forest and its Subsidiaries for the
three-month period ended on such date. All such financial statements are
complete and correct and present fairly, in all material respects, the
consolidated financial condition of Canadian Forest and its Subsidiaries in
accordance with generally accepted accounting principles then in effect in
Canada. Neither 3189503, Canadian Forest nor any of its Subsidiaries has on the
date hereof any material contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
said balance sheets as at said dates. Since March 31, 1997 there has been no
material adverse change in the consolidated financial condition, operations,
business or prospects taken as a whole of Canadian Forest and its Subsidiaries
from that set forth in said financial statements
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as at said date.
7.03 LITIGATION. Except as disclosed to the Lenders in writing prior
to the date of this Agreement, there are no legal or arbitral proceedings, or
any proceedings by or before any governmental or regulatory authority or agency,
now pending or (to the knowledge of the Company) threatened against the Company
or any of the Relevant Parties or affecting the Forest Pledged Properties that,
if adversely determined could (either individually or in the aggregate) have a
Material Adverse Effect.
7.04 NO BREACH. None of the execution and delivery of this Agreement
and the Notes, the other Loan Documents, and the Underlying Loan Documents, the
consummation of the transactions herein and therein contemplated, or compliance
with the terms and provisions hereof and thereof, will conflict with or result
in a breach of, or require any consent under, the organizational documents of
the Company, the BOM Agreement, the Forest Indenture, the Forest Indenture
Guaranty or any applicable law or regulation, or any order, writ, injunction or
decree of any court or governmental authority or agency, or any agreement or
instrument to which the Company is a party or by which it or any of its Property
is bound or to which it is subject (including the Forest Indenture and the
Forest Indenture Guaranty), or constitute a default under any such agreement or
instrument, or (except for the Liens created pursuant to the Security Documents)
result in the creation or imposition of any Lien upon any Property of the
Company pursuant to the terms of any such agreement or instrument.
7.05 ACTION. The Company has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations under
each of the Loan Documents and the Underlying Loan Documents; the execution,
delivery and performance by the Company of each of the Loan Documents and the
Underlying Loan Documents has been duly authorized by all necessary corporate
action on its part (including, without limitation, any required shareholder
approvals); and this Agreement has been duly and validly executed and delivered
by the Company and constitutes, and each of the Notes and the other Loan
Documents and the Underlying Loan Documents when executed and delivered (in the
case of the Notes and the Bankers' Acceptances, for value) will constitute, its
legal, valid and binding obligation, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or similar laws of
general applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
7.06 APPROVALS. No authorizations, approvals or consents of
(including any exchange control approval), and no filings or registrations with,
any governmental or regulatory authority or agency, or any securities exchange,
are necessary for the execution, delivery or performance by the Company of this
Agreement, any of the other Loan Documents, the BOM Agreement or any of the
Underlying Loan Documents or for
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the legality, validity or enforceability hereof or thereof, except for filings
and recordings in respect of the Liens created pursuant to the Security
Documents.
7.07 USE OF CREDIT. The Company is not engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying Margin
Stock, and no part of the proceeds of any extension of credit hereunder will be
used to buy or carry any Margin Stock.
7.08 TAXES. The Company has filed all Canadian federal income tax
returns required to be filed pursuant to the Income Tax Act (Canada) and all
other material tax returns that are required to be filed by the Company and has
paid all taxes due pursuant to such returns or pursuant to any assessment
received by the Company. The charges, accruals and reserves on the books of the
Company in respect of taxes and other governmental charges are, in the opinion
of the Company, adequate. The Company has not given or been requested to give a
waiver of the statute of limitations relating to the payment of any taxes or
other impositions.
7.09 MATERIAL AGREEMENTS AND LIENS.
(a) Other than the Loan Documents, the Underlying Loan Documents and
the guaranty given in respect of the Forest Indenture (the "FOREST INDENTURE
GUARANTY"), the Company is not a party to any credit agreement, loan agreement,
indenture, purchase agreement, guarantee, letter of credit or other arrangement
providing for or otherwise relating to any Indebtedness or any extension of
credit (or commitment for any extension of credit) to, or guarantee by, the
Company, on the date hereof.
(b) Other than the Liens created pursuant to the Security Documents,
there are no Liens securing Indebtedness of any Person and covering Property of
the Company on the date hereof.
7.10 SUBSIDIARIES, ETC. The Company has no Subsidiaries and holds
no Investments in any Person on the date hereof other than (i) the Forest
Indenture Guaranty and (ii) pursuant to the Underlying Loan Documents.
7.11 TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to the Administrative Agent or any Lender in connection
with the negotiation, preparation or delivery of this Agreement and the other
Loan Documents or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole do not contain any untrue statement of material
fact or omit to state any material fact necessary to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the date
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hereof by the Company to the Administrative Agent and the Lenders in connection
with this Agreement and the other Loan Documents and the transactions
contemplated hereby and thereby will be true, complete and accurate in every
material respect, or (in the case of projections) based on reasonable estimates,
on the date as of which such information is stated or certified. There is no
fact known to the Company that could have a Material Adverse Effect that has not
been disclosed herein, in the other Loan Documents or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Lenders for use in connection with the transactions contemplated hereby or
thereby.
7.12 CAPITALIZATION. The issued capital stock of the Company will
consist, on the Effective Date, of one share of common stock. As of the
Effective Date all of such issued and outstanding share of common stock is owned
beneficially and of record by Forest. As of the Effective Date there are no
outstanding Equity Rights with respect to the Company.
7.13 SPECIAL PURPOSE COMPANY. The Company has (a) no material assets
other than the Underlying Loans and (b) no Indebtedness, and no material
obligations other than its obligations under (i) the Loan Documents, (ii) the
Underlying Loan Documents and (iii) the Forest Indenture Guaranty.
Section 8. COVENANTS OF THE COMPANY. The Company covenants and
agrees with the Lenders and the Administrative Agent that, so long as any
Commitment, Loan, Letter of Credit Liability or Bankers' Acceptance is
outstanding and until payment in full of all amounts payable by the Company
hereunder:
8.01 FINANCIAL STATEMENTS ETC. The Company shall deliver (with
respect to clauses (c) and (d) below) and shall cause Canadian Forest (with
respect to clauses (a) and (b) below) to deliver to each of the Lenders
(provided that the consolidating financial statements referred to in clauses (a)
and (b) below need only be delivered if they have been prepared by Canadian
Forest):
(a) as soon as available and in any event within 60 days after the
end of each quarterly fiscal period of each fiscal year of Canadian Forest,
consolidated and consolidating statements of income, retained earnings and
cash flows of Canadian Forest and its Subsidiaries for such period and for
the period from the beginning of the respective fiscal year to the end of
such period, and the related consolidated and consolidating balance sheets
of Canadian Forest and its Subsidiaries as at the end of such period,
setting forth in each case in comparative form the corresponding
consolidated and consolidating figures for the corresponding periods in the
preceding fiscal year (except that, in the case of balance sheets, such
comparison shall be to the last day of the prior fiscal year), accompanied
by a certificate of a senior financial officer of Canadian Forest which
certificate shall state that said consolidated financial statements fairly
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present in all material respects the consolidated financial condition and
results of operations of Canadian Forest and its Subsidiaries, and said
consolidating financial statements fairly present in all material respects
the respective individual unconsolidated financial condition and results of
operations of Canadian Forest and of its Subsidiaries, in each case in
accordance with GAAP, consistently applied, as at the end of, and for, such
period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 100 days after the
end of each fiscal year of Canadian Forest, consolidated and consolidating
statements of income, retained earnings and cash flows of Canadian Forest
and its Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of its Subsidiaries as at the end of such
fiscal year, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied (i) in the case of said consolidated
statements and balance sheet of Canadian Forest, by an opinion thereon of
independent certified public accountants of recognized national standing,
which opinion shall state that said consolidated financial statements
fairly present in all material respects the consolidated financial
condition and results of operations of Canadian Forest and its Subsidiaries
as at the end of, and for, such fiscal year in accordance with generally
accepted accounting principles, and (ii) in the case of said consolidating
statements and balance sheets, by a certificate of a senior financial
officer of Canadian Forest, which certificate shall state that said
consolidating financial statements fairly present in all materials respects
the respective individual unconsolidated financial condition and results of
operations of Canadian Forest and of each of its Subsidiaries, in each case
in accordance with GAAP, consistently applied, as at the end of, and for,
such fiscal year;
(c) as soon as available and in any event within 60 days after the
end of each quarterly fiscal period of each fiscal year of the Company,
statements of income, retained earnings and cash flows of the Company and
its Subsidiaries for such period and for the period from the beginning of
the respective fiscal year to the end of such period and the related
balance sheets of the Company as at the end of such period, setting forth
in each case in comparative form the corresponding figures for the
corresponding periods in the preceding fiscal year (except that, in the
case of balance sheets, such comparison shall be to the last day of the
prior fiscal year), accompanied by a certificate of a senior financial
officer of the Company, which certificate shall state that said financial
statements fairly present in all material respects the financial condition
and results of operations of the Company in accordance with GAAP,
consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments);
(d) as soon as available and in any event within 100 days after the
end of
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each fiscal year of the Company, statements of income, retained earnings
and cash flows of the Company for such fiscal year and the related balance
sheets of the Company as at the end of such fiscal year, setting forth in
each case in comparative form the corresponding figures for the preceding
fiscal year, and accompanied by a certificate of a senior financial officer
of the Company, which certificate shall state that said financial
statements fairly present, in all material respects, the financial
condition and results of operations of the Company in accordance with GAAP,
consistently applied, as at the end of, and for, such fiscal year;
(e) promptly upon receipt by the Company, copies of all financial
statements, certificates, notices and other documents that the Company
shall have received from the Relevant Parties (other than the financial
statements required under Sections 8.01(a) and (b)) pursuant to the
Underlying Loan Documents;
(f) promptly upon their becoming available, copies of all
prospectuses, registration statements and regular periodic reports, if any,
that the Company or any of the Relevant Parties shall have filed with any
securities commission in Canada having jurisdiction or any Canadian or
United States national securities exchange;
(g) promptly upon the mailing thereof to the public shareholders of
the Company or any of the Relevant Parties, if any, generally, copies of
all financial statements, reports and proxy circulars or statements so
mailed;
(h) on or before each Report Delivery Date, the Borrowing Base
Reports;
(i) promptly after the Company knows or has reason to believe that
any Default has occurred hereunder or under any of the Underlying Loan
Documents, a notice of such Default describing the same in reasonable
detail and, together with such notice or as soon thereafter as possible, a
description of the action taken or proposed to be taken with respect
thereto; and
(j) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company, Forest or the
Relevant Parties as any Lender or the Administrative Agent may reasonably
request.
The Company will furnish to each Lender, at the time it causes Canadian Forest
to furnish each set of financial statements pursuant to paragraph (a) or (b)
above, a certificate of a senior financial officer of the Company (i) to the
effect that no Default has occurred and is continuing (or, if any Default has
occurred and is continuing, describing the same in reasonable detail and
describing the action it has taken or
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proposes to take with respect thereto) and (ii) setting forth in reasonable
detail the computations necessary to determine whether the Company is in
compliance with Sections 8.09, 8.10 and 8.11 hereof as of the end of the
respective quarterly fiscal period or fiscal year.
8.02 LITIGATION. The Company will promptly give to each Lender
notice of all legal or arbitral proceedings, and of all proceedings by or before
any governmental or regulatory authority or agency, and any material development
in respect of such legal or other proceedings, affecting the Company or any of
the Relevant Parties or the Forest Pledged Properties, except proceedings that,
if adversely determined, would not (either individually or in the aggregate)
have a Material Adverse Effect. Without limiting the generality of the
foregoing, the Company will give to each Lender notice of the assertion of any
Environmental Claim by any Person against, or with respect to the activities of,
the Relevant Parties or in respect of the Forest Pledged Properties and notice
of any alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations, other than any Environmental Claim or
alleged violation which, if adversely determined, would not have a Material
Adverse Effect.
8.03 EXISTENCE, ETC. The Company will:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises;
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could (either individually or in the
aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained;
(d) maintain all of its Properties, if any, used or useful in its
business in good working order and condition, ordinary wear and tear
excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Administrative Agent,
during normal business hours, to examine, copy and make extracts from its
books and records, to inspect any of its Properties, and to discuss its
business
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and affairs with its officers, all to the extent reasonably requested by
such Lender or the Administrative Agent (as the case may be).
8.04 GOVERNMENTAL APPROVALS. The Company will promptly obtain from
time to time at its own expense and at all times maintain in full force and
effect without any material modification or amendment, all such governmental
licenses, authorizations, registrations, consents, permits and approvals as may
be required for the Company to (a) comply with its obligations, and preserve its
rights under, each of the Loan Documents and the Underlying Loan Documents and
(b) maintain the existence, priority and perfection of the Liens purported to be
created under the Security Documents.
8.05 PROHIBITION OF FUNDAMENTAL CHANGES. The Company will not enter
into any transaction of merger or consolidation or amalgamation, or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution). The
Company will not acquire any business or (other than as contemplated by the
Underlying Loan Documents) Property from, or capital stock of, or be a party to
any acquisition of, any Person. The Company will not convey, sell, lease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or a substantial part of its business or Property, whether now
owned or hereafter acquired.
8.06 LIMITATION ON LIENS. The Company will not create, incur, assume
or suffer to exist any Lien upon any of its Property, whether now owned or
hereafter acquired except Liens created pursuant to the Security Documents and
Liens imposed by any governmental authority for taxes, assessments or charges
not yet due.
8.07 INDEBTEDNESS. The Company will not create, incur or suffer to
exist any Indebtedness except Indebtedness to the Lenders hereunder and the
Forest Indenture Guaranty.
8.08 INVESTMENTS. The Company will not make or permit to remain
outstanding any Investments other than (i) as contemplated by the Underlying
Loan Documents and (ii) the Forest Indenture Guaranty.
8.09 DIVIDEND PAYMENTS. The Company will not make any Dividend
Payment at any time; PROVIDED that the Company may make Dividend Payments in an
amount in any one fiscal year not to exceed the cumulative net income of the
Company for such and previous fiscal years (to the extent the net income of the
Company in any prior fiscal year has not previously been distributed pursuant to
this Section 8.09) if after giving effect to such Dividend Payment no Default
shall have occurred and be continuing or shall occur as a result of the making
of such Dividend Payment.
8.10 DEBT COVERAGE RATIO; INTEREST COVERAGE RATIO.
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(a) The Company will not permit the Debt Coverage Ratio for any
period of two complete consecutive fiscal quarters (treated for this purpose as
a single accounting period), to be less than 1.50 to 1 as of the end of any
fiscal quarter of Canadian Forest.
(b) The Company will not permit the Interest Coverage Ratio for any
period of two complete consecutive fiscal quarters (treated for this purpose as
a single accounting period), to be less than 3.00 to 1 as of the end of any
fiscal quarter of Canadian Forest.
8.11 WORKING CAPITAL. The Company will not permit the current assets
of Canadian Forest and the Subsidiary Borrowers (determined on a consolidated
basis in accordance with GAAP) to be equal to or less than the current
liabilities of Canadian Forest and the Subsidiary Borrowers (so determined).
For purposes hereof, the terms "CURRENT ASSETS" and "CURRENT LIABILITIES" shall
have the respective meanings assigned to them by GAAP, PROVIDED that in any
event there shall be (i) included in current assets the Available Borrowing
Amount (but only to the extent such Available Borrowing Amount could then be
utilized as provided in Section 6.02 hereof), (ii) excluded from current
liabilities all Indebtedness under the Canadian Forest Credit Agreement and
(iii) the current portion of any gas balancing liabilities.
8.12 LINES OF BUSINESS. The Company will not engage in any business
other than (i) the extension of credit to Canadian Forest and the Subsidiary
Borrowers pursuant to the Canadian Forest Credit Agreement and activities
reasonably related thereto, (ii) the borrowings and other extensions of credit
contemplated hereunder and activities reasonably related thereto and (iii) the
granting of the Forest Indenture Guaranty.
8.13 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by
this Agreement, the Company will not: (a) make any Investment in an Affiliate;
(b) transfer, sell, lease, assign or otherwise dispose of any Property to an
Affiliate; (c) merge into or consolidate with or purchase or acquire Property
from an Affiliate; or (d) enter into any other transaction directly or
indirectly with or for the benefit of an Affiliate (including, without
limitation, Guarantees and assumptions of obligations of an Affiliate); PROVIDED
that (i) any Affiliate who is an individual may serve as a director, officer or
employee of the Company and receive reasonable compensation for his or her
services in such capacity and (ii) Canadian Forest may sell the Forest Pledged
Properties to Forest in accordance with the provisions of the Forest Purchase
Agreement.
8.14 USE OF PROCEEDS. The Company will use the proceeds of the Loans
(including the Swingline Loans) solely for extending credit to Canadian Forest
and the Subsidiary Borrowers as contemplated by the Underlying Loan Documents
(in each case in compliance with all applicable legal and regulatory
requirements); PROVIDED that neither the Administrative Agent nor any Lender
shall have any responsibility as to the
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use of any of such proceeds.
8.15 SUBSIDIARIES. The Company will at all times continue to have no
Subsidiaries.
8.16 OWNERSHIP OF THE COMPANY. The Company will at all times
continue to be a Wholly Owned Subsidiary of Forest.
8.17 MODIFICATIONS OF CERTAIN DOCUMENTS AND PAYMENTS. The Company
will not consent to any modification, supplement or waiver of any of the
provisions of any of the Underlying Loan Documents, the Forest Indenture
Guaranty or the charter documents of the Company without the prior consent of
the Administrative Agent (with the approval of the Majority Lenders or such
other percentage of the Lenders as is required by the Underlying Loan
Documents).
8.18 INCORPORATION BY REFERENCE. The Company will cause each of
Atcor Resources, Canadian Forest, the Subsidiary Borrowers and Forest to
perform, comply with and be bound by each of the covenants, agreements and
obligations contained in the Underlying Loan Documents and will at all times
administer the Canadian Forest Credit Agreement in such manner so as to insure
that the Company is able to strictly comply with the provisions of this
Agreement and the other Loan Documents including, without limitation, compliance
with Section 6.02(d) and (e) hereof.
8.19 NO ACTION TO AFFECT SECURITY DOCUMENTS. The Company shall not
do anything to adversely affect the priority of the Security Documents given or
to be given in respect of the obligations of the Company hereunder.
8.20 FURTHER ASSURANCES. The Company shall, after notice thereof
from Lender or the Administrative Agent, do all such further acts and things and
execute and deliver all such further documents or, with respect to the
Underlying Security Documents, cause the applicable Relevant Party to do such
further acts and things and deliver all such further documents, in each case, as
shall be reasonably requested by the Administrative Agent in order to give
effect to this Agreement and the Security Documents and shall cause the same to
be registered wherever, in the opinion of the Administrative Agent, such
registration may be required or advisable to preserve, perfect or validate or
continue the perfected status of any deemed or other Lien granted pursuant to a
Security Document or to enable the Administrative Agent to exercise and enforce
its rights hereunder with respect to such deemed or other Lien.
8.21 SUBSIDIARY BORROWERS. The Company will ensure that, before any
Subsidiary of Canadian Forest becomes a Subsidiary Borrower, that Subsidiary is
a Wholly Owned Subsidiary and provides all required documents, security and
opinions as required by the Administrative Agent in that regard pursuant to
Section 8.28 of the Canadian Forest Credit Agreement and in any event will cause
that Wholly Owned
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Subsidiary to provide each Lender with the representations and warranties
provided in Section 7 of the Canadian Forest Credit Agreement.
Section 9. EVENTS OF DEFAULT; REMEDIES.
9.01 EVENTS OF DEFAULT. If one or more of the following events
(herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) The Company shall (i) default in the payment when due (whether at
stated maturity or upon mandatory or optional prepayment) of any principal
of or interest on any Loan (other than Swingline Loans), Letter of Credit
Reimbursement Obligations or any Bankers' Acceptance, any fee or any other
amount payable by it hereunder or under any other Loan Document or (ii)
default in the payment when due (whether on demand, at stated maturity or
upon mandatory or optional prepayment) of any principal or interest on a
Swingline Loan following the expiration of a 3 Business Day grace period
that shall begin upon the Company's receipt of demand for payment on such
Swingline Loan; provided that with respect to this clause (ii) the Company
shall otherwise be capable of Converting such Swingline Loan to another
Type of Loan; or
(b) Any Relevant Party shall default in the payment when due (whether
at stated maturity or upon mandatory or optional prepayment) of any
principal of or interest on any Underlying Loan or any fee or any other
amount payable by it (whether such fee or other amount is payable on demand
or otherwise) under any Underlying Loan Document; or
(c) Any of the Relevant Parties shall default in the payment when due
of any principal of or interest on any of its Indebtedness to the Company
pursuant to the Underlying Loan Documents (other than as provided in
clause (b) of this Section 9); or any event specified in any note,
agreement, indenture or other document evidencing or relating to any such
Indebtedness shall occur if the effect of such event is to cause, or (with
the giving of any notice or the lapse of time or both) to permit the
Company (or a trustee or agent on behalf of the Company) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise); or
(d) The Company or any of the Relevant Parties shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating C$500,000 or more; or any event specified in any
note, agreement, indenture or other document evidencing or relating to any
such Indebtedness shall occur if the effect of such event is to cause, or
(with the giving of any notice or the lapse of time or both) to permit the
holder or holders of such Indebtedness (or a trustee or agent on behalf of
such holder or holders) to cause, such Indebtedness to become due, or to be
prepaid in full (whether by redemption,
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purchase, offer to purchase or otherwise), prior to its stated maturity or
to have the interest rate thereon reset to a level so that securities
evidencing such Indebtedness trade at a level specified in relation to the
par value thereof; or Forest or any Relevant Party shall default in the
payment when due of any amount aggregating C$100,000 or more under any
Interest Rate Protection Agreement or Commodity Hedging Agreement; or any
event specified in any Interest Rate Protection Agreement or Commodity
Hedging Agreement shall occur if the effect of such event is to cause, or
(with the giving of any notice or the lapse of time or both) to permit,
termination or liquidation payment or payments aggregating C$250,000 or
more to become due; or
(e) Any representation, warranty or certification made or deemed made
herein or in any other Loan Document (or in any modification or supplement
hereto or thereto) by the Company, Forest or any of the Relevant Parties or
any certificate furnished to any Lender or the Administrative Agent
pursuant to the provisions hereof or thereof, shall prove to have been
false or misleading as of the time made or furnished in any material
respect; or
(f) (i) The Company shall default in the performance of any of its
obligations under any of Sections 8.01(i), 8.05, 8.06, 8.07, 8.08, 8.09,
8.10, 8.11, 8.12, 8.14, 8.17 or 8.18 hereof or the Company shall default in
the performance of any of its obligations in any of the Underlying Loan
Documents; or (ii) the Company shall default in the performance of any of
its other obligations in this Agreement or any other Loan Document and such
default shall continue unremedied for a period of thirty or more days after
notice thereof to the Company by the Administrative Agent or any Lender
(through the Administrative Agent); or
(g) The Company, Forest or any Relevant Party shall admit in writing
its inability to, or be generally unable to, pay its debts as such debts
become due; or
(h) The Company, Forest or any Relevant Party shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its Property, (ii) make a general assignment for the
benefit of its creditors, (iii) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or composition or
readjustment of debts, (iv) take any corporate action for the purpose of
effecting any of the foregoing or (v) do the equivalent of any of the
foregoing under the laws of the United States or Canada; or
(i) A proceeding or case shall be commenced, without the application
or consent of the Company, Forest or any of the Relevant Parties, in any
court of
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competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment
of its debts, (ii) the appointment of a receiver, custodian, trustee,
examiner, liquidator or the like of the Company, Forest or such Relevant
Party or of all or any substantial part of its Property, (iii) similar
relief in respect of the Company, Forest or such Relevant Party under the
Bankruptcy and Insolvency Act (Canada) or any other law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more days or (iv) the equivalent of any of the foregoing
under the laws of the United States or Canada; or
(j) A final judgment or judgments for the payment of money of
C$1,000,000 (or C$50,000 in the case of the Company) or more in the
aggregate (exclusive of judgment amounts fully covered by insurance
(subject to ordinary and customary deductibles) where the insurer has
admitted liability in respect of the full amount (subject to ordinary and
customary deductibles) of such judgment(s) in excess of C$1,000,000 (or
C$50,000 in the case of the Company) and in respect of which the Majority
Lenders believe such insurer has the financial ability to satisfy the full
amount of such judgment(s)) shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against the
Company or any of the Relevant Parties and the same shall not be discharged
(or provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within 60 days from the date of entry
thereof and the Company or such Relevant Party shall not, within said
period of 60 days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to
be stayed during such appeal; or
(k) At any time that the Forest Indenture Guaranty is in effect or,
pursuant to the terms of Forest Indenture, is required to be in effect
(unless such provision has been waived in accordance with the Forest
Indenture), an "Event of Default" as defined in the Forest Indenture has
occurred and is continuing; or
(l) Any governmental authority shall take any action to condemn,
seize, nationalize or appropriate any substantial portion of the Property
of the Company either with or without payment of compensation) or shall
take any action that, in the opinion of the Majority Lenders, adversely
affects the ability of the Company to perform its obligations under this
Agreement or any other Loan Document; or
(m) The Liens created by the Security Documents shall at any time not
constitute a valid and perfected Lien on the collateral intended to be
covered thereby (to the extent perfection by filing, registration,
recordation or possession
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is required herein or therein) in favor of the Administrative Agent, free
and clear of all other Liens, or, except for expiration in accordance with
its terms, any of the Security Documents shall for whatever reason be
terminated or cease to be in full force and effect, or the enforceability
thereof shall be contested by the Company; or
(n) Any Governmental Authority shall assert claims against the
Company or any Relevant Party, or any other Person shall commence any
proceeding against the Company or any Relevant Party before any court,
administrative tribunal or other body having jurisdiction over the Company
or such Relevant Party, in either such case based on or arising from the
generation, storage, transport, handling or disposal of Hazardous Materials
by the Company, such Relevant Party or an affiliate thereof, or any
predecessor in interest of the Company, such Relevant Party or affiliate,
or relating to any site or facility owned, operated or leased by the
Company, such Relevant Party or affiliate, which claims or liabilities
(insofar as they are payable by the Company, such Relevant Party but after
deducting any portion thereof which is reasonably expected to be paid by
other creditworthy Persons jointly and severally liable therefor), and the
amount thereof is, singly or in the aggregate, reasonably anticipated to
have a Material Adverse Effect and such claim is not withdrawn or such
proceeding is not withdrawn or dismissed, as the case may be, within 45
days after the assertion or commencement thereof, as applicable; or
(o) Any "Event of Default" shall occur and be continuing under the
Second Amended and Restated Credit Agreement dated as of January 31, 1997
among Forest, the Subsidiary Guarantors and Subsidiary Obligors mentioned
therein, the lenders party thereto and Chase Manhattan, as agent (as such
agreement is amended, supplemented and modified from time to time); or
(p) The Company or any Borrower shall cease to be a Wholly Owned
Subsidiary of Forest; or
(q) Any Event of Default (as defined in any Underlying Loan Document)
shall occur and be continuing; or
(r) The aggregate Principal Amount of each Type of Loan (including
Swingline Loans) and all Bankers' Acceptances and of Letter of Credit
Liabilities outstanding hereunder shall be respectively greater than the
sum of the corresponding aggregate Principal Amounts of the Types of Loans
(including Swingline Loans) and aggregate Letter of Credit Liabilities (as
all such terms are defined in the Canadian Forest Credit Agreement) under
the Canadian Forest Credit Agreement; or
(s) Any of the rates of interest, fees and other amounts payable in
respect
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of Loans, Bankers' Acceptances and Letters of Credit hereunder shall be
greater than the rates of interest, fees and other amounts payable in
respect of corresponding types of loans and Letters of Credit provided
under the Canadian Forest Credit Agreement; or
(t) The Company shall at any time consent or agree (where its consent
or agreement is required) to any amendment or supplement to the terms of
the Forest Indenture in the form dated September 8, 1993 that may
materially adversely affect the Lenders' interests under this Agreement or
the other Loan Documents without the prior written consent of the Majority
Lenders, or if at any time, the Forest Indenture Guaranty shall not be
subordinated in right of payment to the prior payment of all of the
Indebtedness of the Company to the Lenders under any of the Loan Documents
to the extent, in the manner and in accordance with all of the provisions
of the Forest Indenture in the form dated September 8, 1993.
THEREUPON: (1) in the case of the occurrence and during the continuance of an
Event of Default other than one referred to in clause (a)(ii), clause (h) or (i)
of this Section 9.01 with respect to the Company, the Administrative Agent may
and, upon request of the Majority Lenders, will, by notice to the Company,
terminate the Commitments and/or declare the Principal Amount then outstanding
of, and the accrued interest on, the Loans, the Swingline Loans, the Letter of
Credit Reimbursement Obligations, the Bankers' Acceptances and all other amounts
payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05, 5.06, 5.07 or 5.08 hereof)
to be forthwith due and payable, whereupon such amounts shall be immediately due
and payable without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by the Company; (2) in the case
of the occurrence of an Event of Default referred to in clause (h) or (i) of
this Section 9.01 with respect to the Company, the Commitments shall
automatically be terminated and the Principal Amount then outstanding of, and
the accrued interest on, the Loans, the Swingline Loans, the Letter of Credit
Reimbursement Obligations, the Bankers' Acceptances and all other amounts
payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05, 5.06, 5.07 or 5.08 hereof)
shall automatically become immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by the Company; and (3) in the case of the occurrence and
during the continuance of an Event of Default referred to in clause (a)(ii) of
this Section 9.01 with respect to the Company, the Administrative Agent may and,
upon request of BOM, will, by notice to the Company, terminate BOM's Commitment
to make Swingline Loans pursuant to Section 2.05 and/or declare the Principal
Amount then outstanding of, and accrued interest on, the Swingline Loans and all
other amounts payable under the Swingline Note to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of
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which are hereby expressly waived by the Company.
In addition, upon the occurrence and during the continuance of any
Event of Default (if the Administrative Agent has declared the Principal Amount
then outstanding of, and accrued interest on, the Loans and all other amounts
payable by the Company hereunder and under the Notes to be due and payable), the
Company agrees that (i) it shall provide cover for the Letter of Credit
Liabilities, BA Loans and the Bankers' Acceptance Liabilities by paying to the
Administrative Agent immediately available funds in an amount equal to the
aggregate undrawn face amount of all Letters of Credit and the aggregate
Principal Amount of all BA Loans and Bankers' Acceptances, which funds shall be
held by the Administrative Agent in the Cash Collateral Account as collateral
security in the first instance PRO RATA for the Letter of Credit Liabilities,
Bankers' Acceptances and BA Loans and be subject to withdrawal only as therein
provided and (ii) the Administrative Agent and the Lenders may, in addition to
any other rights and remedies that they may have hereunder or in law or at
equity in that event, realize on all or any part of the Security Documents held
by them for the Company's obligations hereunder. Payment of the Principal
Amount of any BA Loan as provided in paragraph (i) above shall satisfy the
obligation to pay any interest accrued on that BA Loan.
9.02 REMEDIES CUMULATIVE. It is expressly understood and agreed that
the rights and remedies of each of the Administrative Agent and the Lenders
under the Loan Documents are cumulative and are in addition to and not in
substitution for any rights or remedies provided by law; any single or partial
exercise by a Lender or by the Administrative Agent on behalf of any Lender of
any right or remedy for a default or breach of any term, covenant, condition or
agreement herein or therein contained 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 such Lender may be lawfully entitled for the same default or
breach, and any waiver by the Administrative Agent or any Lender of the strict
observance, performance or compliance with any term, covenant, condition or
agreement herein or therein contained, and any indulgence granted thereby, shall
not be deemed a waiver of any subsequent default. The Administrative Agent, on
behalf of the Lenders and acting on the instructions of the Majority Lenders (or
BOM in the case of Swingline Loans) may, or failing such action by the
Administrative Agent, the Majority Lenders (or BOM in the case of Swingline
Loans) may, to the extent permitted by applicable law, bring suit at law, in
equity or otherwise for any available relief or purpose including but not
limited to:
(a) the specific performance of any covenant or agreement contained
in the Loan Documents;
(b) enjoining a violation of any of the terms of the Loan Documents;
(c) aiding in the exercise of any power granted by the Loan Documents
or
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by law; or
(d) obtaining and recovering judgment for any and all amounts due in
respect of the Company's obligations under this Agreement.
9.03 LENDERS MAY PERFORM COVENANTS. If the Company shall fail to
perform any covenant on its part herein contained, the Administrative Agent may
on behalf of the Lenders and with the approval of the Majority Lenders, perform
any such covenant capable of being performed by the Administrative Agent and, if
any such covenant requires the payment or expenditure of money, the
Administrative Agent may make such payment or expenditure with its own funds on
behalf of the Lenders. All amounts so paid by the Administrative Agent
hereunder shall be repaid by the Company on demand therefor, and shall bear
interest at the rate set forth in Section 3.04 commencing on the date following
a demand for payment of such amounts.
Section 10. THE ADMINISTRATIVE AGENT.
10.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
appoints and authorizes the Administrative Agent to act as its agent hereunder
and under the other Loan Documents with such powers as are specifically
delegated to the Administrative Agent by the terms of this Agreement and of the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent (which term as used in this
sentence and in Section 10.05 and the first sentence of Section 10.06 hereof
shall include reference to its Affiliates and its own and its Affiliates'
officers, directors, employees and agents):
(a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the other Loan Documents, and shall not
by reason of this Agreement or any other Loan Document be a trustee for any
Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in
any other Loan Document, or in any certificate or other document referred
to or provided for in, or received by any of them under, this Agreement or
any other Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, any Note or
any other Loan Document or any other document referred to or provided for
herein or therein or for any failure by the Company or any other Person to
perform any of its obligations hereunder or thereunder;
(c) shall not, except to the extent expressly instructed by the
Majority Lenders with respect to collateral security under the Security
Documents, be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; and
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(d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other Loan Document or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or
willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee of a Note as the holder thereof for all purposes hereof
unless and until a notice of the assignment or transfer thereof shall have been
filed with the Administrative Agent, together with the consent of the Company to
such assignment or transfer (to the extent required by Section 11.06(b) hereof).
10.02 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telex,
telegram or cable) reasonably believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel, independent accountants and other
experts selected by the Administrative Agent. As to any matters not expressly
provided for by this Agreement or any other Loan Document, the Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or thereunder in accordance with instructions given by the
Majority Lenders, and such instructions of the Majority Lenders and any action
taken or failure to act pursuant thereto shall be binding on all of the Lenders.
10.03 DEFAULTS. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or the Company specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 10.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders,
PROVIDED that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interest of the Lenders except to
the extent that this Agreement expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of the Majority
Lenders or all of the Lenders.
10.04 RIGHTS AS A LENDER. With respect to its Commitment, the Loans
made by it, its Letters of Credit Interest and the Bankers' Acceptances held by
it, Chase Canada (and any successor acting as Administrative Agent) in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and
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may exercise the same as though it were not acting as the Administrative
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include the Administrative Agent in its individual capacity.
Chase Canada (and any successor acting as Administrative Agent) and its
affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Company (and any of its
Affiliates) as if it were not acting as the Administrative Agent, and Chae
Canada (and any such successor) and its affiliates may accept fees and other
consideration from the Company for services in connection with this Agreement
or otherwise without having to account for the same to the Lenders.
10.05 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 11.03 hereof,
but without limiting the obligations of the Company under said Section 11.03)
ratably in accordance with the aggregate Principal Amount of the Loans, Letter
of Credit Reimbursement Obligations and Bankers' Acceptances held by the Lenders
(or, if no Loans, Letter of Credit Reimbursement Obligations or Bankers'
Acceptances are at the time outstanding, ratably in accordance with their
respective Commitments), for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Administrative Agent (including by any Lender) arising out
of or by reason of any investigation in or in any way relating to or arising out
of this Agreement or any other Loan Document or any other documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby (including, without limitation, the costs and expenses that the Company
is obligated to pay under Section 11.03 hereof, but excluding, unless a Default
has occurred and is continuing, normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or of any such other documents, PROVIDED
that no Lender shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to be indemnified.
10.06 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company, Forest, the Relevant Parties and their Subsidiaries and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Administrative Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement
or under any other Loan Document. The Administrative Agent shall not be
required to keep itself informed as to the performance or observance by the
Company of this Agreement or any of the other Loan Documents or any other
document referred to or provided for herein or therein or to inspect the
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Properties or books of the Company. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Administrative Agent hereunder or under the Security Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Company, Forest, the Relevant Parties or any of
their Subsidiaries (or any of their affiliates) that may come into the
possession of the Administrative Agent or any of its affiliates.
10.07 FAILURE TO ACT. Except for action expressly required of the
Administrative Agent hereunder and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 10.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
10.08 RESIGNATION OR REMOVAL OF ADMINISTRATIVE AGENT. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Company, and the Administrative Agent may be removed at
any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, that shall be a bank that
has an office in Toronto or Calgary, Canada with a combined capital and surplus
of at least C$75,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Section 10 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Administrative
Agent.
10.09 CONSENTS UNDER OTHER LOAN DOCUMENTS. Except as otherwise
provided in Section 8.17 and Section 11.04 hereof with respect to this
Agreement, the Administrative Agent may, with the prior consent of the Majority
Lenders (but not otherwise), consent to any modification, supplement or waiver
under any of the Loan Documents, PROVIDED that, without the prior consent of
each Lender, the Administrative Agent shall not (except as required herein, in
the Canadian Forest Credit Agreement or
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in the Security Documents) release any collateral or otherwise terminate any
Lien under any Security Document providing for collateral security, agree to
additional obligations being secured by such collateral security (unless the
Lien for such additional obligations shall be junior to the Lien in favor of
the other obligations secured by such Security Document, in which event the
Administrative Agent may consent to such junior Lien provided that it obtains
the consent of the Majority Lenders thereto), alter the relative priorities
of the obligations entitled to the benefits of the Liens created under the
Security Documents or release any guarantor hereunder or under any Security
Document from its guarantee obligations hereunder or thereunder, except that
no such consent shall be required, and the Administrative Agent is hereby
authorized, to release any Lien covering Property (and to release any such
guarantor) that is the subject of either a Disposition of Property permitted
hereunder or a Disposition to which the Majority Lenders have consented.
10.10 CONSENT TO PERMITTED DISPOSITIONS. Notwithstanding any
provision of this Agreement to the contrary, the Administrative Agent shall, in
connection with any Disposition by any Relevant Party of (i) any Properties
(other than Unrestricted Properties) to the extent such Properties are disposed
of in accordance with the limitations set forth in Section 8.05 of the Canadian
Forest Credit Agreement or (ii) any Unrestricted Properties, in each such case,
consent (and direct or permit the Company to provide its consent under the
Canadian Forest Credit Agreement) to the release of such properties from the
Lien of each of the Underlying Security Documents, without the consent of any
Lender, if (i) no Default or Event of Default has occurred and is continuing and
(ii) the disposition of such Property in the manner contemplated by such
Borrower is permitted pursuant to the terms of this Agreement and provided that
the Administrative Agent has received a certificate from the Relevant Party
seeking such release, confirming the foregoing conditions and provided such
release shall not extend to (A) any equipment located on, proceeds from sale of,
or production of hydrocarbons from, such Hydrocarbon Properties that are
retained by the Relevant Party after any farmout or similar agreement and
(B) any inventory or equipment that is the subject of such farmout or similar
agreement (the "FARMOUT INTEREST") and that is or may be utilized for the
exploration, production or marketing of hydrocarbons attributable to (x) the
Farmout Interest and (y) other properties of the Relevant Party that are not
Unrestricted Properties.
Section 11. MISCELLANEOUS.
11.01 WAIVER. No failure on the part of the Administrative Agent or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note or
Swingline Note shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this Agreement or any
Note or Swingline Note preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and not exclusive of any remedies provided
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by law.
The Company irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the
Administrative Agent or any Lender relating in any way to this Agreement should
be dismissed or stayed by reason, or pending the resolution, of any action or
proceeding commenced by the Company relating in any way to this Agreement
whether or not commenced earlier. To the fullest extent permitted by applicable
law, the Company shall take all measures necessary for any such action or
proceeding commenced by the Administrative Agent or any Lender to proceed to
judgment prior to the entry of judgment in any such action or proceeding
commenced by the Company.
11.02 NOTICES. (a) All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including, without limitation, by
telex or telecopy) delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof); or, as to any
party, at such other address as shall be designated by such party in a notice to
each other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by telex
or telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
(b) The Administrative Agent shall promptly forward to each Lender a
copy of all notices, requests and communications sent by the Administrative
Agent to the Company pursuant to the terms of this Agreement.
11.03 EXPENSES, ETC. (a) EXPENSES. The Company agrees to pay or
reimburse each of the Lenders and the Administrative Agent on demand for:
(a) all reasonable out-of-pocket costs and expenses of the Administrative Agent
(including, without limitation, the reasonable fees and expenses of Stikeman,
Elliott, Canadian counsel to Chase Canada and Milbank, Tweed, Hadley & McCloy,
special New York counsel to Chase Canada) in connection with (i) the
negotiation, preparation, execution and delivery of this Agreement, the other
Loan Documents, the Underlying Documents and the extension of credit hereunder
and (ii) the
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negotiation or preparation of any modification, supplement or
waiver of any of the terms of this Agreement, any of the other Loan Documents or
any of the Underlying Loan Documents (whether or not consummated); (b) all
reasonable out-of-pocket costs and expenses of the Lenders and the
Administrative Agent (including, without limitation, the reasonable fees and
expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceedings resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (x)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 11.03; and (c) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Agreement, any of the other Loan Documents
or any of the Underlying Loan Documents or any other document referred to herein
or therein and all costs, expenses, taxes, assessments and other charges
incurred in connection with any filing, registration, recording or perfection of
any Lien contemplated by any Security Document or any other document referred to
therein or any discharge thereof.
(b) INDEMNIFICATION. The Company agrees to indemnify the
Administrative Agent and each Lender and their respective directors, officers,
employees, attorneys and agents from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages or expenses incurred by any of
them (including, without limitation, any and all losses, liabilities, claims,
damages or expenses incurred by the Administrative Agent to any Lender, whether
or not the Administrative Agent or any Lender is a party thereto) arising out of
or by reason of any failure by the Company to perform any of the obligations
hereunder or any investigation or litigation or other proceedings (including any
threatened investigation or litigation or other proceedings) relating to the
extensions of credit hereunder or any actual or proposed use by the Company of
the proceeds of any of the extensions of credit hereunder, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation or litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified). Without limiting the generality of the foregoing, the Company
will indemnify the Administrative Agent and each Lender from, and hold the
Administrative Agent and each Lender harmless against, any losses, liabilities,
claims, damages or expenses described in the preceding sentence (but excluding,
as provided in the preceding sentence, any loss, liability, claim, damage or
expense incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified) arising under any Environmental Law as a result of the
past, present or future operations of the Company (or any predecessor in
interest to the Company), or the past, present or future condition of any site
or facility owned, operated or leased at any time by the Company (or any such
predecessor in interest), or any Release or threatened Release of any Hazardous
Materials at or from any such site or facility, excluding any such Release or
threatened Release that shall occur during any period when the Administrative
Agent or any Lender shall be in possession of any such site or facility
following the exercise by the Administrative Agent or any Lender of any of its
rights and remedies hereunder or under any of the Security Documents, but
including any such Release or threatened Release occurring during such period
that is a continuation of conditions previously in existence, or of practices
employed by the Company, at such site or facility.
A certificate of the Administrative Agent as to the amount of any such
loss or expense shall be PRIMA FACIE proof of the amount thereof, in the absence
of manifest error. The amount required to be paid by the Company hereunder
shall become part of
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the Company's obligations hereunder, shall be payable by
the Company on demand, shall bear interest at the rate provided in Section 3.04
hereof calculated from the date any indemnified cost, liability or damage outlay
is made by the Administrative Agent hereunder to the date paid by the Company.
11.04 AMENDMENTS, ETC. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company and the Majority Lenders,
or by the Company and the Administrative Agent acting with the consent of the
Majority Lenders, and any provision of this Agreement may be waived by the
Majority Lenders or by the Administrative Agent acting with the consent of the
Majority Lenders; PROVIDED that: (a) no modification, supplement or waiver
shall, unless by an instrument signed by all of the Lenders or by the
Administrative Agent acting with the consent of all of the Lenders:
(i) increase, decrease, or extend the term of the Commitments, or extend the
time or waive any requirement for the reduction or termination of the
Commitments, (ii) change the Types of Loans or other forms of borrowing
hereunder, (iii) extend the date fixed for the payment of principal of or
interest on any Loan, the Letter of Credit Reimbursement Obligations, the
Bankers' Acceptance Liabilities or any fee hereunder, (iv) reduce the amount of
any such payment of principal, (v) reduce the rate at which any interest is
payable thereon or any fee is payable hereunder, (vi) alter the rights or
obligations of the Company to prepay Loans, (vii) alter the manner in which
payments or prepayments of principal, interest or other amounts hereunder shall
be applied as between the Lenders, (viii) alter the terms of this Section 11.04,
(ix) modify the definition of the term "Majority Lenders" or modify in any other
manner the number or percentage of the Lenders required to make any
determinations or waive any rights hereunder or to modify any provision hereof,
(ix) waive any of the conditions precedent set forth in Section 6.01 hereof or
Section 6.02, or (x) do any of the foregoing in respect of any of the Underlying
Loan Documents or any of the comparable or companion provisions thereunder; and
(b) any modification or supplement of Section 10 hereof, or of any of the rights
or duties of the Administrative Agent hereunder, shall require the consent of
the Administrative Agent.
11.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) The Company may not assign any of its rights or obligations
hereunder, under the Notes, under the Swingline Notes, under the Letters of
Credit or under the Bankers' Acceptances without the prior consent of all of the
Lenders and the Administrative Agent, except pursuant to the on-lending
contemplated by the Canadian Forest Credit Agreement.
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(b) Each Lender may assign any of its Loans, its Note (and the
Swingline Note in the case of BOM), its Commitment and the Swingline Loans, its
Letter of Credit Interest and its Bankers' Acceptances (but only with the
consent of, in the case of its outstanding Commitment and the Swingline Loans,
the Company and the Administrative Agent, which consent shall not be
unreasonably withheld or delayed and which consent shall not be required if an
Event of Default has occurred and is continuing, and, in the case of a Letter of
Credit Interest, the Issuing Bank); PROVIDED that
(i) no such consent by the Company or the Administrative Agent
shall be required in the case of any assignment (other than the Swingline
Loans) to another Lender; with respect to the Swingline Loans, the
Company's consent shall be required for such assignment, but such consent
shall not be unreasonably withheld or delayed;
(ii) except to the extent the Company and the Administrative Agent
shall otherwise consent, any such partial assignment (other than to another
Lender) shall be in an amount at least equal to C$5,000,000;
(iii) each such permitted assignment by a Lender of its Loans, Note,
Commitment, Letter of Credit Interest or Bankers' Acceptances shall be made
in such manner so that the same portion of its Loans, Note, Commitment and
Letter of Credit Interest is assigned to the respective assignee; PROVIDED
that in the case of a permitted assignment of the Swingline Note or the
Swingline Loans, BOM shall assign its entire Swingline Loan or Commitment;
(iv) no Lender shall assign all or any portion of its Commitment,
Bankers' Acceptances or Letter of Credit Liabilities or Loans to any
financial institution which is unable to make the representation contained
in Section 5.08(f); and
(v) Chase Canada and its affiliate shall at all times maintain a
Commitment hereunder of not less than the lesser of (x) 10% of the
aggregate of the Commitments and (y) C$8,000,000.
Notwithstanding the foregoing no consents shall be required for any
participation which may be made for purposes of Section 2.05(c) hereof. Upon
execution and delivery by the assignee to the Company, the Administrative Agent
and the Issuing Bank of an instrument in writing pursuant to which such assignee
agrees to become a "Lender" hereunder (if not already a Lender) having the
Commitment, Loans and, if applicable, the Letter of Credit Interest specified in
such instrument, and upon consent thereto by the Company and the Administrative
Agent as provided in this Section 11.06(b) and the Issuing Bank, the assignee
shall have, to the extent of such assignment (unless provided in such assignment
with the consent of the Company, the
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Administrative Agent and the Issuing Bank), the obligations, rights and
benefits of a Lender hereunder holding the Commitment, Loans and, if
applicable, the Letter of Credit Interest (or portions thereof) assigned to
it (in addition to the Commitment, Loans and Letter of Credit Interest
theretofore held by such assignee) and the assigning Lender shall, to the
extent of such assignment, be released from the Commitment, Loans and Letter
of Credit Interest (or portion thereof) so assigned. Any Bankers'
Acceptances specified in such instrument shall remain the liability and
obligation of the Lender hereunder holding such Bankers' Acceptances and such
Lender shall be entitled to all of the rights, titles and benefits arising
out of this Agreement with respect to such Bankers' Acceptances (including
reimbursement rights); provided, however, that the assignee shall indemnify
such Lender and hold such Lender harmless from and against any losses or
costs paid or incurred by such Lender in connection with such Bankers'
Acceptances (other than losses or costs which arise out of the negligence or
wilful misconduct of such Lender). Upon each such assignment the assigning
Lender shall pay the Administrative Agent an assignment fee of $3,000;
provided that no such fee shall be required if a Lender is only transferring
all or a portion of a Bankers' Acceptance.
(c) (i) A Lender may sell or agree to sell to one or more other
Persons (each a "PARTICIPANT") a participation in all or any part of any
Loans, Letter of Credit Interest and/or Bankers' Acceptances held by it, or
in its Commitment, PROVIDED that, except in respect of Bankers'
Acceptances, such Participant shall not have any rights or obligations
under this Agreement or any Note or any other Loan Document (the
Participant's rights against such Lender in respect of such participation
to be those set forth in the agreements executed by such Lender in favor of
the Participant). All amounts payable by the Company to any Lender under
Section 5 hereof in respect of Loans, Letter of Credit Interest held by it,
Bankers' Acceptances held by it and its Commitment, shall be determined as
if such Lender had not sold or agreed to sell any participations in such
Loans, Letter of Credit Interest, Bankers' Acceptances and Commitment, and
as if such Lender were funding each of such Loan, Letter of Credit
Interest, Bankers' Acceptance and Commitment in the same way that it is
funding the portion of such Loan, Letter of Credit Interest, Bankers'
Acceptance and Commitment in which no participations have been sold. In no
event shall a Lender that sells a participation agree with the Participant
to take or refrain from taking any action hereunder or under any other Loan
Document except that such Lender may agree with the Participant that it
will not, without the consent of the Participant, agree to (i) increase or
extend the term of such Lender's Commitment, (ii) extend the date fixed for
the payment of principal of or interest on the related Loan or Loans,
Letter of Credit Reimbursement Obligations, Bankers' Acceptance
Reimbursement Obligations or any portion of any fee hereunder payable to
the Participant, (iii) reduce the amount of any such payment of principal,
(iv) reduce the rate at which interest is payable thereon, or any fee
hereunder payable to the Participant, to a level below the rate at which
the Participant is entitled to receive
<PAGE>
Page 101
such interest or fee or (v) consent to any modification, supplement or
waiver hereof or of any of the other Loan Documents to the extent that the
same, under Section 10.09 or 11.04 hereof, requires the consent of each
Lender.
(ii) In respect of each sale of a participation by a Lender to a
Participant, the Company agrees that it shall, at the request of the
Administrative Agent on behalf of such Lender, consent to an absolute
assignment by such Participant to such Lender of all rights of such
Participant to require payment from the Company in respect of all Bankers'
Acceptances accepted or purchased by such Participant and such Lender
hereby agrees to cause such absolute assignment to be entered into by such
Lender and the Participant. Upon the assignment of such rights, such
Lender shall, subject to this Agreement, thereafter be entitled to enforce
such rights against the Company and amounts owing by the Company to such
Lender in respect of such assigned rights shall constitute amounts owing to
such Lender hereunder to the same extent as if such Bankers' Acceptances
had been accepted and purchased by such Lender. Such Lender upon granting
a participation shall be responsible for the administration of all aspects
of the purchase and the acceptance by such Participant of Bankers'
Acceptances purchased by such Participant.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 11.06, any Lender may (without notice
to the Company, the Administrative Agent or any other Lender and without payment
of any fee) assign and pledge all or any portion of its Loans, its Notes, its
Letter of Credit Interest and its Bankers' Acceptances to any regulatory
authority, and such Loans, Notes and Bankers' Acceptances shall be fully
transferrable as provided therein. No such assignment shall release the
assigning Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the Company,
Forest or any of the Relevant Parties or any of their Subsidiaries in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants), subject, however, to the
provisions of Section 11.13(b) hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan, Letter of Credit
Reimbursement Obligation or Bankers' Acceptance Reimbursement Obligation held by
it hereunder to the Company or any of its Affiliates without the prior consent
of each Lender.
11.07 SURVIVAL. The obligations of the Company under Sections 2.03,
2.04, 5.01, 5.05, 5.06, 5.07, 5.08 and 11.03 hereof and the obligations of the
Lenders under Section 10.05 hereof, shall survive the repayment of the Loans,
Letter of Credit Reimbursement Obligations and Bankers' Acceptance Liabilities
and the termination of
<PAGE>
Page 102
the Commitments and, in the case of any Lender that may assign any interest
in its Commitment, Loans, Letter of Credit Interest or Bankers' Acceptances
hereunder, shall survive the making of such assignment, notwithstanding that
such assigning Lender may cease to be a "Lender" hereunder. In addition, each
representation and warranty made, or deemed to be made by a notice of any
extension of credit (whether by means of Loan, Letter of Credit or issuance
of a Bankers' Acceptance, herein or pursuant hereto shall survive the making
of such representation and warranty, and no Lender shall be deemed to have
waived, by reason of making any extension of credit hereunder (whether by
means of Loans, Letter of Credit or issuance of a Bankers' Acceptance), any
Default that may arise by reason of such representation or warranty proving
to have been false or misleading, notwithstanding that such Lender or the
Administrative Agent may have had notice or knowledge or reason to believe
that such representation or warranty was false or misleading at the time such
extension of credit was made.
11.08 CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
11.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 GOVERNING LAW. This Agreement and the Notes shall be governed
by, and construed in accordance with, the laws of the Province of Alberta and
the laws of Canada applicable therein.
11.11 JURISDICTION, SERVICE OF PROCESS AND VENUE.
(a) Each party hereto hereby agrees that any suit, action or
proceeding with respect to this Agreement, any Note, any Swingline Note, the
other Loan Documents or any judgment entered by any court in respect thereof may
be brought in the courts of the Province of Alberta; and each party hereto
hereby irrevocably submits to the jurisdiction of such courts for the purpose of
any such suit, action, proceeding or judgment. Each party hereto further
submits, for the purpose of any such suit, action, proceeding or judgment
brought or rendered against it, to the appropriate courts of the jurisdiction of
its domicile.
(b) Nothing herein shall in any way be deemed to limit the ability of
the Administrative Agent or any Lender to serve any such writs, process or
summonses in any other manner permitted by applicable law or to obtain
jurisdiction over the Company in such other jurisdictions, and in such manner,
as may be permitted by applicable law.
<PAGE>
Page 103
(c) The Company hereby irrevocably waives any objection that it may
now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Loan
Document brought in the courts of the Province of Alberta and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
11.12 JUDGMENT CURRENCY. This is an international loan transaction
in which the specification of Canadian Dollars or U.S. Dollars is of the
essence, and the stipulated currency shall in each instance be the Currency of
account and payment in all instances. A payment obligation in one Currency
hereunder (the "ORIGINAL CURRENCY") shall not be discharged by an amount paid in
another currency (the "OTHER CURRENCY"), whether pursuant to any judgment
expressed in or converted into any Other Currency or in another place except to
the extent that such tender or recovery results in the effective receipt by such
Lender of the full amount of the Original Currency payable to such Lender under
this Agreement. If for the purpose of obtaining judgment in any court it is
necessary to convert a sum due hereunder in the Original Currency into the Other
Currency, the rate of exchange that shall be applied shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase Original Currency at the Principal Office with the Other Currency on
the Business Day next preceding the day on which such judgment is rendered. The
obligation of the Company in respect of any such sum due from it to the
Administrative Agent or any Lender hereunder or under any other Loan Document
(in this Section 11.12 called an "ENTITLED PERSON") shall, notwithstanding the
rate of exchange actually applied in rendering such judgment, be discharged only
to the extent that on the Business Day following receipt by such Entitled Person
of any sum adjudged to be due hereunder in the Other Currency such Entitled
Person may in accordance with normal banking procedures purchase and transfer
the Original Currency to Toronto with the amount of the judgment currency so
adjudged to be due; and the Company hereby, as a separate obligation and
notwithstanding any such judgment, agrees to indemnify such Entitled Person
against, and to pay such Entitled Person on demand, in the Original Currency,
the amount (if any) by which the sum originally due to such Entitled Person in
the Original Currency hereunder exceeds the amount of the Other Currency so
purchased and transferred.
11.13 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company, Forest, the Relevant Parties, or one or more of their Subsidiaries
or Affiliates (in connection with this Agreement or otherwise) by any Lender or
by one or more subsidiaries or affiliates of such Lender and the Company hereby
authorizes each Lender to share any information delivered to such Lender by or
at the request of the
<PAGE>
Page 104
Company pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such subsidiary or
affiliate. Such authorization shall survive the repayment of the Loans,
Letter of Credit Reimbursement Obligations and Bankers' Acceptance
Liabilities and the termination of the Commitments.
(b) Each Lender and the Administrative Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by or at the request of the Company or any
of its Affiliates pursuant to this Agreement that is identified by such Person
as being confidential at the time the same is delivered to the Lenders or the
Administrative Agent, PROVIDED that nothing herein shall limit the disclosure of
any such information (i) after such information shall have become public (other
than through a violation of this Section 11.13), (ii) to the extent required by
statute, rule, regulation or judicial process, (iii) to counsel for any of the
Lenders or the Administrative Agent, (iv) to bank examiners (or any other
regulatory authority having jurisdiction over any Lender or the Administrative
Agent), or to auditors or accountants, (v) to the Administrative Agent or any
other Lender, (vi) in connection with any litigation to which any one or more of
the Lenders or the Administrative Agent is a party, or in connection with the
enforcement of rights or remedies hereunder or under any other Loan Document,
(vii) to a subsidiary or affiliate of such Lender as provided in paragraph (a)
above (provided that neither the Administrative Agent nor any Lender shall
disclose any non-public information delivered by or at the request of the
Company or Affiliates pursuant to this Agreement to any subsidiary or affiliate
of the Administrative Agent or such Lender, as the case may be, which is
generally engaged in the securities business other than in connection with the
syndication or participation of the Commitments or Loans or Letter of Credit
Interest or the sale of the Bankers' Acceptances under this Agreement without
the prior written consent of the Company) or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to the respective Lender a Confidentiality Agreement substantially in the form
of Exhibit H hereto (or executes and delivers to such Lender an acknowledgement
to the effect that it is bound by the provisions of this Section 11.13(b), which
acknowledgement may be included as part of the respective assignment or
participation agreement pursuant to which such assignee or participant acquires
an interest in the Loans, Letter of Credit Interest or Bankers' Acceptances
hereunder); PROVIDED, FURTHER, that in no event shall any Lender or the
Administrative Agent be obligated or required to return any materials furnished
by or at the request of the Company or any of its Affiliates. The obligations
of any assignee that has executed a Confidentiality Agreement in the form of
Exhibit H hereto shall be superseded by this Section 11.13 upon the date upon
which such assignee becomes a Lender hereunder pursuant to Section 11.06(b)
hereof.
<PAGE>
Page 105
11.14 ADDITIONAL PROVISIONS RELATING TO INTEREST AND FEES.
(a) MAXIMUM RATE OF INTEREST. In no event shall any interest or fee
to be paid hereunder exceed the maximum rate permitted by applicable law. In
the event any such interest rate or fee exceeds such maximum rate, such rate
shall be adjusted downward to the highest rate (expressed as a percentage per
annum) or fee that the parties could validly have agreed to by contract on the
date hereof under applicable law. It is further agreed that any excess actually
received by any Lender shall be credited against the Principal Amount of any
Loan (or the principal owing with respect to a BA Loan), Bankers' Acceptance or
Letter of Credit Liability or, if the Principal Amount shall have been or would
thereby be paid in full, the remaining amount shall be credited to the Company.
(b) CONTINUING OBLIGATIONS. All interest (including interest on
overdue interest) payable by the Company to the Lenders hereunder shall accrue
from day to day, computed as provided herein, and shall be payable after as well
as before maturity, demand, default and judgment.
(c) WAIVER OF SECTION 6 OF JUDGMENT INTEREST ACT. To the extent
permitted by law, section 6 of the Judgment Interest Act (Alberta) shall not
apply to this Agreement and is hereby expressly waived by the Company.
11.15 SEVERABILITY. The provisions of this Agreement are intended to
be severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
11.16 TIME OF ESSENCE. Time shall be of the essence hereof.
11.17 ACKNOWLEDGEMENT OF PRIORITY OF INDEBTEDNESS. The Company
represents and warrants to the Lenders and the Administrative Agent that: (a)
the Indebtedness hereunder and under the other Loan Documents is "Senior
Indebtedness of a Subsidiary Guarantor" for the purposes of the Forest
Indenture; and
(b) Canadian Forest and ProMark are not and will not be obliged to be
Subsidiary Guarantors for purposes of the Forest Indenture as a result of their
execution and delivery of or the performance of their obligations under the BOM
Agreement, any security therefor, any of the Underlying Loan Documents or any
documents signed by them in connection with this Agreement.
11.18 CONFLICT OF TERMS. In the event of any conflict between the
terms of this Agreement and any other Loan Document, the provisions of this
Agreement shall
<PAGE>
Page 106
prevail to the extent necessary to remove such conflict.
11.19 RESTATEMENT OF ORIGINAL CREDIT AGREEMENT. This Agreement
amends and restates the terms and conditions applicable to the revolving term
credit facility provided by the Lenders to the Company under the Original Credit
Agreement. The amendments contained in this Agreement shall be effective,
subject to satisfaction of the conditions precedent contained in Section 6.01,
as of the Effective Date. This Agreement governs the terms and conditions
applicable to the Commitments and the Loans (including the Swingline Loans),
Bankers' Acceptances and Letters of Credit provided hereunder to the Company.
All amounts outstanding to the Lenders as of the Effective Date under the
Original Credit Agreement by way of Eurodollar Loans, U.S. Base Rate Loans,
Canadian Prime Loans, Bankers' Acceptances, and Letters of Credit (as each of
such terms are defined in the Original Credit Agreement) shall, as of the date
hereof, be deemed to be outstanding hereunder as borrowings by way of Eurodollar
Loans, U.S. Base Rate Loans, Canadian Prime Loans, Bankers' Acceptances and
Letters of Credit respectively, and shall thereafter be governed by the terms
and conditions of this Agreement. All accrued interest and fees payable to the
Lenders pursuant to the Original Credit Agreement which are outstanding as of
the date hereof shall be paid to the Lenders in accordance with the terms of
this Agreement and shall be deemed to be amounts owing hereunder.
11.20 BOM LETTERS OF CREDIT. The parties to this Agreement agree
that the following letter of credit issued by BOM to ProMark:
Letter of Credit with BOM in favor of the Minister of
Finance and Corporate Relations, British Columbia dated
November 2, 1994, as amended on September 22, 1995.
Expires October 31, 1997
C$2,500.00
is and shall be from and after the date of this Agreement Letters of Credit
under this Agreement and shall be subject to the applicable terms of this
Agreement in that regard.
11.21 AMENDMENT OF CERTAIN DOCUMENTS. BOM agrees that the
BOM Agreement, the Canadian Forest Guarantee and the ProMark Security Agreement
shall not be amended or supplemented, nor any other security interests obtained
from ProMark or Canadian Forest, in any manner that may materially adversely
affect the security interests of the Lenders in relation to this Agreement
without the prior written approval of the Majority Lenders (other than BOM),
such consents not to be unreasonably withheld or delayed. Each of the Lenders
agrees with BOM that the ProMark Debenture shall not be amended or supplemented,
nor shall any other security interests be obtained from ProMark or Canadian
Forest, in any manner that may materially adversely affect the security
interests of BOM in relation to the BOM Agreement without the prior written
approval of BOM, such consent not to be
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Page 107
unreasonably withheld or delayed.
<PAGE>
Page 108
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
611852 SASKATCHEWAN LTD.
By
-------------------------
Title:
Address for Notices:
611852 SASKATCHEWAN LTD.
c/o Canadian Forest Oil Ltd.
600, 800-Sixth Avenue, S.W.
Calgary, Alberta T2P 3G3
Canada
Attention: Vice President - Finance
Telecopier No.: (403) 261-7665
Telephone No.: (403) 292-8000
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, CO 80202
Attention: Vice President and Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
<PAGE>
Page 109
LENDERS
Commitment THE CHASE MANHATTAN BANK OF CANADA
----------
C$30,000,000
By
-------------------------
Title: Vice President
Lending Office: Toronto, Canada
Address for Notices:
1 First Canadian Place
100 King Street West
Suite 6900, P.O. Box 106
Toronto, Ontario M5X 1A4
Canada
Attention: Vice President
Corporate Finance
Telecopier No.: (416) 216-4161
Telephone No.: (416) 216-4133
<PAGE>
Page 110
Commitment ROYAL BANK OF CANADA
----------
C$25,000,000
By
-------------------------
Title:
Lending Office:
Address for Notices:
Oil & Gas Banking Center
11th Floor, 335-8 Ave. S.W.
Calgary, Alberta
Canada T2P 1C9
Attention: Marc S. Ranson
Sr. Account Manager
Telecopier No.: (403) 292-3436
Telephone No.: (403) 292-3751
<PAGE>
Page 111
Commitment BANK OF MONTREAL
----------
C$25,000,000
By
-------------------------
Title:
Lending Office:
Address for Notices:
Corporate and Institutional
Financial Services
First Canadian Centre
350 - 7th Avenue S.W., 24th Floor
Calgary, Alberta T2P 3N9
Canada
Attention: Director, Natural Resources
Telecopier No.: (403) 234-3644
Telephone No.: (403) 234-3824
<PAGE>
Page 112
THE CHASE MANHATTAN BANK OF CANADA,
as Administrative Agent
By
-------------------------
Title: Vice President
Address for Notices to
Chase Canada as Administrative Agent:
1 First Canadian Place
100 King Street West
Suite 6900, P.O. Box 106
Toronto, Ontario M5X 1A4
Canada
Attention: Vice President
Corporate Finance
Telecopier No.: (416) 216-4161
Telephone No.: (416) 216-4133
<PAGE>
Page 113
With a copy to:
The Chase Manhattan Bank
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Rick Betz
Vice President
Telecopier No.: (212) 552-1687
Telephone No.: (212) 552-2680
\
<PAGE>
EXECUTION COPY
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of August 19, 1997 between 611852
SASKATCHEWAN LTD., a corporation duly organized and validly existing
under the laws of the Province of Saskatchewan, Canada (the "COMPANY");
each of the lenders that is a signatory hereto (individually, a "LENDER"
and, collectively, the "LENDERS"); and THE CHASE MANHATTAN BANK OF
CANADA, as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity, the "ADMINISTRATIVE
AGENT").
The Company, the Lenders and the Administrative Agent are
parties to a Second Amended and Restated Credit Agreement dated as of
April 1, 1997 (the "SECOND AMENDED AND RESTATED CREDIT AGREEMENT"),
providing, subject to the terms and conditions thereof, for extensions
of credit (by making of loans and issuing letters of credit) to be made
by said Lenders to the Company in an aggregate principal or face amount
not exceeding C$80,000,000. CREDIT LYONNAIS CANADA (the "NEW LENDER")
wishes to become a party to the Second Amended and Restated Credit
Agreement as a "Lender" thereunder, the Company, the Lenders and the
Administrative Agent wish to increase the aggregate amount of
Commitments under the Second Amended and Restated Credit Agreement from
C$80,000,000 to C$165,000,000 or the Equivalent Amount in U.S. Dollars
and wish to amend the Second Amended and Restated Credit Agreement in
certain additional respects, and accordingly, the parties hereto hereby
agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 1, terms defined in the Second Amended and Restated Credit
Agreement are used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, but effective as of
the date hereof, the Second Amended and Restated Credit Agreement shall
be further amended as follows:
2.01. The New Lender shall be deemed to be a "Lender" under
and for all purposes of the Second Amended and Restated Credit Agreement
and each reference therein to "Lender" shall be deemed to include the
New Lender. References in the Second Amended and Restated Credit
Agreement (including references to the Second Amended and Restated
Credit Agreement amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein", and "hereof") shall
be deemed to be references to the Second Amended and Restated Credit
Agreement as amended and as further amended hereby.
2.02. The following definitions are hereby added in
alphabetical order in Section 1.01 of the Second Amended and Restated
Credit Agreement:
"ALLOCATED CANADIAN BORROWING BASE" shall mean, as of any date,
an amount in Dollars designated as such from time to time by the Company
pursuant to Section 2.12 hereof.
AMENDMENT NO. 1
<PAGE>
- 2 -
"ALLOCATED U.S. BORROWING BASE" shall mean an amount equal to
the Borrowing Base then in effect MINUS the Allocated Canadian Borrowing
Base.
"AMENDMENT NO. 1" shall mean Amendment No. 1 dated as of August
19, 1997 to this Agreement.
"APPLICABLE COMMITMENT FEE RATE" shall mean for any period
during which the Usage Ratio is within the range specified under "Usage
Ratio" in Schedule IV to Amendment No. 1, the percentage per annum set
forth opposite the range in such Schedule IV.
"BORROWING BASE REPORTS" shall mean collectively, (i) U.S.
Reserve Evaluation Reports, (ii) Reserve Evaluation Reports and (iii)
Net Back Pool Reports and "BORROWING BASE REPORT" shall mean any thereof.
"CANADIAN GUARANTEE" shall mean the Guarantee dated as of
August 19, 1997 executed by Forest in favor of the Administrative Agent
and the Lenders party to this Agreement.
"COMBINED COMMITMENTS" shall have the meaning ascribed thereto
in the Intercreditor Agreement.
"COMBINED MAJORITY LENDERS" shall have the meaning ascribed
thereto in the Intercreditor Agreement.
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor
Agreement dated as of August 19, 1997 between the U.S. Agent and the
Administrative Agent as the same may be modified, supplemented, amended
and/or restated and in effect from time to time."
"LENDER GROUP" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"RESTRICTED SUBSIDIARY" shall have the meaning ascribed thereto
in the U.S. Credit Agreement.
"U.S. AGENT" means The Chase Manhattan Bank, as agent under the
U.S. Credit Agreement.
"U.S. CREDIT AGREEMENT" shall have the meaning ascribed thereto
in the Intercreditor Agreement.
"U.S. CREDIT AGREEMENT OBLIGATIONS" shall mean (i) the Loans
provided for in Section 2.01 of the U.S. Credit Agreement and (ii) the
Letter of Credit Liabilities under the U.S. Credit Agreement.
AMENDMENT NO. 1
<PAGE>
- 3 -
"U.S. LENDERS" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"U.S. RESERVE EVALUATION REPORT" shall mean the report defined
in the U.S. Credit Agreement as the "Reserve Evaluation Report" prepared
for Forest.
2.03. Section 1.01 of the Second Amended and Restated Credit
Agreement is amended by deleting the existing definitions for the
following terms and inserting new definitions as follows:
"APPLICABLE MARGIN" shall mean, with respect to each Type of
Loan for any period during which the Usage Ratio is within the range
specified under "Usage Ratio" in Schedule V to Amendment No. 1, the
number of basis points set forth opposite the range in such Schedule V
to be expressed as percentages per annum for purposes of the interest
calculations in this Agreement, PROVIDED that the "Applicable Margin"
shall be increased or reduced, as applicable, on the date of the
borrowing of a Loan or the issuance of a Letter of Credit or the
acceptance of a Bankers' Acceptance, or the repayment of a Loan or
expiration of a Letter of Credit or maturity of a Bankers' Acceptance,
as the case may be, which results in the Usage Ratio shifting from one
range to another but that the "Applicable Margin" for any BA Loan,
Bankers' Acceptance or Eurodollar Loan outstanding prior to such date
shall remain the same until the maturity of such Bankers' Acceptance or
the end of the Interest Period for such BA Loan or Eurodollar Loan,
respectively.
"ASSIGNMENT OF PAYMENTS" shall mean the Assignment of Payments
relating to the Canadian Forest Credit Agreement dated February 8, 1996,
provided by the Company to the Administrative Agent as same shall be
amended, modified or supplemented and in effect from time to time.
"ASSIGNMENT OF SECURITY" shall mean the assignment of the
Underlying Loan Documents dated February 8, 1996 provided by the Company
to the Administrative Agent as same shall be amended, modified or
supplemented and in effect from time to time.
"CANADIAN FOREST DEBENTURE" shall mean the Demand Debenture and
Negative Pledge dated February 8, 1996, as has been amended, including
as amended by the Third Security Confirmation, Amendment and
Supplemental Debenture Agreement dated as of August 19, 1997 in the
principal of C$165,000,000 payable to the Company and assigned to the
Administrative Agent and its successors and assigns, as the same shall
be amended, modified and supplemented and in effect from time to time.
"COMMITMENT" shall mean, as to each Lender, the obligation of
such Lender to make Loans, to issue or participate in Letters of Credit
and Swingline Loans pursuant to Sections 2.03 and 2.05 hereof, and to
accept Bankers' Acceptances pursuant to Section 2.04 hereof, in an
aggregate principal or face amount (expressed where applicable as the
Equivalent Amount of U.S. Dollars) at any one time outstanding up to but
not exceeding the amount set
AMENDMENT NO. 1
<PAGE>
- 4 -
opposite the name of such Lender on the signature pages of Amendment No.
1 under the caption "Commitment" or, in the case of a Person that
becomes a Lender pursuant to an assignment permitted under Section
11.06(b) hereof, as specified in the respective instrument of assignment
pursuant to which such assignment is effected (as the same may be
reduced at any time or from time to time pursuant to Section 2.06 or
11.06(b) hereof).
"COMMITMENT TERMINATION DATE" shall mean August 19, 2001.
"COMPANY DEBENTURE" shall mean the Demand Debenture and
Negative Pledge dated as of February 8, 1996, as the same has been
amended, including as amended by the Third Security Confirmation,
Amendment and Supplemental Debenture Agreement dated as of August 19,
1997, of the Company in the principal amount of C$165,000,000, payable
to the Administrative Agent and its successors and assigns as the same
shall be amended, modified and supplemented and in effect from time to
time.
"FOREST DEBENTURE" shall mean the Limited Recourse Demand
Debenture and Negative Pledge, dated as of April 1, 1997, as the same
has been amended, including as amended by the Third Security
Confirmation, Amendment and Supplemental Debenture Agreement dated as of
August 19, 1997, of Forest in the principal amount of C$165,000,000,
payable to the Company and assigned to the Administrative Agent and its
successors and assigns, as the same shall be amended, modified and
supplemented and in effect from time to time.
"FUTURE NET REVENUES" shall mean, as of any date of
determination for any period, the future gross revenues attributable to
all or a part (as specified herein) of Proved Reserves constituting part
of the Hydrocarbon Properties for such period less the sum for such
period of all projected Operating Expenses and Capital Expenditures with
respect thereto, as set forth in the related Borrowing Base Report, and
less (without duplication) all amounts projected to be applied to the
discharge of any Production Payment and to the unearned balance of any
advance payment received under any contract to be performed relating to
such Proved Reserves.
"INTEREST COVERAGE RATIO" shall mean, for any period, the ratio
of (a) the sum of Cash Flow PLUS Cash Flow under, and as defined in, the
U.S. Credit Agreement on a consolidated basis for such period to (b) the
sum of Interest Expense PLUS Interest Expense under, and as defined in,
the U.S. Credit Agreement on a consolidated basis for such period.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the
Notes, the Swingline Notes, the Letter of Credit Documents, the Security
Documents, the Bankers' Acceptance Documents and the Intercreditor
Agreement.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on (a) the Property, business, operations, financial condition,
prospects, liabilities or capitalization of Forest and its Subsidiaries
taken as a whole, (b) the ability of any Obligor (as defined in the U.S
Credit Agreement) or the Company to perform their respective obligations
under any of the Basic Documents (as defined in the U.S. Credit
Agreement) or the Loan Documents to which it is a
AMENDMENT NO. 1
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party, (c) the validity or enforceability of any of the Basic Documents
or the Loan Documents, (d) the rights and remedies of any member of the
Lender Group, the U.S. Agent and the Administrative Agent under any of
the Basic Documents or the Loan Documents, as the case may be, or (e)
the timely payment of the principal of or interest on the Loans
(including Swingline Loans), Letter of Credit Reimbursement Obligations,
Forest's obligations under the Forest Guarantee or U.S. Credit Agreement
Obligations or other amounts payable in connection therewith.
"PROMARK DEBENTURE" shall mean the Demand Debenture and
Negative Pledge dated July 17, 1996 as the same has been amended,
including as amended by the Third Security Confirmation, Amendment and
Supplemental Debenture Agreement dated as of August 19, 1997, of ProMark
in the principal amount of C$165,000,000 payable to the Company and
assigned to the Administrative Agent and its successors and assigns, as
the same shall be amended, modified and supplemented in accordance with
Section 11.21 hereof and in effect from time to time.
"SECURITY DOCUMENTS" shall mean collectively, the Underlying
Security Documents, the Company Debenture, the deposit agreement in
respect thereof, the Assignment of Payments, the Assignment of Security,
the Consent and Agreement, the Canadian Guarantee, the promissory notes
issued by the Borrowers under the Canadian Forest Credit Agreement,
including the Notes, Swingline Notes as defined in the Canadian Forest
Credit Agreement, and any other security that is now or is hereafter
granted or held with regard to the Company's obligations hereunder or
the Relevant Parties' obligations under the Underlying Loan Documents
and all amendments, modifications, additions to, renewals of and
substitutions and replacements for any of the foregoing made in
accordance with Section 11.21 hereof and all registrations filed with
respect to the Liens created pursuant to such documents and agreements
and without limiting the generality of the foregoing includes the
foregoing security and other documents as confirmed and amended from
time to time including as amended by the Third Security Confirmation,
Amendment and Supplemental Debenture Agreement dated as of August 19,
1997.
"UNDERLYING SECURITY DOCUMENTS" shall mean, collectively, the
Canadian Forest Debenture and the deposit agreement in respect thereof,
the ProMark Debenture and the deposit agreement in respect thereof, the
Forest Guarantee, Canadian Guarantee, the Forest Debenture and the
deposit agreement in respect thereof, the 3189503 Guarantee and Pledge
Agreement, all instruments granting a Lien on any Property of the
Borrower or the Subsidiary Borrowers to the Company and all
registrations with respect to the Liens created by that security.
"USAGE RATIO" shall mean as of any date the ratio of (a) the
aggregate principal amount of all Loans, Swingline Loans, Letter of
Credit Liabilities and Bankers' Acceptance Liabilities outstanding on
such date PLUS the aggregate principal amount of the U.S. Credit
Agreement Obligations pursuant to the U.S. Credit Agreement outstanding
on such date to (b) the lesser of the Borrowing Base or the Combined
Commitments on such date.
AMENDMENT NO. 1
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2.04 The reference in Section 2.01(d) of the Second Amended
and Restated Credit Agreement to "C$80,000,000" is amended to read
"C$165,000,000".
2.05. The definitions of "DETERMINATION PERIOD", "INDEPENDENT
PETROLEUM ENGINEER", "PROVED RESERVES" and "NET BACK POOL REPORT" in
Section 1 of the Second Amended and Restated Credit Agreement shall be
amended by changing the words "Reserve Evaluation Report" to "Borrowing
Base Report" wherever they appear.
2.06. Section 1 of the Second Amended and Restated Credit
Agreement shall be amended by deleting the existing Section 1.03 and
inserting a new Section 1.03 as follows:
"1.03 BORROWING BASE.
(a) BORROWING BASE REPORTS. Canadian Forest and Forest have
furnished to the U.S. Agent and the Lenders updated Borrowing Base
Reports dated January 1, 1997. On or before each Report Delivery Date,
Canadian Forest and Forest shall furnish to the U.S. Agent, the
Administrative Agent and the Lenders updated Borrowing Base Reports.
(b) BORROWING BASE. During the period commencing on the date
hereof and ending on such date the first redetermination of the
Borrowing Base becomes effective as provided below in this Section
1.03(b), the Borrowing Base shall be $130,000,000 (subject to any
adjustments and redeterminations provided for by Sections 1.03(c),
1.03(d), 1.03(e) and 2.11(f) hereof) which amount has been determined on
the basis of the Borrowing Base Reports referred to in the first
sentence of Section 1.03(a) hereof (with such adjustments to the rates,
factors, values, estimates, assumptions and computations set forth in
such Borrowing Base Reports as are acceptable to the Combined Majority
Lenders). As promptly as reasonably practicable after its receipt of
the Borrowing Base Reports furnished to it pursuant to the second
sentence of Section 1.03(a) hereof, the U.S. Agent (in consultation with
the Combined Majority Lenders) shall endeavor to redetermine the
Borrowing Base as an amount in Dollars on the basis of such Borrowing
Base Reports in the manner provided in this clause (b), notify the
Lender Group of such redetermination and, if such redetermination is
approved by all of the Lender Group (in the case of an increase in the
Borrowing Base) or by the Combined Majority Lenders (in the case of (i)
a decrease in the Borrowing Base or (ii) no change in the Borrowing
Base), as applicable, notify the Company and Forest of the Borrowing
Base as an amount in Dollars as so redetermined and such redetermined
Borrowing Base shall become effective on the Determination Date next
following each Report Delivery Date (or, if later, on the date notified
by the U.S. Agent to the Company and Forest) and shall remain effective
until again redetermined as provided in this Section 1.03(b) (subject to
any adjustments and redeterminations provided for by Sections 1.03(c),
1.03(d) and 1.03(e) hereof, reductions pursuant to Section 2.11(e) and
(f) hereof or additions pursuant to Section 2.11(a) hereof). The
determination by the U.S. Agent and the Lender Group or the Combined
Majority Lenders, as the case may be, of the Borrowing Base for any
Determination Period shall be made on the basis of parameters which may
include the Present Value of Reserves attributable to Hydrocarbon
Properties as set forth in the applicable Borrowing Base Report for such
Determination Period, subject, however, to such adjustments as
AMENDMENT NO. 1
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the U.S. Agent, with the concurrence of the Lender Group or the Combined
Majority Lenders, as the case may be, may make in its and their sole
discretion to the rates, factors, values, estimates, assumptions and
computations set forth in such Borrowing Base Report and any other
relevant information or factors, including without limitation, any
additional Indebtedness or other obligations that may be incurred by
Forest and its Subsidiaries that the Combined Majority Lenders may deem
appropriate.
As used herein, "BORROWING BASE" means the amount specified in
the first sentence of this Section 1.03(b) as determined from time to
time as provided in the second sentence of Section 1.03(b) and subject
to adjustments, redeterminations and principles provided in Sections
1.03(c), 1.03(d), 1.03(e) and 2.11 hereof.
(c) MATERIAL CHANGE. The Company agrees to notify the
Administrative Agent and the U.S. Agent promptly of any material change
of which the Company, Forest, Canadian Forest or any of their respective
Restricted Subsidiaries is aware which reduces or may result in a
reduction of the Borrowing Base by more than 10%. Promptly upon receipt
of such notice, the U.S. Agent (in consultation with the Combined
Majority Lenders) shall endeavor to adjust the Borrowing Base pursuant
to the procedures set forth in Section 1.03(b) hereof.
(d) REDETERMINATION. If so requested by the Majority Lenders
or the Majority Banks under, and as defined in, the U.S. Credit
Agreement, or Forest at any time, the U.S. Agent shall, as promptly as
reasonably practicable after the receipt of such request, endeavor to
redetermine (in consultation with the Lender Group or the Combined
Majority Lenders, as applicable) the Borrowing Base as then in effect on
the basis of the then most recent applicable Borrowing Base Reports
(subject, however, to such additional adjustments to the rates, factors,
values, estimates, assumptions and computations as set forth therein as
the U.S. Agent, with the concurrence of the Combined Majority Lenders,
may determine to be appropriate) as provided in Section 1.03(b) hereof.
As promptly as reasonably practical following its redetermination of the
Borrowing Base, the U.S. Agent shall notify the Lender Group of such
redetermination and, if such redetermination is approved by all of the
Lender Group (in the case of (i) an increase in the Borrowing Base or
(ii) no change in the Borrowing Base) or by the Combined Majority Lender
(in the case of a decrease in the Borrowing Base), as applicable, notify
the Company and Forest of the Borrowing Base as so redetermined and such
redetermined Borrowing Base shall become effective immediately upon
delivery to the Company and Forest of such notice of redetermination.
(e) DETERMINATIONS, ETC. All determinations and
redeterminations and adjustments by the U.S. Agent provided for above in
this Section 1.03 or in the definition of "Present Value of Reserves" in
Section 1.01 (and any determinations and decisions by the Combined
Majority Lenders in connection therewith, including any thereof
approving or disapproving a proposed redetermination or redetermination
by the U.S. Agent or effecting any adjustment to any element included in
a Borrowing Base Report or the determination or redetermination of the
Borrowing Base) shall be made on a reasonable basis, in good faith and
in a manner reasonably consistent with the basis on which the initial
Borrowing Base was determined
AMENDMENT NO. 1
<PAGE>
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to be acceptable to the Lender Group (but after giving effect to changes
in facts and circumstances occurring after the date of such initial
determination including, but not limited to, reserves and production,
operating expenses and economic assumptions with respect to price of
hydrocarbons and inflation), and any such determination, redetermination
or adjustment shall consider any other relevant information or factors,
including without limitation, any additional Indebtedness or other
obligations that may be incurred by Forest and its Subsidiaries that the
Combined Majority Lenders may deem appropriate, PROVIDED that no
Hydrocarbon Properties acquired by any Subsidiary of Forest after the
date hereof shall be included in the calculation of the Borrowing Base
unless such Subsidiary is a Subsidiary Guarantor under the U.S. Credit
Agreement or is a Subsidiary Borrower or otherwise liable as a surety
under the Canadian Forest Credit Agreement.
(f) FOREST SALE. The Company and the Lenders agree that the
sale of the Forest Pledged Properties from Canadian Forest to Forest
pursuant to the Forest Purchase Agreement, and the subjecting of such
Forest Pledged Properties to the Forest Debenture, shall not result in a
redetermination or adjustment of the Borrowing Base, and that such
Forest Pledged Properties shall continue to be included in the Borrowing
Base (so long as they are owned by Forest and are not otherwise
subjected to any Lien (other than the Lien of the Forest Debenture) by
Forest) to the same extent as if such sale had not occurred."
2.07. Section 2.01 of the Second Amended and Restated Credit
Agreement is amended by (i) deleting the existing paragraphs (a) and (d)
and inserting a new paragraph (a) as follows:
"(a) Each Lender severally agrees, in accordance with the
terms and conditions of this Agreement, to make one or more loans to the
Company in Canadian Dollars or U.S. Dollars during the period from and
including the Closing Date to and including the Commitment Termination
Date, in an aggregate amount up to but not exceeding the least of (x)
the Commitment of such Lender and (y) an amount equal to such Lender's
Commitment Percentage multiplied by the then effective Allocated
Canadian Borrowing Base determined pursuant to the immediately preceding
Borrowing Base Reports; PROVIDED that (i) in no event shall the
aggregate principal amount of all Loans (including all Swingline Loans)
(with the Principal Amount of U.S. Dollar Loans expressed as an
Equivalent Amount in Canadian Dollars), together with the aggregate
amount of all Letter of Credit Liabilities (with the Letter of Credit
Liabilities in U.S. dollars expressed in an Equivalent Amount in
Canadian Dollar) and all Bankers' Acceptance Liabilities of the Company,
exceed the lesser of (x) the aggregate amount of the Commitments as in
effect from time to time, and (y) the then effective Allocated Canadian
Borrowing Base determined pursuant to Section 2.12 hereof and the
immediately preceding Borrowing Base Reports and (ii) the Company may
not borrow Loans, obtain Letters of Credit or Bankers' Acceptances under
this Agreement at any time while a Borrowing Base Deficiency exists.
The aggregate of the Commitments of the Lenders on the date hereof is
C$165,000,000 or the Equivalent Amount in U.S. Dollars."; and
(ii) relettering clause "(e)" therein to be clause "(d)"."
AMENDMENT NO. 1
<PAGE>
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2.08. Section 2 of the Second Amended and Restated Credit
Agreement is further amended by:
(i) deleting the existing Section 2.02 and inserting a new
Section 2.02 as follows:
"2.02 BORROWINGS. The Company shall give the
Administrative Agent and the U.S. Agent (which shall promptly notify the
Lenders) notice of each borrowing hereunder as provided in Section 4.06
hereof. Not later than 1:00 p.m. Toronto time on the date specified for
each borrowing hereunder (other than Swingline Loans), each Lender shall
make available the amount of the Loan or Loans to be made by it on such
date to the Administrative Agent, at the Administrative Agent's account
for the Currency in which such Loan is denominated that is maintained by
the Administrative Agent with Chase Canada at the Principal Office, in
immediately available funds, for account of the Company. The amount so
received by the Administrative Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Company by either
depositing the same, in immediately available funds, in an account of
the Company and maintained with Chase Canada at the Principal Office or
by transferring such funds to an account designated by the Company in
writing. At the time of each such notice of borrowing hereunder the
Company shall deliver a certificate of the Chief Financial Officer, the
Treasurer or an Assistant Treasurer of the Company which certificate
shall indicate the Usage Ratio on such date, of Forest and its
Subsidiaries after giving effect to such borrowing and shall show, in
reasonable detail, the calculations used to derive such Usage Ratio.
Notwithstanding any provision of this Agreement to the contrary,
Canadian Prime Loans, BA Loans and Swingline Loans may only be
denominated in Canadian Dollars and U.S. Base Rate Loans and Eurodollar
Loans may only be denominated in U.S. Dollars."; and
(ii) deleting the existing first paragraph of Section 2.03 and
replacing it with the following:
"2.03 LETTERS OF CREDIT. Subject to the terms and conditions
of this Agreement, the Commitments may be utilized, upon the request of
the Company, in addition to the Loans provided for by Section 2.01
hereof and the issuance of Bankers' Acceptances provided for by Section
2.04 hereof, by the issuance by the Issuing Bank of letters of credit
(collectively, "LETTERS OF CREDIT") in Canadian Dollars or U.S. Dollars
for account of the Company, PROVIDED that in no event shall (i) the
aggregate amount of all Letter of Credit Liabilities, together with the
aggregate Principal Amount of the Loans (including all Swingline Loans)
and the aggregate amount of all Bankers' Acceptance Liabilities (with
the amounts of any Loans or Letter of Credit Liabilities outstanding in
U.S. Dollars expressed as an Equivalent Amount in Canadian Dollars),
exceed the lesser of (x) the aggregate amount of the Commitments as in
effect from time to time, and (y) the then effective Allocated Canadian
Borrowing Base determined pursuant to Section 2.12 hereof and the
immediately preceding Borrowing Base Reports, (ii) the aggregate
outstanding amount of all Letter of Credit Liabilities exceed
C$15,000,000, (iii) the expiration date of any Letter of Credit extend
beyond the earlier of the Commitment Termination Date and the date 12
months
AMENDMENT NO. 1
<PAGE>
- 10 -
following the issuance of such Letter of Credit and (iv) any Letter of
Credit require payment against a conforming draft to be made thereunder
on the same Business Day on which that draft is presented, if
presentation is made after 1:00 p.m., Toronto time. Whenever the
Company is required to furnish a notice to the Administrative Agent
pursuant to the following additional provisions of this Section 2.03, it
shall give a copy of such notice to the U.S. Agent. The following
additional provisions shall apply to Letters of Credit;";
(iii) deleting the existing first paragraph of Section 2.04 and
replacing it with the following:
"2.04 BANKERS' ACCEPTANCES. Subject to the terms and
conditions of this Agreement, the Commitments may be utilized, upon the
request of the Company, in addition to the Loans provided for by Section
2.01(a) hereof and the issuance of Letters of Credit provided for by
Section 2.03 hereof, for the acceptance by the Lenders of bankers'
acceptances (collectively, "BANKERS' ACCEPTANCES") issued by the
Company, PROVIDED that in no event shall (i) the aggregate amount of all
Bankers' Acceptance Liabilities, together with the aggregate Principal
Amount of the Loans (including all Swingline Loans) and the aggregate
amount of all Letter of Credit Liabilities (with amounts of any Loans or
Letter of Credit Liabilities outstanding in U.S. Dollars expressed as an
Equivalent Amount in Canadian Dollars) exceed the lesser of (A) the
aggregate of the Commitments and (B) the then effective Allocated
Canadian Borrowing Base determined pursuant to Section 2.12 hereof and
the immediately preceding Borrowing Base Reports and (ii) any Bankers'
Acceptances have maturities of less than 30 days or more than 180 days
from the Acceptance Date (and shall in no event mature on a date after
the Commitment Termination Date). Whenever the Company is required to
furnish a notice to the Administrative Agent pursuant to the following
additional provisions of this Section 2.04, it shall give a copy of such
notice to the U.S. Agent. The following additional provisions shall
apply to Bankers' Acceptances:"; and
(iv) deleting the existing Section 2.05 and inserting a new
Section 2.05 as follows:
"2.05 SWINGLINE LOANS. (a) Subject to the terms and
conditions of this Agreement, BOM agrees to make loans ("SWINGLINE
LOANS") to the Company from time to time prior to the Commitment
Termination Date in an aggregate principal amount at any time
outstanding that will not result in (i) the aggregate Principal Amount
of outstanding Swingline Loans exceeding C$5,000,000 or (ii) the
aggregate Principal Amount of all Loans including all Swingline Loans
(with the Principal Amount of U.S. Dollar Loans expressed as the
Equivalent Amount in Canadian Dollars), together with the aggregate
amount of all Letter of Credit Liabilities (with the Letter of Credit
Liabilities in U.S. Dollars expressed as the Equivalent Amount in
Canadian Dollars) and all Bankers' Acceptance Liabilities at any time
exceeding the lesser of (x) the aggregate amount of the Commitments and
(y) the then effective Allocated Canadian Borrowing Base determined
pursuant to Section 2.12 hereof. All Swingline Loans shall be
denominated in Canadian Dollars. Within the foregoing limits and
subject to the terms and conditions set forth herein, the Company may
borrow, prepay and reborrow Swingline
AMENDMENT NO. 1
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Loans. Swingline Loans shall constitute Loans hereunder.
(b) In order to request a Swingline Loan, the Company shall
notify BOM and the U.S. Agent of such request by telephone (confirmed by
telecopy), not later than 2:00 p.m., Calgary time (or 4:00 p.m. Calgary
time in the case of borrowings to satisfy outstandings under the BOM
Agreement), on the day of a proposed Swingline Loan. Notwithstanding
the foregoing, in the event that at any time BOM makes demand for
payment of any amounts to which it is entitled under the BOM Agreement
and such amounts are not paid by the close of business on the date of
demand, the Company shall be deemed to have notified BOM of a request
for a Swingline Loan in an amount equal to the lesser of (i) C$5,000,000
less the aggregate Principal Amount of any outstanding Swingline Loans
and (ii) the amounts demanded under the BOM Agreement. Each such notice
provided by the Company by telephone request shall be irrevocable and
shall specify the requested date (which shall be a Business Day) and
amount of the requested Swingline Loan. BOM will promptly advise the
Administrative Agent and the U.S. Agent of any such notice received from
the Company and of any such notice deemed to be provided by the Company.
BOM shall make each Swingline Loan available to the Company by means of
a credit to the general deposit account no. 1212-176 of the Company at
the BOM Main Branch Calgary, Alberta by 2:30 p.m., Calgary time, on the
requested date of such Swingline Loan, or in the case of a deemed
notice, on or before the next Business Day following the date BOM
provides the demand for payment.
(c) On each day during the period commencing with the making
by BOM of any Swingline Loan and until such Swingline Loan shall have
been repaid, the Commitment of each Lender shall be deemed to be
utilized for all purposes of this Agreement in an amount equal to such
Lender's Commitment Percentage of the then outstanding aggregate
Principal Amount of such Swingline Loan. Each Lender (other than BOM)
agrees that, upon the making of any Swingline Loan hereunder, it shall
automatically acquire a participation in the BOM's rights under such
Swingline Loan in an amount equal to such Lender's Commitment Percentage
of the then outstanding aggregate Principal Amount of such Swingline
Loan. BOM shall promptly advise the Administrative Agent and the U.S.
Agent of each Swingline Loan made by BOM and the Administrative Agent
shall promptly advise each of the Lenders of each of those Swingline
Loans being made. In furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice from the
Administrative Agent that a Swingline Loan has been made, to pay to the
Administrative Agent, for the account of BOM, such Lender's Commitment
Percentage of such Swingline Loan or Loans. Each Lender acknowledges
and agrees that its obligation to acquire participations in, and make
payments for, Swingline Loans pursuant to this paragraph is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever.
Each Lender shall comply with its obligation under this paragraph by
wire transfer of immediately available funds, in the same manner as
provided in Section 2.02 with respect to Loans made by such Lender (and
Section 2.02 shall apply, MUTATIS MUTANDIS, to the payment obligations
of the Lenders), and the Administrative Agent shall promptly pay to BOM
the amounts so received by it from the Lenders. The purchase
AMENDMENT NO. 1
<PAGE>
- 12 -
of participations in a Swingline Loan pursuant to this paragraph shall
not relieve the Company of any default in the payment thereof."; and
(v) deleting the existing Section 2.07 and inserting a new
Section 2.07 as follows:
"2.07 COMMITMENT FEE. The Company shall pay to the
Administrative Agent for account of each Lender a commitment fee for
each day at a rate per annum equal to the Applicable Commitment Fee Rate
TIMES such Lender's PRO RATA share (based on its respective Commitment)
of the Allocated Canadian Borrowing Base LESS the aggregate principal
amount of all Loans, Bankers' Acceptances and Letter of Credit
Liabilities (collectively, such difference for all of the Lenders being
the "AVAILABLE BORROWING AMOUNT") (with any amounts outstanding in U.S.
Dollars being expressed as an Equivalent Amount in Canadian Dollars)
outstanding on such day for the period from and including the date of
Amendment No. 1 to but not including the earlier of the date such
Lender's Commitment is terminated and the Commitment Termination Date.
Accrued Commitment Fees shall be payable on each Quarterly Date and on
the earlier of the date the Commitments are terminated and the
Commitment Termination Date.".
2.09. Section 2.09 of the Second Amended and Restated
Credit Agreement shall be amended by deleting the existing paragraph (a)
and inserting a new paragraph (a) as follows:
"(a) The Loans made by each Lender (other than Swingline
Loans) to the Company shall be evidenced by the promissory note of the
Company dated August 19, 1997, payable to such Lender in a principal
amount equal to the amount of its Commitment.".
2.10. Section 2.10 of the Second Amended and Restated
Credit Agreement shall be amended by inserting a new sentence at the end
of Section 2.10 as follows:
"Whenever the Company is required to furnish a notice to the
Administrative Agent pursuant to this Section 2.10, it shall give a copy
of such notice to the U.S. Agent.".
2.11. Section 2.11 of the Second Amended and Restated Credit
Agreement is amended by:
(i) deleting the existing paragraph (a) and inserting a new
paragraph (a) as follows:
"(a) BORROWING BASE. The U.S. Agent shall notify the Company
and Forest (in a "DEFICIENCY NOTICE") any time the Borrowing Base as
then in effect is less than the sum of (i) the aggregate principal
amount of the Loans, Swingline Loans, Bankers' Acceptance Liabilities
and Letter of Credit Liabilities outstanding at such time and (ii) the
aggregate principal amount of the U.S. Credit Agreement Obligations
outstanding at such time (the amount of such difference being called
herein the "BORROWING BASE DEFICIENCY") and within 30 days after the
date of the Deficiency Notice, the Company shall notify the U.S. Agent
and the Administrative Agent of the
AMENDMENT NO. 1
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Company's and Forest's intentions with respect to compliance with the
procedures set forth in this Section 2.11(a). As specified in such
notice from the Company, the Company shall (within 90 days after the
date of the Deficiency Notice) prepay, in accordance with Section 3.02
of the Intercreditor Agreement or, provide cover in accordance with
Section 2.11(h) of this Agreement, the aggregate principal amount of all
Loans (including Swingline Loans), Bankers' Acceptance Liabilities and
Letter of Credit Liabilities outstanding at such time, in an amount
sufficient to eliminate such Borrowing Base Deficiency.";
(ii) by deleting the existing paragraph (d) and inserting a
new paragraph (d) as follows:
"(d) EXCESS RESULTING FROM EXCHANGE RATE CHANGE.
(i) Subject to Section 2.11(d)(ii), any time that, following one
or more fluctuations in the exchange rate of the U.S. Dollar against the
Canadian Dollar, the sum of the Equivalent Amount in Canadian Dollars of
the aggregate Principal Amount of Loans and Letter of Credit Liabilities
outstanding at such time denominated in U.S. Dollars PLUS the aggregate
Principal Amount of Canadian Dollar denominated Loans, Letter of Credit
Liabilities and Bankers' Acceptance Liabilities outstanding at such time
(the amount of such sum being called herein the "AGGREGATE BORROWINGS")
EXCEEDS by an amount equal to or in excess of 1% of the lesser of (x) the
aggregate amount of the Commitments of the Lenders on such date and (y) the
then effective Allocated Canadian Borrowing Base or the Equivalent Amount
in Canadian Dollars determined pursuant to Section 2.12 hereof and the
immediately preceding Borrowing Base Reports, the Company shall promptly
after receipt of notice from the Administrative Agent and, in any case,
within 10 days after receipt of such notice, either (A) prepay the Loans
(except BA Loans) (and/or provide cover for the Letter of Credit
Liabilities, BA Loans and the Bankers' Acceptance Liabilities as specified
in clause (h) below) in an amount (such amount being called herein the
"EXCHANGE RATE DEFICIENCY") necessary to reduce the Aggregate Borrowings to
an amount equal to or less than the lesser of (x) the aggregate amount of
the Commitments of the Lenders on such date and (y) the then effective
Allocated Canadian Borrowing Base or the Equivalent Amount in Canadian
Dollars determined pursuant to Section 2.12 hereof and the immediately
preceding Borrowing Base Reports or (B) maintain or cause to be maintained
with the Administrative Agent deposits of Canadian Dollars in an amount
equal to the Exchange Rate Deficiency, such deposits to be maintained in
such form and upon such terms as are acceptable to the Administrative
Agent. Without in any way limiting the forgoing provisions, the
Administrative Agent shall on each Acceptance Date, Maturity Date,
Quarterly Date and on the date of any borrowing hereunder make any
necessary exchange rate calculations to determine whether any such excess
exists on such date and, if such excess exists on such date and if there is
an excess, it shall so notify the Company.
(ii) Notwithstanding Section 2.11(d)(i), the Combined Majority
Lenders shall be entitled, in their sole discretion, to require that the
Company, at the Company's
AMENDMENT NO. 1
<PAGE>
- 14 -
option, (A) make the payments or prepayments or maintain the deposits
required to be maintained under Section 2.11(d)(i) or (B) fully hedge,
to the reasonable satisfaction of the Combined Majority Lenders, the
Exchange Rate Deficiency and assign the benefit of all hedging contracts
to the Administrative Agent, for the benefit of the Lender Group, in any
case where an Exchange Rate Deficiency exists."
(iii) deleting the existing paragraph (e) and inserting a new
paragraph (e) as follows:
"(e) CASUALTY EVENTS. Upon the date 30 days following the receipt
by Canadian Forest or any of the Subsidiary Borrowers incorporated in Canada
(or Forest, in the case of the Forest Pledged Properties) of the proceeds of
insurance, condemnation award or other compensation in respect of any
Casualty Event affecting any Hydrocarbon Property other than Unrestricted
Properties of Canadian Forest or any Subsidiary Borrower incorporated in
Canada or assets used in connection with the gas marketing business of any of
the Subsidiary Borrowers incorporated in Canada (or Forest, in the case of
the Forest Pledged Properties) the Company shall prepay the Loans (and/or
provide cover for Letter of Credit and Bankers' Acceptance Liabilities as
specified in clause (h) below), and if such Casualty Event shall result in
the receipt by the Company or any of the Subsidiary Borrowers incorporated in
Canada (or Forest, in the case of the Forest Pledged Properties) of Net
Available Proceeds in excess of $2,500,000 or the Equivalent Amount in
Canadian Dollars, the Combined Majority Lenders, in their sole discretion
based on their review of such Casualty Event, may reduce the Borrowing Base
in an aggregate amount not in excess of 100% of the Net Available Proceeds of
such Casualty Event not theretofore applied to the repair or replacement of
such Hydrocarbon Property, or such lesser amount as is specified in a written
notice from the Combined Majority Lenders, such prepayment and reduction to
be effected in each case in the manner and to the extent specified in clause
(g) of this Section 2.11. Nothing in this clause (e) shall be deemed to
limit any obligation of the Company pursuant to any of the Security Documents
to remit to a collateral or similar account maintained by the Administrative
Agent pursuant to any of the Security Documents the proceeds of insurance,
condemnation award or other compensation received in respect of any Casualty
Event";
(iv) deleting the existing paragraph (f) and inserting a new
paragraph (f) as follows:
"(f) SALE OF ASSETS. Without limiting the obligation of the
Company to obtain consent of the Combined Majority Lenders pursuant to
Section 8.05 hereof to any Disposition not otherwise permitted hereunder, no
later than five Business Days prior to the occurrence of any Disposition, the
Company will cause Canadian Forest to deliver to the Lender Group a
statement, certified by the chief financial officer or treasurer of such
company, in form and detail satisfactory to the Administrative Agent, of the
amount of the Net Available Proceeds of such Disposition and, if the Net
Available Proceeds of such Disposition together with the aggregate of all
other Dispositions during the current Determination Period is in excess of
$5,000,000 or the Equivalent Amount in Canadian Dollars, the Combined
Majority Lenders, based on their review
AMENDMENT NO. 1
<PAGE>
- 15 -
of the statement referred to in this Section 2.11(f) may, in their sole
discretion, reduce the Borrowing Base in an aggregate amount not in excess of
100% of the Net Available Proceeds of such Disposition, or such lesser amount
as is specified in a written notice from the Combined Majority Lenders. If a
Borrowing Base Deficiency results from such reduction, then the Company
shall, notwithstanding Section 2.11(a) to the contrary, immediately prepay
the Loans (including Swingline Loans) (and/or provide cover for Letter of
Credit and Bankers' Acceptance Liabilities) with the Net Available Proceeds
to cure such deficiency. Notwithstanding the foregoing, the Company shall
not be required to prepay the Loans (including Swingline Loans)(and/or
provide cover for the Letter of Credit and Bankers' Acceptance Liabilities
pursuant to Section 2.11(h) hereof), and the Borrowing Base shall not be
subject to automatic reduction upon any sale of Property by Canadian Forest
or any Subsidiary Borrower or sale of any of the Forest Pledged Properties in
the case of Forest permitted pursuant to Section 8.05 of the Canadian Forest
Credit Agreement."; and
(v) deleting the existing paragraph (g) and inserting a new
paragraph (g) as follows:
"(g) APPLICATION. Prepayments and reductions of the Borrowing Base
described in the above clauses of this Section 2.11 shall be effected as
follows: the Borrowing Base shall be automatically reduced by an amount equal
to the amount specified in such clauses and to the extent that, after giving
effect to such reduction, the aggregate Principal Amount of the Loans,
together with the aggregate amount of all Letter of Credit Liabilities and
Bankers' Acceptances (with the amount of Loans and the Letter of Credit
Liabilities in U.S. Dollars expressed as an Equivalent Amount in Canadian
Dollars), would exceed the then effective Allocated Canadian Borrowing Base
determined pursuant to Section 2.12 hereof and the immediately preceding
Borrowing Base Reports, the Company shall first, prepay the Loans (except BA
Loans) and second, provide cover for Letter of Credit Liabilities, BA Loans
and Bankers' Acceptance Liabilities as specified in clause (h) below, in an
aggregate amount equal to such excess. To the extent possible, any
prepayments required pursuant to this Section 2.11 shall be applied FIRST to
U.S. Base Rate Loans, SECOND to Canadian Prime Rate Loans and THIRD to
Eurodollar Loans."
2.12 A new Section 2.12 of the Second Amended and Restated Credit
Agreement shall be added as follows:
"Section 2.12 ALLOCATION OF BORROWING BASE.
(a) The Borrowing Base may be allocated between the Company under
this Agreement and Forest under the U.S. Credit Agreement. The Allocated
U.S. Borrowing Base in effect from time to time shall represent the maximum
amount of credit in the form of Loans and Letters of Credit (subject to the
aggregate Commitments and the other provisions of the U.S. Credit Agreement)
that the U.S Lenders will extend to Forest at any one time prior to the
"Commitment Termination Date" specified in the U.S. Credit Agreement. The
Allocated Canadian Borrowing Base in effect from time to time shall represent
the maximum amount of credit in the form of Loans, Letters of Credit and
Bankers' Acceptances (subject to the aggregate
AMENDMENT NO. 1
<PAGE>
-16-
Commitments and the other provisions of this Agreement) that the Lenders will
extend to the Company at any one time prior to the Commitment Termination
Date. On the date of Amendment No. 1, the Allocated Canadian Borrowing Base
shall be $100,000,000, resulting in an initial Allocated U.S. Borrowing Base
of $30,000,000.
(b) The Company at any time shall have the right to request in
writing to the Administrative Agent, U.S. Agent and the Lender Group, in
their sole discretion, an increase in the Allocated Canadian Borrowing Base
and a corresponding decrease in the Allocated U.S. Borrowing Base; provided
that any such increase shall require the approval of all of the Lenders and
at no time shall the Allocated Canadian Borrowing Base exceed $100,000,000;
and provided further that the Company may not make a request for an increase
in the Allocated Canadian Borrowing Base more than four (4) times during any
twelve (12) month period. Within ten (10) Business Days of the receipt by
the Lenders of such request, the Lenders shall give written notice to the
Company, Forest and the U.S. Agent of their approval or disapproval of such
increase. If such increase is approved, each such Lender shall have its
share of the Allocated Canadian Borrowing Base increased by an amount equal
to its proportion of the Commitment Percentage. The revised Allocated U.S.
Borrowing Base and Allocated Canadian Borrowing Base shall become effective
upon the distribution by the U.S. Agent to the Company, Forest, the
Administrative Agent and the Lender Group of written notice thereof which
shall occur not later than three (3) Business Days after its receipt of the
notice of increase.
(c) Forest at any time shall have the right to request in writing
to the Administrative Agent, the U.S. Agent and the U.S. Lenders that such
U.S. Lenders, in their sole discretion, permit Forest to increase the
Allocated U.S. Borrowing Base and decrease the Allocated Canadian Borrowing
Base; provided that any such change shall require the approval of all of such
U.S. Lenders and at no time shall the Allocated U.S. Borrowing Base exceed
$100,000,000; and provided further that Forest may not make a request for an
increase in the Allocated U.S. Borrowing Base more than four (4) times during
any twelve (12) month period. Within ten (10) Business Days of the receipt by
such U.S. Lenders of such request, such U.S. Lenders shall give written
notice to the Company, Forest and the U.S. Agent of their approval or
disapproval of such change. The revised Allocated U.S. Borrowing Base and
Allocated Canadian Borrowing Base shall become effective upon the
distribution by the U.S. Agent to the Company, Forest, the Administrative
Agent and the Lender Group of written notice thereof which shall occur not
later than three (3) Business Days after its receipt of the notice of
increase.
(d) For purposes of this Agreement, the Allocated Canadian
Borrowing Base shall be expressed as the Equivalent Amount in Canadian
Dollars. The Equivalent Amount shall be calculated (i) on the date a
reallocation pursuant to this Section 2.12 between the Allocated U.S.
Borrowing Base and the Allocated Canadian Borrowing Base occurs, (ii) on each
Determination Date, or (iii) in any event, at ninety (90) day intervals
following the most recent Determination Date."
2.13. Section 4.01 of the Second Amended and Restated Credit
Agreement shall be amended by inserting a new paragraph (g) as follows:
AMENDMENT NO. 1
<PAGE>
-17-
"(g) The Company shall give the U.S. Agent notice of each payment
hereunder within 3 Business Days of the relevant payment."
2.14. The introduction to Section 8 of the Second Amended and
Restated Credit Agreement shall be amended by replacing the word "Lender"
with the words "Lender Group" on the second line.
2.15. Section 8.10 of the Second Amended and Restated Credit
Agreement shall be amended in its entirety as follows:
"8.10 INTEREST COVERAGE RATIO.
The Company will not permit the Interest Coverage Ratio for any
period of four consecutive fiscal quarters (treated for this purpose as a
single accounting period) following March 31, 1997, to be less than 2.0:1.0
as of the end of any fiscal quarter of the Canadian Forest."
2.16. Section 8.11 of the Second Amended and Restated Credit
Agreement shall be amended in its entirety as follows:
"8.11 WORKING CAPITAL. The Company will not permit the current
assets of Forest and its Subsidiaries (determined on a consolidated basis in
accordance with GAAP) to be equal to or less than the current liabilities of
Forest and its Subsidiaries (so determined). For purposes hereof, the terms
"CURRENT ASSETS" and "CURRENT LIABILITIES" shall have the respective meanings
assigned to them by GAAP, PROVIDED that in any event there shall be (i)
included in current assets the aggregate amount of the unused Combined
Commitments (but only to the extent such unused Combined Commitments could
then be utilized as provided in Section 6.02 hereof and Section 7.02 of the
U.S. Credit Agreement), (ii) excluded from current liabilities all
Indebtedness hereunder PLUS all Indebtedness under, and as defined in, the
U.S. Credit Agreement PLUS all Indebtedness under, and as defined in, the
Canadian Forest Credit Agreement, (iii) excluded from current liabilities all
Production Payments (as defined in the U.S. Credit Agreement) and (iv)
excluded from current liabilities the current portion of any gas balancing
liabilities hereunder and under the U.S. Credit Agreement."
2.17. Section 11 of the Second Amended and Restated Credit
Agreement is amended by inserting a new Section 11.22 as follows:
"11.22 INTERCREDITOR AGREEMENT. (a) Reference is hereby made to
the Intercreditor Agreement, which provides for certain matters relating to
this Agreement and the U.S. Credit Agreement. To the extent of any conflict
between the terms of this Agreement and the terms of the Intercreditor
Agreement, the Intercreditor Agreement shall control. Each Lender hereby
authorizes the Administrative Agent to execute and deliver the Intercreditor
Agreement on its behalf and the execution and delivery by the Administrative
Agent of the Intercreditor
AMENDMENT NO. 1
<PAGE>
-18-
Agreement on behalf of the Lenders is hereby ratified and confirmed by each
of the Lenders. Any Lender that becomes a party to this Agreement after the
date hereof agrees to be bound by the terms and provisions of the
Intercreditor Agreement.
(b) The Company acknowledges that certain financial institutions
including certain of the Lenders are providing financing to Forest. The
Company consents to the disclosure of information provided by the Company to
the Lenders to such other financial institutions. The Company also
acknowledges that the Lenders may enter into participation arrangements and
payment sharing understandings with such financial institutions and consents
to such arrangements and understandings. To the extent any such arrangements
or understandings give rise to any liability for any withholding tax payments
in connection with any payments made by Forest, the Company or any other
Obligor under either this Agreement or the U.S. Credit Agreement, then
(notwithstanding any provisions to the contrary set forth in this Agreement
or the U.S. Credit Agreement), Forest, pursuant to the U.S. Credit Agreement
has agreed to indemnify each of the applicable members of the Lender Group
and shall hold each of the applicable members of the Lender Group harmless
from and against any such liability; PROVIDED, HOWEVER, that each member of
the Lender Group (if so requested by the Company under this Agreement or
Forest under the U.S. Credit Agreement) will use good faith efforts to
accommodate any reasonable request by the Company or Forest in order to avoid
the need for, or reduce the amount of, such compensation so long as the
request will not, in the sole opinion of the applicable member of the Lender
Group, be disadvantageous to such member of the Lender Group.
Section 3. COMMITMENT FEE. Notwithstanding that the increase of
the Commitments contemplated by Section 2 hereof shall not become effective
until the satisfaction of the conditions precedent specified in Section 5
hereof, for purposes of calculating the amount of commitment fee payable
under Section 2.07 of the Second Amended and Restated Credit Agreement, the
Allocated Canadian Borrowing Base of the Lender shall be deemed to have been
so increased (and the Commitments of the New Lenders shall be deemed to have
become effective) immediately upon the execution of Amendment No. 1 by each
of the Lenders.
Section 4. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Lenders that the representations and warranties set forth
in Section 7 of the Second Amended and Restated Credit Agreement are true and
complete on the date hereof (unless otherwise limited to an earlier date) as
if made on and as of the date hereof and as if each reference in said
Section 7 to "this Agreement" and "the Notes" included reference to this
Amendment No. 1.
Section 5. CONDITIONS PRECEDENT. As provided in Section 2 above,
the amendments to the Second Amended and Restated Credit Agreement set forth
in said Section 2 shall become effective, as of the date hereof, upon the
satisfaction of the following conditions precedent:
5.01. EXECUTION BY ALL PARTIES. This Amendment No. 1 shall have
been executed
AMENDMENT NO. 1
<PAGE>
-19-
and delivered by each of the parties hereto.
5.02. NOTES AND INITIAL LOANS. The Company shall deliver for each
Bank whose Commitment is increasing (an "INCREASING LENDER"), a new
promissory note of the Company in substantially the form of Exhibit A to the
Second Amended and Restated Credit Agreement, dated the date hereof, payable
to such Bank in a principal amount equal to its Commitment (as increased
hereby) and otherwise duly completed and shall deliver for the New Lender a
promissory note of the Company in substantially the form of Exhibit A to the
Second Amended and Restated Credit Agreement, dated the date hereof, payable
to the order of such New Lender in a principal amount equal to its Commitment
and otherwise duly completed, and each of such promissory notes (a "NEW
NOTE") delivered to each Increasing Lender and the New Lender shall
constitute a "Note" under the Second Amended and Restated Credit Agreement as
amended hereby. In addition, the Company shall have borrowed from, and the
New Lender shall have made Loans to, the Company.
5.03. INTERCREDITOR AGREEMENT. The Intercreditor Agreement shall
have been executed and delivered by each of the parties thereto.
5.04. FOREST AMENDMENT AGREEMENT. The Amendment No. 2 to the U.S.
Credit Agreement shall have been executed and delivered by each of the
parties thereto.
5.05. OPINION OF COUNSEL TO THE COMPANY. An opinion of Daniel
McNamara, Corporate Counsel to the Company, Macleod Dixon, special Canadian
counsel to the Company and Vinson & Elkins L.L.P., special New York counsel
to Forest shall have been delivered to the Administrative Agent.
5.06. NOTES. The Notes, duly completed and executed, delivered by
the party thereto.
5.07. OTHER DOCUMENTS. The Administrative Agent shall have
received such other documents, certificates and opinions as the
Administrative Agent or any Lender or special counsel to Chase Canada may
reasonably request including the Canadian Guarantee and Third Security
Confirmation, Amendment and Supplemental Debenture Agreement.
Section 6. MISCELLANEOUS. Except as herein provided, the Second
Amended and Restated Credit Agreement shall remain unchanged and in full
force and effect. This Amendment No. 1 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
amendatory instrument and any of the parties hereto may execute this
Amendment No. 1 by signing any such counterpart. This Amendment No. 1 shall
be governed by, and construed in accordance with, the laws of the Province of
Alberta and the laws of Canada applicable therein.
AMENDMENT NO. 1
<PAGE>
S-1
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and delivered as of the day and year first
above written.
611852 SASKATCHEWAN LTD.
By /s/ Kenton M. Scroggs
-----------------------------------
Title: Vice President
Address for Notices:
611852 SASKATCHEWAN LTD.
c/o Canadian Forest Oil Ltd.
600, 800-Sixth Avenue, S.W.
Calgary, Alberta T2P 3G3
Canada
Telecopier No.: (403) 292-8072
Telephone No.: (403) 292-8000
Attention: Vice President-Finance
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, CO 80202
Attention: Vice President and Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
AMENDMENT NO. 1
<PAGE>
S-2
LENDERS
THE CHASE MANHATTAN BANK OF CANADA
COMMITMENT
- ----------
C$45,000,000
By /s/ Christine Chan
-----------------------------------
Title: Vice President
By /s/ D. McGorman
-----------------------------------
Title: Vice President
<PAGE>
S-3
COMMITMENT ROYAL BANK OF CANADA
- ----------
C$40,000,000
By /s/ D.R. Crook
-----------------------------------
Title: Senior Account Manager
<PAGE>
S-4
COMMITMENT BANK OF MONTREAL
- ----------
C$40,000,000
By /s/ Michael St. A. Gardner
-----------------------------------
Title: Director
<PAGE>
S-5
COMMITMENT CREDIT LYONNAIS CANADA
- ----------
C$40,000,000
<TABLE>
<S> <C>
By /s/ J.A. Scott Billingsley By /s/ R.L. (Bob) Wiesinger
---------------------------- -----------------------------
Title: Vice President Title: Manager, Corp. Banking
</TABLE>
Lending Office:
Address for Notices:
The Stock Exchange Tower
300 - 5th Avenue S.W.
Calgary, Alberta
CANADA T2P 3C4
Attention: First Vice President and Manager,
Western Region
Telecopier No.: (403) 263-4095
Telephone No.: (403) 263-1080
<PAGE>
S-6
THE CHASE MANHATTAN BANK OF CANADA
as Administrative Agent
By /s/ Christine Chan
----------------------------------
Title: Vice President
By /s/ D. McGorman
----------------------------------
Title: Vice President
Address for Notices to
Chase Canada as Administrative Agent:
1 First Canadian Place
100 King Street West
Suite 6900, P.O. Box 106
Toronto, Ontario M5X 1A4
Canada
Attention: Vice President Corporate Finance
Telecopier No.: (416) 216-4161
Telephone No.: (416) 216-4133
with a copy to:
The Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Rick Betz
Telecopier No.: (212) 552-1687
Telephone No.: (212) 552-2680
<PAGE>
SCHEDULE IV
APPLICABLE COMMITMENT FEE RATE
RANGE OF APPLICABLE COMMITMENT
- -------- ----------------------
USAGE RATIO FEE RATE (BPS PER ANNUM)
- ----------- ------------------------
less than or equal to .330:1.00 30.0
greater than .330:1.00 but less than
or equal to 0.660:1.00 35.0
greater than .660:1.00 37.5
<PAGE>
SCHEDULE V
APPLICABLE MARGIN
<TABLE>
<CAPTION>
APPLICABLE MARGIN (BPS)
-----------------------
CANADIAN U.S. BASE EURODOLLAR
RANGE OF USAGE RATIO PRIME LOANS RATE LOANS LOANS BA FEE RATE
- -------------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
less than or equal to .330:1.00 0.0 0.0 100.0 100.0
greater than .330:1.00 but less than
or equal to .660:1.00 25.0 25.0 125.0 125.0
greater than .660:1.00 0.0 50.0 50.0 150.0 150.0
</TABLE>
<PAGE>
EXECUTION COPY
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of September 26, 1997 between 611852
SASKATCHEWAN LTD., a corporation duly organized and validly existing under
the laws of the Province of Saskatchewan, Canada (the "COMPANY"); each of the
lenders that is a signatory hereto (individually, a "LENDER" and,
collectively, the "LENDERS"); and THE CHASE MANHATTAN BANK OF CANADA, as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "ADMINISTRATIVE AGENT").
The Company, the Lenders and the Administrative Agent are parties to
a Second Amended and Restated Credit Agreement dated as of April 1, 1997 as
amended by Amendment No. 1 dated as of August 19, 1997 (as heretofore further
modified and supplemented and in effect on the date hereof, the "SECOND
AMENDED AND RESTATED CREDIT AGREEMENT"), providing, subject to the terms and
conditions thereof, for extensions of credit (by making of loans and issuing
letters of credit) to be made by said Lenders to the Company in an aggregate
principal or face amount not exceeding C$165,000,000. The Company, the
Lenders and the Administrative Agent wish to amend the Second Amended and
Restated Credit Agreement in certain additional respects, and accordingly,
the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 2, terms defined in the Second Amended and Restated Credit
Agreement are used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the
conditions precedent specified in Section 5 below, but effective as of the
date hereof, the Second Amended and Restated Credit Agreement shall be
further amended as follows:
2.01. References in the Second Amended and Restated Credit
Agreement (including references to the Second Amended and Restated Credit
Agreement amended hereby) to "this Agreement" (and indirect references such
as "hereunder", "hereby", "herein", and "hereof") shall be deemed to be
references to the Second Amended and Restated Credit Agreement as amended and
as further amended hereby.
2.02. The following definitions are hereby added in alphabetical
order in Section 1.01 of the Second Amended and Restated Credit Agreement:
"AMENDMENT NO. 2" shall mean Amendment No. 2 dated as
<PAGE>
Page 2
of September 26, 1997 to this Agreement.
"CANADIAN FOREST INDENTURE" shall mean the Indenture dated as of
September 29, 1997 among Forest, as guarantor, Canadian Forest, as issuer,
and State Street Bank and Trust Company, as trustee, as the same shall,
subject to Section 8.17 hereof, be modified and supplemented and in effect
from time to time.
"CANADIAN FOREST SENIOR SUBORDINATED DEBT" shall mean the
Indebtedness of Canadian Forest evidenced by and in respect of the Canadian
Forest Senior Subordinated Notes issued pursuant to the Canadian Forest
Senior Subordinated Debt Documents.
"CANADIAN FOREST SENIOR SUBORDINATED DEBT DOCUMENTS" shall mean all
documents and agreements executed and delivered in connection with the
original issuance of the Canadian Forest Senior Subordinated Notes, including
the Canadian Forest Indenture.
"CANADIAN FOREST SENIOR SUBORDINATED NOTES" shall mean Canadian
Forest's 8 3/4% Senior Subordinated Notes due 2007 in an aggregate principal
amount not to exceed US$125,000,000.
2.03 Section 9.01 of the Second Amended and Restated Credit
Agreement shall be amended by deleting ";or" at the end of clause "(k)"
therein, and inserting the following:
", or, at any time that the guarantee granted by Forest pursuant to
the Canadian Forest Senior Subordinated Debt is in effect or, pursuant to
the terms of the Canadian Forest Indenture, is required to be in effect
(unless such provision has been waived in accordance with the Canadian
Forest Indenture), an "Event of Default" as defined in the Canadian Forest
Indenture has occurred and is continuing; or"
2.04. The opening paragraph of Section 11.17 of the Second
Amended and Restated Credit Agreement shall be deleted and the following
substituted therefor:
"11.17. ACKNOWLEDGEMENT OF PRIORITY OF INDEBTEDNESS. The Company
represents and warrants to the Lenders and the Administrative Agent that:
(a) the Indebtedness hereunder and under the other Loan Documents is (i)
"Senior Indebtedness of the Company" and "Senior Indebtedness of a
Subsidiary Guarantor", as applicable, for the purposes of the Forest
Indenture and (ii) "Designated Senior Indebtedness" for the purposes of the
Canadian Forest Indenture; and"
Section 3. CONSENT. The Administrative Agent and the Lenders
consent to the amendments, waivers and consents contained in the Amendment
No. 3 to the
<PAGE>
Page 3
U.S. Credit Agreement and in the Amendment No. 2 to the Canadian Forest
Credit Agreement.
Section 4. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Lender Group that the representations and warranties set
forth in Section 7 of the Second Amended and Restated Credit Agreement are
true and complete on the date hereof (unless otherwise limited to an earlier
date) as if made on and as of the date hereof and as if each reference in said
Section 7 to "this Agreement" included a reference to this Amendment No. 2.
Section 5. CONDITIONS PRECEDENT. As provided in Sections 2 and 3
above, the amendments to the Second Amended and Restated Credit Agreement set
forth in said Section 2 and the consent in said Section 3 shall become
effective, as of the date hereof, upon the satisfaction of the following
conditions precedent:
5.01. EXECUTION BY ALL PARTIES. This Amendment No. 2 shall have
been executed and delivered by each of the parties hereto.
5.02. CANADIAN FOREST SENIOR SUBORDINATED NOTES. The Canadian
Forest Indenture and the Guarantee granted by Forest in relation thereto
shall be in form and substance satisfactory to the Administrative Agent.
5.03. OTHER DOCUMENTS. The Administrative Agent shall have
received such other documents, certificates and opinions as the
Administrative Agent or any Lender or special counsel to Chase Canada may
reasonably request.
Section 6. MISCELLANEOUS. Except as herein provided, the Second
Amended and Restated Credit Agreement shall remain unchanged and in full
force and effect. This Amendment No. 2 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
amendatory instrument and any of the parties hereto may execute this
Amendment No. 2 by signing any such counterpart. This Amendment No. 2 shall
be governed by, and construed in accordance with, the laws of the Province of
Alberta and the laws of Canada applicable therein.
<PAGE>
Page 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be duly executed and delivered as of the day and year first above
written.
611852 SASKATCHEWAN LTD.
By
-------------------------
Title:
Address for Notices:
611852 SASKATCHEWAN LTD.
c/o Canadian Forest Oil Ltd.
600, 800-Sixth Avenue, S.W.
Calgary, Alberta TAP 3G3
Canada
Telecopier No.: (403) 292-8072
Telephone No.: (403) 292-8000
Attention: Vice President-Finance
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, CO 80202
Attention: Vice President and Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
<PAGE>
Page 5
LENDERS
-------
THE CHASE MANHATTAN BANK OF CANADA
By
-------------------------
Title:
By
-------------------------
Title:
<PAGE>
Page 6
ROYAL BANK OF CANADA
By
-------------------------
Title:
<PAGE>
Page 7
BANK OF MONTREAL
By
-------------------------
Title:
<PAGE>
Page 8
CREDIT LYONNAIS CANADA
By
-------------------------
Title:
<PAGE>
Page 9
THE CHASE MANHATTAN BANK OF CANADA
as Administrative Agent
By
-------------------------
Title:
By
-------------------------
Title:
Address for Notices to
Chase Canada as Administrative Agent:
1 First Canadian Place
100 King Street West
Suite 6900, P.O. Box 106
Toronto, Ontario M5X 1A4
Canada
Attention: Vice President Corporate
Finance
Telecopier No.: (416) 216-4161
Telephone No.: (416) 216-4133
with a copy to:
The Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Rick Betz
Telecopier No.: (212) 552-1687
Telephone No.: (212) 552-2680
<PAGE>
Page 1
EXECUTION COPY
************************************************************
CANADIAN FOREST OIL LTD.
and
SUBSIDIARY BORROWERS
-----------------------------
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of April 1, 1997
------------------------------
611852 SASKATCHEWAN LTD.
************************************************************
<PAGE>
Page 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . . . 1
1.01 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations. . . . . . . . . . . . . . . . 21
1.03 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.04 Types and Currency of Loans. . . . . . . . . . . . . . . . . . . . 24
Section 2. Commitment, Loans, Letters of Credit, Notes and Prepayments. . . 24
2.01 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.02 Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.03 BA Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.04 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . 26
2.05 Swingline Loans. . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.06 Changes of Commitment. . . . . . . . . . . . . . . . . . . . . . . 30
2.07 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.08 Loans Made Only if Proceeds are Available. . . . . . . . . . . . . 30
2.09 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.10 Optional Prepayments and Conversions or Continuations of Loans . . 31
2.11 Mandatory Prepayments and Reductions of Commitments. . . . . . . . 32
Section 3. Payments of Principal and Interest . . . . . . . . . . . . . . . 36
3.01 Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.02 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.03 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.04 Interest on Overdue Amounts. . . . . . . . . . . . . . . . . . . . 37
Section 4. Payments; Pro Rata Treatment; Computations; Etc. . . . . . . . . 37
4.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.02 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.03 Minimum Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.04 Interest Act (Canada). . . . . . . . . . . . . . . . . . . . . . . 39
4.05 Certain Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.06 Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5. Yield Protection, Etc. . . . . . . . . . . . . . . . . . . . . . 41
5.01 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.02 Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . 41
5.03 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.04 Treatment of Affected Loans. . . . . . . . . . . . . . . . . . . . 43
5.05 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.06 Compliance with Section 2.08 . . . . . . . . . . . . . . . . . . . 44
<PAGE>
Page 3
Section 6. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . 44
6.01 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.02 Effectiveness and Subsequent Extensions of Credit. . . . . . . . . 47
Section 7. Representations and Warranties . . . . . . . . . . . . . . . . . 48
7.01 Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . 48
7.02 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . 49
7.03 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.04 No Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.05 Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.06 Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.07 Use of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.08 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.09 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . 50
7.10 Public Utility Holding Company Act . . . . . . . . . . . . . . . . 51
7.11 Material Agreements and Liens. . . . . . . . . . . . . . . . . . . 51
7.12 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 51
7.13 Subsidiaries, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 52
7.14 True and Complete Disclosure . . . . . . . . . . . . . . . . . . . 52
7.15 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.16 Special Purpose Company. . . . . . . . . . . . . . . . . . . . . . 53
7.17 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.18 Forest Indenture. . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8. Covenants of the Borrowers . . . . . . . . . . . . . . . . . . . 54
8.01 Financial Statements Etc.. . . . . . . . . . . . . . . . . . . . . 54
8.02 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.03 Existence, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.04 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.05 Prohibition of Fundamental Changes . . . . . . . . . . . . . . . . 58
8.06 Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . . 59
8.07 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.08 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.09 Dividend Payments. . . . . . . . . . . . . . . . . . . . . . . . . 63
8.10 Debt Coverage Ratio; Interest Coverage Ratio . . . . . . . . . . . 64
8.11 Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.12 Subordinated Indebtedness. . . . . . . . . . . . . . . . . . . . . 64
8.13 Lines of Business. . . . . . . . . . . . . . . . . . . . . . . . . 65
8.14 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . 65
8.15 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.16 Certain Obligations Respecting Subsidiaries. . . . . . . . . . . . 65
8.17 Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.18 Modifications of Certain Documents and Payments. . . . . . . . . . 66
8.19 Limitations on Sale and Leaseback Transactions . . . . . . . . . . 66
8.20 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . 66
8.21 Property Subject to the Lien of the Security Documents . . . . . . 67
8.22 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 67
8.23 No Action to Affect Security Documents . . . . . . . . . . . . . . 67
<PAGE>
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8.24 Fixed Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.25 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 68
8.26 Title Defects. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.27 Additional Borrowers . . . . . . . . . . . . . . . . . . . . . . . 68
8.28 Special Covenant with Respect to ProMark . . . . . . . . . . . . . 69
Section 9. Events of Default; Remedies. . . . . . . . . . . . . . . . . . . 69
9.01 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . 69
9.02 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . 75
9.03 Lender May Perform Covenants . . . . . . . . . . . . . . . . . . . 76
Section 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.01 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.03 Expenses, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.04 Amendments, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . 78
10.05 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 78
10.06 Assignments and Participations. . . . . . . . . . . . . . . . . . 79
10.07 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.08 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.09 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.11 Jurisdiction, Service of Process and Venue. . . . . . . . . . . . 80
10.12 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . 80
10.13 Appointment of Canadian Forest as Agent for Notice. . . . . . . . 81
10.14 Joint and Several Liability . . . . . . . . . . . . . . . . . . . 81
10.15 Additional Provisions Relating to Interest and Fees . . . . . . . 82
10.16 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 82
10.17 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . 82
10.18 Conflict of Terms . . . . . . . . . . . . . . . . . . . . . . . . 82
10.19 Restatement of Original Credit Agreement. . . . . . . . . . . . . 82
10.20 BOM Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 83
10.21 Amendment of Certain Documents. . . . . . . . . . . . . . . . . . 83
</TABLE>
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Subsidiaries and Investments
SCHEDULE III - Environmental Matters
EXHIBIT A-1 - Form of Note
EXHIBIT A-2 - Form of Swingline Note
EXHIBIT B - Form of Opinion of Counsel to Forest, Canadian Forest and
the Subsidiary Borrowers
<PAGE>
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 1,
1997 among: CANADIAN FOREST OIL LTD., a corporation duly amalgamated and
validly existing under the laws of Alberta ("CANADIAN FOREST"); PRODUCERS
MARKETING LTD., an Alberta corporation and a Wholly Owned Subsidiary of
Canadian Forest ("PROMARK") and each of the other Subsidiaries of Canadian
Forest that becomes a borrower pursuant to Section[nb]8.27 hereof (individually
a "SUBSIDIARY BORROWER" and collectively with Canadian Forest, the
"BORROWERS"); and 611852 SASKATCHEWAN LTD. (the "LENDER").
Canadian Forest, a Wholly Owned Subsidiary of 3189503, and the
Lender are parties to a Credit Agreement dated as of February 8, 1996 (as
modified, amended and restated on July 17, 1996 and supplemented and in
effect immediately prior to the Effective Date referred to below, the
"ORIGINAL CREDIT AGREEMENT"). In order to reflect, firstly, certain corporate
changes affecting the Borrowers (namely, the amalgamation of Acquisition Co.
and Atcor Resources to form 721940 Alberta Ltd. as the continuing corporation
resulting therefrom, and the amalgamation of 721940 Alberta Ltd. and Canadian
Forest to form Canadian Forest (as used herein Canadian Forest means, where
applicable, the corporation formed on the amalgamation of 721940 Alberta Ltd.
and Canadian Forest) as the continuing corporation resulting therefrom), and
secondly, certain asset sales from Canadian Forest to Forest and the
continued secured position of the Lender with respect to such assets, as well
as the continued inclusion of such assets in the Borrowing Base and financial
covenants hereunder, Canadian Forest has requested that the Lender agree to
amend and restate the Original Credit Agreement, and the Lender is willing to
amend and restate the Original Credit Agreement, all on the terms and
conditions hereinafter set forth. Accordingly, the parties hereto agree as
follows:
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and VICE VERSA):
"ACQUISITION CO." shall mean 3189490 Canada Ltd., (as it existed prior
to its amalgamation with Atcor Resources).
"AFFILIATE" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Borrowers
and, if such Person is an individual, any member of the immediate family
(including parents, spouse, children and siblings) of such individual and any
trust whose principal beneficiary is such individual
<PAGE>
Page 6
or one or more members of such immediate family and any Person who is
controlled by any such member or trust. As used in this definition,
"CONTROL" (including, with its correlative meanings, "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH") shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests,
by contract or otherwise), PROVIDED that, in any event, any Person that owns
directly or indirectly securities having 10% or more of the voting power for
the election of directors or other governing body of a corporation or 10% or
more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
control such corporation or other Person. Notwithstanding the foregoing, (a)
no individual shall be an Affiliate solely by reason of his or her being a
director, officer or employee of the Borrowers or any of their Subsidiaries
and (b) none of the Borrowers or their respective Subsidiaries shall be an
Affiliate.
"AGENT" shall mean Chase Canada, or its successors as agent under the
Funding Credit Agreement.
"AGGREGATE BORROWINGS" has the meaning given to such term in Section
2.11(b).
"APPLICABLE MARGIN" shall mean, with respect to each Type of Loan
for any period during which the Usage Ratio is within the range specified
below, the percentage per annum set forth opposite such range under the
appropriate heading, PROVIDED that the "Applicable Margin" shall be increased
or reduced, as applicable, on the date of the borrowing of a Loan or the
repayment of a Loan which results in the Usage Ratio shifting from one range
to another but that the "Applicable Margin" for any BA Loan or Eurodollar
Loan outstanding prior to such date shall remain the same until the end of
Interest Period for such BA Loan or Eurodollar Loan, respectively.
APPLICABLE MARGIN (% P.A.)
-------------------------
Range of Canadian BA Fee U.S. Base Eurodollar
Usage Ratio Prime Loans Rate Rate Loans Loans
----------- ----------- ------- ----------- -------------
0 - .500:1.00 0.010% 1.010% 0.010% 1.010%
.501:1.00 to .750:1.00 0.385% 1.385% 0.385% 1.385%
.751:1.00 to 1.000:1.00 0.76% 1.76% 0.76% 1.76%
"ATCOR RESOURCES" shall mean Atcor Resources Ltd., (as it existed
prior to its amalgamation with Acquisition Co.)
"ATCOR RESOURCES PLEDGE AGREEMENT" shall mean the Guarantee and Pledge
Agreement dated as of February 8, 1996, between Atcor Resources and the
<PAGE>
Page 7
Lender, as the same may be supplemented and amended up to the Effective Date.
"AVAILABLE BORROWING AMOUNT" has the meaning given to such term in
Section 2.07 hereof.
"BA LOAN" shall mean a Loan that bears interest at the BA Rate.
"BA RATE" has the meaning given such term in Section 2.03 hereof.
"BA FEE RATE" shall mean the rate that the Lender uses in charging the
fee for a BA Loan, such rate being described in the definition of Applicable
Margin.
"BANKRUPTCY AND INSOLVENCY ACT (CANADA)" shall mean, collectively, the
Bankruptcy and Insolvency Act (Canada) and the Companies' Creditors Arrangement
Act (Canada), each as amended from time to time and any similar statute of
Canada or any province thereof.
"BOM" shall mean the Bank of Montreal.
"BOM AGREEMENT" shall mean the Amended and Restated Financial
EDI Agreement Accounts Payable Service between ProMark and BOM dated July 17,
1996 with respect to the electronic transfers of funds and related remittance
data, as the same may be supplemented and amended and in effect from time to
time; PROVIDED that any supplements or amendments thereto shall be made in
accordance with the provisions of Section 11.21 of the Funding Credit Agreement.
"BOM PRIME RATE" shall mean the per annum floating rate of interest
established from time to time by BOM as the base rate it will use to determine
rates of interest on Canadian dollar demand loans to its customers in Canada and
which it designates as its prime rate. Each change in any interest rate
provided for herein based upon the BOM Prime Rate resulting from a change in the
BOM Prime Rate shall take effect at the time of such change in the BOM Prime
Rate.
"BORROWING BASE" has the meaning given to such term in Section 1.03
hereof.
"BORROWING BASE DEFICIENCY" has the meaning given to such term in
Section 2.11(a) hereof.
"BORROWING BASE REPORTS" shall mean collectively, (i) Net Back Pool
Reports and (ii) Reserve Evaluation Reports and "BORROWING BASE REPORT" shall
mean any thereof.
"BUSINESS DAY" shall mean (i) any day other than a Saturday or Sunday
<PAGE>
Page 8
on which commercial banks are not authorized or required to close in Calgary
or Toronto, Canada, (ii) if such day relates to a U.S. Base Rate Loan or any
payments in connection therewith, a day (other than a Saturday or Sunday) on
which banks are open for business in New York City, Toronto and Calgary and
(iii) if such day relates to a borrowing of, a payment or prepayment of
principal of or interest on, a Conversion of or into, or an Interest Period
for, a Eurodollar Loan or a notice by any of the Borrowers with respect to
any such borrowing, payment, prepayment, Conversion or Interest Period, any
day other than a Saturday or Sunday on which dealings in U.S. Dollar deposits
are carried out in the London interbank market which is also a day on which
banks are open for business in New York City, Calgary and Toronto.
"CANADIAN DOLLARS" and "C$" shall mean lawful money of Canada.
"CANADIAN FOREST DEBENTURE" shall mean the Demand Debenture and
Negative Pledge, dated as of February 8, 1996, of Canadian Forest in the
original principal amount of C$80,000,000 payable to the Lender and assigned to
the Agent and its successors and assigns, as the same shall be modified and
supplemented and in effect from time to time.
"CANADIAN FOREST GUARANTEE" shall mean the guarantee made February 20,
1996 by Canadian Forest in favor of BOM with respect to obligations and
liabilities of ProMark under the BOM Agreement, as confirmed and amended by a
Guarantee Confirmation and Amendment Agreement entered into between Canadian
Forest and BOM dated July 17, 1996.
"CANADIAN PRIME LOANS" shall mean loans that bear interest at rates
based upon the Chase Canada Prime Rate.
"CAPITAL EXPENDITURES" shall mean, for any period, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made (a) by the Borrowers in connection
with the acquisition and exploitation of, or the exploration for or development
or production of, hydrocarbon reserves or to acquire or construct fixed assets,
plant and equipment (including renewals, improvements and replacements, but
excluding repairs) or (b) by Forest in connection with the acquisition and
exploitation of, or the exploration for or development or production of, the
Forest Pledged Properties or to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements, but excluding
repairs) in connection with the Forest Pledged Properties during such period, in
each case computed in accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person
<PAGE>
Page 9
under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"CASH COLLATERAL ACCOUNT" shall mean the cash collateral account
referred to in Section 13.4 of the Canadian Forest Debenture.
"CASH FLOW" shall mean, for any period, (a) for the Borrowers
(determined on a combined basis in accordance with GAAP), the sum, without
duplication, of the following: (i) the total sales revenue from natural gas,
oil and other hydrocarbon products and revenues from services related to
natural gas, oil and other hydrocarbon products for such period PLUS (ii)
cash dividends paid, if any, by any Non-Borrowing Subsidiary to the Borrowers
in an aggregate amount in excess of the aggregate amount of the Investments
in such Non-Borrowing Subsidiaries by the Borrowers during such period PLUS
(iii) the total Net Cash Payments (excluding the fair market value of
non-cash consideration) received during such period PLUS (iv) the total cash
proceeds received by Canadian Forest as a result of any capital contribution
by Acquisition Co., Atcor Resources or 3189503 that has been utilized to
repay indebtedness (to the extent permitted by the terms of this Agreement)
MINUS (v) the revenue attributable to the unearned balance of any advance
payment received during such period by the Borrowers relating to hydrocarbons
in place MINUS (vi) Operating Expenses, plus (b) for Forest (determined in
accordance with GAAP), the lesser of (A) the sum, without duplication, of the
following (determined in respect only of the Forest Pledged Properties): (i)
the total sales revenue from natural gas, oil and other hydrocarbon products;
PLUS (ii) the total Net Cash Payments (excluding the fair market value of
non-cash consideration) received during such period; MINUS (iii) the revenue
attributable to the unearned balance of any advance payment received during
such period by Forest relating to hydrocarbons in place MINUS (iv) Operating
Expenses, and (B) the amount contributed by 3189503 to Canadian Forest in
respect of the period for which the determination is made.
"CASUALTY EVENT" shall mean, with respect to any Property of any
Person, any loss of or damage to, or any condemnation or other taking of,
such Property for which such Person or any of its Subsidiaries receives
insurance proceeds, or proceeds of a condemnation award or other compensation.
"CHASE CANADA" shall mean The Chase Manhattan Bank of Canada or its
successors.
"CHASE CANADA PRIME RATE" shall mean the greater of (i) the per
annum floating rate of interest established from time to time by Chase Canada
as the base rate it will use to determine rates of interest on Canadian
dollar loans to its customers in Canada and (ii) the sum of (A) the discount
rate expressed as a rate of interest per annum payable by the purchasers of
30 day bills of exchange, duly completed and accepted by Chase Canada, as
established by Chase Canada, and (B) 100 basis
<PAGE>
Page 10
points. Each change in any interest rate provided for herein based upon the
Chase Canada Prime Rate resulting from a change in the Chase Canada Prime
Rate shall take effect at the time of such change in the Chase Canada Prime
Rate.
"CHASE MANHATTAN" shall mean The Chase Manhattan Bank or its
successors.
"CHASE MANHATTAN PRIME RATE" shall mean the rate of interest from
time to time announced by Chase Manhattan at the Chase Manhattan Principal
Office as its prime commercial lending rate.
"CHASE MANHATTAN PRINCIPAL OFFICE" shall mean the principal office
of Chase Manhattan, located on the date hereof at 1 Chase Manhattan Plaza,
New York, New York 10081.
"CLOSING DATE" shall mean February 8, 1996.
"COMMITMENT" shall mean the obligation of the Lender to make Loans
pursuant to Sections 2.01 and 2.05 hereof and to obtain Letters of Credit
pursuant to Section 2.04 hereof, in an aggregate Principal Amount at any one
time outstanding up to but not exceeding C$80,000,000 or the Equivalent
Amount thereof in U.S. Dollars, as the same may be reduced at any time or
from time to time pursuant to Section 2.06 hereof.
"COMMITMENT TERMINATION DATE" shall mean February 7, 1999.
"COMMODITY HEDGING AGREEMENT" shall mean, for any Person, a notional
amount agreement or arrangement between such Person and one or more financial
institutions or other entities providing for the transfer or mitigation of
risks of fluctuations in prices of hydrocarbons, either generally or under
specific circumstances.
"CONTINUE," "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 2.10 hereof of a Eurodollar Loan or BA Loan
from one Interest Period to the next Interest Period.
"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.10 hereof of all or a portion of one Type of Loan into
another Type of Loan or Loans and shall include, if applicable, the
simultaneous conversion from one currency into another currency.
"CURRENCY" shall have the meaning assigned to such term in Section
1.04 hereof.
"DEBT COVERAGE RATIO" shall mean, for any period, the ratio of (a)
Cash
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Page 11
Flow for such period to (b) Debt Service for such period.
"DEBT SERVICE" shall mean, for any period, the sum, without
duplication, of the following: (a) all payments of principal of Indebtedness
scheduled to be made during such period by the Lender (determined on a
consolidated basis in accordance with GAAP) PLUS (b) all payments of
principal of Indebtedness (other than Indebtedness to the Lender under this
Agreement) scheduled to be made during such period by the Borrowers
(determined on a combined basis in accordance with GAAP) PLUS (c) all
Interest Expense for such period.
"DEFAULT" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"DEFICIENCY CURE PERIOD" shall have the meaning assigned to such
term in Section 2.11(a) hereof.
"DEFICIENCY NOTICE" shall have the meaning assigned to such term in
Section 2.11(a) hereof.
"DETERMINATION DATE" shall mean (a) each May 1 and October 15 of
each year prior to the Commitment Termination Date, commencing October 15,
1996 and (b) 45 days after each other date, if any, on which the Borrowing
Base Reports are delivered to the Lender as contemplated pursuant to Section
1.03 hereof.
"DISPOSITION" shall mean any sale, assignment, transfer or other
disposition of any Property by the Borrowers, or of any Forest Pledged
Property by Forest (whether now owned or hereafter acquired), to any other
Person excluding any sale, assignment, transfer or other disposition of any
Property sold or disposed of in the ordinary course of business and on
ordinary business terms, and also excluding the sale of the Forest Pledged
Properties by Canadian Forest to Forest pursuant to the Forest Purchase
Agreement.
"DIVIDEND PAYMENT" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Borrowers or any of their Subsidiaries or of any
warrants, options or other rights to acquire the same (or to make any
payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market or equity value of
either Borrower or any of their Subsidiaries), but excluding dividends
payable solely in shares of common stock of any Borrower.
"DOLLARS", "$" and "U.S. DOLLARS" shall mean lawful money of the
United States of America.
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"EFFECTIVE DATE" shall mean April 1, 1997.
"ENVIRONMENTAL CLAIM" shall mean, with respect to any Person, any
written or oral notice, claim, demand or other communication (a "CLAIM") by
any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into
the environment, of any Hazardous Material at any location, whether or not
owned by such Person, or (ii) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law. The term
"Environmental Claim" shall include, without limitation, any claim by any
governmental authority for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
any claim by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from the presence
of Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"ENVIRONMENTAL LAWS" shall mean any and all present and future
Canadian federal, provincial, local and foreign laws, policies, guidelines,
rules or regulations, and any orders or decrees, in each case as now or
hereafter in effect, and including without limiting the foregoing both
statutory provisions and the common law, relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or Hazardous Materials or wastes into the indoor or
outdoor environment, including, without limitation, ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or toxic or hazardous substances or wastes.
"EQUITY RIGHTS" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including, without limitation, any stockholders' or
voting trust agreements) for the issuance, sale, registration or voting of,
or securities convertible into, any additional shares of capital stock of any
class, or partnership or other ownership interests of any type in, such
Person.
"EQUIVALENT AMOUNT" shall mean as at any date the amount of Canadian
Dollars into which an amount of U.S. Dollars may be converted, or the amount
of U.S. Dollars into which an amount of Canadian Dollars may be converted, in
either case at The Bank of Canada mid-point noon spot rate of exchange for
such date in Toronto at approximately 12:00 noon, Toronto time on such date.
"EURODOLLAR BASE RATE" shall mean, with respect to any Eurodollar
Loan
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Page 13
for any Interest Period therefor, the rate obtained by the Lender under the
Funding Credit Agreement with respect to eurodollar loans available to it
under such agreement with identical principal amounts and interest periods
and commencing on the same date as the applicable Eurodollar Loans hereunder.
"EURODOLLAR LOANS" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "Eurodollar
Base Rate" in this Section 1.01.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 9 hereof.
"EXCHANGE RATE DEFICIENCY" shall have the meaning assigned to such
term in Section 2.11(b) hereof.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, PROVIDED that (a) if the day for which
such rate is to be determined is not a Business Day, the Federal Funds Rate
for such day shall be such rate for such transactions on the next preceding
Business Day as so published on the next succeeding Business Day and (b) if
such rate is not so published for any Business Day, the Federal Funds Rate
for such Business Day shall be the average rate charged to Chase Manhattan on
such Business Day on such transactions as determined by the Agent.
"FEE LETTER" shall mean the letter dated February 7, 1996 from Chase
Manhattan and Chase Securities Inc. to Forest describing certain fees payable
in connection with the transactions contemplated by this Agreement.
"FOREST" shall mean Forest Oil Corporation, a New York corporation.
"FOREST DEBENTURE" shall mean the Limited Recourse Demand Debenture
and Negative Pledge, dated as of April 1, 1997, of Forest in the original
principal amount of C$80,000,000, payable to the Lender and assigned to the
Agent and its successors and assigns, as the same shall be modified and
supplemented and in effect from time to time.
"FOREST GUARANTEE" shall mean the Limited Recourse Secured Guarantee
dated as of April 1, 1997 by Forest in favor of the Lender and assigned to
the Agent and its successors and assigns, as the same shall be modified and
supplemented and in effect from time to time.
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Page 14
"FOREST PLEDGED PROPERTIES" shall mean the Property which is from
time to time the subject of the Lien created by the Forest Debenture.
"FOREST PURCHASE AGREEMENT" shall mean the Petroleum, Natural Gas
and General Rights Conveyance made effective as of April 1, 1997 between
Canadian Forest, as seller, and Forest, as purchaser.
"FUNDING CREDIT AGREEMENT" shall mean the Second Amended and
Restated Credit Agreement dated as of April 1, 1997 among the Lender, the
lenders party thereto and Chase Canada, as agent, as the same may be modified
and supplemented and in effect from time to time.
"FUTURE NET REVENUES" shall mean, as of any date of determination
for any period, the projected gross revenues attributable to all or a part
(as specified herein) of Proved Reserves constituting part of the Hydrocarbon
Properties included in the Reserve Evaluation Report for such period less the
sum for such period of all projected Operating Expenses and Capital
Expenditures with respect thereto, as set forth in the related Reserve
Evaluation Report, and less (without duplication) all amounts projected to be
applied to the discharge of any advance payments or similar agreements with
respect to hydrocarbons in place and to the unearned balance of any advance
payment received under any contract to be performed relating to such Proved
Reserves.
"GAAP" shall mean generally accepted accounting principles in the
United States applied on a basis consistent with those that, in accordance
with the last sentence of Section 1.02(a) hereof, are to be used in making
the calculations for purposes of determining compliance with this Agreement.
"GAS PAYMENT SETTLEMENT DAY" means the day of each calendar month on
which purchasers of natural gas produced in Alberta generally settle their
obligations (currently the 25th day of each month).
"GUARANTEE" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of,
or otherwise to be or become contingently liable under or with respect to,
the Indebtedness, other obligations, net worth, working capital or earnings
of any Person, or a guarantee of the payment of dividends or other
distributions upon the stock or equity interests of any Person, or an
agreement to purchase, sell or lease (as lessee or lessor) Property,
products, materials, supplies or services primarily for the purpose of
enabling a debtor to make payment of such debtor's obligations or an
agreement to assure a creditor against loss, and including, without
limitation, causing a bank or other financial institution to issue a letter
of credit or other similar instrument for the benefit of another Person, but
excluding endorsements for collection or deposit in the ordinary
<PAGE>
Page 15
course of business. The terms "GUARANTEE" and "GUARANTEED" used as a verb
shall have a correlative meaning.
"HAZARDOUS MATERIAL" shall mean, collectively, (a) any petroleum or
petroleum products, flammable explosives, radioactive materials, asbestos in
any form that is or could become friable, urea formaldehyde foam insulation,
and transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes",
"toxic substances", "toxic pollutants", "contaminants", "pollutants" or words
of similar import under any Environmental Law and (c) any other chemical or
other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
"HYDROCARBON PROPERTIES" shall mean interests which the Borrowers
have from time to time in hydrocarbon reserves, and interests which Forest
has in the Forest Pledged Properties.
"INCOME TAX ACT (CANADA)" shall mean the Income Tax Act (Canada), as
amended from time to time.
"INDEBTEDNESS" shall mean, for any Person, without duplication: (a)
obligations created, issued or incurred by such Person for borrowed money
(whether by loan, the issuance and sale of debt securities or the sale of
Property to another Person subject to an understanding or agreement,
contingent or otherwise, to repurchase such Property from such Person); (b)
obligations of such Person to pay the deferred purchase or acquisition price
of Property or services, other than trade accounts payable (other than for
borrowed money) arising, and accrued expenses incurred, in the ordinary
course of business so long as such trade accounts payable are paid within 90
days of the date the respective goods are delivered or the respective
services are rendered; (c) Indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective indebtedness so
secured has been assumed by such Person; (d) obligations of such Person in
respect of letters of credit or similar instruments issued or accepted by
banks and other financial institutions for account of such Person; (e)
Capital Lease Obligations of such Person; (f) obligations of such Person in
respect of obligations of the types specified in other clauses of this
definition as a general partner or joint venturer of any partnership or joint
venture (other than in respect of obligations incurred in the ordinary course
of business); (g) the unearned balance of any advance payments received by
such Person under any contract to be performed in excess of C$350,000 (or the
equivalent in other currencies) in the aggregate (other than as provided in
clause (h) below); (h) the unearned balance of any advance payments received
by such Person under any contract to be performed in excess of C$2,500,000
(or the equivalent in other currencies) in the aggregate resulting
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Page 16
from transactions in the ordinary course of such Person's business; and (i)
Indebtedness of others Guaranteed by such Person.
"INDEPENDENT PETROLEUM ENGINEER" shall mean (a) McDaniel &
Associates Consultants Ltd. or (b) such other firm of independent petroleum
engineers expert in the matters required to be performed in connection with
the preparation and delivery of a Reserve Evaluation Report and satisfactory
to the Majority Lenders.
"INTEREST COVERAGE RATIO" shall mean, for any period, the ratio of
(a) Cash Flow for such period to (b) Interest Expense for such period.
"INTEREST EXPENSE" shall mean, for any period, interest expense for
the Borrowers for such period (determined on a combined basis without
duplication in accordance with GAAP) including, without limitation, the
following: all interest in respect of Indebtedness accrued or capitalized
during such period (whether or not actually paid during such period) (other
than interest paid in common stock of the Borrowers) and the net amounts
payable (or minus the net amounts receivable) under Interest Rate Protection
Agreements accrued during such period (whether or not actually paid or
received during such period), but excluding the non-cash amortization of
deferred debt issuance costs and original issue discount for such period.
"INTEREST PERIOD" shall mean, (a) with respect to any Eurodollar
Loan, each period commencing on the date such Eurodollar Loan is made or
Converted from another Type of Loan or the last day of the next preceding
Interest Period for such Loan and ending on the numerically corresponding day
in the first, second or third calendar month thereafter, as the applicable
Borrower may select as provided in Section 4.05 hereof, except that each
Interest Period that commences on the last Business Day of a calendar month
(or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of
the appropriate subsequent calendar month. Notwithstanding the foregoing:
(i) if any Interest Period would otherwise end after the Commitment
Termination Date, such Interest Period shall end on the Commitment
Termination Date; (ii) each Interest Period that would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business Day (or
if the next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and (iii) notwithstanding clause
(i) above, no Interest Period shall have a duration of less than one month
and, if the Interest Period for any Eurodollar Loan would otherwise be a
shorter period, such Loan shall not be available as a Eurodollar Loan
hereunder for such period and (b) with respect to any BA Loan, each period
commencing on the date such BA Loan is made or Converted from another Type of
Loan or the last day of the next preceding Interest Period for such BA Loan
and ending on the date not less than 30 days or more than 180 days
thereafter, as the applicable Borrower may select as provided in Section 4.05
hereof. Notwithstanding the foregoing, no Interest Period shall mature on a
date after the Commitment Termination Date.
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Page 17
"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between
such Person and one or more financial institutions providing for the transfer
or mitigation of interest risks either generally or under specific
contingencies.
"INVESTMENT" shall mean, for any Person: (a) the acquisition
(whether for cash, Property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of
any securities at a time when such securities are not owned by the Person
entering into such short sale); (b) the making of any deposit with, or
advance, loan or other extension of credit to, any other Person (including
the purchase of Property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such Property to such Person,
but excluding any such advance, loan or extension of credit having a term not
exceeding 90 days representing the purchase price of inventory or supplies
sold by such Person in the ordinary course of business); (c) the entering
into of any Guarantee of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person and (without duplication)
any amount committed to be advanced, lent or extended to such Person; or (d)
the entering into of any Interest Rate Protection Agreement or Commodity
Hedging Agreement. The definition of "INVESTMENT" shall not include
expenditures made to acquire interests in joint ventures in oil and gas
properties and plants, facilities, pipelines and equipment reasonably related
thereto.
"ISSUING BANK" shall mean BOM, as the issuer of Letters of Credit
under Section 2.03 of the Funding Credit Agreement, together with its
successors and assigns in such capacity.
"LETTER OF CREDIT" shall have the meaning assigned to such term in
Section 2.04 hereof.
"LETTER OF CREDIT DOCUMENTS" shall mean, with respect to any Letter
of Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to
such Letter of Credit or (b) any collateral security for any of such
obligations, each as the same may be modified and supplemented and in effect
from time to time.
"LETTER OF CREDIT LIABILITY" shall mean, without duplication, at any
time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit PLUS (b) the aggregate unpaid principal
amount of all Letter of Credit Reimbursement Obligations of the Borrowers at
such time due and payable in respect
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of all drawings made under such Letter of Credit.
"LETTER OF CREDIT REIMBURSEMENT OBLIGATIONS" shall mean, at any
time, the obligations of the Borrowers then outstanding, or that may
thereafter arise in respect of all Letters of Credit then outstanding, to
reimburse amounts paid by the Lender in respect of any drawings under a
Letter of Credit (to the extent not converted to a Canadian Prime Loan or a
U.S. Base Rate Loan hereunder).
"LIEN" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such Property (including any advance payment or similar arrangements with
respect to minerals in place). For purposes of this Agreement and the other
Loan Documents, a Property shall be deemed to be subject to a Lien if a
Person has acquired or holds that Property subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement (other than an operating lease) relating to such
Property.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the
Notes, the Swingline Notes, the Letter of Credit Documents and the Security
Documents.
"LOANS" shall mean the loans provided for in Section 2.01 hereof and
the Swingline Loans provided for in Section 2.05 hereof.
"MAJORITY LENDERS" shall mean (i) at any time when there are three
or more lenders under the Funding Credit Agreement, lenders having at least
66 2/3% of the aggregate amount of the Commitments (as defined in the Funding
Credit Agreement) or, if the Commitments shall have terminated, lenders under
the Funding Credit Agreement holding at least 66 2/3% of the aggregate unpaid
Principal Amount of the Loans, Bankers' Acceptance Liabilities and Letter of
Credit Liabilities (each as defined in the Funding Credit Agreement); and
(ii) at any other time all of the lenders under the Funding Credit Agreement.
"MARGIN STOCK" shall mean "margin stock" within the meaning of
Regulations U and X.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Borrowers and their Subsidiaries taken
as a whole or on the Forest Pledged Properties, (b) the ability of the
Borrowers or Forest (as applicable) to perform their respective obligations
under any of the Loan Documents, (c) the validity or enforceability of any of
the Loan Documents, (d) the rights and remedies of the Lender under any of
the Loan Documents or (e) the timely payment of the principal of or interest
on the Loans or Letter of Credit Reimbursement Obligations or Forest's
obligations under the Forest Guarantee or other amounts payable in connection
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Page 19
therewith.
"MATERIAL SUBSIDIARY" shall mean, at any time of determination
thereof, any Subsidiary of any Borrower whose assets at such time exceed
C$7,500,000.
"NET AVAILABLE PROCEEDS" shall mean:
(a) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition; PROVIDED that if 20% or less of
the total value of such Net Cash Payments consists of non-cash consideration,
and if such non-cash consideration is subjected to the Lien of the Security
Documents upon receipt by the Borrowers or Forest (as applicable), the amount
of such Net Cash Payments received shall be deemed to equal the amount of all
cash payments received in connection with such Disposition; and
(b) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received by
the Borrowers or Forest (as applicable) in respect of such Casualty Event net
of (i) reasonable expenses incurred by the Borrowers and their Subsidiaries
or Forest (as applicable) in connection therewith and (ii) contractually
required repayments of Indebtedness to the extent secured by a Lien on such
Property and any income and transfer taxes payable by the Borrowers or Forest
(as applicable) in respect of such Casualty Event.
"NET BACK POOL REPORT" shall mean a report furnished to the Lender,
the Agent and the lenders under the Funding Credit Agreement at the time of
each delivery of the Reserve Evaluation Report, in form and substance
satisfactory to the Agent and the Majority Lenders setting forth, in the case
of the report to be delivered in connection with the Determination Date
occurring on May 1 of each year, for the preceding fiscal year, and in the
case of the report to be delivered in connection with the Determination Date
occurring on October 15 of each year, for the first two calendar quarters of
such fiscal year, the following:
(i) the names of the buyers of hydrocarbons from the Borrowers
during the respective period;
(ii) the quantity of hydrocarbons sold to such buyer;
(iii) the unit price received from such buyer for such hydrocarbons
including the basis on which such price was calculated;
(iv) the payment terms of each sales contract with such buyer for
the remaining term of such contract and the basis upon which
the unit price under each such sales contract is to be
calculated; and
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(v) the remaining term of each such contract.
"NET CASH PAYMENTS" shall mean, with respect to any Disposition, the
aggregate amount of all cash payments, and the fair market value of any
non-cash consideration, received by the Borrowers (or by Forest, in the case
of any Disposition of any Forest Pledged Property) directly or indirectly in
connection with such Disposition; PROVIDED that (a) Net Cash Payments shall
be net of (i) the amount of any legal, title and recording tax expenses,
commissions and other fees and expenses paid by the Borrowers (or Forest, as
applicable) in connection with such Disposition and (ii) any Federal,
provincial, state and local income or other taxes estimated to be payable by
Borrowers (or Forest, as applicable) as a result of such Disposition (but
only to the extent that (x) such estimated taxes are in fact paid to the
relevant Federal, provincial, state or local governmental authority within
three months of the date of such Disposition or placed in escrow for the
payment of such taxes or (y) the amount of such estimated taxes is less than
C$1,000,000 and the payment of such taxes is being contested in good faith
and by appropriate proceedings) and (b) Net Cash Payments shall be net of any
repayments by the Borrowers of Indebtedness to the extent that (i) such
Indebtedness is secured by a Lien solely on the Property that is the subject
of such Disposition and (ii) such Indebtedness is to be repaid as a condition
to the Disposition of such Property.
"NON-BORROWING SUBSIDIARIES" shall mean Subsidiaries of Canadian
Forest other than the Subsidiary Borrowers.
"NOTES" shall mean the promissory notes provided for by Sections
2.09 (a) and (b) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time.
"OPERATING EXPENSES" shall mean, for any period, the sum without
duplication of the following (a) for the Borrowers (determined on a combined
basis in accordance with GAAP) to the extent accrued or paid during such
period (without duplication): (i) lease operating expenses; (ii) Taxes;
(iii) general and administrative and other overhead expenditures; and (iv)
all other expenses paid or accrued related to or arising from the operations
of the Borrowers, and (b) for Forest (determined in accordance with GAAP in
respect only of the Forest Pledged Properties) to the extent accrued or paid
during such period (without duplication): (i) lease operating expenses; (ii)
Taxes; (iii) general and administrative and other overhead expenditures; and
(iv) all other expenses paid or accrued related to or arising from the
operations of Forest in connection with the Forest Pledged Properties.
"ORIGINAL CREDIT AGREEMENT" shall have the meaning assigned to such
term in the second paragraph hereof.
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"PERMITTED INVESTMENTS" shall mean: (a) direct obligations of
Canada or the United States of America, or of any agency of either thereof,
or obligations guaranteed as to principal and interest by Canada, or the
United States of America or by any agency of either thereof, in either case
maturing not more than 90 days from the date of acquisition thereof; (b)
certificates of deposit issued or bankers' acceptances issued by any lender
under the Funding Credit Agreement or any other bank or trust company
organized under the laws of Canada or any province thereof or the United
States of America or any state thereof and having capital, surplus and
undivided profits of at least C$500,000,000 (or the Equivalent Amount),
maturing not more than 90 days from the date of acquisition thereof; and (c)
commercial paper rated A-l or better or P-1, R-1 low or A-1 or better by
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., Moody's
Investors Service, Inc., Dominion Bond Rating Service Limited or Canada Bond
Rating Service, respectively, maturing not more than 90 days from the date of
acquisition thereof.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"PRESENT VALUE OF RESERVES" shall mean, on any date, estimated net
cash flow expressed in Canadian Dollars (after development expenses and
production taxes) in respect of Proved Reserves attributable to Hydrocarbon
Properties calculated in accordance with the risk factors, product pricing
models and discounted to present value at a discount rate for Proved Reserves
in each case acceptable to the Majority Lenders from time to time.
"PRINCIPAL AMOUNT" shall mean for a BA Loan, the gross principal
amount of the BA Loan requested (as opposed to the amount advanced) and for
any other Loans, the outstanding principal amount thereof.
"PRINCIPAL OFFICE" shall mean the principal office of Chase Canada,
located on the date of this Agreement at 1 First Canadian Place, 100 King
Street West, Suite 6900, P.O. Box 106, Toronto, Ontario, Canada M5X 1A4.
"PROMARK DEBENTURE" shall mean the Demand Debenture and Negative
Pledge dated July 17, 1996 of ProMark in the original principal amount of
C$80,000,000 payable to the Lender and assigned to the Agent and its
successors and assigns, as the same shall be modified and supplemented in
accordance with Section 11.21 of the Funding Credit Agreement and in effect
from time to time.
"PROMARK SECURITY AGREEMENT" shall mean the Joint Security Agreement
dated July 17, 1996 of ProMark (joined by Canadian Forest to give full effect
thereto) in favor of BOM as same shall be modified and supplemented from time
to time in
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accordance with Section 11.21 of the Funding Credit Agreement.
"PROPERTY" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"PROVED RESERVES" shall mean reserves (to the extent of the net
interest of the Borrowers, and, in the case of the Forest Pledged Properties,
the net interest of Forest) comprised of quantities of hydrocarbons that
geologic and engineering data demonstrate with reasonable certainty to be
recoverable in the future from known reservoirs under existing conditions,
PROVIDED that such reserves are recoverable from (a) existing wells, whether
from completion intervals currently open and producing to market, or completion
intervals currently open but not currently producing or zones behind casing of
existing wells, or (b) new wells on undrilled acreage. Proved Reserves on
undrilled acreage shall be limited to those drilling units offsetting productive
units that are reasonably certain to be productive when drilled. Other
undrilled units may also be credited with Proved Reserves where continuity of
production from existing productive formations can be demonstrated with
reasonable certainty. For purposes of determining whether any Hydrocarbon
Properties of the Borrowers (and Forest, as applicable) (other than Hydrocarbon
Properties that have been acquired since the date of the most recent Reserve
Evaluation Report or other internal reserve reports prepared by Canadian Forest,
all of which shall be considered Proved Reserves) contain Proved Reserves, the
Lender and the Borrowers agree that the most recent Reserve Evaluation Report or
other internal reserve reports prepared by Canadian Forest (including with
respect to the Forest Pledged Properties) shall be determinative.
"QUARTERLY DATES" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be the first such
day after the date hereof.
"REGULATIONS A, D, U AND X" shall mean, respectively, Regulations A,
D, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"REGULATORY CHANGE" shall mean, with respect to any lender under the
Funding Credit Agreement, any change after the date of this Agreement in
Canadian federal, provincial or foreign laws or regulations or the adoption or
making after such date of any interpretation, directive or request applying to a
class of banks, including such lender, of or under any Canadian federal,
provincial or foreign law or regulations (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful) by any court
or governmental or monetary authority charged with the interpretation or
administration thereof.
"RELEASE" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the
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environment, including, without limitation, the movement of Hazardous
Materials through ambient air, soil, surface water, ground water, wetlands, land
or subsurface strata.
"RELEVANT PARTIES" shall mean any Borrower, any Material Subsidiary or
3189503.
"REPORT DELIVERY DATE" shall mean, with respect to any Borrowing Base
Report, 45 days prior to the applicable Determination Date.
"RESERVE EVALUATION REPORT" shall mean an unsuperceded report that
(a) is (i) prepared, in the case of the report required to be delivered by
Canadian Forest in connection with the Determination Date occurring on May 1 of
each year, by the Independent Petroleum Engineer on the basis of assumptions and
projections which Canadian Forest believes in good faith to be reasonable or, in
the case of the report required to be delivered by Canadian Forest in connection
with the Determination Date occurring on October 15 of each year, by Canadian
Forest and (ii) satisfactory in form and substance to the Majority Lenders
(including as to assumptions) and (b) is prepared on the basis of findings and
material data (x) as of January 1 of such year, in the case of a report prepared
by the Independent Petroleum Engineer in connection with the Determination Date
occurring on May 1 of each year and (y) as of July 1 of such year, in the case
of a report prepared by Canadian Forest in connection with the Determination
Date occurring on October 15 of each year, and (i) identifies the Hydrocarbon
Properties covered thereby, and (ii) as to each of the Hydrocarbon Properties,
sets forth (A) the Proved Reserves attributable to such Hydrocarbon Property (in
the case of the report prepared by the Independent Petroleum Engineer),
describing the producing and non-producing Proved Reserves separately for
purposes of the following items (B) through (F)), (B) the total amount of such
Proved Reserves attributable to such Hydrocarbon Property that, in the opinion
of the preparer of such report, Canadian Forest and its Subsidiaries (and
Forest, in the case of the Forest Pledged Properties) have the right to produce
for their own account in the current and each succeeding calendar year, (C) a
projection of the rate of production and the Future Net Revenues of the
Borrowers and Forest, as applicable (including as additional information the
data and assumptions used to determine such Future Net Revenues), from such
Proved Reserves for the current and each succeeding calendar year, (D) the
quantity and type of hydrocarbons recoverable from such Proved Reserves in the
current and each succeeding calendar year, (E) an estimate of the projected
revenues and expenses attributable to such Proved Reserves in the current and
each succeeding calendar year, and (F) any reports or evaluations prepared by
Canadian Forest regarding the expediency of any change in methods of treatment
or operation of all or any wells drilled to produce any of such Proved Reserves
that are producing or capable of producing hydrocarbons, any new drilling or
development, any method of secondary recovery by repressuring or otherwise, or
any other action with respect to such Proved Reserves, the decision as to which
may increase or reduce in
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any material respect the quantity of hydrocarbons
ultimately recoverable, or the rate of production thereof.
"SALE AGREEMENT" shall mean the Gas Marketing Business Sale and
Purchase Agreement dated January 30, 1996 between Atcor Ltd. (as Canadian Forest
was previously known) and ProMark.
"SECURITY DOCUMENTS" shall mean, collectively, the Canadian Forest
Debenture and the deposit agreement in respect thereof, the 3189503 Guarantee
and Pledge Agreement, the ProMark Debenture and the deposit agreement in respect
thereof, the Forest Guarantee, the Forest Debenture and the deposit agreement in
respect thereof, and any other security that is now or is hereafter held by or
on behalf of the Lender for the Borrowers' obligations hereunder and all
amendments, supplements, modifications, additions to, renewals of, substitutions
and replacements for any of the foregoing made in accordance with Section 11.21
of the Funding Credit Agreement and all registrations filed with respect to the
Liens created pursuant to any of such documents and agreements and without
limiting the generality of the foregoing includes the foregoing security and
other documents as confirmed and amended as provided in the Security
Confirmation and Amending Agreement described in Section 6.01(e) hereof.
"SUBORDINATED INDEBTEDNESS" shall mean Indebtedness (i) for which a
Borrower is directly and primarily liable, (ii) in respect of which none of its
Subsidiaries is contingently or otherwise obligated (unless such obligations are
subordinated to the obligation hereunder and under the Notes) and (iii) that is
subordinated to the obligations of Canadian Forest and its Affiliates to pay
principal of and interest on the Loans and Notes hereunder on terms, and
pursuant to documentation containing other terms (including interest,
amortization, covenants and events of default), in form and substance (including
term) satisfactory to each of the lenders under the Funding Credit Agreement.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"SWINGLINE LOANS" shall mean the loans provided for by Section 2.05
hereof.
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"SWINGLINE LOAN LIABILITY" shall mean, with respect to any Swingline
Loan, the obligation of the Borrowers to pay to the Lender the Principal Amount
of any Swingline Loan which the Borrowers have not repaid.
"SWINGLINE NOTE" shall mean the promissory note provided for by
Section 2.09 (b) hereof and any promissory note delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"TAXES" shall mean all taxes, levies, imposts, stamp taxes, duties,
charges to tax, fees, deductions, withholdings, royalties, charges, compulsory
loans or restrictions or conditions resulting in a charge which are imposed,
levied, collected, withheld or assessed by any political subdivision or taxing
authority as of the date of this Agreement or at any time in the future together
with interest thereon and penalties with respect thereto, if any, and any
payments of principal, interest, charges, fees or other amounts made on or in
respect thereof, including without limitation, production and severance taxes
and windfall profit taxes, and "Tax" and "Taxation" shall be construed
accordingly provided that "Taxes" shall exclude taxes imposed on or measured by
the overall net income of a Person.
"3189503" shall mean 3189503 Canada Ltd., a Canadian corporation and a
Wholly Owned Subsidiary of Forest.
"3189503 GUARANTEE AND PLEDGE AGREEMENT" shall mean the Guarantee and
Pledge Agreement dated as of April 1, 1997 between 3189503 and the Lender, as
the same may be supplemented and amended and in effect from time to time.
"TYPE" shall have the meaning assigned to such term in Section 1.04
hereof.
"UNRESTRICTED PROPERTIES" shall mean, at any time of determination,
the Hydrocarbon Properties of Canadian Forest and its Subsidiaries that have not
been given any value in the Borrowing Base as determined immediately prior to
such time of determination and that do not contain Proved Reserves.
"USAGE RATIO" shall mean as of any date the ratio of (a) Aggregate
Borrowings on such date to (b) the lesser of the Borrowing Base or the
Commitment on such date.
"U.S. BASE RATE" shall mean, for any day, a rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Chase Manhattan Prime Rate for such day. Each change in any interest rate
provided for herein based upon the U.S. Base Rate resulting from a change in the
U.S. Base Rate
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Page 26
shall take effect at the time of such change in the U.S. Base
Rate.
"U.S. BASE RATE LOAN" shall mean a Loan that bears interest at the
U.S. Base Rate.
"U.S. DOLLARS", "$" and "U.S.$" shall mean lawful money of the United
States of America.
"WHOLLY OWNED SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are directly or indirectly owned or controlled by
such Person or one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
1.02 ACCOUNTING TERMS AND DETERMINATIONS.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lender hereunder shall (unless otherwise disclosed to the Lender in writing at
the time of delivery thereof in the manner described in subsection (b) below),
be prepared in accordance with GAAP. All calculations made for the purposes of
determining compliance with this Agreement shall (except as otherwise expressly
provided herein) be made by application of GAAP applied on a basis consistent
with that used in the preparation of the latest annual or quarterly financial
statements furnished to the Lender pursuant to Section 8.01 hereof, unless
(i) Canadian Forest shall have objected to determining such compliance on such
basis at the time of delivery of such financial statements or (ii) the Majority
Lenders shall so object in writing within 30 days after delivery of such
financial statements, in either of which events such calculations shall be made
on a basis consistent with those used in the preparation of the latest financial
statements as to which such objection shall not have been made.
(b) Canadian Forest shall deliver to the Lender at the same time as
the delivery of any annual or quarterly financial statements under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statements and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, no Borrower will change the
last day of its
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fiscal year from December 31, or the last days of the first three fiscal
quarters in each of its fiscal years from March 31, June 30 and September 30
of each year, respectively.
1.03 BORROWING BASE.
(a) RESERVE EVALUATION REPORTS. Canadian Forest has furnished to
the Lender, the Agent and the lenders under the Funding Credit Agreement (i) a
reserve report prepared by McDaniel & Associates Consultants Ltd. as of January
1, 1996, which report shall be deemed to be the initial Reserve Evaluation
Report, and (ii) a Net Back Pool Report for the fiscal year ending December 31,
1995, which report shall be deemed to be the initial Net Back Pool Report. On
or before each Report Delivery Date (commencing September 1, 1996), Canadian
Forest shall furnish to the Lender, the Agent and the lenders under the Funding
Credit Agreement updated Borrowing Base Reports.
(b) BORROWING BASE. The Borrowers acknowledge and agree that the
Borrowing Base determined from time to time under the Funding Credit Agreement
shall also be the Borrowing Base under and for the purposes of this Agreement.
In that regard, during the period commencing on the date hereof and ending on
the date the first redetermination of the Borrowing Base becomes effective as
provided below in this Section 1.03(b), the Borrowing Base shall be C$60,000,000
(subject to any adjustments and redeterminations provided for by Sections
1.03(c), 1.03(d) and 1.03(e) hereof) which amount has been determined on the
basis of the initial Borrowing Base Reports referred to in the first sentence of
Section 1.03(a) hereof (with such adjustments to the rates, factors, values,
estimates, assumptions and computations set forth in such initial Reserve
Evaluation Report and the initial Net Back Pool Report as were acceptable to the
Majority Lenders in their sole discretion). Under the Funding Credit Agreement
the Agent has agreed, as promptly as reasonably practicable after its receipt of
the Borrowing Base Reports furnished to it pursuant to the second sentence of
Section 1.03(a) hereof, to endeavor (in consultation with the Majority Lenders)
to redetermine the Borrowing Base on the basis of such updated Borrowing Base
Reports and in the manner provided for in Section 1.03(b) of the Funding Credit
Agreement, to notify the lenders under the Funding Credit Agreement of such
redetermination and, if such redetermination is approved by each of such lenders
(in the case of an increase in the Borrowing Base or determination to maintain
the then existing Borrowing Base) or by the Majority Lenders (in the case of a
decrease in the Borrowing Base), as applicable, to notify the Lender (who shall
promptly notify the Borrowers) of the Borrowing Base as so redetermined and such
redetermined Borrowing Base shall become effective on the Determination Date
next following each Report Delivery Date (or, if later, on the date notified by
the Agent to the Lender) and shall remain effective until again redetermined as
provided in this Section 1.03(b) (subject to any adjustments and
redeterminations provided for by Sections 1.03(c), 1.03(d) and 1.03(e) hereof,
additions pursuant to Section 2.11(a) hereof or reductions pursuant to Section
2.11(c) and (d) hereof).
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As used herein, "BORROWING BASE" shall mean the amount specified in
the first sentence of this Section 1.03(b) as determined from time to time as
provided in the second sentence of Section 1.03(b) and subject to adjustments,
redeterminations and principles provided in Sections 1.03(c), 1.03(d), 1.03(e)
and 2.11.
(c) MATERIAL CHANGE. The Borrowers agree to notify the Lender and
the Agent promptly of any material change of which the Borrowers or Forest or
any of their Subsidiaries are aware which reduces or may result in a reduction
of the Borrowing Base by more than 10%. Promptly upon receipt of such notice,
the Agent (in consultation with, and with the approval of, the Majority Lenders)
may adjust the Borrowing Base pursuant to the procedures set forth in the
Funding Credit Agreement.
(d) REDETERMINATION. If so requested by the Majority Lenders or
the Lender at the request of the Borrowers or otherwise at any time, the Agent
has agreed that it shall, as promptly as reasonably practicable after the
receipt of such request, endeavor to redetermine (in consultation with the
Lender and the lenders under the Funding Credit Agreement) the Borrowing Base as
then in effect on the basis of the then most recent Borrowing Base Reports
(subject, however, to such other factors and assumptions as the Agent, with the
concurrence of the Majority Lenders, may determine to be appropriate).
(e) DETERMINATIONS, ETC. It has been agreed in the Funding Credit
Agreement that all determinations and redeterminations and adjustments of the
Borrowing Base by the Agent or the Majority Lenders provided for in this Section
1.03 or in the definition of "Present Value of Reserves" in Section 1.01 hereof,
including any approvals or disapprovals of a determination or redetermination of
the Borrowing Base or any adjustment thereof shall be made on a reasonable
basis, in good faith and in a manner reasonably consistent with prevailing
practice in connection with borrowing base loans if then made by such lenders
under the Funding Credit Agreement to comparable borrowers.
(f) FOREST SALE. The Borrowers and the Lender agree that the sale of
the Forest Pledged Properties from Canadian Forest to Forest pursuant to the
Forest Purchase Agreement, and the subjecting of such Forest Pledged Properties
to the Forest Debenture, shall not result in a redetermination or adjustment of
the Borrowing Base, and that such Forest Pledged Properties shall continue to be
included in the Borrowing Base (so long as they are owned by Forest and are not
otherwise subjected to any Lien (other than the Lien of the Forest Debenture) by
Forest) to the same extent as if such sale had not occurred.
1.04 TYPES AND CURRENCY OF LOANS. Loans hereunder are distinguished
by "Type" and "Currency". The "Type" of a Loan refers to whether such Loan is a
Canadian Prime Loan, a BA Loan, a U.S. Base Rate Loan or a Eurodollar Loan, each
of which constitutes a Type. The "Currency" of a Loan refers to whether such
Loan is
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denominated in Canadian Dollars or U.S. Dollars. Loans may be
identified by Type and Currency.
Section 2. COMMITMENT, LOANS, LETTERS OF CREDIT, NOTES AND
PREPAYMENTS.
2.01 LOANS.
(a) The Lender agrees, in accordance with the terms and conditions of
this Agreement, to make one or more loans to the Borrowers in Canadian Dollars
or U.S. Dollars during the period from and including the Closing Date to and
including the Commitment Termination Date, in an aggregate amount up to but not
exceeding the lesser of (x) the Commitment and (y) the most recently determined
Borrowing Base; PROVIDED that in no event shall the aggregate Principal Amount
of all Loans (including all Swingline Loans), together with the aggregate amount
of all Letter of Credit Liabilities (with the amounts of any Loans or Letter of
Credit Liabilities outstanding in U.S. Dollars expressed as an Equivalent Amount
in Canadian Dollars), exceed the lesser of (x) the amount of the Commitment as
in effect from time to time and (y) the most recently determined Borrowing Base.
(b) The Borrowers may not borrow Loans (including Swingline Loans)
under this Agreement at any time while a Borrowing Base Deficiency exists and
the Interest Period for any Loan that is Converted to or Continued as a
Eurodollar Loan or BA Loan at any time while a Borrowing Base Deficiency exists
shall not end after the Deficiency Cure Period.
(c) Subject to the terms and conditions of this Agreement, during the
period from and including the Closing Date to but not including the Commitment
Termination Date, the Borrowers may borrow, repay and reborrow the Loans by
means of Canadian Prime Loans, BA Loans, U.S. Base Rate Loans and Eurodollar
Loans and may, subject to Section 4.03 hereof, Convert all or a portion of any
Loan of one Type into Loans of another Type (as provided in Section 2.10 hereof)
or Continue all or a portion of a Loan of one Type as Loans of the same Type (as
provided in Section 2.10 hereof); PROVIDED that (i) no more than 3 separate
Interest Periods in respect of Eurodollar Loans may be outstanding at any one
time and (ii) no more than 6 separate Interest Periods with respect to BA Loans
may be outstanding at any one time.
2.02 BORROWINGS. The applicable Borrower shall give the Lender and
the Agent (or in the case of Swingline Loans, BOM instead of the Agent) notice
of each borrowing hereunder as provided in Section 4.05 hereof. Not later than
1:00 p.m. Toronto time on the date specified for each borrowing hereunder, the
Lender shall make available the amount of the Loan or Loans to be made by it on
such date, subject to the terms and conditions of this Agreement, to the
applicable Borrower by depositing the same, in immediately available funds, in
an account of the Borrowers or any one of
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them designated by such Borrower. Notwithstanding any provision of this
Agreement to the contrary, Canadian Prime Loans, Swingline Loans and BA Loans
may only be denominated in Canadian Dollars and U.S. Base Rate Loans and
Eurodollar Loans may only be denominated in U.S. Dollars.
2.03 BA LOANS. On or prior to 1:00 p.m. (Toronto time) on the date
of any requested extension of a BA Loan, the Lender shall determine an interest
rate per annum (the "BA RATE") for that BA Loan which rate shall be equal to the
Bankers' Acceptance Rate (as defined in the Funding Credit Agreement) on such
date for the Bankers' Acceptances issued under the Funding Credit Agreement
concurrently with funding any BA Loan plus .1%. The amount of proceeds to be
advanced by the Lender in respect of a BA Loan and, notwithstanding the
Principal Amount of that Loan, the amount that interest at the BA Rate will be
calculated on shall be equal to the following formula:
PA X PRICE
----------
100
Where:
PA = Principal Amount of BA Loan Requested
Price = 100
--- ---
( )
rounded to the nearest 1/1000 of 1%.
On the date a BA Loan is advanced the Borrowers shall pay the Lender a
fee with respect to that BA Loan. That fee shall be the product obtained by
multiplying:
(a) the applicable BA Fee Rate specified in the definition of
Applicable Margin in effect from time to time; by
(b) the Principal Amount of that BA Loan;
and pro rating that product for the number of days in the Interest Period for
the BA Loan on the basis of a year of 365 days.
That fee shall be deducted by the Lender from the proceeds of the BA
Loan advanced to the Borrower.
The Lender's Commitment shall be deemed utilized for the full
Principal Amount of the BA Loan requested notwithstanding that the proceeds
advanced are reduced as provided above and the Lender's fee for that BA Loan is
deducted from
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those proceeds.
2.04 LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, upon request by any Borrower, the Lender hereby agrees to utilize a
portion of the commitments available to it under the Funding Credit Agreement
from time to time to obtain letters of credit ("LETTERS OF CREDIT") in Canadian
or U.S. Dollars and to provide the same to the Borrower which has requested such
Letter of Credit; PROVIDED that in no event shall (i) the aggregate amount of
all Letter of Credit Liabilities, together with the aggregate Principal Amount
of the Loans (including all Swingline Loans) (with the amounts of any Loans or
Letter of Credit Liabilities outstanding in U.S. Dollars being expressed as an
Equivalent Amount in Canadian Dollars), exceed the lesser of (x) the amount of
the Commitment in effect from time to time, and (y) the most recently determined
Borrowing Base, (ii) the aggregate outstanding amount of all Letter of Credit
Liabilities exceed C$15,000,000, (iii) the expiration date of any Letter of
Credit extend beyond the earlier of the Commitment Termination Date and the date
12 months following the issuance of such Letter of Credit and (iv) any Letter of
Credit require payment against a conforming draft to be made thereunder on the
same Business Day on which the draft is presented if presentation is made after
1:00 p.m. Toronto time. Each Letter of Credit shall comply in all respects with
the provisions of Section 2.03 of the Funding Credit Agreement. Each request by
a Borrower for a Letter of Credit shall be irrevocable.
The following additional provisions shall apply to Letters of Credit:
(a) The applicable Borrower shall give the Lender and the Agent at
least 3 Business Days' irrevocable and binding prior notice (effective upon
receipt) specifying the Business Day (which shall be no later than 30 days
preceding the Commitment Termination Date) on which each Letter of Credit is to
be issued, the beneficiary thereof and describing in reasonable detail the
proposed terms of such Letter of Credit (including the Currency of such Letter
of Credit) and the nature of the transactions or obligations proposed to be
supported thereby (including whether such Letter of Credit is to be a commercial
letter of credit or a standby letter of credit).
(b) On each day during the period commencing with the date on which
the Lender obtains the issuance of any Letter of Credit under the Funding Credit
Agreement and until such Letter of Credit shall have expired or been terminated,
the Commitment of the Lender shall be deemed to be utilized for all purposes of
this Agreement in an amount equal to the then undrawn face amount of such Letter
of Credit.
(c) Upon receipt by the Lender (through the Administrative Agent)
from the beneficiary of any Letter of Credit of any demand for payment under
such Letter of Credit, the Lender shall promptly notify the Borrowers of the
amount to be paid by the Lender as a result of such demand and the date on which
payment is to be made by
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the Lender to such beneficiary in respect of such demand. Notwithstanding
the identity of the account party of any Letter of Credit, the Borrowers
hereby unconditionally agree to pay and reimburse the Lender for the amount
of each demand for payment, in the Currency of the amount payable, under such
Letter of Credit that is in substantial compliance with the provisions of
such Letter of Credit at or prior to the date on which payment is to be made
by the Lender to the Issuing Bank, without presentment, demand, protest or
other formalities of any kind. The Borrowers' obligation to pay and
reimburse the Lender and the Lender's right to receive the same is
unconditional and irrevocable and shall be paid strictly in accordance with
this Agreement under all circumstances.
(d) Forthwith upon its receipt of a notice referred to in
paragraph (c) of this Section 2.04, the Borrowers shall advise the Lender and
the Agent whether or not the Borrowers intend to borrow hereunder to finance
their obligation with respect to the amount of the related demand for payment
and, if they do, submit a notice of such borrowing as provided in Section 4.05
hereof.
(e) Any payment by the Lender of an amount due under a Letter of
Credit shall be deemed to be a Canadian Prime Loan or U.S. Base Rate Loan made
to the Borrowers depending on whether the amounts paid are in Canadian Dollars
or U.S. Dollars.
(f) The Borrowers shall pay to the Lender a letter of credit fee in
respect of each Letter of Credit, payable in the Currency that such Letter of
Credit is denominated, in an amount equal to the Applicable Margin with respect
to BA Fee Rates (for Letters of Credit payable in Canadian Dollars) or the
Applicable Margin with respect to Eurodollar Loans (for Letters of Credit
payable in U.S. Dollars), of the daily average undrawn face amount of such
Letter of Credit for the period from and including the date of issuance of such
Letter of Credit (i) in the case of a Letter of Credit that expires in
accordance with its terms, to and including such expiration date and (ii) in the
case of a Letter of Credit that is drawn in full or is otherwise terminated
other than on the stated expiration date of such Letter of Credit, to but
excluding the date such Letter of Credit is drawn in full or is terminated (such
fee to be non-refundable, to be paid in arrears on each Quarterly Date and on
the Commitment Termination Date and to be calculated for any day after giving
effect to any payments made under such Letter of Credit on such day). In
addition, the Borrowers shall pay to the Lender a fronting fee in respect of
each Letter of Credit in an amount equal to the lesser of (y) C$1,010 and (z)
.51% per annum of the daily average undrawn face amount of such Letter of Credit
for the period from and including the date of issuance of such Letter of Credit
(i) in the case of a Letter of Credit that expires in accordance with its terms,
to and including such expiration date and (ii) in the case of a Letter of Credit
that is drawn in full or is otherwise terminated other than on the stated
expiration date of such Letter of Credit, to but excluding the date such Letter
of Credit is drawn in full or is terminated (such fee to be non-refundable, to
be paid in arrears on each Quarterly Date and on the
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Commitment Termination Date no later than 1:00 p.m. (Toronto time) and to be
calculated for any day after giving effect to any payments made under such
Letter of Credit on such day) and the Borrowers shall reimburse the Lender on
demand for all commissions, charges, costs and expenses in amounts equal to
the amounts customarily charged by the Issuing Bank from time to time in like
circumstances with respect to the issuance of each Letter of Credit and
drawings and other transactions relating thereto.
(g) Promptly following the end of each calendar month, the Lender
shall deliver to each Borrower all notices and information that the Lender has
received pursuant to the terms of Section 2.03(h) of the Funding Credit
Agreement.
As between the Borrowers and the Lender, the Borrowers assume all risks for the
acts and omissions of, or misuse of, the Letters of Credit by the respective
beneficiaries of such Letter of Credit. The Borrowers hereby jointly and
severally indemnify and hold harmless the Lender from and against any and all
claims and damages, losses, liabilities, costs or expenses that the Lender may
incur (or that may be claimed against the Lender by any Person whatsoever) by
reason of or in connection with (i) any loss or expense incurred by the Lender
as a result of the Borrowers' failure to honor or fulfill, before the date
specified for the issuance of any Letter of Credit, the applicable conditions
set forth in Section 6 and this Section 2.04 if the Letter of Credit is not
issued on that date because of that failure; and (ii) the execution, delivery,
issuance or transfer of or payment or refusal to pay by the Issuing Bank under
any Letter of Credit. Nothing in this Section 2.04 is intended to limit the
other obligations of the Borrowers or the Lender under this Agreement.
2.05 SWINGLINE LOANS. (a) In addition to the Loans provided for in
Section 2.01(a) hereof and subject to the terms and conditions of this
Agreement, the Lender agrees to make loans ("SWINGLINE LOANS") to the Borrowers
during the period from the date hereof to but excluding the Commitment
Termination Date, PROVIDED that the aggregate Principal Amount of all Loans
(including all Swingline Loans), together with the aggregate amount of all
Letter of Credit Liabilities (with the amounts of any Loans or Letters of Credit
Liabilities outstanding in U.S. Dollars expressed as an Equivalent Amount in
Canadian Dollars) shall not at any time exceed the lesser of (x) the aggregate
amount of the Commitment and (y) the most recently determined Borrowing Base,
nor shall the aggregate Principal Amount of all Swingline Loans exceed
C$5,000,000. All Swingline Loans shall be denominated in Canadian Dollars and
may not be made as BA Loans. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrowers may borrow, prepay and
reborrow Swingline Loans. Swingline Loans shall constitute Loans hereunder.
(b) In order to request a Swingline Loan, the applicable Borrower
shall notify the Lender of such request by telephone (confirmed by telecopy),
not later than 2:00 p.m., Calgary time (or 4:00 p.m. Calgary time in the case of
borrowings to satisfy
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outstandings under the BOM Agreement), on the day of a proposed Swingline
Loan. Notwithstanding the foregoing, in the event that at any time BOM makes
demand for payment of any amounts to which it is entitled under the BOM
Agreement and such amounts are not paid by the close of business on the date
of demand, ProMark shall be deemed to have notified the Lender of a request
for a Swingline Loan in an amount equal to the lesser of (i) $5,000,000 less
the aggregate Principal Amount of any outstanding Swingline Loans and (ii)
the amounts demanded under the BOM Agreement. Each such notice provided by a
Borrower by telephone request shall be irrevocable and shall specify the
requested date (which shall be a Business Day) and amount of the requested
Swingline Loan. The Lender shall promptly advise BOM of any such notice
received from a Borrower. The Lender shall make each Swingline Loan
available to the applicable Borrower by means of a credit to the general
deposit account of such Borrower at the BOM Main Branch, Calgary, Alberta by
2:30 p.m., Calgary time, on the requested date of such Swingline Loan, or in
the case of a deemed notice on or before the next Business Day following the
date that BOM so provides the demand for payment.
2.06 CHANGES OF COMMITMENT.
(a) The amount of the Commitment shall be automatically reduced to
zero on the Commitment Termination Date.
(b) The Borrowers shall have the right at any time or from time to
time (i) so long as no Loans are outstanding, to terminate the Commitment and
(ii) to reduce the aggregate unused amount of the Commitment (with any amounts
outstanding in U.S. Dollars being expressed as an Equivalent Amount in Canadian
Dollars); PROVIDED that (x) the Borrowers shall give notice of each such
termination or reduction as provided in Section 4.05 hereof, (y) each partial
reduction shall be in an aggregate amount at least equal to C$1,000,000 (or a
larger multiple of C$100,000 in excess thereof) and (z) the Lender concurrently
makes an identical termination or reduction under the Funding Credit Agreement.
(c) The Commitment once terminated or reduced may not be reinstated.
2.07 COMMITMENT FEE. The Borrowers jointly and severally shall pay
to the Lender a commitment fee on the daily average unused amount of the
difference, if any, between (x) the sum of the outstanding Loans and Letter of
Credit Liabilities (with any amounts outstanding in U.S. Dollars being expressed
as an Equivalent Amount in Canadian Dollars) and (y) an amount equal to the most
recently determined Borrowing Base (the "AVAILABLE BORROWING AMOUNT") for the
period from and including the date of this Agreement to but not including the
earlier of the date the Commitment is terminated and the Commitment Termination
Date, at a rate per annum equal to 1/2 of 1%. Accrued commitment fees shall be
payable in arrears on each Quarterly Date and on the earlier of the date the
Commitment is terminated and the Commitment Termination
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Date.
2.08 LOANS MADE ONLY IF PROCEEDS ARE AVAILABLE. The obligation of
the Lender to make Loans or Convert or Continue on any date shall be subject to
the condition that the Lender shall have received loans or had Bankers'
Acceptances (as defined in the Funding Credit Agreement) accepted in an amount
such that:
(a) the Lender has received net proceeds in the same amount of the
same Currency as the Loan requested by or, in the case of BA Loans, to be
advanced to the applicable Borrower hereunder;
(b) the aggregate Principal Amount of each Type of Loan (including
Swingline Loans) and all Bankers' Acceptances and of Letter of Credit
Liabilities (all such terms being as defined in the Funding Credit Agreement)
outstanding under the Funding Credit Agreement shall not be respectively greater
than the sum of the corresponding:
(i) aggregate Principal Amounts of the Types of Loans (including
Swingline Loans) under this Agreement; and
(ii) aggregate Letter of Credit Liabilities; and
(c) the rates of interest, fees and other amounts payable in respect
of Loans, Bankers' Acceptances and Letters of Credit (all those terms being as
defined in the Funding Credit Agreement) under the Funding Credit Agreement
shall be the same or less than the rates of interest, fees and other amounts
payable in respect of corresponding Types of Loans and Letters of Credit under
this Agreement.
2.09 NOTES.
(a) The Loans made by the Lender (other than Swingline Loans) to the
Borrowers shall be evidenced by the promissory note of each Borrower dated July
17, 1996, payable to the Lender in a principal amount equal to C$80,000,000.
(b) The Swingline Loans made by the Lender to each Borrower shall be
evidenced by the promissory note of each Borrower dated July 17, 1996, payable
to the Lender in a principal amount equal to C$5,000,000.
(c) The date, amount, Type, Interest Period and Currency of each Loan
made by the Lender to each Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of the Notes of such Borrower held by it, endorsed by the Lender on
the schedule attached to such Note or any continuation thereof; PROVIDED that
the failure of the Lender to make any such recordation or endorsement shall not
affect the obligations of
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such Borrower to make a payment when due of any amount owing hereunder or
under such Note in respect of the Loans.
(d) The Lender shall not be entitled to have its Notes substituted or
exchanged for any reason, or subdivided for promissory notes of lesser
denominations.
2.10 OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF LOANS.
Subject to Section 4.03 hereof, the Borrowers shall have the right to prepay
Loans or to Convert all or a part of any Loan of one Type into Loans of another
Type (PROVIDED that a Loan that is not a Swingline Loan cannot be converted to a
Swingline Loan and a Loan (including a Swingline Loan) cannot be converted to a
Letter of Credit) or Continue all or a part of any Loan of one Type as Loans of
the same Type, at any time or from time to time, and Convert Letters of Credit
Liabilities and Swingline Loan Liabilities into Loans hereunder and may Continue
any Letter of Credit, PROVIDED that: (a) the applicable Borrower shall give the
Lender and the Agent (or in the case of Swingline Loans, shall give BOM instead
of the Agent) notice of each such prepayment, Conversion or Continuation as
provided in Section 4.05 hereof (and, upon the date specified in any such notice
of prepayment, the amount to be prepaid shall become due and payable hereunder);
(b) Eurodollar Loans and BA Loans may be prepaid or Converted only on the last
day of an Interest Period for such Loans; (c) the Lender concurrently makes an
identical prepayment, Conversion or Continuation under the Funding Credit
Agreement; and (d) the Conversion of a Swingline Loan to another Type of Loan
shall satisfy the full amount of the related Swingline Loan Liability.
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lender under Section 9 hereof, in the event that any Event of Default shall
have occurred and be continuing, the Lender may (and, if the Lender may only
maintain loans under the Funding Credit Agreement based on the Chase Canada
Prime Rate, shall) by notice to Canadian Forest suspend the right of the
Borrowers to Convert any Loan into a Eurodollar Loan, a U.S. Base Rate Loan or a
BA Loan or to Continue any Loan as a Eurodollar Loan, a U.S. Base Rate Loan or a
BA Loan, in which event all Loans shall be Converted (on the last day(s) of the
respective Interest Periods therefor, if applicable) or Continued, as the case
may be, as Canadian Prime Loans.
2.11 MANDATORY PREPAYMENTS AND REDUCTIONS OF COMMITMENTS.
(a) BORROWING BASE. The Lender shall promptly notify the Borrowers
(following the Lender's receipt of notice from the Agent (a "DEFICIENCY
NOTICE")) if following any redetermination of the Borrowing Base, the Borrowing
Base as then in effect is less than the aggregate Principal Amount of the Loans
and Letter of Credit Liabilities outstanding at such time (with any amounts
outstanding in U.S. Dollars being expressed as an Equivalent Amount in Canadian
Dollars)(the amount of such difference being called herein the "BORROWING BASE
DEFICIENCY"); and within 30 days after the date of the Deficiency Notice, the
Borrowers shall notify the Lender and the Agent of the Borrowers' intentions
with respect to compliance with the procedures set
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forth in this Section 2.11(a). As specified in such notice from the
Borrowers, the Borrowers shall (within 90 days after the date of the
Deficiency Notice (the "DEFICIENCY CURE PERIOD")) (i) prepay (in accordance
with the procedures of this Agreement) the outstanding principal of the Loans
(except BA Loans) in the manner as specified in clause (e) below and, if all
of the Loans (except BA Loans) have been prepaid and a Borrowing Base
Deficiency still exists, provide cover for Letter of Credit Liabilities and
BA Loans in an amount equal to such Borrowing Base Deficiency in the manner
specified in clause (f) below and/or (ii) add to the Hydrocarbon Properties
(other than to the interests which Forest has in the Forest Pledged
Properties) additional Hydrocarbon Properties (other than Unrestricted
Properties) (each such additional Hydrocarbon Property to have a Present
Value of Reserves at least equal to C$1,000,000) having a loan value, as
determined by the Majority Lenders, in an amount sufficient so that the
aggregate amount of such prepayments and/or the loan value of such additional
Hydrocarbon Properties shall equal or exceed the Borrowing Base Deficiency
(any such additional Hydrocarbon Property to be deemed added to the
Hydrocarbon Properties on the date the Borrowers deliver to the Lender and
the Agent evidence of satisfactory title to those additional Hydrocarbon
Properties, a written confirmation that such additional Hydrocarbon Property
is subject to the Lien of the Canadian Forest Debenture, or the Lien of
similar security granted by a Subsidiary Borrower to the Lender and an
opinion of counsel regarding such title and priority in form and substance
satisfactory to the Agent and the Majority Lenders).
(b) EXCESS RESULTING FROM EXCHANGE RATE CHANGE.
(i) Subject to Section 2.11(b)(ii), any time that, following one or
more fluctuations in the exchange rate of the U.S. Dollar against the
Canadian Dollar, the sum of the Equivalent Amount in Canadian Dollars of
the aggregate Principal Amount of Loans and Letter of Credit Liabilities
denominated in U.S. Dollars outstanding at such time PLUS the aggregate
Principal Amount of Canadian Dollar denominated Loans outstanding at such
time PLUS the aggregate amount of Letter of Credit Liabilities denominated
in Canadian Dollars (the amount of such sum being called herein the
"AGGREGATE BORROWINGS") EXCEEDS by an amount equal to or in excess of 1% of
the lesser of (x) the amount of the Commitment on such date and (y) the
most recently determined Borrowing Base, the Borrowers shall promptly after
receipt by the Lender of notice from the Agent in this regard and, in any
case, within 10 days after receipt of such notice, either (A) prepay the
Loans (except BA Loans) (and/or provide cover for Letter of Credit
Liabilities and BA Loans as specified in clause (f) below) in an amount
(such amount being called herein the "EXCHANGE RATE DEFICIENCY") necessary
to reduce the Aggregate Borrowings to an amount equal to or less than the
lesser of (x) the amount of the Commitment on such date and (y) the most
recently determined Borrowing Base or (B) maintain or cause to be
maintained with the Lender (who, in turn shall maintain with the Agent)
deposits of Canadian Dollars in an amount equal to the Exchange Rate
Deficiency, such deposits to be maintained in such
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form and upon such terms as are acceptable to the Agent. Without in any
way limiting the foregoing provisions, the Lender shall receive from the
Agent, on each Quarterly Date and on the date of any borrowing hereunder
any necessary exchange rate calculations to determine whether any such
excess exists on such date and, if such excess exists on such date, the
Lender shall so notify the Borrowers.
(ii) Notwithstanding Section 2.11(b)(i), the Lender (at the
direction of the Majority Lenders) shall be entitled to require that the
Borrowers, at the Borrowers' option, (A) make the payments or prepayments
or maintain the deposits required to be maintained under Section 2.11(b)(i)
or (B) fully hedge, to the reasonable satisfaction of the Majority Lenders,
the Exchange Rate Deficiency and assign the benefit of all hedging
contracts to the Lender, for the benefit of the lenders under the Funding
Credit Agreement, in any case where an Exchange Rate Deficiency exists.
(c) CASUALTY EVENTS. Upon the date 30 days following the receipt by
the Borrowers (or Forest, in the case of the Forest Pledged Properties), of the
proceeds of insurance, condemnation award or other compensation in respect of
any Casualty Event affecting any Hydrocarbon Property or gas marketing assets of
any Borrower (or Forest, in the case of the Forest Pledged Properties), other
than Unrestricted Properties or any Property of a Non-Borrowing Subsidiary, the
Borrowing Base shall be subject to automatic reduction, in an aggregate amount,
if any, equal to 100% of the Net Available Proceeds of such Casualty Event not
theretofore applied or committed to be applied to the repair or replacement of
such Hydrocarbon Property or gas marketing assets, or such lesser amount as is
specified in a written notice from the Majority Lenders to the Lender, such
reduction to be effected in the manner and to the extent specified in clause (e)
of this Section 2.11. Nothing in this clause (c) shall be deemed to limit any
obligation of the Borrowers or any of their Subsidiaries (or Forest, in the case
of the Forest Pledged Properties), pursuant to any of the Security Documents to
remit to a collateral or similar account maintained by the Agent (as assignee of
the Lender) pursuant to any of the Security Documents the proceeds of insurance,
condemnation award or other compensation received in respect of any Casualty
Event.
(d) SALE OF ASSETS. Without limiting the obligation of the Borrowers
to obtain the consent of the Lender and the Majority Lenders pursuant to
Section 8.05 hereof to any Disposition not otherwise permitted hereunder, no
later than five Business Days prior to the occurrence of any Disposition, the
applicable Borrower will deliver to the Lender and the Agent a statement,
certified by the chief financial officer or treasurer of such Borrower in form
and detail satisfactory to the Agent, of the amount of the Net Available
Proceeds of such Disposition and, to the extent such Net Available Proceeds
(when taken together with the Net Available Proceeds of all prior Dispositions
as to which a prepayment has not yet been made under this Section 2.11(d)) shall
exceed C$5,000,000, the Borrowing Base shall be subject to automatic reduction
and, if the
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amount of Loans and the Letter of Credit Liabilities (with the amounts of
Loans and Letter of Credit Liabilities in U.S. Dollars expressed as an
Equivalent Amount in Canadian Dollars) exceeds the Borrowing Base (as
reduced), such amount shall be applied as provided in clause (e) below, in an
aggregate amount equal to 100% of the Net Available Proceeds of such
Disposition, or such lesser amount as is specified in a written notice from
the Majority Lenders (together with 100%, or such lesser amount as is
specified in a written notice from the Majority Lenders, of the Net Available
Proceeds of all prior Dispositions as to which a prepayment has not yet been
made under this Section 2.11(d)), such reduction to be effected in the manner
and to the extent specified in clause (e) of this Section 2.11.
Notwithstanding the foregoing, the Borrowers shall not be required to prepay
Loans (except BA Loans) (and/or provide cover for Letter of Credit
Liabilities and BA Loans as specified in clause (f) below) and the Borrowing
Base shall not be subject to automatic reduction upon any sale of Property
permitted pursuant to Section 8.05 hereof.
(e) APPLICATION. Prepayments and reductions of the Commitment and/or
Borrowing Base described in the above clauses of this Section 2.11 shall be
effected as follows: the Commitment and/or Borrowing Base shall be
automatically reduced by an amount equal to the amount specified in such clauses
and to the extent that, after giving effect to such reduction, the aggregate
Principal Amount of the Loans together with the aggregate amount of all Letter
of Credit Liabilities (with the amounts of Loans and Letter of Credit
Liabilities in U.S. Dollars expressed as an Equivalent Amount in Canadian
Dollars), would exceed the Commitment and/or Borrowing Base, the Borrowers shall
first prepay the Loans (except BA Loans) and second, provide cover for Letter of
Credit Liabilities and BA Loans as specified in clause (f) below, in an
aggregate amount equal to such excess. To the extent possible, any prepayments
required pursuant to this Section 2.11 shall be applied FIRST to U.S. Base Rate
Loans, SECOND to Canadian Prime Rate Loans and THIRD to Eurodollar Loans.
(f) COVER FOR LETTERS OF CREDIT AND BA LOANS. In the event that the
Borrowers shall be required pursuant to this Section 2.11, or pursuant to
Section 3.01 hereof, to provide cover for Letter of Credit Liabilities and BA
Loans, the Borrowers shall effect the same by paying to the Lender immediately
available funds in an amount equal to the required amount, which funds shall be
retained by the Lender in the Cash Collateral Account (as provided in
Section 13.4 of the Canadian Forest Debenture or the ProMark Debenture) as
collateral security in the first instance PRO RATA for the Letter of Credit
Liabilities and BA Loans until such time as the Letters of Credit shall have
been terminated, all of the Letter of Credit Liabilities shall have been paid in
full and all BA Loans have been paid in full.
(g) MONTHLY CLEAN.
(i) The Borrowers will each month prior to the Commitment
Termination Date prepay the Swingline Loans and any other Loans or other
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borrowings outstanding hereunder as required so that (x) for the period
from the earlier of the 22nd day of each month and two Business Days
preceding the Gas Payment Settlement Day for such month (the "CLEANUP
DATE") until the Gas Payment Settlement Day, the outstanding Principal
Amount of Swingline Loans shall be zero, and (y) for the period from the
Cleanup Date to the close of business in Calgary, Alberta on the second
Business Day immediately following the Gas Payment Settlement Day (the
"CLEANUP TIME"), the Available Borrowing Amount shall be not less than
C$5,000,000 less any borrowings of Swingline Loans permitted pursuant to
clause (ii) below.
(ii) During the period from the Cleanup Date to the Cleanup
Time, the Borrowers shall not borrow any Swingline Loans other than for the
purposes of satisfying obligations under the BOM Agreement or as may be
required pursuant to any deemed notice of ProMark pursuant to Section
2.05(b) hereof.
(h) FUNDING CREDIT AGREEMENT. Any and all payments made to the
Lender shall be deemed payments hereunder only if they are forwarded by the
Lender to the Agent or the lenders under the Funding Credit Agreement.
Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01 REPAYMENTS. Each Borrower hereby promises to pay to the Lender
the entire outstanding Principal Amount of the Loans to such Borrower (or with
respect to BA Loans, the proceeds thereof advanced by the Lender in accordance
with Section 2.03 hereof), and each Loan (other than Swingline Loans) shall
mature, on the earlier of the stipulated maturity date or the Commitment
Termination Date. All Letter of Credit Liabilities shall also be payable to the
Lender on the Commitment Termination Date. In addition, if following any
reduction in the Commitment, the aggregate Principal Amount of the Loans,
together with the aggregate amount of all Letter of Credit Liabilities (with the
amounts of any Loans and Letter of Credit Liabilities outstanding in U.S.
Dollars expressed as an Equivalent Amount in Canadian Dollars) shall exceed the
Commitments, the Borrowers shall pro rata, based on the outstanding Loans and
Letter of Credit Liabilities of the Borrowers, first, prepay Loans and second,
provide cover for Letter of Credit Liabilities with respect to the Commitments
as specified in Section 2.11(f) above, in an aggregate amount equal to such
excess.
3.02 INTEREST. Each Borrower hereby promises to pay to the Lender
interest on the unpaid principal amount of each Loan made to such Borrower (or
with respect to BA Loans, the proceeds thereof advanced by the Lender in
accordance with Section 2.03 hereof) for the period from and including the date
of such Loan to but excluding the date such Loan shall be paid in full, at the
following rates:
(a) during such periods as such Loan is a Canadian Prime Loan, the
Chase Canada Prime Rate (as in effect from time to time) PLUS the
Applicable
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Margin for such Loans,
(b) during such periods as such Loan is a U.S. Base Rate Loan, the
U.S. Base Rate (as in effect from time to time) PLUS the Applicable Margin
for such Loans,
(c) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Base Rate for such Loan
for such Interest Period PLUS the Applicable Margin for such Loans,
(d) during such periods as such Loan is a BA Loan, for each Interest
Period relating thereto, the BA Rate for such Loan for such Interest
Period; and
(e) during such periods as such Loan is a Swingline Loan, the BOM
Prime Rate (as in effect from time to time) PLUS the Applicable Margin for
Canadian Prime Loans.
Accrued interest on each Loan shall be payable (i) quarterly on the Quarterly
Dates for Canadian Prime Loans and U.S. Base Rate Loans, (ii) at the end of each
Interest Period in the case of Eurodollar Loans and BA Loans, (iii) on any
Swingline Loan monthly on the last Business Day of each month and (iv) in the
case of any Loan, upon the payment or prepayment thereof (but only on the
principal amount so paid or prepaid). Promptly after the determination of any
interest rate provided for herein or any change therein, the Lender shall give
notice thereof to the Borrowers but failure to do so on a timely basis or at all
shall not effect the Borrowers' obligation to pay interest for any period at the
applicable rate determined by the Lender.
3.03 CURRENCY. Borrowings hereunder and any payments in respect
thereof including payments of any interest and fees are payable by the Borrowers
in the currency in which they are denominated.
3.04 INTEREST ON OVERDUE AMOUNTS. Except as otherwise provided in
this Agreement, all amounts owed by the Borrowers to the Lender under this
Agreement (including amounts of principal and interest) which are not paid when
due (whether at stated maturity, on demand, by acceleration or otherwise) shall
bear interest (both before and after judgment), from the date on which such
amount is due until such amount is paid in full, payable on demand, at a rate
per annum equal at all times to the rates applicable to U.S. Base Rate Loans (if
the amounts are due in U.S. Dollars) or to Canadian Prime Loans (if the amounts
are due in Canadian Dollars), with interest on overdue interest at the same rate
as well after as before maturity, demand and judgment.
Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
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4.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments
in Canadian Dollars of principal, interest, Letter of Credit Reimbursement
Obligations and other amounts to be made by the Borrowers under this
Agreement and the Notes, and, except to the extent otherwise provided
therein, all payments to be made by the Borrowers under any other Loan
Document, shall be made in immediately available funds, without deduction,
set-off or counterclaim, to the Lender at account number 219-247-4 at Royal
Bank of Canada, Main Branch, Toronto or at any other account designated by
the Lender, not later than 1:00 p.m. Toronto time on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on, and applicable interest shall be
payable to, the next succeeding Business Day).
(b) Except to the extent otherwise provided herein, all payments
in U.S. Dollars of principal, interest, Letter of Credit Reimbursement
Obligations and other amounts to be made by the Borrowers under this
Agreement and the Notes, and, except to the extent otherwise provided
therein, all payments to be made by the Borrowers under any other Loan
Document, shall be made in immediately available funds, without deduction,
set-off or counterclaim, to the Lender at account number 001-1-150620 at
Chase Manhattan Principal Office or at any other account designated by the
Lender, not later than 1:00 p.m. Toronto time on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on, and applicable interest shall be
payable to, the next succeeding Business Day).
(c) Each Borrower shall, at the time of making each payment under
this Agreement or any Note, specify to the Lender the Loans, Letter of Credit
Reimbursement Obligations or other amounts payable by the Borrowers hereunder
to which such payment is to be applied (and in the event that the Borrowers
fail to so specify, or if an Event of Default has occurred and is continuing,
the Lender may apply such payment as it determines to be appropriate).
(d) Except as provided in clause (a)(ii) of the definition of
"Interest Period", if the due date of any payment under this Agreement, or
any Note would otherwise fall on a day that is not a Business Day, such date
shall be extended to the next succeeding Business Day, and interest shall be
payable for any principal so extended for the period of such extension.
4.02 COMPUTATIONS. Interest on Eurodollar Loans and commitment
fees and Letter of Credit fees shall be computed on the basis of a year of
360 days and actual days elapsed (including the first day but, except as
otherwise provided in Section 2.04(f) hereof, excluding the last day)
occurring in the period for which that interest and those fees are payable,
interest on BA Loans and the fees for BA Loans shall be
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computed on the basis of a year of 365 days and the actual days elapsed
(including the first day but excluding the last day) occurring during the
period for which that interest or those fees are payable. Interest on any
other Loans and Letter of Credit Reimbursement Obligations shall be computed
on the basis of a year of 365 or 366 days and actual days elapsed (including
the first day but excluding the last day) occurring in the period for which
that interest and those fees are payable.
4.03 MINIMUM AMOUNTS. Except for conversions of Swingline Loans
pursuant to Section 2.10 hereof, mandatory prepayments made pursuant to
Section 2.11 hereof or prepayments or Conversions made pursuant to Section
5.04 hereof, each borrowing, Conversion and partial prepayment of principal
of Loans (other than Swingline Loans) shall be in an aggregate amount at
least equal to C$1,000,000 (or the equivalent in U.S. Dollars) or a larger
multiple of C$100,000 (or the equivalent in U.S. Dollars) (borrowings,
Conversions or prepayments of Loans of different Currencies at the same time
hereunder to be deemed separate borrowings, Conversions and prepayments for
purposes of the foregoing, one for each Currency); PROVIDED that any
borrowings of BA Loans shall be in an amount such that each lender under the
Funding Credit Agreement will be required to issue Bankers' Acceptances on
each Acceptance Date (as defined in the Funding Credit Agreement) in
accordance with their Commitment Percentage (as defined in the Funding Credit
Agreement), adjusted so as to permit each BA Loan to be in integral multiples
of C$100,000. Each borrowing other than a borrowing pursuant to a deemed
notice pursuant to Section 2.05(b) hereof or partial prepayment by any
Borrower of Swingline Loans shall be in an aggregate amount at least equal to
C$250,000 or a larger multiple of C$50,000 in excess thereof.
4.04 INTEREST ACT (CANADA). (a) For purposes of the INTEREST ACT
(Canada), (i) whenever any interest or fee under this Agreement is calculated
using a rate based on a year of 360 days or 365 days, such rate determined
pursuant to such calculation, when expressed as an annual rate, is equivalent
to (x) the applicable rate based on a year of 360 days or 365 days, as the
case may be, (y) multiplied by the actual number of days in the calendar year
in which the period for which such interest or fee is payable (or compounded)
ends, and (z) divided by 360 or 365 as the case may be.
(b) The principle of deemed reinvestment of interest shall not
apply to any interest calculation under this Agreement, and the rates of
interest stipulated in this Agreement are intended to be nominal rates and
not effective rates or yields.
4.05 CERTAIN NOTICES. Notices by the Borrowers shall be given to
the Lender and the Agent of terminations or reductions of the Commitment and
of borrowings and optional prepayments of Loans (other than Swingline Loans),
and Conversions and Continuations of Loans. These notices shall be
irrevocable and shall be effective only if received by the Lender and the
Agent not later than 1:00 p.m. Toronto time on the number of Business Days
prior to the date of the relevant
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termination, reduction, borrowing or prepayment specified below:
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Number of
Business
Notice Days Prior
------ ----------
Termination or reduction
of Commitments; borrowings or
prepayments of, Conversions of
or into, Continuations as, or
duration of Interest Period
for, BA Loans 2
Borrowing or prepayment of,
or Conversions of or into,
Canadian Prime Loans or
U.S. Base Rate Loans 1
Borrowing or prepayment of,
Conversions of or into,
Continuations as, or duration
of Interest Period for, Eurodollar
Loans 3
Request for issuance of a
Letter of Credit 3
Notices by the Borrowers with respect to borrowings and optional
prepayment of Swingline Loans shall be irrevocable and shall be effective
only if received not later than 2:00 p.m. Calgary time (or 4:00 p.m. Calgary
time in the case of borrowings to satisfy outstandings under the BOM
Agreement) on the Business Day of the relevant borrowing or prepayment.
Each such notice of termination or reduction shall specify the amount of the
Commitment to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation or optional prepayment shall specify the Loans to be
borrowed, Converted, Continued or prepaid and the amount (subject to Section
4.04 hereof) and Type and Currency of each Loan to be borrowed, Converted,
Continued or prepaid and the date of borrowing, Conversion, Continuation or
optional prepayment (which shall be a Business Day) and, if applicable, the
relevant Interest Period. Each such notice of the duration of an Interest
Period shall specify the Loans to which such Interest Period is to relate.
In the event that any Borrower fails to select the Type of Loan, or the
duration of any Interest Period for any Eurodollar Loan, within the time
period and otherwise as provided in this Section 4.05, such Loan (if
outstanding as a Eurodollar Loan or U.S. Base Rate Loan) will be
automatically Converted into a Canadian Prime Loan on the last day of the
then current Interest Period for such Loan or (if outstanding
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as a Canadian Prime Loan) will remain as, or (if not then outstanding) will
be made as, a Canadian Prime Loan.
4.06 SET-OFF. Each of the Borrowers agrees that, in addition to
(and without limitation of) any right of set-off or counterclaim the Lender
may otherwise have, the Lender shall be entitled, at its option (to the
fullest extent permitted by law), to set off and apply any other
indebtedness, held by it for the credit or account of such Borrower at any of
its offices, in Canadian Dollars, U.S. Dollars or in any other currency,
against any principal of or interest on any of the Loans or any other amount
payable to the Lender hereunder, that is not paid when due (regardless of
whether such indebtedness is then due to the Borrowers), in which case it
shall promptly notify such Borrower thereof, PROVIDED that the Lender's
failure to give such notice shall not affect the validity thereof.
Section 5. YIELD PROTECTION, ETC.
5.01 ADDITIONAL COSTS.
(a) The Borrowers shall pay directly to the Lender promptly upon
request (but in any event within 10 Business Days), an amount equal to the
amount the Lender is required to pay pursuant to Section 5.01 of the Funding
Credit Agreement.
5.02 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, if:
(a) the Agent has notified the Lender that quotations of interest
rates for the relevant deposits referred to in the definition of
"Eurodollar Base Rate" in Section 1.01 hereof are not being provided in the
relevant amounts or for the relevant maturities for purposes of determining
rates of interest for Eurodollar Loans as provided herein; or
(b) the Agent has notified the Lender that the Majority Lenders have
notified the Agent that:
(i) the relevant rates of interest referred to in the
definition of "Eurodollar Base Rate" in Section 1.01 hereof upon the
basis of which the rate of interest for Eurodollar Loans for such
Interest Period is to be determined are not likely to be adequate to
cover the cost to any lender under the Funding Credit Agreement of
making or maintaining Eurodollar Loans for such Interest Period;
(ii) by reason of circumstances affecting financial markets
inside or outside Canada, deposits of U.S. Dollars are unavailable to
the lenders under the Funding Credit Agreement in such markets; or
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(iii) the making or continuation of any Eurodollar Loan has
been made impracticable:
(A) by the occurrence of a contingency (other than a
mere increase in rates payable by any lender under the Funding
Credit Agreement to fund such loan) which materially and
adversely affects the funding of a Loan at any interest rate
computed on the basis of Eurodollar Base Rate, or
(B) by reason of:
(i) any law or the interpretation or
application thereof by any official body;
(ii) compliance by a lender under the Funding
Credit Agreement with any guideline, official directive
or request from any central bank or other official body
(whether or not having the force of law); or
(iii) a change since the date of this Agreement
in any relevant financial market, which results in the
Eurodollar Base Rate no longer representing the
effective cost to any lender under the Funding Credit
Agreement of deposits in such market for a relevant
Interest Period or other applicable period;
and the Agent gives the Lender (who shall give prompt notice to the
Borrowers) prompt notice thereof and, so long as such condition remains in
effect, the Lender shall be under no obligation to make additional Eurodollar
Loans, to Continue Eurodollar Loans or to Convert Canadian Prime Loans, U.S.
Base Rate Loans or BA Loans into Eurodollar Loans, depending upon which of
those loans is affected by such condition, and the Borrowers shall, on the
last day(s) of the then current Interest Period(s) for the outstanding
Eurodollar Loans, either prepay such Loans or Convert such Loans into U.S.
Base Rate Loans in accordance with Section 2.10 hereof if making U.S. Base
Rate Loans is not affected by such condition; PROVIDED that the Lender shall
be under no obligation to make additional U.S. Base Rate Loans or Eurodollar
Loans or to Convert Canadian Prime Loans, BA Loans, U.S. Base Rate Loans or
Eurodollar Loans into Eurodollar Loans or U.S. Base Rate Loans if deposits of
U.S. Dollars are unavailable to lenders under the Funding Credit Agreement.
5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in
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the event that it becomes unlawful for any lender under the Funding Credit
Agreement or its Applicable Lending Office (as defined in the Funding Credit
Agreement) to honor its obligation to make or maintain any Type of U.S.
Dollar loans under the Funding Credit Agreement then upon notification from
the Lender to the Borrowers thereof, the Lender's obligation to make or
Continue, or to Convert Loans of any other Type into, that Type of U.S.
Dollar Loan hereunder shall be suspended to the extent of that lender's
Commitment (as defined in the Funding Credit Agreement) until such time as
that lender under the Funding Credit Agreement may again make and maintain
that Type of U.S. Dollar loan (in which case the provisions of Section 5.04
hereof shall be applicable).
5.04 TREATMENT OF AFFECTED LOANS. If the obligation of any lender
under the Funding Credit Agreement to make Eurodollar Loans or to Continue,
or to Convert Canadian Prime Loans, U.S. Base Rate Loans or BA Loans into,
Eurodollar Loans (each as defined in the Funding Credit Agreement) shall be
suspended pursuant to the Funding Credit Agreement, such amount of Eurodollar
Loans hereunder equal to such lender's eurodollar loans under the Funding
Credit Agreement shall be automatically Converted into U.S. Base Rate Loans
on the last day(s) of the then current Interest Period(s) for Eurodollar
Loans (or, in the case of a Conversion required by Section 5.03 hereof, on
such earlier date as the Lender may specify to the Borrowers) and, unless and
until the Lender gives notice as provided below that the circumstances
specified in Section 5.01 or 5.03 hereof that gave rise to such Conversion no
longer exist:
(a) to the extent that all of such portion of the Eurodollar Loans
have been so Converted, all payments and prepayments of principal that
would otherwise be applied to such Eurodollar Loans shall be applied
instead to its U.S. Base Rate Loans; and
(b) the Principal Amount of Loans (the "APPLICABLE LOANS") that would
otherwise be made or Continued as Eurodollar Loans shall be made or
Continued instead as U.S. Base Rate Loans, and all Applicable Loans that
would otherwise be Converted into Eurodollar Loans shall remain in the Type
and Currency that they are currently in or if the Borrowers elect be
Converted into, as the case may be, U.S. Base Rate Loans.
If any U.S. Base Rate Loans are outstanding at any time when the
right of the Borrowers to select U.S. Base Rate Loans is suspended, all those
outstanding U.S. Base Rate Loans shall be Converted into Canadian Prime Loans.
If the Agent gives notice to the Lender (which notice the Lender
shall promptly give to the Borrowers) that the circumstances described in
Sections 5.01, 5.02 or 5.03 of the Funding Credit Agreement that resulted in
the suspension of a lender's obligations under that Agreement to provide any
borrowings thereunder no longer exist, the Borrowers shall cause such
borrowings or Conversions to occur hereunder so that
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Page 49
the amounts of outstanding Types of Loans hereunder continue to be the same
as the outstanding corresponding types of loans under the Funding Credit
Agreement, including any eurodollar loans thereunder that occur as a result
of the suspension ending.
5.05 COMPENSATION. The Borrowers (jointly and severally) shall pay
to the Lender promptly upon request (but in any event within 10 Business
Days) an amount equal to the amount that the Lender is required to pay
pursuant to Section 5.05, 5.06, 5.07 or 5.08 of the Funding Credit Agreement.
5.06 COMPLIANCE WITH SECTION 2.08. Notwithstanding any suspension
of the Lender's obligations to provide Eurodollar Loans or any other Type of
Loan or Conversions that might be required as a result thereof, the amounts,
Types, Currencies and, if applicable, Interest Periods of Loans that are
outstanding hereunder shall at all times be and remain in compliance with the
provisions of Section 2.08 hereof.
Section 6. CONDITIONS PRECEDENT.
6.01 EFFECTIVENESS. The effectiveness of the amendment and
restatement of the Original Credit Agreement provided for hereby is subject
to the conditions precedent that the Lender shall have received the following
documents, each of which shall be satisfactory to the Lender, the Agent and
the Majority Lenders in form and substance:
(a) ORGANIZATIONAL DOCUMENTS. A certificate of a senior officer of
each Borrower and Forest dated the Effective Date certifying the articles
and by-laws for each Borrower and Forest, respectively, have not been
amended since December 31, 1996 and certifying the corporate authority for
each Borrower and Forest.
(b) EXISTENCE. A certificate of compliance under the Canada Business
Corporations Act dated as of a recent date as to the continuing existence
of 3189503, certificates of status under the Business Corporations Act
(Alberta) dated as of a recent date for each of Canadian Forest and
ProMark, a certificate of status under The Business Corporations Act
(Saskatchewan) from Saskatchewan Justice (Corporations Branch) dated as of
a recent date for the Lender, and Certificate from the Secretary of State
of New York dated as of a recent date as to the continuing existence of
Forest and a certificate from the appropriate official as to the
qualification of Forest to conduct business in the Province of Alberta.
(c) OFFICER'S CERTIFICATE. A certificate of a senior officer of
Canadian Forest, dated the Effective Date, to the effect set forth in the
first sentence of Section 6.02 hereof.
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(d) OPINION OF COUNSEL TO THE BORROWERS. An opinion, dated the
Effective Date, from each of Macleod Dixon, counsel to the Borrowers, and
Vinson & Elkins, counsel to Forest, substantially in the forms of Exhibit B
hereto and covering such other matters as the Lender, the Agent or any
lender under the Funding Credit Agreement may reasonably request (and the
Borrowers hereby confirm that they have instructed such counsel to deliver
such opinion to the Lender, the Agent and the lenders under the Funding
Credit Agreement).
(e) SECURITY CONFIRMATION. A Second Security Confirmation and
Amendment Agreement among the Agent, the Lender, ProMark, Forest, 3189503
and Canadian Forest relating to the security and guarantees given in
connection with the Original Credit Agreement and terminating the Atcor
Resources Pledge Agreement.
(f) NOTES. The existing Notes, duly completed and executed.
(g) CANADIAN FOREST DEBENTURE. The existing Canadian Forest
Debenture and the deposit agreement in respect thereof duly executed and
delivered by Canadian Forest including a charge over and delivery of the
certificates for the ProMark shares accompanied by undated stock powers in
blank.
(h) PROMARK DEBENTURE. The existing ProMark Debenture and the
existing deposit agreement in respect thereof duly executed and delivered
by ProMark.
(i) FOREST GUARANTEE. The Forest Guarantee, duly completed and
executed.
(j) FOREST DEBENTURE. The Forest Debenture and a deposit agreement
in respect thereof duly executed and delivered by Forest, providing for a
Lien on the Properties acquired by Forest pursuant to the Forest Purchase
Agreement.
(k) 3189503 GUARANTEE AGREEMENT. The 3189503 Guarantee and Pledge
Agreement duly executed and delivered by 3189503 (as successor to Atcor
Resources' position as direct owner of all of the issued and outstanding
shares of Canadian Forest) and the Lender, pledging all such shares to the
Lender, and the certificates identified in Section 3.10 thereof accompanied
by undated stock powers in blank.
(l) FOREST SALE. The Forest Purchase Agreement duly completed and
executed.
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(m) BOM AGREEMENT. The BOM Agreement, the ProMark Security Agreement
and the Canadian Forest Guarantee as in effect on the Effective Date.
(n) REGISTRATION. Evidence that all Security Documents shall have
been registered in all places required to perfect the Liens and priority
thereof against other competing interests.
(o) INSURANCE. The existing certificate of the Chief Financial
Officer, Vice President-Finance or Treasurer of Canadian Forest setting
forth the insurance obtained by it in accordance with the requirements of
Section 8.04 and stating that such insurance is in full force and effect
and that all premiums then due and payable thereon have been paid.
(p) TITLE TO THE HYDROCARBON PROPERTIES. The existing opinion of
Macleod Dixon and Bennett Jones Verchere with respect to the title to
certain Hydrocarbon Properties agreed to by Canadian Forest, the Lender and
the Agent.
(q) GOVERNMENTAL APPROVALS. Evidence that all governmental and
third-party consents and approvals necessary in connection with the
Acquisition, the financing hereunder and the security therefor and the
other transactions contemplated hereby have been obtained (without the
imposition of any conditions that are not reasonably acceptable to the
Lender and the lenders under the Funding Credit Agreement) and are in full
force and effect; all applicable waiting periods have expired without any
action being taken by any competent authority; and no law or regulation is
applicable (in the reasonable judgment of the lenders under the Funding
Credit Agreement) that restrains, prevents or imposes materially adverse
conditions upon the Acquisition, the financing hereunder, or any security
therefor or any of the other transactions contemplated hereby.
(r) NO MATERIAL ADVERSE CHANGE. Evidence satisfactory to the Lender,
the Agent and the lenders under the Funding Credit Agreement that:
(i) since March 31, 1997, there has been no material adverse
change in the consolidated financial condition,
operations, business or prospects taken as a whole of
Forest and its Subsidiaries from that set forth in
Forest's Form 10Q for the quarter ended March 31, 1997
filed with the U.S. Securities and Exchange Commission
pursuant to the United States Securities and Exchange Act
of 1934, as amended; and
(ii) completion of the Forest Purchase Agreement will not
result
<PAGE>
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in any termination, cancellation or other Material
Adverse Effect in respect of the Property included in the
Forest Purchase Agreement or in Forest's title to or
interest in that property.
(s) NO CONFLICT. A certificate of a senior officer of Forest that
none of the transactions contemplated herein conflict with, violate or
result in a default under any indentures, agreements or other documents
providing for or relating to any indebtedness or other obligations
aggregating U.S.$500,000 or more of any of Forest, Canadian Forest or any
of their respective Subsidiaries or cause any of such Persons to be
required to prepay, purchase, redeem or acquire any of such Indebtedness or
obligation or any other securities issued by any of such Persons for an
aggregate cost exceeding U.S.$500,000.
(t) SEARCH REPORTS. Updated search reports in customary form
indicating that no prior encumbrances affect Canadian Forest, 3189503,
ProMark or the Forest Pledged Properties (other than those permitted
pursuant to Section 8.06 hereof).
(u) FUNDING CREDIT AGREEMENT. The Funding Credit Agreement and all
security and other documents required thereby have been entered into and
all conditions precedent with regard thereto have been or are being
contemporaneously satisfied.
(v) PROMARK GAS MARKETING POLICY. The existing copy of ProMark's
written policy with respect to its gas marketing activities.
(w) OTHER DOCUMENTS. Such other documents (including without
limitation certificates from senior officers of 3189503 and Forest) as the
Lender and the Agent or any lender under the Funding Credit Agreement or
special New York or Canadian counsel to Chase Canada under the Funding
Credit Agreement may reasonably request.
The effectiveness of the amendment and restatement of the Original Credit
Agreement provided for hereby is also subject to the payment by on or behalf
of Forest of the reasonable fees and expenses of Stikeman, Elliott, Canadian
counsel to Chase Canada under the Funding Credit Agreement and Milbank,
Tweed, Hadley & McCloy, special New York counsel to Chase Canada under the
Funding Credit Agreement, in connection with the negotiation, preparation,
execution and delivery of this Agreement and the Notes and the other Loan
Documents and the extensions of credit hereunder (to the extent that
statements for such fees and expenses have been delivered to the Borrowers).
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6.02 EFFECTIVENESS AND SUBSEQUENT EXTENSIONS OF CREDIT. The
obligation of the Lender to make any Loan or otherwise extend any credit to
the Borrowers upon the occasion of each borrowing or other extension of
credit hereunder (including the initial extension of credit) is subject to
the further conditions precedent that, both immediately prior to the making
of such Loan or other extension of credit and also after giving effect
thereto and to the intended use thereof:
(a) no Default shall have occurred and be continuing nor shall any
Default (as defined in the Funding Credit Agreement) have occurred and be
continuing PROVIDED that if the only Default hereunder is a failure to make
a payment when due on a Swingline Loan, the Borrowers shall have the
ability to Convert such Swingline Loan to a Canadian Prime Loan;
(b) the representations and warranties made by the Borrowers in
Section 7 hereof, and in each of the other Loan Documents to which they are
a party, shall be true and complete on and as of the date of the making of
such Loan with the same force and effect as if made on and as of such date
(or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date);
(c) the aggregate Principal Amount of the Loans and the aggregate
amount of the Letter of Credit Liabilities (with the amount of Loans and
Letter of Credit Liabilities in U.S. Dollars expressed as an Equivalent
Amount in Canadian Dollars outstanding hereunder) shall not exceed the
Borrowing Base as determined pursuant to Section 1.03 hereof; and
(d) the provisions of Section 2.08 hereof shall have been complied
with.
Each notice of borrowing by the Borrowers or request for the issuance of a
Letter of Credit hereunder shall constitute a certification by the Borrowers
to the effect set forth in the preceding sentence (both as of the date of
such notice or request and, unless the Borrowers otherwise notify the Lender
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
Section 7. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers
represents and warrants to the Lender that:
7.01 CORPORATE EXISTENCE. Each of the Borrowers and their
Subsidiaries: (a) is a corporation, partnership or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and subject to the provisions in the Sale Agreement relating to
"Constrained Gas Marketing Agreements", has all material governmental
licenses,
<PAGE>
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authorizations, consents and approvals necessary to own its assets and carry
on its business as now being or as proposed to be conducted; and (c) is
qualified to do business and is in good standing in all jurisdictions in
which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify could (either individually or in
the aggregate) have a Material Adverse Effect.
7.02 FINANCIAL CONDITION. The Borrowers have heretofore furnished
to the Lender consolidated balance sheets of Atcor Resources as at December
31, 1996 and the related consolidated statements of income, retained earnings
and cash flows of Canadian Forest and its Subsidiaries for the fiscal year
ended on said date, with the opinion thereon (in the case of said
consolidated balance sheet and statements) of Price Waterhouse, and the
unaudited consolidated balance sheets of Canadian Forest and its Subsidiaries
as at March 31, 1997 and the related consolidated statements of income,
retained earnings and cash flows of Canadian Forest and its Subsidiaries for
the three-month period ended on such date. All such financial statements are
complete and correct and present fairly in all material respects the
consolidated financial condition of Canadian Forest and its Subsidiaries in
accordance with generally accepted accounting principles then in effect in
Canada. None of 3189503, Canadian Forest nor any of its Subsidiaries has on
the date hereof any material contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments, except as referred to or reflected or
provided for in said balance sheets as at said dates. Since March 31, 1997
there has been no material adverse change in the consolidated financial
condition, operations, business or prospects taken as a whole of Canadian
Forest and its Subsidiaries from that set forth in said financial statements
as at said date.
7.03 LITIGATION. Except as disclosed to the Lender in writing
prior to the date of this Agreement, there are no legal or arbitral
proceedings, or any proceedings by or before any governmental or regulatory
authority or agency, now pending or (to the knowledge of the Borrowers)
threatened against the Borrowers or any of their Subsidiaries or affecting
the Forest Pledged Properties that, if adversely determined could (either
individually or in the aggregate) have a Material Adverse Effect.
7.04 NO BREACH. None of the execution and delivery of this
Agreement and the Notes, the BOM Agreement, the ProMark Security Agreement,
the Canadian Forest Guarantee and the other Loan Documents, the consummation
of the transactions herein and therein contemplated or compliance with the
terms and provisions hereof and thereof will conflict with or result in a
breach of, or require any consent under, the organizational documents of any
Borrower or any of its Subsidiaries, the BOM Agreement, or any applicable law
or regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which any
Borrower or any of its Subsidiaries is a party or by which any of them or any
of their Property is bound or to which any of them is subject, or constitute
a default under any such agreement or instrument, or (except for the Liens
created
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pursuant to the Security Documents, the BOM Agreement, the ProMark Security
Agreement and the Canadian Forest Guarantee) result in the creation or
imposition of any Lien upon any Property of any Borrower or any of its
Subsidiaries pursuant to the terms of any such agreement or instrument.
7.05 ACTION. Each Borrower has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations
under each of the Loan Documents and the BOM Agreement, the ProMark Security
Agreement and the Canadian Forest Guarantee to which it is a party; the
execution, delivery and performance by the Borrowers of each of the Loan
Documents and the BOM Agreement, the ProMark Security Agreement and the
Canadian Forest Guarantee to which it is a party has been duly authorized by
all necessary corporate action on its part (including, without limitation,
any required shareholder approvals); and this Agreement has been duly and
validly executed and delivered by each Borrower and constitutes, and each of
the Notes, the other Loan Documents and the BOM Agreement, the ProMark
Security Agreement and the Canadian Forest Guarantee when executed and
delivered (in the case of the Notes for value) will constitute, its legal,
valid and binding obligation, enforceable against each Borrower in accordance
with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
7.06 APPROVALS. No authorizations, approvals or consents of
(including any exchange control approval), and no filings or registrations
with, any governmental or regulatory authority or agency, or any securities
exchange, are necessary for the execution, delivery or performance by each
Borrower of this Agreement, any of the other Loan Documents or the BOM
Agreement, the ProMark Security Agreement and the Canadian Forest Guarantee
or for the legality, validity or enforceability hereof or thereof, except for
filings and recordings in respect of the Liens created pursuant to the
Security Documents.
7.07 USE OF CREDIT. None of the Borrowers nor any of their
Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose, whether immediate,
incidental or ultimate, of buying or carrying Margin Stock, and no part of
the proceeds of any extension of credit hereunder will be used to buy or
carry any Margin Stock.
7.08 TAXES. Each Borrower and its respective Subsidiaries have
filed all Canadian federal income tax returns required to be filed pursuant
to the Income Tax Act (Canada) and all other material tax returns that are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by any Obligor or any of their
Subsidiaries. The charges, accruals and reserves on the books of the
Borrowers and their Subsidiaries in respect of taxes and
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other governmental charges are, in the opinion of the Borrowers, adequate.
Except as disclosed in writing to the Lender and the Agent prior to the
Closing Date, no Borrower has given or been requested to give a waiver of the
statute of limitations relating to the payment of any taxes or other
impositions.
7.09 INVESTMENT COMPANY ACT. None of the Borrowers nor any of
their Subsidiaries is an "investment company", or a company "controlled" by
an "investment company", within the meaning of the Investment Company Act of
1940, as amended.
7.10 PUBLIC UTILITY HOLDING COMPANY ACT. None of the Borrowers nor
any of their Subsidiaries is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
7.11 MATERIAL AGREEMENTS AND LIENS.
(a) Part A of Schedule I hereto is a complete and correct list of
each credit agreement, loan agreement, indenture, purchase agreement,
guarantee, letter of credit or other arrangement providing for or otherwise
relating to any Indebtedness or any extension of credit (or commitment for
any extension of credit) to, or guarantee by, each Borrower and its
Subsidiaries, outstanding on the date hereof the aggregate principal or face
amount of which equals or exceeds (or may equal or exceed) C$250,000 (or the
equivalent in other currencies), and the aggregate principal or face amount
outstanding or that may become outstanding under each such arrangement is
correctly described in Part A of said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct list of
each Lien securing Indebtedness of any Person outstanding on the date hereof
the aggregate principal or face amount of which equals or exceeds (or may
equal or exceed) C$250,000 (or the equivalent in other currencies) and
covering any Property of each Borrower or any of their Subsidiaries, and the
aggregate Indebtedness secured (or that may be secured) by each such Lien and
the Property covered by each such Lien is correctly described in Part B of
said Schedule I.
7.12 ENVIRONMENTAL MATTERS. Each of the Borrowers and their
respective Subsidiaries have obtained all environmental, health and safety
permits, licenses and other authorizations required under all Environmental
Laws to carry on its business as now being or as proposed to be conducted,
except to the extent failure to have any such permit, license or
authorization would not have a Material Adverse Effect. Each of such
permits, licenses and authorizations is in full force and effect and each of
the Borrowers and their respective Subsidiaries is in compliance with the
terms and conditions thereof, and is also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order,
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decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
therewith would not have a Material Adverse Effect. In addition, no notice,
notification, demand, request for information, citation, summons or order has
been issued, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any governmental or other
entity with respect to any alleged failure by the Borrowers or any of their
respective Subsidiaries to have any environmental, health or safety permit,
license or other authorization required under any Environmental Law in
connection with the conduct of the business of the Borrowers or any of their
respective Subsidiaries or with respect to any generation, treatment,
storage, recycling, transportation, discharge or disposal, or any Release of
any Hazardous Materials generated by the Borrowers or any of their respective
Subsidiaries. Except as disclosed in Schedule III hereto, there have been no
environmental investigations, studies, audits, tests, reviews or other
analyses conducted by or that are in the possession of the Borrowers or any
of their respective Subsidiaries in relation to any site or facility now or
previously owned, operated or leased by the Borrowers or any of their
respective Subsidiaries which have not been made available to the Lender.
7.13 SUBSIDIARIES, ETC.
(a) Set forth in Part A of Schedule II hereto is a complete and
correct list of all of the Subsidiaries of each Borrower as of the date
hereof together with, for each such Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding ownership interests
in such Subsidiary and (iii) the nature of the ownership interests held by
each such Person and the percentage of ownership of such Subsidiary
represented by such ownership interests. Except as disclosed in Part A of
Schedule II hereto, (x) each of the Borrowers and their respective
Subsidiaries owns, free and clear of Liens (other than Liens created pursuant
to the Security Documents), and has the unencumbered right to vote, all
outstanding ownership interests in each Person shown to be held by it in Part
A of Schedule II hereto, (y) all of the issued and outstanding capital stock
of each such Person organized as a corporation is validly issued, fully paid
and nonassessable and (z) there are no outstanding Equity Rights with respect
to such Person.
(b) Set forth in Part B of Schedule II hereto is a complete and
correct list of all Investments (other than Investments disclosed in Part A
of said Schedule II hereto) held by the Borrowers or any of their respective
Subsidiaries in any Person on the date hereof and, for each such Investment,
(x) the identity of the Person or Persons holding such Investment and (y) the
nature of such Investment. Except as disclosed in Part B of Schedule II
hereto, each of the Borrowers and their respective Subsidiaries owns, free
and clear of all Liens (other than Liens created pursuant to the Security
Documents), all such Investments.
(c) None of the Subsidiaries of the Borrowers is, on the date
hereof,
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subject to any indenture, agreement, instrument or other arrangement of the
type described in Section 8.16(b) hereof.
7.14 TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Borrowers to the Lender, the Agent or any lender under the
Funding Credit Agreement in connection with the negotiation, preparation or
delivery of this Agreement and the other Loan Documents or included herein or
therein or delivered pursuant hereto or thereto, when taken as a whole do not
contain any untrue statement of material fact or omit to state any material
fact necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. All written
information furnished after the date hereof by the Borrowers and their
Subsidiaries to the Lender, the Agent and the lenders under the Funding
Credit Agreement in connection with this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby will be true,
complete and accurate in every material respect, or (in the case of
projections) based on reasonable estimates, on the date as of which such
information is stated or certified. There is no fact known to the Borrowers
that could have a Material Adverse Effect that has not been disclosed herein,
in the other Loan Documents or in a report, financial statement, exhibit,
schedule, disclosure letter or other writing furnished to the Lender or the
lenders under the Funding Credit Agreement for use in connection with the
transactions contemplated hereby or thereby.
7.15 CAPITALIZATION.
(a) As of the Effective Date all of the issued and outstanding
shares of stock of Canadian Forest, consisting of 100 common shares, are
owned beneficially and of record by 3189503. As of the Effective Date there
are no outstanding Equity Rights with respect to Canadian Forest.
(b) As of the Effective Date all of the issued and outstanding
shares of common stock of 3189503, consisting of 100 common shares, are owned
beneficially and of record by Forest. As of the Effective Date there are no
outstanding Equity Rights with respect to 3189503.
(c) As of the Effective Date all of the issued and outstanding
shares of common stock of ProMark, consisting of 1,000,001 common shares, are
owned beneficially and of record by Canadian Forest. As of the Effective
Date there are no outstanding Equity Rights with respect to ProMark.
7.16 SPECIAL PURPOSE COMPANY. 3189503 has (a) no material assets
other than the stock of Canadian Forest and (b) no Indebtedness and no
material obligations other than its obligations under the 3189503 Guarantee
and Pledge Agreement.
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7.17 TITLE. Except for the title deficiencies in respect of
certain Hydrocarbon Properties which are set out in the opinions of (i)
Macleod Dixon, dated as of the date of the Original Credit Agreement and
effective as of January 30, 1996 and (ii) Bennett Jones Verchere, the
Borrowers have good and valid title to its Hydrocarbon Properties, and Forest
has good and valid title to the Forest Pledged Properties and, except for the
Liens described in Section 8.06, such Hydrocarbon Properties are not subject
to any Liens; provided that the remedy of the Lender for any breach of this
representation shall be limited to the remedy set forth in Section 8.26
hereof.
7.18 FOREST INDENTURE. None of the execution and delivery of the
BOM Agreement, the Canadian Forest Guarantee, the ProMark Security Agreement,
the Forest Guarantee, the Forest Debenture, the 3189503 Guarantee and Pledge
Agreement, the consummation of the transactions therein contemplated, the
performance of the obligations therein contained or compliance with the terms
and provisions thereof will conflict with or result in a breach by Forest of
the Forest Indenture or by the Lender of the Forest Indenture Guaranty (as
such terms are defined in the Funding Credit Agreement) nor will obligate
Forest to cause any of the Borrowers to grant a "Guarantee" (as defined in
the Forest Indenture).
To the knowledge of the Borrowers, each of the Borrowers has good
and valid title to all of its material assets and properties (other than
Hydrocarbon Properties) and, except for the Liens described in Section 8.06,
such assets and properties are not subject to any Liens.
Section 8. COVENANTS OF THE BORROWERS. Each of the Borrowers
covenants and agrees with the Lender that, so long as the Commitment or any
Loan is outstanding and until payment in full of all amounts payable by the
Borrowers hereunder:
8.01 FINANCIAL STATEMENTS ETC. Canadian Forest (and ProMark with
respect to clauses (c) and (d) below and any Borrower with respect to clause
(h) below) shall deliver to the Lender and each of the lenders under the
Funding Credit Agreement (provided that the consolidating financial
statements referred to in clauses (a), (b), (c) and (d) below need only be
delivered if they have been prepared by the Borrowers):
(a) as soon as available and in any event within 60 days after the
end of each quarterly fiscal period of each fiscal year of Canadian Forest,
consolidated and consolidating statements of income, retained earnings and
cash flows of Canadian Forest and its Subsidiaries for such period and for
the period from the beginning of the respective fiscal year to the end of
such period, and the related consolidated and consolidating balance sheets
of Canadian Forest and its Subsidiaries as at the end of such period,
setting forth in each case in comparative form the corresponding
consolidated and consolidating figures for
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the corresponding periods in the preceding fiscal year (except that, in
the case of balance sheets, such comparison shall be to the last day of
the prior fiscal year), accompanied by a certificate of a senior
financial officer of Canadian Forest, which certificate shall state that
said consolidated financial statements fairly present in all material
respects the consolidated financial condition and results of operations
of Canadian Forest and its Subsidiaries, and said consolidating financial
statements fairly present, in all material respects, the respective
individual unconsolidated financial condition and results of operations
of Canadian Forest and of its Subsidiaries, in each case in accordance
with GAAP, consistently applied, as at the end of, and for, such period
(subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 100 days after the
end of each fiscal year of Canadian Forest, consolidated and consolidating
statements of income, retained earnings and cash flows of Canadian Forest
and its Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of its Subsidiaries as at the end of such
fiscal year, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied (i) in the case of said consolidated
statements and balance sheet of Canadian Forest, by an opinion thereon of
independent certified public accountants of recognized national standing,
which opinion shall state that said consolidated financial statements
fairly present in all material respects the consolidated financial
condition and results of operations of Canadian Forest and its Subsidiaries
as at the end of, and for, such fiscal year in accordance with generally
accepted accounting principles, and (ii) in the case of said consolidating
statements and balance sheets, by a certificate of a senior financial
officer of Canadian Forest, which certificate shall state that said
consolidating financial statements fairly present, in all material
respects, the respective individual unconsolidated financial condition and
results of operations of Canadian Forest and of each of its Subsidiaries,
in each case in accordance with GAAP, consistently applied, as at the end
of, and for, such fiscal year;
(c) as soon as available and in any event within 60 days after the
end of each quarterly fiscal period of each fiscal year of ProMark,
consolidated and consolidating statements of income, retained earnings and
cash flows of ProMark and its Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated and consolidating balance sheets of
ProMark and its Subsidiaries as at the end of such period, setting forth in
each case in comparative form the corresponding consolidated and
consolidating figures for the corresponding periods in the preceding fiscal
year (except that, in the case of balance sheets, such comparison shall be
to the last day of the prior fiscal year), accompanied by a certificate of
a senior financial officer of ProMark, which certificate shall state
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that said consolidated financial statements fairly present in all
material respects the consolidated financial condition and results of
operations of ProMark and its Subsidiaries, and said consolidating
financial statements fairly present, in all material respects, the
respective individual unconsolidated financial condition and results of
operations of ProMark and of its Subsidiaries, in each case in accordance
with GAAP, consistently applied, as at the end of, and for, such period
(subject to normal year-end audit adjustments);
(d) as soon as available and in any event within 100 days after the
end of each fiscal year of ProMark, consolidated and consolidating
statements of income, retained earnings and cash flows of ProMark and its
Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of ProMark and its Subsidiaries as at the end
of such fiscal year, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied in the case of said consolidating statements
and balance sheets, by a certificate of a senior financial officer of
ProMark, which certificate shall state that said consolidating financial
statements fairly present, in all material respects, the respective
individual unconsolidated financial condition and results of operations of
ProMark and of each of its Subsidiaries, in each case in accordance with
GAAP, consistently applied, as at the end of, and for, such fiscal year;
(e) promptly upon their becoming available, copies of all
prospectuses, registration statements and regular periodic reports, if any,
that any Borrower shall have filed with any securities commission in Canada
having jurisdiction or any Canadian or United States national securities
exchange;
(f) promptly upon the mailing thereof to the public shareholders of
any Borrower, if any, generally or to holders of Indebtedness generally
(other than the Lenders), copies of all financial statements, reports and
proxy circulars or statements so mailed;
(g) on or before each Report Delivery Date, the Borrowing Base
Reports;
(h) promptly after such Borrower knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action taken or proposed to be taken with
respect thereto; and
(i) from time to time such other information regarding the financial
condition, operations, business or prospects of the Borrowers or any of
their respective Subsidiaries, Forest or 3189503, as the Lender or the
Agent may reasonably request.
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Canadian Forest will furnish to the Lender and each lender under the Funding
Credit Agreement, at the time it furnishes each set of financial statements
pursuant to paragraph (a) or (b) above, a certificate of its senior financial
officer (i) to the effect that no Default has occurred and is continuing (or, if
any Default has occurred and is continuing, describing the same in reasonable
detail and describing the action the Borrowers have taken or propose to take
with respect thereto) and (ii) setting forth in reasonable detail the
computations necessary to determine whether the Borrowers are in compliance with
Sections 8.06(k) and (n), 8.07(e), (f) and (h), 8.08(e), (f) and (h), 8.09, 8.10
and 8.11 hereof as of the end of the respective quarterly fiscal period or
fiscal year.
8.02 LITIGATION. Each of the Borrowers will promptly give to the
Lender and each lender under the Funding Credit Agreement notice of all legal or
arbitral proceedings, and of all proceedings by or before any governmental or
regulatory authority or agency, and any material development in respect of such
legal or other proceedings, affecting such Borrower or any of its Subsidiaries
or the Forest Pledged Properties, except proceedings that, if adversely
determined, would not (either individually or in the aggregate) have a Material
Adverse Effect. Without limiting the generality of the foregoing, each Borrower
will give to the Lender and each lender under the Funding Credit Agreement
notice of the assertion of any Environmental Claim by any Person against, or
with respect to the activities of, such Borrowers or any of its Subsidiaries or
in respect of the Forest Pledged Properties and notice of any alleged violation
of or non-compliance with any Environmental Laws or any permits, licenses or
authorizations, other than any Environmental Claim or alleged violation which,
if adversely determined, would not have a Material Adverse Effect.
8.03 EXISTENCE, ETC. Each Borrower will, and will cause each of its
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (PROVIDED that nothing in this
Section 8.03 shall prohibit any transaction expressly permitted under
Section 8.05 hereof or required pursuant to Section 8.21 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could (either individually or in the
aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained;
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(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of the Lender, any lender under the
Funding Credit Agreement or the Agent, during normal business hours, to
examine, copy and make extracts from its books and records, to inspect any
of its Properties, and to discuss its business and affairs with its
officers, all to the extent reasonably requested by the Lender, any such
lender under the Funding Credit Agreement or the Agent (as the case may
be).
8.04 INSURANCE. Each of the Borrowers will, and will cause each of
its Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by corporations engaged in the same or similar business
similarly situated, against loss, damage and liability of the kinds and in the
amounts customarily maintained by such corporations and carry such other
insurance as is usually carried by such corporations or as is required by law.
8.05 PROHIBITION OF FUNDAMENTAL CHANGES. No Borrower will enter into
any transaction of merger or consolidation or amalgamation, or liquidate, wind
up or dissolve itself (or suffer any liquidation or dissolution). No Borrower
will acquire any business or Property from, or capital stock of, or be a party
to any acquisition of, any Person except for (i) purchases of inventory and
other Property to be sold or used in the ordinary course of business, and (ii)
Investments permitted under Section 8.08 hereof. No Borrower will convey, sell,
lease, transfer or otherwise dispose of, in one transaction or a series of
transactions, all or a substantial part of its business or Property, whether now
owned or hereafter acquired including, without limitation, receivables and
leasehold interests, but excluding (i) obsolete or worn-out Property, tools or
equipment no longer used or useful in its business so long as the sum of the
amount thereof PLUS the amount of any Mortgaged Property (other than the Alberta
Hydrocarbon Rights and the proceeds thereof) (each as defined in the Forest
Debenture), tools or equipment no longer used or useful in connection with the
Forest Pledged Properties, sold in any single fiscal year by all Borrowers and
Forest shall not, in the aggregate, have a fair market value in excess of
C$1,000,000 (or the equivalent in other currencies), (ii) any hydrocarbons
produced or sold in the ordinary course of business and on ordinary business
terms (excluding prepayment contracts or similar agreements or any other sale or
lease of interests in hydrocarbons in the ground), (iii) other Properties (other
than Unrestricted Properties) provided that the sum of the fair market value of
such other Properties and the fair market value of any Alberta
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Hydrocarbon Rights (as defined in the Forest Debenture) conveyed, sold,
leased, transferred or otherwise disposed of on or after the date hereof
shall not, in the aggregate, exceed C$7,500,000 (or the equivalent in other
currencies) (PROVIDED, if any single Property or Mortgaged Property (as
defined in the Forest Debenture) or group of Properties or Mortgaged
Properties (as defined in the Forest Debenture) disposed of as part of a
single plan of disposition, sale, transfer, lease or conveyance shall have a
fair market value in excess of C$1,000,000 (or the equivalent in other
Currencies), such disposition shall not occur without the prior written
consent of the Lender and the Agent), (iv) the scheduled expiration of leases
covering hydrocarbon producing properties in accordance with their terms, (v)
Unrestricted Properties, (vi) Canadian Forest may complete the transfer of
assets to ProMark in connection with the transfer to ProMark of all or
substantially all of Canadian Forest's assets used or useful in gas
marketing, and (vii) the transactions contemplated by the Forest Purchase
Agreement.
Notwithstanding the foregoing provisions of this Section 8.05:
(a) any Subsidiary of Canadian Forest (other than ProMark) may be
amalgamated or consolidated with or into: (i) Canadian Forest if Canadian
Forest shall be the continuing or surviving corporation and the
amalgamation or consolidation does not have a Material Adverse Effect or
(ii) any other such Subsidiary; PROVIDED that (x) if any such transaction
shall be between a Subsidiary and a Wholly Owned Subsidiary, the Wholly
Owned Subsidiary shall be the continuing or surviving corporation and
(y) ProMark may be amalgamated or consolidated as provided in clauses (i)
and (ii) above if each of the lenders party to Funding Credit Agreement
(other than BOM) and BOM have entered into intercreditor arrangements
satisfactory to each of such lenders and BOM;
(b) any Non-Borrowing Subsidiary of Canadian Forest may sell, lease,
transfer or otherwise dispose of any or all of its Property (upon voluntary
liquidation or otherwise) to Canadian Forest or a Wholly Owned Subsidiary
of Canadian Forest and any Subsidiary Borrower may sell, lease, transfer or
otherwise dispose of any or all of its Property (upon voluntary liquidation
or otherwise) to Canadian Forest or another Subsidiary Borrower; and
(c) Canadian Forest or any Subsidiary of Canadian Forest may
amalgamate or consolidate with any other Person if (i) in the case of a
merger or consolidation of Canadian Forest, Canadian Forest is the
surviving corporation and, in any other case, the surviving corporation is
a Wholly Owned Subsidiary of Canadian Forest and (ii) after giving effect
thereto no Material Adverse Effect would occur nor would any Default exist
hereunder; provided that none of the Security Documents shall be affected
in any adverse manner or impaired by any of the foregoing and any documents
required to confirm the Borrowers' obligations hereunder and under the
Security Documents are provided to the Lender on or prior to the
transactions described above occurring.
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8.06 LIMITATION ON LIENS. No Borrower will create, incur, assume or
suffer to exist any Lien upon any of its Property, whether now owned or
hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the Effective Date and listed in Part B of
Schedule I hereto;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if, unless the amount thereof is not
material with respect to it or its financial condition, adequate reserves
with respect thereto are maintained on the books of such Borrower or such
Borrower's Subsidiaries, as the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, builder's or other like Liens arising in the ordinary course
of business that are not overdue for a period of more than 45 days or that
are being contested in good faith and by appropriate proceedings, and Liens
securing judgments (but only to the extent for an amount and for a period
not resulting in an Event of Default under Section 9.01(h) hereof);
(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade contracts
(other than for Indebtedness), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of such Borrower or any
of such Borrower's Subsidiaries;
(h) Liens (provided such Liens consist only of floating charges on
real property and security interests in personal property) on Property of
any corporation that becomes a Subsidiary of Canadian Forest after the date
hereof, PROVIDED that such Liens are in existence at the time such
corporation becomes
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a Subsidiary of Canadian Forest and were not created in anticipation
thereof;
(i) Liens securing obligations of a Subsidiary of Canadian Forest to
a Borrower, and obligations of a Borrower to another Borrower;
(j) Liens for farm-in, farm-out, joint operating, area of mutual
interest agreements or similar agreements entered into by a Borrower in the
ordinary course of business which a Borrower determines in good faith to be
necessary for or advantageous to the economic development of its
Properties; PROVIDED any farm-out agreements covering any Property other
than Unrestricted Property shall require the prior written consent of the
Lender (with the consent of Majority Lenders);
(k) (i) Liens on Property of the Borrowers that are pari passu or
subordinated to the Liens created pursuant to this Agreement (other than
receivables) created pursuant to any Commodity Hedging Agreement or
Interest Rate Protection Agreement or Currency hedge agreement permitted
pursuant to Section 8.08(e) with any lender under the Funding Credit
Agreement or any affiliate of such lender or (ii) Liens on cash or cash
equivalents (other than receivables) created pursuant to any Commodity
Hedging Agreement or Interest Rate Protection Agreement or Currency hedge
agreement permitted pursuant to Section 8.08(e) hereof with any Person
(other than a lender under the Funding Credit Agreement) provided that the
aggregate amount of cash or cash equivalents secured by such Liens shall
not exceed C$2,000,000 (or its equivalent in other currencies) in the
aggregate at any one time;
(l) Liens on the accounts receivable of ProMark (including accounts
receivable held by Canadian Forest in trust for ProMark pursuant to the
Sale Agreement) to secure ProMark's obligations under the BOM Agreement;
(m) any extension, renewal or replacement of the foregoing, PROVIDED
that the Liens permitted hereunder would not nor shall be amended to cover
any additional Indebtedness or Property (other than a substitution of like
Property); and
(n) additional Liens upon Property created after the Effective Date,
PROVIDED that the aggregate Indebtedness secured thereby and incurred on
and after the Effective Date shall not exceed C$1,000,000 (or its
equivalent in other currencies) in the aggregate at any one time
outstanding.
8.07 INDEBTEDNESS. No Borrower will create, incur or suffer to exist
any Indebtedness except:
(a) Indebtedness to the Lender;
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(b) Indebtedness of a Borrower outstanding on the Effective Date and
listed in Part A of Schedule I hereto;
(c) Subordinated Indebtedness of a Borrower;
(d) Indebtedness of a Borrower to another Borrower; and Indebtedness
of Subsidiaries of Canadian Forest to a Borrower or to other Wholly Owned
Subsidiaries of a Borrower;
(e) Indebtedness of the Borrowers and their Subsidiaries secured by
Liens permitted by Section 8.06(j) hereof up to but not exceeding C$500,000
(or its equivalent in other currencies) at any one time outstanding;
(f) performance Guarantees of the obligations of ProMark issued by
Canadian Forest guaranteeing delivery of gas volumes under gas sales
contracts entered into in the ordinary course of business by ProMark,
PROVIDED that the aggregate volumes of gas for which delivery has been
guaranteed does not exceed 1.5bcf per day; and unsecured payment Guarantees
issued by Canadian Forest guaranteeing payment for hydrocarbons purchased
in the ordinary course of business by ProMark, PROVIDED that the aggregate
amount guaranteed does not exceed C$100,000,000 (or the equivalent Amount)
at any one time outstanding;
(g) Indebtedness of ProMark assumed or acquired by it under the Sale
Agreement;
(h) additional Indebtedness of Canadian Forest and its Subsidiaries
up to but not exceeding C$1,000,000 (or its equivalent in other Currencies)
at any one time outstanding; and
(i) the Canadian Forest Guarantee.
8.08 INVESTMENTS. No Borrower will, nor will any Borrower permit any
of its Subsidiaries to, make or permit to remain outstanding any Investments
except:
(a) Investments outstanding on the Effective Date and identified in
Schedule II hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by a Borrower permitted by Section 8.07(d), (f) and
(h)
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hereof;
(e) Investments made on and after the Closing Date by a Borrower in
(i) Interest Rate Protection Agreements in which (A) a Borrower is a fixed
rate payor (or for which a Borrower shall have purchased a cap), and (B)
the notional amount(s) therefor will constitute, at any time during the
term(s) of such Interest Rate Protection Agreement(s), an amount not to
exceed the lesser of C$30,000,000 and the outstanding aggregate principal
balance of the Loans; and (ii) Commodity Hedging Agreements (A) entered
into by a Borrower in the ordinary course of business to hedge expected
potential fluctuations of the price of oil and gas or for other business
purposes and not for speculation and (B) where the aggregate notional
amount of all such Commodity Hedging Agreements shall not exceed 80% of the
Borrowers' combined anticipated hydrocarbon production (net of royalties)
during the three years immediately succeeding any date of determination;
(f) Investments by a Borrower in Wholly Owned direct Subsidiaries of
a Borrower made after the Effective Date provided that if at any time the
aggregate amount of such Investments PLUS the aggregate amount of
Investments pursuant to Section 8.08(h) hereof exceeds C$5,000,000 (or its
equivalent in other currencies), a Borrower will cause each such Subsidiary
that receives any such Investment (including without limitation the
Investment which causes the aggregate of the Investments pursuant to
Section 8.08(h) and this Section 8.08(f) to exceed C$5,000,000 (or its
equivalent in other Currencies)) to become a Subsidiary Borrower in
accordance with Section 8.28 hereof; provided that (i) if any Wholly Owned
Subsidiaries are sold, transferred or otherwise disposed of, the amount of
the Investment in such Wholly Owned Subsidiary shall be considered to be an
Investment pursuant to this Section 8.08(f) provided that the net proceeds
received by a Borrower (after the payment of any expenses incurred in
connection therewith and the repayment of any debt required to be paid upon
such sale, transfer or other disposition) from such sale, transfer or other
disposition shall reduce (but not below zero) the Investment in such Wholly
Owned Subsidiary and (ii) the amount (but not in excess of the amount
invested pursuant to this Section 8.08(f)) of any Investment in a Wholly
Owned Subsidiary pursuant to this Section 8.08(f) that becomes a Subsidiary
Borrower shall cease to be considered an Investment for the purposes of
this Section 8.08(f);
(g) Investments by a Borrower in another Borrower; and
(h) additional Investments of the Borrowers up to but not exceeding
C$5,000,000 (or its equivalent in other Currencies) in the aggregate.
8.09 DIVIDEND PAYMENTS. No Borrower will make, nor will such
Borrower permit any of its Subsidiaries to make any Dividend Payment at any
time; PROVIDED that
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(i) a Borrower or any Subsidiary of a Borrower may make dividend payments to
a Borrower, (ii) Canadian Forest may, contemporaneously with consummation of
the Forest Purchase Agreement, make a Dividend Payment or return of capital
to 3189503 in an amount not to exceed C$30,000,000, and (iii) Canadian Forest
may declare and make Dividend Payments in cash, subject to the satisfaction
of each of the following conditions on the date of such Dividend Payment and
after giving effect thereto:
(A) no Default shall have occurred and be continuing or shall occur
as a result of the making of such Dividend Payment; and
(B) the aggregate amount of such dividend payments from and after the
Closing Date shall not exceed (x) $45,000,000 PLUS (y) an amount (which
cannot be less than zero) equal to 50% of consolidated net income of
Canadian Forest and its Subsidiaries for the period from the Trigger Date
to the date of determination (treated for these purposes as a single
accounting period) or zero, if Canadian Forest and its Subsidiaries have a
consolidated net loss for such period. For the purposes of this Section
8.09, "TRIGGER DATE" shall mean the date upon which the aggregate of the
combined Cash Flow of the Borrowers following the Closing Date PLUS cash
equity contributions received by Canadian Forest from Atcor Resources,
Acquisition Co. or 3189503 following the Closing Date and exclusive of any
increase in the equity of Canadian Forest (or its successor) as a result of
the Amalgamation, equals $45,000,000.
Nothing herein shall be deemed to prohibit the payment of dividends by
any Subsidiary of a Borrower to a Borrower or to any other Subsidiary of a
Borrower.
8.10 DEBT COVERAGE RATIO; INTEREST COVERAGE RATIO.
(a) The Borrowers will not permit the Debt Coverage Ratio for any
period of two complete consecutive fiscal quarters (treated for this purpose as
a single accounting period), to be less than 1.50 to 1 as of the end of any
fiscal quarter of Canadian Forest.
(b) The Borrowers will not permit the Interest Coverage Ratio for any
period of two complete consecutive fiscal quarters (treated for this purpose as
a single accounting period), to be less than 3.00 to 1 as of the end of any
fiscal quarter of Canadian Forest.
8.11 WORKING CAPITAL. The Borrowers will not permit the current
assets of the Borrowers (determined on a consolidated basis in accordance with
GAAP) to be equal to or less than the current liabilities of the Borrowers (so
determined). For purposes hereof, the terms "CURRENT ASSETS" and "CURRENT
LIABILITIES" shall have the respective meanings assigned to them by GAAP,
PROVIDED that in any event there shall be (i) included in current assets the
Available Borrowing Amount (but only to the extent
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such Available Borrowing Amount could then be utilized as provided in Section
6.02 hereof), (ii) excluded from current liabilities all Indebtedness
hereunder and (iii) excluded from current liabilities the current portion of
any liabilities generated from the overproduction of any of the Borrower's
working interest gas.
8.12 SUBORDINATED INDEBTEDNESS. No Borrower will nor will it permit
any of its Subsidiaries to purchase, redeem, retire or otherwise acquire for
value, set apart any money for a sinking, defeasance or other analogous fund
for, the purchase, redemption, retirement or other acquisition of, or make any
voluntary payment or prepayment of the principal of or interest on, or any other
amount owing in respect of any Subordinated Indebtedness.
8.13 LINES OF BUSINESS. The Borrowers will not, nor will they permit
any of their Subsidiaries to, engage to any substantial extent in any line or
lines of business activity other than the business of the acquisition,
exploration, production, processing, marketing, trading, gathering and sale of
hydrocarbons in Canada and the United States (but in no event shall the
Borrowers or any of their Subsidiaries engage in the refining of oil).
8.14 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by
this Agreement, the Borrowers will not, nor will they permit any of their
respective Subsidiaries to, directly or indirectly: (a) make any Investment in
an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate; (c) merge into or consolidate with or purchase or
acquire Property from an Affiliate; or (d) enter into any other transaction
directly or indirectly with or for the benefit of an Affiliate (including,
without limitation, Guarantees and assumptions of obligations of an Affiliate);
PROVIDED that (i) any Affiliate who is an individual may serve as a director,
officer or employee of the Borrowers or any of its Subsidiaries and receive
reasonable compensation for his or her services in such capacity, (ii) the
Borrowers and their Subsidiaries may enter into transactions (other than
extensions of credit by the Borrowers or any of their Subsidiaries to an
Affiliate) providing for the leasing of Property, the rendering or receipt of
services or the purchase or sale of inventory and other Property in the ordinary
course of business if the monetary or business consideration arising therefrom
would be substantially as advantageous to the Borrowers and their Subsidiaries
as the monetary or business consideration that would obtain in a comparable
transaction with a Person not an Affiliate and (iii) Canadian Forest may sell
the Forest Pledged Properties to Forest in accordance with the provisions of the
Forest Purchase Agreement.
8.15 USE OF PROCEEDS.
(a) The Borrowers will use the proceeds of the Loans hereunder solely
for general corporate purposes (in compliance with all applicable legal and
regulatory requirements); PROVIDED that the Lender shall not have any
responsibility as to the use
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of any of such proceeds.
(b) The Borrowers will use the proceeds of the Swingline Loans
hereunder solely (i) to repay amounts outstanding under the BOM Agreement and
(ii) for general corporate purposes.
8.16 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES.
(a) OWNERSHIP OF SUBSIDIARIES. Canadian Forest will, and will cause
each of its Subsidiaries to, take such action from time to time as shall be
necessary to ensure that each of its Subsidiaries is a Wholly Owned Subsidiary.
In the event that any additional shares of stock shall be issued by any
Subsidiary Borrower, Canadian Forest agrees forthwith to deliver to the Agent,
on behalf of the Lender pursuant to the Canadian Forest Debenture the
certificates evidencing such shares of stock, accompanied by undated stock
powers executed in blank and to take such other action as the Agent, as assignee
of the Lender shall request to perfect the security interest created therein
pursuant to the Canadian Forest Debenture.
(b) CERTAIN RESTRICTIONS. Other than (i) the Loan Documents, (ii)
any documents in favor of the Agent or the lenders under the Funding Credit
Agreement and (iii) in the case of ProMark, the BOM Agreement, no Borrower will
permit any of its Subsidiaries to enter into, after the date hereof, any
indenture, agreement, instrument or other arrangement that, directly or
indirectly, prohibits or restrains, or has the effect of prohibiting or
restraining, or imposes materially adverse conditions upon, the incurrence or
payment of Indebtedness, the granting of Liens, the declaration or payment of
dividends, the making of loans, advances or Investments or the sale, assignment,
transfer or other disposition of Property.
8.17 OWNERSHIP. Canadian Forest will at all times own 100% of the
outstanding capital stock of ProMark.
8.18 MODIFICATIONS OF CERTAIN DOCUMENTS AND PAYMENTS. Canadian
Forest will not consent to any material modification, supplement or waiver of
any of the provisions of (i) its charter documents if such modification,
supplement or waiver would have a Material Adverse Effect, or (ii) documentation
in respect of any Subordinated Indebtedness, in each case without the prior
consent of the Lender (with the approval of each lender under the Funding Credit
Agreement). No Borrower will consent to any modification, supplement or waiver
of any of the Loan Documents without the approval of the Agent and the Majority
Lenders.
8.19 LIMITATIONS ON SALE AND LEASEBACK TRANSACTIONS. No Borrower
will, nor will it permit any of its Subsidiaries to, enter into, renew or extend
any transaction or series of related transactions pursuant to which such
Borrower or any such Subsidiary sells or transfers any Property in connection
with the leasing, or the release against
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installment payments, or as part of an arrangement involving the leasing or
resale against installment payments, of such Property to the seller or
transferor ("SALE AND LEASEBACK TRANSACTION") except a Sale and Leaseback
Transaction entered into prior to the date of this Agreement.
8.20 GOVERNMENTAL APPROVALS. Each Borrower agrees that it will
promptly obtain from time to time at its own expense and at all times maintain
in full force and effect without any material modification or amendment, all
such governmental licenses, authorizations, registrations, consents, permits and
approvals as may be required for such Borrower to (a) comply with its
obligations, and preserve its rights under, each of the Loan Documents and
(b) maintain the existence, priority and perfection of the Liens purported to be
created under the Security Documents.
8.21 PROPERTY SUBJECT TO THE LIEN OF THE SECURITY DOCUMENTS. By the
Closing Date, Canadian Forest shall (i) cause substantially all of its
Properties, including without limitation all of the Hydrocarbon Properties which
have been given any value in connection with the determination of the initial
Borrowing Base to be subjected to the Lien of the Security Documents and (ii)
perform such other acts and deeds in connection with clause (i) above, at the
expense of Canadian Forest, as the Lender (at the direction of the Majority
Lenders) shall require.
8.22 ENVIRONMENTAL MATTERS.
(a) Each Borrower will and will cause each of its Subsidiaries to
comply in all material respects with all Environmental Laws now or hereafter
applicable to such Borrower or its Subsidiaries, and shall obtain, at or prior
to the time required by applicable Environmental Laws, all environmental, health
and safety permits, licenses and other authorizations necessary for its
operations and maintain such authorizations in full force and effect, except to
the extent failure to have any such permit, license or authorization would not
have a Material Adverse Effect.
(b) Each Borrower will and will cause each of its Subsidiaries to
promptly furnish to the Lender and the Agent all written notices of violation,
orders, claims, citations, complaints, penalty assessments, suits or other
proceedings, administrative, civil or criminal, at law or in equity, received by
such Borrower or its Subsidiaries or of which it has notice, pending or
threatened against such Borrower or its Subsidiaries by any governmental
authority with respect to any alleged violation of or non-compliance with any
Environmental Laws or any permits, licenses or authorizations in connection with
its ownership or use of the Properties or the operation of its business.
(c) Each Borrower will and will cause each of its Subsidiaries to
promptly furnish to the Lender and the Agent all requests for information,
notices of claim, demand letters, and other notifications, received by such
Borrower or its Subsidiaries, to the effect that, in connection with its
ownership or use of its Properties or the conduct
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of its business, it may be potentially responsible with respect to any
investigation or clean-up of Hazardous Material at any location.
8.23 NO ACTION TO AFFECT SECURITY DOCUMENTS. The Borrowers shall not
do anything to adversely affect the priority of the Security Documents given or
to be given in respect of the obligations of the Borrowers hereunder.
8.24 FIXED CHARGE. The Borrowers shall, upon the reasonable request
by the Lender or the Agent, grant a fixed mortgage and charge (in form and
substance satisfactory to the Lender and the Agent) to or for the benefit of the
Lender, as collateral security for the Borrowers' obligations to the Lender
under this Agreement, on any of its Hydrocarbon Properties and assets (other
than the accounts receivable of ProMark) now owned or hereafter acquired that
are subject to a floating charge created by the Security Documents, free and
clear of any other mortgages, charges, encumbrances or other security interests
except as provided in Section 8.06.
8.25 FURTHER ASSURANCES. Each Borrower shall, after notice thereof
from Lender or the Agent, do all such further acts and things and execute and
deliver all such further documents as shall be reasonably requested by the
Lender or the Agent in order to give effect to this Agreement and the Security
Documents and shall cause the same to be registered wherever, in the opinion of
the Lender or the Agent, such registration may be required or advisable to
preserve, perfect or validate or continue the perfected status of any deemed or
other Lien granted pursuant to a Security Document or to enable the Lender to
exercise and enforce its rights hereunder with respect to such deemed or other
Lien.
8.26 TITLE DEFECTS. Canadian Forest shall, promptly upon becoming
aware of the existence of any title defect or any encumbrance (other than as
described in Section 8.06) affecting any Hydrocarbon Property which has been
given value in the most recent Borrowing Base (other than title defects which do
not materially and adversely impact the value of such Hydrocarbon Property),
give the Lender and the Agent prompt written notice of such title defect or
encumbrance, and in such case, Canadian Forest shall or shall cause the
applicable Subsidiary Borrower to undertake to take all steps necessary to cure
such title defect or discharge such encumbrance; PROVIDED that if Canadian
Forest, Forest or the applicable Subsidiary Borrower is unable to cure such
title defect or discharge such encumbrance to the reasonable satisfaction of the
Agent within 60 days following the date on which Canadian Forest shall have
given the notice referred to in this Section 8.26, then the remedy of the
Lender, the Agent and the lenders under the Funding Credit Agreement shall be to
cause the Borrowing Base to be reduced by an amount equal to the value (or such
portion thereof which has been impaired) assigned such Hydrocarbon Property in
the most recent Borrowing Base which reductions may lead to the provisions of
Section 2.11(a) becoming applicable and actions taken by the Lender, the Agent
and the Lenders under the Funding Credit Agreement in that regard; PROVIDED that
if the Agent
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reasonably believes that any title defect or series of defects has caused a
reduction in the Borrowing Base in excess of C$10,000,000 and such reduction
results in a Borrowing Base Deficiency, the Lender shall have all the rights
set forth in Section 9 hereof.
8.27 ADDITIONAL BORROWERS. The Borrowers will take such action, and
will cause each of their Wholly Owned Subsidiaries to take such action,
including without limitation the action specified below in this Section 8.27
from time to time as shall be necessary to ensure that if at any time the
aggregate amount of all Investments pursuant to Section 8.08(f) and (h) hereof
exceeds C$5,000,000 (or its equivalent in other currencies), Canadian Forest
will cause each Wholly Owned Subsidiary that receives any Investment from
Canadian Forest or ProMark (including without limitation the Investment which
causes the aggregate of the Investments pursuant to Section 8.08(f) and (h)
hereof to exceed C$5,000,000) (or its equivalent in other currencies) to become
Subsidiary Borrowers hereunder. Each Wholly Owned Subsidiary of Canadian Forest
that is required to or for any other reason desires to become a Subsidiary
Borrower after the date hereof shall execute such instruments, agreements,
guarantees and security and provide such other documents and opinions, in form
and substance satisfactory to, and as required by, the Lender and the Agent to
acknowledge that such Subsidiary has all of the rights and obligations of a
Borrower under this Agreement and to confirm that the Security Documents
constitute a Lien on its Properties free of any other encumbrances except those
described in Section 8.06 and that the Subsidiary Borrower and the other
Borrowers are and remain liable and obligated to pay all amounts due hereunder
and under any other Loan Document that they are party to.
8.28 SPECIAL COVENANT WITH RESPECT TO PROMARK.
(a) ProMark shall not amend in any material respect the written
policy with respect to its gas marketing activities delivered pursuant to
Section 6.01(v) hereof without the consent of the Lender, the Agent, BOM
and the Majority Banks.
(b) ProMark will provide the Lender, the Agent and each of the
Lenders under the Funding Credit Agreement with:
(i) a report as soon as available and in any event within 60
days after the end of each quarterly fiscal period of each fiscal year
of ProMark setting forth the aging with respect to each of ProMark's
receivables (and the name and amount owed by each Person that is an
obligor with respect to such receivables); and
(ii) prompt notice of any request or demand for payment of an
amount in excess of C$5,000,000 (other than in the ordinary course of
business) or for delivery of gas valued in excess of C$5,000,000
(other
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than in the ordinary course of business) or of any requests or
demands for payment or for delivery of gas if the aggregate amount so
requested or demanded (other than in the ordinary course of business)
exceeds or is valued in excess of, as the case may be, C$5,000,000 in
any calendar month under any Guarantee of Canadian Forest permitted
pursuant to Section 8.
Section 9. EVENTS OF DEFAULT; REMEDIES.
9.01 EVENTS OF DEFAULT. If one or more of the following events
(herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) Any Borrower shall (i) default in the payment when due (whether
at stated maturity or upon mandatory or optional prepayment) of any
principal of or interest on any Loan (other than Swingline Loans), Letter
of Credit Reimbursement Obligations, any fee or any other amount payable by
it hereunder or under any other Loan Document or (ii) default in the
payment when due (whether on demand, at stated maturity or upon mandatory
or optional prepayment) of any principal or interest on a Swingline Loan
following the expiration of a 3 Business Day grace period that shall begin
upon the Borrowers' receipt of demand for payment on such Swingline Loan;
provided that with respect to this clause (ii) the Borrowers shall be
entitled to Convert such Swingline Loan to another Type of Loan to cure
such default; or
(b) Any Borrower or any of their respective Subsidiaries, or 3189503
shall default in the payment when due of any principal of or interest on
any of its other Indebtedness aggregating C$500,000 or more; or any event
specified in any note, agreement, indenture or other document evidencing or
relating to any such Indebtedness shall occur if the effect of such event
is to cause, or (with the giving of any notice or the lapse of time or
both) to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, such Indebtedness to
become due, or to be prepaid in full (whether by redemption, purchase,
offer to purchase or otherwise), prior to its stated maturity or to have
the interest rate thereon reset to a level so that securities evidencing
such Indebtedness trade at a level specified in relation to the par value
thereof; or any Borrower or any of their respective Subsidiaries, or
3189503 shall default in the payment when due of any amount aggregating
C$100,000 or more under any Interest Rate Protection Agreement or Commodity
Hedging Agreement; or any event specified in any Interest Rate Protection
Agreement or Commodity Hedging Agreement shall occur if the effect of such
event is to cause, or (with the giving of any notice or the lapse of time
or both) to permit, termination or liquidation payment or payments
aggregating C$250,000 or more to become due; or
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(c) Any representation, warranty or certification made or deemed made
herein or in any other Loan Document (or in any modification or supplement
hereto or thereto) by any Borrower, 3189503, or Forest or any Material
Subsidiary, or any certificate furnished to any lender under the Funding
Credit Agreement or the Agent pursuant to the provisions hereof or thereof,
shall prove to have been false or misleading as of the time made or
furnished in any material respect; or
(d) Any Borrower shall default in the performance of any of its
obligations under any of Sections 8.01(h), 8.05, 8.06, 8.07, 8.08, 8.09,
8.10, 8.11, 8.13, 8.15, 8.16, 8.17, 8.18 or 8.20 hereof; or 3189503 shall
default in the performance of any of its obligations under Sections
6.01(e), 6.04 or 7.02 of the 3189503 Guarantee and Pledge Agreement; or
Forest shall default in the performance of any of its obligations under any
of Sections 9.1, 9.2, 9.4 or 9.6 of the Forest Debenture; or any Borrower,
3189503 or Forest shall default in the performance of any of its other
obligations in this Agreement or any other Loan Document and such default
shall continue unremedied for a period of thirty or more days after notice
thereof to the Borrowers by the Lender; or
(e) Any Relevant Party or Forest shall admit in writing its inability
to, or be generally unable to, pay its debts as such debts become due; or
(f) Any Relevant Party or Forest shall (i) apply for or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, examiner or liquidator of itself or of all or a substantial part
of its Property, (ii) make a general assignment for the benefit of its
creditors, (iii) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (iv) take any corporate action for the purpose of effecting any of
the foregoing or (v) do the equivalent of any of the foregoing under the
laws of Canada or the United States, as applicable; or
(g) A proceeding or case shall be commenced, without the application
or consent of the affected Relevant Party or Forest, as the case may be, in
any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver, custodian,
trustee, examiner, liquidator or the like of such Relevant Party or Forest
or of all or any substantial part of its Property, (iii) similar relief in
respect of such Relevant Party under the Bankruptcy and Insolvency Act
(Canada) or such Relevant Party or Forest under any other law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 60
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or more days or (iv) the equivalent of any of the foregoing
under the laws of Canada or the United States, as applicable; or
(h) A final judgment or judgments for the payment of money of
C$1,000,000 or more in the aggregate (exclusive of judgment amounts fully
covered by insurance (subject to ordinary and customary deductibles) where
the insurer has admitted liability in respect of the full amount (subject
to ordinary and customary deductibles) of such judgment(s) in excess of
C$1,000,000 and in respect of which the Majority Lenders believe such
insurer has the financial ability to satisfy the full amount of such
judgment(s)) shall be rendered by one or more courts, administrative
tribunals or other bodies having jurisdiction against any Relevant Party
and the same shall not be discharged (or provision shall not be made for
such discharge), or a stay of execution thereof shall not be procured,
within 60 days from the date of entry thereof, or such Relevant Party shall
not, within said period of 60 days, or such longer period during which
execution of the same shall have been stayed, appeal therefrom and cause
the execution thereof to be stayed during such appeal; or
(i) Any governmental authority shall take any action to condemn,
seize, nationalize or appropriate any substantial portion of the Property
of any Borrower (either with or without payment of compensation) or shall
take any action that, in the opinion of the Majority Lenders, adversely
affects the ability of such Borrower to perform its obligations under this
Agreement or any other Loan Document; or
(j) The Liens created by the Security Documents shall at any time not
constitute a valid and perfected Lien on the collateral intended to be
covered thereby (to the extent perfection by filing, registration,
recordation or possession is required herein or therein) in favor of the
Lender, free and clear of all other Liens (other than Liens permitted under
Section 8.06 hereof or under the respective Security Documents), or, except
for expiration in accordance with its terms, any of the Security Documents
shall for whatever reason be terminated or cease to be in full force and
effect, or the enforceability thereof shall be contested by any Borrower,
Forest or 3189503, as applicable; or
(k) Any Governmental Authority shall assert claims against any
Relevant Party, or any other Person shall commence any proceeding against
any Relevant Party before any court, administrative tribunal or other body
having jurisdiction over such Relevant Party, in either such case based on
or arising from the generation, storage, transport, handling or disposal of
Hazardous Materials by such Relevant Party or Affiliates, or any
predecessor in interest of such Relevant Party or Affiliates, or relating
to any site or facility owned, operated or leased by such Relevant Party or
Affiliates, which claims or liabilities (insofar as they are payable by
such Relevant Party but after deducting any portion thereof which may
reasonably be expected to be paid by other
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creditworthy Persons jointly and severally liable therefor), and the amount
thereof may, singly or in the aggregate, reasonably be anticipated to have
a Material Adverse Effect and such claim is not withdrawn or such proceeding
is not withdrawn or dismissed, as the case may be, within 45 days after the
assertion or commencement thereof, as applicable; or
(l) Canadian Forest shall cease to be a Wholly Owned Subsidiary of
3189503; or
(m) if a writ, execution or attachment or similar process is issued
or levied against all or a material portion of the Forest Pledged
Properties in connection with any judgement or judgements against those
Forest Pledged Properties aggregating in excess of C$1,000,000 and such
writ, execution, attachment or similar process is not released, bonded,
satisfied, discharged, vacated or stayed within 30 days after its entry,
commencement or levy;
(n) if an encumbrancer or lienor takes possession of any material
part of the Forest Pledged Properties, or if execution or other similar
process is enforced against such property;
(o) Forest shall apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee, examiner or
liquidator of all or a substantial part of the Forest Pledged Properties;
or a proceeding or case shall be commenced, without the application or
consent of Forest, in any court of competent jurisdiction, seeking the
appointment of a receiver, custodian, trustee, examiner, liquidator or the
like of all or any substantial part of the Forest Pledged Properties and
such proceeding or case shall continue undismissed, or an order, judgment
or decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days; or any
governmental authority shall take any action to condemn, seize, nationalize
or appropriate any substantial portion of the Forest Pledged Properties
(either with or without payment of compensation) or shall take any action
that, in the opinion of the Majority Lenders, adversely affects the ability
of Forest to perform its obligations under the Forest Guarantee or the
Forest Debenture; or any claim shall be asserted, or proceeding commenced,
against Forest based on or arising from the matters dealt with in clause
(k) which affect the Forest Pledged Properties, and the amount thereof may,
singly or in the aggregate, reasonably be anticipated to have a Material
Adverse Effect and such claim is not withdrawn or such proceeding is not
withdrawn or dismissed, as the case may be, within 45 days after the
assertion or commencement thereof, as applicable; or
(p) 3189503 shall cease to be a Wholly Owned Subsidiary of Forest; or
(q) ProMark or any other Subsidiary Borrower shall cease to be a
Wholly
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Owned Subsidiary of Canadian Forest; or
(r) Any event shall occur if the effect is to cause the Indebtedness
under the Second Amended and Restated Credit Agreement dated as of January
31, 1997 among Forest, the Subsidiary Guarantors and Subsidiary Obligors
mentioned therein, the lenders party thereto and Chase Manhattan, as agent
(as such agreement is amended, supplemented and modified from time to time)
to become due, or to be prepaid (other than voluntary) in full prior to its
stated maturity; or
(s) Any Event of Default (as defined in the Funding Credit Agreement)
shall occur and be continuing; or
(t) the aggregate Principal Amount of each Type of Loan (including
Swingline Loans) and all Bankers' Acceptance Liabilities and of Letter of
Credit Liabilities (all of those terms being as defined in the Funding
Credit Agreement) outstanding under the Funding Credit Agreement shall be
respectively greater than the sum of the corresponding:
(i) aggregate Principal Amount of all Types of Loans
(including Swingline Loans) under this Agreement; and
(ii) aggregate Letter of Credit Liabilities hereunder; or
(u) the rates of interest, fees and other amounts payable in respect
of Loans, Bankers' Acceptances and Letters of Credit (all those terms being
as defined in the Funding Credit Agreement) under the Funding Credit
Agreement shall be greater than the rates of interest, fees and other
amounts payable in respect of corresponding Types of Loans and Letters of
Credit under this Agreement; or
(v) Forest shall have or incur any obligation to cause any of the
Borrowers to grant a "Guarantee" (as defined in the Forest Indenture).
THEREUPON: (1) in the case of the occurrence and during the continuance of an
Event of Default other than one referred to in clause (a)(ii), (f) or (g) of
this Section 9.01 with respect to any Borrower, the Lender shall (but only upon
the direction of the Agent or the Majority Lenders), by notice to the Borrowers,
terminate the Commitment and/or declare the Principal Amount then outstanding
of, and the accrued interest on, the Loans, the Swingline Loans, the Letter of
Credit Reimbursement Obligations and all other amounts payable by any Borrower
hereunder and under the Notes (including, without limitation, any amounts
payable under Section 5.05 hereof) to be forthwith due and payable, whereupon
such amounts shall be immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby
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expressly waived by each Borrower; (2) in the case of the occurrence of an
Event of Default referred to in clause (f) or (g) of this Section 9.01 with
respect to any Borrower, the Commitments shall automatically be terminated
and the principal amount then outstanding of, and the accrued interest on,
the Loans, the Swingline Loans, the Letter of Credit Reimbursement
Obligations, and all other amounts payable by any Borrower hereunder and
under the Notes (including, without limitation, any amounts payable under
Section 5.05 hereof) shall automatically become immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by each Borrower and (3) in the case of the
occurrence of an Event of Default referred to in clause (a)(ii) of this
Section 9.01 with respect to the Borrowers, the Lender may and, upon receipt
of notice from the Administrative Agent, will, by notice to the Borrowers,
terminate the Commitment to make Swingline Loans pursuant to Section 2.05
hereof and/or declare the Principal Amount then outstanding of, and accrued
interest on, the Swingline Loans and all other amounts payable under the
Swingline Notes to be forthwith due and payable, whereupon such amounts shall
be immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each
Borrower.
In addition, upon the occurrence and during the continuance of any
Event of Default (if the Lender has declared the Principal Amount then
outstanding of, and accrued interest on, the Loans and all other amounts payable
by the Borrowers hereunder and under the Notes to be due and payable), the
Borrowers agree that (i) they shall provide cover for the Letter of Credit
Liabilities and BA Loans by paying to the Lender immediately available funds in
an amount equal to the aggregate undrawn face amount of all Letters of Credit
and all BA Loans, which funds shall be held by the Lender in the Cash Collateral
Account as collateral security in the first instance PRO RATA for the Letter of
Credit Liabilities and BA Loans and be subject to withdrawal only as therein
provided and (ii) the Lender may (but only at the direction of the Agent or the
Majority Lenders), in addition to any other rights and remedies that it may have
hereunder or in law or at equity in that event, realize on all or any part of
the Security Documents held by them for the Borrowers' obligations hereunder.
Payment of the Principal Amount of any BA Loan as provided in paragraph (i)
above shall satisfy the obligation to pay any interest accrued on that BA Loan.
9.02 REMEDIES CUMULATIVE. It is expressly understood and agreed that
the rights and remedies of the Lender under the Loan Documents are cumulative
and are in addition to and not in substitution for any rights or remedies
provided by law; any single or partial exercise by the Lender of any right or
remedy for a default or breach of any term, covenant, condition or agreement
herein or therein contained 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 Lender may be lawfully entitled for the same default or breach, and
any waiver by the Lender of the strict observance, performance or compliance
with any term, covenant, condition or agreement herein or therein contained, and
any indulgence granted thereby, shall be deemed not to be a waiver of
<PAGE>
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any subsequent default. The Lender acting on the instructions of the Agent
and the Majority Lenders (or BOM in the case of Swingline Loans) may, to the
extent permitted by applicable law, bring suit at law, in equity or otherwise
for any available relief or purpose including but not limited to:
(a) the specific performance of any covenant or agreement contained
in the Loan Documents;
(b) enjoining a violation of any of the terms of the Loan Documents;
(c) aiding in the exercise of any power granted by the Loan Documents
or by law; or
(d) obtaining and recovering judgment for any and all amounts due in
respect of the Borrowers' obligations under this Agreement.
9.03 LENDER MAY PERFORM COVENANTS. If the Borrowers shall fail to
perform any covenant on their part herein contained, the Lender with the
approval of the Majority Lenders, may perform any such covenant capable of being
performed by the Lender and, if any such covenant requires the payment or
expenditure of money, the Lender may make such payment or expenditure with its
own funds. All amounts so paid by the Lender hereunder shall be repaid by the
Borrowers on demand therefor, and shall bear interest at the rate set forth in
Section 3.04 commencing on the date following a demand for payment of such
amounts.
Section 10. MISCELLANEOUS.
10.01 WAIVER. No failure on the part of the Lender to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement or any Note shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or any Note preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Each Borrower irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the Lender,
the Agent or any lender under the Funding Credit Agreement relating in any way
to this Agreement should be dismissed or stayed by reason, or pending the
resolution, of any action or proceeding commenced by any such Borrower relating
in any way to this Agreement whether or not commenced earlier. To the fullest
extent permitted by applicable law, each Borrower shall take all measures
necessary for any such action or proceeding commenced by the Lender, the Agent
or any lender under the Funding Credit Agreement to proceed to judgment prior to
the entry of judgment in any such
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action or proceeding commenced by any such Borrower.
10.02 NOTICES. All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including, without limitation, by
telex or telecopy) delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof); or, as to any
party, at such other address as shall be designated by such party in a notice to
each other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by telex
or telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
10.03 EXPENSES, ETC. The Borrowers jointly and severally agree to
pay or reimburse the Lender on demand an amount equal to the amount the Lender
owes to the lenders under the Funding Credit Agreement and the Agent for:
(a) all reasonable out-of-pocket costs and expenses of the Agent (including,
without limitation, the reasonable fees and expenses of Stikeman, Elliott,
Canadian counsel to Chase Canada and Milbank, Tweed, Hadley & McCloy, special
New York counsel to Chase Canada) in connection with (i) the negotiation,
preparation, execution and delivery of this Agreement, the Funding Credit
Agreement, the other Loan Documents thereunder and hereunder (without
duplication of amounts paid pursuant to Section 10.03 of the Funding Credit
Agreement) and the extension of credit hereunder and (ii) the negotiation or
preparation of any modification, supplement or waiver of any of the terms of
this Agreement, the Funding Credit Agreement or any of the other Loan Documents
(whether or not consummated); (b) all reasonable out-of-pocket costs and
expenses of the Lender, the lenders under the Funding Credit Agreement and the
Agent (including, without limitation, the reasonable fees and expenses of legal
counsel) in connection with (i) any Default and any enforcement or collection
proceedings resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this
Section 10.03; and (c) all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Loan Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Security Document or any other document referred to therein (in each case to
the extent, in the case of the lenders under the Funding Credit Agreement and
the Agent are not reimbursed by the Lender under the Funding Credit Agreement
for such expenses) or any discharge thereof.
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The Borrowers jointly and severally agree to indemnify the Lender, the
Agent and each lender under the Funding Credit Agreement and their respective
directors, officers, employees, attorneys and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages or expenses
incurred by any of them (including, without limitation, any and all losses,
liabilities, claims, damages or expenses incurred by the Lender, the Agent or
any lender under the Funding Credit Agreement, whether or not the Lender, the
Agent or any lender under the Funding Credit Agreement is a party thereto)
arising out of or by reason of any failure of the Borrowers to perform any of
their obligations hereunder or any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to the extensions of credit hereunder or any actual or
proposed use by the Borrowers or any of their Subsidiaries of the proceeds of
any of the extensions of credit hereunder, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified) in each case,
with respect to the Agent and the lenders under the Funding Credit Agreement, to
the extent the full amount of such indemnification is not made by the Lender
pursuant to the Funding Credit Agreement. Without limiting the generality of
the foregoing, the Borrowers will jointly and severally indemnify the Lender,
the Agent and each lender under the Funding Credit Agreement from, and hold the
Lender, the Agent and each lender under the Funding Credit Agreement harmless
against, any losses, liabilities, claims, damages or expenses described in the
preceding sentence (but excluding, as provided in the preceding sentence, any
loss, liability, claim, damage or expense incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified) arising under
any Environmental Law as a result of the past, present or future operations of
any Borrower or any of its Subsidiaries (or any predecessor in interest to such
Borrower or any of its Subsidiaries), or the past, present or future condition
of any site or facility owned, operated or leased at any time by such Borrower
or any of its Subsidiaries (or any such predecessor in interest), or any Release
or threatened Release of any Hazardous Materials at or from any such site or
facility, excluding any such Release or threatened Release that shall occur
during any period when the Lender, the Agent or any lender under the Funding
Credit Agreement shall be in possession of any such site or facility following
the exercise by the Lender, the Agent or any lender under the Funding Credit
Agreement of any of its rights and remedies hereunder or under any of the
Security Documents, but including any such Release or threatened Release
occurring during such period that is a continuation of conditions previously in
existence, or of practices employed by such Borrower and its Subsidiaries, at
such site or facility.
A certificate of the Lender or the Agent as to the amount of any such
loss or expense shall be PRIMA FACIE proof of the amount thereof, in the absence
of manifest error. The amount required to be paid by the Borrowers hereunder
shall become part of the Borrowers' obligations hereunder, shall be payable by
the Borrower on demand,
<PAGE>
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shall bear interest at the rate of interest that the Lender is required to
pay under the Funding Credit Agreement on such amounts calculated from the
date any indemnified cost, liability or damage is incurred or outlay is made
by the Lender hereunder to the date paid by the Borrowers.
10.04 AMENDMENTS, ETC. Any provision of this Agreement may be
modified or supplemented only by an instrument in writing signed by each
Borrower and the Lender with the prior written consent of the Agent and the
Majority Lenders.
10.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
10.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) No Borrower may assign any of its rights or obligations hereunder
or under the Notes without the prior consent of the Lender (with the prior
written consent of the Agent).
(b) Except as provided in clause (c) below, the Lender may not assign
any of its Loans, its Note or its Commitment hereunder.
(c) Each Borrower understands that the Lender will assign and grant
to the Agent, as agent for the lenders from time to time party to the Funding
Credit Agreement a security interest in all of the Lender's right, title and
interest under this Agreement and the Security Documents. Each Borrower
consents to such assignment and grant and further agrees that all
representations, warranties, covenants and agreements of such Borrower made
herein shall also be for the benefit and inure to the Agent and such lenders and
all holders from time to time of the notes issued to and Bankers' Acceptances
accepted by, such lenders.
(d) Each Borrower acknowledges that in addition to the assignments
referred to above the Lender will assign to the Agent all payments to be made by
the Borrowers under this Agreement. The Lender agrees that payments made by the
Borrowers to the Agent pursuant to that assignment of payments will satisfy the
Borrowers' obligations hereunder to the extent of the amounts of the payments
made to the Agent.
10.07 SURVIVAL. The obligations of the Borrowers under Sections
5.01, 5.05 and 10.03 hereof shall survive the repayment of the Loans and the
Letter of Credit Reimbursement Obligations and the termination of the Commitment
and, in the case the Lender may assign any interest in the Commitment or Loans
hereunder, shall survive the making of such assignment, notwithstanding that it
may cease to be the "Lender" hereunder. In addition, each representation and
warranty made, or deemed to
<PAGE>
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be made by a notice of any extension of credit herein or pursuant hereto
shall survive the making of such representation and warranty, and the Lender
shall not be deemed to have waived, by reason of making any extension of
credit hereunder, any Default that may arise by reason of such representation
or warranty proving to have been false or misleading, notwithstanding that
the Lender or the Agent may have had notice or knowledge or reason to believe
that such representation or warranty was false or misleading at the time such
extension of credit was made.
10.08 CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
10.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
10.10 GOVERNING LAW. This Agreement and the Notes shall be governed
by, and construed in accordance with, the laws of the Province of Alberta and
the laws of Canada applicable therein.
10.11 JURISDICTION, SERVICE OF PROCESS AND VENUE.
(a) Each party hereto hereby agrees that any suit, action or
proceeding with respect to this Agreement, any Note, the other Loan Documents or
any judgment entered by any court in respect thereof may be brought in the
courts of the Province of Alberta; and each party hereto hereby irrevocably
submits to the jurisdiction of such courts for the purpose of any such suit,
action, proceeding or judgment. Each party hereto further submits, for the
purpose of any such suit, action, proceeding or judgment brought or rendered
against it, to the appropriate courts of the jurisdiction of its domicile.
(b) Nothing herein shall in any way be deemed to limit the ability of
the Lender, the Agent or any lender under the Funding Credit Agreement to serve
any such writs, process or summonses in any other manner permitted by applicable
law or to obtain jurisdiction over the Borrowers in such other jurisdictions,
and in such manner, as may be permitted by applicable law.
(c) Each Borrower hereby irrevocably waives any objection that it may
now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Loan
Document brought in the courts of the Province of Alberta and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
<PAGE>
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10.12 JUDGMENT CURRENCY. This is an international loan transaction
in which the specification of Canadian Dollars or U.S. Dollars is of the
essence, and the stipulated currency shall in each instance be the Currency of
account and payment in all instances. A payment obligation in one Currency
hereunder (the "ORIGINAL CURRENCY") shall not be discharged by an amount paid in
another currency (the "OTHER CURRENCY"), whether pursuant to any judgment
expressed in or converted into any Other Currency or in another place except to
the extent that such tender or recovery results in the effective receipt by the
Lender of the full amount of the Original Currency payable to the Lender under
this Agreement. If for the purpose of obtaining judgment in any court it is
necessary to convert a sum due hereunder in the Original Currency into the Other
Currency, the rate of exchange that shall be applied shall be that at which in
accordance with normal banking procedures the Agent could purchase Original
Currency at the Principal Office with the Other Currency on the Business Day
next preceding the day on which such judgment is rendered. The obligation of
each Borrower in respect of any such sum due from it to the Lender, the Agent or
any lender under the Funding Credit Agreement hereunder or under any other Loan
Document (in this Section 10.12 called an "ENTITLED PERSON") shall,
notwithstanding the rate of exchange actually applied in rendering such
judgment, be discharged only to the extent that on the Business Day following
receipt by such Entitled Person of any sum adjudged to be due hereunder in the
Other Currency such Entitled Person may in accordance with normal banking
procedures purchase and transfer the Original Currency to Toronto with the
amount of the judgment currency so adjudged to be due; and each Borrower hereby,
as a separate obligation and notwithstanding any such judgment, agrees to
indemnify such Entitled Person against, and to pay such Entitled Person on
demand, in the Original Currency, the amount (if any) by which the sum
originally due to such Entitled Person in the Original Currency hereunder
exceeds the amount of the Other Currency so purchased and transferred.
10.13 APPOINTMENT OF CANADIAN FOREST AS AGENT FOR NOTICE. Each
Borrower (other than Canadian Forest) hereby irrevocably appoints Canadian
Forest as its agent for the purpose of giving and receiving any and all notices
and other communications provided for herein to be given by or to it hereunder.
By its signature below, Canadian Forest hereby accepts such appointment.
10.14 JOINT AND SEVERAL LIABILITY. (a) All monetary obligations of
the Borrowers hereunder and under the other Loan Documents (including, without
limitation, the Notes) to which the Borrowers are a party shall be their joint
and several obligations.
(b) Each Borrower hereby agrees that until the payment and
satisfaction in full of all monetary obligations hereunder and the expiration or
termination of the Commitments it shall not exercise any right or remedy against
any other Borrower arising by reason of any performance by it of its joint and
several obligations hereunder,
<PAGE>
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whether by subrogation or otherwise.
(c) In any action or proceeding involving any state or provincial
corporate law, or any state provincial or Federal bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
monetary obligations of any Borrower hereunder or under the Notes would
otherwise be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, then, notwithstanding any
other provision hereof to the contrary, the amount of such liability shall,
without any further action by such Borrower, the Lender or any other Person, be
automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding (but such limitation and reduction shall not affect
the obligations of any other Borrower hereunder or under any other Loan
Document).
10.15 ADDITIONAL PROVISIONS RELATING TO INTEREST AND FEES.
(a) MAXIMUM RATE OF INTEREST. In no event shall any interest or fee
to be paid hereunder exceed the maximum rate permitted by applicable law. In
the event any such interest rate or fee exceed such maximum rate, such rate
shall be adjusted downward to the highest rate (expressed as a percentage per
annum) or fee that the parties could validly have agreed to by contract on the
date hereof under applicable law. It is further agreed that any excess actually
received by the Lender shall be credited against the Principal Amount of any
Loan (or the principal owing with respect to a BA Loan) or, if the Principal
Amount shall have been or would thereby be paid in full, the remaining amount
shall be credited to the applicable Borrower.
(b) CONTINUING OBLIGATIONS. All interest (including interest on
overdue interest) payable by the Borrowers to the Lender hereunder shall accrue
from day to day, computed as provided herein, and shall be payable after as well
as before maturity, demand, default and judgment.
(c) WAIVER OF SECTION 6 OF JUDGMENT INTEREST ACT. To the extent
permitted by law, Section 6 of the Judgment Interest Act (Alberta) shall not
apply to this Agreement and is hereby expressly waived by each Borrower.
10.16 SEVERABILITY. The provisions of this Agreement are intended to
be severable. If any provision of this Agreement shall be held invalid of
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity of
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
10.17 TIME OF ESSENCE. Time shall be of the essence hereof.
<PAGE>
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10.18 CONFLICT OF TERMS. In the event of any conflict between the
terms of this Agreement and any other Loan Document, the provisions of this
Agreement shall prevail to the extent necessary to remove such conflict.
10.19 RESTATEMENT OF ORIGINAL CREDIT AGREEMENT. This Agreement
amends and restates the terms and conditions applicable to the revolving term
credit facility provided by the Lender to the Borrowers under the Original
Credit Agreement. The amendments contained in this Agreement shall be effective
as of the Effective Date. This Agreement governs the terms and conditions
applicable to the Commitment and the Loans (including the Swingline Loans) and
Letters of Credit provided hereunder to the Borrowers. All amounts outstanding
to the Lender as of the Effective Date under the Original Credit Agreement by
way of Eurodollar Loans, U.S. Base Rate Loans, Canadian Prime Loans, Letters of
Credit, and BA Loans (as each of such terms are defined in the Original Credit
Agreement) shall, as of the date hereof, be deemed to be outstanding hereunder
as borrowings by way of Eurodollar Loans, U.S. Base Rate Loans, Canadian Prime
Loans, BA Loans and Letters of Credit, respectively, and shall thereafter be
governed by the terms and conditions of this Agreement, notwithstanding that the
Issuing Bank under Letters of Credit will continue to be Chase Canada. All
accrued interest and fees payable to the Lender pursuant to the Original Credit
Agreement which are outstanding as of the date hereof shall be paid to the
Lender in accordance with the terms of this Agreement and shall be deemed to be
amounts owing hereunder.
10.20 BOM LETTERS OF CREDIT. The Lender and the Borrowers agree that
in addition to Section 10.19 the following letter of credit issued by BOM to
ProMark:
Letter of Credit with BOM in favor of the Minister of C$2,500.00
Finance and Corporate Relations, British Columbia dated
November 2, 1994, as amended on September 22, 1995. Expires
October 31, 1997
is and shall be from and after the date of this Agreement Letters of Credit
under this Agreement and shall be subject to the applicable terms of this
Agreement in that regard.
10.21 AMENDMENT OF CERTAIN DOCUMENTS. References to the BOM
Agreement, the Canadian Forest Guarantee, the ProMark Security Agreement and the
ProMark Debenture mean such agreements in the form thereof on the date of
execution of this Agreement, together with such amendments or supplements
thereto as are permitted by the provisions of Section 11.21 of the Funding
Credit Agreement.
<PAGE>
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
CANADIAN FOREST OIL LTD.
By
-------------------------
Title:
Address for Notices:
Canadian Forest Oil Ltd.
600, 800-Sixth Avenue S.W.
Calgary, Alberta T2P3G3
Canada
Attention: Vice President-Finance
Telecopier No.: (403) 261-7665
Telephone No.: (403) 292-8000
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, Colorado 80202
Attention: Vice President-Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
<PAGE>
Page 90
PRODUCERS MARKETING LTD.
By
-------------------------
Title:
Address for Notices:
Producers Marketing Ltd.
c/o Canadian Forest Oil Ltd.
600, 800-Sixth Avenue S.W.
Calgary, Alberta T2P 3G3
Canada
Attention: Vice President-Finance
Telecopier No.: (403) 261-7665
Telephone No.: (403) 292-8000
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, Colorado 80202
Attention: Vice President-Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
<PAGE>
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611852 SASKATCHEWAN LTD.
By
-------------------------
Title:
Address for Notices
611852 SASKATCHEWAN LTD.
c/o Canadian Forest Oil Ltd.
600, 800-Sixth Avenue S.W.
Calgary, Alberta T2P 3G3
Canada
Attention: Vice President-Finance
Telecopier No.: (403) 261-7665
Telephone No.: (403) 292-8000
with a copy to:
The Chase Manhattan Bank of Canada
1 First Canadian Place
100 King Street West
Suite 6900, P.O. Box 106
Toronto, Ontario M5X 1A4
Canada
Attention: Vice President
Corporate Finance
Telecopier No.: (416) 216-4161
Telephone No.: (416) 216-4144
and
<PAGE>
Page 92
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, Colorado 80202
Attention: Vice President and
Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
<PAGE>
Page 93
SCHEDULE I
MATERIAL AGREEMENTS AND LIENS
[See Sections 7.11, 8.06(b) or 8.07(b)]
Part A - MATERIAL AGREEMENTS
Part B - LIENS
<PAGE>
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SCHEDULE II
SUBSIDIARIES AND INVESTMENTS
[See Sections 7.13 and 8.08(a)]
Part A - SUBSIDIARIES
Part B - INVESTMENTS
<PAGE>
Page 95
SCHEDULE III
ENVIRONMENTAL MATTERS
[See Section 7.12]
<PAGE>
Page 1
EXECUTION COPY
EXHIBIT B
SECOND AMENDED AND RESTATED SECURITY AGREEMENT
SECOND AMENDED AND RESTATED SECURITY AGREEMENT dated as of January 31,
1997 between FOREST OIL CORPORATION, a corporation duly organized and validly
existing under the laws of the State of New York (the "COMPANY"); each of the
Subsidiaries of the Company that becomes a guarantor pursuant to Section 9.16 of
the Second Amended and Restated Credit Agreement referred to below (the
"SUBSIDIARY GUARANTOR", and together with the Company, the "OBLIGORS"); and THE
CHASE MANHATTAN BANK, as agent for the Banks party to the Second Amended and
Restated Credit Agreement (the "BANKS") (in such capacity, together with its
successors in such capacity, the "AGENT").
The Company, the Existing Banks (as defined in the Second Amended and
Restated Credit Agreement referred to below), and the Agent are parties to a
Credit Agreement dated as of December 1, 1993 (as modified and supplemented and
in effect from time to time, the "ORIGINAL CREDIT AGREEMENT") as amended and
restated by an Amended and Restated Credit Agreement dated as of August 31,
1995. The Company, the Banks and the Agent have agreed to amend and restate the
Amended and Restated Credit Agreement pursuant to a Second Amended and Restated
Credit Agreement dated as of January 31, 1997 (the Original Credit Agreement as
so amended and restated and as the same may be further modified and supplemented
and in effect from time to time being referred to herein as the "SECOND AMENDED
AND RESTATED CREDIT AGREEMENT").
Pursuant to the terms of the Amended and Restated Credit Agreement the
Obligors entered into an Amended and Restated Security Agreement dated as of
August 31, 1995 (the "AMENDED AND RESTATED SECURITY AGREEMENT") providing for
the pledge and grant of a security interest in the Collateral (as hereinafter
defined) as security for the Secured Obligations (as so defined). The parties
hereto desire to amend and restate the Amended and Restated Security Agreement
to provide for the continuation of the pledge and grant of a security interest
thereunder with respect to the Collateral as security for the Secured
Obligations. Accordingly, the parties hereto agree as follows:
Section 1. DEFINITIONS. Terms defined in the Second Amended and
Restated Credit Agreement are used herein as defined therein. In addition, as
used herein:
<PAGE>
Page 2
"ACCOUNTS" shall have the meaning ascribed thereto in Section 3(a)
hereof.
"CHASE DEPOSIT PROCEEDS" shall mean cash to the extent that such cash
is credited to accounts at The Chase Manhattan Bank.
"COLLATERAL" shall have the meaning ascribed thereto in Section 3
hereof.
"COLLATERAL ACCOUNT" shall have the meaning ascribed thereto in
Section 4.01 hereof.
"EQUIPMENT" shall mean all fixtures and equipment as defined in the
Uniform Commercial Code.
"HYDROCARBONS" shall mean, collectively, oil, gas, casinghead gas,
condensate, natural gas liquids finished and unfinished petroleum products
and other liquid or gaseous hydrocarbons (including, without limitation,
all liquefiable hydrocarbons and other products that may be extracted from
gas and gas condensate by processing thereof in a gas processing plant).
"INVENTORY" shall mean all inventory (as defined in the Uniform
Commercial Code) of such Obligor produced from Mortgaged Properties, all
goods obtained by such Obligor in exchange for such inventory, and any
products made or processed from such inventory including all substances, if
any, commingled therewith or added thereto.
"SECURED OBLIGATIONS" shall mean, collectively, (a) the principal of
and interest on the Loans made by the Banks to, and the Note(s) held by
each Bank of, the Company and all other amounts from time to time owing to
the Banks or the Agent by the Obligors under the Basic Documents including,
without limitation, all Reimbursement Obligations and interest thereon,
(b) all obligations of the Subsidiary Guarantors under the Second Amended
and Restated Credit Agreement and the other Basic Documents (c) all
obligations of the Obligors to the Banks under any Commodity Hedging
Agreements or Interest Rate Protection Agreements and (d) all obligations
of the Obligors to the Banks and the Agent hereunder.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect from time to time in the State of New York.
Section 2. REPRESENTATIONS AND WARRANTIES. Each Obligor represents
and warrants to the Banks and the Agent that:
(a) Such Obligor is the sole beneficial owner of the
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Page 3
Collateral in which it purports to grant a security interest pursuant to
Section 3 hereof and no Lien exists or will exist upon such Collateral at
any time (and no right or option to acquire the same exists in favor of any
other Person) except for Liens permitted under Section 9.06 of the Second
Amended and Restated Credit Agreement and except for the pledge and
security interest in favor of the Agent for the benefit of the Banks
created or provided for herein, which pledge and security interest
constitute a first priority perfected pledge and security interest in and
to all of such Collateral.
(b) The goods or products now or hereafter produced by such Obligor
or any of its Subsidiaries which results in the creation of the Accounts
included in the Collateral have been and will be produced in compliance
with the requirements of the Fair Labor Standards Act, as amended.
Section 3. COLLATERAL. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, each Obligor hereby pledges and grants to the Agent,
for the benefit of the Banks as hereinafter provided, a security interest in all
of such Obligor's right, title and interest in the following property now owned
by such Obligor, whether now owned by such Obligor or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "COLLATERAL"):
(a) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of such Obligor constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to such Obligor in respect of any loans or advances in
connection with the sale of Hydrocarbons produced from Mortgaged Properties
(which loans and advances are payable within one year) or for sales of
Hydrocarbons, Inventory or Equipment or for services rendered, all moneys
due and to become due to such Obligor under any guarantee (including a
letter of credit) of the purchase price of Hydrocarbons Equipment sold by
such Obligor (such accounts, general intangibles and moneys due and to
become due being herein called collectively "ACCOUNTS");
(b) the balance from time to time in the Collateral Account;
(c) all fixtures and equipment (as such terms are defined in the
Uniform Commercial Code), including, without limitation, any and all
property, equipment, fixtures and other property, including, without
limitation, oil wells, gas wells, injection wells or other wells or well
equipment,
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compressors, pumps, pumping units, pipelines, sales and flow lines,
gathering lines, field gathering systems, salt water disposal facilities,
tanks and tank batteries, valves, fittings, machinery and parts, engines,
boilers, meters, apparatus, equipment, appliances, tools, implements,
cables, wires, towers, casing, tubing and rods, power and telephone and
telegraph lines, constituting all or a portion of a production or drilling
platform located on Mortgaged Properties or used or useful in the
production of Hydrocarbons from Mortgaged Properties.
(d) all proceeds, profits, income, benefits, renewals, extensions,
substitutions and replacements of and to any of the property of such
Obligor described in the preceding clauses of this Section 3 (including,
without limitation, any proceeds of insurance thereon and all causes of
action, claims and warranties now or hereafter held by any Obligor in
respect of any of the items listed above) and, to the extent related to any
property described in said clauses or such proceeds, products and
accessions, all books, correspondence, credit files records, invoices and
other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of
such Obligor or any computer bureau or service company from time to time
acting for such Obligor; and
(e) any property that may from time to time hereafter, by delivery or
by writing of any kind, be subjected to the lien and security interest
hereof by such Obligor or by anyone on such Obligor's behalf.
Section 4. CASH PROCEEDS OF COLLATERAL.
4.01 COLLATERAL ACCOUNT. There was previously established with the
Agent a cash collateral account (the "COLLATERAL ACCOUNT") in the name and under
the control of the Agent into which there shall be deposited from time to time
the cash proceeds of any of the Collateral (including proceeds of insurance
thereon) required to be delivered to the Agent pursuant hereto and into which
the Obligors may from time to time deposit any additional amounts that any of
them wishes to pledge to the Agent for the benefit of the Banks as additional
collateral security hereunder. The balance from time to time in the Collateral
Account shall constitute part of the Collateral hereunder and shall not
constitute payment of the Secured Obligations until applied as hereinafter
provided. Except as expressly provided in the next sentence, the Agent shall
remit the collected balance outstanding to the credit of the Collateral Account
to or upon the order of the respective Obligor as such Obligor through the
Company shall from time to time instruct. However, at any time following the
occurrence and during the
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continuance of an Event of Default, the Agent may (and, if instructed by the
Banks in accordance with the Second Amended and Restated Credit Agreement,
shall) in its (or their) discretion apply or cause to be applied (subject to
collection) the balance from time to time outstanding to the credit of the
Collateral Account to the payment of the Secured Obligations in the manner
specified in Section 5.08 hereof. The balance from time to time in the
Collateral Account shall be subject to withdrawal only as provided herein.
4.02 PROCEEDS OF ACCOUNTS. At any time after the occurrence and
during the continuance of an Event of Default, each Obligor shall, upon the
request of the Agent, instruct all account debtors and other Persons obligated
in respect of all Accounts to make all payments in respect of the Accounts
either (a) directly to the Agent (by instructing that such payments be remitted
to a post office box which shall be in the name and under the control of the
Agent) or (b) to one or more other banks in the United States of America (by
instructing that such payments be remitted to a post office box which shall be
in the name and under the control of the Agent) under arrangements, in form and
substance satisfactory to the Agent pursuant to which such Obligor shall have
irrevocably instructed such other bank (and such other bank shall have agreed)
to remit all proceeds of such payments directly to the Agent for deposit into
the Collateral Account. All payments made to the Agent, as provided in the
preceding sentence, shall be immediately deposited in the Collateral Account.
In addition to the foregoing, each Obligor agrees that, at any time after the
occurrence and during the continuance of an Event of Default, if the proceeds of
any Collateral hereunder (including the payments made in respect of Accounts)
shall be received by it, such Obligor shall, upon the request of the Agent, as
promptly as possible deposit such proceeds into the Collateral Account. Until
so deposited, all such proceeds shall be held in trust by such Obligor for and
as the property of the Agent and shall not be commingled with any other funds or
property of such Obligor.
4.03 INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. Amounts on deposit
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the respective Obligor through the Company (or, after the
occurrence and during the continuance of a Default, the Agent) shall determine,
which Permitted Investments shall be held in the name and be under the control
of the Agent, PROVIDED that (i) at any time after the occurrence and during the
continuance of an Event of Default, the Agent may (and, if instructed by the
Banks in accordance with the Second Amended and Restated Credit Agreement,
shall) in its (or their) discretion at any time and from time to time elect to
liquidate any such Permitted Investments and to apply or cause to be applied the
proceeds thereof to the payment of the Secured Obligations in the manner
specified in Section 5.08 hereof and (ii) if requested by the respective Obligor
through the Company,
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such Permitted Investments may be held in the name and under the control of one
or more of the Banks (and in that connection each Bank, pursuant to
Section 11.10 of the Second Amended and Restated Credit Agreement, has agreed
that such Permitted Investments shall be held by such Bank as a collateral
sub-agent for the Agent hereunder).
4.04 COVER FOR LETTER OF CREDIT LIABILITIES. Amounts deposited into
the Collateral Account as cover for Letter of Credit Liabilities under the
Second Amended and Restated Credit Agreement pursuant to Section 2.10(e) or 10
thereof shall be held by the Agent in a separate sub-account (designated "Letter
of Credit Liabilities Sub-Account") and all amounts held in such sub-account
shall constitute collateral security FIRST for the Letter of Credit Liabilities
outstanding from time to time and SECOND as collateral security for the other
Secured Obligations hereunder.
4.05 AUTHORITY TO COLLECT. Until the occurrence of an Event of
Default, each Obligor (i) shall, at its own expense, endeavor to collect, as and
when due, all amounts due to such Obligor with respect to the Collateral,
including the taking of any action with respect to such collection as the Agent
may reasonably request, or, in the absence of such request, as such Obligor may
deem advisable and (ii) may grant, in the ordinary course of business, to any
account debtor, any rebate, refund or allowance to which such account debtor may
lawfully be entitled, and may accept, in connection therewith, the return of
Hydrocarbons, the sale of which shall have given rise to Accounts.
Section 5. FURTHER ASSURANCES; REMEDIES. In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof, the Obligors
hereby jointly and severally agree with each Bank and the Agent as follows:
5.01 DELIVERY AND OTHER PERFECTION. Each Obligor shall:
(a) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Agent) to create,
preserve, perfect or validate the security interest granted pursuant hereto
or to enable the Agent to exercise and enforce its rights hereunder with
respect to such pledge and security interest, PROVIDED that notices to
account debtors in respect of any Accounts shall be subject to the
provisions of clause (e) below;
(b) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Agent may reasonably
<PAGE>
Page 7
require in order to reflect the security interests granted by this
Agreement;
(c) permit representatives of the Agent, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from
its books and records pertaining to the Collateral, and permit
representatives of the Agent to be present at such Obligor's place of
business to receive copies of all communications and remittances relating
to the Collateral, and forward copies of any notices or communications
received by such Obligor with respect to the Collateral, all in such manner
as the Agent may require; and
(d) upon the occurrence and during the continuance of any Default,
upon request of the Agent, promptly notify (and such Obligor hereby
authorizes the Agent so to notify) each account debtor in respect of any
Accounts or Instruments that such Collateral has been assigned to the Agent
hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Agent.
5.02 OTHER FINANCING STATEMENTS AND LIENS. Except as otherwise
permitted under Section 9.06 of the Second Amended and Restated Credit
Agreement, without the prior written consent of the Agent (granted with the
authorization of the Banks as specified in Section 12.04 of the Second Amended
and Restated Credit Agreement), no Obligor shall file or suffer to be on file,
or authorize or permit to be filed or to be on file, in any jurisdiction, any
financing statement or like instrument with respect to the Collateral in which
the Agent is not named as the sole secured party for the benefit of the Banks.
5.03 PRESERVATION OF RIGHTS. The Agent shall not be required to take
steps necessary to preserve any rights against prior parties to any of the
Collateral.
5.04 EVENTS OF DEFAULT, ETC. During the period during which an Event
of Default shall have occurred and be continuing:
(a) each Obligor shall, at the request of the Agent, assemble the
Collateral owned by it at such place or places, reasonably convenient to
both the Agent and such Obligor, designated in its request;
(b) the Agent may make any reasonable compromise or settlement deemed
desirable with respect to any of the Collateral and may extend the time of
payment, arrange for payment in installments, or otherwise modify the terms
of, any of the Collateral;
(c) the Agent shall have all of the rights and
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Page 8
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to the
maximum extent permitted by law, to exercise all voting, consensual and
other powers of ownership pertaining to the Collateral as if the Agent were
the sole and absolute owner thereof (and each Obligor agrees to take all
such action as may be appropriate to give effect to such right);
(d) the Agent in its discretion may, in its name or in the name of
the Obligors or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(e) the Agent may, upon ten business days' prior written notice to
the Obligors of the time and place, with respect to the Collateral or any
part thereof that shall then be or shall thereafter come into the
possession, custody or control of the Agent, the Banks or any of their
respective agents, sell, lease, assign or otherwise dispose of all or any
part of such Collateral, at such place or places as the Agent deems best,
and for cash or for credit or for future delivery (without thereby assuming
any credit risk), at public or private sale, without demand of performance
or notice of intention to effect any such disposition or of the time or
place thereof (except such notice as is required above or by applicable
statute and cannot be waived), and the Agent or any Bank or anyone else may
be the purchaser, lessee, assignee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent permitted
by law, at any private sale) and thereafter hold the same absolutely, free
from any claim or right of whatsoever kind, including any right or equity
of redemption (statutory or otherwise), of the Obligors, any such demand,
notice and right or equity being hereby expressly waived and released. The
Agent may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at
the time and place fixed for the sale, and such sale may be made at any
time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this
Section 5.04 shall be applied in accordance with Section 5.08 hereof.
The Obligors recognize that, by reason of certain
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Page 9
prohibitions contained in the Securities Act of 1933, as amended, and
applicable state securities laws, the Agent may be compelled, with respect
to any sale of all or any part of the Collateral, to limit purchasers to
those who will agree, among other things, to acquire the Collateral for
their own account, for investment and not with a view to the distribution
or resale thereof. The Obligors acknowledge that any such private sales
may be at prices and on terms less favorable to the Agent than those
obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agree that any such private sale shall
be deemed to have been made in a commercially reasonable manner and that
the Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Collateral for the period of time
necessary to permit the issuer thereof to register it for public sale.
5.05 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.04 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Obligors shall remain liable for any
deficiency.
5.06 REMOVALS, ETC. Without at least 30 days' prior written notice
to the Agent, no Obligor shall (i) maintain any of its books and records with
respect to the Collateral at any office or maintain its principal place of
business at any place, other than at the address indicated beneath the signature
of the Company to the Second Amended and Restated Credit Agreement or at one of
the locations identified in Annex 1 hereto under its name or in transit from one
of such locations to another or (ii) change its name, or the name under which it
does business, from the name shown on the signature pages hereto.
5.07 PRIVATE SALE. The Agent and the Banks shall incur no liability
as a result of the sale of the Collateral, or any part thereof, at any private
sale pursuant to Section 5.04 hereof conducted in a commercially reasonable
manner. Each Obligor hereby waives any claims against the Agent or any Bank
arising by reason of the fact that the price at which the Collateral may have
been sold at such a private sale was less than the price that might have been
obtained at a public sale or was less than the aggregate amount of the Secured
Obligations, even if the Agent accepts the first offer received and does not
offer the Collateral to more than one offeree.
5.08 APPLICATION OF PROCEEDS. Except as otherwise herein expressly
provided and except as provided below in this Section 5.08, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Agent under
Section 4 hereof or this Section 5, shall be applied by the Agent:
<PAGE>
Page 10
FIRST, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Agent and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by the Agent in connection
therewith;
NEXT, to the payment in full of the Secured Obligations, in each case
equally and ratably in accordance with the respective amounts thereof then
due and owing or as the Banks holding the same may otherwise agree; and
FINALLY, after payment in full of all of the Secured Obligations and
the termination of the Commitments to the payment to the respective
Obligor, or their respective successors or assigns, or as a court of
competent jurisdiction may direct, of any surplus then remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.04 hereof shall be applied FIRST to the Letter of Credit
Liabilities outstanding from time to time and SECOND to the other Secured
Obligations in the manner provided above in this Section 5.08.
As used in this Section 5, "PROCEEDS" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Obligors or any issuer of or obligor on
any of the Collateral.
5.09 ATTORNEY-IN-FACT. Without limiting any rights or powers granted
by this Agreement to the Agent while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Agent is hereby appointed the attorney-in-fact of each Obligor for
the purpose of carrying out the provisions of this Section 5 and taking any
action and executing any instruments that the Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, so long as the Agent shall be entitled under
this Section 5 to make collections in respect of the Collateral, the Agent shall
have the right and power to receive, endorse and collect all checks made payable
to the order of any Obligor representing any dividend, payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
5.10 PERFECTION. Prior to or concurrently with the execution and
delivery of this Agreement, each Obligor shall file such financing statements
and other documents in such offices as
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the Agent may request to perfect the security interests granted by Section 3 of
this Agreement.
5.11 TERMINATION. When all Secured Obligations shall have been paid
in full and the Commitments of the Banks under the Second Amended and Restated
Credit Agreement and all Letter of Credit Liabilities shall have expired or been
terminated, this Agreement shall terminate, and the Agent shall forthwith cause
to be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect thereof, to or on the order of the respective Obligor.
The Agent shall also execute and deliver to the respective Obligor upon such
termination such Uniform Commercial Code termination statements and such other
documentation as shall be reasonably requested by the respective Obligor to
effect the termination and release of the Liens on the Collateral.
5.12 FURTHER ASSURANCES. Each Obligor agrees that, from time to time
upon the written request of the Agent, such Obligor will execute and deliver
such further documents and do such other acts and things as the Agent may
reasonably request in order fully to effect the purposes of this Agreement.
Section 6. MISCELLANEOUS.
6.01 NO WAIVER. No failure on the part of the Agent or any Bank to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Agent or any Bank of any right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein are
cumulative and are not exclusive of any remedies provided by law.
6.02 NOTICES. All notices, requests, consents and demands hereunder
shall be in writing and telexed, telecopied or delivered to the intended
recipient at its "Address for Notices" specified pursuant to Section 12.02 of
the Second Amended and Restated Credit Agreement and shall be deemed to have
been given at the times specified in said Section 12.02.
6.03 EXPENSES. The Obligors jointly and severally agree to reimburse
each of the Banks and the Agent for all reasonable costs and expenses of the
Banks and the Agent (including, without limitation, the reasonable fees and
expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (w)
performance by the Agent of any obligations of the Obligors in respect of the
Collateral that the
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Obligors have failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Agent in respect
thereof, by litigation or otherwise, including expenses of insurance, (y)
judicial or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 6.03, and all such costs and expenses shall be Secured Obligations
entitled to the benefits of the collateral security provided pursuant to
Section 3 hereof.
6.04 AMENDMENTS, ETC. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by each
Obligor and the Agent (with the consent of the Banks as specified in Section
12.04 of the Second Amended and Restated Credit Agreement). Any such amendment
or waiver shall be binding upon the Agent and each Bank, each holder of any of
the Secured Obligations and each Obligor.
6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of each
Obligor, the Agent, the Banks and each holder of any of the Secured Obligations
(PROVIDED, however, that no Obligor shall assign or transfer its rights
hereunder without the prior written consent of the Agent).
6.06 CAPTIONS. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
6.07 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.08 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
6.09 AGENTS AND ATTORNEYS-IN-FACT. The Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.
6.10 INCONSISTENT PROVISIONS. In the event of any inconsistency
between the provisions of this Agreement and the provisions of the Second
Amended and Restated Credit Agreement,
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the provisions set forth in the Second Amended and Restated Credit Agreement
shall control.
6.11 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Agent and the
Banks in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the day and year first above
written.
FOREST OIL CORPORATION
By
-------------------------
Title:
THE CHASE MANHATTAN BANK,
as Agent
By
-------------------------
Title:
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Page 15
ANNEX 1
LIST OF LOCATIONS
[See Section 5.06]
[Complete for each Obligor:]
[NAME OF OBLIGOR]
<PAGE>
Page 16
EXHIBIT C-1
[Form of Opinion of Vinson & Elkins LLP]
January __, 1997
To the Banks party to the
Second Amended and Restated Credit
Agreement referred to
below and The Chase
Manhattan Bank, as Agent
Ladies and Gentlemen:
We have acted as counsel to Forest Oil Corporation (the "COMPANY") in
connection with the Second Amended and Restated Credit Agreement (the "SECOND
AMENDED AND RESTATED CREDIT AGREEMENT") dated as of January __, 1997, between
the Company, the lenders named therein (the "BANKS") and THE CHASE MANHATTAN
BANK, as agent for the Banks, providing for extensions of credit to be made by
said lenders to the Company in an aggregate amount not exceeding $100,000,000.
Terms defined in the Second Amended and Restated Credit Agreement are used
herein as defined therein.
In rendering the opinion expressed below, we have examined the
originals or conformed copies of such corporate records, agreements and
instruments of the Obligors, certificates of public officials and of officers of
the Obligors, and such other documents and records, and such matters of law, as
we have deemed appropriate as a basis for the opinions hereinafter expressed.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of New York has the
necessary corporate power to make and perform the Second Amended and
Restated Credit Agreement and the Notes and the other Basic Documents and
to borrow under the Credit Agreement. Each Subsidiary (1) of the Company
is a corporation duly incorporated, validly existing and in good standing
under the laws of the respective state indicated opposite its name in
Schedule III to the Second Amended and Restated Credit Agreement. The
Company is duly qualified to transact business in the States of Colorado,
Louisiana, Oklahoma, Texas and Wyoming and, to our knowledge, the Company
is duly qualified to transact business in such other jurisdictions, and the
Subsidiaries of the Company are duly qualified to transact business in
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all such jurisdictions, where failure so to qualify would have a material
adverse effect on the consolidated financial condition, operations,
business or prospects taken as a whole of the Company and its Consolidated
Subsidiaries.
2. The making and performance by the Company of the Second Amended
and Restated Credit Agreement and the other Basic Documents including the
Notes and the borrowings by the Company under the Second Amended and
Restated Credit Agreement have been duly authorized by all necessary
corporate action, and do not and will not violate any provision of law or
regulation or any provision of the charter or by-laws of the Company or any
Subsidiary of the Company or result in the breach of, or constitute a
default or require any consent under, or (except for the Liens created
pursuant to the Security Documents) result in the creation of any Lien upon
any of the Properties, revenues or assets of the Company or any Subsidiary
of the Company pursuant to certain material documents to be specified.
3. The Second Amended and Restated Credit Agreement, the Notes and
the Security Agreement constitute legal, valid and binding obligations of
the Company enforceable in accordance with their respective terms, except
as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), and except that no opinion
is expressed as to Section 4.07(c) of the Second Amended and Restated
Credit Agreement.
We express no opinion as to (i) whether a Federal or state court
outside of the State of New York would give effect to the choice of New
York law provided for in the Second Amended and Restated Credit Agreement
and the Notes and in the other Basic Documents, (ii) the second sentence of
Section 12.11 of the Amended and Restated Credit Agreement, insofar as such
sentences relate to the subject matter jurisdiction of the United States
District Court for the Southern District of New York to adjudicate any
controversy related to the Second Amended and Restated Credit Agreement or
the Notes or (iii) the waiver of inconvenient forum set forth in
Section 12.12 of the Second Amended and Restated Credit Agreement with
respect to proceedings in the United States District Court for the Southern
District of New York. We also wish to point out that the obligations of
the Company under the Second Amended and Restated Security Agreement may be
subject to possible limitations upon the exercise of remedial or procedural
provisions contained in the Second Amended and Restated Security Agreement,
PROVIDED that such limitations do not,
<PAGE>
Page 18
in our opinion, make the remedies and procedures which will be afforded to
the Agent and the Banks inadequate for the practical realization of the
substantive benefits purported to be provided to the Agent and the Banks by
the Second Amended and Restated Security Agreement. Finally, we wish to
point out that provisions of the Basic Documents which permit the Agent or
any Bank to take action or make determinations, or to benefit from
indemnities and similar undertakings of the Company, may be subject to a
requirement that such action be taken or such determinations be made, and
that any action or inaction by the Agent or any Bank which may give rise to
a request for payment under such an undertaking be taken or not taken, on a
reasonable basis and in good faith.
4. There are no legal or arbitral proceedings, and no proceedings by
or before any governmental or regulatory authority or agency, pending or
(to our knowledge) threatened against or affecting the Company or any of
its Subsidiaries, or any Properties or rights of any of the Company or any
of its Subsidiaries, which, if adversely determined, would have a Material
Adverse Effect.
5. No authorizations, consents, approvals, licenses, filings or
registrations with, any governmental or regulatory authority or agency are
required in connection with the execution, delivery or performance by the
Company of the Basic Documents, except the filings and recordings of Liens
to be created pursuant to the Security Documents.
6. The Security Agreement is effective to create, in favor of the
Agent for the benefit of the Banks thereunder, a valid security interest
(to the extent that Article 9 of the Uniform Commercial Code is applicable
thereto) in the right, title and interest of the Company in the Collateral
(as defined in the Security Agreement), as collateral security for the
payment of the Secured Obligations (as so defined), except that the
security interest in Collateral in which the Company acquires rights after
the commencement of a case against it under the Bankruptcy Code will be
limited by Section 552 of the Bankruptcy Code. By virtue of the filings
described in Annex 1 attached hereto, all such security interests which can
be perfected by a Uniform Commercial Code filing in the United States of
America will have been, upon such filings being completed, so perfected.
We express no opinion as to the right, title or interest of the Company in
any of the Collateral.
Very truly yours,
<PAGE>
Page 19
EXHIBIT C-2
[Form of Opinion of Corporate Counsel
of the Obligors]
<PAGE>
Page 20
EXHIBIT D
[Form of Opinion of Special Counsel to Chase]
________, 1995
Each of the Banks party
to the Credit Agreement
referred to below
The Chase Manhattan Bank,
as Agent
for said Banks
1 Chase Manhattan Plaza
New York, New York 10081
Ladies and Gentlemen:
We have acted as special New York counsel to The Chase Manhattan Bank
("CHASE") in connection with (i) the Second Amended and Restated Credit
Agreement (the "CREDIT AGREEMENT") dated as of January ___, 1997, between Forest
Oil Company (the "COMPANY"), the Subsidiary Guarantors party thereto, the
lenders party thereto (the "BANKS") and Chase, in its capacity as agent for the
Banks (the "AGENT"), providing for, among other things, loans to be made by the
Banks to the Company in an aggregate principal amount not exceeding $100,000,000
and (ii) the various other agreements, instruments and other documents referred
to in the next following paragraph. All capitalized terms used but not defined
herein have the respective meanings given to such terms in the Credit Agreement.
This opinion letter is being delivered pursuant to Section 7.01(d) of the Credit
Agreement.
In rendering the opinions expressed below, we have examined the
following (collectively referred to as the "DOCUMENTS"):
(a) the Credit Agreement;
(b) the Notes being delivered concurrently with the delivery of this
opinion; and
(c) the Security Agreement.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity with authentic original documents of all documents submitted to us as
copies.
<PAGE>
Page 21
In rendering the opinions expressed below, we have assumed, with
respect to all of the documents referred to in this opinion letter, that:
(i) such documents have been duly authorized by, have been duly
executed and delivered by, and (except, to the extent set forth
in the opinions expressed below, as to the Obligors) constitute
legal, valid, binding and enforceable obligations of, all of the
parties to such documents;
(ii) all signatories to such documents have been duly authorized; and
(iii) all of the parties to such documents are duly organized and
validly existing and have the power and authority (corporate,
partnership or other) to execute, deliver and perform such
documents.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. Each Document constitutes the legal, valid and binding obligation
of each Obligor party thereto, enforceable against each Obligor party
thereto in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or transfer or other similar laws relating to or affecting the rights of
creditors generally and except as the enforceability of the Documents is
subject to the application of general principles of equity (regardless of
whether considered in a proceeding in equity or at law), including, without
limitation, (a) the possible unavailability of specific performance,
injunctive relief or any other equitable remedy and (b) concepts of
materiality, reasonableness, good faith and fair dealing.
2. The Security Agreement is effective to create, in favor of the
Agent for the benefit of the Agent and the Banks, a valid security interest
under the Uniform Commercial Code as in effect in the State of New York
(the "UCC") in all of the right, title and interest of the Obligors in, to
and under the Collateral as collateral security for the payment when due of
the Secured Obligations, except that:
(a) such security interest will continue in Collateral after its
sale, exchange or other
<PAGE>
Page 22
disposition and in any Proceeds thereof only to the extent provided in
Sections 9-306 and 9-307 and 9-308 of the UCC;
(b) such security interest in any portion of the Collateral in
which an Obligor acquires rights after the commencement of a case
under the Bankruptcy Code in respect of such Obligor may be limited by
Section 552 of the Bankruptcy Code; and
(c) the creation of a security interest in any portion of the
Collateral constituting an Investment Security requires the transfer
thereof to the Agent pursuant to Section 8-313(1) of the UCC.
The foregoing opinions are subject to the following comments and
qualifications:
(A) The enforceability of Section 12.03 of the Credit Agreement (and
any similar provisions in any of the other Documents) may be limited by
laws limiting the enforceability of provisions exculpating or exempting a
party from, or requiring indemnification of a party for, its own action or
inaction, to the extent such action or inaction involves gross negligence,
recklessness or wilful or unlawful conduct.
(B) Clause (iii) of the second sentence of Section 6.02 of the Credit
Agreement may not be enforceable to the extent that the Guaranteed
Obligations are materially modified.
(C) The enforceability of provisions in the Documents to the effect
that terms may not be waived or modified except in writing may be limited
under certain circumstances.
(D) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Bank is located (other than the State of New
York) that limit the interest, fees or other charges such Bank may impose
for the loan or use of money or other credit, (ii) Section 4.07(c) of the
Credit Agreement, (iii) Sections 6.06 and 6.09 of the Credit Agreement,
(iv) the second sentence of Section 12.10 of the Credit Agreement (and any
similar provisions in any of the other Documents), insofar as such sentence
relates to the subject matter jurisdiction of the United States District
Court for the Southern District of New York to adjudicate any controversy
related to the Document and (v) the waiver of inconvenient forum set forth
in Section 12.10 of the Credit Agreement (and any similar provisions in any
of the other Documents) with respect to proceedings in the United States
District Court for the Southern District of New York.
<PAGE>
Page 23
(E) We express no opinion as to the applicability to the obligations
of any Subsidiary Guarantor (or the enforceability of such obligations) of
Section 548 of the Bankruptcy Code, Article 10 of the New York Debtor and
Creditor Law or any other provision of law relating to fraudulent
conveyances, transfers or obligations.
(F) We wish to point out that the obligations of the Obligors, and
the rights and remedies of the Agent, under the Security Agreement and the
Mortgages may be subject to possible limitations upon the exercise of
remedial or procedural provisions contained therein, provided that such
limitations do not, in our opinion (but subject to the other comments and
qualifications set forth in this opinion letter), make the remedies and
procedures that will be afforded to the Agent and the Banks inadequate for
the practical realization of the substantive benefits purported to be
provided to the Agent and the Banks thereby.
(G) With respect to our opinions in paragraph 2 above, we express no
opinion as to the creation of any security interest in (or other lien on)
any portion of the Collateral (i) to the extent that, pursuant to
Section 9-104 of the UCC, Article 9 of the UCC does not apply thereto or
(ii) consisting of Uncertificated Securities issued by a corporation
organized under any laws other than the laws of the State of New York.
(H) We express no opinion as to the existence of, or the right, title
or interest of any Obligor in, to or under, any of the Collateral.
(I) Except as expressly provided in paragraph 2 above, we express no
opinion as to the creation, perfection or priority of any security interest
in, or other lien on, the Collateral.
The foregoing opinions are limited to matters involving the Federal
laws of the United States of America and the law of the State of New York, and
we do not express any opinion as to the laws of any other jurisdiction.
At the request of our clients, this opinion letter is provided to you
by us in our capacity as special New York counsel to Chase, and this opinion
letter may not be relied upon by any Person for any purpose other than in
connection with the transactions contemplated by the Credit Agreement without,
in each instance, our prior written consent.
Very truly yours,
<PAGE>
Page 24
JRR/TDB
<PAGE>
Page 25
EXHIBIT E
[Form of Mortgage]
<PAGE>
Page 26
EXHIBIT F
[Form of Pledge Agreement]
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of ________ __, 1997 between FOREST OIL
CORPORATION, a corporation duly organized and validly existing under the laws of
the State of New York (the "COMPANY"); each of the Subsidiaries of the Company
identified under the captions "SUBSIDIARY PLEDGORS" on the signature pages
hereof (individually, a "SUBSIDIARY PLEDGOR" and, collectively, the "SUBSIDIARY
PLEDGORS" and, together with the Company, the "PLEDGORS"); and THE CHASE
MANHATTAN BANK, as agent for the lenders or other financial institutions or
entities party, as lenders, to the Credit Agreement referred to below (in such
capacity, together with its successors in such capacity, the "AGENT").
The Company, certain Subsidiary Guarantors, certain lenders and the
Agent are parties to a Second Amended and Restated Credit Agreement dated as of
January __, 1997 (as modified and supplemented and in effect from time to time,
the "SECOND AMENDED AND RESTATED CREDIT AGREEMENT"), providing, subject to the
terms and conditions thereof, for extensions of credit (by making of loans and
issuing of letters of credit) to be made by said lenders to the Company in an
aggregate principal or face amount not exceeding $100,000,000.
To induce said lenders to enter into the Second Amended and Restated
Credit Agreement and to extend credit thereunder, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Pledgor has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined) as security for the Secured Obligations
(as so defined). Accordingly, the parties hereto agree as follows:
Section 1. DEFINITIONS. Terms defined in the Second Amended and
Restated Credit Agreement are used herein as defined therein. In addition, as
used herein:
"COLLATERAL" shall have the meaning ascribed thereto in Section 3
hereof.
"COLLATERAL ACCOUNT" shall have the meaning ascribed thereto in
Section 4.01 hereof.
"ISSUERS" shall mean, collectively, the respective corporations
identified beneath the names of the Pledgors on
<PAGE>
Page 27
Annex 1 hereto under the caption "ISSUER".
"PLEDGED STOCK" shall have the meaning ascribed thereto in
Section 3(a) hereof.
"SECURED OBLIGATIONS" shall mean, collectively, (a) the principal of
and interest on the Loans made by the Banks to, and the Note(s) held by
each Bank of, the Company and all other amounts from time to time owing to
the Banks or the Agent by the Pledgors under the Basic Documents including,
without limitation, all Reimbursement Obligations and interest thereon,
(b) all obligations of the Subsidiary Guarantors under the Second Amended
and Restated Credit Agreement and the other Basic Documents (c) all
obligations of the Obligors to the Banks under any Commodity Hedging
Agreements or Interest Rate Protection Agreements and (d) all obligations
of the Pledgors to the Banks and the Agent hereunder.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect from time to time in the State of New York.
Section 2. REPRESENTATIONS AND WARRANTIES. Each Pledgor represents
and warrants to the Banks and the Agent that:
(a) Such Pledgor is the sole beneficial owner of the Collateral in
which it purports to grant a security interest pursuant to Section 3 hereof
and no Lien exists or will exist upon such Collateral at any time (and no
right or option to acquire the same exists in favor of any other Person),
except for Liens permitted under Section 9.06 of the Second Amended and
Restated Credit Agreement and except for the pledge and security interest
in favor of the Agent for the benefit of the Banks created or provided for
herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of such Collateral.
(b) The Pledged Stock represented by the certificates identified
under the name of such Pledgor in Annex 1 hereto is, and all other Pledged
Stock in which such Pledgor shall hereafter grant a security interest
pursuant to Section 3 hereof will be, duly authorized, validly existing,
fully paid and non-assessable and none of such Pledged Stock is or will be
subject to any contractual restriction, or any restriction under the
charter or by-laws of the respective Issuer of such Pledged Stock, upon the
transfer of such Pledged Stock (except for any such restriction contained
herein or in the Second Amended and Restated Credit Agreement).
<PAGE>
Page 28
(c) The Pledged Stock represented by the certificates identified
under the name of such Pledgor in Annex 1 hereto constitutes all of the
issued and outstanding shares of capital stock of any class of the Issuers
beneficially owned by such Pledgor on the date hereof (whether or not
registered in the name of such Pledgor) and said Annex 1 correctly
identifies, as at the date hereof, the respective Issuers of such Pledged
Stock, the respective class and par value of the shares comprising such
Pledged Stock and the respective number of shares (and registered owners
thereof) represented by each such certificate.
Section 3. THE PLEDGE. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, each Pledgor hereby pledges and grants to the Agent,
for the benefit of the Banks as hereinafter provided, a security interest in all
of such Pledgor's right, title and interest in the following property, whether
now owned by such Pledgor or hereafter acquired and whether now existing or
hereafter coming into existence (all being collectively referred to herein as
"COLLATERAL"):
(a) the shares of [common/preferred] stock of the Issuers represented
by the certificates identified in Annex 1 hereto under the name of such
Pledgor and all other shares of capital stock of whatever class of the
Issuers, now or hereafter owned by such Pledgor, in each case together with
the certificates evidencing the same (collectively, the "PLEDGED STOCK");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of such Pledgor under any
provision prohibiting such action hereunder or under the Second Amended and
Restated Credit Agreement, in the event of any consolidation or merger in
which an Issuer is not the surviving corporation, all shares of each class
of the capital stock of the successor corporation (unless such successor
corporation is such Pledgor itself) formed by or resulting from such
consolidation or merger;
(d) the balance from time to time in the Collateral Account; and
<PAGE>
Page 29
(e) all proceeds of and to any of the property of such Pledgor
described in the preceding clauses of this Section 3 (including, without
limitation, all causes of action, claims and warranties now or hereafter
held by any Pledgor in respect of any of the items listed above) and, to
the extent related to any property described in said clauses or such
proceeds, all books, correspondence, credit files, records, invoices and
other papers.
Section 4. CASH PROCEEDS OF COLLATERAL.
4.01 COLLATERAL ACCOUNT. There was previously established with the
Agent a cash collateral account (the "COLLATERAL ACCOUNT") in the name and under
the control of the Agent into which there shall be deposited from time to time
the cash proceeds of any of the Collateral required to be delivered to the Agent
pursuant hereto and into which the Pledgors may from time to time deposit any
additional amounts that any of them wishes to pledge to the Agent for the
benefit of the Banks as additional collateral security hereunder. The balance
from time to time in the Collateral Account shall constitute part of the
Collateral hereunder and shall not constitute payment of the Secured Obligations
until applied as hereinafter provided. Except as expressly provided in the next
sentence, the Agent shall remit the collected balance outstanding to the credit
of the Collateral Account to or upon the order of the respective Pledgor as such
Pledgor through the Company shall from time to time instruct. However, at any
time following the occurrence and during the continuance of an Event of Default,
the Agent may (and, if instructed by the Banks as specified in Section 11.03 of
the Second Amended and Restated Credit Agreement, shall) in its (or their)
discretion apply or cause to be applied (subject to collection) the balance from
time to time outstanding to the credit of the Collateral Account to the payment
of the Secured Obligations in the manner specified in Section 5.09 hereof. The
balance from time to time in the Collateral Account shall be subject to
withdrawal only as provided herein. In addition to the foregoing, each Pledgor
agrees that if the proceeds of any Collateral hereunder shall be received by it,
such Pledgor shall as promptly as possible deposit such proceeds into the
Collateral Account. Until so deposited, all such proceeds shall be held in
trust by such Pledgor for and as the property of the Agent and shall not be
commingled with any other funds or property of such Pledgor.
4.02 INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. Amounts on deposit
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the respective Pledgor through the Company (or, after the
occurrence and during the continuance of a Default, the Agent) shall determine,
which Permitted Investments shall be held in the name and be under the control
of the Agent, PROVIDED that (i) at any time after the
<PAGE>
Page 30
occurrence and during the continuance of an Event of Default, the Agent may
(and, if instructed by the Banks as specified in Section 11.03 of the Second
Amended and Restated Credit Agreement, shall) in its (or their) discretion at
any time and from time to time elect to liquidate any such Permitted Investments
and to apply or cause to be applied the proceeds thereof to the payment of the
Secured Obligations in the manner specified in Section 5.09 hereof and (ii) if
requested by the respective Pledgor through the Company, such Permitted
Investments may be held in the name and under the control of one or more of the
Banks (and in that connection each Bank, pursuant to Section 11.10 of the Second
Amended and Restated Credit Agreement) has agreed that such Permitted
Investments shall be held by such Bank as a collateral sub-agent for the Agent
hereunder).
4.03 COVER FOR LETTER OF CREDIT LIABILITIES. Amounts deposited into
the Collateral Account as cover for Letter of Credit Liabilities under the
Second Amended and Restated Credit Agreement pursuant to Section 2.10(e) and
Section 10 thereof shall be held by the Agent in a separate sub-account
(designated "Letter of Credit Liabilities Sub-Account") and all amounts held in
such sub-account shall constitute collateral security FIRST for the Letter of
Credit Liabilities outstanding from time to time and SECOND as collateral
security for the other Secured Obligations hereunder.
Section 5. FURTHER ASSURANCES; REMEDIES. In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof, the Pledgors
hereby jointly and severally agree with each Bank and the Agent as follows:
5.01 DELIVERY AND OTHER PERFECTION. Each Pledgor shall:
(a) if any of the shares, securities, moneys or property required to
be pledged by such Pledgor under clauses (a), (b) and (c) of Section 3
hereof are received by such Pledgor, forthwith either (x) transfer and
deliver to the Agent such shares or securities so received by such Pledgor
(together with the certificates for any such shares and securities duly
endorsed in blank or accompanied by undated stock powers duly executed in
blank), all of which thereafter shall be held by the Agent, pursuant to the
terms of this Agreement, as part of the Collateral or (y) take such other
action as the Agent shall deem necessary or appropriate to duly record the
Lien created hereunder in such shares, securities, moneys or property in
said clauses (a), (b) and (c);
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement
<PAGE>
Page 31
or other papers that may be necessary or desirable (in the judgment of the
Agent) to create, preserve, perfect or validate the security interest
granted pursuant hereto or to enable the Agent to exercise and enforce its
rights hereunder with respect to such pledge and security interest,
including, without limitation, causing any or all of the Collateral to be
transferred of record into the name of the Agent or its nominee (and the
Agent agrees that if any Collateral is transferred into its name or the
name of its nominee, the Agent will thereafter promptly give to the
respective Pledgor copies of any notices and communications received by it
with respect to the Collateral pledged by such Pledgor hereunder);
(c) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Agent may reasonably require in order to reflect the security
interests granted by this Agreement; and
(d) permit representatives of the Agent, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from
its books and records pertaining to the Collateral, and permit
representatives of the Agent to be present at such Pledgor's place of
business to receive copies of all communications and remittances relating
to the Collateral, and forward copies of any notices or communications
received by such Pledgor with respect to the Collateral, all in such manner
as the Agent may require.
5.02 OTHER FINANCING STATEMENTS AND LIENS. Except as otherwise
permitted under Section 9.06 of the Second Amended and Restated Credit
Agreement, without the prior written consent of the Agent (granted with the
authorization of the Banks as specified in Section 11.09 of the Second Amended
and Restated Credit Agreement), no Pledgor shall file or suffer to be on file,
or authorize or permit to be filed or to be on file, in any jurisdiction, any
financing statement or like instrument with respect to the Collateral in which
the Agent is not named as the sole secured party for the benefit of the Banks.
5.03 PRESERVATION OF RIGHTS. The Agent shall not be required to take
steps necessary to preserve any rights against prior parties to any of the
Collateral.
5.04 COLLATERAL.
(1) The Pledgors will cause the Collateral to constitute at all times
[100%] of the total number of shares of each class of capital stock of each
Issuer then outstanding.
(2) So long as no Event of Default shall have occurred
<PAGE>
Page 32
and be continuing, the Pledgors shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral for all
purposes not inconsistent with the terms of this Agreement, the Second Amended
and Restated Credit Agreement, the Notes or any other instrument or agreement
referred to herein or therein, PROVIDED that the Pledgors jointly and severally
agree that they will not vote the Collateral in any manner that is inconsistent
with the terms of this Agreement, the Second Amended and Restated Credit
Agreement, the Notes or any such other instrument or agreement; and the Agent
shall execute and deliver to the Pledgors or cause to be executed and delivered
to the Pledgors all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as the Pledgors may reasonably
request for the purpose of enabling the Pledgors to exercise the rights and
powers that they are entitled to exercise pursuant to this Section 5.04(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Pledgors shall be entitled to receive and retain any dividends
on the Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Agent or any Bank
exercises any available right to declare any Secured Obligation due and payable
or seeks or pursues any other relief or remedy available to it under applicable
law or under this Agreement, the Second Amended and Restated Credit Agreement,
the Notes or any other agreement relating to such Secured Obligation, all
dividends and other distributions on the Collateral shall be paid directly to
the Agent and retained by it in the Collateral Account as part of the
Collateral, subject to the terms of this Agreement, and, if the Agent shall so
request in writing, the Pledgors jointly and severally agree to execute and
deliver to the Agent appropriate additional dividend, distribution and other
orders and documents to that end, PROVIDED that if such Event of Default is
cured, any such dividend or distribution theretofore paid to the Agent shall,
upon request of the Pledgors (except to the extent theretofore applied to the
Secured Obligations), be returned by the Agent to the Pledgors.
5.05 EVENTS OF DEFAULT, ETC. During the period during which an Event
of Default shall have occurred and be continuing:
(a) the Agent shall have all of the rights and remedies with respect
to the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights
and remedies are asserted) and such additional rights and remedies to which
a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including, without
limitation,
<PAGE>
Page 33
the right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral as if
the Agent were the sole and absolute owner thereof (and each Pledgor agrees
to take all such action as may be appropriate to give effect to such
right);
(b) the Agent in its discretion may, in its name or in the name of
the Pledgors or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(c) the Agent may, upon ten business days' prior written notice to
the Pledgors of the time and place, with respect to the Collateral or any
part thereof that shall then be or shall thereafter come into the
possession, custody or control of the Agent, the Banks or any of their
respective agents, sell, lease, assign or otherwise dispose of all or any
part of such Collateral, at such place or places as the Agent deems best,
and for cash or for credit or for future delivery (without thereby assuming
any credit risk), at public or private sale, without demand of performance
or notice of intention to effect any such disposition or of the time or
place thereof (except such notice as is required above or by applicable
statute and cannot be waived), and the Agent or any Bank or anyone else may
be the purchaser, lessee, assignee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent permitted
by law, at any private sale) and thereafter hold the same absolutely, free
from any claim or right of whatsoever kind, including any right or equity
of redemption (statutory or otherwise), of the Pledgors, any such demand,
notice and right or equity being hereby expressly waived and released. The
Agent may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at
the time and place fixed for the sale, and such sale may be made at any
time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this
Section 5.05 shall be applied in accordance with Section 5.09 hereof.
The Pledgors recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Agent may be compelled, with respect to any sale of all or
any part of the Collateral, to limit purchasers to those who will agree, among
other things, to acquire the Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. The Pledgors
acknowledge that any such private sales may be at prices
<PAGE>
Page 34
and on terms less favorable to the Agent than those obtainable through a public
sale without such restrictions, and, notwithstanding such circumstances, agree
that any such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Agent shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the respective Issuer or issuer thereof to
register it for public sale.
5.06 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Pledgors shall remain liable for any
deficiency.
5.07 REMOVALS, ETC. Without at least 30 days' prior written notice
to the Agent, no Pledgor shall (i) maintain any of its books and records with
respect to the Collateral at any office or maintain its principal place of
business at any place other than at the address indicated beneath the signature
of the Company to the Second Amended and Restated Credit Agreement or
(ii) change its name, or the name under which it does business, from the name
shown on the signature pages hereto.
5.08 PRIVATE SALE. The Agent and the Banks shall incur no liability
as a result of the sale of the Collateral, or any part thereof, at any private
sale pursuant to Section 5.05 hereof conducted in a commercially reasonable
manner. Each Pledgor hereby waives any claims against the Agent or any Bank
arising by reason of the fact that the price at which the Collateral may have
been sold at such a private sale was less than the price that might have been
obtained at a public sale or was less than the aggregate amount of the Secured
Obligations, even if the Agent accepts the first offer received and does not
offer the Collateral to more than one offeree.
5.09 APPLICATION OF PROCEEDS. Except as otherwise herein expressly
provided and except as provided below in this Section 5.09, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Agent under
Section 4 hereof or this Section 5, shall be applied by the Agent:
FIRST, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Agent and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by the Agent in connection
therewith;
NEXT, to the payment in full of the Secured
<PAGE>
Page 35
Obligations, in each case equally and ratably in accordance with the respective
amounts thereof then due and owing or as the Banks holding the same may
otherwise agree; and
FINALLY, to the payment to the respective Pledgor, or their respective
successors or assigns, or as a court of competent jurisdiction may direct,
of any surplus then remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.03 hereof shall be applied FIRST to the Letter of Credit
Liabilities outstanding from time to time and SECOND to the other Secured
Obligations in the manner provided above in this Section 5.09.
As used in this Section 5, "PROCEEDS" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Pledgors or any issuer of or obligor on
any of the Collateral.
5.10 ATTORNEY-IN-FACT. Without limiting any rights or powers granted
by this Agreement to the Agent while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Agent is hereby appointed the attorney-in-fact of each Pledgor for
the purpose of carrying out the provisions of this Section 5 and taking any
action and executing any instruments that the Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, so long as the Agent shall be entitled under
this Section 5 to make collections in respect of the Collateral, the Agent shall
have the right and power to receive, endorse and collect all checks made payable
to the order of any Pledgor representing any dividend, payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
5.11 PERFECTION. Prior to or concurrently with the execution and
delivery of this Agreement, each Pledgor shall deliver to the Agent all
certificates identified in Annex 1 hereto, accompanied by undated stock powers
duly executed in blank.
5.12 TERMINATION. When all Secured Obligations shall have been paid
in full and the Commitments of the Banks under the Second Amended and Restated
Credit Agreement and all Letter of Credit Liabilities shall have expired or been
terminated, this Agreement shall terminate, and the Agent shall forthwith cause
to be assigned, transferred and delivered, against receipt but
<PAGE>
Page 36
without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect thereof, to or on the order of the
respective Pledgor.
5.13 FURTHER ASSURANCES. Each Pledgor agrees that, from time to time
upon the written request of the Agent, such Pledgor will execute and deliver
such further documents and do such other acts and things as the Agent may
reasonably request in order fully to effect the purposes of this Agreement.
Section 6. MISCELLANEOUS.
6.01 NO WAIVER. No failure on the part of the Agent or any Bank to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Agent or any Bank of any right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein are
cumulative and are not exclusive of any remedies provided by law.
6.02 NOTICES. All notices, requests, consents and demands hereunder
shall be in writing and telexed, telecopied or delivered to the intended
recipient at its "Address for Notices" specified pursuant to Section 12.02 of
the Second Amended and Restated Credit Agreement and shall be deemed to have
been given at the times specified in said Section 12.02.
6.03 EXPENSES. The Pledgors jointly and severally agree to reimburse
each of the Banks and the Agent for all reasonable costs and expenses of the
Banks and the Agent (including, without limitation, the reasonable fees and
expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (w)
performance by the Agent of any obligations of the Pledgors in respect of the
Collateral that the Pledgors have failed or refused to perform, (x) bankruptcy,
insolvency, receivership, foreclosure, winding up or liquidation proceedings, or
any actual or attempted sale, or any exchange, enforcement, collection,
compromise or settlement in respect of any of the Collateral, and for the care
of the Collateral and defending or asserting rights and claims of the Agent in
respect thereof, by litigation or otherwise, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or proceedings
(whether or not the workout, restructuring or transaction contemplated thereby
is consummated) and (ii) the enforcement of this Section 6.03, and all such
costs and expenses shall be Secured Obligations entitled to the benefits of the
collateral security provided pursuant to Section 3 hereof.
<PAGE>
Page 37
6.04 AMENDMENTS, ETC. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by each
Pledgor and the Agent (with the consent of the Banks as specified in Section
11.09 of the Second Amended and Restated Credit Agreement). Any such amendment
or waiver shall be binding upon the Agent and each Bank, each holder of any of
the Secured Obligations and each Pledgor.
6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of each
Pledgor, the Agent, the Banks and each holder of any of the Secured Obligations
(PROVIDED, however, that no Pledgor shall assign or transfer its rights
hereunder without the prior written consent of the Agent).
6.06 CAPTIONS. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
6.07 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.08 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
6.09 AGENTS AND ATTORNEYS-IN-FACT. The Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.
6.10 INCONSISTENT PROVISIONS. In the event of any inconsistency
between the provisions of this Agreement and the provisions of the Second
Amended and Restated Credit Agreement, the provisions set forth in the Second
Amended and Restated Credit Agreement shall control.
6.11 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Agent and the
Banks in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
<PAGE>
Page 38
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered as of the day and year first above
written.
FOREST OIL CORPORATION
By
-------------------------
Title:
SUBSIDIARY PLEDGORS
[SUBSIDIARY PLEDGOR]
By
-------------------------
Title:
[SUBSIDIARY PLEDGOR]
By
-------------------------
Title:
[SUBSIDIARY PLEDGOR]
By
-------------------------
Title:
THE CHASE MANHATTAN BANK,
as Agent
By
-------------------------
Title:
<PAGE>
Page 39
ANNEX 1
PLEDGED STOCK
[See Section 2(b) and (c)]
[Complete for each Pledgor:]
[NAME OF PLEDGOR]
Certificate Registered
ISSUER NOS. OWNER NUMBER OF SHARES
- ------ ----------- ---------- ----------------
[Issuer #1] _______ ________ _______ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #2] _______ ________ _______ shares of
[common/preferred]
stock, [no] par
value [$________]
[Issuer #3] _______ ________ _______ shares of
[common/preferred]
stock, [no] par
value [$________]
<PAGE>
Page 40
EXHIBIT G
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Second Amended and Restated Amended and Restated Credit Agreement
dated as of January __, 1997 (the "SECOND AMENDED AND RESTATED
CREDIT AGREEMENT"), between Forest Oil Corporation (the
"COMPANY"), the Subsidiary Guarantors, the lenders named therein
and The Chase Manhattan Bank, as Agent.
Dear Ladies and Gentlemen:
As a Bank party to the Second Amended and Restated Credit Agreement,
we have agreed with the Company pursuant to Section 12.13 of the Second Amended
and Restated Credit Agreement to use reasonable precautions to keep
confidential, except as otherwise provided therein, all non-public information
identified by the Company or any of its Subsidiaries as being confidential at
the time the same is delivered to us pursuant to the Second Amended and Restated
Credit Agreement.
As provided in said Section 12.13, we are permitted to provide you, as
a prospective [holder of a participation in the Loans (as defined in the Second
Amended and Restated Credit Agreement)][assignee Bank], with certain of such
non-public information subject to the execution and delivery by you, prior to
receiving such non-public information, of a Confidentiality Agreement in this
form. Such information will not be made available to you until your execution
and return to us of this Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf
of yourself and each of your affiliates, directors, officers, employees and
representatives) that (A) such information will not be used by you except in
connection with the proposed [participation][assignment] mentioned above and
(B) you shall use reasonable precautions, in accordance with your customary
procedures for handling confidential information and in
<PAGE>
Page 41
accordance with safe and sound banking practices, to keep such information
confidential, PROVIDED that nothing herein shall limit the disclosure of any
such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to your counsel or to counsel for any of the Banks or the
Agent, (iii) to bank examiners, auditors or accountants, (iv) to the Agent or
any other Bank, (v) in connection with any litigation to which you or any one or
more of the Banks or the Agent are a party, (vi) to a subsidiary or affiliate of
yours as provided in Section 12.13(a) of the Second Amended and Restated Credit
Agreement (provided that you shall not disclose any non-public information
delivered pursuant to this Confidentiality Agreement to any subsidiary of your
which is generally engaged in securities business other than in connection with
(x) Commodity Hedging Agreements or Interest Rate Protection Agreements
permitted pursuant to Section 9.08(f) of the Second Amended and Restated Credit
Agreement or (y) the syndication or participation of the Commitments, Loans or
Letter of Credit Interests under the Second Amended and Restated Credit
Agreement without the prior written consent of the Company) or (vii) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) first executes
and delivers to you a Confidentiality Agreement substantially in the form
hereof; PROVIDED, FURTHER, that (x) unless specifically prohibited by applicable
law or court order, you agree, prior to disclosure thereof, to notify the
Company of any request for disclosure of any such non-public information (A) by
any governmental agency or representative thereof (other than any such request
in connection with an examination of your financial condition by such
governmental agency) or (B) pursuant to legal process and (y) that in no event
shall you be obligated to return any materials furnished to you pursuant to this
Confidentiality Agreement.
Please indicate your agreement to the foregoing by signing as provided
below the enclosed copy of this Confidentiality Agreement and returning the same
to us.
Very truly yours,
[INSERT NAME OF BANK]
By
-------------------------
The foregoing is agreed to
as of the date of this letter.
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
<PAGE>
Page 42
By
-------------------------
<PAGE>
EXECUTION COPY
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of August 19, 1997 between CANADIAN FOREST
OIL LTD., a corporation duly amalgamated and validly existing under the laws of
Alberta, Canada ("CANADIAN FOREST"); PRODUCERS MARKETING LTD., an Alberta
corporation and a Wholly Owned Subsidiary of Canadian Forest ("PROMARK") and
each of the other Subsidiaries of Canadian Forest that becomes a borrower
pursuant to Section 8.27 of the Second Amended and Restated Credit Agreement
(individually a "SUBSIDIARY BORROWER" and collectively with Canadian Forest, the
"BORROWERS"); and 611852 SASKATCHEWAN LTD. (the "LENDER").
Canadian Forest, a Wholly Owned Subsidiary of 3189503, Promark and the
Lender are parties to a Second Amended and Restated Credit Agreement dated as of
April 1, 1997 (the "SECOND AMENDED AND RESTATED CREDIT AGREEMENT"), providing,
subject to the terms and conditions thereof, for extensions of credit (by making
of loans and issuing letters of credit) to be made by said Lender to the
Borrowers in an aggregate principal or face amount not exceeding C$80,000,000.
Canadian Forest and the Lender wish to increase the Commitment under the Second
Amended and Restated Credit Agreement from C$80,000,000 to C$165,000,000 or the
Equivalent Amount thereof in U.S. Dollars and amend the Second Amended and
Restated Credit Agreement in certain respects, and accordingly, the parties
hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 1, terms defined in the Second Amended and Restated Credit
Agreement are used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the conditions
precedent specified in Section 4 below, but effective as of the date hereof, the
Second Amended and Restated Credit Agreement shall be further amended as
follows:
2.01. References in the Second Amended and Restated Credit Agreement
(including references to the Second Amended and Restated Credit Agreement
amended hereby) to "this Agreement" (and indirect references such as
"hereunder", "hereby", "herein", and "hereof") shall be deemed to be references
to the Second Amended and Restated Credit Agreement as amended and as further
amended hereby.
2.02. The following definitions are hereby added in alphabetical
order in Section 1.01 of the Second Amended and Restated Credit Agreement:
"ALLOCATED CANADIAN BORROWING BASE" shall mean, as of any date, an
amount in Dollars designated as such from time to time by the Company pursuant
to Section 2.12 hereof.
"ALLOCATED U.S. BORROWING BASE" shall mean an amount equal to the
Borrowing
AMENDMENT NO. 1
<PAGE>
-2-
Base then in effect MINUS the Allocated Canadian Borrowing Base.
"AMENDMENT NO. 1" shall mean Amendment No. 1 dated as of August 19,
1997 to this Agreement.
"APPLICABLE COMMITMENT FEE RATE" shall mean for any period during
which the Usage Ratio is within the range specified under "Usage Ratio" in
Schedule IV to Amendment No. 1, the percentage per annum set forth opposite the
range in such Schedule IV.
"BORROWING BASE REPORTS" shall mean collectively, (i) U.S. Reserve
Evaluation Reports, (ii) Reserve Evaluation Reports and (iii) Net Back Pool
Reports and "BORROWING BASE REPORT" shall mean any thereof.
"CANADIAN GUARANTEE" shall mean the Guarantee dated as of August 19,
1997 executed by Forest in favor of the Agent and the Canadian Lenders.
"CANADIAN LENDERS" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"COMBINED COMMITMENTS" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"COMBINED MAJORITY LENDERS" shall have the meaning ascribed thereto in
the Intercreditor Agreement.
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement dated
as of August 19, 1997 between the U.S. Agent and the Agent as the same may be
modified, supplemented, amended and/or restated and in effect from time to
time."
"LENDER GROUP" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"RESTRICTED SUBSIDIARIES" shall have the meaning ascribed thereto in
the U.S. Credit Agreement.
"U.S. AGENT" means The Chase Manhattan Bank, as agent under the U.S.
Credit Agreement.
"U.S. CREDIT AGREEMENT" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"U.S. CREDIT AGREEMENT OBLIGATIONS" shall mean (i) the Loans provided
for in Section 2.01 of the U.S. Credit Agreement and (ii) the Letter of Credit
Liabilities under the U.S. Credit Agreement.
AMENDMENT NO. 1
<PAGE>
-3-
"U.S. LENDERS" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"U.S. RESERVE EVALUATION REPORT" shall mean the report defined in the
U.S. Credit Agreement as the "Reserve Evaluation Report" prepared for Forest.
2.03. Section 1.01 of the Second Amended and Restated Credit
Agreement is amended by deleting the existing definitions for the following
terms and inserting new definitions as follows:
"APPLICABLE MARGIN" shall mean, with respect to each Type of Loan for
any period during which the Usage Ratio is within the range specified under
"Usage Ratio" in Schedule V to Amendment No. 1, the number of basis points set
forth opposite the range in such Schedule V to be expressed as percentages per
annum for purposes of the interest calculations in this Agreement, PROVIDED that
the "Applicable Margin" shall be increased or reduced, as applicable, on the
date of the borrowing of a Loan or the repayment of a Loan or the issuance or
expiration of a Letter of Credit which results in the Usage Ratio shifting from
one range to another but that the "Applicable Margin" for any BA Loan or
Eurodollar Loan outstanding prior to such date shall remain the same until the
end of the Interest Period for such BA Loan or Eurodollar Loan, respectively.
"CANADIAN FOREST DEBENTURE" shall mean the Demand Debenture and
Negative Pledge, dated as of February 8, 1996, as the same has been amended,
including as amended by the Third Security Confirmation, Amendment and
Supplemental Debenture Agreement dated as of August 19, 1997, of Canadian Forest
in the principal amount of C$165,000,000 payable to the Lender and assigned to
the Agent and its successors and assigns, as the same shall be amended, modified
and supplemented and in effect from time to time.
"COMMITMENT" shall mean the obligation of the Lender to make Loans
pursuant to Sections 2.01 and 2.05 hereof and to obtain Letters of Credit
pursuant to Section 2.04 hereof, in an aggregate Principal Amount at any one
time outstanding up to but not exceeding C$165,000,000 or the Equivalent Amount
thereof in U.S. Dollars, as the same may be reduced at any time or from time to
time pursuant to Section 2.06 hereof.
"COMMITMENT TERMINATION DATE" shall mean August 19, 2001.
"FOREST DEBENTURE" shall mean the Limited Recourse Demand Debenture
and Negative Pledge, dated as of April 1, 1997, as amended by the Third Security
Confirmation, Amendment and Supplemental Debenture Agreement dated as of August
19, 1997, of Forest in the principal amount of C$165,000,000 payable to the
Lender and assigned to the Agent and its successors and assigns, as the same
shall be modified and supplemented and in effect from time to time.
AMENDMENT NO. 1
<PAGE>
-4-
"FUTURE NET REVENUES" shall mean, as of any date of determination for
any period, the projected gross revenues attributable to all or a part (as
specified herein) of Proved Reserves constituting part of the Hydrocarbon
Properties included in the Borrowing Base Report for such period less the sum
for such period of all projected Operating Expenses and Capital Expenditures
with respect thereto, as set forth in the related Borrowing Base Report, and
less (without duplication) all amounts projected to be applied to the discharge
of any advance payments or similar agreements with respect to hydrocarbons in
place and to the unearned balance of any advance payment received under any
contract to be performed relating to such Proved Reserves.
"INTEREST COVERAGE RATIO" shall mean, for any period, the ratio of (a)
the sum of Cash Flow PLUS Cash Flow under, and as defined in, the U.S. Credit
Agreement on a consolidated basis for such period to (b) the sum of Interest
Expense PLUS Interest Expense under, and as defined in, the U.S. Credit
Agreement on a consolidated basis for such period.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Notes,
the Swingline Notes, the Letter of Credit Documents, the Security Documents and
the Intercreditor Agreement.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a)
the Property, business, operations, financial condition, prospects, liabilities
or capitalization of Forest and its Subsidiaries taken as a whole, (b) the
ability of, any Obligor (as defined in the U.S. Credit Agreement) or the
Borrowers to perform their respective obligations under any of the Basic
Documents (as defined in the U.S. Credit Agreement) or the Loan Documents to
which it is a party, (c) the validity or enforceability of any of the Basic
Documents or the Loan Documents, (d) the rights and remedies of any member of
the Lender Group, the U.S. Agent and the Agent under any of the Basic Documents
or the Loan Documents, as the case may be, or (e) the timely payment of the
principal of or interest on the Loans (including Swingline Loans), Letter of
Credit Reimbursement Obligations, Forest's obligations under the Forest
Guarantee or U.S. Credit Agreement Obligations or other amounts payable in
connection therewith.
"PROMARK DEBENTURE" shall mean the Demand Debenture and Negative
Pledge dated July 17, 1996 as the same has been amended, including as amended by
the Third Security Confirmation, Amendment and Supplemental Debenture Agreement
dated as of August 19, 1997, of ProMark in the principal amount of C$165,000,000
payable to the Lender and assigned to the Agent and its successors and assigns,
as the same shall be amended, modified and supplemented in accordance with
Section 11.21 of the Funding Credit Agreement and in effect from time to time.
"SECURITY DOCUMENTS" shall mean, collectively, the Canadian Forest
Debenture and the deposit agreement in respect thereof, the Canadian Guarantee,
the ProMark Debenture and the deposit agreement in respect thereof, the Forest
Guarantee, the Forest Debenture and the deposit agreement in respect thereof,
and any other security that is now or is hereafter held by or on behalf of the
Lender for the Borrowers' obligations hereunder and all amendments, supplements,
modifications, additions to, renewals of, substitutions and replacements for any
of
AMENDMENT NO. 1
<PAGE>
-5-
the foregoing made in accordance with Section 11.21 of the Funding Credit
Agreement and all registrations filed with respect to the Liens created pursuant
to any of such documents and agreements and without limiting the generality of
the foregoing includes the foregoing security and other documents as confirmed
and amended from time to time including as amended by the Third Security
Confirmation, Amendment and Supplemental Debenture Agreement dated as of August
19, 1997.
"USAGE RATIO" shall mean as of any date the ratio of (a) Aggregate
Borrowings outstanding on such date PLUS the aggregate principal amount of the
U.S. Credit Agreement Obligations pursuant to the U.S. Credit Agreement
outstanding on such date to (b) the lesser of the Borrowing Base or the Combined
Commitments on such date.
2.03A. Section 1.01 of the Second Amended and Restated Credit
Agreement is further amended by deleting the definition of "DIVIDEND PAYMENT".
2.04. The definitions of "INDEPENDENT PETROLEUM ENGINEER", "PROVED
RESERVES" and "NET BACK POOL REPORT" in Section 1 of the Second Amended and
Restated Credit Agreement shall be amended by changing the words "Reserve
Evaluation Report" to "Borrowing Base Report" wherever they appear.
2.05. Section 1 of the Second Amended and Restated Credit Agreement
shall be amended by deleting the existing Section 1.03 and inserting a new
Section 1.03 as follows:
"1.03 BORROWING BASE.
(a) BORROWING BASE REPORTS. Canadian Forest and Forest have
furnished to the U.S. Agent, the Lender and the Canadian Lenders updated
Borrowing Base Reports dated January 1, 1997. On or before each Report Delivery
Date, Canadian Forest and Forest shall furnish to the U.S. Agent, the Agent and
the Canadian Lenders updated Borrowing Base Reports.
(b) BORROWING BASE. The Borrowers acknowledge and agree that the
Borrowing Base determined from time to time under the Funding Credit Agreement
shall also be the Borrowing Base under and for the purposes of this Agreement.
In that regard, the Borrowers acknowledge and agree that the Borrowing Base
determined from time to time under the Funding Credit Agreement shall also be
the Borrowing Base under and for the purposes of this Agreement. During the
period commencing on the date hereof and ending on such date the first
redetermination of the Borrowing Base becomes effective as provided below in
this Section 1.03(b), the Borrowing Base shall be $130,000,000 (subject to any
adjustments and redeterminations provided for by Sections 1.03(c), 1.03(d),
1.03(e) and 2.11(d) hereof) which amount has been determined on the basis of the
Borrowing Base Reports referred to in the first sentence of Section 1.03(a)
hereof (with such adjustments to the rates, factors, values, estimates,
assumptions and computations set forth in such Borrowing Base Reports as are
acceptable to the Combined Majority Lenders). Under the Funding Credit
Agreement, the U.S. Agent shall, as promptly as reasonably practicable after its
receipt of the Borrowing Base Reports furnished to it
AMENDMENT NO. 1
<PAGE>
-6-
pursuant to the second sentence of Section 1.03(a) hereof (in consultation with
the Combined Majority Lenders) endeavor to redetermine the Borrowing Base as an
amount in Dollars on the basis of such Borrowing Base Reports in the manner
provided for in Section 1.03(b) of the Funding Credit Agreement, to notify the
Lender Group of such redetermination and, if such redetermination is approved
by all of the Lender Group (in the case of an increase in the Borrowing Base)
or by the Combined Majority Lenders (in the case of (i) a decrease in the
Borrowing Base or (ii) no change in the Borrowing Base), as applicable, notify
the Lender (who shall promptly notify the Borrowers) and Forest of the
Borrowing Base as so redetermined and such redetermined Borrowing Base shall
become effective on the Determination Date next following each Report Delivery
Date (or, if later, on the date notified by the U.S. Agent to the Lender (who
shall promptly notify the Borrowers) and Forest) and shall remain effective
until again redetermined as provided in this Section 1.03(b) (subject to any
adjustments and redeterminations provided for by Sections 1.03(c), 1.03(d) and
1.03(e) hereof, reductions pursuant to Section 2.11(c) and (d) hereof or
additions pursuant to Section 2.11(a) hereof).
As used herein, "BORROWING BASE" means the amount specified in the
first sentence of this Section 1.03(b) as determined from time to time as
provided in the second sentence of Section 1.03(b) and subject to adjustments,
redeterminations and principles provided in Sections 1.03(c), 1.03(d), 1.03(e)
and 2.11 hereof.
(c) MATERIAL CHANGE. The Borrowers agree to notify the Lender, the
Agent and the U.S. Agent promptly of any material change of which the Borrowers
or Forest or any of their respective Restricted Subsidiaries is aware which
reduces or may result in a reduction of the Borrowing Base by more than 10%.
Promptly upon receipt of such notice, the U.S. Agent (in consultation with the
Combined Majority Lenders) shall endeavor to adjust the Borrowing Base pursuant
to the procedures set forth in the Funding Credit Agreement.
(d) REDETERMINATION. If so requested by the Majority Lenders or the
Majority Banks under, and as defined in, the U.S. Credit Agreement, or Forest at
any time, the U.S. Agent shall, as promptly as reasonably practicable after the
receipt of such request, endeavor to redetermine (in consultation with the
Lender Group or the Combined Majority Lenders, as applicable) the Borrowing Base
as then in effect on the basis of the then most recent applicable Borrowing Base
Reports (subject, however, to such other factors as the U.S. Agent, with the
concurrence of the Combined Majority Lenders, may determine to be appropriate).
As promptly as reasonably practical following its redetermination of the
Borrowing Base, the U.S. Agent shall notify the Lender Group of such
redetermination and, if such redetermination is approved by all of the Lender
Group (in the case of (i) an increase in the Borrowing Base or (ii) no change in
the Borrowing Base) or by the Combined Majority Lenders (in the case of a
decrease in the Borrowing Base), as applicable, notify the Lender (who shall
promptly notify the Borrowers) and Forest of the Borrowing Base as so
redetermined and such redetermined Borrowing Base shall become effective
immediately upon delivery to the Lender and Forest of such notice of
redetermination.
(e) DETERMINATIONS, ETC. It has been agreed in the Funding Credit
Agreement
AMENDMENT NO. 1
<PAGE>
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that all determinations and redeterminations and adjustments by the U.S.
Agent provided for above in this Section 1.03 or in the definition of
"Present Value of Reserves" in Section 1.01 including any approvals or
disapprovals of a determination or redetermination by the U.S. Agent of the
Borrowing Base or any adjustment thereof shall be made on a reasonable basis,
in good faith and in a manner reasonably consistent with the basis on which
the initial Borrowing Base was determined to be acceptable to the Lender
Group as provided in the Funding Credit Agreement.
(f) FOREST SALE. The Borrowers and the Lender agree that the sale
of the Forest Pledged Properties from Canadian Forest to Forest pursuant to
the Forest Purchase Agreement, and the subjecting of such Forest Pledged
Properties to the Forest Debenture, shall not result in a redetermination or
adjustment of the Borrowing Base, and that such Forest Pledged Properties
shall continue to be included in the Borrowing Base (so long as they are
owned by Forest and are not otherwise subjected to any Lien (other than the
Lien of the Forest Debenture) by Forest) to the same extent as if such sale
had not occurred."
2.06. Section 2.01 of the Second Amended and Restated Credit
Agreement is amended by deleting the existing paragraph (a) and inserting a new
paragraph (a) as follows:
"(a) The Lender agrees, in accordance with the terms and
conditions of this Agreement, to make one or more loans to the Borrowers in
Canadian Dollars or U.S. Dollars during the period from and including the
Closing Date to and including the Commitment Termination Date, in an
aggregate amount up to but not exceeding the lesser of (x) the Commitment and
(y) an amount equal to the then effective Allocated Canadian Borrowing Base
determined pursuant to the immediately preceding Borrowing Base Reports;
PROVIDED that (i) in no event shall the aggregate principal amount of all
Loans (including all Swingline Loans) (with the Principal Amount of U.S.
Dollar Loans expressed as an Equivalent Amount in Canadian Dollars), together
with the aggregate amount of all Letter of Credit Liabilities (with the
Letter of Credit Liabilities in U.S. dollars expressed in an Equivalent
Amount in Canadian Dollar), exceed the lesser of (x) the aggregate amount of
the Commitments as in effect from time to time, and (y) the then effective
Allocated Canadian Borrowing Base determined pursuant to Section 2.12 hereof
and the immediately preceding Borrowing Base Reports and (ii) the Company may
not borrow Loans or obtain Letters of Credit under this Agreement at any time
while a Borrowing Base Deficiency exists. The Commitment of the Lender on
the date hereof is C$165,000,000 or the Equivalent Amount in U.S. Dollars.
2.07. Section 2 of the Second Amended and Restated Credit Agreement
is further amended by:
(i) deleting the existing Section 2.02 and inserting a new Section
2.02 as follows:
"2.02 BORROWINGS. The applicable Borrower shall give the
Lender, the Agent and the U.S. Agent (which shall promptly notify the U.S.
Lenders) (or in the case of
AMENDMENT NO. 1
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-8-
Swingline Loans, BOM instead of the Agent and the U.S. Agent) notice of each
borrowing hereunder as provided in Section 4.05 hereof. Not later than 1:00
p.m. Toronto time on the date specified for each borrowing hereunder, the
Lender shall make available the amount of the Loan or Loans to be made by it
on such date to the applicable Borrower by depositing the same, in
immediately available funds, in an account of the Borrowers or any one of
them designated by such Borrower. Notwithstanding any provision of this
Agreement to the contrary, Canadian Prime Loans, BA Loans and Swingline Loans
may only be denominated in Canadian Dollars and U.S. Base Rate Loans and
Eurodollar Loans may only be denominated in U.S. Dollars";
(ii) deleting the existing first paragraph of Section 2.04 and
replacing it with the following:
"2.04 LETTERS OF CREDIT. Subject to the terms and conditions of
this Agreement, upon the request by any Borrower, the Lender hereby agrees to
utilize a portion of the commitments available to it under the Funding Credit
Agreement from time to time to obtain letters of credit ("LETTERS OF CREDIT")
in Canadian Dollars or U.S. Dollars and to provide the same to the Borrower
which has requested such Letter of Credit, PROVIDED that in no event shall
(i) the aggregate amount of all Letter of Credit Liabilities, together with
the aggregate Principal Amount of the Loans (including all Swingline Loans)
(with the amounts of any Loans or Letter of Credit Liabilities outstanding in
U.S. Dollars expressed as an Equivalent Amount in Canadian Dollars), exceed
the lesser of (x) the amount of the Commitment as in effect from time to
time, and (y) the then effective Allocated Canadian Borrowing Base determined
pursuant to Section 2.12 hereof and the immediately preceding Borrowing Base
Reports, (ii) the aggregate outstanding amount of all Letter of Credit
Liabilities exceed C$15,000,000, (iii) the expiration date of any Letter of
Credit extend beyond the earlier of the Commitment Termination Date and the
date 12 months following the issuance of such Letter of Credit and (iv) any
Letter of Credit require payment against a conforming draft to be made
thereunder on the same Business Day on which that draft is presented, if
presentation is made after 1:00 p.m., Toronto time. Each Letter of Credit
shall comply in all respects with the provisions of Section 2.03 of the
Funding Credit Agreement. Each request by a Borrower for a Letter of Credit
shall be irrevocable. Whenever the applicable Borrower is required to
furnish a notice to the Lender or the Agent pursuant to the following
additional provisions of this Section 2.04, it shall give a copy of such
notice to the U.S. Agent.";
(iii) deleting the existing Section 2.05 and inserting a new Section
2.05 as follows:
"2.05 SWINGLINE LOANS. (a) In addition to the Loans provided for
in Section 2.01(a) hereof and subject to the terms and conditions of this
Agreement, the Lender agrees to make loans ("SWINGLINE LOANS") to the
Borrowers during the period from the date hereof but excluding the Commitment
Termination Date, PROVIDED that the aggregate Principal Amount of all Loans
(including all Swingline Loans) (with the Principal Amount of U.S. Dollar
Loans expressed as the Equivalent Amount in Canadian Dollars), together with
the aggregate amount of all Letter of Credit Liabilities (with the Letter of
Credit Liabilities in U.S. Dollars expressed as the Equivalent Amount in
Canadian Dollars) shall not at any time exceed the lesser of (x) the
AMENDMENT NO. 1
<PAGE>
-9-
aggregate amount of the Commitment and (y) the then effective Allocated
Canadian Borrowing Base determined pursuant to Section 2.12 hereof, nor shall
the aggregate Principal Amount of all Swingline Loans exceed C$5,000,000.
All Swingline Loans shall be denominated in Canadian Dollars and may not be
made as BA Loans. Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrowers may borrow, prepay and reborrow
Swingline Loans. Swingline Loans shall constitute Loans hereunder.
(b) In order to request a Swingline Loan, the applicable Borrower
shall notify the Lender, the Agent and the U.S. Agent of such request by
telephone (confirmed by telecopy), not later than 2:00 p.m., Calgary time (or
4:00 p.m. Calgary time in the case of borrowings to satisfy outstandings
under the BOM Agreement), on the day of a proposed Swingline Loan.
Notwithstanding the foregoing, in the event that at any time BOM makes demand
for payment of any amounts to which it is entitled under the BOM Agreement
and such amounts are not paid by the close of business on the date of demand,
ProMark shall be deemed to have notified the Lender of a request for a
Swingline Loan in an amount equal to the lesser of (i) C$5,000,000 less the
aggregate Principal Amount of any outstanding Swingline Loans and (ii) the
amounts demanded under the BOM Agreement. Each such notice provided by a
Borrower by telephone request shall be irrevocable and shall specify the
requested date (which shall be a Business Day) and amount of the requested
Swingline Loan. The Lender shall promptly advise BOM, the Agent and the U.S.
Agent of any such notice received from a Borrower. The Lender shall make
each Swingline Loan available to the applicable Borrower by means of a credit
to the general deposit account of such Borrower at the BOM Main Branch,
Calgary, Alberta by 2:30 p.m., Calgary time, on the requested date of such
Swingline Loan, or in the case of a deemed notice on or before the next
Business Day following the date that BOM so provides the demand for
payment."; and
(iv) deleting the existing Section 2.07 and inserting a new Section
2.07 as follows:
"2.07 COMMITMENT FEE. The Borrowers jointly and severally shall pay
to the Lender a commitment fee for each day at a rate per annum equal to the
Applicable Commitment Fee Rate TIMES the Allocated Canadian Borrowing Base LESS
the aggregate principal amount of all Loans and Letter of Credit Liabilities
(collectively, such difference for the Lender being the "AVAILABLE BORROWING
AMOUNT") (with any amounts outstanding in U.S. Dollars being expressed as an
Equivalent Amount in Canadian Dollars) outstanding on such day for the period
from and including the date of Amendment No. 1 to but not including the earlier
of the date the Lender's Commitment is terminated and the Commitment Termination
Date. Accrued Commitment Fees shall be payable on each Quarterly Date and on
the earlier of the date the Commitments are terminated and the Commitment
Termination Date."
2.08. Section 2.09 of the Second Amended and Restated Credit
Agreement shall be amended by deleting the existing paragraph (a) and inserting
a new paragraph (a) as follows:
"(a) The Loans made by the Lender (other than Swingline Loans) to the
AMENDMENT NO. 1
<PAGE>
-10-
Borrowers shall be evidenced by the promissory note of each Borrower dated
August 19, 1997, payable to the Lender in a principal amount equal to
C$165,000,000, or the Equivalent Amount in U.S. Dollars."
2.09. Section 2.10 of the Second Amended and Restated Credit
Agreement shall be amended by inserting a new sentence at the end of Section
2.10 as follows:
"Whenever the applicable Borrower is required to furnish a notice to
the Lender or the Agent pursuant to this Section 2.10, it shall give a copy of
such notice to the U.S. Agent.".
2.10. Section 2.11 of the Second Amended and Restated Credit
Agreement is amended by:
(i) deleting the existing paragraph (a) and inserting a new
paragraph (a) as follows:
"(a) BORROWING BASE. The Lender shall promptly notify the Borrowers
and Forest (following the Lender's receipt of notice from the U.S. Agent (a
"DEFICIENCY NOTICE")) any time the Borrowing Base as then in effect is less than
the sum of (i) the aggregate principal amount of the Loans, Swingline Loans and
Letter of Credit Liabilities outstanding at such time (with any amounts
outstanding in U.S. Dollars being expressed as an Equivalent Amount in Canadian
Dollars) and (ii) the aggregate principal amount of the U.S. Credit Agreement
Obligations outstanding at such time (the amount of such difference being called
herein the "BORROWING BASE DEFICIENCY") and within 30 days after the date of the
Deficiency Notice, the Borrowers shall cause notice to be given to the Lender,
the U.S. Agent and the Administrative Agent of the Borrower's and Forest's
intentions with respect to compliance with the procedures set forth in this
Section 2.11(a). As specified in such notice, the Borrowers shall (within 90
days after the date of the Deficiency Notice) prepay, in accordance with Section
3.02 of the Intercreditor Agreement or, provide cover for Letter of Credit
Liabilities and BA Loans in the manner specified in clause (f) below, the
aggregate principal amount of all Loans (including Swingline Loans), and Letter
of Credit Liabilities outstanding at such time under the Funding Credit
Agreement, in an amount sufficient to eliminate such Borrowing Base
Deficiency.";
(ii) by deleting the existing paragraph (b) and inserting a new
paragraph (b) as follows:
"(d) EXCESS RESULTING FROM EXCHANGE RATE CHANGE.
(i) Subject to Section 2.11(b)(ii), any time that, following one
or more fluctuations in the exchange rate of the U.S. Dollar against the
Canadian Dollar, the sum of the Equivalent Amount in Canadian Dollars of
the aggregate Principal Amount of Loans and Letter of Credit Liabilities
outstanding at such time denominated in U.S. Dollars PLUS the aggregate
Principal Amount of Canadian Dollar denominated Loans and Letter of Credit
Liabilities outstanding at such time (the amount of such sum being
AMENDMENT NO. 1
<PAGE>
-11-
called herein the "AGGREGATE BORROWINGS") EXCEEDS by an amount equal to or
in excess of 1% of the lesser of (x) the amount of the Commitment on such
date and (y) the then effective Allocated Canadian Borrowing Base or the
Equivalent Amount in Canadian Dollars determined pursuant to Section 2.12
hereof and the immediately preceding Borrowing Base Reports, the Borrowers
shall promptly after receipt by the Lender of notice from the Agent and, in
any case, within 10 days after receipt of such notice, either (A) prepay
the Loans (except BA Loans) (and/or provide cover for the Letter of Credit
Liabilities and BA Loans as specified in clause (f) below) in an amount
(such amount being called herein the "EXCHANGE RATE DEFICIENCY") necessary
to reduce the Aggregate Borrowings to an amount equal to or less than the
lesser of (x) the aggregate amount of the Commitment on such date and
(y) the then effective Allocated Canadian Borrowing Base or the Equivalent
Amount in Canadian Dollars determined pursuant to Section 2.12 hereof and
the immediately preceding Borrowing Base Reports or (B) maintain or cause
to be maintained with the Lender (who, in turn shall maintain with the
Agent) deposits of Canadian Dollars in an amount equal to the Exchange Rate
Deficiency, such deposits to be maintained in such form and upon such terms
as are acceptable to the Agent. Without in any way limiting the forgoing
provisions, the Lender shall receive from the Agent, on each Quarterly Date
and on the date of any borrowing hereunder any necessary exchange rate
calculations to determine whether any such excess exists on such date, the
Lender shall so notify the Company.
(ii) Notwithstanding Section 2.11(b)(i), the Lender (at the
direction of the Majority Lenders) shall be entitled to require that the
Borrowers, at the Borrowers' option, (A) make the payments or prepayments
or maintain the deposits required to be maintained under Section 2.11(b)(i)
or (B) fully hedge, to the reasonable satisfaction of the Combined Majority
Lenders, the Exchange Rate Deficiency and assign the benefit of all hedging
contracts to the Lender, for the benefit of the Canadian Lenders, in any
case where an Exchange Rate Deficiency exists."
(iii) deleting the existing paragraph (c) and inserting a new
paragraph (c) as follows:
"(c) CASUALTY EVENTS. Upon the date 30 days following the receipt by
the Borrowers (or Forest, in the case of the Forest Pledged Properties) of the
proceeds of insurance, condemnation award or other compensation in respect of
any Casualty Event affecting any Hydrocarbon Property or gas marketing assets of
any Borrower (or Forest, in the case of the Forest Pledged Properties), other
than Unrestricted Properties or any Property of a Non-Borrowing Subsidiary, the
Borrowers shall prepay the Loans (and/or provide cover for Letter of Credit
Liabilities and BA Loans as specified in clause (f) below), and if such Casualty
Event shall result in the receipt by the Borrowers (or Forest, in the case of
the Forest Pledged Properties) of Net Available Proceeds in excess of $2,500,000
or the Equivalent Amount in Canadian Dollars, the Combined Majority Lenders, in
their sole discretion based on their review of such Casualty Event, may reduce
the Borrowing Base in an aggregate amount not in excess of 100% of the Net
Available Proceeds of such Casualty Event not theretofore applied to the repair
AMENDMENT NO. 1
<PAGE>
-12-
or replacement of such Hydrocarbon Property, or such lesser amount as is
specified in a written notice from the Combined Majority Lenders, such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in clause (f) of this Section 2.11. Nothing in this clause (c)
shall be deemed to limit any obligation of the Borrowers pursuant to any of the
Security Documents to remit to a collateral or similar account maintained by the
Agent (as assignee of the Lenders) pursuant to any of the Security Documents the
proceeds of insurance, condemnation award or other compensation received in
respect of any Casualty Event.";
(iv) deleting the existing paragraph (d) and inserting a new
paragraph (d) as follows:
"(d) SALE OF ASSETS. Without limiting the obligation of the Borrower
to obtain the consent of the Lender and the Majority Lenders pursuant to Section
8.05 hereof to any Disposition not otherwise permitted hereunder, no later than
five Business Days prior to the occurrence of any Disposition, the applicable
Borrower will deliver to the Lender Group a statement, certified by the chief
financial officer or treasurer of such Borrower, in form and detail satisfactory
to the Agent, of the amount of the Net Available Proceeds of such Disposition
and, if the Net Available Proceeds of such Disposition together with the
aggregate of all other Dispositions during the current Determination Period is
in excess of $5,000,000 or the Equivalent Amount in Canadian Dollars, the
Combined Majority Lenders, based on their review of the statement referred to in
this Section 2.11(d) may, in their sole discretion, reduce the Borrowing Base in
an aggregate amount not in excess of 100% of the Net Available Proceeds of such
Disposition, or such lesser amount as is specified in a written notice from the
Combined Majority Lenders. If a Borrowing Base Deficiency results from such
reduction, then the Borrowers shall, notwithstanding Section 2.11(a) to the
contrary, immediately prepay the Loans (including Swingline Loans) (and/or
provide cover for Letter of Credit Liabilities and BA Loans) with the Net
Available Proceeds to cure such deficiency. Notwithstanding the foregoing, the
Borrowers shall not be required to prepay the Loans (including Swingline
Loans)(and/or provide cover for the Letter of Credit Liabilities or BA Loans
pursuant to Section 2.11(f) hereof), and the Borrowing Base shall not be subject
to automatic reduction upon any sale of Property by the Borrower or any
Subsidiary Borrower or sale of any of the Forest Pledged Properties in the case
of Forest permitted pursuant to Section 8.05 hereof."; and
(v) deleting the existing paragraph (e) and inserting a new paragraph
(e) as follows:
"(e) APPLICATION. Prepayments and reductions of the Borrowing Base
described in the above clauses of this Section 2.11 shall be effected as
follows: the Borrowing Base shall be automatically reduced by an amount equal to
the amount specified in such clauses and to the extent that, after giving effect
to such reduction, the aggregate Principal Amount of the Loans, together with
the aggregate amount of all Letter of Credit Liabilities (with the amount of
Loans and the Letter of Credit Liabilities in U.S. Dollars expressed as an
Equivalent Amount in Canadian Dollars), would exceed the then effective
Allocated Canadian Borrowing Base determined pursuant to Section 2.12 hereof and
the immediately preceding Borrowing Base
AMENDMENT NO. 1
<PAGE>
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Reports, the Borrowers shall first, prepay the Loans (except BA Loans) and
second, provide cover for Letter of Credit Liabilities and BA Loans as
specified in clause (f) below, in an aggregate amount equal to such excess. To
the extent possible, any prepayments required pursuant to this Section 2.11
shall be applied FIRST to U.S. Base Rate Loans, SECOND to Canadian Prime Rate
Loans and THIRD to Eurodollar Loans.".
2.11. A new Section 2.12 of the Second Amended and Restated Credit
Agreement shall be added as follows:
"Section 2.12 ALLOCATION OF BORROWING BASE.
(a) The Borrowing Base may be allocated between the Lender under the
Funding Credit Agreement (which shall be the Borrowing Base for the purpose of
this Agreement) and Forest under the U.S. Credit Agreement. The Allocated U.S.
Borrowing Base in effect from time to time shall represent the maximum amount of
credit in the form of Loans and Letters of Credit (subject to the aggregate
Commitments and the other provisions of the U.S. Credit Agreement) that the U.S
Lenders will extend to Forest at any one time prior to the "Commitment
Termination Date" specified in the U.S. Credit Agreement. The Allocated
Canadian Borrowing Base in effect from time to time shall represent the maximum
amount of credit in the form of Loans, Letters of Credit and Bankers'
Acceptances (subject to the aggregate Commitments and the other provisions of
this Agreement) that the Canadian Lenders will extend to the Lender (and
therefor the maximum amount of credit in the form of Loans and Letter of Credit
Liabilities that the Lender will extend the Borrowers) at any one time prior to
the "Commitment Termination Date" specified in the Funding Credit Agreement. On
the date of Amendment No. 1, the Allocated Canadian Borrowing Base shall be
$100,000,000, resulting in an initial Allocated U.S. Borrowing Base of
$30,000,000.
(b) The Borrowers at any time shall have the right to request in
writing to the Lender (which shall promptly notify the Agent, U.S. Agent and the
Lender Group), in their sole discretion, an increase in the Allocated Canadian
Borrowing Base and a corresponding decrease in the Allocated U.S. Borrowing
Base; provided that any such increase shall require the approval of all of the
Canadian Lenders and at no time shall the Allocated Canadian Borrowing Base
exceed $100,000,000; and provided further that the Borrowers may not make a
request for an increase in the Allocated Canadian Borrowing Base more than four
(4) times during any twelve (12) month period. Within ten (10) Business Days of
the receipt by the Canadian Lenders of such request, the Canadian Lenders shall
give written notice to the Lender, Forest and the U.S. Agent of their approval
or disapproval of such increase and the Lender shall promptly notify the
Borrowers. If such increase is approved, each such Lender shall have its share
of the Allocated Canadian Borrowing Base increased by an amount equal to its
proportion of the Commitment Percentage. The revised Allocated U.S. Borrowing
Base and Allocated Canadian Borrowing Base shall become effective upon the
distribution by the U.S. Agent to the Lender (who in turn shall notify the
Borrowers), Forest, the Agent and the Lender Group of written notice thereof
which shall occur not later than three (3) Business Days after its receipt of
the notice of increase.
AMENDMENT NO. 1
<PAGE>
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(c) Forest at any time shall have the right to request in writing to
the Agent, the U.S. Agent and the U.S. Lenders that such U.S. Lenders, in their
sole discretion, permit Forest to increase the Allocated U.S. Borrowing Base and
decrease the Allocated Canadian Borrowing Base; provided that any such change
shall require the approval of all of such U.S. Lenders and at no time shall the
Allocated U.S. Borrowing Base exceed $100,000,000; and provided further that
Forest may not make a request for an increase in the Allocated U.S. Borrowing
Base more than four (4) times during any twelve (12) month period. Within ten
(10) Business Days of the receipt by such U.S. Lenders of such request, such
U.S. Lenders shall give written notice to the Lender (who in turn shall notify
the Borrowers), Forest and the U.S. Agent of their approval or disapproval of
such change. The revised Allocated U.S. Borrowing Base and Allocated Canadian
Borrowing Base shall become effective upon the distribution by the U.S. Agent to
the Lender (who in turn shall notify the Borrowers), Forest, the Agent and the
Lender Group of written notice thereof which shall occur not later than three
(3) Business Days after its receipt of the notice of increase.
(d) For purposes of this Agreement, the Allocated Canadian Borrowing
Base shall be expressed as the Equivalent Amount in Canadian Dollars. The
Equivalent Amount shall be calculated (i) on the date a reallocation pursuant to
this Section 2.12 between the Allocated U.S. Borrowing Base and the Allocated
Canadian Borrowing Base occurs, (ii) on each Determination Date, or (iii) in any
event, at ninety (90) day intervals following the most recent Determination
Date."
2.12. Section 4.01 of the Second Amended and Restated Credit
Agreement shall be amended by inserting a new paragraph (e) as follows:
"(e) The Borrowers shall give the U.S. Agent notice of each payment
hereunder within 3 Business Days of the relevant payment."
2.13. The introduction to Section 8 of the Second Amended and
Restated Credit Agreement shall be amended by replacing the word "Lender" with
the words "Lender Group" on the second line.
2.13A. Section 8.09 of the Second Amended and Restated Credit
Agreement is deleted in its entirety.
2.14. Section 8.10 of the Second Amended and Restated Credit
Agreement shall be amended in its entirety as follows:
"8.10 INTEREST COVERAGE RATIO.
The Borrowers will not permit the Interest Coverage Ratio for any
period of four consecutive fiscal quarters (treated for this purpose as a single
accounting period) following March 31, 1997, to be less than 2.0:1.0 as of the
end of any fiscal quarter of Canadian Forest."
AMENDMENT NO. 1
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2.15. Section 8.11 of the Second Amended and Restated Credit
Agreement shall be amended in its entirety as follows:
"8.11 WORKING CAPITAL. The Borrowers will not permit the current
assets of Forest and its Subsidiaries (determined on a consolidated basis in
accordance with GAAP) to be equal to or less than the current liabilities of
Forest and its Subsidiaries (so determined). For purposes hereof, the terms
"CURRENT ASSETS" and "CURRENT LIABILITIES" shall have the respective meanings
assigned to them by GAAP, PROVIDED that in any event there shall be (i) included
in current assets the aggregate amount of the unused Combined Commitments (but
only to the extent such unused Combined Commitments could then be utilized as
provided in Section 6.02 hereof and Section 7.02 of the U.S. Credit Agreement),
(ii) excluded from current liabilities all Indebtedness hereunder PLUS all
Indebtedness under, and as defined in the U.S. Credit Agreement, (iii) excluded
from current liabilities all Production Payments (as defined in the U.S. Credit
Agreement) and (iv) excluded from current liabilities the current portion of any
gas balancing liabilities hereunder and under the U.S. Credit Agreement."
2.16. Section 9 of the Second Amended and Restated Credit Agreement
is amended by:
(i) inserting a new clause (s) as follows:
"Any Event of Default shall occur under the U.S. Credit Agreement";
and
(ii) relettering clauses "(s)", "(t)", "(u)" and "(v)" as clauses
"(t)","(u)", "(v)" and "(w)", respectively.
2.17. Section 11 of the Second Amended and Restated Credit Agreement
is amended by inserting a new Section 11.22 as follows:
"11.22 INTERCREDITOR AGREEMENT. (a) Reference is hereby made to the
Intercreditor Agreement, which provides for certain matters relating to the
Funding Credit Agreement and the U.S. Credit Agreement. To the extent of any
conflict between the terms of this Agreement and the terms of the Intercreditor
Agreement, the Intercreditor Agreement shall control. Each Canadian Lender
pursuant to the Funding Credit Agreement authorizes the Agent to execute and
deliver the Intercreditor Agreement on its behalf and the execution and delivery
by the Agent of the Intercreditor Agreement on behalf of the Canadian Lenders is
ratified and confirmed by each of the Canadian Lenders. Any Lender that becomes
a party to the Funding Credit Agreement after the date hereof agrees to be bound
by the terms and provisions of the Intercreditor Agreement.
(b) Each Borrower acknowledges that certain financial institutions
including certain of the Canadian Lenders are providing financing to Forest.
Each Borrower consents to the disclosure of information provided by the Lender
to the Canadian Lenders to such other financial institutions. The Borrowers
also acknowledge that the Canadian Lenders may enter
AMENDMENT NO. 1
<PAGE>
-16-
into participation arrangements and payment sharing understandings with such
financial institutions and consents to such arrangements and understandings.
To the extent any such arrangements or understandings give rise to any
liability for any withholding tax payments in connection with any payments made
by Forest, the Lender or any other Obligor under either the Funding Credit
Agreement or the U.S. Credit Agreement, then (notwithstanding any provisions to
the contrary set forth in the Funding Credit Agreement or the U.S. Credit
Agreement), Forest, pursuant to the U.S. Credit Agreement has agreed to
indemnify each of the applicable members of the Lender Group and shall hold
each of the applicable members of the Lender Group harmless from and against
any such liability; PROVIDED, HOWEVER, that each member of the Lender Group (if
so requested by the Lender under the Funding Credit Agreement or Forest under
the U.S. Credit Agreement) will use good faith efforts to accommodate any
reasonable request by the Lender or Forest in order to avoid the need for, or
reduce the amount of, such compensation so long as the request will not, in the
sole opinion of the applicable member of the Lender Group, be disadvantageous
to such member of the Lender Group.
Section 3. REPRESENTATIONS AND WARRANTIES. Each Borrower represents
and warrants to the Lender that the representations and warranties set forth in
Section 7 of the Second Amended and Restated Credit Agreement are true and
complete on the date hereof (unless otherwise limited to an earlier date) as if
made on and as of the date hereof and as if each reference in said Section 7 to
"this Agreement" and "the Notes" included reference to this Amendment No. 1.
Section 4. CONDITIONS PRECEDENT. As provided in Section 2 above, the
amendments to the Second Amended and Restated Credit Agreement set forth in said
Section 2 shall become effective, as of the date hereof, upon the satisfaction
of the following conditions precedent:
4.01. EXECUTION BY ALL PARTIES. This Amendment No. 1 shall have been
executed and delivered by each of the parties hereto.
4.02. INTERCREDITOR AGREEMENT. The Intercreditor Agreement shall
have been executed and delivered by each of the parties thereto.
4.03. FOREST AMENDMENT AGREEMENT. The Amendment No. 2 to the U.S.
Credit Agreement shall have been executed and delivered by each of the parties
thereto.
4.04. OPINION OF COUNSEL TO THE BORROWERS. An opinion of Bruce
Thompson, Corporate Counsel to the Obligors and Macleod Dixon, special Canadian
counsel to the Obligors shall have been delivered to the Administrative Agent.
4.05. NOTES. The Note, duly completed and executed shall have
been delivered by the party thereto.
4.06. OTHER DOCUMENTS. The Agent shall have received such other
documents,
AMENDMENT NO. 1
<PAGE>
-17-
certificates and opinions as the Agent or any Canadian Lender or special
counsel to Chase Canada may reasonably request including the Third Security
Confirmation, Amendment and Supplemental Debenture Agreement.
Section 5. MISCELLANEOUS. Except as herein provided, the Second
Amended and Restated Credit Agreement shall remain unchanged and in full force
and effect. This Amendment No. 1 may be executed in any number of counterparts,
all of which taken together shall constitute one and the same amendatory
instrument and any of the parties hereto may execute this Amendment No. 1 by
signing any such counterpart. This Amendment No. 1 shall be governed by, and
construed in accordance with, the laws of the Province of Alberta and the laws
of Canada applicable therein.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to be duly executed and delivered as of the day and year first above written.
611852 SASKATCHEWAN LTD.
By /s/ Kenton M. Scroggs
----------------------------
Title: Vice President
Address for Notices:
611852 SASKATCHEWAN LTD.
c/o Canadian Forest Oil Ltd.
600, 800-Sixth Avenue, S.W.
Calgary, Alberta T2P 3G3
Canada
Telecopier No.: (403) 292-8072
Telephone No.: (403) 292-8000
Attention: Vice President-Finance
AMENDMENT NO. 1
<PAGE>
S-2
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, CO 80202
Attention: Vice President and Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
and
The Chase Manhattan Bank of Canada
1 First Canadian Place
100 King Street West
Suite 6900, P.O. Box 106
Toronto, Ontario MX5 1A4
Canada
Attention: Vice President
Corporate Finance
Telecopier No.: (416) 216-4161
Telephone No.: (416) 216-4133
AMENDMENT NO. 1
<PAGE>
S-3
CANADIAN FOREST OIL LTD.
By /s/ Ronald E. Pratt
----------------------------------
Title: VP - Finance
Address for Notices:
Canadian Forest Oil Ltd.
600, 800-Sixth Avenue S.W.
Calgary, Alberta T2P 3G3
Canada
Attention: Vice President Finance
Telecopier No.: (403) 261-7665
Telephone No.: (403) 292-8000
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, Colorado 80202
Attention: Vice President-Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
AMENDMENT NO. 1
<PAGE>
S-4
PRODUCERS MARKETING LTD.
By /s/ Ronald E. Pratt
-------------------------------
Title: Secretary
Address for Notices:
Producers Marketing Ltd.
c/o Canadian Forest Oil Ltd.
600, 800-Sixth Avenue S.W.
Calgary, Alberta T2P 3G3
Canada
Attention: Vice President-Finance
Telecopier No.: (403) 261-7665
Telephone No.: (403) 292-8000
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, Colorado 80202
Attention: Vice President-Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
AMENDMENT NO. 1
<PAGE>
SCHEDULE IV
APPLICABLE COMMITMENT FEE RATE
Range of Applicable Commitment
Usage Ratio Fee Rate (bps per annum)
- ----------- ------------------------
less than or equal to .330:1.00 30.0
greater than .330:1.00 but less than or equal to 0.660:1.00 35.0
greater than .660:1.00 37.5
<PAGE>
SCHEDULE V
APPLICABLE MARGIN
<TABLE>
<CAPTION>
Applicable Margin (bps)
------------------------
Canadian U.S. Base Eurodollar
Range of Usage Ratio Prime Loans Rate Loans Loans BA Fee Rate
- --------------------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
less than or equal to .330:1.00 1.0 1.0 101.0 101.0
greater than .330:1.00 but less than
or equal to .660:1.00 26.0 26.0 126.0 126.0
greater than .660:1.00 51.0 51.0 151.0 151.0
</TABLE>
<PAGE>
Page 1
EXECUTION COPY
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of September 26, 1997 between CANADIAN FOREST
OIL LTD., a corporation duly amalgamated and validly existing under the laws of
Alberta, Canada ("CANADIAN FOREST"); PRODUCERS MARKETING LTD., an Alberta
corporation and a Wholly Owned Subsidiary of Canadian Forest ("PROMARK") and
each of the other Subsidiaries of Canadian Forest that becomes a borrower
pursuant to Section 8.27 of the Second Amended and Restated Credit Agreement
(individually a "SUBSIDIARY BORROWER" and collectively with Canadian Forest, the
"BORROWERS"); and 611852 SASKATCHEWAN LTD. (the "LENDER").
Canadian Forest, a Wholly Owned Subsidiary of 3189503 Canada Ltd.,
ProMark and the Lender are parties to a Second Amended and Restated Credit
Agreement dated as of April 1, 1997 and as amended by Amendment No. 1 dated as
of August 19, 1997 (as heretofore amended and supplemented and in effect on the
date hereof, the "SECOND AMENDED AND RESTATED CREDIT AGREEMENT"), providing,
subject to the terms and conditions thereof, for extensions of credit (by making
of loans and issuing letters of credit) to be made by said Lender to the
Borrowers in an aggregate principal or face amount not exceeding C$165,000,000.
The Borrowers and the Lender wish to amend the Second Amended and Restated
Credit Agreement in certain respects, and accordingly, the parties hereto hereby
agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 2, terms defined in the Second Amended and Restated Credit
Agreement are used herein as defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the conditions
precedent specified in Section 4 below, but effective as of the date hereof, the
Second Amended and Restated Credit Agreement shall be further amended as
follows:
2.01. References in the Second Amended and Restated Credit Agreement
(including references to the Second Amended and Restated Credit Agreement
amended hereby) to "this Agreement" (and indirect references such as
"hereunder", "hereby", "herein", and "hereof") shall be deemed to be references
to the Second Amended and Restated Credit Agreement as amended and as further
amended hereby.
2.02. The following definitions are hereby added in alphabetical
order in Section 1.01 of the Second Amended and Restated Credit Agreement:
<PAGE>
Page 2
"AMENDMENT NO. 2" shall mean Amendment No. 2 dated as of
September 26, 1997 to this Agreement.
"CANADIAN FOREST SENIOR SUBORDINATED DEBT" shall mean the Indebtedness
of Canadian Forest evidenced by and in respect of the Canadian Forest Senior
Subordinated Notes issued pursuant to the Canadian Forest Senior Subordinated
Debt Documents.
"CANADIAN FOREST SENIOR SUBORDINATED DEBT DOCUMENTS" shall mean all
documents and agreements executed and delivered in connection with the original
issuance of the Canadian Forest Senior Subordinated Notes, including the
Indenture dated as of September 29, 1997 among Forest, as guarantor, Canadian
Forest, as issuer, and State Street Bank and Trust Company, as trustee, as the
same shall, subject to Sections 8.12 and 8.18 hereof, be modified and
supplemented and in effect from time to time.
"CANADIAN FOREST SENIOR SUBORDINATED NOTES" shall mean Canadian
Forest's 83/4% Senior Subordinated Notes due 2007 in the aggregate principal
amount of US$125,000,000.
2.03. The definition of "Subordinated Indebtedness" in Section 1.01
of the Second Amended and Restated Credit Agreement is amended by adding the
following at the end of such definition (prior to the period): "and shall
include, without limitation, the Canadian Forest Senior Subordinated Debt".
2.04. Section 8.07 of the Second Amended and Restated Credit
Agreement is amended by adding a new clause (i) therein as set forth below,
changing the existing clause "(i)" to clause "(j)" and deleting the word "and"
at the end of clause (h) therein:
"(i) the Canadian Forest Senior Subordinated Debt; and"
2.05. Section 8.16(b) of the Second Amended and Restated Credit
Agreement shall be deleted and the following substituted therefor:
"(b) CERTAIN RESTRICTIONS. Other than (i) the Loan Documents, (ii) any
documents in favor of the Agent or the lenders under the Funding Credit
Agreement, (iii) the Canadian Forest Senior Subordinated Debt Documents and
(iv) in the case of ProMark, the BOM Agreement, no Borrower will permit any
of its Subsidiaries to enter into, after the date hereof, any indenture,
agreement, instrument or other arrangement that, directly or indirectly,
prohibits or restrains, or has the effect of prohibiting or restraining, or
imposes materially adverse conditions upon, the incurrence or payment of
Indebtedness, the granting of Liens, the declaration or payment of
dividends, the making of loans, advances or Investments or the sale,
assignment, transfer or other disposition of Property."
<PAGE>
Page 3
2.06. Schedule I to the Second Amended and Restated Credit Agreement,
as in effect prior to the effectiveness of this Amendment No. 2, shall be
replaced with Schedule I to this Amendment No. 2.
Section 3. REPRESENTATIONS AND WARRANTIES. Each Borrower represents
and warrants to the Lender that the representations and warranties set forth in
Section 7 of the Second Amended and Restated Credit Agreement are true and
complete on the date hereof (unless otherwise limited to an earlier date) as if
made on and as of the date hereof and as if each reference in said Section 7 to
"this Agreement" included a reference to this Amendment No. 2.
Section 4. CONDITIONS PRECEDENT. As provided in Section 2 above, the
amendments to the Second Amended and Restated Credit Agreement set forth in said
Section 2 shall become effective, as of the date hereof, upon the satisfaction
of the following conditions precedent:
4.01. EXECUTION BY ALL PARTIES. This Amendment No. 2 shall have been
executed and delivered by each of the parties hereto.
4.02. CANADIAN FOREST SENIOR SUBORDINATED NOTES. The indenture
pursuant to which the Canadian Forest Senior Subordinated Notes are to be issued
and the guarantee granted by Forest in relation thereto shall be in form and
substance satisfactory to the Agent.
4.03. FOREST AMENDMENT AGREEMENT. The Amendment No. 3 to the U.S.
Credit Agreement shall have been executed and delivered by each of the parties
thereto.
4.04. OPINIONS OF COUNSEL. Bennett Jones Verchere, special Canadian
counsel to Canadian Forest in connection with the Canadian Forest Senior
Subordinated Debt Documents shall have provided an opinion to each of the
Lenders under the Funding Credit Agreement stating that each of the Canadian
Forest Senior Subordinated Debt Documents have been duly authorized executed and
delivered by Canadian Forest and Vinson & Elkins L.L.P., special New York
counsel to Canadian Forest shall have provided an opinion to each of the Lenders
under the Funding Credit Agreement stating that each of the Canadian Forest
Senior Subordinated Debt Documents constitute the legal, valid and binding
obligation of Canadian Forest and Forest and each such opinion shall otherwise
be in form and substance satisfactory to the Agent.
4.05. OTHER DOCUMENTS. The Agent shall have received such other
documents, certificates and opinions as the Agent or any Canadian Lender or
special counsel to Chase Canada may reasonably request.
<PAGE>
Page 4
Section 5. MISCELLANEOUS. Except as herein provided, the Second
Amended and Restated Credit Agreement shall remain unchanged and in full force
and effect. This Amendment No. 2 may be executed in any number of counterparts,
all of which taken together shall constitute one and the same amendatory
instrument and any of the parties hereto may execute this Amendment No. 2 by
signing any such counterpart. This Amendment No. 2 shall be governed by, and
construed in accordance with, the laws of the Province of Alberta and the laws
of Canada applicable therein.
<PAGE>
Page 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
2 to be duly executed and delivered as of the day and year first above written.
611852 SASKATCHEWAN LTD.
By
-------------------------
Title:
Address for Notices:
611852 SASKATCHEWAN LTD.
c/o Canadian Forest Oil Ltd.
600, 800-Sixth Avenue, S.W.
Calgary, Alberta T2P 3G3
Canada
Telecopier No.: (403) 292-8072
Telephone No.: (403) 292-8000
Attention: Vice President-Finance
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, CO 80202
Attention: Vice President and Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
and
The Chase Manhattan Bank of Canada
1 First Canadian Place
100 King Street West
Suite 6900, P.O. Box 106
Toronto, Ontario MX5 1A4
<PAGE>
Page 6
Canada
Attention: Vice President
Corporate Finance
Telecopier No.: (416) 216-4161
Telephone No.: (416) 216-4133
<PAGE>
Page 7
CANADIAN FOREST OIL LTD.
By
-------------------------
Title:
Address for Notices:
Canadian Forest Oil Ltd.
600, 800-Sixth Avenue S.W.
Calgary, Alberta T2P 3G3
Canada
Attention: Vice President Finance
Telecopier No.: (403) 261-7665
Telephone No.: (403) 292-8000
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, Colorado 80202
Attention: Vice President-Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
<PAGE>
Page 8
PRODUCERS MARKETING LTD.
By
-------------------------
Title:
Address for Notices:
Producers Marketing Ltd.
c/o Canadian Forest Oil Ltd.
600, 800-Sixth Avenue S.W.
Calgary, Alberta T2P 3G3
Canada
Attention: Vice President-Finance
Telecopier No.: (403) 261-7665
Telephone No.: (403) 292-8000
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, Colorado 80202
Attention: Vice President-Treasurer
Telecopier No.: (303) 812-1510
Telephone No.: (303) 812-1400
<PAGE>
Page 9
SCHEDULE I
MATERIAL AGREEMENTS AND LIENS
<PAGE>
EXECUTION COPY
EXHIBIT B
SECOND AMENDED AND RESTATED SECURITY AGREEMENT
SECOND AMENDED AND RESTATED SECURITY AGREEMENT dated as of January
31, 1997 between FOREST OIL CORPORATION, a corporation duly organized and
validly existing under the laws of the State of New York (the "COMPANY");
each of the Subsidiaries of the Company that becomes a guarantor pursuant to
Section 9.16 of the Second Amended and Restated Credit Agreement referred to
below (the "SUBSIDIARY GUARANTOR", and together with the Company, the
"OBLIGORS"); and THE CHASE MANHATTAN BANK, as agent for the Banks party to
the Second Amended and Restated Credit Agreement (the "BANKS") (in such
capacity, together with its successors in such capacity, the "AGENT").
The Company, the Existing Banks (as defined in the Second Amended
and Restated Credit Agreement referred to below), and the Agent are parties
to a Credit Agreement dated as of December 1, 1993 (as modified and
supplemented and in effect from time to time, the "ORIGINAL CREDIT
AGREEMENT") as amended and restated by an Amended and Restated Credit
Agreement dated as of August 31, 1995. The Company, the Banks and the Agent
have agreed to amend and restate the Amended and Restated Credit Agreement
pursuant to a Second Amended and Restated Credit Agreement dated as of
January 31, 1997 (the Original Credit Agreement as so amended and restated
and as the same may be further modified and supplemented and in effect from
time to time being referred to herein as the "SECOND AMENDED AND RESTATED
CREDIT AGREEMENT").
Pursuant to the terms of the Amended and Restated Credit Agreement
the Obligors entered into an Amended and Restated Security Agreement dated as
of August 31, 1995 (the "AMENDED AND RESTATED SECURITY AGREEMENT") providing
for the pledge and grant of a security interest in the Collateral (as
hereinafter defined) as security for the Secured Obligations (as so defined).
The parties hereto desire to amend and restate the Amended and Restated
Security Agreement to provide for the continuation of the pledge and grant of
a security interest thereunder with respect to the Collateral as security for
the Secured Obligations. Accordingly, the parties hereto agree as follows:
Section 1. DEFINITIONS. Terms defined in the Second Amended and
Restated Credit Agreement are used herein as defined therein. In addition,
as used herein:
"ACCOUNTS" shall have the meaning ascribed thereto in Section 3(a)
hereof.
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
"CHASE DEPOSIT PROCEEDS" shall mean cash to the extent that such cash
is credited to accounts at The Chase Manhattan Bank.
"COLLATERAL" shall have the meaning ascribed thereto in Section 3
hereof.
"COLLATERAL ACCOUNT" shall have the meaning ascribed thereto in
Section 4.01 hereof.
"EQUIPMENT" shall mean all fixtures and equipment as defined in the
Uniform Commercial Code.
"HYDROCARBONS" shall mean, collectively, oil, gas, casinghead gas,
condensate, natural gas liquids finished and unfinished petroleum products
and other liquid or gaseous hydrocarbons (including, without limitation,
all liquefiable hydrocarbons and other products that may be extracted from
gas and gas condensate by processing thereof in a gas processing plant).
"INVENTORY" shall mean all inventory (as defined in the Uniform
Commercial Code) of such Obligor produced from Mortgaged Properties, all
goods obtained by such Obligor in exchange for such inventory, and any
products made or processed from such inventory including all substances, if
any, commingled therewith or added thereto.
"SECURED OBLIGATIONS" shall mean, collectively, (a) the principal of
and interest on the Loans made by the Banks to, and the Note(s) held by
each Bank of, the Company and all other amounts from time to time owing to
the Banks or the Agent by the Obligors under the Basic Documents including,
without limitation, all Reimbursement Obligations and interest thereon,
(b) all obligations of the Subsidiary Guarantors under the Second Amended
and Restated Credit Agreement and the other Basic Documents (c) all
obligations of the Obligors to the Banks under any Commodity Hedging
Agreements or Interest Rate Protection Agreements and (d) all obligations
of the Obligors to the Banks and the Agent hereunder.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect from time to time in the State of New York.
Section 2. REPRESENTATIONS AND WARRANTIES. Each Obligor
represents and warrants to the Banks and the Agent that:
(a) Such Obligor is the sole beneficial owner of the Collateral in
which it purports to grant a security interest pursuant to Section 3 hereof
and no Lien exists or will exist upon such Collateral at any time (and no
right or option to acquire the same exists in favor of any other
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
Person) except for Liens permitted under Section 9.06 of the Second Amended
and Restated Credit Agreement and except for the pledge and security
interest in favor of the Agent for the benefit of the Banks created or
provided for herein, which pledge and security interest constitute a first
priority perfected pledge and security interest in and to all of such
Collateral.
(b) The goods or products now or hereafter produced by such Obligor
or any of its Subsidiaries which results in the creation of the Accounts
included in the Collateral have been and will be produced in compliance
with the requirements of the Fair Labor Standards Act, as amended.
Section 3. COLLATERAL. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations, each Obligor hereby pledges and grants
to the Agent, for the benefit of the Banks as hereinafter provided, a
security interest in all of such Obligor's right, title and interest in the
following property now owned by such Obligor, whether now owned by such
Obligor or hereafter acquired and whether now existing or hereafter coming
into existence (all being collectively referred to herein as "COLLATERAL"):
(a) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of such Obligor constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to such Obligor in respect of any loans or advances in
connection with the sale of Hydrocarbons produced from Mortgaged Properties
(which loans and advances are payable within one year) or for sales of
Hydrocarbons, Inventory or Equipment or for services rendered, all moneys
due and to become due to such Obligor under any guarantee (including a
letter of credit) of the purchase price of Hydrocarbons Equipment sold by
such Obligor (such accounts, general intangibles and moneys due and to
become due being herein called collectively "ACCOUNTS");
(b) the balance from time to time in the Collateral Account;
(c) all fixtures and equipment (as such terms are defined in the
Uniform Commercial Code), including, without limitation, any and all
property, equipment, fixtures and other property, including, without
limitation, oil wells, gas wells, injection wells or other wells or well
equipment, compressors, pumps, pumping units, pipelines, sales and flow
lines, gathering lines, field gathering systems, salt water disposal
facilities, tanks and tank batteries, valves, fittings, machinery and
parts, engines, boilers, meters, apparatus, equipment, appliances, tools,
implements, cables, wires, towers, casing, tubing and rods, power and
telephone
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
and telegraph lines, constituting all or a portion of a production or
drilling platform located on Mortgaged Properties or used or useful in
the production of Hydrocarbons from Mortgaged Properties.
(d) all proceeds, profits, income, benefits, renewals, extensions,
substitutions and replacements of and to any of the property of such
Obligor described in the preceding clauses of this Section 3 (including,
without limitation, any proceeds of insurance thereon and all causes of
action, claims and warranties now or hereafter held by any Obligor in
respect of any of the items listed above) and, to the extent related to any
property described in said clauses or such proceeds, products and
accessions, all books, correspondence, credit files records, invoices and
other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of
such Obligor or any computer bureau or service company from time to time
acting for such Obligor; and
(e) any property that may from time to time hereafter, by delivery or
by writing of any kind, be subjected to the lien and security interest
hereof by such Obligor or by anyone on such Obligor's behalf.
Section 4. CASH PROCEEDS OF COLLATERAL.
4.01 COLLATERAL ACCOUNT. There was previously established with
the Agent a cash collateral account (the "COLLATERAL ACCOUNT") in the name
and under the control of the Agent into which there shall be deposited from
time to time the cash proceeds of any of the Collateral (including proceeds
of insurance thereon) required to be delivered to the Agent pursuant hereto
and into which the Obligors may from time to time deposit any additional
amounts that any of them wishes to pledge to the Agent for the benefit of the
Banks as additional collateral security hereunder. The balance from time to
time in the Collateral Account shall constitute part of the Collateral
hereunder and shall not constitute payment of the Secured Obligations until
applied as hereinafter provided. Except as expressly provided in the next
sentence, the Agent shall remit the collected balance outstanding to the
credit of the Collateral Account to or upon the order of the respective
Obligor as such Obligor through the Company shall from time to time instruct.
However, at any time following the occurrence and during the continuance of
an Event of Default, the Agent may (and, if instructed by the Banks in
accordance with the Second Amended and Restated Credit Agreement, shall) in
its (or their) discretion apply or cause to be applied (subject to
collection) the balance from time to time outstanding to the credit of the
Collateral Account to the payment of the Secured Obligations in the manner
specified in Section 5.08 hereof. The balance from time to time
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
in the Collateral Account shall be subject to withdrawal only as provided
herein.
4.02 PROCEEDS OF ACCOUNTS. At any time after the occurrence and
during the continuance of an Event of Default, each Obligor shall, upon the
request of the Agent, instruct all account debtors and other Persons
obligated in respect of all Accounts to make all payments in respect of the
Accounts either (a) directly to the Agent (by instructing that such payments
be remitted to a post office box which shall be in the name and under the
control of the Agent) or (b) to one or more other banks in the United States
of America (by instructing that such payments be remitted to a post office
box which shall be in the name and under the control of the Agent) under
arrangements, in form and substance satisfactory to the Agent pursuant to
which such Obligor shall have irrevocably instructed such other bank (and
such other bank shall have agreed) to remit all proceeds of such payments
directly to the Agent for deposit into the Collateral Account. All payments
made to the Agent, as provided in the preceding sentence, shall be
immediately deposited in the Collateral Account. In addition to the
foregoing, each Obligor agrees that, at any time after the occurrence and
during the continuance of an Event of Default, if the proceeds of any
Collateral hereunder (including the payments made in respect of Accounts)
shall be received by it, such Obligor shall, upon the request of the Agent,
as promptly as possible deposit such proceeds into the Collateral Account.
Until so deposited, all such proceeds shall be held in trust by such Obligor
for and as the property of the Agent and shall not be commingled with any
other funds or property of such Obligor.
4.03 INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. Amounts on
deposit in the Collateral Account shall be invested from time to time in such
Permitted Investments as the respective Obligor through the Company (or,
after the occurrence and during the continuance of a Default, the Agent)
shall determine, which Permitted Investments shall be held in the name and be
under the control of the Agent, PROVIDED that (i) at any time after the
occurrence and during the continuance of an Event of Default, the Agent may
(and, if instructed by the Banks in accordance with the Second Amended and
Restated Credit Agreement, shall) in its (or their) discretion at any time
and from time to time elect to liquidate any such Permitted Investments and
to apply or cause to be applied the proceeds thereof to the payment of the
Secured Obligations in the manner specified in Section 5.08 hereof and (ii)
if requested by the respective Obligor through the Company, such Permitted
Investments may be held in the name and under the control of one or more of
the Banks (and in that connection each Bank, pursuant to Section 11.10 of the
Second Amended and Restated Credit Agreement, has agreed that such Permitted
Investments shall be held by such Bank as a collateral sub-agent for the
Agent hereunder).
4.04 COVER FOR LETTER OF CREDIT LIABILITIES. Amounts deposited
into the Collateral Account as cover for Letter of
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
Credit Liabilities under the Second Amended and Restated Credit Agreement
pursuant to Section 2.10(e) or 10 thereof shall be held by the Agent in a
separate sub-account (designated "Letter of Credit Liabilities Sub-Account")
and all amounts held in such sub-account shall constitute collateral security
FIRST for the Letter of Credit Liabilities outstanding from time to time and
SECOND as collateral security for the other Secured Obligations hereunder.
4.05 AUTHORITY TO COLLECT. Until the occurrence of an Event of
Default, each Obligor (i) shall, at its own expense, endeavor to collect, as
and when due, all amounts due to such Obligor with respect to the Collateral,
including the taking of any action with respect to such collection as the
Agent may reasonably request, or, in the absence of such request, as such
Obligor may deem advisable and (ii) may grant, in the ordinary course of
business, to any account debtor, any rebate, refund or allowance to which
such account debtor may lawfully be entitled, and may accept, in connection
therewith, the return of Hydrocarbons, the sale of which shall have given
rise to Accounts.
Section 5. FURTHER ASSURANCES; REMEDIES. In furtherance of the
grant of the pledge and security interest pursuant to Section 3 hereof, the
Obligors hereby jointly and severally agree with each Bank and the Agent as
follows:
5.01 DELIVERY AND OTHER PERFECTION. Each Obligor shall:
(a) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Agent) to create,
preserve, perfect or validate the security interest granted pursuant hereto
or to enable the Agent to exercise and enforce its rights hereunder with
respect to such pledge and security interest, PROVIDED that notices to
account debtors in respect of any Accounts shall be subject to the
provisions of clause (e) below;
(b) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Agent may reasonably require in order to reflect the security
interests granted by this Agreement;
(c) permit representatives of the Agent, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from
its books and records pertaining to the Collateral, and permit
representatives of the Agent to be present at such Obligor's place of
business to receive copies of all communications and remittances relating
to the Collateral, and forward copies of any notices or communications
received by such Obligor with
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
respect to the Collateral, all in such manner as the Agent may require; and
(d) upon the occurrence and during the continuance of any Default,
upon request of the Agent, promptly notify (and such Obligor hereby
authorizes the Agent so to notify) each account debtor in respect of any
Accounts or Instruments that such Collateral has been assigned to the Agent
hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Agent.
5.02 OTHER FINANCING STATEMENTS AND LIENS. Except as otherwise
permitted under Section 9.06 of the Second Amended and Restated Credit
Agreement, without the prior written consent of the Agent (granted with the
authorization of the Banks as specified in Section 12.04 of the Second
Amended and Restated Credit Agreement), no Obligor shall file or suffer to be
on file, or authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Agent is not named as the sole secured party for the
benefit of the Banks.
5.03 PRESERVATION OF RIGHTS. The Agent shall not be required to
take steps necessary to preserve any rights against prior parties to any of
the Collateral.
5.04 EVENTS OF DEFAULT, ETC. During the period during which an
Event of Default shall have occurred and be continuing:
(a) each Obligor shall, at the request of the Agent, assemble the
Collateral owned by it at such place or places, reasonably convenient to
both the Agent and such Obligor, designated in its request;
(b) the Agent may make any reasonable compromise or settlement deemed
desirable with respect to any of the Collateral and may extend the time of
payment, arrange for payment in installments, or otherwise modify the terms
of, any of the Collateral;
(c) the Agent shall have all of the rights and remedies with respect
to the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights
and remedies are asserted) and such additional rights and remedies to which
a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including, without
limitation, the right, to the maximum extent permitted by law, to exercise
all voting, consensual and other powers of ownership pertaining to the
Collateral as if the Agent were the sole and absolute owner thereof (and
each Obligor agrees to take all such action as may be appropriate to give
effect to such right);
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
(d) the Agent in its discretion may, in its name or in the name of
the Obligors or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(e) the Agent may, upon ten business days' prior written notice to
the Obligors of the time and place, with respect to the Collateral or any
part thereof that shall then be or shall thereafter come into the
possession, custody or control of the Agent, the Banks or any of their
respective agents, sell, lease, assign or otherwise dispose of all or any
part of such Collateral, at such place or places as the Agent deems best,
and for cash or for credit or for future delivery (without thereby assuming
any credit risk), at public or private sale, without demand of performance
or notice of intention to effect any such disposition or of the time or
place thereof (except such notice as is required above or by applicable
statute and cannot be waived), and the Agent or any Bank or anyone else may
be the purchaser, lessee, assignee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent permitted
by law, at any private sale) and thereafter hold the same absolutely, free
from any claim or right of whatsoever kind, including any right or equity
of redemption (statutory or otherwise), of the Obligors, any such demand,
notice and right or equity being hereby expressly waived and released. The
Agent may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at
the time and place fixed for the sale, and such sale may be made at any
time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.04 shall be applied in accordance with Section 5.08 hereof.
The Obligors recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Agent may be compelled, with respect to any sale of all
or any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Obligors acknowledge that any such private sales may be at prices and on
terms less favorable to the Agent than those obtainable through a public sale
without such restrictions, and, notwithstanding such circumstances, agree
that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Agent shall have no obligation to
engage in public sales and no obligation to delay the sale of any Collateral
for the period of time necessary to permit the issuer thereof to register it
for public sale.
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
5.05 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.04 hereof are
insufficient to cover the costs and expenses of such realization and the
payment in full of the Secured Obligations, the Obligors shall remain liable
for any deficiency.
5.06 REMOVALS, ETC. Without at least 30 days' prior written
notice to the Agent, no Obligor shall (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its
principal place of business at any place, other than at the address indicated
beneath the signature of the Company to the Second Amended and Restated
Credit Agreement or at one of the locations identified in Annex 1 hereto
under its name or in transit from one of such locations to another or (ii)
change its name, or the name under which it does business, from the name
shown on the signature pages hereto.
5.07 PRIVATE SALE. The Agent and the Banks shall incur no
liability as a result of the sale of the Collateral, or any part thereof, at
any private sale pursuant to Section 5.04 hereof conducted in a commercially
reasonable manner. Each Obligor hereby waives any claims against the Agent
or any Bank arising by reason of the fact that the price at which the
Collateral may have been sold at such a private sale was less than the price
that might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if the Agent accepts the first offer
received and does not offer the Collateral to more than one offeree.
5.08 APPLICATION OF PROCEEDS. Except as otherwise herein
expressly provided and except as provided below in this Section 5.08, the
proceeds of any collection, sale or other realization of all or any part of
the Collateral pursuant hereto, and any other cash at the time held by the
Agent under Section 4 hereof or this Section 5, shall be applied by the Agent:
FIRST, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Agent and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by the Agent in connection
therewith;
NEXT, to the payment in full of the Secured Obligations, in each case
equally and ratably in accordance with the respective amounts thereof then
due and owing or as the Banks holding the same may otherwise agree; and
FINALLY, after payment in full of all of the Secured Obligations and
the termination of the Commitments to the payment to the respective
Obligor, or their respective successors or assigns, or as a court of
competent jurisdiction may direct, of any surplus then remaining.
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
Notwithstanding the foregoing, the proceeds of any cash or other amounts held
in the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.04 hereof shall be applied FIRST to the Letter of
Credit Liabilities outstanding from time to time and SECOND to the other
Secured Obligations in the manner provided above in this Section 5.08.
As used in this Section 5, "PROCEEDS" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions
in kind of, Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of the Obligors or any
issuer of or obligor on any of the Collateral.
5.09 ATTORNEY-IN-FACT. Without limiting any rights or powers
granted by this Agreement to the Agent while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any
Event of Default the Agent is hereby appointed the attorney-in-fact of each
Obligor for the purpose of carrying out the provisions of this Section 5 and
taking any action and executing any instruments that the Agent may deem
necessary or advisable to accomplish the purposes hereof, which appointment
as attorney-in-fact is irrevocable and coupled with an interest. Without
limiting the generality of the foregoing, so long as the Agent shall be
entitled under this Section 5 to make collections in respect of the
Collateral, the Agent shall have the right and power to receive, endorse and
collect all checks made payable to the order of any Obligor representing any
dividend, payment or other distribution in respect of the Collateral or any
part thereof and to give full discharge for the same.
5.10 PERFECTION. Prior to or concurrently with the execution and
delivery of this Agreement, each Obligor shall file such financing statements
and other documents in such offices as the Agent may request to perfect the
security interests granted by Section 3 of this Agreement.
5.11 TERMINATION. When all Secured Obligations shall have been
paid in full and the Commitments of the Banks under the Second Amended and
Restated Credit Agreement and all Letter of Credit Liabilities shall have
expired or been terminated, this Agreement shall terminate, and the Agent
shall forthwith cause to be assigned, transferred and delivered, against
receipt but without any recourse, warranty or representation whatsoever, any
remaining Collateral and money received in respect thereof, to or on the
order of the respective Obligor. The Agent shall also execute and deliver to
the respective Obligor upon such termination such Uniform Commercial Code
termination statements and such other documentation as shall be reasonably
requested by the respective Obligor to effect the termination and release of
the Liens on the Collateral.
5.12 FURTHER ASSURANCES. Each Obligor agrees that, from time to
time upon the written request of the Agent, such
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
Obligor will execute and deliver such further documents and do such other
acts and things as the Agent may reasonably request in order fully to effect
the purposes of this Agreement.
Section 6. MISCELLANEOUS.
6.01 NO WAIVER. No failure on the part of the Agent or any Bank
to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Agent or any Bank of
any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The remedies
herein are cumulative and are not exclusive of any remedies provided by law.
6.02 NOTICES. All notices, requests, consents and demands
hereunder shall be in writing and telexed, telecopied or delivered to the
intended recipient at its "Address for Notices" specified pursuant to Section
12.02 of the Second Amended and Restated Credit Agreement and shall be deemed
to have been given at the times specified in said Section 12.02.
6.03 EXPENSES. The Obligors jointly and severally agree to
reimburse each of the Banks and the Agent for all reasonable costs and
expenses of the Banks and the Agent (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (i) any
Default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (w) performance by the Agent of any obligations of the
Obligors in respect of the Collateral that the Obligors have failed or
refused to perform, (x) bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings, or any actual or attempted sale, or
any exchange, enforcement, collection, compromise or settlement in respect of
any of the Collateral, and for the care of the Collateral and defending or
asserting rights and claims of the Agent in respect thereof, by litigation or
otherwise, including expenses of insurance, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or
proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this Section
6.03, and all such costs and expenses shall be Secured Obligations entitled
to the benefits of the collateral security provided pursuant to Section 3
hereof.
6.04 AMENDMENTS, ETC. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by each
Obligor and the Agent (with the consent of the Banks as specified in Section
12.04 of the Second Amended and Restated Credit Agreement). Any such
amendment or waiver shall be binding upon the Agent and each Bank, each
holder of any of the Secured Obligations and each Obligor.
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of each
Obligor, the Agent, the Banks and each holder of any of the Secured Obligations
(PROVIDED, however, that no Obligor shall assign or transfer its rights
hereunder without the prior written consent of the Agent).
6.06 CAPTIONS. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
6.07 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.08 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
6.09 AGENTS AND ATTORNEYS-IN-FACT. The Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.
6.10 INCONSISTENT PROVISIONS. In the event of any inconsistency
between the provisions of this Agreement and the provisions of the Second
Amended and Restated Credit Agreement, the provisions set forth in the Second
Amended and Restated Credit Agreement shall control.
6.11 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Agent and the
Banks in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the day and year first above
written.
FOREST OIL CORPORATION
By
----------------------------------
Title:
THE CHASE MANHATTAN BANK,
as Agent
By
----------------------------------
Title:
AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
ANNEX 1
LIST OF LOCATIONS
[See Section 5.06]
[Complete for each Obligor:]
[NAME OF OBLIGOR]
ANNEX 1 TO AMENDED AND RESTATED SECURITY AGREEMENT
<PAGE>
EXHIBIT C-1
[Form of Opinion of Vinson & Elkins LLP]
January __, 1997
To the Banks party to the
Second Amended and Restated Credit
Agreement referred to
below and The Chase
Manhattan Bank, as Agent
Ladies and Gentlemen:
We have acted as counsel to Forest Oil Corporation (the "COMPANY") in
connection with the Second Amended and Restated Credit Agreement (the "SECOND
AMENDED AND RESTATED CREDIT AGREEMENT") dated as of January __, 1997, between
the Company, the lenders named therein (the "BANKS") and THE CHASE MANHATTAN
BANK, as agent for the Banks, providing for extensions of credit to be made by
said lenders to the Company in an aggregate amount not exceeding $100,000,000.
Terms defined in the Second Amended and Restated Credit Agreement are used
herein as defined therein.
In rendering the opinion expressed below, we have examined the
originals or conformed copies of such corporate records, agreements and
instruments of the Obligors, certificates of public officials and of officers of
the Obligors, and such other documents and records, and such matters of law, as
we have deemed appropriate as a basis for the opinions hereinafter expressed.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of New York has the
necessary corporate power to make and perform the Second Amended and
Restated Credit Agreement and the Notes and the other Basic Documents and
to borrow under the Credit Agreement. Each Subsidiary (1) of the Company
is a corporation duly incorporated, validly existing and in good standing
under the laws of the respective state indicated opposite its name in
Schedule III to the Second Amended and Restated Credit Agreement. The
Company is duly
- --------------------------
(1) If any Subsidiaries are not incorporated in Delaware New York or Texas,
such Subsidiaries may be excluded from the scope of this opinion.
OPINION OF COUNSEL TO THE OBLIGORS
<PAGE>
-2-
qualified to transact business in the States of Colorado, Louisiana,
Oklahoma, Texas and Wyoming and, to our knowledge, the Company is duly
qualified to transact business in such other jurisdictions, and the
Subsidiaries of the Company are duly qualified to transact business
in all such jurisdictions, where failure so to qualify would have a
material adverse effect on the consolidated financial condition,
operations, business or prospects taken as a whole of the Company and its
Consolidated Subsidiaries.
2. The making and performance by the Company of the Second Amended
and Restated Credit Agreement and the other Basic Documents including the
Notes and the borrowings by the Company under the Second Amended and
Restated Credit Agreement have been duly authorized by all necessary
corporate action, and do not and will not violate any provision of law or
regulation or any provision of the charter or by-laws of the Company or any
Subsidiary of the Company or result in the breach of, or constitute a
default or require any consent under, or (except for the Liens created
pursuant to the Security Documents) result in the creation of any Lien upon
any of the Properties, revenues or assets of the Company or any Subsidiary
of the Company pursuant to certain material documents to be specified.
3. The Second Amended and Restated Credit Agreement, the Notes and
the Security Agreement constitute legal, valid and binding obligations of
the Company enforceable in accordance with their respective terms, except
as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), and except that no opinion
is expressed as to Section 4.07(c) of the Second Amended and Restated
Credit Agreement.
We express no opinion as to (i) whether a Federal or state court
outside of the State of New York would give effect to the choice of New
York law provided for in the Second Amended and Restated Credit Agreement
and the Notes and in the other Basic Documents, (ii) the second sentence of
Section 12.11 of the Amended and Restated Credit Agreement, insofar as such
sentences relate to the subject matter jurisdiction of the United States
District Court for the Southern District of New York to adjudicate any
controversy related to the Second Amended and Restated Credit Agreement or
the Notes or (iii) the waiver of
OPINION OF COUNSEL TO THE OBLIGORS
<PAGE>
-3-
inconvenient forum set forth in Section 12.12 of the Second Amended and
Restated Credit Agreement with respect to proceedings in the United States
District Court for the Southern District of New York. We also wish to
point out that the obligations of the Company under the Second Amended and
Restated Security Agreement may be subject to possible limitations upon the
exercise of remedial or procedural provisions contained in the Second
Amended and Restated Security Agreement, PROVIDED that such limitations
do not, in our opinion, make the remedies and procedures which will be
afforded to the Agent and the Banks inadequate for the practical
realization of the substantive benefits purported to be provided to the
Agent and the Banks by the Second Amended and Restated Security Agreement.
Finally, we wish to point out that provisions of the Basic Documents which
permit the Agent or any Bank to take action or make determinations, or to
benefit from indemnities and similar undertakings of the Company, may be
subject to a requirement that such action be taken or such determinations
be made, and that any action or inaction by the Agent or any Bank which
may give rise to a request for payment under such an undertaking be taken
or not taken, on a reasonable basis and in good faith.
4. There are no legal or arbitral proceedings, and no proceedings by
or before any governmental or regulatory authority or agency, pending or
(to our knowledge) threatened against or affecting the Company or any of
its Subsidiaries, or any Properties or rights of any of the Company or any
of its Subsidiaries, which, if adversely determined, would have a Material
Adverse Effect.
5. No authorizations, consents, approvals, licenses, filings or
registrations with, any governmental or regulatory authority or agency are
required in connection with the execution, delivery or performance by the
Company of the Basic Documents, except the filings and recordings of Liens
to be created pursuant to the Security Documents.
6. The Security Agreement is effective to create, in favor of the
Agent for the benefit of the Banks thereunder, a valid security interest
(to the extent that Article 9 of the Uniform Commercial Code is applicable
thereto) in the right, title and interest of the Company in the Collateral
(as defined in the Security Agreement), as collateral security for the
payment of the Secured Obligations (as so defined), except that the
security interest in Collateral in which the Company acquires rights after
the commencement of a case against it under the Bankruptcy Code will be
limited
OPINION OF COUNSEL TO THE OBLIGORS
<PAGE>
-4-
by Section 552 of the Bankruptcy Code. By virtue of the filings
described in Annex 1 attached hereto, all such security interests which can
be perfected by a Uniform Commercial Code filing in the United States of
America will have been, upon such filings being completed, so perfected.
We express no opinion as to the right, title or interest of the Company in
any of the Collateral.
Very truly yours,
OPINION OF COUNSEL TO THE OBLIGORS
<PAGE>
-5-
EXHIBIT C-2
[Form of Opinion of Corporate Counsel
of the Obligors]
OPINION OF COUNSEL TO THE OBLIGORS
<PAGE>
EXHIBIT D
[Form of Opinion of Special Counsel to Chase]
________, 1995
Each of the Banks party
to the Credit Agreement
referred to below
The Chase Manhattan Bank,
as Agent
for said Banks
1 Chase Manhattan Plaza
New York, New York 10081
Ladies and Gentlemen:
We have acted as special New York counsel to The Chase Manhattan Bank
("CHASE") in connection with (i) the Second Amended and Restated Credit
Agreement (the "CREDIT AGREEMENT") dated as of January ___, 1997, between Forest
Oil Company (the "COMPANY"), the Subsidiary Guarantors party thereto, the
lenders party thereto (the "BANKS") and Chase, in its capacity as agent for the
Banks (the "AGENT"), providing for, among other things, loans to be made by the
Banks to the Company in an aggregate principal amount not exceeding $100,000,000
and (ii) the various other agreements, instruments and other documents referred
to in the next following paragraph. All capitalized terms used but not defined
herein have the respective meanings given to such terms in the Credit Agreement.
This opinion letter is being delivered pursuant to Section 7.01(d) of the Credit
Agreement.
In rendering the opinions expressed below, we have examined the
following (collectively referred to as the "DOCUMENTS"):
(a) the Credit Agreement;
(b) the Notes being delivered concurrently with the delivery of this
opinion; and
(c) the Security Agreement.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity with authentic original documents of all documents submitted to us as
copies.
OPINION OF SPECIAL COUNSEL TO CHASE
<PAGE>
-2-
In rendering the opinions expressed below, we have assumed, with
respect to all of the documents referred to in this opinion letter, that:
(i) such documents have been duly authorized by, have been duly
executed and delivered by, and (except, to the extent set forth
in the opinions expressed below, as to the Obligors) constitute
legal, valid, binding and enforceable obligations of, all of the
parties to such documents;
(ii) all signatories to such documents have been duly authorized; and
(iii) all of the parties to such documents are duly organized and
validly existing and have the power and authority (corporate,
partnership or other) to execute, deliver and perform such
documents.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. Each Document constitutes the legal, valid and binding obligation
of each Obligor party thereto, enforceable against each Obligor party
thereto in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or transfer or other similar laws relating to or affecting the rights of
creditors generally and except as the enforceability of the Documents is
subject to the application of general principles of equity (regardless of
whether considered in a proceeding in equity or at law), including, without
limitation, (a) the possible unavailability of specific performance,
injunctive relief or any other equitable remedy and (b) concepts of
materiality, reasonableness, good faith and fair dealing.
2. The Security Agreement is effective to create, in favor of the
Agent for the benefit of the Agent and the Banks, a valid security interest
under the Uniform Commercial Code as in effect in the State of New York
(the "UCC") in all of the right, title and interest of the Obligors in, to
and under the Collateral as collateral security for the payment when due of
the Secured Obligations, except that:
OPINION OF SPECIAL COUNSEL TO CHASE
<PAGE>
-3-
(a) such security interest will continue in Collateral after its
sale, exchange or other disposition and in any Proceeds thereof only
to the extent provided in Sections 9-306 and 9-307 and 9-308 of the
UCC;
(b) such security interest in any portion of the Collateral in
which an Obligor acquires rights after the commencement of a case
under the Bankruptcy Code in respect of such Obligor may be limited by
Section 552 of the Bankruptcy Code; and
(c) the creation of a security interest in any portion of the
Collateral constituting an Investment Security requires the transfer
thereof to the Agent pursuant to Section 8-313(1) of the UCC.
The foregoing opinions are subject to the following comments and
qualifications:
(A) The enforceability of Section 12.03 of the Credit Agreement (and
any similar provisions in any of the other Documents) may be limited by
laws limiting the enforceability of provisions exculpating or exempting a
party from, or requiring indemnification of a party for, its own action or
inaction, to the extent such action or inaction involves gross negligence,
recklessness or wilful or unlawful conduct.
(B) Clause (iii) of the second sentence of Section 6.02 of the Credit
Agreement may not be enforceable to the extent that the Guaranteed
Obligations are materially modified.
(C) The enforceability of provisions in the Documents to the effect
that terms may not be waived or modified except in writing may be limited
under certain circumstances.
(D) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Bank is located (other than the State of New
York) that limit the interest, fees or other charges such Bank may impose
for the loan or use of money or other credit, (ii) Section 4.07(c) of the
Credit Agreement, (iii) Sections 6.06 and 6.09 of the Credit Agreement,
(iv) the second sentence of Section 12.10 of the Credit Agreement (and any
similar provisions in any of the other Documents), insofar as such sentence
relates to the subject matter jurisdiction of the United States District
OPINION OF SPECIAL COUNSEL TO CHASE
<PAGE>
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Court for the Southern District of New York to adjudicate any controversy
related to the Document and (v) the waiver of inconvenient forum set forth
in Section 12.10 of the Credit Agreement (and any similar provisions in any
of the other Documents) with respect to proceedings in the United States
District Court for the Southern District of New York.
(E) We express no opinion as to the applicability to the obligations
of any Subsidiary Guarantor (or the enforceability of such obligations) of
Section 548 of the Bankruptcy Code, Article 10 of the New York Debtor and
Creditor Law or any other provision of law relating to fraudulent
conveyances, transfers or obligations.
(F) We wish to point out that the obligations of the Obligors, and
the rights and remedies of the Agent, under the Security Agreement and the
Mortgages may be subject to possible limitations upon the exercise of
remedial or procedural provisions contained therein, provided that such
limitations do not, in our opinion (but subject to the other comments and
qualifications set forth in this opinion letter), make the remedies and
procedures that will be afforded to the Agent and the Banks inadequate for
the practical realization of the substantive benefits purported to be
provided to the Agent and the Banks thereby.
(G) With respect to our opinions in paragraph 2 above, we express no
opinion as to the creation of any security interest in (or other lien on)
any portion of the Collateral (i) to the extent that, pursuant to
Section 9-104 of the UCC, Article 9 of the UCC does not apply thereto or
(ii) consisting of Uncertificated Securities issued by a corporation
organized under any laws other than the laws of the State of New York.
(H) We express no opinion as to the existence of, or the right, title
or interest of any Obligor in, to or under, any of the Collateral.
(I) Except as expressly provided in paragraph 2 above, we express no
opinion as to the creation, perfection or priority of any security interest
in, or other lien on, the Collateral.
The foregoing opinions are limited to matters involving the Federal
laws of the United States of America and the law of the State of New York, and
we do not express any opinion as to the laws of any other jurisdiction.
OPINION OF SPECIAL COUNSEL TO CHASE
<PAGE>
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At the request of our clients, this opinion letter is provided to you
by us in our capacity as special New York counsel to Chase, and this opinion
letter may not be relied upon by any Person for any purpose other than in
connection with the transactions contemplated by the Credit Agreement without,
in each instance, our prior written consent.
Very truly yours,
JRR/TDB
OPINION OF SPECIAL COUNSEL TO CHASE
<PAGE>
EXHIBIT E
[Form of Mortgage]
<PAGE>
EXHIBIT F
[Form of Pledge Agreement]
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of ________ __, 1997 between FOREST OIL
CORPORATION, a corporation duly organized and validly existing under the laws
of the State of New York (the "COMPANY"); each of the Subsidiaries of the
Company identified under the captions "SUBSIDIARY PLEDGORS" on the signature
pages hereof (individually, a "SUBSIDIARY PLEDGOR" and, collectively, the
"SUBSIDIARY PLEDGORS" and, together with the Company, the "PLEDGORS"); and
THE CHASE MANHATTAN BANK, as agent for the lenders or other financial
institutions or entities party, as lenders, to the Credit Agreement referred
to below (in such capacity, together with its successors in such capacity,
the "AGENT").
The Company, certain Subsidiary Guarantors, certain lenders and the
Agent are parties to a Second Amended and Restated Credit Agreement dated as
of January __, 1997 (as modified and supplemented and in effect from time to
time, the "SECOND AMENDED AND RESTATED CREDIT AGREEMENT"), providing, subject
to the terms and conditions thereof, for extensions of credit (by making of
loans and issuing of letters of credit) to be made by said lenders to the
Company in an aggregate principal or face amount not exceeding $100,000,000.
To induce said lenders to enter into the Second Amended and
Restated Credit Agreement and to extend credit thereunder, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Pledgor has agreed to pledge and grant a security interest
in the Collateral (as hereinafter defined) as security for the Secured
Obligations (as so defined). Accordingly, the parties hereto agree as
follows:
Section 1. DEFINITIONS. Terms defined in the Second Amended and
Restated Credit Agreement are used herein as defined therein. In addition,
as used herein:
"COLLATERAL" shall have the meaning ascribed thereto in Section 3
hereof.
"COLLATERAL ACCOUNT" shall have the meaning ascribed thereto in
Section 4.01 hereof.
AMENDED AND RESTATED PLEDGE AGREEMENT
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"ISSUERS" shall mean, collectively, the respective corporations
identified beneath the names of the Pledgors on Annex 1 hereto under the
caption "ISSUER".
"PLEDGED STOCK" shall have the meaning ascribed thereto in
Section 3(a) hereof.
"SECURED OBLIGATIONS" shall mean, collectively, (a) the principal of
and interest on the Loans made by the Banks to, and the Note(s) held by
each Bank of, the Company and all other amounts from time to time owing to
the Banks or the Agent by the Pledgors under the Basic Documents including,
without limitation, all Reimbursement Obligations and interest thereon,
(b) all obligations of the Subsidiary Guarantors under the Second Amended
and Restated Credit Agreement and the other Basic Documents (c) all
obligations of the Obligors to the Banks under any Commodity Hedging
Agreements or Interest Rate Protection Agreements and (d) all obligations
of the Pledgors to the Banks and the Agent hereunder.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect from time to time in the State of New York.
Section 2. REPRESENTATIONS AND WARRANTIES. Each Pledgor
represents and warrants to the Banks and the Agent that:
(a) Such Pledgor is the sole beneficial owner of the Collateral in
which it purports to grant a security interest pursuant to Section 3 hereof
and no Lien exists or will exist upon such Collateral at any time (and no
right or option to acquire the same exists in favor of any other Person),
except for Liens permitted under Section 9.06 of the Second Amended and
Restated Credit Agreement and except for the pledge and security interest
in favor of the Agent for the benefit of the Banks created or provided for
herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of such Collateral.
(b) The Pledged Stock represented by the certificates identified
under the name of such Pledgor in Annex 1 hereto is, and all other Pledged
Stock in which such Pledgor shall hereafter grant a security interest
pursuant to Section 3 hereof will be, duly authorized, validly existing,
fully paid and non-assessable and none of such Pledged Stock is or will be
subject to any contractual restriction, or any restriction under the
charter or by-laws of the respective Issuer of such Pledged Stock, upon the
transfer of such Pledged Stock (except for any such restriction contained
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
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herein or in the Second Amended and Restated Credit Agreement).
(c) The Pledged Stock represented by the certificates identified
under the name of such Pledgor in Annex 1 hereto constitutes all of the
issued and outstanding shares of capital stock of any class of the Issuers
beneficially owned by such Pledgor on the date hereof (whether or not
registered in the name of such Pledgor) and said Annex 1 correctly
identifies, as at the date hereof, the respective Issuers of such Pledged
Stock, the respective class and par value of the shares comprising such
Pledged Stock and the respective number of shares (and registered owners
thereof) represented by each such certificate.
Section 3. THE PLEDGE. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations, each Pledgor hereby pledges and grants
to the Agent, for the benefit of the Banks as hereinafter provided, a
security interest in all of such Pledgor's right, title and interest in the
following property, whether now owned by such Pledgor or hereafter acquired
and whether now existing or hereafter coming into existence (all being
collectively referred to herein as "COLLATERAL"):
(a) the shares of [common/preferred] stock of the Issuers represented
by the certificates identified in Annex 1 hereto under the name of such
Pledgor and all other shares of capital stock of whatever class of the
Issuers, now or hereafter owned by such Pledgor, in each case together with
the certificates evidencing the same (collectively, the "PLEDGED STOCK");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of such Pledgor under any
provision prohibiting such action hereunder or under the Second Amended and
Restated Credit Agreement, in the event of any consolidation or merger in
which an Issuer
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
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is not the surviving corporation, all shares of each class of the capital
stock of the successor corporation (unless such successor corporation is
such Pledgor itself) formed by or resulting from such consolidation or
merger;
(d) the balance from time to time in the Collateral Account; and
(e) all proceeds of and to any of the property of such Pledgor
described in the preceding clauses of this Section 3 (including, without
limitation, all causes of action, claims and warranties now or hereafter
held by any Pledgor in respect of any of the items listed above) and, to
the extent related to any property described in said clauses or such
proceeds, all books, correspondence, credit files, records, invoices and
other papers.
Section 4. CASH PROCEEDS OF COLLATERAL.
4.01 COLLATERAL ACCOUNT. There was previously established with
the Agent a cash collateral account (the "COLLATERAL ACCOUNT") in the name
and under the control of the Agent into which there shall be deposited from
time to time the cash proceeds of any of the Collateral required to be
delivered to the Agent pursuant hereto and into which the Pledgors may from
time to time deposit any additional amounts that any of them wishes to pledge
to the Agent for the benefit of the Banks as additional collateral security
hereunder. The balance from time to time in the Collateral Account shall
constitute part of the Collateral hereunder and shall not constitute payment
of the Secured Obligations until applied as hereinafter provided. Except as
expressly provided in the next sentence, the Agent shall remit the collected
balance outstanding to the credit of the Collateral Account to or upon the
order of the respective Pledgor as such Pledgor through the Company shall
from time to time instruct. However, at any time following the occurrence
and during the continuance of an Event of Default, the Agent may (and, if
instructed by the Banks as specified in Section 11.03 of the Second Amended
and Restated Credit Agreement, shall) in its (or their) discretion apply or
cause to be applied (subject to collection) the balance from time to time
outstanding to the credit of the Collateral Account to the payment of the
Secured Obligations in the manner specified in Section 5.09 hereof. The
balance from time to time in the Collateral Account shall be subject to
withdrawal only as provided herein. In addition to the foregoing, each
Pledgor agrees that if the proceeds of any Collateral hereunder shall be
received by it, such Pledgor shall
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
-5-
as promptly as possible deposit such proceeds into the Collateral Account.
Until so deposited, all such proceeds shall be held in trust by such Pledgor
for and as the property of the Agent and shall not be commingled with any
other funds or property of such Pledgor.
4.02 INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. Amounts on
deposit in the Collateral Account shall be invested from time to time in such
Permitted Investments as the respective Pledgor through the Company (or,
after the occurrence and during the continuance of a Default, the Agent)
shall determine, which Permitted Investments shall be held in the name and be
under the control of the Agent, PROVIDED that (i) at any time after the
occurrence and during the continuance of an Event of Default, the Agent may
(and, if instructed by the Banks as specified in Section 11.03 of the Second
Amended and Restated Credit Agreement, shall) in its (or their) discretion at
any time and from time to time elect to liquidate any such Permitted
Investments and to apply or cause to be applied the proceeds thereof to the
payment of the Secured Obligations in the manner specified in Section 5.09
hereof and (ii) if requested by the respective Pledgor through the Company,
such Permitted Investments may be held in the name and under the control of
one or more of the Banks (and in that connection each Bank, pursuant to
Section 11.10 of the Second Amended and Restated Credit Agreement) has agreed
that such Permitted Investments shall be held by such Bank as a collateral
sub-agent for the Agent hereunder).
4.03 COVER FOR LETTER OF CREDIT LIABILITIES. Amounts deposited
into the Collateral Account as cover for Letter of Credit Liabilities under
the Second Amended and Restated Credit Agreement pursuant to Section 2.10(e)
and Section 10 thereof shall be held by the Agent in a separate sub-account
(designated "Letter of Credit Liabilities Sub-Account") and all amounts held
in such sub-account shall constitute collateral security FIRST for the Letter
of Credit Liabilities outstanding from time to time and SECOND as collateral
security for the other Secured Obligations hereunder.
Section 5. FURTHER ASSURANCES; REMEDIES. In furtherance of the
grant of the pledge and security interest pursuant to Section 3 hereof, the
Pledgors hereby jointly and severally agree with each Bank and the Agent as
follows:
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
-6-
5.01 DELIVERY AND OTHER PERFECTION. Each Pledgor shall:
(a) if any of the shares, securities, moneys or property required to
be pledged by such Pledgor under clauses (a), (b) and (c) of Section 3
hereof are received by such Pledgor, forthwith either (x) transfer and
deliver to the Agent such shares or securities so received by such Pledgor
(together with the certificates for any such shares and securities duly
endorsed in blank or accompanied by undated stock powers duly executed in
blank), all of which thereafter shall be held by the Agent, pursuant to the
terms of this Agreement, as part of the Collateral or (y) take such other
action as the Agent shall deem necessary or appropriate to duly record the
Lien created hereunder in such shares, securities, moneys or property in
said clauses (a), (b) and (c);
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Agent) to create,
preserve, perfect or validate the security interest granted pursuant hereto
or to enable the Agent to exercise and enforce its rights hereunder with
respect to such pledge and security interest, including, without
limitation, causing any or all of the Collateral to be transferred of
record into the name of the Agent or its nominee (and the Agent agrees that
if any Collateral is transferred into its name or the name of its nominee,
the Agent will thereafter promptly give to the respective Pledgor copies of
any notices and communications received by it with respect to the
Collateral pledged by such Pledgor hereunder);
(c) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Agent may reasonably require in order to reflect the security
interests granted by this Agreement; and
(d) permit representatives of the Agent, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from
its books and records pertaining to the Collateral, and permit
representatives of the Agent to be present at such Pledgor's place of
business to receive copies of all communications and remittances relating
to the Collateral, and forward copies of any notices or communications
received by such Pledgor with
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
-7-
respect to the Collateral, all in such manner as the Agent may require.
5.02 OTHER FINANCING STATEMENTS AND LIENS. Except as otherwise
permitted under Section 9.06 of the Second Amended and Restated Credit
Agreement, without the prior written consent of the Agent (granted with the
authorization of the Banks as specified in Section 11.09 of the Second
Amended and Restated Credit Agreement), no Pledgor shall file or suffer to be
on file, or authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Agent is not named as the sole secured party for the
benefit of the Banks.
5.03 PRESERVATION OF RIGHTS. The Agent shall not be required to
take steps necessary to preserve any rights against prior parties to any of
the Collateral.
5.04 COLLATERAL.
(1) The Pledgors will cause the Collateral to constitute at all
times [100%] of the total number of shares of each class of capital stock of
each Issuer then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Pledgors shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral for all
purposes not inconsistent with the terms of this Agreement, the Second
Amended and Restated Credit Agreement, the Notes or any other instrument or
agreement referred to herein or therein, PROVIDED that the Pledgors jointly
and severally agree that they will not vote the Collateral in any manner that
is inconsistent with the terms of this Agreement, the Second Amended and
Restated Credit Agreement, the Notes or any such other instrument or
agreement; and the Agent shall execute and deliver to the Pledgors or cause
to be executed and delivered to the Pledgors all such proxies, powers of
attorney, dividend and other orders, and all such instruments, without
recourse, as the Pledgors may reasonably request for the purpose of enabling
the Pledgors to exercise the rights and powers that they are entitled to
exercise pursuant to this Section 5.04(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Pledgors shall be entitled to receive and retain any
dividends on the Collateral paid in cash out of earned surplus.
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
-8-
(4) If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the Agent or any
Bank exercises any available right to declare any Secured Obligation due and
payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement, the Second Amended and Restated
Credit Agreement, the Notes or any other agreement relating to such Secured
Obligation, all dividends and other distributions on the Collateral shall be
paid directly to the Agent and retained by it in the Collateral Account as
part of the Collateral, subject to the terms of this Agreement, and, if the
Agent shall so request in writing, the Pledgors jointly and severally agree
to execute and deliver to the Agent appropriate additional dividend,
distribution and other orders and documents to that end, PROVIDED that if
such Event of Default is cured, any such dividend or distribution theretofore
paid to the Agent shall, upon request of the Pledgors (except to the extent
theretofore applied to the Secured Obligations), be returned by the Agent to
the Pledgors.
5.05 EVENTS OF DEFAULT, ETC. During the period during which an
Event of Default shall have occurred and be continuing:
(a) the Agent shall have all of the rights and remedies with respect
to the Collateral of a secured party under the Uniform Commercial Code
(whether or not said Code is in effect in the jurisdiction where the rights
and remedies are asserted) and such additional rights and remedies to which
a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including, without
limitation, the right, to the maximum extent permitted by law, to exercise
all voting, consensual and other powers of ownership pertaining to the
Collateral as if the Agent were the sole and absolute owner thereof (and
each Pledgor agrees to take all such action as may be appropriate to give
effect to such right);
(b) the Agent in its discretion may, in its name or in the name of
the Pledgors or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(c) the Agent may, upon ten business days' prior written notice to
the Pledgors of the time and place, with respect to the Collateral or any
part thereof that shall then be or shall thereafter come into the
possession,
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
-9-
custody or control of the Agent, the Banks or any of their respective
agents, sell, lease, assign or otherwise dispose of all or any part of
such Collateral, at such place or places as the Agent deems best, and for
cash or for credit or for future delivery (without thereby assuming any
credit risk), at public or private sale, without demand of performance or
notice of intention to effect any such disposition or of the time or place
thereof (except such notice as is required above or by applicable statute
and cannot be waived), and the Agent or any Bank or anyone else may be the
purchaser, lessee, assignee or recipient of any or all of the Collateral so
disposed of at any public sale (or, to the extent permitted by law, at any
private sale) and thereafter hold the same absolutely, free from any claim
or right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Pledgors, any such demand, notice and
right or equity being hereby expressly waived and released. The Agent may,
without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05 shall be applied in accordance with Section 5.09 hereof.
The Pledgors recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Agent may be compelled, with respect to any sale of all
or any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Pledgors acknowledge that any such private sales may be at prices and on
terms less favorable to the Agent than those obtainable through a public sale
without such restrictions, and, notwithstanding such circumstances, agree
that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Agent shall have no obligation to
engage in public sales and no obligation to delay the sale of any Collateral
for the period of time necessary to permit the respective Issuer or issuer
thereof to register it for public sale.
5.06 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
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Section 5.05 hereof are insufficient to cover the costs and expenses of such
realization and the payment in full of the Secured Obligations, the Pledgors
shall remain liable for any deficiency.
5.07 REMOVALS, ETC. Without at least 30 days' prior written
notice to the Agent, no Pledgor shall (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its
principal place of business at any place other than at the address indicated
beneath the signature of the Company to the Second Amended and Restated
Credit Agreement or (ii) change its name, or the name under which it does
business, from the name shown on the signature pages hereto.
5.08 PRIVATE SALE. The Agent and the Banks shall incur no
liability as a result of the sale of the Collateral, or any part thereof, at
any private sale pursuant to Section 5.05 hereof conducted in a commercially
reasonable manner. Each Pledgor hereby waives any claims against the Agent
or any Bank arising by reason of the fact that the price at which the
Collateral may have been sold at such a private sale was less than the price
that might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if the Agent accepts the first offer
received and does not offer the Collateral to more than one offeree.
5.09 APPLICATION OF PROCEEDS. Except as otherwise herein
expressly provided and except as provided below in this Section 5.09, the
proceeds of any collection, sale or other realization of all or any part of
the Collateral pursuant hereto, and any other cash at the time held by the
Agent under Section 4 hereof or this Section 5, shall be applied by the Agent:
FIRST, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Agent and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by the Agent in connection
therewith;
NEXT, to the payment in full of the Secured Obligations, in each case
equally and ratably in accordance with the respective amounts thereof then
due and owing or as the Banks holding the same may otherwise agree; and
FINALLY, to the payment to the respective Pledgor, or their respective
successors or assigns, or as a court of
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
-11-
competent jurisdiction may direct, of any surplus then remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held
in the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.03 hereof shall be applied FIRST to the Letter of
Credit Liabilities outstanding from time to time and SECOND to the other
Secured Obligations in the manner provided above in this Section 5.09.
As used in this Section 5, "PROCEEDS" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions
in kind of, Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of the Pledgors or any
issuer of or obligor on any of the Collateral.
5.10 ATTORNEY-IN-FACT. Without limiting any rights or powers
granted by this Agreement to the Agent while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any
Event of Default the Agent is hereby appointed the attorney-in-fact of each
Pledgor for the purpose of carrying out the provisions of this Section 5 and
taking any action and executing any instruments that the Agent may deem
necessary or advisable to accomplish the purposes hereof, which appointment
as attorney-in-fact is irrevocable and coupled with an interest. Without
limiting the generality of the foregoing, so long as the Agent shall be
entitled under this Section 5 to make collections in respect of the
Collateral, the Agent shall have the right and power to receive, endorse and
collect all checks made payable to the order of any Pledgor representing any
dividend, payment or other distribution in respect of the Collateral or any
part thereof and to give full discharge for the same.
5.11 PERFECTION. Prior to or concurrently with the execution and
delivery of this Agreement, each Pledgor shall deliver to the Agent all
certificates identified in Annex 1 hereto, accompanied by undated stock
powers duly executed in blank.
5.12 TERMINATION. When all Secured Obligations shall have been
paid in full and the Commitments of the Banks under the Second Amended and
Restated Credit Agreement and all Letter of Credit Liabilities shall have
expired or been terminated, this Agreement shall terminate, and the Agent
shall forthwith cause to be assigned, transferred and delivered, against
receipt but without any recourse, warranty or representation whatsoever, any
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
-12-
remaining Collateral and money received in respect thereof, to or on the
order of the respective Pledgor.
5.13 FURTHER ASSURANCES. Each Pledgor agrees that, from time to
time upon the written request of the Agent, such Pledgor will execute and
deliver such further documents and do such other acts and things as the Agent
may reasonably request in order fully to effect the purposes of this
Agreement.
Section 6. MISCELLANEOUS.
6.01 NO WAIVER. No failure on the part of the Agent or any Bank
to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Agent or any Bank of
any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The remedies
herein are cumulative and are not exclusive of any remedies provided by law.
6.02 NOTICES. All notices, requests, consents and demands
hereunder shall be in writing and telexed, telecopied or delivered to the
intended recipient at its "Address for Notices" specified pursuant to Section
12.02 of the Second Amended and Restated Credit Agreement and shall be deemed
to have been given at the times specified in said Section 12.02.
6.03 EXPENSES. The Pledgors jointly and severally agree to
reimburse each of the Banks and the Agent for all reasonable costs and
expenses of the Banks and the Agent (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (i) any
Default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (w) performance by the Agent of any obligations of the
Pledgors in respect of the Collateral that the Pledgors have failed or
refused to perform, (x) bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings, or any actual or attempted sale, or
any exchange, enforcement, collection, compromise or settlement in respect of
any of the Collateral, and for the care of the Collateral and defending or
asserting rights and claims of the Agent in respect thereof, by litigation or
otherwise, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the
workout, restructuring or transaction contemplated thereby is consummated)
and (ii) the
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
-13-
enforcement of this Section 6.03, and all such costs and expenses shall be
Secured Obligations entitled to the benefits of the collateral security
provided pursuant to Section 3 hereof.
6.04 AMENDMENTS, ETC. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by each
Pledgor and the Agent (with the consent of the Banks as specified in Section
11.09 of the Second Amended and Restated Credit Agreement). Any such
amendment or waiver shall be binding upon the Agent and each Bank, each
holder of any of the Secured Obligations and each Pledgor.
6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of each
Pledgor, the Agent, the Banks and each holder of any of the Secured
Obligations (PROVIDED, however, that no Pledgor shall assign or transfer its
rights hereunder without the prior written consent of the Agent).
6.06 CAPTIONS. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
6.07 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
6.08 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
6.09 AGENTS AND ATTORNEYS-IN-FACT. The Agent may employ agents
and attorneys-in-fact in connection herewith and shall not be responsible for
the negligence or misconduct of any such agents or attorneys-in-fact selected
by it in good faith.
6.10 INCONSISTENT PROVISIONS. In the event of any inconsistency
between the provisions of this Agreement and the provisions of the Second
Amended and Restated Credit Agreement, the provisions set forth in the Second
Amended and Restated Credit Agreement shall control.
6.11 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
-14-
remain in full force and effect in such jurisdiction and shall be liberally
construed in favor of the Agent and the Banks in order to carry out the
intentions of the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any
other jurisdiction.
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
-15-
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered as of the day and year first
above written.
FOREST OIL CORPORATION
By
-------------------------------------
Title:
SUBSIDIARY PLEDGORS
[SUBSIDIARY PLEDGOR]
By
-------------------------------------
Title:
[SUBSIDIARY PLEDGOR]
By
-------------------------------------
Title:
[SUBSIDIARY PLEDGOR]
By
-------------------------------------
Title:
THE CHASE MANHATTAN BANK,
as Agent
By
-------------------------------------
Title:
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
-16-
AMENDED AND RESTATED PLEDGE AGREEMENT
<PAGE>
ANNEX 1
PLEDGED STOCK
[See Section 2(b) and (c)]
[Complete for each Pledgor:]
[NAME OF PLEDGOR]
CERTIFICATE REGISTERED
ISSUER NOS. OWNER NUMBER OF SHARES
- ------ ----------- ---------- ----------------
[Issuer #1] shares of
------------ ------------ ------------
[common/preferred]
stock, [no] par
value [$ ]
------------
[Issuer #2] shares of
------------ ------------ ------------
[common/preferred]
stock, [no] par
value [$ ]
------------
[Issuer #3] shares of
------------ ------------ ------------
[common/preferred]
stock, [no] par
value [$ ]
------------
ANNEX 1 TO PLEDGE AGREEMENT
<PAGE>
EXHIBIT G
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Second Amended and Restated Amended and Restated Credit Agreement
dated as of January __, 1997 (the "SECOND AMENDED AND RESTATED
CREDIT AGREEMENT"), between Forest Oil Corporation (the
"COMPANY"), the Subsidiary Guarantors, the lenders named therein
and The Chase Manhattan Bank, as Agent.
Dear Ladies and Gentlemen:
As a Bank party to the Second Amended and Restated Credit
Agreement, we have agreed with the Company pursuant to Section 12.13 of the
Second Amended and Restated Credit Agreement to use reasonable precautions to
keep confidential, except as otherwise provided therein, all non-public
information identified by the Company or any of its Subsidiaries as being
confidential at the time the same is delivered to us pursuant to the Second
Amended and Restated Credit Agreement.
As provided in said Section 12.13, we are permitted to provide you,
as a prospective [holder of a participation in the Loans (as defined in the
Second Amended and Restated Credit Agreement)] [assignee Bank], with certain
of such non-public information subject to the execution and delivery by you,
prior to receiving such non-public information, of a Confidentiality
Agreement in this form. Such information will not be made available to you
until your execution and return to us of this Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on
behalf of yourself and each of your affiliates, directors, officers,
employees and representatives) that (A) such information will not be used by
you except in connection with the proposed [participation][assignment]
mentioned above and (B) you shall use reasonable precautions, in accordance
with your customary procedures for handling confidential information and in
CONFIDENTIALITY AGREEMENT
<PAGE>
-2-
accordance with safe and sound banking practices, to keep such information
confidential, PROVIDED that nothing herein shall limit the disclosure of any
such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to your counsel or to counsel for any of the Banks or
the Agent, (iii) to bank examiners, auditors or accountants, (iv) to the
Agent or any other Bank, (v) in connection with any litigation to which you
or any one or more of the Banks or the Agent are a party, (vi) to a
subsidiary or affiliate of yours as provided in Section 12.13(a) of the
Second Amended and Restated Credit Agreement (provided that you shall not
disclose any non-public information delivered pursuant to this
Confidentiality Agreement to any subsidiary of your which is generally
engaged in securities business other than in connection with (x) Commodity
Hedging Agreements or Interest Rate Protection Agreements permitted pursuant
to Section 9.08(f) of the Second Amended and Restated Credit Agreement or (y)
the syndication or participation of the Commitments, Loans or Letter of
Credit Interests under the Second Amended and Restated Credit Agreement
without the prior written consent of the Company) or (vii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee
or participant (or prospective assignee or participant) first executes and
delivers to you a Confidentiality Agreement substantially in the form hereof;
PROVIDED, FURTHER, that (x) unless specifically prohibited by applicable law
or court order, you agree, prior to disclosure thereof, to notify the Company
of any request for disclosure of any such non-public information (A) by any
governmental agency or representative thereof (other than any such request in
connection with an examination of your financial condition by such
governmental agency) or (B) pursuant to legal process and (y) that in no
event shall you be obligated to return any materials furnished to you
pursuant to this Confidentiality Agreement.
CONFIDENTIALITY AGREEMENT
<PAGE>
-3-
Please indicate your agreement to the foregoing by signing as provided
below the enclosed copy of this Confidentiality Agreement and returning the
same to us.
Very truly yours,
[INSERT NAME OF BANK]
By
-----------------------------------
The foregoing is agreed to
as of the date of this letter.
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By
-----------------------------------
CONFIDENTIALITY AGREEMENT
<PAGE>
EXECUTION COPY
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of August 19, 1997 between 3189503 Canada
Ltd., a corporation duly organized and validly existing under the laws of
Canada ("3189503"), and The Chase Manhattan Bank, a New York Bank, as agent
for the Banks (in such capacity, together with its successors in such
capacity, the "AGENT").
RECITALS
1. Forest Oil Corporation, a corporation duly organized under the laws
of the state of New York (the "COMPANY"), each of the Subsidiaries of the
Company that becomes a guarantor pursuant to Section 9.16 of the Second
Amended and Restated Credit Agreement (as herein defined) (individually, a
"SUBSIDIARY GUARANTOR" and collectively, the "SUBSIDIARY GUARANTORS" and,
together with the Company, the "OBLIGORS"), the Banks and the Agent are
parties to a Second Amended and Restated Credit Agreement dated as of January
31, 1997, as amended by Amendment No. 1 and Waiver dated April 1, 1997 and
Amendment No. 2 dated August 19, 1997 (as modified and supplemented or further
restated and in effect from time to time, the "SECOND AMENDED AND RESTATED
CREDIT AGREEMENT"), providing, subject to the terms and conditions thereof,
for extensions of credit (by making loans and issuing letters of credit) by
the Banks to the Company in an aggregate principal or face amount not
exceeding $130,000,000.
2. Amendment No. 2 to the Second Amended and Restated Credit Agreement
provides for a global U.S. and Canadian borrowing structure for the Company
and its Subsidiaries and increases the amounts available to Funding Co. under
the Funding Credit Agreement and to Canadian Forest Oil, Producers Marketing
and the Subsidiary Borrowers under the Canadian Forest Oil Credit Agreement.
3. 3189503 is a Wholly Owned Subsidiary of the Company.
4. All of the issued and outstanding shares of Canadian Forest Oil, a
corporation duly organized under the laws of Alberta, an indirect Wholly
Owned Subsidiary of the Company, are currently directly held by 3189503.
5. 3189503 will benefit from the result of Amendment No. 2 to the
Second Amended and Restated Credit Agreement as a result of the increased
credit available to Canadian Forest Oil and as a result of other benefits to
the Company and its subsidiaries.
6. To induce the Banks and the Agent to enter into the Second Amended
and Restated Credit Agreement and to extend credit thereunder and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, 3189503 has agreed to pledge and grant to the Banks a
security interest in certain of the shares of Canadian Forest Oil and the
other Collateral (as herein defined) as security for the Secured Obligations
(as herein defined). Accordingly, the parties hereto agree as follows:
PLEDGE AGREEMENT
<PAGE>
-2-
SECTION 1
DEFINITIONS
Unless otherwise defined, terms defined in the Second Amended and
Restated Credit Agreement are used herein as defined therein. Notwithstanding
the preceding sentence, defined terms used in Section 2 of this Pledge
Agreement and defined in the Canadian Forest Oil Credit Agreement (as defined
in the Second Amended and Restated Credit Agreement) shall have herein the
meanings ascribed thereto therein. In addition, as used herein:
"NEW YORK UCC" shall mean the NEW YORK UNIFORM COMMERCIAL CODE as
in effect from time to time in the State of New York.
"COLLATERAL" shall have the meaning ascribed thereto in Section 3
hereof.
"COLLATERAL ACCOUNT" shall have the meaning ascribed thereto in
Section 4.1 hereof.
"PLEDGED STOCK" shall have the meaning ascribed thereto in Section
3(a) hereof.
"SECURED OBLIGATIONS" shall mean the principal of and interest on
the Loans made by the Banks and all other amounts (including, without
limitation, Reimbursement Obligations) from time to time owing to, and
obligations to be performed in favour of the Banks by the Company under the
Second Amended and Restated Credit Agreement, the Notes and under any of
the other Basic Documents (any reborrowings, future advances, readvances,
modifications, extensions, substitutions, exchanges and renewals shall
enjoy the same priority as the initial advances evidenced by the Notes),
and the obligations to be performed in favour of the Banks by the Company
under any Commodity Hedging Agreements or Interest Rate Protection
Agreements (as those terms are defined in the Second Amended and Restated
Credit Agreement).
SECTION 2
REPRESENTATIONS AND WARRANTIES
3189503 represents and warrants to the Agent and the Banks that:
2.1 CORPORATE EXISTENCE. Each of 3189503 and its Subsidiaries: (a) is
a corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation; (b) has all requisite corporate power,
and, subject to the provisions in the Sale Agreement (as defined in the
Canadian Forest Oil Credit Agreement) relating to "Constrained Gas Marketing
Agreements", has all material governmental licenses, authorizations, consents
and approvals necessary to own its assets and carry on its business as now being
or as proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure to so qualify would (either
individually or in the aggregate) have a material adverse effect on the
consolidated financial condition, operations, business or prospects taken as
a whole of 3189503 and its consolidated Subsidiaries.
PLEDGE AGREEMENT
<PAGE>
-3-
2.2 LITIGATION. Except as disclosed are in writing to the Banks and
the Agent prior to the date hereof, there are no legal or arbitral
proceedings or any proceedings by or before any governmental or regulatory
authority or agency, now pending or (to the knowledge of 3189503) threatened
against 3189503 or any of its Subsidiaries that, if adversely determined,
could (either individually or in the aggregate) have a material adverse
effect on the consolidated financial condition, operations, business or
prospects taken as a whole of 3189503 and its consolidated Subsidiaries.
2.3 NO BREACH. None of the execution and delivery of this Pledge
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result
in a breach of, or require any consent under, the organizational documents of
3189503, or any applicable law or regulation, or any order, writ, injunction
or decree of any court or governmental authority or agency, or any agreement
or instrument to which 3189503 or any of its Subsidiaries is a party or by
which any of them is bound or to which any of them is subject, or constitute
a default under any such agreement or instrument, or (except for Liens
created pursuant to the Security Documents) result in the creation or
imposition of any Lien upon any of the revenues or assets of 3189503 or any
of its Subsidiaries pursuant to the terms of any such agreement or instrument.
2.4 CORPORATE ACTION. 3189503 has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Pledge
Agreement; the execution, delivery and performance by 3189503 of this Pledge
Agreement have been duly authorized by all necessary corporate action on its
part (including without limitation, any required shareholder approvals); and
this Pledge Agreement has been duly and validly executed and delivered by
3189503 and constitutes its legal, valid and binding obligations, enforceable
in accordance with its terms, except as such enforceability may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or similar laws of
general applicability affecting the enforcement of creditors' rights and (b)
the application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
2.5 APPROVALS. No authorizations, approvals or consents of (including
any exchange control approval), and no filings or registrations with, any
governmental or regulatory authority or agency, or any securities exchange
are necessary for the execution, delivery or performance by 3189503 of this
Pledge Agreement or for the validity or enforceability hereof except for
filings and recordings in respect of Liens created herein.
2.6 TAXES. 3189503 and its Subsidiaries have filed all Canadian
federal income tax returns required to be filed pursuant to the INCOME TAX
ACT (Canada) and all other material tax returns that are required to be filed
by 3189503 and its Subsidiaries and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by 3189503 or any of its
Subsidiaries. The charges, accruals and reserves on the books of 3189503 and
its Subsidiaries in respect of taxes and other governmental charges are, in
the opinion of 3189503, adequate. Except as disclosed in writing to the
Banks and the Agent prior to August 19, 1997, 3189503 has not given or been
requested to give a waiver of the statute of limitations relating to the
payment of any taxes or other impositions.
PLEDGE AGREEMENT
<PAGE>
-4-
2.7 LEGAL FORM. This Pledge Agreement is in proper legal form under
the laws of the State of New York and the laws of the United States of
America applicable therein for the enforcement thereof against 3189503 under
such laws. All formalities required in the State of New York and the laws of
the United States of America and the laws of Canada applicable therein for
the validity and enforceability of this Pledge Agreement (including, without
limitation, any necessary registration, recording or filing with any court or
other authority in New York or the United States of America) have been
accomplished, and no Taxes are required to be paid and no notarization is
required for the validity and enforceability thereof.
2.8 RANKING. This Pledge Agreement and the obligations evidenced
hereby are and will at all times be direct and unconditional general
obligations of the 3189503, and rank and will at all times rank in right of
payment and otherwise at least PARI PASSU with all unsecured Indebtedness of
3189503, whether now existing or hereafter outstanding. There exists no Lien
(including any Lien arising out of any attachment, judgment or execution),
other than (i) inchoate Liens arising by operation of law or statute, or (ii)
as permitted by the Second Amended and Restated Credit Agreement, the Funding
Credit Agreement and the Canadian Forest Oil Credit Agreement, nor any
segregation or other preferential arrangement of any kind, on, in or with
respect to any of the Property or revenues of any Subsidiaries of 3189503.
2.9 COMMERCIAL ACTIVITY. 3189503 is subject to civil and commercial
law with respect to its obligations under this Pledge Agreement. The
execution, delivery and performance by 3189503 of this Pledge Agreement
constitute private and commercial acts rather than public or governmental
acts. 3189503 is not, nor is any of its Properties or revenues, entitled to
any right of immunity in any jurisdiction from suit, court jurisdiction,
judgment, attachment (whether before or after judgment), set-off or execution
or a judgment or from any other legal process or remedy relating to the
obligations of 3189503 under this Pledge Agreement.
2.10 PLEDGED STOCK; NEGATIVE PLEDGE STOCK.
(a) 3189503 is the sole legal and beneficial owner of all of the common
stock of Canadian Forest Oil and the other Collateral and, upon the release
by Chase Canada of the pledge of such common stock in favor of Chase Canada
pursuant to the Third Security Confirmation, Amendment and Supplemental
Debenture Agreement dated as of August 19, 1997 among Chase Canada, the
Lender, Canadian Forest Oil, the Company, ProMark and 3189503 (the
"Confirmation Agreement"), concurrent with the effectiveness of this
Agreement, no Lien, other than inchoate Liens arising by operation of law or
statute, exists or will exist upon such common stock or the other collateral
at any time (and no right or option to acquire the same exists in favour of
any other Person), except, in the case of the Collateral for the pledge and
security interests in favour of the Banks created or provided for herein,
which pledge and security interest constitute a first priority perfected
pledge and security interest in and to all of the Collateral.
(b) The Pledged Stock represented by certificate No. 2 is, and all
other Pledged Stock in which 3189503 shall hereafter grant a security
interest pursuant to Section 3 hereof will be, duly authorized, validly
existing, fully paid and non-assessable and none of such Pledged Stock is or
will be subject to any contractual restriction, or any restriction under the
charter or by-laws of Canadian Forest Oil, upon the transfer of such Pledged
Stock (except for any such restriction contained herein).
PLEDGE AGREEMENT
<PAGE>
-5-
(c) The authorized capital stock of Canadian Forest Oil is one class of
shares, designated as "Common Shares", in an unlimited number.
(d) The Pledged Stock represented by certificate No. 2 constitutes
sixty-six (66) of the one hundred (100) issued and outstanding common shares
in the capital stock of Canadian Forest Oil legally and beneficially owned by
3189503 on the date hereof and the only other shares in the capital stock of
outstanding on the date hereof are the thirty-four (34) issued and
outstanding common shares of represented by certificate No. 3 (the "Negative
Pledge Stock").
(e) No person, firm or corporation has any agreement or option or any
right or privilege (whether by law, preemptive or contractual) capable of
becoming an agreement or option for the purchase or for the subscription and
issue of any unissued shares in the capital of Canadian Forest Oil.
(f) Upon the release by Chase Canada of the pledge of such common
stock in favour of Chase Canada pursuant to the Confirmation Agreement
concurrent with the effectiveness of this Agreement, 3189503 is not a party
to any agreement relating to any of the Pledged Stock or the Negative Pledge
Stock except as permitted by the Second Amended and Restated Credit Agreement
and this Agreement.
2.11 INVESTMENT COMPANY ACT. 3189503 is not an "investment company", or
a company "controlled" by and "investment company", within the meaning of the
INVESTMENT COMPANY ACT of 1940, as amended.
2.12 PUBLIC UTILITY HOLDING COMPANY ACT. 3189503 is not a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary company"
of a "holding company", within the meaning of the PUBLIC UTILITY HOLDING
COMPANY ACT of 1935, as amended.
The representations and warranties herein set forth or contained in any
certificates or documents delivered to the Banks or the Agent pursuant hereto
shall not merge in or be prejudiced by and shall survive any act done
pursuant hereto or to the Second Amended and Restated Credit Agreement and
shall continue in full force and effect so long as any amount is owing,
contingent or otherwise, by the Company to the Agent.
SECTION 3
THE PLEDGE
3.1 As continuing collateral security for the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) of the
Secured Obligations, 3189503 hereby pledges and grants to the Agent for the
benefit of the Banks as hereinafter provided a security interest in all of
3189503's right, title and interest in the following property, whether now
owned by 3189503 or hereafter acquired and whether now existing or hereafter
coming into existence (all being collectively referred to herein as
"COLLATERAL"):
PLEDGE AGREEMENT
<PAGE>
-6-
(a) Sixty-six (66) shares of common stock of Canadian Forest Oil,
without par value, represented by certificate No. 2 owned by 3189503,
together with the certificate(s) evidencing the same (collectively, the
"PLEDGED STOCK");
(b) all shares, securities, moneys or property representing a dividend
on any of the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the Pledged Stock, or resulting from a
split-up, revision, reclassification or other like change of the Pledged
Stock or otherwise received in exchange therefor, and any subscription
warrants, rights or options issued to the holders of, or otherwise in
respect of, the Pledged Stock;
(c) without affecting the obligations of 3189503 under any provision
prohibiting such action hereunder, in the event of any consolidation or merger
in which Canadian Forest Oil is not the surviving corporation, 66% of the
shares of each class of the capital stock of the successor corporation
(unless such successor corporation is 3189503 itself) formed by or resulting
from such consolidation or merger received in exchange or consideration for
the Pledged Stock;
(d) the balance from time to time in the Collateral Account; and
(e) all proceeds of and to any of the property of 3189503 described in
the preceding clauses of this Section 3 (including, without limitation, all
causes of action, claims and warranties now or hereafter held by 3189503 in
respect of any of the items listed above) and, to the extent related to any
property described in said clauses or such proceeds, all books,
correspondence, credit files, records, invoices and other papers.
SECTION 4
CASH PROCEEDS OF COLLATERAL
4.1 COLLATERAL ACCOUNT. The Agent shall be entitled, when in its sole
discretion it considers doing so advantageous to it at any time during the
term hereof (including in the course of realizing on the pledge, security
interest and lien hereof), to establish a cash collateral account at the
Agent (the "COLLATERAL ACCOUNT") in the name and under the control of the
Agent, into which there shall be deposited from time to time the cash
proceeds of any of the Collateral required to be delivered to the Banks
pursuant hereto and into which 3189503 may from time to time deposit any
additional amounts that it wishes to pledge to the Banks as additional
collateral security hereunder. The balance from time to time in the
Collateral Account shall constitute part of the Collateral hereunder and
shall not constitute payment of the Secured Obligations until applied as
hereinafter provided. Except as expressly provided in the next sentence, the
Banks shall direct the Agent to remit the collected balance outstanding to
the credit of the Collateral Account to or upon the order of 3189503 as
3189503 shall from time to time instruct. However, at any time following the
occurrence and during the continuance of an Event of Default, the Banks may
in their discretion apply or cause to be applied (subject to collection) the
balance from time to time outstanding to the credit of the Collateral Account
to the payment of the Secured Obligations in the manner specified in Section
6.9 hereof. The balance from time to time in the Collateral Account shall be
subject to withdrawal only as provided herein. In addition to the foregoing,
3189503 agrees that if the proceeds of any Collateral hereunder shall be
received by it, 3189503 shall as promptly as possible deposit such proceeds
into the Collateral Account. Until
PLEDGE AGREEMENT
<PAGE>
-7-
so deposited, all such proceeds shall be held in trust by 3189503 for and as
the property of the Banks and shall not be commingled with any other funds or
property of 3189503.
4.2 INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. Amounts on deposit in
the Collateral Account shall be invested from time to time in such Permitted
Investments as 3189503 (or, after the occurrence and during the continuance of
a Default, the Banks) shall determine, which Permitted Investments shall be
held in the name and be under the control of the Banks, PROVIDED that at any
time after the occurrence and during the continuance of an Event of Default,
the Banks may in their discretion at any time and from time to time elect to
liquidate any such Permitted Investments and to apply or cause to be applied
the proceeds thereof to the payment of the Secured Obligations in the manner
specified in Section 6.9 hereof.
SECTION 5
COVENANTS
3189503 agrees that, until the payment and satisfaction in full of
the Secured Obligations and the expiration or termination of the Commitments
and all Letter of Credit Liabilities under the Second Amended and Restated
Credit Agreement:
5.1 FINANCIAL STATEMENTS. 3189503 shall deliver to the Banks and the
Agent (in the case of clauses (a) and (b) below only to the extent financial
statements are not delivered by Canadian Forest Oil under Section 8.01 of the
Canadian Forest Oil Credit Agreement):
(a) as soon as available and in any event within 60 days after the end
of each quarterly fiscal period of each fiscal year of 3189503, consolidated
and consolidating statements of income, retained earnings and cash flows of
3189503 and its consolidated Subsidiaries for such period and for the period
from the beginning of the respective fiscal year to the end of such period,
and the related consolidated and consolidating balance sheets of 3189503 and
its consolidated Subsidiaries as at the end of such period, setting forth in
each case in comparative form the corresponding consolidated and
consolidating figures for the corresponding periods in the preceding fiscal
year (except that, in the case of balance sheets, such comparison shall be to
the last day of the prior fiscal year), accompanied by a certificate of a
senior financial officer of 3189503, which certificate shall state that said
financial statements fairly present in all material respects the consolidated
financial condition and results of operations of 3189503 and its consolidated
Subsidiaries, and said consolidating financial statements fairly represent in
all material respects the respective individual unconsolidated financial
condition and results of operations of 3189503 and of each of its
consolidated Subsidiaries, in each case in accordance with generally accepted
accounting principles, consistently applied, as at the end of, and for, such
period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 100 days after the end
of each fiscal year of 3189503, consolidated and consolidating statements of
income, retained earnings and cash flows of 3189503 and its consolidated
Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of 3189503 and its consolidated Subsidiaries as
at the end of such fiscal year, setting forth in each case in comparative
form the corresponding consolidated and consolidating figures for the
preceding fiscal year, and accompanied (i) in the
PLEDGED AGREEMENT
<PAGE>
-8-
case of said consolidated statements and balance sheet of 3189503, by an
opinion thereon of independent chartered accountants of recognized national
standing, which opinion shall state that said consolidated financial
statements fairly present in all material respects the consolidated financial
condition and results of operations of 3189503 and its consolidated
Subsidiaries as at the end of, and for, such fiscal year in accordance with
generally accepted accounting principles, and (ii) the case of said
consolidating statements and balance sheets, by a certificate of a senior
financial officer of 3189503, which certificate shall state that said
consolidating financial statements fairly present in all material respects
the respective individual unconsolidated financial condition and results of
operations of 3189503 and of each of its consolidated Subsidiaries, in each
case in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such fiscal year;
(c) promptly upon their becoming available, copies all prospectuses,
registration statements and regular periodic reports, if any, that 3189503
shall have filed with any securities commission in Canada having jurisdiction
or any Canadian or United States national securities exchange;
(d) promptly upon the mailing thereof to the public shareholders of
3189503 generally, if any, or to holders of Indebtedness of 3189503
generally, copies of all financial statements, reports and proxy statements
so mailed; and
(e) from time to time such other information regarding the financial
condition, operations, business or prospects of 3189503 or any of its
Subsidiaries as the Banks or the Agent may reasonably request (to the extent
such information is not provided pursuant to Section 9.01 of the Second
Amended and Restated Credit Agreement).
5.2 LITIGATION. 3189503 will promptly give to the Banks and the Agent
notice of all legal or arbitral proceedings, and of all proceedings by or
before any governmental or regulatory authority or agency, affecting 3189503
or any of its Subsidiaries (unless a notice of such proceeding has been given
to the Banks and the Agent pursuant to Section 9.02 of the Second Amended and
Restated Credit Agreement) except proceedings that, if adversely determined,
would not (either individually or in the aggregate) have a material adverse
effect on the consolidated financial condition, operations, business or
prospects taken as a whole of 3189503 and its consolidated Subsidiaries.
5.3 CORPORATE EXISTENCE, ETC. 3189503 will, and will cause each of its
Subsidiaries (except as otherwise permitted by the Second Amended and
Restated Credit Agreement) to: preserve and maintain its corporate existence
and all of its material rights, privileges and franchises; comply with the
requirements of all applicable laws, rules, regulations and orders of
governmental or regulatory authorities if failure to comply with such
requirements could (either individually or in the aggregate) materially and
adversely affect the consolidated financial condition, operations, business
or prospects taken as a whole of 3189503 and its consolidated Subsidiaries;
pay and discharge all taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its property prior to
the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good
faith and by proper proceedings and against which adequate reserves are being
maintained; maintain all of its properties used or useful in its business in
good working order and
PLEDGE AGREEMENT
<PAGE>
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condition, ordinary wear and tear excepted; and keep insured by financially
sound and reputable insurers all property of a character usually insured by
corporations engaged in the same or similar business similarly situated
against loss or damage of the kinds and in the amounts customarily insured
against by such corporations and carry such other insurance as is usually
carried by such corporations.
5.4 LINES OF BUSINESS. 3189503 will not engage in any business other
than the ownership of the common stock of and activities reasonably related
thereto.
5.5 NEGATIVE PLEDGE (SALE). 3189503 will not sell, transfer, grant any
option or any other right to acquire or otherwise dispose of the Negative
Pledge Stock or enter any agreement to do so. Without limiting the
generality of the foregoing, 3189503 will deliver to the Agent the shares of
Canadian Forest Oil represented by certificate No. 3 which constitute all of
the Negative Pledge Stock. For certainty, the Negative Pledge Stock is not
subject to the security interests created hereby and does not form part of
the Collateral. Upon request by 3189503 in writing, the Agent shall return
the Negative Pledge Stock to 3189503.
5.6 NO NEW SHARES, ETC. 3189503 shall ensure that Canadian Forest Oil
does not issue any new shares, cancel or repurchase any of its shares or
change its capitalization in any other manner.
SECTION 6
FURTHER ASSURANCES; REMEDIES
In furtherance of the pledge and security interest granted pursuant
to Section 3 hereof, 3189503 hereby agrees with the Agent and the Banks as
follows:
6.1 DELIVERY AND OTHER PERFECTION. 3189503 shall:
(a) if any of the shares, securities, moneys or property required to be
pledged by 3189503 under clauses (a), (b) and (c) of Section 3 hereof are
received by 3189503, forthwith either (x) transfer and deliver to the Agent
such shares or securities so received by 3189503 (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers of attorney duly executed in blank), all
of which thereafter shall be held by the Agent, pursuant to the terms of this
Pledge Agreement, as part of the Collateral or (y) take, without limiting the
rights of 3189503 under Section 6.4(c) hereof, such other action as the Agent
or the Banks shall deem necessary or appropriate to duly record the Lien
created hereunder in such shares, securities, moneys or property in said
clauses (a), (b) and (c);
(b) give, execute, deliver, file and/or record any financing statement,
notice, instrument, document, agreement or other papers that may be necessary
or desirable (in the judgement of the Agent or the Banks) to create,
preserve, perfect or validate the security interest granted pursuant hereto
or to enable the Agent or the Banks to exercise and enforce their rights
hereunder with respect to such pledge and security interest, including,
without limitation, if so requested by the Banks or the Agent, causing any or
all of the Collateral to be transferred of
PLEDGE AGREEMENT
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-10-
record into the name of the Banks or their nominee, (and the Banks agree that
if any Collateral is transferred into their name or the name of their
nominee, the Banks will thereafter promptly give 3189503 copies of any
notices and communications received by them with respect to the Collateral);
(c) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such manner
as the Agent or the Banks may reasonably require in order to reflect the
security interests granted by this Pledge Agreement; and
(d) permit representatives of the Banks and the Agent, upon reasonable
notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, and permit
representatives of the Banks and the Agent, to be present at 3189503's place
of business to receive copies of all communications and remittances relating
to the Collateral, and forward copies of any notices or communications
received by 3189503 with respect to the Collateral, all in such manner as the
Agent or the Banks may require.
Without limiting the generality of the foregoing, 3189503 agrees that it will
promptly obtain from time to time at its own expense all such governmental
licenses, authorizations, consents, permits and approvals as may be required
for 3189503 to (a) comply with its obligations, and preserve its rights
under, this Pledge Agreement and (b) maintain the existence, priority and
perfection of the Liens purported to be created and continued hereunder.
6.2 OTHER FINANCING STATEMENTS AND LIENS. Without the prior written
consent of the Banks, 3189503 shall not file or suffer to be on file (other
than any filing by a Person in Alberta, filed without the consent of
3189503), or authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with respect to the
Collateral or any other common stock of Canadian Forest Oil in which the
Banks (or the Agent as assignee of the Banks) is not named as the sole
secured party. 3189503 shall use reasonable efforts to discharge any
financing statements filed without 3189503's consent in Alberta.
6.3 PRESERVATION OF RIGHTS. Neither the Banks nor the Agent shall be
required to take steps necessary to preserve any rights against prior parties
to any of the Collateral.
6.4 COLLATERAL.
(a) 3189503 will cause the Collateral to constitute at all times 66% of
the total number of shares of each class of capital stock of Canadian Forest
Oil then outstanding.
(b) So long as no Event of Default shall have occurred and be
continuing, 3189503 shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral for all purposes
not inconsistent with the terms of this Pledge Agreement, the Second Amended
and Restated Agreement, the Notes, or any other instrument or agreement
referred to herein or therein, PROVIDED that 3189503 agrees that it will not
vote the Collateral in any manner that is inconsistent with the terms of this
Pledge Agreement, the Second Amended and Restated Agreement, the Notes or any
such other instrument or agreement; and the Banks shall execute and deliver
to 3189503 or cause to be executed and delivered to 3189503 all such proxies,
powers of attorney, dividend and other orders, and all such instruments,
PLEDGE AGREEMENT
<PAGE>
-11-
without recourse, as 3189503 may reasonably request for the purpose of
enabling 3189503 to exercise the rights and powers that it is entitled to
exercise to this Section 6.4(b).
(c) Unless and until an Event of Default has occurred and is
continuing, 3189503 shall be entitled to receive and retain any dividends on
the Collateral (i) paid in cash out of earned surplus or (ii) paid in shares
of common stock of, provided such shares of common stock are pledged to the
Banks in accordance with Section 3(b).
(d) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Banks or the Agent
exercises any available right to declare any Secured Obligation due and
payable or seek or pursue any other relief or remedy available to them under
applicable law or under this Pledge Agreement, the Second Amended and
Restated Credit Agreement, the Notes, or any other agreement relating to such
Secured Obligation, all dividends and other distributions on the Collateral
shall be paid directly to the Agent on behalf of the Banks and retained by it
in the Collateral Accounts as part of the Collateral, subject to the terms of
this Pledge Agreement, and, if the Agent or the Banks shall so request in
writing, 3189503 agrees to execute and deliver to the Agent on behalf of the
Banks appropriate additional dividend, distribution and other orders and
documents to that end, PROVIDED that if such Event of Default is cured, any
such dividend or distribution theretofore paid to the Agent on behalf of the
Banks shall, upon request of 3189503 (except to the extent theretofore
applied to the Secured Obligations), be returned by the Agent or the Banks,
as the case may be, to 3189503.
6.5 EVENTS OF DEFAULT, ETC. During the period during which an Event of
Default shall have occurred and be continuing:
(a) The Banks shall have all of the rights and remedies with respect to
the Collateral of a secured party under the New York UCC (whether or not said
New York UCC is in effect in the jurisdiction where the rights and remedies
are asserted) and such additional rights and remedies to which a secured
party is entitled under the laws in effect in any jurisdiction where any
rights and remedies hereunder may be asserted, including, without limitation,
the right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral as if
the Banks were the sole and absolute owners thereof (and 3189503 agrees to
take all such actions as may be appropriate to give effect to such right);
(b) The Agent or the Banks in their discretion may, in their name or in
the name of 3189503 or otherwise, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to do
so; and
(c) The Banks may, upon 10 Business Days' prior written notice to
3189503 of the time and place, with respect to the Collateral or any part
thereof that shall then be or shall thereafter come into the possession,
custody or control of the Agent or the Banks or any of their agents or
assignees, sell, lease, assign or otherwise dispose of all or any part of
such Collateral, at such place or places as the Agent or the Banks deem best,
and for cash or for credit or for future delivery (without thereby assuming
any credit risk), at public or private sale, without demand of performance or
notice of intention to effect any such disposition or of the time or place
thereof (except such notice as is required above or by applicable statute and
cannot be
PLEDGE AGREEMENT
<PAGE>
-12-
waived), and the Agent, the Banks, their assignees hereunder or anyone else
may be the purchaser, lessee, assignee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent permitted by
law, at any private sale) and thereafter hold the same absolutely, free from
any claim or right of whatsoever kind, including any right or equity of
redemption (statutory or otherwise), of 3189503, any such demand, notice and
right or equity being hereby expressly waived and released. The Banks may,
without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
6.5 shall be applied in accordance with Section 6.9 hereof.
3189503 recognizes that, by reason of certain prohibitions contained in
Canadian federal and provincial securities laws, the UNITED STATES SECURITIES
ACT of 1933, as amended, and applicable state securities laws, the Agent and
the Banks may be compelled, with respect to any sale of all or any part of
the Collateral, to limit purchasers to those who will agree, among other
things, to acquire the Collateral for their own account, for investment and
not with a view to the distribution or resale thereof. 3189503 acknowledges
that any such private sales may be at prices and on terms less favourable to
the Banks than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that the Agent and the Banks shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit or the issuer thereof to register it for
public sale.
6.6 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 6.5 hereof are
insufficient to cover the costs and expenses of such realization and the
payment in full of the Secured Obligations, 3189503 shall remain liable for
any deficiency.
6.7 REMOVALS, ETC. Without at least 30 days' prior written notice to
the Banks and the Agent, 3189503 shall not (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its
principal place of business at any place other than at the address indicated
beneath its signature hereto or (ii) change its corporate name, or the name
under which it does business, from the name shown on the signature pages
hereto.
6.8 PRIVATE SALE. The Agent, the Banks and their assignees hereunder
shall incur no liability as a result of the sale of the Collateral, or any
part thereof, at any private sale pursuant to Section 6.5 hereof conducted in
a commercially reasonable manner. 3189503 hereby waives any claims against
the Agent, the Banks and their assignees hereunder arising by reason of the
fact that the price at which the Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a
public sale or was less than the aggregate amount of the Secured Obligations,
even if the Agent on behalf of the Banks accept the first offer received and
do not offer the Collateral to more than one offeree.
PLEDGE AGREEMENT
<PAGE>
-13-
6.9 APPLICATION OF PROCEEDS. Except as otherwise herein expressly
provided and except as provided below in this Section 6.9, the proceeds of
any collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Agent or the
Banks under Section 4 hereof or this Section 6, shall be applied by the Agent
or the Banks:
FIRST, the payment of the costs and expenses of such collection, sale or
other realization, including reasonable out-of-pocket costs and expenses
of the Agent or the Banks and the reasonable fees and expenses of their
agents and counsel, and all expenses incurred and advances made by the
Agent or the Bank in connection therewith;
NEXT, to the payment in full of the Secured Obligations, in each case
equally and ratably in accordance with the respective amounts thereof
then due and owing or as the Agent or the Banks may otherwise agree; and
FINALLY, to the payment to 3189503, or its successors or assigns, or as
a court of competent jurisdiction may direct, or any surplus then
remaining.
As used in this Section 6, "PROCEEDS" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in
kind of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of 3189503 or any issuer of or obligor on
any of the Collateral.
6.10 ATTORNEY-IN-FACT. Without limiting any rights or powers granted by
this Agreement to Agent while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Agent is hereby appointed the attorney-in-fact with full powers
of substitution of 3189503 for the purpose of carrying out the provisions of
this Section 6 and taking any action and executing any instruments that the
Banks may deem necessary or advisable to accomplish the purposes hereof,
which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, (a) so long as
the Agent and Banks shall be entitled under this Section 6 to make collections
in respect of the collateral, the Agent and Banks shall have the right and
power to receive, endorse and collect all checks made payable to the order of
3189503 representing any dividend, payment or other distribution in respect
of the Collateral or any part thereof and to give full discharge for the same
and (b) the Agent, as assignee of the Banks, as described in Section ?
hereof, or such Person as the Agent shall designate, shall act as such
attorney-in-fact.
The attorney-in-fact for 3189503 shall have full power to endorse
or transfer, or both the Pledged Stock or any of them to the Agent, its
nominees or transferees, and the Agent and its nominees or transferees are
hereby empowered to exercise all rights and powers and to perform all acts of
ownership with respect to the Pledged Stock to the same extent as 3189503
might do, and any consequent outlay and expense shall be payable by 3189503 on
demand with interest at the per annum rate of interest from time to time in
effect under the Second Amended and Restated Credit Agreement. The power of
attorney herein granted is in addition to and not
PLEDGE AGREEMENT
<PAGE>
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in substitution of, any stock power of attorney delivered by 3189503 with
delivery of the Pledged Stock, and such powers and attorney may be relied
upon by Banks and the Agent severally or in combination.
6.11 PERFECTION. Prior to or concurrently with the execution and
delivery of this Pledge Agreement, 3189503 shall deliver to the Banks all
certificates identified in Section 3(a) and 2.10(d) hereof, accompanied in
the case of the Pledged Stock by undated stock powers of attorney duly
executed in blank.
6.12 TERMINATION. When all Secured Obligations shall have been paid in
full and the Commitments under the Second Amended and Restated Credit
Agreement and all Letter of Credit Liabilities shall have expired or been
terminated, this Pledge Agreement shall terminate, and the Banks shall
forthwith cause to be assigned, transferred and delivered, against receipt
but without any recourse, warranty or representation whatsoever, any
remaining Collateral and money received in respect thereof, to or on the
order of 3189503.
6.13 FURTHER ASSURANCES. 3189503 agrees that, from time to time upon
the written request of the Banks or the Agent, 3189503 will execute and
deliver such further documents and do such other acts and things as the Banks
or the Agent may reasonably request in order fully to effect the purposes of
this Pledge Agreement.
SECTION 7
NEGATIVE PLEDGE
7.1 NEGATIVE PLEDGE. 3189503 shall not create, grant, assume or suffer
to exist any mortgage, lien, charge, pledge, security interest or
encumbrances on the Pledged Stock or the Negative Pledge Stock other than
created pursuant to this Pledge Agreement as amended, modified, supplemented
and restated from time to time.
SECTION 8
MISCELLANEOUS
8.1 NO WAIVER. No failure on the part of the Banks to exercise, and no
course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by the Banks of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. The remedies herein are cumulative and are
not exclusive of any remedies provided by law.
8.2 NOTICES. All notices, requests, consents and demands hereunder
shall be in writing and telexed, telecopied or delivered to the intended
recipient at the "Address for Notices" specified beneath its name on the
signature pages hereof or, as to either party, at such other address as shall
be designated by such party in a notice to the other party. Except as
otherwise
PLEDGE AGREEMENT
<PAGE>
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provided in this Pledge Agreement, all such communications shall be deemed to
have been duly given when transmitted by telex or telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case
given or addressed as aforesaid.
8.3 EXPENSES. 3189503 agrees to reimburse the Agent and the Banks an
amount equal to the amount the Banks owe under the Second Amended and
Restated Credit Agreement for all reasonable costs and expenses of the Banks
and the Agent under the Second Amendment and Restated Credit Agreement
(including, without limitation, the reasonable fees and expenses of legal
counsel) in connection with (i) any Default and any enforcement or collection
proceeding resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (w) performance by the Banks or
the Agent of any obligations of 3189503 in respect of the Collateral that
3189503 has failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any
actual or attempted sale, or any exchange, enforcement, collection,
compromise or settlement in respect of any of the Collateral, and for the
care of the Collateral and defending or asserting rights and claims of the
Banks or the Agent in respect thereof, by litigation or otherwise, (y)
judicial or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 8.3, and all such costs and expenses shall be Secured
Obligations entitled to the benefits of the collateral security provided
pursuant to Section 3 hereof.
8.4 AMENDMENTS, ETC. The terms of this Pledge Agreement may be waived,
altered or amended only by an instrument in writing duly executed by 3189503
and the Agent (with the prior written consent of the Banks as specified in
Section 12.04 of the Second Amended and Restated Credit Agreement). Any such
amendment or waiver shall be binding upon the Agent, the Banks, each holder
of any of the Secured Obligations and 3189503.
8.5 SUCCESSORS AND ASSIGNS.
This Pledge Agreement shall be binding upon and inure to the benefit
of the respective successors and assigns of 3189503, the Agent, the Banks and
each holder of any of the Secured Obligations (PROVIDED, however, that
3189503 shall not assign and transfer its rights hereunder without the prior
written consent of the Agent with the prior written consent of the Agent).
8.6 CAPTIONS. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Pledge Agreement.
8.7 COUNTERPARTS. This Pledge Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Pledge Agreement
by signing any such counterpart.
8.8 GOVERNING LAW. This Pledge Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
PLEDGE AGREEMENT
<PAGE>
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8.9 JURISDICTION, SERVICE OF PROCESS AND VENUE.
(a) Each party hereto hereby agrees that any suit, action or proceeding
with respect to this Pledge Agreement or any judgment entered by any court in
respect thereof may be brought the courts of the State of New York or the
federal courts of the United States of America sitting in the Borough of
Manhattan of the City of New York; and each party hereto hereby irrevocably
submits to the jurisdiction of such courts for the purpose of any such suit,
action, proceeding or judgement. Each party hereto further submits, for the
purpose of any such suit, action, proceeding or judgment brought or rendered
against it, to the appropriate courts of the jurisdiction of its domicile.
(b) Nothing herein shall in any way be deemed to limit the ability of
the Banks or the Agent to serve any such writs, process or summonses in any
other manner permitted by applicable law or to obtain jurisdiction over
3189503 in such other jurisdictions, and in such manner, as may be permitted
by applicable law.
(c) 3189503 hereby irrevocably waives any objection that it may now or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Pledge Agreement or any other Basic
Document brought in the State of New York, and hereby further irrevocably
waives any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
8.10 JUDGMENT CURRENCY. THis is an international loan transaction in
which the specification of Canadian Dollars or U.S. Dollars is of the
essence, and the stipulated Currency shall be the Currency of account and
payment in all instances. A payment obligation in one Currency hereunder
(the "ORIGINAL CURRENCY") shall not be discharged by an amount paid in
another Currency (the "OTHER CURRENCY"), whether pursuant to any judgment
expressed in or converted into any Other Currency or in another place except
to the extent that such tender or recovery results in the effective receipt
by the Agent or the Banks of the full amount of the Original Currency payable
to the Bank under this Pledge Agreement. If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due hereunder in the
Original Currency into the Other Currency, the rate of exchange that shall be
applied shall be that at which, in accordance with normal banking procedures,
the Bank's could purchase Original Currency at the Principal Office with the
Other Currency on the Business Day next preceding the day on which such
judgment is rendered. The Obligation of 3189503 in respect of any such sum
due from it to the Banks or the Agent (in this Section 8.10 called an
"ENTITLED PERSON") shall, notwithstanding the rate of exchange actually
applied in rendering such judgment, be discharged only to the extent that on
the Business Day following receipt by such Entitled Person of any sum
adjudged to be due hereunder in the Other Currency such Entitled Person may
in accordance with normal banking procedures purchase and transfer the
Original Currency in Toronto with the amount of the judgment currency so
adjudged to be due; and 3189503 hereby, as a separate obligation and
notwithstanding any such judgment, agrees to indemnify such Entitled Person
against, and to pay such Entitled Person on demand, in the Original Currency,
the amount (if any) by which the sum originally due to such Entitled Person
in the Original Currency hereunder exceeds the amount of the Other Currency
so purchased and transferred.
PLEDGE AGREEMENT
<PAGE>
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8.11 AGENTS AND ATTORNEYS-IN-FACT. The Agent and the Banks may employ
agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
8.12 SEVERABILITY. If any provision hereof is invalid and unenforceable
in any jurisdiction, then, to the fullest extent permitted by law, (i) the
other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favour of the Agent and the
Banks in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
8.13 ATTACHMENT. 3189503 acknowledges that:
(a) value has been given;
(b) 3189503 has rights in the Pledged Stock; and
(c) the time of attachment of the security interest created and
continued by this Pledge Agreement, to the extent that such attachment may be
held by a court of competent jurisdiction to be governed by the laws of
Alberta, shall be the time of receipt of the Pledged Stock by the Agent at
its address set forth on the signature page hereto.
814. RECEIPT. 3189503 acknowledges receipt of the duplicate original
hereof and waives its rights to receive a copy of any financing, financing
change or other registration statement resulting from any registration of
this Pledge Agreement or any verification statement issued with respect
thereto where such waiver is not otherwise prohibited by law.
PLEDGE AGREEMENT
<PAGE>
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered as of the day and year first
above written.
3189503 CANADA, LTD.
By: /s/ Kenneth B. Potter
------------------------------------
Kenneth B. Potter
Secretary
Address for Notices:
3189503 Canada Ltd.
c/o Canadian Forest Oil Ltd.
600-800 Sixth Avenue, S.W.
Calgary, Alberta T2P 3G3 Canada
Attention: Vice President-Finance
with a copy to:
Forest Oil Corporation
Suite 2200, 1600 Broadway
Denver, CO 80202 USA
Attention: Vice President and Treasurer
THE CHASE MANHATTAN BANK
AS AGENT
By: /s/ Mary Jo Woodford
----------------------------------
Mary Jo Woodford
Vice President
Address for Notices:
The Chase Manhattan Bank
One Chase Manhattan Plaza
Eighth Floor
New York, New York 10081
Ph: (212) 552-7953
Fax: (212) 552-5658
Attention: Agency Services, Sandra Miklave
PLEDGE AGREEMENT
<PAGE>
EXECUTION COPY
GUARANTEE
THIS GUARANTEE (this "GUARANTEE") dated as of August 19, 1997 is executed
and delivered by FOREST OIL CORPORATION, a corporation duly organized and
validly existing under the laws of the State of New York ("GUARANTOR"), to
THE CHASE MANHATTAN BANK OF CANADA, as Administrative Agent ("ADMINISTRATIVE
AGENT") for itself and the Lenders (as defined in the hereinafter identified
Second Amended and Restated Credit Agreement) under the Second Amended and
Restated Credit Agreement (as hereinafter defined).
ARTICLE 1
SECTION 1.1 DEFINITIONS. As used in this Guarantee, these terms shall
have these respective meanings:
"CANADIAN FOREST" means Canadian Forest Oil Ltd., a corporation organized
under the laws of the Province of Alberta, Canada.
"COMPANY" means 611852 SASKATCHEWAN LTD., a corporation organized under
the laws of the Province of Saskatchewan, Canada.
"DEBT" means at any relevant time the sum of (a) all debt (principal,
interest or other) evidenced by the Notes, the Letter of Credit Liabilities,
the Letter of Credit Reimbursement Obligations, the Bankers' Acceptance
Liabilities or any of the foregoing, and all other obligations incurred under
or arising pursuant to or in connection with the Second Amended and Restated
Credit Agreement or any of the other Loan Documents, (b) all obligations and
indebtedness ("INTEREST RATE OBLIGATIONS") evidenced by all Interest Rate
Protection Agreements of Company, Canadian Forest or any Subsidiary Borrower
to any one or more of the Lenders or an Affiliate of a Lender (and if
Interest Rate Obligations are owed to an Affiliate of a Lender, the
references to "Lender" or "Lenders" shall, where the context permits, be
deemed to include such Affiliate) in connection with any program for interest
rate protection permitted under the Second Amended and Restated Credit
Agreement or otherwise approved in writing by the Majority Lenders and (c)
all obligations and indebtedness ("CONTRACT OBLIGATIONS") evidenced by all
Commodity Hedging Agreements of Company, Canadian Forest or any Subsidiary
Borrower to any one or more of the Lenders permitted under the Second Amended
and Restated Credit Agreement or otherwise approved in writing by the
Majority Lenders. The Debt includes interest and other obligations accruing
or arising in connection with the foregoing after (a) commencement of any
case under any bankruptcy
GUARANTEE
<PAGE>
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or similar laws by or against any Obligor or (b) the obligations of any
Obligor shall cease to exist by operation of law or for any other reason. The
Debt also includes all reasonable attorneys' fees and any other expenses
incurred by Administrative Agent in negotiating, monitoring or enforcing the
Loans, the Notes, the Bankers' Acceptances, the Letter of Credit Liabilities,
the Letter of Credit Reimbursement Obligations, the Interest Rate
Obligations, the Bankers' Acceptance Liabilities, the Contract Obligations or
any of the Loan Documents or defending against any claims arising directly or
indirectly in respect of or on account of any of the Debt.
"INTERCREDITOR AGREEMENT" shall have the meaning ascribed thereto in the
Second Amended and Restated Credit Agreement.
"LENDER GROUP" shall have the meaning ascribed thereto in the
Intercreditor Agreement.
"LOAN DOCUMENTS" means collectively, the Loan Documents (as defined in
the Second Amended and Restated Credit Agreement) and the Loan Documents (as
defined in the Canadian Forest Credit Agreement).
"OBLIGOR" means any person or entity now or hereafter primarily or
secondarily obligated to pay all or any part of the Debt, including Company,
Guarantor, 3189503, Canadian Forest or any of the Subsidiary Borrowers.
"SECOND AMENDED AND RESTATED CREDIT AGREEMENT" means the Second Amended
and Restated Credit Agreement dated as of April 1, 1997 among Company,
the lenders party thereto and the Administrative Agent, as amended by
Amendment No. 1 dated as of even date herewith and as modified by the
Intercreditor Agreement, and as the same may be further modified and
supplemented from time to time.
Unless otherwise defined in this Guarantee, any capitalized term used in this
Guarantee has the meaning ascribed to it in the Second Amended and Restated
Credit Agreement.
GUARANTEE
<PAGE>
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ARTICLE 2
SECTION 2.1. EXECUTION OF LOAN DOCUMENTS. Company has executed and
delivered the Notes and the other documents evidencing the Debt to
Administrative Agent and Lenders, and the Debt is secured by certain of the
Liens created, evidenced or carried forward by the Loan Documents.
SECTION 2.2. CONSIDERATION. In consideration of the credit and financial
accommodations extended and contemplated to be extended to Company by
Administrative Agent and Lenders pursuant to the Second Amended and Restated
Credit Agreement, the other Loan Documents or otherwise, which Guarantor has
determined will substantially benefit it directly or indirectly, and for
other good and valuable consideration, the receipt and sufficiency of which
Guarantor hereby acknowledges, Guarantor executes and delivers this Guarantee
to Administrative Agent with the intention of being presently and legally
bound by its terms.
ARTICLE 3
SECTION 3.1. PAYMENT GUARANTEE. Guarantor, as a primary obligor and not
as a surety, unconditionally guarantees to Administrative Agent for the
ratable benefit of Lenders the full, prompt and punctual payment of the Debt
when due (whether at its stated maturity, by acceleration or otherwise) in
accordance with the Loan Documents or documents evidencing Interest Rate
Protection Agreements or Commodity Hedging Agreements, as the case may be.
This Guarantee is irrevocable, unconditional and absolute, and if for any
reason all or any portion of the Debt shall not be paid when due, Guarantor
will immediately pay the Debt to Administrative Agent or other Person
entitled to it, in U.S. Dollars or in Canadian Dollars, whichever currency or
currencies in which the Debt is then denominated, regardless of (a) any
defense, right of set-off or counterclaim which any Obligor may have or
assert, (b) whether Administrative Agent or any other Person shall have taken
any steps to enforce any rights against any Obligor or any other Person to
collect any of the Debt, and (c) any other circumstance, condition or
contingency whatsoever.
SECTION 3.2. APPLICATION OF PAYMENTS OR PREPAYMENTS. The parties hereto
agree that any payment or prepayment by Company or any other Person against
the Debt shall be deemed paid in such order and manner as Administrative
Agent shall determine in its sole discretion.
GUARANTEE
<PAGE>
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SECTION 3.3. OBLIGATIONS NOT AFFECTED. The obligations of the Guarantor
under Section 3.1 hereof are absolute and unconditional irrespective of the
value, genuineness, validity, regularity or enforceability of the Second
Amended and Restated Credit Agreement, the Notes, the other Loan Documents, or
any other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for
any of the guaranteed Debt, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor. The Guarantor's obligations hereunder shall not be diminished in
any way except by the payment in full of the guaranteed Debt. Without
limiting the generality of the foregoing, and to the fullest extent permitted
by applicable law, Guarantor's covenants, agreements and obligations under
this Guarantee shall in no way be released, diminished, reduced, impaired or
otherwise affected by reason of the happening from time to time of any of the
following things, for any reason, whether by voluntary act, operation of law
or order of any competent governmental authority and whether or not Guarantor
is given any notice or is asked for or gives any further consent (all
requirements for which, however arising, Guarantor hereby WAIVES to the
fullest extent permitted by applicable law):
(a) release or waiver of any obligation or duty to perform or observe
any express or implied agreement, covenant, term or condition imposed in any
of the Loan Documents or by applicable law on any Obligor or any party to the
Loan Documents;
(b) extension of the time for payment of any part of the Debt or any
other sums payable under the Loan Documents, extension of the time for
performance of any other obligation under or arising out of or in connection
with the Loan Documents or change in the manner, place or other terms of such
payment or performance;
(c) settlement or compromise of any or all of the Debt;
(d) renewal, supplement, modification, rearrangement, amendment,
restatement, replacement, cancellation, rescission, revocation or
reinstatement (whether or not material) of any part of any of the Loan
Documents or any obligations under the Loan Documents of any Obligor or any
other party to the Loan Documents;
(e) acceleration of the time for payment or performance of any Debt or
other obligation under any of the Loan Documents or exercise of any other
right, privilege or remedy under or in regard to any of the Loan Documents;
GUARANTEE
<PAGE>
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(f) failure, omission, delay, neglect, refusal or lack of diligence by
Administrative Agent or any other Person to assert, enforce, give notice of
intent to exercise or any other notice with respect to or exercise any right,
privilege, power or remedy conferred on Administrative Agent or any other
Person in any of the Loan Documents or by law or action on the part of
Administrative Agent or any other Person granting indulgence, grace,
adjustment, forbearance or extension of any kind to any Obligor or any other
Person;
(g) release, surrender, exchange, subordination or loss of any security
or Lien or the priority thereof under any of the Loan Documents or in
connection with the Debt;
(h) release, modification or waiver of, or failure, omission, delay,
neglect, refusal or lack of diligence to enforce, any guaranty, pledge,
mortgage, deed of trust, security agreement, lien, charge, insurance
agreement, bond, letter of credit or other security device, guaranty, surety
or indemnity agreement whatsoever;
(i) taking or acceptance of any other security or guaranty for the
payment or performance of any or all of the Debt or the obligations of any
Obligor;
(j) release, modification or waiver of, or failure, omission, delay,
neglect, refusal or lack of diligence to enforce, any right, benefit,
privilege or interest under any contract or agreement, under which the rights
of any Obligor have been collaterally or absolutely assigned, or in which a
security interest has been granted, to Administrative Agent or any Lender as
direct or indirect security for payment of the Debt or performance of any
other obligations to or at any time held by Administrative Agent or any
Lender;
(k) death, legal incapacity, disability, voluntary or involuntary
liquidation, dissolution, sale of any collateral, marshaling of assets and
liabilities, change in corporate or organizational status, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of debt or other
similar proceedings of or affecting any Obligor or any of the assets of any
Obligor, even if any of the Debt is thereby rendered void, unenforceable or
uncollectible against any other Person;
(l) occurrence or discovery of any irregularity, invalidity or
unenforceability of any of the Debt or Loan Documents or any defect or
deficiency in any of the Debt or Loan Documents, including the
unenforceability of any provisions of any of the Loan Documents because
entering into any such Loan Documents was ULTRA VIRES or because anyone who
executed them exceeded their authority;
GUARANTEE
<PAGE>
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(m) failure to acquire, protect or perfect any lien or security interest
in any collateral intended to secure any part of the Debt or any other
obligations under the Loan Documents or failure to maintain perfection;
(n) failure by Administrative Agent or any other Person to notify, or
timely notify, Guarantor of any default, event of default or similar event
(however denominated) under any of the Loan Documents, any renewal,
extension, supplement, modification, rearrangement, amendment, restatement,
replacement, cancellation, rescission, revocation or reinstatement (whether
or not material) or assignment of any part of the Debt, or of the Loan
Documents, release or exchange of any security, any other action taken or not
taken by Administrative Agent or any other Person against any Obligor or any
other Person or any direct or indirect security for any part of the Debt or
other obligation of Company, any new agreement between Administrative Agent
and/or any Lender and any Obligor or any other Person or any other event or
circumstance. Neither Administrative Agent nor any Lender has any duty or
obligation to give Guarantor any notice of any kind under any circumstances
whatsoever with respect to or in connection with the Debt or the Loan
Documents;
(o) occurrence of any event or circumstances which might otherwise
constitute a defense available to, or a discharge of, any Obligor, including
failure of consideration, fraud by or affecting any Person, usury, forgery,
breach of warranty, failure to satisfy any requirement of the statute of
frauds, running of any statute of limitation, accord and satisfaction and any
defense based on election of remedies of any type;
(p) receipt and/or application of any proceeds, credits or recoveries
from any source, including any proceeds, credits, or amounts realized from
exercise of any of Administrative Agents' rights, remedies, powers or
privileges under the Loan Documents, by law or otherwise available to
Administrative Agent or any Lender; and
(q) occurrence of any act, error or omission of Administrative Agent or
any other Person.
SECTION 3.4. WAIVER OF CERTAIN RIGHTS AND NOTICES. To the fullest extent
permitted by applicable law, Guarantor hereby WAIVES and RELEASES all right
to require marshalling of assets and liabilities, sale in inverse order of
alienation, notice of acceptance of this Guarantee and of any liability to
which it applies or may apply, notice of the creation, accrual, renewal,
increase, extension, modification, amendment or rearrangement of any part of
the Debt, presentment, demand for payment, protest, notice of nonpayment,
notice of dishonor, notice of intent to accelerate, notice of acceleration
and, all other notices and
GUARANTEE
<PAGE>
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demands, collection, suit and the taking of any other action by
Administrative Agent or any Lender.
SECTION 3.5. NOT A COLLECTION GUARANTEE. This is an absolute guarantee
of payment, and not of collection, and to the fullest extent permitted by
applicable law, Guarantor WAIVES any right to require that any action be
brought against any Obligor or any other Person, or that Administrative Agent
or any Lender be required to enforce or exhaust any of its rights, benefits
or privileges under any of the Loan Documents, by law or otherwise; PROVIDED
that nothing herein shall be construed to prevent Administrative Agent or any
Lender from exercising and enforcing at any time any right, benefit or
privilege which it may have under any Loan Document or by law from time to
time, and at any time, and Guarantor agrees that Guarantor's obligations
hereunder are and shall be absolute, independent and unconditional under any
and all circumstances. Should Administrative Agent or any Lender seek to
enforce Guarantor's obligations by action in any court, Guarantor WAIVES any
requirement, substantive or procedural, that such Administrative Agent or
such Lender pursue any foreclosure action or that a judgment first be sought
or rendered against any Obligor or any other Person or that any Obligor or
any other Person be joined in such cause or that a separate action be brought
against any Obligor or any other Person. All waivers in this Guarantee or any
of the Loan Documents shall be without prejudice to Administrative Agent or
any Lender at its option to proceed against any Obligor or any other Person,
whether by separate action or joinder. The guarantee in Section 3.1 is a
continuing guarantee and shall apply to all Debt whenever arising. Guarantor
agrees that this Guarantee shall not be discharged except by payment of the
Debt in full in the applicable currency, complete performance of all payment
obligations of the Obligors on the Debt and termination of the obligation (if
any) to make any further advances under the Loan Documents or extend other
financial accommodations to any Obligor.
SECTION 3.6. SUBROGATION. Guarantor agrees that it shall not be entitled
to exercise any rights of subrogation to Administrative Agent's or any
Lender's rights against any Obligor or any other Person or any collateral or
offset rights held by Administrative Agent or any Lender for payment of the
Debt until the later of complete and final payment of all of the guaranteed
Debt under this Guarantee and final termination of this Guarantee.
SECTION 3.7. RELIANCE ON GUARANTEE. All extensions of credit and
financial accommodations heretofore or hereafter made by Administrative Agent
or any Lender under or in respect of the Debt or any Loan Documents shall be
conclusively presumed to have been accepted by the Guarantor as part of the
Debt guaranteed hereby.
GUARANTEE
<PAGE>
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SECTION 3.8. DEMANDS ARE CONCLUSIVE. A certificate submitted to
Guarantor by Administrative Agent setting forth the basis for any demand by
Administrative Agent hereunder shall constitute a demand hereunder and shall
be conclusive, absent manifest error, as to the matters therein stated,
including the amount due.
SECTION 3.9. JOINT AND SEVERAL. If any Person makes any guaranty of any
of the obligations guaranteed hereby or gives any security for them,
Guarantor's obligations hereunder shall be joint and several with the
obligations of such other Persons pursuant to such agreement or other papers
making the guaranty or giving the security.
SECTION 3.10. PAYMENTS RETURNED. Guarantor agrees that, if at any time all
or any part of any payment previously applied by Administrative Agent or any
Lender to the Debt is or must be returned by Administrative Agent or any
Lender or recovered from Administrative Agent or any Lender for any reason
(including the order of any bankruptcy court), this Guarantee shall
automatically be reinstated to the same effect as if the prior application
had not been made, and, in addition, Guarantor hereby agrees to indemnify
Administrative Agents and Lenders against, and to save and hold
Administrative Agents and Lenders harmless from any required return by
Administrative Agent and any Lender or recovery from Administrative Agent or
any Lender of any such payment because of its being deemed preferential under
applicable bankruptcy, receivership or insolvency laws, or for any other
reason.
SECTION 3.11. REMEDIES. Guarantor agrees that, as between Guarantor and
Administrative Agent, the obligations of Company under the Second Amended and
Restated Credit Agreement and the Notes may be declared to be forthwith due
and payable as provided in Section 9 of the Second Amended and Restated
Credit Agreement (and shall be deemed to have become automatically due and
payable in the circumstances provided in said Section 9) for purposes of
Section 3.1 hereof notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically
due and payable) as against the applicable Obligor and that, in the event of
such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and
payable by the applicable Obligor) shall forthwith become due and payable by
Guarantor for purposes of said Section 3.1.
SECTION 3.12. CONTINUING GUARANTEE. The guarantee in Section 3.1 is a
continuing guarantee, and shall apply to all guaranteed Debt whenever arising.
GUARANTEE
<PAGE>
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SECTION 3.13. PRINCIPAL DEBTOR. Notwithstanding any other obligations of
Guarantor under this Guarantee, any amounts which may not be recoverable from
Guarantor as guarantor under this Guarantee shall be recoverable from
Guarantor as principal debtor in respect thereof and shall be paid to
Administrative Agent by Guarantor after demand therefor.
ARTICLE 4
Guarantor warrants and represents as follows:
SECTION 4.1. RELATIONSHIP TO COMPANY, 3189503, CANADIAN FOREST AND THE
SUBSIDIARY BORROWERS. Guarantor has determined that its liability and
obligation under this Guarantee may reasonably be expected to substantially
benefit Guarantor directly or indirectly, and Guarantor's board of directors
has made that determination. Company, 3189503, Canadian Forest and the
Subsidiary Borrowers and Guarantor are mutually dependent on each other in the
conduct to their respective businesses and are, and do business together with
the other Subsidiaries of Guarantor as, an integrated business enterprise
involved in the development, exploration, production, marketing and
transportation of oil, gas and other minerals. The maintenance and
improvement of Company's, 3189503's, Canadian Forest's and the Subsidiary
Borrowers' financial condition is vital to the business of Guarantor and the
transactions contemplated in the Second Amended and Restated Credit Agreement
produce distinct and identifiable financial and economic direct or indirect
benefits to Guarantor. Guarantor has had full and complete access to the
underlying papers relating to the Debt and all other papers executed by any
Obligor or any other Person in connection with the Debt, has reviewed them
and is fully aware of the meaning and effect of their contents. Guarantor is
fully informed of all circumstances which bear upon the risks of executing
this Guarantee and which a diligent inquiry would reveal. Guarantor has
adequate means to obtain from Company, Canadian Forest, 3189503 and the
Subsidiary Borrowers on a continuing basis information concerning Company's,
Canadian Forest's, 3189503's and the Subsidiary Borrowers' financial
condition, and is not depending on Administrative Agent or any Lender to
provide such information, now or in the future. Guarantor agrees that neither
Administrative Agent nor any Lender shall have an obligation to advise or
notify Guarantor or to provide Guarantor with any data or information. The
execution and delivery of this Guarantee is not a condition precedent (and
neither Administrative Agent nor any Lender has in any way implied that the
execution of this Guarantee is a condition precedent) to Administrative
Agent's or any Lender's making, extending or modifying any loan or any other
financial accommodation to or for Guarantor.
GUARANTEE
<PAGE>
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SECTION 4.2 PROCEEDINGS. No bankruptcy or insolvency proceedings are
pending or contemplated by or, to the best of Guarantor's knowledge, against
Guarantor.
ARTICLE 5
SECTION 5.1 TERM. Subject to the automatic reinstatement provisions of
ARTICLE 3 above, this Guarantee shall terminate and be of no further force or
effect upon full and final payment of the Debt, complete performance of all of
the obligations of the Obligors under the Loan Documents and Guarantor
hereunder and final termination of the obligation (if any) to make any
further advances under the Loan Documents or to provide any other financial
accommodations to any Obligor.
ARTICLE 6
SECTION 6.1. BINDING ON SUCCESSORS; NO ASSIGNMENT BY GUARANTOR. All
guaranties, warranties, representations, covenants and agreements in this
Guarantee shall bind the successors and assigns of Guarantor and shall benefit
Administrative Agent and Lenders and their respective successors and assigns,
and any holder of any part of the Debt. Guarantor shall not assign or
delegate any of its obligations under this Guarantee or any of the Loan
Documents without Administrative Agent's and Lenders' express prior written
consent.
SECTION 6.2. SUBORDINATION OF COMPANY'S OBLIGATIONS TO GUARANTOR.
Guarantor agrees that if, for any reason whatsoever, Company, Canadian
Forest, 3189503 or the Subsidiary Borrowers now or hereafter becomes liable,
obligated or indebted to Guarantor, all such liabilities, obligations and
indebtedness, together with all interest thereon and fees and other charges
in connection therewith, and all Liens shall at all times, be second,
subordinate and inferior in right of payment, in lien priority and in all
other respects to the Debt and all Liens securing the Debt.
SECTION 6.3. WAIVER OF SURETYSHIP RIGHTS. By signing this Guarantee,
Guarantor WAIVES each and every right to which it may be entitled by virtue
of any suretyship law, including any rights it may have under applicable laws
to require that any action or proceeding be commenced against Company,
Canadian Forest, 3189503, the Subsidiary Borrowers or any other Person as a
condition to the institution of any action or proceeding relating to the
obligations of Guarantor hereunder.
GUARANTEE
<PAGE>
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SECTION 6.4. AMENDMENTS IN WRITING. This Guarantee shall be changed
only by agreement in writing signed by Guarantor and Administrative Agent.
Any waiver or consent with respect to this Guarantee shall be effective only
in the specific instance and for the specific purpose for which given. No
course of dealing between the parties, no usage of trade and no parole or
extrinsic evidence of any nature shall be used to supplement or modify any of
the terms or provisions of this Guarantee.
SECTION 6.5. NOTICES. Any notices or other communications required or
permitted to be given hereunder shall be given or made by telegraph, telecopy
(confirmed by mail), mail or other writing and telecopied, telegraphed,
mailed or delivered to the intended recipient at the address set forth below
for such recipient or at such other address as shall be designated by such
recipient in a notice to the other parties hereto given in accordance with
this Section:
If to Guarantor: Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, Colorado 80202
Attention: Kenton Scroggs
Telecopier No.: (303) 812-1602
Telephone No.: (303) 812-1414
If to Administrative Agent: The Chase Manhattan Bank of Canada,
as Administrative Agent
First Canadian Place
150 King Street West
Suite 1600
Toronto, Ontario M5H 1J9
Canada
Attention: Vice President
Corporate Finance
Telecopier No.: (416) 216-4161
Telephone No.: (416) 216-4144
GUARANTEE
<PAGE>
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Except as may be otherwise provided herein, all notices and other
communications shall be deemed to have been duly received when transmitted by
telecopier during regular business hours, delivered to the telegraph office,
or personally delivered or, in the case of a mailed notice, three (3) days
after deposit in the United States mail, postage prepaid, certified mail with
return receipt requested (or upon actual receipt, if earlier), in each case
given or addressed as aforesaid. Actual notice, however and from whomever
given or received, shall always be effective when received.
SECTION 6.6. SECTION HEADINGS. The table of contents, captions and
section headings used in this Guarantee are included for reference only and
shall not be considered in interpreting, applying or enforcing this Guarantee.
SECTION 6.7. VENUE. This Guarantee is performable in Alberta, Canada,
which shall be a proper place of venue for suit on or in respect of this
Guarantee. Guarantor irrevocably agrees that any legal proceeding in respect
of this Guarantee shall be brought in the courts of the Province of Alberta
and the courts of appeal therefrom (collectively, the "SPECIFIED COURTS").
Guarantor hereby irrevocably submits to the nonexclusive jurisdiction of such
courts. Guarantor hereby irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to any
Loan Document brought in any Specified Court, and hereby further irrevocably
waives any claims that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum. Guarantor further (1)
agrees to designate and maintain Canadian Forest Oil Ltd., at 600, 800-Sixth
Avenue S.W., Calgary, Alberta 72P 3G3, as its agent for service of process in
Alberta, Canada in connection with any such suit, action or proceeding and to
deliver to Administrative Agent evidence thereof and (2) irrevocably consents
to the service of process out of any of the aforementioned courts in any such
suit, action or proceeding by the mailing of copies thereof by registered
mail, return receipt requested, postage prepaid, to Guarantor at its address
as provided in this Guarantee or as otherwise provided by governing law.
Nothing herein shall affect the right of Administrative Agent or any Lender
to commence legal proceedings or otherwise proceed against Guarantor in any
jurisdiction or to serve process in any manner permitted by applicable law.
Guarantor agrees that a final judgment in any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. THIS GUARANTEE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE
PROVINCE OF ALBERTA AND OF CANADA FROM TIME TO TIME IN EFFECT.
GUARANTEE
<PAGE>
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SECTION 6.8. SURVIVAL. The guarantees, representations, warranties,
covenants and agreements set forth in this Guarantee shall continue and
survive until final termination of this Guarantee.
SECTION 6.9. RIGHTS CUMULATIVE; DELAY NOT WAIVER. Administrative
Agent's or any Lender's exercise of any right, benefit or privilege under any
of the Loan Documents or at law or in equity shall not preclude the
concurrent or subsequent exercise of any of Administrative Agent's or any
Lender's other present or future rights, benefits or privileges. The remedies
provided in this Guarantee are cumulative and not exclusive of any remedies
provided by law or the Loan Documents. No failure by Administrative Agent or
any Lender to exercise, and no delay in exercising, any right under any Loan
Document shall operate as a waiver thereof.
SECTION 6.10. SEVERABILITY. If any provision of this Guarantee is held
to be illegal, invalid or unenforceable under present or future laws, the
legality, validity and enforceability of the remaining provisions of this
Guarantee shall not be affected thereby, and this Guarantee shall be
liberally construed so as to carry out the intent of the parties to it.
SECTION 6.11. ADDITIONAL AGREEMENT. This Guarantee is in addition to
and not in substitution for the Limited Recourse Secured Guarantee provided
by Guarantor to Company that was assigned to Administrative Agent as of
April 1, 1997. Subject to the foregoing, this Guarantee embodies the entire
agreement and understanding among Guarantor, Administrative Agent and Lenders
with respect to its subject matter. Guarantor acknowledges and agrees that
there is no oral agreement among Guarantor, Administrative Agents and Lenders
which has not been incorporated in this Guarantee.
SECTION 6.12. USURY NOT INTENDED; SAVING PROVISIONS. Notwithstanding
any provision to the contrary contained in any Loan Document, it is expressly
provided that in no case or event shall the aggregate of any amounts accrued
or paid pursuant to this Guarantee which under applicable laws are or may be
deemed to constitute interest ever exceed the maximum nonusurious interest
rate permitted by applicable laws of the Province of Alberta or the applicable
laws of Canada, whichever permit the higher rate. In this connection,
Guarantor, Administrative Agent and Lenders stipulate and agree that it is
their common and overriding intent to contract in strict compliance with
applicable usury laws. In furtherance thereof, none of the terms of this
Guarantee shall ever be construed to create a contract to pay, as
consideration for the use, forbearance or detention of money, interest at a
rate in excess of the maximum rate permitted by applicable laws. The
Guarantor shall never be liable for interest in excess of the maximum rate
permitted by applicable laws. If, for any reason whatever, such interest paid
or received during the full term of the applicable
GUARANTEE
<PAGE>
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indebtedness produces a rate which exceeds the maximum rate permitted by
applicable laws, then Administrative Agent or Lenders, as the case may be,
shall credit against the principal of such indebtedness (or, if such
indebtedness shall have been paid in full, shall refund to the payor of such
interest) such portion of said interest as shall be necessary to cause the
interest paid to produce a rate equal to the maximum rate permitted by
applicable laws. All sums paid or agreed to be paid to Administrative Agent
or any Lender for the use, forbearance or detention of money shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread in equal parts throughout the full term of the applicable
indebtedness, so that the interest rate is uniform throughout the full term
of such indebtedness. The provisions of this Section shall control all
agreements, whether now or hereafter existing and whether written or oral,
among Guarantor, Administrative Agent and Lenders.
SECTION 6.13. TAXES. If any payment made by Guarantor to
Administrative Agent hereunder becomes subject to any withholding or
deduction with respect to Covered Taxes (as defined in the Second Amended and
Restated Credit Agreement), Guarantor shall also duly and punctually pay to
Administrative Agent such additional amount as may be necessary to ensure
that Administrative Agent receives an amount, after taking into account all
applicable Covered Taxes, equal to the amount which would have been received
by Administrative Agent had such payment not been made subject to any
withholding or deduction. In any circumstance, to the extent available,
Guarantor shall also promptly remit to Administrative Agent the relevant
official receipts or other evidence satisfactory to Administrative Agent
evidencing payment to the appropriate taxing authority of each such Covered
Tax by Guarantor on behalf of Administrative Agent.
SECTION 6.14. JUDGEMENT CURRENCY. The credit provided in the Second
Amended and Restated Credit Agreement is an international loan transaction in
which the specification of Canadian Dollars or U.S. Dollars is of the
essence, and the stipulated currency shall in each instance be the currency
of account and payment in all instances. A payment obligation in one currency
hereunder (the "ORIGINAL CURRENCY") shall not be discharged by an amount paid
in another Currency (the "OTHER CURRENCY"), whether pursuant to any judgment
expressed in or converted into any Other Currency or in another place except
to the extent that such tender or recovery results in the effective receipt
by Administrative Agent or a Lender of the full amount of the Original
Currency payable under this Guarantee. If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due hereunder in the
Original Currency into the Other Currency, the rate of exchange that shall be
applied shall be that at which in accordance with normal banking procedures
Administrative Agent could purchase Original Currency at the Principal Office
with the Other Currency on the Business Day next preceding the day on which
such judgment is rendered or otherwise in accordance with applicable law. The
obligation of Guarantor in respect of any such sum due from it to the
Administrative Agent or any Lenders under the Second Amended and Restated
Credit
GUARANTEE
<PAGE>
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Agreement, hereunder (in this Section 6.14 called an "ENTITLED PERSON")
shall, notwithstanding the rate of exchange actually applied in rendering
such judgment, be discharged only to the extent that on the Business Day
following receipt by such Entitled Person of any sum adjudged to be due
hereunder in the Other Currency such Entitled Person may in accordance with
normal banking procedures purchase and transfer the Original Currency to
Toronto with the amount of the judgment currency so adjudged to be due; and
Guarantor hereby, as a separate obligation and notwithstanding any such
judgment, agrees to indemnify such Entitled Person against, and to pay such
Entitled Person on demand, in the Original Currency, the amount (if any) by
which the sum originally due to such Entitled Person the Original Currency
hereunder exceeds the amount of the Other Currency so purchased and
transferred.
SECTION 6.15. INTERCREDITOR AGREEMENT. Guarantor acknowledges that
Lenders may enter into participation arrangements and payment sharing
understandings with the banks and other financial institutions which are or
may from time to time become parties to the U.S. Credit Agreement pursuant to
the Intercreditor Agreement or otherwise and consents to such arrangements
and understandings. To the extent any such arrangements or understandings
give rise to any liability for any withholding tax payments in connection
with any payments made by the Company or any other Obligor under or in
connection with the Second Amended and Restated Credit Agreement, then
(notwithstanding any provisions to the contrary set forth in this Guarantee
or the Second Amended and Restated Credit Agreement), Guarantor shall
indemnify each of the applicable members of the Lender Group and shall hold
each of the applicable members of the Lender Group harmless from and against
any such liability; provided, however, that each member of the Lender Group
(if so requested by Guarantor under this Guarantee or Funding Co. under the
Second Amended and Restated Credit Agreement) will use good faith efforts to
accommodate any reasonable request by Company or Guarantor in order to avoid
the need for, or reduce the amount of, such compensation so long as the
request will not, in the sole opinion of the applicable member of the Lender
Group, be disadvantageous to such member of the Lender Group.
GUARANTEE
<PAGE>
EXECUTION COPY
THIRD SECURITY CONFIRMATION,
AMENDMENT AND SUPPLEMENTAL DEBENTURE AGREEMENT
This Third Security Confirmation, Amendment and Supplemental
Debenture Agreement (the "AGREEMENT") is made as of August 19, 1997 among
Canadian Forest Oil Ltd. ("CANADIAN FOREST"), Producers Marketing Ltd.
("PROMARK"), 3189503 Canada Ltd. ("HOLDCO"), 611852 Saskatchewan Ltd.
("FUNDCO"), Forest Oil Corporation ("FOREST OIL"), and The Chase Manhattan
Bank of Canada ("CHASE" or the "AGENT") in its capacity as Administrative
Agent for the Lenders (the "LENDERS") now or hereafter party to the Second
Amended and Restated Fundco Credit Agreement (as defined below).
WHEREAS:
1. The parties hereto (or certain of them, as applicable) are
parties to various notes, guarantees and security documents given to assure
and secure payment and performance of obligations under the following credit
agreements:
(a) Credit Agreement dated as of February 8, 1996 between Fundco and
Chase (the "ORIGINAL FUNDCO CREDIT AGREEMENT");
(b) Credit Agreement dated as of February 8, 1996 between Canadian
Forest, the Subsidiary Borrowers (as defined therein), and Fundco
(the "ORIGINAL CANADIAN FOREST CREDIT AGREEMENT"); and
(c) Letter of Credit and Reimbursement Agreement dated as of February
8, 1996 between ProMark and Fundco (the "PRODUCERS MARKETING
AGREEMENT").
2. The parties subsequently agreed to certain changes to the above
facilities, including the addition of new lenders to the Original Fundco
Credit Agreement, the inclusion of ProMark as a direct Borrower under the
Original Canadian Forest Credit Agreement, and the termination of the
Producers Marketing Agreement, and agreed to effect such changes by entering
into:
(a) the Amended and Restated Credit Agreement dated July 17, 1996 among
Fundco, as borrower, and Chase, Bank of Montreal and Royal Bank of
Canada, as lenders, and Chase as Administrative AGent for the
Lenders; and
(b) the Amended and Restated Credit Agreement dated July 17, 1996 among
Canadian Forest, ProMark and other Subsidiary Borrowers (as defined
therein), as borrowers, and Fundco, as Lender.
In that regard, the parties entered into a Security Confirmation and
Amendment Agreement dated July 17, 1996 (the "FIRST CONFIRMATION") to effect
certain confirmations and amendments in respect of the Loan Documents, and to
terminate certain Loan Documents.
THIRD CONFIRMATION ETC.
<PAGE>
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3. In order to reflect, firstly, certain corporate changes affecting
Canadian Forest (namely, the amalgamation of 3189490 Canada Ltd. and Atcor
Resources Ltd. to form 721940 Alberta Ltd. as the continuing corporation
resulting therefrom, and the amalgamation of 721940 Alberta Ltd. and
Canadian Forest to form Canadian Forest as the continuing corporation
resulting therefrom), and secondly, certain asset sales from Canadian Forest
to Forest Oil and the continued secured position of Fundco with respect to
such assets, the parties hereto (or certain of them) subsequently agreed to
effect certain additional amendments by entering into:
(a) the Second Amended and Restated Credit Agreement dated as of April
1, 1997 among Fundco, as borrower, and Chase, Bank of Montreal and
Royal Bank of Canada, as Lenders, and Chase as Administrative Agent
for the Lenders (as amended, restated or otherwise modified from
time to time, including by the amendments effected by Fundco
Amendment No. 1 (as hereinafter defined), the "SECOND AMENDED AND
RESTATED FUNDCO CREDIT AGREEMENT"); and
(b) the Second Amended and Restated Credit Agreement dated as of April
1, 1997 among Canadian Forest, ProMark and other Subsidiary Borrowers
as borrowers, and Fundco, as lender (as amended, restated or
otherwise modified from to time, including by the amendments
effected by Canadian Forest Amendment No. 1 (as hereinafter defined),
the "SECOND AMENDED AND RESTATED CANADIAN FOREST CREDIT AGREEMENT").
In that regard, the parties entered into a Second Security Confirmation and
Amendment Agreement dated as of April 1, 1997 (the "SECOND CONFIRMATION", the
First Confirmation and the Second Confirmation being collectively referred to
herein as the "CONFIRMATIONS") to effect certain confirmations and amendments
in respect of the Loan Documents, and to terminate certain Loan Documents.
4. In order to reflect the establishment of a global U.S. and Canadian
borrowing structure for Forest Oil and its Subsidiaries, to increase the
amounts available to Fundco under the second Amended and Restated Fundco
Credit Agreement and to Canadian Forest, ProMark and other Subsidiary
Borrowers under the Second Amended and Restated Canadian Forest Credit
Agreement, and to add Credit Lyonnais Canada as a new lender to the Second
Amended and Restated Fundco Credit Agreement, the parties hereto have agreed
to effect certain additional amendments by entering into:
(a) an amendment dated as of August 19, 1997 among Fundco, as borrower,
and Chase, Bank of Montreal, Royal Bank of Canada and Credit Lyonnais
Canada as Lenders, and Chase as Administrative Agent for the Lenders
("FUNDCO AMENDMENT NO.1"); and
(b) an amendment dated as of August 19, 1997 among Canadian Forest,
ProMark and other Subsidiary Borrowers, as borrowers, and Fundco,
as lender ("CANADIAN FOREST AMENDMENT NO. 1").
THIRD CONFIRMATION ETC.
<PAGE>
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5. The parties desire to confirm that in connection with the
amendments and restatements referred to in Recital 4 above, certain
guarantees and security given in connection with the original agreements
referred to in Recital 1 above continue in effect with certain amendments as
herein and in the Confirmations set out, while certain other instruments are
terminated as herein set out.
NOW THEREFORE, in consideration of Chase and the Lenders agreeing
to the amendment of the Second Amended and Restated Fundco Credit Agreement
in the manner provided in Fundco Amendment No. 1 and the amendment of the
Second Amended and Restated Canadian Forest Credit Agreement in the manner
provided in Canadian Forest Amendment No. 1 and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
Canadian Forest, ProMark, Holdco, Fundco and Forest Oil, the parties agree as
follows:
1. DEFINITIONS
Capitalized terms used but not defined in this Agreement shall have
the meanings ascribed to them in the Second Amended and Restated Fundco
Credit Agreement as amended by Fundco Amendment No. 1.
2. EXISTING FUNDCO NOTES
The existing Notes dated July 17, 1996 and issued by Fundco
pursuant to Section 2.09(a) of the Amended and Restated Credit Agreement
referred to in Recital 2(a) of this Agreement are hereby cancelled
concurrently with the issuance of new Notes in favour of each of the Lenders
that are party to the Second Amended and Restated Fundco Credit Agreement as
amended by Fundco Amendment No. 1 to reflect the amendment to Section 2.09(a)
of the Second Amended and Restated Fundco Credit Agreement effected by
Section 2.09 of Fundco Amendment No. 1.
The Swingline Note dated July 17, 1996 and issued by Fundco
pursuant to Section 2.09(b) of the Amended and Restated Credit Agreement
referred to in Recital 2(a) of this Agreement shall continue in full force
and effect, with each reference to "Amended and Restated Credit Agreement"
therein being deemed to refer to and include the Second Amended and Restated
Fundco Credit Agreement as amended by Fundco Amendment No. 1.
3. FUNDCO ASSIGNMENT OF SECURITY (RE: CANADIAN FOREST)
The Assignment of Security (Canadian Forest Credit Agreement) made
February 8, 1996 by Fundco in favour of Chase, as amended by the
Confirmations, is hereby confirmed as continuing security in favour of Chase
for the timely payment of the principal, interest (including interest on
amounts in default) and all other indebtedness and liabilities, present or
future, direct or indirect, now or hereafter owing by Fundco under the Second
Amended and Restated Fundco Credit Agreement, as amended by Fundco Amendment
No. 1, and for the due performance by Fundco of all of its covenants and
obligations under that Second Amended and Restated Fundco Credit Agreement as
amended by Fundco Amendment No. 1, with each reference to "Credit Agreement"
therin being deemed to refer to and include the Second Amended and Restated
THIRD CONFIRMATION ETC.
<PAGE>
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Fundco Credit Agreement as amended by Fundco Amendment No. 1, and each
reference to "Canadian Forest Credit Agreement" shall be deemed to refer to
and include the Second Amended and Restated Canadian Forest Credit Agreement
as amended by Canadian Forest Amendment No. 1.
4. FUNDCO ASSIGNMENT OF PAYMENTS (RE: CANADIAN FOREST)
The Assignment of Payments (Canadian Forest Credit Agreement)
dated effective February 8, 1996 and executed by Fundco in favour of Chase,
as amended by the Confirmations, is hereby confirmed as continuing security
in favour of Chase for the timely payment of the principal, interest
(including interest on amounts in default) and all other indebtedness and
liabilities, present or future, direct or indirect, now or hereafter owing by
Fundco under the second Amended and Restated Fundco Credit Agreement, as
amended by Fundco Amendment No. 1, and for the due performance by Fundco of
all of its covenants and obligations under that Second Amended and Restated
Fundco Credit Agreement as amended by Fundco Amendment No. 1, with each
reference to "Credit Agreement" therein being deemed to refer to and include
the Second Amended and Restated Fundco Credit Agreement as amended by Fundco
Amendment No. 1, and each reference to "Canadian Forest Credit Agreement"
being deemed to refer to and include the Second Amended and Restated Canadian
Forest Credit Agreement as amended by Canadian Forest Amendment No. 1.
5. CANADIAN FOREST/ATCOR RESOURCES AGREEMENT (RE: CANADIAN FOREST)
The Consent and Agreement (Canadian Forest Credit Agreement) made
February 8, 1996 and executed by Canadian Forest and Atcor Resources Ltd. in
favour of Chase, as amended by the Confirmations, is hereby confirmed as a
continuing consent and agreement in favour of Chase for the timely payment of
the principal, interest (including interest on amounts in default) and all
other indebtedness and liabilities, present or future, direct or indirect,
now or hereafter owing by Fundco under the Second Amended and Restated Fundco
Credit Agreement, as amended by Fundco Amendment No. 1, and for the due
performance by Fundco of all of its covenants and obligations under that
Second Amended and Restated Fundco Credit Agreement as amended by Fundco
Amendment No. 1, with each reference to "Credit Agreement" therein being
deemed to refer to and include the Second Amended and Restated Fundco Credit
Agreement as amended by Fundco Amendment No. 1, and each reference to
"Canadian Forest Agreement" shall be deemed to refer to and include the Second
Amended and Restated Canadian Forest Credit Agreement as amended by Canadian
Forest Amendment No. 1.
6. FUNDCO DEMAND DEBENTURE
The Demand Debenture and Negative Pledge issued February 8, 1996
(the "FUNDCO DEBENTURE") by Fundco in favour of Chase, as amended by the
Confirmations, is hereby confirmed as continuing security in favour of Chase
for the timely payment of the principal, interest (including interest on
amounts in default) and all other indebtedness and liabilities, present or
future, direct or indirect, now or hereafter owing by Fundco under the
THIRD CONFIRMATION ETC.
<PAGE>
-5-
Second Amended and Restated Fundco Credit Agreement, as amended by Fundco
Amendment No. 1, and for the due performance by Fundco of all of its
covenants and obligations under that Second Amended and Restated Fundco
Credit Agreement as amended by Fundco Amendment No. 1, with the following
deemed reference and amendment:
(a) each reference to "Credit Agreement" in the Fundco Debenture shall
be deemed to refer to and include the Second Amended and Restated
Fundco Credit Agreement as amended by Fundco Amendment No. 1;
(b) by deleting from the sixth and seventh lines of Section 1.1 "the
principal amount of Eighty Million Canadian dollars ($80,000,000)"
and replacing it with "the principal amount of One Hundred Sixty
Five Million Canadian dollars (Cdn. $165,000,000)" with the intent
and result that the Principal Amount owed by Fundco under and
secured by the Fundco Debenture and Negative Pledge is hereby
increased from Cdn. $80,000,000 to Cdn. $165,000,000;
and the Fundco Debenture is hereby supplemented and amended accordingly in
accordance with this Section 6 and Section 6A below.
6A. FUNDCO SUPPLEMENTAL CHARGES
Fundco hereby continues the original grants, assignments,
conveyances, transfers, mortgages, charges and security interests created by
the Fundco Debenture and, in consideration of the premises herein contained,
the amendments to the Fundco Debenture described in Fundco Amendment No. 1
including, but not limited to, the increase of the amount available under the
Second Amended and Restated Fundco Credit Agreement, and of $10.00 paid by
Chase to Fundco (the receipt and sufficiency of which is hereby acknowledged
by Fundco), and for securing repayment to Chase and the Lenders of the
increased principal amount of the Fundco Debenture referred to in Section
6(b) above, Fundco hereby grants, assigns, transfers, mortgages and charges
as and by way of:
(a) a first floating charge to and in favour of the Holder (as defined
in the Fundco Debenture), in and to all of Fundco's Property that
is described in Section 4.1(a) of the Fundco Debenture (subject to
Section 7.1 of the Fundco Debenture); and
(b) a first fixed and specific mortgage and charge to and in favour of
the Holder (as defined in the Fundco Debenture), and the Holder
hereby takes a continuing security interest, in all of Fundco's
Property described in Sections 4.1(b), (c), and (d) of the Fundco
Debenture (subject to Section 7.1 of the Fundco Debenture).
7. FUNDCO DEPOSIT AGREEMENT
The Deposit Agreement made February 8, 1996 by Fundco in favour of
Chase, as amended by the Confirmations, is hereby confirmed as continuing
security in favour of Chase for the timely payment of the principal, interest
(including interest on amounts in default) and all other indebtedness and
liabilities, present or future, direct or indirect, now or hereafter owing by
Fundco under the Second Amended and Restated Fundco Credit Agreement, as
amended by
THIRD CONFIRMATION ETC.
<PAGE>
-6-
Fundco Amendment No. 1, and for the due performance by Fundco of all of its
covenants and obligations under that Second Amended and Restated Fundco
Credit Agreement as amended by Fundco Amendment No. 1, with each reference to
"Credit Agreement" in that Deposit Agreement being deemed to refer to and
include the Second Amended and Restated Fundco Credit Agreement as amended by
Fundco Amendment No. 1.
8. CHASE CONFIRMATION RE: INCREMENTAL INTEREST RATE
The letter acknowledgement of Chase dated February 8, 1996 to
Fundco, as amended by the Confirmations, is confirmed as a continuing
acknowledgement in favour of Fundco, with each reference to "Credit
Agreement" therein being deemed to refer to and include the Second Amended
and Restated Fundco Credit Agreement as amended by Fundco Amendment No. 1.
9. CANADIAN FOREST AND PROMARK NOTES
The existing Note dated July 17, 1996 issued by Canadian Forest,
and the existing Note dated July 17, 1996 issued by ProMark, in each case
pursuant to Section 2.09(a) of the Amended and Restated Credit Agreement
referred to in Recital 2(b) of this Agreement are hereby cancelled
concurrently with the issuance of new Notes in favour of Fundco to reflect
the amendment to Section 2.09(a) of the Second Amended and Restated Canadian
Forest Credit Agreement effected by Section 2.08 of Canadian Forest Amendment
No. 1.
The existing Note dated July 17, 1996 issued by Canadian Forest,
and the existing Note dated July 17, 1996 issued by ProMark, in each case
pursuant to Section 2.09(b) of the Amended and Restated Credit Agreement
referred to in Recital 2(b) of this Agreement, shall continue in full force
and effect, with each reference to "Amended and Restated Credit Agreement"
therein being deemed to refer to and include the Second Amended and Restated
Canadian Forest Credit Agreement as amended by Canadian Forest Amendment
No. 1.
10. CANADIAN FOREST AND PROMARK DEMAND DEBENTURES
The Demand Debenture and Negative Pledge issued February 8, 1996
by Canadian Forest in favour of Fundco, as amended by the Confirmations (the
"CANADIAN FOREST DEBENTURE"), and the Demand Debenture and Negative Pledge
issued July 17, 1996 by ProMark in favour of Fundco, as amended by the Second
Confirmation (the "PROMARK DEBENTURE") are hereby confirmed as continuing
security in favour of Fundco for the timely payment of the principal,
interest (including interest on amounts in default) and all other
indebtedness and liabilities, present or future, direct or indirect, now or
hereafter owing by the Borrowers under the Second Amended and Restated
Canadian Forest Credit Agreement, as amended by Canadian Forest Amendment No.
1, and for the due performance by the Borrowers of all of their covenants and
obligations under that Second Amended and Restated Canadian Forest Credit
Agreement as amended by Canadian Forest Amendment No. 1 with the following
deemed reference and amendment:
THIRD CONFIRMATION ETC.
<PAGE>
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(a) each reference to "Canadian Forest Credit Agreement" therein shall
be deemed to refer to and include the Second Amended and Restated
Canadian Forest Credit Agreement as amended by Canadian Forest
Amendment No.1;
(b) by deleting from the fifth and sixth lines of Section 1.1 of each
Debenture "the principal amount of Eighty Million Canadian dollars
($80,000,000)" and replacing it with "the principal amount of One
Hundred Sixty Five Million Canadian dollars (Cdn.$165,000,000)" with
the intent and result that the Principal Amount owed by each of
Canadian Forest and ProMark under and secured by the Canadian Forest
Debenture and Promark Debenture, respectively, is hereby increased
from Cdn. $80,000,000 to Cdn. $165,000,000;
and each of the Canadian Forest Debenture and the ProMark Debenture are
hereby supplemented and amended accordingly in accordance with this Section
10 and Section 10A and Section 10B below.
10A. CANADIAN FOREST SUPPLEMENTAL CHARGES
Canadian Forest hereby continues the grants, assignments,
conveyances, transfers, mortgages, charges and security interests created by
the Canadian Forest Debenture and, in consideration of the premises herein
contained, the amendments to the Second Amended and Restated Canadian Forest
Agreement described in Canadian Forest Amendment No. 1 including, but not
limited to, the increase of the amount available under the Second Amended and
Restated Canadian Forest Credit Agreement, and of $10.00 paid by Fundco to
Canadian Forest (the receipt and sufficiency of which is hereby acknowledged
by Fundco), and for securing repayment to Chase and the Lenders of the
increased principal amount of the Canadian Forest Debenture referred to in
Section 10(b) above, Canadian Forest hereby grants, assigns, transfers,
mortgages and charges as and by way of:
(a) a first floating charge to and in favor of the Holder (as defined
in the Canadian Forest Debenture), in and to all of Canadian Forest's
Property that is described in Section 4.1(a) of the Canadian Forest
Debenture (subject to Section 7.1 of the Canadian Forest Debenture);
and
(b) a first fixed and specific mortgage and charge to and in favour of
the Holder (as defined in the Canadian Forest Debenture), and the
Holder hereby takes a continuing security interest in, all of Canadian
Forest's Property described in Sections 4.1(b), (c), and (d) of the
Canadian Forest Debenture (subject to Section 7.1 of the Canadian
Forest Debenture);
PROVIDED that the charges referred to in (a) and (b) above the Excluded
Property (as defined in the Canadian Forest Debenture).
THIRD CONFIRMATION ETC.
<PAGE>
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10B. PROMARK SUPPLEMENTAL CHARGES
ProMark hereby continues the grants, assignments,conveyances,
transfers, mortgages, charges and security interests created by the Promark
Debenture and, in consideration of the premises herein contained the
amendments to the Second Amended and Restated Canadian Forest Agreement
described in Canadian Forest Amendment No. 1 including, but not limited to,
the increase of the amount available under the Second Amended and Restated
Canadian Forest Credit Agreement, and of $10.00 paid by Fundco to ProMark
(the receipt and sufficiency of which is hereby acknowledged by ProMark), and
for securing repayment to Chase and the Lenders of the increased principal
amount of the ProMark Debenture referred to in Section 10(b) above, ProMark
hereby grants, assigns, transfers, mortgages and charges as and by way of:
(a) a first floating charge to and in favour of the Holder (as defined
in the ProMark Debenture), in and to all of ProMark's Property that
is described in Section 4.1(a) of the ProMark Debenture (subject to
Section 7.1 of the ProMark Debenture); and
(b) a first fixed and specific mortgage and charge to and in favour of
the Holder (as defined in the ProMark Debenture), and the Holder
hereby takes a continuing security interest in, all of ProMark's
Property described in Section 4.1(b), (c), and (d) of the ProMark
Debenture (subject of Section 7.1 of the ProMark Debenture);
PROVIDED that the charges referred to in (a) and (b) above exclude the
Excluded Property (as defined in the ProMark Debenture).
11. CANADIAN FOREST AND PROMARK DEPOSIT AGREEMENTS
The Deposit Agreement made February 8, 1996 by Canadian Forest in
favour of Fundco, as amended by the Confirmations, and the Deposit Agreement
made July 17, 1996 by ProMark in favour of Fundco, as amended by the Second
Confirmation, are hereby confirmed as continuing security in favour of Fundco
for the timely payment of the principal, interest (including interest on
amounts of default) and all other indebtedness and liabilities, present or
future, direct or indirect, now or hereafter owing by the Borrowers under the
Second Amended and Restated Canadian Forest Credit Agreement, as amended by
Canadian Forest Amendment No. 1, and for the due performance by the Borrowers
of all of their covenants and obligations under that Second Amended and
Restated Canadian Forest Credit Agreement as amended by Canadian Forest
Amendment No. 1, with each reference to "Credit Agreement" therein being
deemed to refer to and include the Second Amended and Restated Canadian
Forest Credit Agreement as amended by Canadian Forest Amendment No. 1.
12. HOLDCO GUARANTEE AND PLEDGE AGREEMENT
The Guarantee and Pledge Agreement dated as of April 1, 1997 by
Holdco in favour of Fundco (the "HOLDCO GUARANTEE AND PLEDGE AGREEMENT"), is
hereby confirmed as a continuing guarantee in favour of Fundco with that
security and all payments thereunder being assigned to Chase pursuant to the
Assignment of Security (Canadian Forest Credit Agreement) referred to in
Section 3 hereof and the Assignment of Payments (Canadian Forest Credit
Agreement) referred to in Section 4 hereof, PROVIDED that the pledge of and
grant of a security
THIRD CONFIRMATION ETC.
<PAGE>
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interest in the shares of Canadian Forest (the "PLEDGED STOCK") and other
collateral (as defined therein) contained therein (the "ORIGINAL PLEDGE") is
hereby terminated and wholly discharged and in that regard Section 3.10,
Article 4, Article 5, Article 7 and Section 8.13 of the Holdco Guarantee and
Pledge Agreement are hereby deleted without affecting the ongoing validity of
the Holdco Guarantee and Pledge Agreement as to all other parts thereof.
Chase is hereby authorized to transfer possession of all of the Pledged Stock
to The Chase Manhattan Bank, 66 shares of which are to be held by it as
continuing collateral security for the obligations secured by the Pledge
Agreement provided by Holdco to The Chase Manhattan Bank concurrently with
the execution and effectiveness of this Agreement (the "U.S. PLEDGE
AGREEMENT").
13. HOLDCO POWERS OF ATTORNEY
Each Power of Attorney dated April 1, 1997 given by Holdco in
respect of the Pledged Stock in connection with the security interests
granted by it to Fundco with regard to the Pledged Stock, is terminated
concurrently with the granting of a Power of Attorney by Holdco in respect of
the share certificate issued in respect of the Pledged Stock and delivered
pursuant to The Chase Manhattan Bank pursuant to the U.S. Pledge Agreement.
14. CANADIAN FOREST POWER OF ATTORNEY
The Powers of Attorney dated February 8, 1996 given by Canadian
Forest in respect of the share certificates of ProMark in connection with the
security interest granted by Canadian Forest to Fundco shall continue in full
force and effect.
15. FOREST LIMITED RECOURSE SECURED GUARANTEE
The Limited Recourse Secured Guarantee of Forest Oil dated as of
April 1, 1997 (the "FOREST LIMITED RECOURSE SECURED GUARANTEE") is hereby
confirmed as continuing security in favour of Fundco for the timely payment
of the principal, interest (including interest on amounts in default) and all
other indebtedness and liabilities, present or future, direct or indirect,
now or hereafter owing by the Borrowers under the Second Amended and Restated
Canadian Forest Credit Agreement, as amended by Canadian Forest Amendment No.
1, and for due performance by the Borrowers of all their covenants and
obligations under that Second Amended and Restated Canadian Forest Credit
Agreement as amended by Canadian Forest Amendment No. 1, with the following
deemed reference and amendments:
(a) each reference to "Credit Agreement" therein shall be deemed to refer
to and include the Second Amended and Restated Canadian Forest
Credit Agreement as amended by Canadian Forest Amendment No. 1;
(b) the first paragraph of the recitals is hereby amended by deleting
"Cdn. $80,000,000" and replacing it with "Cdn. $165,000,000";
(c) the definition of "Debenture" is amended by replacing "Cdn.
$80,000,000" with "Cdn. $165,000,000";
THIRD CONFIRMATION ETC.
<PAGE>
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(d) Section 4.03 is hereby deleted and replaced with the following:
"4.03 RIGHTS NOT AFFECTED. Nothing in Section 4.02
shall be construed as: (i) limiting Saskco's rights
to enforce the Loan Documents against any of the
parties hereto other than the Guarantor; and
(ii) limiting the rights of The Chase Manhattan Bank
of Canada to enforce that certain Guarantee dated as
of August 19, 1997 granted in its favour by Forest
Oil Corporation."
16. FOREST LIMITED RECOURSE DEMAND DEBENTURE
The Limited Recourse Demand Debenture and Negative Pledge issued as of
April 1, 1997 by Forest Oil in favour of Fundco (the "FOREST OIL DEBENTURE")
is hereby confirmed as continuing security in favour of Fundco for the timely
payment of the principal, interest (including interest on amounts in default)
and all other indebtedness and liabilities, present or future, direct or
indirect, now or hereafter owing by the Borrowers under the Second Amended
and Restated Canadian Forest Credit Agreement, as amended by Canadian Forest
Amendment No. 1, and for due performance by the Borrowers of all their
covenants and obligations under the Second Amended and Restated Canadian
Forest Credit Agreement as amended by Canadian Forest Amendment No. 1, with
the following deemed reference and amendments;
(a) each reference to "Credit Agreement" therein shall be deemed to
refer to and include the Second Amended and Restated Canadian Forest
Credit Agreement as amended by Canadian Forest Amendment No. 1;
(b) by deleting from the fourth and fifth lines of Section 1.1 "the
principal amount of Eighty Million Canadian dollars ($80,000,000)"
and replacing it with "the principal amount of One Hundred Sixty
Five Million Canadian dollars (Cdn. $165,000,000)" with the intent
and result that the Principal Amount owed by Forest Oil under and
secured by the Forest Oil Debenture is hereby increased from
Cdn. $80,000,000 to Cdn. $165,000,000;
and the Forest Oil Debenture is hereby supplemented and amended accordingly
in accordance with this Section 16 and Section 16A below.
16A. FOREST OIL SUPPLEMENTAL CHARGES
Forest Oil hereby continues the grants, assignments, conveyances,
transfers, mortgages, charges and security interests created by the Forest
Oil Debenture and, in consideration of the premises herein contained and of
$10.00 paid by Fundco to Forest Oil (the receipt and sufficiency of which is
hereby acknowledged by Forest Oil), and for securing repayment to Chase and
the Lenders of the increased principal amount of the Forest Debenture
referred to in Section 16(b) above, Forest Oil hereby grants, assigns,
transfers, mortgages and charges as and by way of:
THIRD CONFIRMATION ETC.
<PAGE>
-11-
(a) a first floating charge to and in favour of the Holder (as defined
in the Forest Oil Debenture), in and to all of Forest Oil's Property
that is described in Section 4.1(a) of the Forest Oil Debenture
(subject to Section 7.1 of the Forest Oil Debenture); and
(b) a first fixed and specific mortgage and charge to and in favour of
the Holder (as defined in the Forest Oil Debenture), and the Holder hereby
takes a continuing security interest in, all of Forest Oil's Property
described in Section 4.1(b), (c), and (d) of the Forest Oil Debenture
(subject to Section 7.1 of the Forest Oil Debenture).
17. FOREST OIL DEPOSIT AGREEMENT
The Deposit Agreement made as of April 1, 1997 by Forest Oil in favour
of Fundco is hereby confirmed as continuing security in favour of Fundco for
the timely payment of the principal, interest (including interest on amounts
in default) and all other indebtedness and liabilities, present or future,
direct or indirect, now or hereafter owing by the Borrowers under the Second
Amended and Restated Canadian Forest Credit Agreement, as amended by Canadian
Forest Amendment No. 1, and for the due performance by the Borrowers of all
their covenants and obligations under that Second Amended and Restated
Canadian Forest Credit Agreement as amended by Canadian Forest Amendment
No. 1, with the reference to "Cdn. $80,000,000" in the second paragraph of
the recitals therein being hereby deleted and replaced by "Cdn. $165,000,000"
and each reference to "Credit Agreement" therein being deemed to refer to the
Second Amended and Restated Canadian Forest Credit Agreement as amended by
Canadian Forest Amendment No. 1.
18. PRINCIPLE AMOUNT
Any reference made in the Security Documents (as they refer to any of
the Debentures referred to in this Agreement) to "Eighty Million Canadian
dollars", "Cdn. $80,000,000" and similar expressions of such amount in
Canadian funds shall be deemed to be replaced by, respectively, a reference
to "One hundred Sixty Five Million Canadian dollars", "Cdn. $165,000,000", or
such similar expression of such amount in Canadian funds as the context may
require.
19. FOREST GUARANTEE AND MORTGAGE AMENDMENTS
The parties acknowledge that, in connection with the transaction
referred to in Recital 4 of this Agreement, Forest Oil is granting the
following new security as security for the fulfillment of all debts and
liabilities, present and future, direct and indirect, absolute and contingent,
matured or not, at any time owing by Fundco under the Second Amended and
Restated Fundco Credit Agreement as amended by Fundco Amendment No. 1:
(a) a Guarantee of Forest Oil dated as of August 19, 1997;
THIRD CONFIRMATION ETC.
<PAGE>
-12-
(b) the Deed of Trust, Mortgage, Security Agreement, Assignment of
Production, Financing Statement (Personal Property Including
Hydrocarbons) and Fixture Filing dated as of June 3, 1994 from
Forest Oil to Secured Party and the Trustee (as defined therein) as
supplemented and amended to the date hereof including pursuant to
Amendment No. 3 dated as of August 19, 1997; and
(c) the Deed of Trust, Mortgage, Security Agreement, Assignment of
Production, Financing Statement (Personal Property Including
Hydrocarbons) and Fixture Filing dated as of June 3, 1994 from
Forest Oil to Secured Party and the Trustee (as defined therein) as
supplemented and amended to the date hereof including pursuant to
Amendment No. 4 dated as of August 19, 1997.
20. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws of the Province of Alberta and the laws of Canada applicable therein
and shall be treated as an Alberta contract. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the courts of the Province of
Alberta, without prejudice to the rights of a party to take proceedings in
any other jurisdictions.
21. SEVERABILITY
If one or more of the provisions of this Agreement is, or is adjudged to
be, invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby, and such invalid, illegal or unenforceable
provision shall, to the extent permitted at law, be severable.
22. SECURITY IN ADDITION
The rights hereby constituted are in addition to and not in substitution
for any other security, or for any other agreement between the parties
whether or not creating any security interest in all or part of the Property
of any party hereto whether heretofore or hereafter made, and such security
and such agreement shall be deemed to be continued and not affected hereby
unless expressly provided to the contrary herein. The taking of any action or
proceedings or refraining from so doing, or any other dealing with any other
security or any part thereof shall not release or affect this Agreement and
neither the taking of any proceedings hereunder or under the documents
continued hereunder for the realization of any security shall release or
affect any other security held by Chase.
23. CONTINUING SECURITY
Without limiting the generality of the foregoing, Forest Oil, Holdco,
Canadian Forest, ProMark and Fundco acknowledge and agree with the Agent that
the Security Documents (as defined in the Second Amended and Restated Fundco
Credit Agreement as amended by Fundco Amendment No. 1), and including the
security provided by Forest Oil that is referred to in Section 19 above,
except as expressly changed, altered, amended, modified or supplemented by
the Confirmations and by this Agreement, are and shall remain in full force
and effect as
THIRD CONFIRMATION ETC.
<PAGE>
-13-
amended as provided in the Confirmations and in this Agreement, and shall
continue to constitute collateral security for the fulfillment of all debts and
liabilities, present and future, direct and indirect, absolute and
contingent, matured or not, at any time owing by Fundco under the Second
Amended and Restated Fundco Credit Agreement as amended by the Fundco
Amendment No. 1, howsoever arising. Each of the Fundco Debenture, the
Canadian Forest Debenture, the ProMark Debenture and the Forest Oil Debenture
(collectively, the "DEBENTURES") shall henceforth be read in conjunction with
the Confirmations and this Agreement (the applicable provisions of those
Confirmations and this Agreement constituting supplemental debentures to
those Debentures, respectively) and the Debentures, the Confirmations and
this Agreement shall henceforth have effect so far as is practicable as if
all of the provisions of the Debentures as originally executed, and as
amended by the First Confirmation, the Second Confirmation and this Agreement
were contained in a single instrument in respect of each of those
Debentures.
24. WAIVERS AND CONSENTS
No waiver of any provision hereof, or consent to any action or inaction
shall be effective unless the same is in writing and signed by the party
granting the same. Such waivers and consents shall not extend to any matters
other than those in respect of which the same were given, and the same may be
subject to such conditions as the party giving the same may stipulate.
25. FURTHER ASSURANCES
Each of Forest Oil, Holdco, Canadian Forest, ProMark and Fundco shall
from time to time, whether before or after the occurrence of any default in
the performance of any obligation to Chase under the Second Amended and
Restated Fundco Credit Agreement or the Second Amended and Restated Canadian
Forest Credit Agreement, do all such acts and things and execute and deliver
all such deeds, transfers, assignments and instruments as Chase may require
to give effect to the intent of this Agreement.
THIRD CONFIRMATION ETC.
<PAGE>
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Agreement by signing any such counterpart.
IN WITNESS WHEREOF the parties have executed this Agreement.
3189503 CANADA LTD.
By: /s/ Kenneth B. Potter
--------------------------
Kenneth B. Potter
Secretary
CANADIAN FOREST OIL LTD.
By: /s/ Ronald E. Pratt
------------------------
Ronald E. Pratt
Vice President, Finance
PRODUCERS MARKETING LTD.
By: /s/ Ronald E. Pratt
------------------------
Ronald E. Pratt
Secretary
FOREST OIL CORPORATION
By: /s/ Kenton M. Scroggs
------------------------
Kenton M. Scroggs
Vice President and Treasurer
611852 SASKATCHEWAN LTD.
By: /s/ Kenneth B. Potter
------------------------
Kenneth B. Potter
Secretary
THE CHASE MANHATTAN BANK OF
CANADA, AS ADMINISTRATIVE AGENT
By: /s/ Christine Chan /s/ Arun K. Bery
-------------------------------------
Christine Chan Arun K. Bery
Vice President Vice President
THIRD CONFIRMATION ETC.
<PAGE>
SECOND SECURITY CONFIRMATION AND
AMENDMENT AGREEMENT
This Second Security Confirmation and Amendment Agreement (the
"AGREEMENT") is made as of April 1, 1997 among Canadian Forest Oil Ltd.
("CANADIAN FOREST"), Producers Marketing Ltd. ("PROMARK"), 3189503 Canada Ltd.
("HOLDCO"), 611852 Saskatchewan Ltd. ("FUNDCO"), Forest Oil Corporation ("FOREST
OIL"), and The Chase Manhattan Bank of Canada ("CHASE" or the "AGENT") in its
capacity as Administrative Agent for the Lenders (the "LENDERS") now or
hereafter party to the Second Amended and Restated Fundco Credit Agreement (as
defined below).
WHEREAS:
1. The parties hereto (or certain of them, as applicable) are parties to
various notes, guarantees and security documents given to assure and secure
payment and performance of obligations under the following credit agreements:
(a) Credit Agreement dated as of February 8, 1996 between Fundco and Chase
(the "ORIGINAL FUNDCO CREDIT AGREEMENT"),
(b) Credit Agreement dated as of February 8, 1996 between Canadian Forest,
the "Subsidiary Borrowers" (as defined therein), and Fundco (the
"ORIGINAL CANADIAN FOREST CREDIT AGREEMENT"), and
(c) Letter of Credit and Reimbursement Agreement dated as of February 8,
1996 between ProMark and Fundco (the "PRODUCERS MARKETING AGREEMENT").
2. The parties subsequently agreed to certain changes to the above
facilities, including the addition of new lenders to the Original Fundco Credit
Agreement, the inclusion of ProMark as a direct Borrower under the Original
Canadian Forest Credit Agreement, and the termination of the Producers Marketing
Agreement, and agreed to effect such changes by entering into:
(a) the Amended and Restated Credit Agreement dated July 17, 1996 among
Fundco, as borrower, and Chase, Bank of Montreal and Royal Bank of
Canada, as lenders, and Chase as Administrative Agent for the Lenders,
and
(b) the Amended and Restated Credit Agreement dated July 17, 1996 among
Canadian Forest, ProMark, and other "Subsidiary Borrowers" (as defined
therein), as borrowers, and Fundco, as lender.
In that regard, the parties entered into a Security Confirmation and Amendment
Agreement dated July 17, 1996 (the "FIRST CONFIRMATION") to effect certain
confirmations and amendments in respect of the Loan Documents, and to terminate
certain Loan Documents.
<PAGE>
-2-
3. In order to reflect, firstly, certain corporate changes affecting
Canadian Forest (namely, the amalgamation of 3189490 Canada Ltd. and Atcor
Resources Ltd. to form 721940 Alberta Ltd. as the continuing corporation
resulting therefrom, and the amalgamation of 721940 Alberta Ltd. and Canadian
Forest to form Canadian Forest as the continuing corporation resulting
therefrom), and secondly, certain asset sales from Canadian Forest to Forest Oil
and the continued secured position of Fundco with respect to such assets, the
parties hereto (or certain of them) have agreed to effect certain additional
amendments by entering into:
(a) the Second Amended and Restated Credit Agreement dated as of April 1,
1997 among Fundco, as borrower, and Chase, Bank of Montreal and Royal
Bank of Canada, as Lenders, and Chase as Administrative Agent for the
Lenders (as amended, restated or otherwise modified from time to time,
the "SECOND AMENDED AND RESTATED FUNDCO CREDIT AGREEMENT");
(b) the Second Amended and Restated Credit Agreement dated as of April 1,
1997 among Canadian Forest, ProMark, and other "Subsidiary Borrowers"
(as defined therein), as borrowers, and Fundco, as lender (as amended,
restated or otherwise modified from time to time, the "SECOND AMENDED
AND RESTATED CANADIAN FOREST CREDIT AGREEMENT").
4. The parties desire to confirm that in connection with the amendments
and restatements referred to in Recital 3 above, certain guarantees and security
given in connection with the original agreements referred to in Recital 1 above
continue in effect with certain amendments as herein and in the First
Confirmation set out, while certain other instruments are terminated as herein
set out.
NOW THEREFORE, in consideration of Chase and the Lenders agreeing to
the further amendment and restatement of the Original Fundco Credit Agreement
and the Original Canadian Forest Credit Agreement and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS
Capitalized terms used but not defined in this Agreement shall have
the meanings ascribed to them in the Second Amended and Restated Fundco Credit
Agreement.
2. EXISTING FUNDCO NOTES
Each of the four existing Notes dated July 17, 1996 and issued by
Fundco pursuant to Sections 2.09(a) and (b) of the Amended and Restated Credit
Agreement referred to in Recital 2(a) of this Agreement shall continue in full
force and effect, with each reference to "Amended and Restated Credit Agreement"
therein being deemed to refer to and include the Second Amended and Restated
Fundco Credit Agreement.
<PAGE>
-3-
3. FUNDCO ASSIGNMENT OF SECURITY (RE: CANADIAN FOREST)
The Assignment of Security (Canadian Forest Credit Agreement) made
February 8, 1996 by Fundco in favour of Chase, as amended by the First
Confirmation, is hereby confirmed as continuing security in favour of Chase for
the timely payment of the principal, interest (including interest on amounts in
default) and all other indebtedness and liabilities, present or future, direct
or indirect, now or hereafter owing by Fundco under the Second Amended and
Restated Fundco Credit Agreement and for the due performance by Fundco of all of
its covenants and obligations under that Second Amended and Restated Fundco
Credit Agreement, with the following deemed references and amendments:
(a) each reference to "Credit Agreement" therein shall be deemed to refer
to and include the Second Amended and Restated Fundco Credit
Agreement, and each reference to "Canadian Forest Credit Agreement"
shall be deemed to refer to and include the Second Amended and
Restated Canadian Forest Credit Agreement;
(b) the reference to "Sections 6.02(e) and (f) of the Credit Agreement"
found in the last line of Section 5.1(a) thereto is deleted and
replaced with a reference to "Sections 6.02(d) and (e) of the Credit
Agreement";
(c) the references to "Atcor Resources" in Sections 5.1(d) and (e) thereof
shall be deleted and replaced with references to "3189503"; and
(d) Item 4 of Schedule A thereto is deleted, and the following items are
added to such Schedule A:
"8. Guarantee and Pledge Agreement of 3189503 in favour of 611852
Saskatchewan Ltd. dated April 1, 1997.
9. Limited Recourse Secured Guarantee of Forest Oil Corporation in
favour of 611852 Saskatchewan Ltd. dated April 1, 1997.
10. Limited Recourse Demand Debenture and Negative Pledge of Forest
Oil Corporation in favour of 611852 Saskatchewan Ltd. dated April
1, 1997.
11. Deposit Agreement of Forest Oil Corporation in favour of 611852
Saskatchewan Ltd. dated April 1, 1997."
4. FUNDCO ASSIGNMENT OF PAYMENTS (RE: CANADIAN FOREST)
The Assignment of Payments (Canadian Forest Credit Agreement) dated
effective February 8, 1996 and executed by Fundco in favour of Chase, as amended
by the First Confirmation, is hereby confirmed as continuing security in favour
of Chase for the timely payment of the principal, interest (including interest
on amounts in default) and all other indebtedness and liabilities, present or
future, direct or indirect, now or hereafter owing by Fundco under the Second
Amended and Restated Fundco Credit Agreement and for the due performance by
Fundco of all of its
<PAGE>
-4-
covenants and obligations under that Second Amended and Restated Fundco
Credit Agreement, with "(the "CREDIT AGREEMENT") and (the "CANADIAN FOREST
CREDIT AGREEMENT")" found in Section 1 thereof being deleted and replaced by
"(as at any time amended, restated, supplemented or modified, the "CREDIT
AGREEMENT")", and "(as at any time amended, restated, supplemented or
modified in the "CANADIAN FOREST CREDIT AGREEMENT")" respectively, and with
each reference to "Credit Agreement" therein being deemed to refer to and
include the Second Amended and Restated Fundco Credit Agreement, and each
reference to "Canadian Forest Credit Agreement" being deemed to refer to and
include the Second Amended and Restated Canadian Forest Credit Agreement.
5. CANADIAN FOREST/ATCOR RESOURCES CONSENT AND AGREEMENT (RE: CANADIAN
FOREST)
The Consent and Agreement (Canadian Forest Credit Agreement) made
February 8, 1996 and executed by Canadian Forest and Atcor Resources Ltd. in
favour of Chase, as amended by the First Confirmation, is hereby confirmed as a
continuing consent and agreement in favour of Chase for the timely payment of
the principal, interest (including interest on amounts in default) and all other
indebtedness and liabilities, present or future, direct or indirect, now or
hereafter owing by Fundco under the Second Amended and Restated Fundco Credit
Agreement and for the due performance by Fundco of all of its covenants and
obligations under that Second Amended and Restated Fundco Credit Agreement, with
the following deemed references and amendments:
(a) by their execution of this Agreement each of Forest Oil and Holdco
hereby becomes a party to such Consent and Agreement as one of the
"Canadian Forest Companies"; the term "Canadian Forest Companies"
shall be deemed to include Forest Oil and Holdco throughout that
Consent and Agreement; and Forest Oil and Holdco hereby provide the
consents, confirmations and acknowledgements, and assume the
representations, covenants, agreements and other obligations, of the
Canadian Forest Companies thereunder. The "Address for Notices" for
Forest Oil and Holdco shall be the same as that set out in respect of
Forest Oil on the signature page for Fundco in the Second Amended and
Restated Fundco Credit Agreement;
(b) each reference to "Credit Agreement" therein shall be deemed to refer
to and include the Second Amended and Restated Fundco Credit
Agreement, and each reference to "Canadian Forest Credit Agreement"
shall be deemed to refer to and include the Second Amended and
Restated Canadian Forest Credit Agreement; and
(c) Item 4 of Schedule A thereto is deleted, and the following items are
added to such Schedule A:
"8. Guarantee and Pledge Agreement of 3189503 in favour of 611852
Saskatchewan Ltd. dated April 1, 1997.
9. Limited Recourse Secured Guarantee of Forest Oil Corporation in
favour of 611852 Saskatchewan Ltd. dated April 1, 1997.
10. Limited Recourse Demand Debenture and Negative Pledge of Forest
Oil Corporation in favour of 611852 Saskatchewan Ltd. dated
April 1, 1997.
<PAGE>
-5-
11. Deposit Agreement of Forest Oil Corporation in favour of 611852
Saskatchewan Ltd. dated April 1, 1997."
6. FUNDCO DEMAND DEBENTURE
The Demand Debenture and Negative Pledge issued February 8, 1996 by
Fundco in favour of Chase, as amended by the First Confirmation, is hereby
confirmed as continuing security in favour of Chase for the timely payment of
the principal, interest (including interest on amounts in default) and all other
indebtedness and liabilities, present or future, direct or indirect, now or
hereafter owing by Fundco under the Second Amended and Restated Fundco Credit
Agreement and for the due performance by Fundco of all of its covenants and
obligations under that Second Amended and Restated Fundco Credit Agreement, with
each reference to "Credit Agreement" in that Demand Debenture being deemed to
refer to and include the Second Amended and Restated Fundco Credit Agreement.
7. FUNDCO DEPOSIT AGREEMENT
The Deposit Agreement made February 8, 1996 by Fundco in favour of
Chase, as amended by the First Confirmation, is hereby confirmed as continuing
security in favour of Chase for the timely payment of the principal, interest
(including interest on amounts in default) and all other indebtedness and
liabilities, present or future, direct or indirect, now or hereafter owing by
Fundco under the Second Amended and Restated Fundco Credit Agreement and for the
due performance by Fundco of all of its covenants and obligations under that
Second Amended and Restated Fundco Credit Agreement, with each reference to
"Credit Agreement" in that Deposit Agreement being deemed to refer to and
include the Second Amended and Restated Fundco Credit Agreement.
8. CHASE CONFIRMATION RE: INCREMENTAL INTEREST RATE
The letter acknowledgement of Chase dated February 8, 1996 to Fundco,
as amended by the First Confirmation, is confirmed as a continuing
acknowledgement in favour of Fundco, with each reference to "Credit Agreement"
therein being deemed to refer to and include the Second Amended and Restated
Fundco Credit Agreement.
9. CANADIAN FOREST AND PROMARK NOTES
Each of the two existing Notes dated July 17, 1996 issued by Canadian
Forest, and each of the two existing Notes dated July 17, 1996 issued by
ProMark, in each case pursuant to Sections 2.09(a) and (b) of the Amended and
Restated Credit Agreement referred to in Recital 2(b) of this Agreement, shall
continue in full force and effect, with each reference to "Amended and Restated
Credit Agreement" therein being deemed to refer to and include the Second
Amended and Restated Canadian Forest Credit Agreement.
<PAGE>
-6-
10. CANADIAN FOREST AND PROMARK DEMAND DEBENTURES
The Demand Debenture and Negative Pledge issued February 8, 1996 by
Canadian Forest in favour of Fundco, as amended by the First Confirmation (the
"CANADIAN FOREST DEBENTURE"), and the Demand Debenture and Negative Pledge
issued July 17, 1996 by ProMark in favour of Fundco, are hereby confirmed as
continuing security in favour of Fundco for the timely payment of the principal,
interest (including interest on amounts in default) and all other indebtedness
and liabilities, present or future, direct or indirect, now or hereafter owing
by the Borrowers under the Second Amended and Restated Canadian Forest Credit
Agreement and for the due performance by the Borrowers of all of their covenants
and obligations under that Second Amended and Restated Canadian Forest Credit
Agreement with the following deemed reference and amendment:
(a) each reference to "Canadian Forest Credit Agreement" therein shall be
deemed to refer to and include the Second Amended and Restated
Canadian Forest Credit Agreement; and
(b) Section 12.6(a) of the Canadian Forest Debenture is deleted and
replaced with "the occurrence of an event described in Section 12.2(b)
or (c); or".
11. CANADIAN FOREST AND PROMARK DEPOSIT AGREEMENTS
The Deposit Agreement made February 8, 1996 by Canadian Forest in
favour of Fundco, as amended by the First Confirmation, and the Deposit
Agreement made July 17, 1996 by ProMark in favour of Fundco, are hereby
confirmed as continuing security in favour of Fundco for the timely payment of
the principal, interest (including interest on amounts in default) and all other
indebtedness and liabilities, present or future, direct or indirect, now or
hereafter owing by the Borrowers under the Second Amended and Restated Canadian
Forest Credit Agreement and for the due performance by the Borrowers of all of
their covenants and obligations under that Second Amended and Restated Canadian
Forest Credit Agreement, with each reference to "Credit Agreement" therein being
deemed to refer to and include the Second Amended and Restated Canadian Forest
Credit Agreement.
12. ATCOR GUARANTEE AND PLEDGE AGREEMENT
The Guarantee and Pledge Agreement dated as of February 8, 1996 by
Atcor Resources Ltd. in favour of Fundco, as amended by the First Confirmation,
is hereby terminated concurrently with the execution by Holdco of the Guarantee
and Pledge Agreement in favour of Fundco dated April 1, 1997 (the "NEW
GUARANTEE") with that security and all payments thereunder and under the Powers
of Attorney referred to in Section 13 hereof being assigned to Chase pursuant to
the Assignment of Security (Canadian Forest Credit Agreement) referred to in
Section 3 hereof and the Assignment of Payments (Canadian Forest Credit
Agreement) referred to in Section 4 hereof. Notwithstanding the immediately
preceding sentence, such termination shall not become effective until the New
Guarantee is in full force and effect and such termination shall be without
prejudice to the security interest in the Pledged Stock and other Collateral (as
defined in the New Guarantee) created in favour of Fundco by the New Guarantee,
and Chase shall continue in possession of the
<PAGE>
-7-
Pledged Stock and other Collateral (as assignee of the New Guarantee) as
continuing collateral security for the obligations secured by the New
Guarantee on the terms set out in the New Guarantee.
13. ATCOR RESOURCES POWERS OF ATTORNEY
Each Power of Attorney dated February 8, 1996 given by Atcor Resources
Ltd. in respect of the share certificates of Canadian Forest in connection with
the security interests granted by it to Fundco, is terminated concurrently with
the granting of a Power of Attorney by Holdco in respect of the sole share
certificate issued in respect of all of the issued and outstanding shares in the
capital of Canadian Forest and delivered pursuant to the New Guarantee.
14. CANADIAN FOREST POWER OF ATTORNEY
The Powers of Attorney dated February 8, 1996 given by Canadian Forest
in respect of the share certificates of ProMark in connection with the security
interest granted by Canadian Forest to Fundco shall continue in full force and
effect.
15. NEW FOREST SECURITY
The parties acknowledge that in connection with the sale transaction
referred to in Recital 3 of this Agreement, Forest Oil is granting the following
new security, with that security and all payments thereunder being assigned to
Chase pursuant to the Assignment of Security (Canadian Forest Credit Agreement)
referred to in Section 3 hereof and the Assignment of Payments (Canadian Forest
Credit Agreement) referred to in Section 4 hereof:
(a) Limited Recourse Secured Guarantee of Forest Oil dated as of April 1,
1997;
(b) Limited Recourse Demand Debenture and Negative Pledge of Forest Oil
dated as of April 1, 1997; and
(c) Deposit Agreement of Forest Oil dated as of April 1, 1997;
(collectively, the "NEW FOREST SECURITY").
Fundco (and Chase, as Fundco's assignee) acknowledge that their
recourse in respect of enforcing the New Forest Security is limited to realizing
upon the Liens created by the Limited Recourse Demand Debenture and Negative
Pledge referred to in clause (b) above, all as provided in the New Forest
Security, and that Forest is not liable on the aforesaid Guarantee or Demand
Debenture for any deficiency that may exist following such realization.
16. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws of the Province of Alberta and the laws of Canada applicable therein
and shall be treated as an Alberta contract. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the courts of
<PAGE>
-8-
the Province of Alberta, without prejudice to the rights of a party to take
proceedings in any other jurisdictions.
17. SEVERABILITY
If one or more of the provisions of this Agreement is, or is adjudged
to be, invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby, and such invalid, illegal or unenforceable
provision shall, to the extent permitted at law, be severable.
18. SECURITY IN ADDITION
The rights hereby constituted are in addition to and not in
substitution for any other security, or for any other agreement between the
parties whether or not creating any security interest in all or part of the
property of any party hereto whether heretofore or hereafter made, and such
security and such agreement shall be deemed to be continued and not affected
hereby unless expressly provided to the contrary herein. The taking of any
action or proceedings or refraining from so doing, or any other dealing with any
other security or any part thereof shall not release or affect this Agreement
and neither the taking of any proceedings hereunder or under the documents
continued hereunder for the realization of any security shall release or affect
any other security held by Chase.
19. CONTINUING SECURITY
Without limiting the generality of the foregoing, Forest Oil, Holdco,
Canadian Forest, ProMark and Fundco acknowledge and agree with the Agent that
the Security Documents (as defined in the Second Amended and Restated Fundco
Credit Agreement), as amended as provided in this Agreement, are and shall
remain in full force and effect and shall continue to constitute collateral
security for the fulfilment of all debts and liabilities, present and future,
direct and indirect, absolute and contingent, matured or not, at any time owing
by Fundco under the Second Amended and Restated Fundco Credit Agreement,
howsoever arising.
20. WAIVERS AND CONSENTS
No waiver of any provision hereof, or consent to any action or
inaction shall be effective unless the same is in writing and signed by the
party granting the same. Such waivers and consents shall not extend to any
matters other than those in respect of which the same were given, and the same
may be subject to such conditions as the party giving the same may stipulate.
21. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
<PAGE>
-9-
22. FURTHER ASSURANCES
Each of Forest Oil, Holdco, Canadian Forest, ProMark and Fundco shall
from time to time, whether before or after the occurrence of any default in the
performance of any obligation to Chase under the Second Amended and Restated
Fundco Credit Agreement or the Second Amended and Restated Canadian Forest
Credit Agreement, do all such acts and things and execute and deliver all such
deeds, transfers, assignments and instruments as Chase may require to give
effect to the intent of this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement.
3189503 CANADA LTD.
By: /s/ Kenneth B. Potter
----------------------------------
Kenneth B. Potter
Secretary
CANADIAN FOREST OIL LTD.
By: /s/ Ronald E. Pratt
----------------------------------
Ronald E. Pratt
Vice President, Finance
PRODUCERS MARKETING LTD.
By: /s/ Ronald E. Pratt
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Ronald E. Pratt
Secretary
FOREST OIL CORPORATION
By: /s/ Kenton M. Scroggs
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Kenton M. Scroggs
Vice President and Treasurer
611852 SASKATCHEWAN LTD.
By: /s/ Kenneth B. Potter
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Kenneth B. Potter
Secretary
THE CHASE MANHATTAN BANK OF
CANADA, AS ADMINISTRATIVE AGENT
By: /s/ (Illegible)
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Vice President
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GUARANTEE AND PLEDGE AGREEMENT
GUARANTEE AND PLEDGE AGREEMENT dated as of April 1, 1997 between
3189503 Canada Ltd., a corporation duly organized and validly existing under
the laws of Canada (the "GUARANTOR"); and 611852 SASKATCHEWAN LTD., a
corporation duly organized under the laws of the Province of Saskatchewan
("SASKCO").
RECITALS
1. Canadian Forest Oil Ltd., a corporation duly organized under the
laws of Alberta ("CANADIAN FOREST"), each of the Subsidiaries that becomes a
party to the Credit Agreement as provided therein (individually a "SUBSIDIARY
BORROWER" and collectively with Canadian Forest, the "BORROWERS") and Saskco
are parties to a Second Amended and Restated Credit Agreement dated as of
April 1, 1997 (as amended, restated, modified and supplemented or further
restated and in effect from time to time, the "CREDIT AGREEMENT"), providing,
subject to the terms and conditions thereof, for extensions of credit (by
making of loans or the provision of Letters of Credit) by Saskco to the
Borrowers in an aggregate principal or face amount not exceeding C$80,000,000.
2. All of the issued and outstanding shares of Canadian Forest are
currently pledged to Saskco pursuant to a Guarantee and Pledge Agreement
dated February 8, 1996 given by Atcor Resources Ltd. (then an indirect
wholly-owned subsidiary of the Guarantor and the direct parent of Canadian
Forest). Through a series of amalgamations, including the amalgamation of
Canadian Forest and Atcor Resources Ltd., the Guarantor is the successor to
Atcor Resources Ltd. as the direct owner of all of such shares.
3. To induce Saskco to enter into the Credit Agreement and to extend
credit thereunder and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Guarantor has agreed to
guarantee the Guaranteed Obligations (as hereinafter defined), and to
continue the security interest currently held by Saskco in the shares of
Canadian Forest and the other Collateral (as herein defined) as security for
the Secured Obligations (as herein defined). Accordingly, the parties hereto
agree as follows:
SECTION 1
DEFINITIONS
Terms defined in the Credit Agreement are used herein as defined
therein. In addition, as used herein:
"ALBERTA PPSA" shall mean the PERSONAL PROPERTY SECURITY ACT (Alberta)
as in effect from time to time in the Province of Alberta.
"COLLATERAL" shall have the meaning ascribed thereto in Section 4
hereof.
GUARANTEE AND PLEDGE AGREEMENT
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"COLLATERAL ACCOUNT" shall have the meaning ascribed thereto in
Section 5.01 hereof.
"GUARANTEED OBLIGATIONS" shall have the meaning ascribed thereto in
Section 2.01 hereof.
"LETTER OF CREDIT LIABILITIES" shall have the meaning ascribed thereto
in the Credit Agreement.
"OBLIGORS" shall mean, collectively, the Borrowers.
"PLEDGED STOCK" shall have the meaning ascribed thereto in
Section 4(a) hereof.
"SECURED OBLIGATIONS" shall mean, collectively, (a) all obligations of
the Guarantor in respect of its Guarantee under Section 2 hereof and
(b) all other obligations of the Guarantor to Saskco hereunder.
SECTION 2
THE GUARANTEE
2.01 THE GUARANTEE. The Guarantor hereby guarantees to Saskco and its
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the principal of and interest on
the Loans made by Saskco to, and the Note(s) held by Saskco of, the Borrowers
and all other amounts from time to time owing to Saskco by the Borrowers
under the Credit Agreement, the Notes and the other Loan Documents (such
obligations being herein collectively called the "GUARANTEED OBLIGATIONS").
The Guarantor hereby further agrees that if the Obligors shall fail to pay in
full when due (whether at stated maturity, by acceleration or otherwise) any
of the Guaranteed Obligations, the Guarantor will promptly pay the same,
without any demand or notice whatsoever and without regard to any defence,
counterclaim or right of set-off available to the Guarantor, and that in the
case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms
of such extension or renewal.
2.02 OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantor under
Section 2.01 hereof are absolute and unconditional irrespective of the value,
genuineness, validity, regularity or enforceability of the Credit Agreement,
the Notes, the other Loan Documents or any other agreement or instrument
referred to herein or therein, or any substitution, release or exchange of
any other guarantee of or security for any of the Guaranteed Obligations,
and, to the fullest extent permitted by applicable law, irrespective of any
other circumstance whatsoever that might otherwise constitute a legal or
equitable discharge or defence of a surety or guarantor. The Guarantor's
obligations hereunder shall not be diminished in any way except by the
payments in full of the Guaranteed Obligations. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one or
more of the following shall not alter, reduce or impair the liability of the
Guarantor hereunder which liability shall remain absolute and unconditional
as described above:
GUARANTEE AND PLEDGE AGREEMENT
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(i) at any time or from time to time, without notice to the Guarantor,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of the Credit
Agreement, the Notes or any other agreement or instrument referred to herein
or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement, the Notes or any other agreement or instrument referred to herein
or therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in whole
or in part or otherwise dealt with;
(iv) any lien or security interest granted to, or in favour of, Saskco
as security for any of the Guaranteed Obligations shall fail to be perfected;
(v) the bankruptcy, insolvency, liquidation, dissolution or winding up
of any Obligor, the Guarantor or any other guarantor of the Guaranteed
Obligations;
(vi) any change in the name, capital structure, constitution or
capacity of any Obligor or any of those parties being merged, consolidated,
reorganized or amalgamated with another corporation (in this latter case the
guarantee provided in this Section 2 shall apply to the liabilities of the
resulting corporation, and the term "Borrower" shall include such resulting
corporation);
(vii) any loss of, or in respect of, or under, any other guarantee or
other security which Saskco may now or hereafter hold in respect of the
Guaranteed Obligations, whether occasioned by the fault of Saskco, the Agent,
the lenders under the Funding Credit Agreement or otherwise;
(viii) any dealings with any security that Saskco holds or may hold for
payment of the Guaranteed Obligations and the performance of the obligations
of the Borrowers under the Credit Agreement or the Guarantor under this
Agreement including the taking and giving up of securities, the accepting of
compositions and the granting of releases and discharges;
(ix) any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of the Guaranteed Obligations or the rights of
Saskco with respect thereto;
(x) any contest by any Obligor or any other Person of the validity or
enforceability of any terms of this Agreement or any security provided for
the Guaranteed Obligations or the priority of any such security or of the
amount of the Guaranteed Obligations or any part of the Guaranteed
Obligations;
(xi) the assignment of all or any parts of the benefits of this
Agreement; or
(xii) any defence, counterclaim or right of set-off available to the
Guarantor.
GUARANTEE AND PLEDGE AGREEMENT
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The Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that Saskco
exhaust any right, power or remedy or proceed against any Obligor under the
Credit Agreement, Notes or any other Loan Documents, or any other agreement
or instrument referred to herein or therein, or against any other Person
under any other guarantee of, or security for, any of the Guaranteed
Obligations.
2.03 REINSTATEMENT. The obligations of the Guarantor under this Section
2 shall be automatically reinstated if and to the extent that for any reason
any payment by or on behalf of any of the Obligors in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, and the Guarantor
agrees that it will indemnify Saskco on demand for all reasonable costs and
expenses (including, without limitation, fees of counsel) incurred by Saskco
in connection with such rescission or restoration, including any such costs
and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer of similar payment
under any bankruptcy, insolvency or similar law.
2.04 SUBROGATION. The Guarantor hereby agrees that until the payment
and satisfaction in full of all Guaranteed Obligations and the expiration or
termination of the Commitment and all Letter of Credit Liabilities of the
Obligors under the Credit Agreement it shall not exercise any right or remedy
arising by reason of any performance by it of its guarantee in Section 2.01
hereof, whether by subrogation or otherwise, against any Obligor or any other
guarantor of any of the Guaranteed Obligations or any security for any of the
Guaranteed Obligations.
2.05 REMEDIES. The Guarantor agrees that, as between the Guarantor and
Saskco, the obligations of the Borrowers under the Credit Agreement and Notes
may be declared to be forthwith due and payable as provided in Section 9 of
the Credit Agreement (and shall be deemed to have become automatically due
and payable in the circumstances provided in said Section 9) for purposes of
Section 2.01 hereof notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically
due and payable) as against the applicable Obligor and that, in the event of
such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and
payable by the applicable Obligor) shall forthwith become due and payable by
the Guarantor for purposes of said Section 2.01.
2.06 CONTINUING GUARANTEE. The guarantee in this Section 2 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
2.07 POSTPONEMENT AND SUBORDINATION OF CLAIMS. All debts owed by the
Obligors to the Guarantor and all claims that the Guarantor has against any
one or more of the Obligors, both present and future, shall be postponed to
the Guaranteed Obligations and Saskco shall have the right to rank in
priority to the Guarantor for its full claim in respect of the Guaranteed
Obligations until its claims in respect of the Guaranteed Obligations have
been paid in full and the Guarantor shall continue to be liable for any
balance which may be owing to Saskco by the Obligors.
GUARANTEE AND PLEDGE AGREEMENT
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2.08 PRINCIPAL DEBTOR. Notwithstanding any other obligations of the
Guarantor under this Agreement, any amounts which may not be recoverable from
the Guarantor as guarantor under this Agreement shall be recoverable from the
Guarantor as principal debtor of respect thereof and shall be paid to Saskco
by the Guarantor after demand therefor.
2.09 GUARANTOR'S AGREEMENTS. The Guarantor agrees that:
(a) Saskco shall not be concerned to see or inquire into the powers of
the Obligors or their respective directors, officers or agents acting or
purporting to act on their behalf, and moneys, advances or credits in fact
borrowed or obtained from Saskco pursuant to the Credit Agreement in the
professed exercise of such powers shall be deemed to form part of the
Guaranteed Obligations, even though such borrowing or obtaining thereof may
have been irregularly, defectively or informally effected or in excess of the
powers of any of the Obligors or their respective directors, officers or
agents or notwithstanding that the Obligors may not be a legal or suable
entity; and
(b) the Guarantor shall not have any recourse against Saskco for any
invalidity, non-perfection or unenforceability of any security held by Saskco
in respect of the Guaranteed Obligations or any irregularity or defect in the
manner or procedure by which Saskco realizes on such security, whether
occasioned by the fault of Saskco or otherwise.
2.10 DISCUSSION AND DIVISION. Should Saskco elect to realize on any
security that Saskco may hold, either before, concurrently with or after
demand for payment to the Guarantor, the Guarantor shall have no right of
discussion or division.
2.11 ACCOUNTS. Any account settled or stated by or between Saskco and
the Obligors or if any such account has not been settled or stated
immediately before demand for payment of the Guaranteed Obligations, any
account thereafter stated by Saskco, shall in the absence of manifest error,
constitute prima facie evidence that the balance or amount thereof thereby
appearing due by the Obligors to Saskco is so due.
2.12 OTHER SECURITY. The guarantee provided in this Section 2 shall be
in addition to and not in substitution for any other guarantees or other
security which Saskco may now or hereafter hold in respect of the Guaranteed
Obligations, and Saskco shall be under no obligation to marshall in favour of
the Guarantor any other guarantees or other security or any monies or other
assets which Saskco may be entitled to receive or may have a claim upon.
2.13 CURRENCY OF PAYMENTS. The Guarantor acknowledges that the
Guaranteed Obligations may be payable either in U.S. Dollars or Canadian
Dollars or partly in one currency and partly in the other, and, without
limiting the effect of Section 8.10 hereof, agrees to make payment in the
currency or currencies in which such Guaranteed Obligations are owing.
2.14 TAXES. If any payment made by the Guarantor to Saskco hereunder
becomes subject to any withholding or deduction with respect to Covered Taxes
(as defined in the Funding Credit Agreement), the Guarantor shall also duly
and punctually pay to Saskco such additional amount as may be necessary to
ensure that Saskco receives an amount, after taking into account all
applicable
GUARANTEE AND PLEDGE AGREEMENT
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Covered Taxes, equal to the amount which would have been received by Saskco
had such payment not been made subject to any withholding or deduction. In
any such circumstance, the Guarantor shall also promptly remit to Saskco the
relevant official receipts or other evidence satisfactory to Saskco
evidencing payment to the appropriate taxing authority of each such Covered
Tax by the Guarantor on behalf of Saskco.
2.15 CHANGE OF RESIDENCY OF GUARANTOR. If any payment made to Saskco
becomes subject to any Tax from any taxation authority having jurisdiction
over such payment as a consequence of the change of residency of the
Guarantor to a jurisdiction other than Canada, Saskco shall be entitled to
all the rights and benefits arising under Section 2.14 hereof.
SECTION 3
REPRESENTATIONS AND WARRANTIES
The Guarantor represents and warrants to Saskco that:
3.01 CORPORATE EXISTENCE. Each of the Guarantor and its Subsidiaries:
(a) is a corporation duly organized and validly existing under the laws of
the jurisdiction of its incorporation; (b) has all requisite corporate power,
and, subject to the provisions in the Sale Agreement relating to "Constrained
Gas Marketing Agreements", has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry
on its business as now being or as proposed to be conducted; and (c) is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where failure
to so qualify would (either individually or in the aggregate) have a material
adverse effect on the consolidated financial condition, operations, business
or prospects taken as a whole of the Guarantor and its consolidated
Subsidiaries.
3.02 LITIGATION. Except as disclosed to Saskco in writing prior to the
date hereof, there are no legal or arbitral proceedings or any proceedings by
or before any governmental or regulatory authority or agency, now pending or
(to the knowledge of the Guarantor) threatened against the Guarantor or any
of its Subsidiaries that, if adversely determined, could (either individually
or in the aggregate) have a material adverse effect on the consolidated
financial condition, operations, business or prospects taken as a whole of
the Guarantor and its consolidated Subsidiaries.
3.03 NO BREACH. None of the execution and delivery of this Agreement,
the consummation of the transactions herein contemplated or compliance with
the terms and provisions hereof will conflict with or result in a breach of,
or require any consent under, the organizational documents of the Guarantor,
or any applicable law or regulation, or any order, writ, injunction or decree
of any court or governmental authority or agency, or any agreement or
instrument to which the Guarantor or any of its Subsidiaries is a party or by
which any of them is bound or to which any of them is subject, or constitute
a default under any such agreement or instrument, or (except for Liens
created pursuant to the Security Documents) result in the creation or
imposition of any Lien upon any of the revenues or assets of the Guarantor or
any of its Subsidiaries pursuant to the terms of any such agreement or
instrument.
GUARANTEE AND PLEDGE AGREEMENT
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3.04 CORPORATE ACTION. The Guarantor has all necessary corporate power
and authority to execute, deliver and perform its obligations under this
Agreement; the execution, delivery and performance by the Guarantor of this
Agreement have been duly authorized by all necessary corporate action on its
part (including without limitation, any required shareholder approvals); and
this Agreement has been duly and validly executed and delivered by the
Guarantor and constitutes its legal, valid and binding obligations,
enforceable in accordance with its terms, except as such enforceability may
be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
similar laws of general applicability affecting the enforcement of creditors'
rights and (b) the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
3.05 APPROVALS. No authorizations, approvals or consents of (including
any exchange control approval), and no filings or registrations with, any
governmental or regulatory authority or agency, or any securities exchange
are necessary for the execution, delivery or performance by the Guarantor of
this Agreement or for the validity or enforceability hereof except for
filings and recordings in respect of Liens created herein.
3.06 TAXES. The Guarantor and its Subsidiaries have filed all Canadian
federal income tax returns required to be filed pursuant to the INCOME TAX
ACT (Canada) and all other material tax returns that are required to be filed
by the Guarantor and its Subsidiaries and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Guarantor or any
of its Subsidiaries. The charges, accruals and reserves on the books of the
Guarantor and its Subsidiaries in respect of taxes and other governmental
charges are, in the opinion of the Guarantor, adequate. Except as disclosed
in writing to the Lenders and the Agent prior to the Closing Date, the
Guarantor has not given or been requested to give a waiver of the statute of
limitations relating to the payment of any taxes or other impositions.
3.07 LEGAL FORM. This Agreement is in proper legal form under the laws
of the Province of Alberta and the laws of Canada applicable therein for the
enforcement thereof against the Guarantor under such laws. All formalities
required in the Province of Alberta and the laws of Canada applicable therein
for the validity and enforceability of this Agreement (including, without
limitation, any necessary registration, recording or filing with any court or
other authority in Alberta or Canada) have been accomplished, and no Taxes
are required to be paid and no notarization is required for the validity and
enforceability thereof.
3.08 RANKING. This Agreement and the obligations evidenced hereby are
and will at all times be direct and unconditional general obligations of the
Guarantor, and rank and will at all times rank in right of payment and
otherwise at least PARI PASSU with all unsecured Indebtedness of the
Guarantor, whether now existing or hereafter outstanding. There exists no
Lien (including any Lien arising out of any attachment, judgment or
execution), other than (i) inchoate Liens arising by operation of law or
statute, or (ii) as permitted by the Credit Agreement and the Funding Credit
Agreement, nor any segregation or other preferential arrangement of any kind,
on, in or with respect to any of the Property or revenues of any Subsidiaries
of the Guarantor.
GUARANTEE AND PLEDGE AGREEMENT
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3.09 COMMERCIAL ACTIVITY. The Guarantor is subject to civil and
commercial law with respect to its obligations under this Agreement. The
execution, delivery and performance by the Guarantor of this Agreement
constitute private and commercial acts rather than public or governmental
acts. The Guarantor is not, nor is any of its Properties or revenues,
entitled to any right of immunity in any jurisdiction from suit, court
jurisdiction, judgment, attachment (whether before or after judgment),
set-off or execution of a judgment or from any other legal process or remedy
relating to the obligations of such Guarantor under this Agreement.
3.10 PLEDGED STOCK.
(a) The Guarantor is the sole beneficial owner of the Collateral and no
Lien, other than inchoate Liens arising by operation of law or statute,
exists or will exist upon the Collateral at any time (and no right or option
to acquire the same exists in favour of any other Person), except for the
pledge and security interest in favour of Saskco created or provided for
herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of the Collateral.
(b) The Pledged Stock represented by certificate No. 1 is, and all
other Pledged Stock in which the Guarantor shall hereafter grant a security
interest pursuant to Section 4 hereof will be, duly authorized, validly
existing, fully paid and non-assessable and none of such Pledged Stock is or
will be subject to any contractual restriction, or any restriction under the
charter or by-laws of Canadian Forest, upon the transfer of such Pledged
Stock (except for any such restriction contained herein).
(c) The authorized capital stock of Canadian Forest is one class of
shares, designated as "Common Shares", in an unlimited number.
(d) The Pledged Stock represented by certificated No. 1 constitutes all
of the issued and outstanding shares of capital stock of any class of
Canadian Forest beneficially owned by the Guarantor on the date hereof
(whether or not registered in the name of the Guarantor) and such
certificates represent 100 common shares of Canadian Forest, and the
Guarantor is the registered owner of all such shares.
(e) No person, firm or corporation has any agreement or option or any
right or privilege (whether by law, preemptive or contractual) capable of
becoming an agreement or option for the purchase or for the subscription and
issue of any unissued shares in the capital of Canadian Forest.
(f) The Guarantor is not a party to any agreement relating to any of
the Pledged Stock.
3.11 INVESTMENT COMPANY ACT. The Guarantor is not an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the INVESTMENT COMPANY ACT of 1940, as amended.
3.12 PUBLIC UTILITY HOLDING COMPANY ACT. The Guarantor is not a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary company"
of a "holding company", within the meaning of the PUBLIC UTILITY HOLDING
COMPANY ACT of 1935, as amended.
GUARANTEE AND PLEDGE AGREEMENT
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The representations and warranties herein set forth or contained in any
certificates or documents delivered to Saskco or the Agent pursuant hereto
shall not merge in or be prejudiced by and shall survive any act done
pursuant hereto or to the Credit Agreement and shall continue in full force
and effect so long as any amount is owing, contingent or otherwise, by the
Guarantor to Saskco.
SECTION 4
THE PLEDGE
As continuing collateral security for the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) of the
Secured Obligations, the Guarantor hereby pledges and grants to Saskco as
hereinafter provided, and hereby continues the original pledge and grant by
Atcor Resources Ltd. of, a security interest in all of the Guarantor's right,
title and interest in the following property, whether now owned by the
Guarantor or hereafter acquired and whether now existing or hereafter coming
into existence (all being collectively referred to herein as "COLLATERAL"):
(a) the shares of common stock of Canadian Forest, without par value,
represented by certificate No. 1 and all other shares of capital stock of
whatever class of Canadian Forest, now or hereafter owned by the Guarantor,
in each case together with the certificates evidencing the same
(collectively, the "PLEDGED STOCK");
(b) all shares, securities, moneys or property representing a dividend
on any of the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the Pledged Stock, or resulting from a
split-up, revision, reclassification or other like change of the Pledged
Stock or otherwise received in exchange therefor, and any subscription
warrants, rights or options issued to the holders of, or otherwise in respect
of, the Pledged Stock;
(c) without affecting the obligations of the Guarantor under any
provision prohibiting such action hereunder, in the event of any
consolidation or merger in which Canadian Forest is not the surviving
corporation, all shares of each class of the capital stock of the successor
corporation (unless such successor corporation is the Guarantor itself)
formed by or resulting from such consolidation or merger;
(d) the balance from time to time in the Collateral Account; and
(e) all proceeds of and to any of the property of the Guarantor
described in the preceding clauses of this Section 4 (including, without
limitation, all causes of action, claims and warranties now or hereafter held
by the Guarantor in respect of any of the items listed above) and, to the
extent related to any property described in said clauses or such proceeds,
all books, correspondence, credit files, records, invoices and other papers.
GUARANTEE AND PLEDGE AGREEMENT
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SECTION 5
CASH PROCEEDS OF COLLATERAL
5.01 COLLATERAL ACCOUNT. The Guarantor and Saskco hereby acknowledge
and confirm the existence of a cash collateral account at Chase Canada (the
"COLLATERAL ACCOUNT") in the name and under the control of Saskco established
pursuant to the Guarantee and Pledge Agreement referenced in the second
paragraph of the recitals hereto, into which there shall be deposited from
time to time the cash proceeds of any of the Collateral required to be
delivered to Saskco pursuant hereto and into which the Guarantor may from
time to time deposit any additional amounts that it wishes to pledge to
Saskco as additional collateral security hereunder. The balance from time to
time in the Collateral Account shall constitute part of the Collateral
hereunder and shall not constitute payment of the Secured Obligations until
applied as hereinafter provided. Except as expressly provided in the next
sentence, Saskco shall direct Chase Canada to remit the collected balance
outstanding to the credit of the Collateral Account to or upon the order of
the Guarantor as the Guarantor shall from time to time instruct. However, at
any time following the occurrence and during the continuance of an Event of
Default, Saskco may in its discretion apply or cause to be applied (subject
to collection) the balance from time to time outstanding to the credit of the
Collateral Account to the payment of the Secured Obligations in the manner
specified in Section 7.09 hereof. The balance from time to time in the
Collateral Account shall be subject to withdrawal only as provided herein.
In addition to the foregoing, the Guarantor agrees that if the proceeds of
any Collateral hereunder shall be received by it, the Guarantor shall as
promptly as possible deposit such proceeds into the Collateral Account. Until
so deposited, all such proceeds shall be held in trust by the Guarantor for
and as the property of Saskco and shall not be commingled with any other
funds or property of the Guarantor.
5.02 INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. Amounts on deposit in
the Collateral Account shall be invested from time to time in such Permitted
Investments as the Guarantor (or, after the occurrence and during the
continuance of a Default, Saskco) shall determine, which Permitted
Investments shall be held in the name and be under the control of Saskco,
PROVIDED that at any time after the occurrence and during the continuance of
an Event of Default, Saskco may in its discretion at any time and from time
to time elect to liquidate any such Permitted Investments and to apply or
cause to be applied the proceeds thereof to the payment of the Secured
Obligations in the manner specified in Section 7.09 hereof.
5.03 COVER FOR LETTER OF CREDIT LIABILITIES. Amounts deposited into the
Collateral Account as cover for Letter of Credit Liabilities by the Guarantor
shall be held by Saskco in a separate sub-account (designated "Letter of
Credit Liabilities Sub-Account") and all amounts held in such sub-account
shall constitute collateral security FIRST for the Letter of Credit
Liabilities outstanding from time to time and SECOND as collateral security
for the other Secured Obligations hereunder.
SECTION 6
COVENANTS
The Guarantor agrees that, until the payment and satisfaction in
full of the Secured Obligations and the expiration or termination of the
Commitments and all Letter of Credit Liabilities under the Credit Agreement:
GUARANTEE AND PLEDGE AGREEMENT
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6.01 FINANCIAL STATEMENTS. The Guarantor shall deliver to Saskco (in
the case of clauses (a) and (b) below only to the extent financial statements
are not delivered by Canadian Forest pursuant to Section 8.01 of the Credit
Agreement):
(a) as soon as available and in any event within 60 days after the end
of each quarterly fiscal period of each fiscal year of the Guarantor,
consolidated and consolidating statements of income, retained earnings and
cash flows of the Guarantor and its consolidated Subsidiaries for such period
and for the period from the beginning of the respective fiscal year to the
end of such period, and the related consolidated and consolidating balance
sheets of the Guarantor and its consolidated Subsidiaries as at the end of
such period, setting forth in each case in comparative form the corresponding
consolidated and consolidating figures for the corresponding periods in the
preceding fiscal year (except that, in the case of balance sheets, such
comparison shall be to the last day of the prior fiscal year), accompanied by
a certificate of a senior financial officer of the Guarantor, which
certificate shall state that said financial statements fairly present in all
material respects the consolidated financial condition and results of
operations of the Guarantor and its consolidated Subsidiaries, and said
consolidating financial statements fairly present in all material respects
the respective individual unconsolidated financial condition and results of
operations of the Guarantor and of each of its consolidated Subsidiaries, in
each case in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments);
(b) as soon as available and in any event within 100 days after the end
of each fiscal year of the Guarantor, consolidated and consolidating
statements of income, retained earnings and cash flows of the Guarantor and
its consolidated Subsidiaries for such fiscal year and the related
consolidated and consolidating balance sheets of the Guarantor and its
consolidated Subsidiaries as at the end of such fiscal year, setting forth in
each case in comparative form the corresponding consolidated and
consolidating figures for the preceding fiscal year, and accompanied (i) in
the case of said consolidated statements and balance sheet of the Guarantor,
by an opinion thereon of independent chartered accountants of recognized
national standing, which opinion shall state that said consolidated financial
statements fairly present in all material respects the consolidated financial
condition and results of operations of the Guarantor and its consolidated
Subsidiaries as at the end of, and for, such fiscal year in accordance with
generally accepted accounting principles, and (ii) in the case of said
consolidating statements and balance sheets, by a certificate of a senior
financial officer of the Guarantor, which certificate shall state that said
consolidating financial statements fairly present in all material respects
the respective individual unconsolidated financial condition and results of
operations of the Guarantor and of each of its consolidated Subsidiaries, in
each case in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such fiscal year;
(c) promptly upon their becoming available, copies of all prospectuses,
registration statements and regular periodic reports, if any, that the
Guarantor shall have filed with any securities commission in Canada having
jurisdiction or any Canadian or United States national securities exchange;
GUARANTEE AND PLEDGE AGREEMENT
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(d) promptly upon the mailing thereof to the public shareholders of the
Guarantor generally, if any, or to holders of Indebtedness of the Guarantor
generally, copies of all financial statements, reports and proxy statements so
mailed;
(e) promptly after the Guarantor knows or has reason to believe that any
Default under the Credit Agreement has occurred, a notice of such Default
(unless a notice of such Default has been delivered pursuant to Section 8.01(f)
of the Credit Agreement) describing the same in reasonable detail and, together
with such notice or as soon thereafter as possible, a description of the action
that the Guarantor has taken or proposes to take with respect thereto; and
(f) from time to time such other information regarding the financial
condition, operations, business or prospects of the Guarantor or any of its
Subsidiaries as Saskco, the Agent or any lender under the Funding Credit
Agreement may reasonably request (to the extent such information is not provided
by Canadian Forest pursuant to Section 8.01(h) of the Credit Agreement).
The Guarantor will furnish to Saskco and the Agent, at the time it furnishes
each set of financial statements pursuant to paragraph (a) or (b) above, a
certificate of a senior financial officer of the Guarantor to the effect that no
Default under the Credit Agreement has occurred and is continuing (or, if any
Default under the Credit Agreement has occurred and is continuing, describing
the same in reasonable detail and describing the action that the Guarantor has
taken or proposes to take with respect thereto).
6.02 LITIGATION. The Guarantor will promptly give to Saskco and the Agent
notice of all legal or arbitral proceedings, and of all proceedings by or before
any governmental or regulatory authority or agency, affecting the Guarantor or
any of its Subsidiaries (unless a notice of such proceeding has been given to
Saskco and the Agent pursuant to Section 8.02 of the Credit Agreement) except
proceedings that, if adversely determined, would not (either individually or in
the aggregate) have a material adverse effect on the consolidated financial
condition, operations, business or prospects taken as a whole of the Guarantor
and its consolidated Subsidiaries.
6.03 CORPORATE EXISTENCE, ETC. The Guarantor will, and will cause each of
its Subsidiaries (except as otherwise permitted by the Credit Agreement) to:
preserve and maintain its corporate existence and all of its material rights,
privileges and franchises; comply with the requirements of all applicable laws,
rules, regulations and orders of governmental or regulatory authorities if
failure to comply with such requirements could (either individually or in the
aggregate) materially and adversely affect the consolidated financial condition,
operations, business or prospects taken as a whole of the Guarantor and its
consolidated Subsidiaries; pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or on
any of its property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which adequate
reserves are being maintained; maintain all of its properties used or useful in
its business in good working order and condition, ordinary wear and tear
excepted; and keep insured by financially sound and reputable insurers all
property of a character usually insured by corporations engaged in the same or
similar business similarly situated against loss or damage of the
GUARANTEE AND PLEDGE AGREEEMENT
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kinds and in the amounts customarily insured against by such corporations and
carry such other insurance as is usually carried by such corporations.
6.04 LINES OF BUSINESS. The Guarantor will not engage in any business
other than the ownership of the common stock of Canadian Forest and activities
reasonably related thereto.
SECTION 7
FURTHER ASSURANCES; REMEDIES
In furtherance of the pledge and security interest granted and
continued pursuant to Section 4 hereof, the Guarantor hereby agrees with Saskco
as follows:
7.01 DELIVERY AND OTHER PERFECTION. The Guarantor shall:
(a) if any of the shares, securities, moneys or property required to be
pledged by the Guarantor under clauses (a), (b) and (c) of Section 4 hereof are
received by the Guarantor, forthwith either (x) transfer and deliver to Saskco
such shares or securities so received by the Guarantor (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers of attorney duly executed in blank), all of
which thereafter shall be held by Saskco, pursuant to the terms of this
Agreement, as part of the Collateral or (y) take, without limiting the rights of
the Guarantor under Section 7.04(3) hereof, such other action as Saskco shall
deem necessary or appropriate to duly record the Lien created hereunder in such
shares, securities, moneys or property in said clauses (a), (b) and (c);
(b) give, execute, deliver, file and/or record any financing statement,
notice, instrument, document, agreement or other papers that may be necessary or
desirable (in the judgement of Saskco) to create, preserve, perfect or validate
the security interest granted pursuant hereto or to enable Saskco to exercise
and enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, if so requested by Saskco or the Agent,
causing any or all of the Collateral to be transferred of record into the name
of Saskco or its nominee, (and Saskco agrees that if any Collateral is
transferred into its name or the name of its nominee, Saskco will thereafter
promptly give to the Guarantor copies of any notices and communications received
by it with respect to the Collateral);
(c) keep full and accurate books and records relating to the Collateral,
and stamp or otherwise mark such books and records in such manner as Saskco may
reasonably require in order to reflect the security interests granted by this
Agreement; and
(d) permit representatives of Saskco, the Agent and any lender under the
Funding Credit Agreement upon reasonable notice, at any time during normal
business hours to inspect and make abstracts from its books and records
pertaining to the Collateral, and permit representatives of Saskco, the Agent
and any lender under the Funding Credit Agreement to be present at the
Guarantor's place of business to receive copies of all communications and
remittances relating to the Collateral, and forward copies of any notices or
communications received by the Guarantor with respect to the Collateral, all in
such manner as Saskco may require.
GUARANTEE AND PLEDGE AGREEEMENT
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Without limiting the generality of the foregoing, the Guarantor agrees
that it will promptly obtain from time to time at its own expense all such
governmental licenses, authorizations, consents, permits and approvals as may be
required for the Guarantor to (a) comply with its obligations, and preserve its
rights under, this Agreement and (b) maintain the existence, priority and
perfection of the Liens purported to be created and continued hereunder.
7.02 OTHER FINANCING STATEMENTS AND LIENS. Without the prior written
consent of Saskco (granted with the prior written consent of the Agent as
specified in Section 10.04 of the Credit Agreement), the Guarantor shall not
file or suffer to be on file (other than any filing by a Person in Alberta,
filed without the consent of the Guarantor), or authorize or permit to be filed
or to be on file, in any jurisdiction, any financing statement or like
instrument with respect to the Collateral in which Saskco (or the Agent as
assignee of Saskco) is not named as the sole secured party. The Guarantor shall
use reasonable efforts to discharge any financing statements filed without the
Guarantor's consent in Alberta.
7.03 PRESERVATION OF RIGHTS. Saskco shall not be required to take steps
necessary to preserve any rights against prior parties to any of the Collateral.
7.04 COLLATERAL.
(a) The Guarantor will cause the Collateral to constitute at all times
100% of the total number of shares of each class of capital stock of Canadian
Forest then outstanding.
(b) So long as no Event of Default shall have occurred and be continuing,
the Guarantor shall have the right to exercise all voting, consensual and other
powers of ownership pertaining to the Collateral for all purposes not
inconsistent with the terms of this Agreement, the Credit Agreement, the Notes,
or any other instrument or agreement referred to herein or therein, PROVIDED
that the Guarantor agrees that it will not vote the Collateral in any manner
that is inconsistent with the terms of this Agreement, the Credit Agreement, the
Notes or any such other instrument or agreement; and Saskco shall execute and
deliver to the Guarantor or cause to be executed and delivered to the Guarantor
all such proxies, powers of attorney, dividend and other orders, and all such
instruments, without recourse, as the Guarantor may reasonably request for the
purpose of enabling the Guarantor to exercise the rights and powers that it is
entitled to exercise pursuant to this Section 7.04(c).
(c) Unless and until an Event of Default has occurred and is continuing,
the Guarantor shall be entitled to receive and retain any dividends on the
Collateral (i) paid in cash out of earned surplus or (ii) paid in shares of
common stock of Canadian Forest, provided such shares of common stock are
pledged to Saskco in accordance with Section 4(b) hereof.
(d) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not Saskco exercises any
available right to declare any Secured Obligation due and payable or seeks or
pursues any other relief or remedy available to it under applicable law or under
this Agreement, the Credit Agreement, the Notes, or any other agreement relating
to such Secured Obligation, all dividends and other distributions on the
Collateral shall be paid directly to Saskco and retained by it in the Collateral
Account as part of the Collateral, subject
GUARANTEE AND PLEDGE AGREEEMENT
<PAGE>
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to the terms of this Agreement, and, if Saskco shall so request in writing,
the Guarantor agrees to execute and deliver to Saskco appropriate additional
dividend, distribution and other orders and documents to that end, PROVIDED
that if such Event of Default is cured, any such dividend or distribution
theretofore paid to Saskco shall, upon request of the Guarantor (except to
the extent theretofore applied to the Secured Obligations), be returned by
Saskco to the Guarantor.
7.05 EVENTS OF DEFAULT, ETC. During the period during which an Event of
Default shall have occurred and be continuing:
(a) Saskco shall have all of the rights and remedies with respect to the
Collateral of a secured party under the Alberta PPSA (whether or not said
Alberta PPSA is in effect in the jurisdiction where the rights and remedies are
asserted) and such additional rights and remedies to which a secured party is
entitled under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including, without limitation, the right, to
the maximum extent permitted by law, to exercise all voting, consensual and
other powers of ownership pertaining to the Collateral as if Saskco were the
sole and absolute owner thereof (and the Guarantor agrees to take all such
action as may be appropriate to give effect to such right);
(b) Saskco in its discretion may, in its name or in the name of the
Guarantor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for any
of the Collateral, but shall be under no obligation to do so; and
(c) Saskco may, upon 10 Business Days' prior written notice to the
Guarantor of the time and place, with respect to the Collateral or any part
thereof that shall then be or shall thereafter come into the possession, custody
or control of Saskco or any of its agents or assignees, sell, lease, assign or
otherwise dispose of all or any part of such Collateral, at such place or places
as the Agent deems best, and for cash or for credit or for future delivery
(without thereby assuming any credit risk), at public or private sale, without
demand of performance or notice of intention to effect any such disposition or
of the time or place thereof (except such notice as is required above or by
applicable statute and cannot be waived), and Saskco, its assignees hereunder or
anyone else may be the purchaser, lessee, assignee or recipient of any or all of
the Collateral so disposed of at any public sale (or, to the extent permitted by
law, at any private sale) and thereafter hold the same absolutely, free from any
claim or right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Guarantor, any such demand, notice and right or
equity being hereby expressly waived and released. Saskco may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the sale may be so
adjourned.
The proceeds of each collection, sale or other disposition under this
Section 7.05 shall be applied in accordance with Section 7.09 hereof.
The Guarantor recognizes that, by reason of certain prohibitions
contained in Canadian federal and provincial securities laws, the UNITED STATES
SECURITIES ACT of 1933, as amended, and applicable state securities laws, Saskco
may be compelled, with respect to any sale of all or any part of the Collateral,
to limit purchasers to those who will agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution
GUARANTEE AND PLEDGE AGREEEMENT
<PAGE>
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or resale thereof. The Guarantor acknowledges that any such private sales
may be at prices and on terms less favourable to Saskco than those obtainable
through a public sale without such restrictions, and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that the Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of
any Collateral for the period of time necessary to permit Canadian Forest or
the issuer thereof to register it for public sale.
7.06 DEFICIENCY. If the proceeds of sale, collection or other realization
of or upon the Collateral pursuant to Section 7.05 hereof are insufficient to
cover the costs and expenses of such realization and the payment in full of the
Secured Obligations, the Guarantor shall remain liable for any deficiency.
7.07 REMOVALS, ETC. Without at least 30 days' prior written notice to
Saskco and the Agent, the Guarantor shall not (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its principal
place of business at any place other than at the address indicated beneath its
signature hereto or (ii) change its corporate name, or the name under which it
does business, from the name shown on the signature pages hereto.
7.08 PRIVATE SALE. Saskco and its assignees hereunder shall incur no
liability as a result of the sale of the Collateral, or any part thereof, at any
private sale pursuant to Section 7.05 hereof conducted in a commercially
reasonable manner. The Guarantor hereby waives any claims against Saskco and
its assignees hereunder arising by reason of the fact that the price at which
the Collateral may have been sold at such a private sale was less than the price
that might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if Saskco accepts the first offer
received and does not offer the Collateral to more than one offeree.
7.09 APPLICATION OF PROCEEDS. Except as otherwise herein expressly
provided and except as provided below in this Section 7.09, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by Saskco under Section 5
hereof or this Section 7, shall be applied by Saskco:
FIRST, the payment of the costs and expenses of such collection, sale
or other realization, including reasonable out-of-pocket costs and
expenses of Saskco and the reasonable fees and expenses of its agents
and counsel, and all expenses incurred and advances made by Saskco in
connection therewith;
NEXT, to the payment in full of the Secured Obligations, in each case
equally and ratably in accordance with the respective amounts thereof
then due and owing or as Saskco may otherwise agree; and
FINALLY, to the payment to the Guarantor, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
GUARANTEE AND PLEDGE AGREEEMENT
<PAGE>
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Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 5.03 hereof shall be applied FIRST to the Letter of Credit
Liabilities outstanding from time to time and SECOND to the other Secured
Obligations in the manner provided above in this Section 7.09.
As used in this Section 7, "PROCEEDS" of Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of the Guarantor or any issuer of or obligor on any of the
Collateral.
7.10 ATTORNEY-IN-FACT. Without limiting any rights or powers granted by
this Agreement to Saskco while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default Saskco is hereby appointed the attorney-in-fact with full powers of
substitution of the Guarantor for the purpose of carrying out the provisions of
this Section 7 and taking any action and executing any instruments that Saskco
may deem necessary or advisable to accomplish the purposes hereof, which
appointment as attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, (a) so long as Saskco shall be
entitled under this Section 7 to make collections in respect of the Collateral,
Saskco shall have the right and power to receive, endorse and collect all checks
made payable to the order of the Guarantor representing any dividend, payment or
other distribution in respect of the Collateral or any part thereof and to give
full discharge for the same and (b) the Agent, as assignee of Saskco, as
described in Section 8.05(b) hereof, or such Person as the Agent shall
designate, shall act as such attorney-in-fact.
The attorney-in-fact for the Guarantor shall have full power to
endorse or transfer, or both, the Pledged Stock or any of them to the Agent, its
nominees or transferees, and the Agent and its nominees or transferees are
hereby empowered to exercise all rights and powers and to perform all acts of
ownership with respect to the Pledged Stock to the same extent as the Guarantor
might do, and any consequent outlay and expense shall be payable by the
Guarantor on demand with interest at the per annum rate of interest from time to
time in effect under the Credit Agreement. The power of attorney herein granted
is in addition to and not in substitution of, any stock power of attorney
delivered by the Guarantor with delivery of the Pledged Stock, and such powers
and attorney may be relied upon by Saskco and the Agent severally or in
combination.
7.11 PERFECTION. Prior to or concurrently with the execution and delivery
of this Agreement, the Guarantor shall deliver to Saskco all certificates
identified in Section 4(a) hereof, accompanied by undated stock powers of
attorney duly executed in blank.
7.12 TERMINATION. When all Secured Obligations shall have been paid in
full and the Commitment under the Credit Agreement and all Letter of Credit
Liabilities shall have expired or been terminated, this Agreement shall
terminate, and Saskco shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect thereof, to
or on the order of the Guarantor.
GUARANTEE AND PLEDGE AGREEEMENT
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7.13 FURTHER ASSURANCES. The Guarantor agrees that, from time to time upon
the written request of Saskco or the Agent, the Guarantor will execute and
deliver such further documents and do such other acts and things as Saskco or
the Agent may reasonably request in order fully to effect the purposes of this
Agreement.
SECTION 8
MISCELLANEOUS
8.01 NO WAIVER. No failure on the part of Saskco to exercise, and no
course of dealing with respect to, and no delay in exercising, any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by Saskco of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any
remedies provided by law.
8.02 NOTICES. All notices, requests, consents and demands hereunder shall
be in writing and telexed, telecopied or delivered to the intended recipient at
the "Address for Notices" specified beneath its name on the signature pages
hereof or, as to either party, at such other address as shall be designated by
such party in a notice to the other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telex or telecopier or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as aforesaid.
8.03 EXPENSES. The Guarantor agrees to reimburse Saskco an amount equal to
the amount Saskco owes under the Funding Credit Agreement for all reasonable
costs and expenses of Saskco, the Agent and the lenders under the Funding Credit
Agreement (including, without limitation, the reasonable fees and expenses of
legal counsel) in connection with (i) any Default and any enforcement or
collection proceeding resulting therefrom, including, without limitation, all
manner of participation in or other involvement with (w) performance by Saskco
or the Agent of any obligations of the Guarantor in respect of the Collateral
that the Guarantor has failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of Saskco or the Agent
in respect thereof, by litigation or otherwise, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or proceedings
(whether or not the workout, restructuring or transaction contemplated thereby
is consummated) and (ii) the enforcement of this Section 8.03, and all such
costs and expenses shall be Secured Obligations entitled to the benefits of the
collateral security provided pursuant to Section 4 hereof.
8.04 AMENDMENTS, ETC. The terms of this Agreement may be waived, altered
or amended only by an instrument in writing duly executed by the Guarantor and
Saskco (with the prior written consent of the Agent as specified in
Section 10.04 of the Credit Agreement). Any such amendment or waiver shall be
binding upon Saskco, each holder of any of the Secured Obligations and the
Guarantor.
GUARANTEE AND PLEDGE AGREEEMENT
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8.05 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the Guarantor, Saskco and each holder of
any of the Secured Obligations (PROVIDED, however, that the Guarantor shall not
assign or transfer its rights hereunder without the prior written consent of
Saskco with the prior written consent of the Agent).
(b) The Guarantor understands that Saskco will assign and grant to the
Agent (as defined in the Funding Credit Agreement), as agent for the lenders
from time to time party to the Funding Credit Agreement, a security interest in
all of its right, title and interest under this Agreement and the Collateral.
The Guarantor consents to such assignment and grant and further agrees that
(i) all representations, warranties, covenants and agreements of the Guarantor
made herein shall also be for the benefit and inure to the Agent and such
lenders and all holders from time to time of the notes issued to, Bankers'
Acceptances accepted by and Letters of Credit issued by such lenders and
(ii) the Pledged Stock and power of attorney referred to in Section 7.11 hereof
shall be delivered to and held by the Agent in accordance with that assignment
and security interest and the Agent (or any Person designated by the Agent) may
be endorsed as the transferee in the transfer in blank for the Pledged Stock.
8.06 CAPTIONS. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
8.07 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
8.08 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the law of the Province of Alberta and the laws of Canada
applicable therein.
8.09 JURISDICTION, SERVICE OF PROCESS AND VENUE.
(a) Each party hereto hereby agrees that any suit, action or proceeding
with respect to this Agreement or any judgment entered by any court in respect
thereof may be brought the courts of the Province of Alberta; and each party
hereto hereby irrevocably submits to the jurisdiction of such courts for the
purpose of any such suit, action, proceeding or judgement. Each party hereto
further submits, for the purpose of any such suit, action, proceeding or
judgment brought or rendered against it, to the appropriate courts of the
jurisdiction of its domicile.
(b) Nothing herein shall in any way be deemed to limit the ability of
Saskco, the Agent or any lender under the Funding Credit Agreement to serve any
such writs, process or summonses in any other manner permitted by applicable law
or to obtain jurisdiction over the Guarantor in such other jurisdictions, and in
such manner, as may be permitted by applicable law.
GUARANTEE AND PLEDGE AGREEEMENT
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(c) The Guarantor hereby irrevocably waives any objection that it may now
or hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Document brought
in the Province of Alberta, and hereby further irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.
8.10 JUDGMENT CURRENCY. This is an international loan transaction in which
the specification of Canadian Dollars or U.S. Dollars is of the essence, and
the stipulated Currency shall be the Currency of account and payment in all
instances. A payment obligation in one Currency hereunder (the "ORIGINAL
CURRENCY") shall not be discharged by an amount paid in another Currency (the
"OTHER CURRENCY"), whether pursuant to any judgment expressed in or converted
into any Other Currency or in another place except to the extent that such
tender or recovery results in the effective receipt by Saskco of the full amount
of the Original Currency payable to the Lender under this Agreement. If for the
purpose of obtaining judgment in any court it is necessary to convert a sum due
hereunder in the Original Currency into the Other Currency, the rate of exchange
that shall be applied shall be that at which, in accordance with normal banking
procedures, the Agent could purchase Original Currency at the Principal Office
with the Other Currency on the Business Day next preceding the day on which such
judgment is rendered. The obligation of the Guarantor in respect of any such
sum due from it to Saskco, the Agent or any lender under the Funding Credit
Agreement hereunder or under any other Loan Document (in this Section 8.10
called an "ENTITLED PERSON") shall, notwithstanding the rate of exchange
actually applied in rendering such judgment, be discharged only to the extent
that on the Business Day following receipt by such Entitled Person of any sum
adjudged to be due hereunder in the Other Currency such Entitled Person may in
accordance with normal banking procedures purchase and transfer the Original
Currency in Toronto with the amount of the judgment Currency so adjudged to be
due; and the Guarantor hereby, as a separate obligation and notwithstanding any
such judgment, agrees to indemnify such Entitled Person against, and to pay such
Entitled Person on demand, in the Original Currency, the amount (if any) by
which the sum originally due to such Entitled Person in the Original Currency
hereunder exceeds the amount of the Other Currency so purchased and transferred.
8.11 AGENTS AND ATTORNEYS-IN-FACT. Saskco may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.
8.12 SEVERABILITY. If any provision hereof is invalid and unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favour of Saskco in order to carry out the
intentions of the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
8.13 ATTACHMENT. The Guarantor acknowledges that:
(a) value has been given;
GUARANTEE AND PLEDGE AGREEEMENT
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(b) the Guarantor has rights in the Pledged Stock; and
(c) the time of attachment of the security interest created and continued
by this Agreement has not been postponed.
8.14 RECEIPT. The Guarantor acknowledges receipt of the duplicate original
hereof and waives its rights to receive a copy of any financing, financing
change or other registration statement resulting from any registration of this
Agreement or any verification statement issued with respect thereto where such
waiver is not otherwise prohibited by law.
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee and
Pledge Agreement to be duly executed and delivered as of the day and year first
above written.
3189503 CANADA LTD.
By: /s/ Kenneth B. Potter
----------------------------------
Kenneth B. Potter
Secretary
Address for Notices:
3189503 Canada Ltd.
c/o Canadian Forest Oil Ltd.
600-800 Sixth Avenue, S.W.
Calgary, Alberta T2P 3G3
Canada
Attention: Vice President-Finance
with a copy to:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, CO 80202
USA
Attention: Vice President and Treasurer
GUARANTEE AND PLEDGE AGREEEMENT
<PAGE>
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611852 SASKATCHEWAN LTD.
By: /s/ Kenneth B. Potter
-----------------------------------
Kenneth B. Potter
Secretary
Address for Notices:
611852 Saskatchewan Ltd.
c/o Canadian Forest Oil Ltd.
600-800 Sixth Avenue, S.W.
Calgary, Alberta T2P 3G3
Canada
Attention: Vice President-Finance
with a copy to:
The Chase Manhattan Bank of Canada
150 King Street West
Suite 160
Toronto, Ontario M5H 1J9
Canada
Attention: Vice President,
Corporate Finance
and:
Forest Oil Corporation
1600 Broadway
Suite 2200
Denver, CO 80202
USA
Attention: Vice President and Treasurer
GUARANTEE AND PLEDGE AGREEEMENT
<PAGE>
LIMITED RECOURSE SECURED GUARANTEE
LIMITED RECOURSE SECURED GUARANTEE dated as of April 1, 1997 between
Forest Oil Corporation, a corporation duly organized and validly existing under
the laws of New York (the "GUARANTOR"); and 611852 SASKATCHEWAN LTD., a
corporation duly organized under the laws of the Province of Saskatchewan
("SASKCO").
RECITALS
Canadian Forest Oil Ltd., a corporation duly organized under the laws
of Alberta ("CANADIAN FOREST"), each of the Subsidiaries that becomes a party to
the Credit Agreement as provided therein (individually a "SUBSIDIARY BORROWER"
and collectively with Canadian Forest, the "BORROWERS") and Saskco are parties
to a Second Amended and Restated Credit Agreement dated as of April 1, 1997 (as
modified and supplemented or further restated and in effect from time to time,
the "CREDIT AGREEMENT"), providing, subject to the terms and conditions thereof,
for extensions of credit (by making of loans) by Saskco to the Borrowers in an
aggregate principal or face amount not exceeding C$80,000,000.
Pursuant to a Petroleum, Natural Gas and General Rights Conveyance
dated as of April 1, 1997, Canadian Forest sold certain Hydrocarbon Properties
to the Guarantor, such Properties having been previously pledged by Canadian
Forest to Saskco to secure the Borrowers' obligations under the Credit
Agreement.
To induce Saskco to enter into the Credit Agreement and to extend
credit thereunder and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor has
agreed to guarantee the Guaranteed Obligations (as hereinafter defined), and to
create substantially the same Lien as that formerly held by Saskco in the
aforementioned Hydrocarbon Properties and the other Mortgaged Property (as
defined in the Debenture) as security for the Secured Obligations (as herein
defined), with the recourse of Saskco under this Guarantee limited to
realization on such Mortgaged Property, with no liability on the part of the
Guarantor for any deficiency resulting therefrom. Accordingly, the parties
hereto agree as follows:
SECTION 1
DEFINITIONS
Terms defined in the Credit Agreement are used herein as defined
therein. In addition, as used herein:
"THIS AGREEMENT", "HEREIN", "HEREOF", "HERETO" and similar expressions
mean this Limited Recourse Secured Guarantee, as same may be amended and
restated from time to time.
LIMITED RECOURSE SECURED GUARANTEE
<PAGE>
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"DEBENTURE" means the Limited Recourse Demand Debenture and Negative
Pledge dated as of April 1, 1997 issued by the Guarantor in favour of
Saskco, in the principal amount of $80,000.000.
"GUARANTEED OBLIGATIONS" shall have the meaning ascribed thereto in
Section 2.01 hereof.
"LETTER OF CREDIT LIABILITIES" shall have the meaning ascribed thereto
in the Credit Agreement.
"LOAN DOCUMENTS" shall have the meaning ascribed thereto in
Section 4.02 hereof.
"MORTGAGED PROPERTY" shall have the meaning ascribed thereto in the
Debenture.
"OBLIGORS" shall mean, collectively, the Borrowers.
"SECURED OBLIGATIONS" shall mean, collectively, (a) all obligations of
the Guarantor in respect of its Guarantee under Section 2 hereof and
(b) all other obligations of the Guarantor to Saskco hereunder.
SECTION 2
THE GUARANTEE
2.01 THE GUARANTEE. The Guarantor hereby guarantees to Saskco and its
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the principal of and interest on the
Loans made by Saskco to, and the Note(s) held by Saskco of, the Obligors and all
other amounts from time to time owing to Saskco by the Obligors under the Credit
Agreement, the Notes and the other Loan Documents (such obligations being herein
collectively called the "GUARANTEED OBLIGATIONS"). The Guarantor hereby further
agrees that if the Obligors shall fail to pay in full when due (whether at
stated maturity, by acceleration or otherwise) any of the Guaranteed
Obligations, the Guarantor will promptly pay the same, without any demand or
notice whatsoever and without regard to any defence, counterclaim or right of
set-off available to the Guarantor, and that in the case of any extension of
time of payment or renewal of any of the Guaranteed Obligations, the same will
be promptly paid in full when due (whether at extended maturity, by acceleration
or otherwise) in accordance with the terms of such extension or renewal.
2.02 OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantor under
Section 2.01 hereof are absolute and unconditional irrespective of the value,
genuineness, validity, regularity or enforceability of the Credit Agreement, the
Notes, the other Loan Documents or any other agreement or instrument referred to
herein or therein, or any substitution, release or exchange of any other
guarantee of or security for any of the Guaranteed Obligations, and, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defence of a surety or guarantor. The Guarantor's obligations
hereunder shall not be diminished in any way except by the payments in full of
the Guaranteed Obligations. Without limiting the generality of the foregoing,
it is agreed that the occurrence of any
LIMITED RECOURSE SECURED GUARANTEE
<PAGE>
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one or more of the following shall not alter, reduce or impair the liability
of the Guarantor hereunder which liability shall remain absolute and
unconditional as described above:
(i) at any time or from time to time, without notice to the Guarantor,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of the Credit
Agreement, the Notes, the Loan Documents or any other agreement or instrument
referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit Agreement,
the Notes, the Loan Documents, or any other agreement or instrument referred to
herein or therein shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or exchanged
in whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favour of, Saskco as security for any of
the Guaranteed Obligations shall fail to be perfected;
(v) the bankruptcy, insolvency, liquidation, dissolution or winding up
of any Obligor, the Guarantor or any other guarantor of the Guaranteed
Obligations;
(vi) any change in the name, capital structure, constitution or capacity
of any Obligor or any of those parties being merged, consolidated,
reorganized or amalgamated with another corporation (in this latter case the
guarantee provided in this Section 2 shall apply to the liabilities of the
resulting corporation, and the term "Borrower" shall include such resulting
corporation);
(vii) any loss of, or in respect of, or under, any other guarantee or
other security which Saskco may now or hereafter hold in respect of the
Guaranteed Obligations, whether occasioned by the fault of Saskco, the Agent,
the lenders under the Funding Credit Agreement or otherwise;
(viii) any dealings with any security that Saskco holds or may hold for
payment of the Guaranteed Obligations and the performance of the obligations of
the Borrowers under the Credit Agreement or the Guarantor under this Agreement
including the taking and giving up of securities, the accepting of compositions
and the granting of releases and discharges;
(ix) any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of the Guaranteed Obligations or the rights of Saskco
with respect thereto;
(x) any contest by any Obligor or any other Person of the validity or
enforceability of any terms of this Agreement or any security provided for the
Guaranteed Obligations or the priority of any such security or of the amount of
the Guaranteed Obligations or any part of the Guaranteed Obligations;
(xi) the assignment of all or any parts of the benefits of this
Agreement; or
LIMITED RECOURSE SECURED GUARANTEE
<PAGE>
-4-
(xii) any defence, counterclaim or right of set-off available to the
Guarantor.
The Guarantor hereby expressly waives diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that Saskco exhaust any
right, power or remedy or proceed against any Obligor under the Credit
Agreement, Notes or any other Loan Documents, or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.
2.03 REINSTATEMENT. The obligations of the Guarantor under this Section 2
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of any of the Obligors in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, and the Guarantor agrees that it will indemnify
Saskco on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by Saskco in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer of similar payment under any bankruptcy, insolvency or
similar law.
2.04 SUBROGATION. The Guarantor hereby agrees that until the payment and
satisfaction in full of all Guaranteed Obligations and the expiration or
termination of the Commitment and all Letter of Credit Liabilities of the
Obligors under the Credit Agreement it shall not exercise any right or remedy
arising by reason of any performance by it of its guarantee in Section 2.01
hereof, whether by subrogation or otherwise, against any Obligor or any other
guarantor of any of the Guaranteed Obligations or any security for any of the
Guaranteed Obligations.
2.05 REMEDIES. The Guarantor agrees that, as between the Guarantor and
Saskco, the obligations of the Obligors under the Credit Agreement and Notes may
be declared to be forthwith due and payable as provided in Section 9 of the
Credit Agreement (and shall be deemed to have become automatically due and
payable in the circumstances provided in said Section 9) for purposes of
Section 2.01 hereof notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically due
and payable) as against the applicable Obligor and that, in the event of such
declaration (or such obligations being deemed to have become automatically due
and payable), such obligations (whether or not due and payable by the applicable
Obligor) shall forthwith become due and payable by the Guarantor for purposes of
said Section 2.01.
2.06 CONTINUING GUARANTEE. The guarantee in this Section 2 is a continuing
guarantee, and shall apply to all Guaranteed Obligations whenever arising.
2.07 POSTPONEMENT AND SUBORDINATION OF CLAIMS. All debts owed by the
Obligors to the Guarantor and all claims that the Guarantor has against any one
or more of the Obligors, both present and future, shall be postponed to the
Guaranteed Obligations and Saskco shall have the right to rank in priority to
the Guarantor for its full claim in respect of the Guaranteed Obligations until
its claims in respect of the Guaranteed Obligations have been paid in full and
the Guarantor shall continue to be liable for any balance which may be owing to
Saskco by the Obligors.
LIMITED RECOURSE SECURED GUARANTEE
<PAGE>
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2.08 PRINCIPAL DEBTOR. Notwithstanding any other obligations of the
Guarantor under this Agreement, any amounts which may not be recoverable from
the Guarantor as guarantor under this Agreement shall be recoverable from the
Guarantor as principal debtor of respect thereof and shall be paid to Saskco by
the Guarantor after demand therefor.
2.09 GUARANTOR'S AGREEMENTS. The Guarantor agrees that:
(a) Saskco shall not be concerned to see or inquire into the powers of the
Obligors or their respective directors, officers or agents acting or purporting
to act on their behalf, and moneys, advances or credits in fact borrowed or
obtained from Saskco pursuant to the Credit Agreement in the professed exercise
of such powers shall be deemed to form part of the Guaranteed Obligations, even
though such borrowing or obtaining thereof may have been irregularly,
defectively or informally effected or in excess of the powers of any of the
Obligors or their respective directors, officers or agents or notwithstanding
that the Obligors may not be a legal or suable entity; and
(b) the Guarantor shall not have any recourse against Saskco for any
invalidity, non-perfection or unenforceability of any security held by Saskco in
respect of the Guaranteed Obligations or any irregularity or defect in the
manner or procedure by which Saskco realizes on such security, whether
occasioned by the fault of Saskco or otherwise.
2.10 DISCUSSION AND DIVISION. Should Saskco elect to realize on any
security that Saskco may hold, either before, concurrently with or after demand
for payment to the Guarantor, the Guarantor shall have no right of discussion or
division.
2.11 ACCOUNTS. Any account settled or stated by or between Saskco and the
Obligors or if any such account has not been settled or stated immediately
before demand for payment of the Guaranteed Obligations, any account thereafter
stated by Saskco, shall in the absence of manifest error, constitute prima facie
evidence that the balance or amount thereof thereby appearing due by the
Obligors to Saskco is so due.
2.12 OTHER SECURITY. The guarantee provided in this Section 2 shall be in
addition to and not in substitution for any other guarantees or other security
which Saskco may now or hereafter hold in respect of the Guaranteed Obligations,
and Saskco shall be under no obligation to marshall in favour of the Guarantor
any other guarantees or other security or any monies or other assets which
Saskco may be entitled to receive or may have a claim upon.
2.13 CURRENCY OF PAYMENTS. The Guarantor acknowledges that the Guaranteed
Obligations may be payable either in U.S. Dollars or Canadian Dollars or partly
in one currency and partly in the other, and, without limiting the effect of
Section 7.10 hereof, agrees to make payment in the currency or currencies in
which such Guaranteed Obligations are owing.
2.14 TAXES. If any payment made by the Guarantor to Saskco hereunder
becomes subject to any withholding or deduction with respect to Covered Taxes
(as defined in the Funding Credit Agreement), the Guarantor shall also duly and
punctually pay to Saskco such additional amount as may be necessary to ensure
that Saskco receives an amount, after taking into account all applicable Covered
Taxes, equal to the amount which would have been received by Saskco had such
payment not been made subject to any withholding or deduction. In any such
circumstance, the Guarantor
LIMITED RECOURSE SECURED GUARANTEE
<PAGE>
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shall also promptly remit to Saskco the relevant official receipts or other
evidence satisfactory to Saskco evidencing payment to the appropriate taxing
authority of each such Covered Tax by the Guarantor on behalf of Saskco.
2.15 CHANGE OF RESIDENCY OF GUARANTOR. If any payment made to Saskco
becomes subject to any Tax from any taxation authority having jurisdiction over
such payment as a consequence of the change of residency of the Guarantor to a
jurisdiction other than the United States of America, Saskco shall be entitled
to all the rights and benefits arising under Section 2.14 hereof.
SECTION 3
REPRESENTATIONS AND WARRANTIES
The Guarantor represents and warrants to Saskco that:
3.01 CORPORATE EXISTENCE. The Guarantor: (a) is a corporation duly
organized and validly existing under the laws of the jurisdiction of its
incorporation; (b) has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
the Mortgaged Property and carry on its business as it pertains thereto as now
being or as proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the Mortgaged Property is situate.
3.02 LITIGATION. Except as disclosed to Saskco in writing prior to the
date hereof, there are no legal or arbitral proceedings or any proceedings by or
before any governmental or regulatory authority or agency, now pending or (to
the knowledge of the Guarantor) threatened against the Guarantor that, if
adversely determined, could (either individually or in the aggregate) have a
material adverse effect on the Mortgaged Property or on the financial condition,
operations, business or prospects taken as a whole of the Guarantor.
3.03 NO BREACH. None of the execution and delivery of this Agreement, the
consummation of the transactions herein contemplated or compliance with the
terms and provisions hereof will conflict with or result in a breach of, or
require any consent under, the organizational documents of the Guarantor, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any agreement or instrument to
which the Guarantor is a party or by which it is bound or to which it is
subject, or constitute a default under any such agreement or instrument, or
(except for Liens created pursuant to the Debenture) result in the creation or
imposition of any Lien upon any of the Mortgaged Property.
3.04 CORPORATE ACTION. The Guarantor has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement;
the execution, delivery and performance by the Guarantor of this Agreement have
been duly authorized by all necessary corporate action on its part (including
without limitation, any required shareholder approvals); and this Agreement has
been duly and validly executed and delivered by the Guarantor and constitutes
its legal, valid and binding obligations, enforceable in accordance with its
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
LIMITED RECOURSE SECURED GUARANTEE
<PAGE>
-7-
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.05 APPROVALS. No authorizations, approvals or consents of (including any
exchange control approval), and no filings or registrations with, any
governmental or regulatory authority or agency, or any securities exchange are
necessary for the execution, delivery or performance by the Guarantor of this
Agreement or for the validity or enforceability hereof except for filings and
recordings in respect of Liens created by the Debenture.
3.06 LEGAL FORM. This Agreement is in proper legal form under the laws of
the Province of Alberta and the laws of Canada applicable therein for the
enforcement thereof against the Guarantor under such laws. All formalities
required in the Province of Alberta and the laws of Canada applicable therein
for the validity and enforceability of this Agreement (including, without
limitation, any necessary registration, recording or filing with any court or
other authority in Alberta or Canada) have been accomplished, and no Taxes are
required to be paid and no notarization is required for the validity and
enforceability thereof.
3.07 RANKING. This Agreement and the obligations evidenced hereby are and
will at all times be direct and unconditional general obligations of the
Guarantor, and rank and will at all times rank in right of payment and otherwise
at least PARI PASSU with all unsecured Indebtedness of the Guarantor, whether
now existing or hereafter outstanding. There exists no Lien on the Mortgaged
Property (including any Lien arising out of any attachment, judgment or
execution) other than those as permitted by the Debenture, nor any segregation
or other preferential arrangement of any kind on, in or with respect to any of
the Mortgaged Property.
3.08 COMMERCIAL ACTIVITY. The Guarantor is subject to civil and commercial
law with respect to its obligations under this Agreement. The execution,
delivery and performance by the Guarantor of this Agreement constitute private
and commercial acts rather than public or governmental acts. The Guarantor is
not, nor is any of the Mortgaged Property, entitled to any right of immunity in
any jurisdiction from suit, court jurisdiction, judgment, attachment (whether
before or after judgment), set-off or execution of a judgment or from any other
legal process or remedy relating to the obligations of such Guarantor under this
Agreement.
3.09 MORTGAGED PROPERTY. The Guarantor is the sole beneficial owner of the
Mortgaged Property and no Lien, other than those permitted by the Debenture,
exists or will exist upon the Mortgaged Property at any time, except for the
Lien in favour of Saskco created by the Debenture, which Lien constitutes a
first priority Lien in and to all of the Mortgaged Property.
3.10 INVESTMENT COMPANY ACT. The Guarantor is not an "investment company",
or a company "controlled" by an "investment company", within the meaning of the
INVESTMENT COMPANY ACT of 1940, as amended.
3.11 PUBLIC UTILITY HOLDING COMPANY ACT. The Guarantor is not a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company", within the meaning of the PUBLIC UTILITY HOLDING COMPANY
ACT of 1935, as amended.
LIMITED RECOURSE SECURED GUARANTEE
<PAGE>
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The representations and warranties herein set forth or contained in any
certificates or documents delivered to Saskco or the Agent pursuant hereto
shall not merge in or be prejudiced by and shall survive any act done
pursuant hereto or to the Credit Agreement and shall continue in full force
and effect so long as any amount is owing, contingent or otherwise, by the
Guarantor to Saskco.
SECTION 4
THE DEBENTURE; LIMITED RECOURSE
4.01 THE DEBENTURE. As continuing collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations, the Guarantor shall issue the
Debenture to, and deposit the Debenture with, Saskco.
4.02 LIMITED RECOURSE. Notwithstanding anything else in this Guarantee
expressed or implied or expressed or implied in any other agreement,
document, instrument or certificate entered into or to be entered into by,
between or among any persons (including the Guarantor) in connection with any
transactions to which this Guarantee or the Credit Agreement relates (all of
the foregoing agreements, documents, certificates and instruments, including
this Guarantee and the Credit Agreement, are herein collectively called the
"LOAN DOCUMENTS"), it is expressly understood and agreed that:
(a) the right of Saskco to recover any Secured Obligations from, or any
other indebtedness, obligations, liabilities, costs, expenses, or
damages owing by the Guarantor under, in connection with or arising
out of the Loan Documents (whether by reason of breach or default
under any covenant, term, representation, warranty or other provision
of any of the Loan Documents or otherwise), or owing by the Guarantor
at law, in equity or otherwise howsoever in connection with the Loan
Documents, shall be limited and restricted to the rights of Saskco to
realize upon the Mortgaged Property, and the obtaining of any judgment
in respect of the indebtedness, obligations, liabilities, costs,
expenses, or damages referred to above to the extent necessary to
effect such realization; and
(b) Saskco shall have no recourse against the Guarantor for the
deficiency, if any, which may exist after Saskco has realized upon the
Mortgaged Property pursuant to the Debenture.
All Loan Documents shall be deemed to incorporate the foregoing limitations
whether or not expressly set out therein. Each reference to Saskco and the
Guarantor shall, for certainty, be deemed to include their respective
successors and assigns.
4.03 RIGHTS AGAINST OTHER PARTIES NOT AFFECTED. Nothing in Section 4.02
shall be construed as limiting Saskco's rights to enforce the Loan Documents
against any of the parties thereto other than the Guarantor.
LIMITED RECOURSE SECURED GUARANTEED
<PAGE>
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SECTION 5
COVENANTS
The Guarantor agrees that:
5.01 FINANCIAL STATEMENTS. The Guarantor shall deliver to Saskco (in
the case of clauses (a) and (b) below only to the extent financial statements
are not delivered by Canadian Forest pursuant to Section 8.01 of the Credit
Agreement):
(a) as soon as available and in any event within 60 days after the end
of each quarterly fiscal period of each fiscal year of the Guarantor,
consolidated and consolidating statements of income, retained earnings and
cash flows of the Guarantor and its consolidated Subsidiaries for such period
and for the period from the beginning of the respective fiscal year to the
end of such period, and the related consolidated and consolidating balance
sheets of the Guarantor and its consolidated Subsidiaries as at the end of
such period, setting forth in each case in comparative form the corresponding
consolidated and consolidating figures for the corresponding periods in the
preceding fiscal year (except that, in the case of balance sheets, such
comparison shall be to the last day of the prior fiscal year), accompanied by
a certificate of a senior financial officer of the Guarantor, which
certificate shall state that said financial statements fairly present in all
material respects the consolidated financial condition and results of
operations of the Guarantor and its consolidated Subsidiaries, and said
consolidating financial statements fairly present in all material respects
the respective individual unconsolidated financial condition and results of
operations of the Guarantor and of each of its consolidated Subsidiaries, in
each case in accordance with generally accepted accounting principles,
consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments);
(b) as soon as available and in any event within 100 days after the end
of each fiscal year of the Guarantor, consolidated and consolidating
statements of income, retained earnings and cash flows of the Guarantor and
its consolidated Subsidiaries for such fiscal year and the related
consolidated and consolidating balance sheets of the Guarantor and its
consolidated Subsidiaries as at the end of such fiscal year, setting forth in
each case in comparative form the corresponding consolidated and
consolidating figures for the preceding fiscal year, and accompanied (i) in
the case of said consolidated statements and balance sheet of the Guarantor,
by an opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall state that said
consolidated financial statements fairly present in all material respects the
consolidated financial condition and results of operations of the Guarantor
and its consolidated Subsidiaries as at the end of, and for, such fiscal year
in accordance with generally accepted accounting principles, and (ii) in the
case of said consolidating statements and balance sheets, by a certificate of
a senior financial officer of the Guarantor, which certificate shall state
that said consolidating financial statements fairly present in all material
respects the respective individual unconsolidated financial condition and
results of operations of the Guarantor and of each of its consolidated
Subsidiaries, in each case in accordance with generally accepted accounting
principles, consistently applied, as at the end of, and for, such fiscal
year; and
(c) from time to time such other information regarding the Mortgaged
Property as Saskco, the Agent or any lender under the Funding Credit
Agreement may reasonably request (to
LIMITED RECOURSE SECURED GUARANTEED
<PAGE>
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the extent such information is not provided by Canadian Forest pursuant to
Section 8.01(h) of the Credit Agreement).
5.02 LITIGATION. The Guarantor will promptly give to Saskco and the
Agent notice of all legal or arbitral proceedings, and of all proceedings by
or before any governmental or regulatory authority or agency, affecting the
Mortgaged Property (unless a notice of such proceeding has been given to
Saskco and the Agent pursuant to Section 8.02 of the Credit Agreement) except
proceedings that, if adversely determined, would not (either individually or
in the aggregate) have a material adverse effect on the Mortgaged Property.
5.03 CORPORATE EXISTENCE, ETC. The Guarantor will: preserve and
maintain its corporate existence and all of its material rights, privileges
and franchises as they pertain to the Mortgaged Property; comply with the
requirements of all applicable laws, rules, regulations and orders of
governmental or regulatory authorities if failure to comply with such
requirements could (either individually or in the aggregate) materially and
adversely affect the Mortgaged Property; pay and discharge all taxes,
assessments and governmental charges or levies imposed on the Mortgaged
Property (including all such taxes, assessments and governmental charges or
levies imposed on the Guarantor generally which may be satisfied from the
Mortgaged Property) prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of which is
being contested in good faith and by proper proceedings and against which
adequate reserves are being maintained; and maintain all of the Mortgaged
Property in good working order and condition, ordinary wear and tear excepted.
SECTION 6
FURTHER ASSURANCES; REMEDIES
In furtherance of the security referred to in Section 4 hereof, the
Guarantor hereby agrees with Saskco as follows:
6.01 DELIVERY AND OTHER PERFECTION. The Guarantor shall:
(a) give, execute, deliver, file and/or record any financing statement,
notice, instrument, document, agreement or other papers that may be necessary
or desirable (in the judgement of Saskco) to create, preserve, perfect or
validate the security interest granted pursuant hereto or to enable Saskco to
exercise and enforce its rights hereunder with respect to such security;
(b) keep full and accurate books and records relating to the Mortgaged
Property; and
(c) permit representatives of Saskco, the Agent and any lender under
the Funding Credit Agreement upon reasonable notice, at any time during
normal business hours to inspect and make abstracts from its books and
records pertaining to the Mortgaged Property, and permit representatives of
Saskco, the Agent and any lender under the Funding Credit Agreement to be
present at the Guarantor's place of business to receive copies of all
communications and remittances relating to the Mortgaged Property, and
forward copies of any notices or communications received by the Guarantor
with respect to the Mortgaged Property, all in such manner as Saskco may
require.
LIMITED RECOURSE SECURED GUARANTEED
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Without limiting the generality of the foregoing, the Guarantor
agrees that it will promptly obtain from time to time at its own expense all
such governmental licenses, authorizations, consents, permits and approvals
as may be required for the Guarantor to (a) comply with its obligations, and
preserve its rights under, this Agreement and (b) maintain the existence,
priority and perfection of the Liens created by the Debenture.
6.02 OTHER FINANCING STATEMENTS AND LIENS. Without the prior written
consent of Saskco (granted with the prior written consent of the Agent as
specified in Section 10.04 of the Credit Agreement), the Guarantor shall not
file or suffer to be on file (other than any filing by a Person in Alberta,
filed without the consent of the Guarantor), or authorize or permit to be
filed or to be on file, in any jurisdiction, any financing statement or like
instrument with respect to the Mortgaged Property in which Saskco (or the
Agent as assignee of Saskco) is not named as the sole secured party. The
Guarantor shall use reasonable efforts to discharge any financing statements
filed without the Guarantor's consent in Alberta.
6.03 PRESERVATION OF RIGHTS. Saskco shall not be required to take steps
necessary to preserve any rights against prior parties to any of the
Mortgaged Property.
6.04 TERMINATION. When all Secured Obligations shall have been paid in
full and the Commitment under the Credit Agreement and all Letter of Credit
Liabilities shall have expired or been terminated, this Agreement shall
terminate, and Saskco shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Mortgaged Property and money
received in respect thereof, to or on the order of the Guarantor.
6.05 FURTHER ASSURANCES. The Guarantor agrees that, from time to time
upon the written request of Saskco or the Agent, the Guarantor will execute
and deliver such further documents and do such other acts and things as
Saskco or the Agent may reasonably request in order fully to effect the
purposes of this Agreement.
SECTION 7
MISCELLANEOUS
7.01 NO WAIVER. No failure on the part of Saskco to exercise, and no
course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Saskco of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
7.02 NOTICES. All notices, requests, consents and demands hereunder
shall be in writing and telexed, telecopied or delivered to the intended
recipient at the "Address for Notices" specified beneath its name on the
signature pages hereof or, as to either party, at such other address as shall
be designated by such party in a notice to the other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed
to have been duly given when transmitted by telex or telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case
given or addressed as aforesaid.
LIMITED RECOURSE SECURED GUARANTEED
<PAGE>
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7.03 EXPENSES. The Guarantor agrees to reimburse Saskco an amount equal
to the amount Saskco owes under the Funding Credit Agreement for all
reasonable costs and expenses of Saskco, the Agent and the lenders under the
Funding Credit Agreement (including, without limitation, the reasonable fees
and expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (w)
performance by Saskco or the Agent of any obligations of the Guarantor in
respect of the Mortgaged Property that the Guarantor has failed or refused to
perform, (x) bankruptcy, insolvency, receivership, foreclosure, winding up or
liquidation proceedings, or any actual or attempted sale, or any exchange,
enforcement, collection, compromise or settlement in respect of any of the
Mortgaged Property, and for the care of the Mortgaged Property and defending
or asserting rights and claims of Saskco or the Agent in respect thereof, by
litigation or otherwise, (y) judicial or regulatory proceedings and (z)
workout, restructuring or other negotiations or proceedings (whether or not
the workout, restructuring or transaction contemplated thereby is
consummated) and (ii) the enforcement of this Section 7.03, and all such
costs and expenses shall be Secured Obligations entitled to the benefits of
the security provided pursuant to Section 4 hereof.
7.04 AMENDMENTS, ETC. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the
Guarantor and Saskco (with the prior written consent of the Agent as
specified in Section 10.04 of the Credit Agreement). Any such amendment or
waiver shall be binding upon Saskco, each holder of any of the Secured
Obligations and the Guarantor.
7.05 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the Guarantor, Saskco and each
holder of any of the Secured Obligations (PROVIDED, however, that the
Guarantor shall not assign or transfer its rights hereunder without the prior
written consent of Saskco with the prior written consent of the Agent).
(b) The Guarantor understands that Saskco will assign and grant to the
Agent (as defined in the Funding Credit Agreement), as agent for the lenders
from time to time party to the Funding Credit Agreement, a security interest
in all of its right, title and interest under this Agreement and the
Mortgaged Property. The Guarantor consents to such assignment and grant and
further agrees that all representations, warranties, covenants and agreements
of the Guarantor made herein shall also be for the benefit and inure to the
Agent and such lenders and all holders from time to time of the notes issued
to, Bankers' Acceptances accepted by and Letters of Credit issued by such
lenders, subject to Section 4.02 hereof.
7.06 CAPTIONS. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
7.07 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
LIMITED RECOURSE SECURED GUARANTEED
<PAGE>
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7.08 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the law of the Province of Alberta and the laws of Canada
applicable therein.
7.09 JURISDICTION, SERVICE OF PROCESS AND VENUE.
(a) Each party hereto hereby agrees that any suit, action or proceeding
with respect to this Agreement or any judgment entered by any court in
respect thereof may be brought the courts of the Province of Alberta; and
each party hereto hereby irrevocably submits to the jurisdiction of such
courts for the purpose of any such suit, action, proceeding or judgment.
Each party hereto further submits, for the purpose of any such suit, action,
proceeding or judgment brought or rendered against it, to the appropriate
courts of the jurisdiction of its domicile.
(b) Nothing herein shall in any way be deemed to limit the ability of
Saskco, the Agent or any lender under the Funding Credit Agreement to serve
any such writs, process or summonses in any other manner permitted by
applicable law or to obtain jurisdiction over the Guarantor in such other
jurisdictions, and in such manner, as may be permitted by applicable law.
(c) The Guarantor hereby irrevocably waives any objection that it may
now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Loan
Document brought in the Province of Alberta, and hereby further irrevocably
waives any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
7.10 JUDGMENT CURRENCY. The Guaranteed Obligations relate to an
international loan transaction in which the specification of Canadian Dollars
or U.S. Dollars is of the essence, and the stipulated Currency shall be the
Currency of account and payment in all instances. A payment obligation in
one Currency hereunder (the "ORIGINAL CURRENCY") shall not be discharged by
an amount paid in another Currency (the "OTHER CURRENCY"), whether pursuant
to any judgment expressed in or converted into any Other Currency or in
another place except to the extent that such tender or recovery results in
the effective receipt by Saskco of the full amount of the Original Currency
payable to Saskco under this Agreement. If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due hereunder in the
Original Currency into the Other Currency, the rate of exchange that shall be
applied shall be that at which, in accordance with normal banking procedures,
the Agent could purchase Original Currency at the Principal Office with the
Other Currency on the Business Day next preceding the day on which such
judgment is rendered. The obligation of the Guarantor in respect of any such
sum due from it to Saskco, the Agent or any lender under the Funding Credit
Agreement hereunder or under any other Loan Document (in this Section 7.10
called an "ENTITLED PERSON") shall, notwithstanding the rate of exchange
actually applied in rendering such judgment, be discharged only to the extent
that on the Business Day following receipt by such Entitled Person of any sum
adjudged to be due hereunder in the Other Currency such Entitled Person may
in accordance with normal banking procedures purchase and transfer the
Original Currency in Toronto with the amount of the judgment Currency so
adjudged to be due; and the Guarantor hereby, as a separate obligation and
notwithstanding any such judgment, agrees to indemnify such Entitled Person
against, and to pay such Entitled Person on demand, in the Original Currency,
the amount (if any) by which the sum originally due to such Entitled Person
in the Original Currency hereunder exceeds the amount of the Other Currency
so purchased and transferred.
LIMITED RECOURSE SECURED GUARANTEED
<PAGE>
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7.11 AGENTS AND ATTORNEYS-IN-FACT. Saskco may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by
it in good faith.
7.12 SEVERABILITY. If any provision hereof is invalid and unenforceable
in any jurisdiction, then, to the fullest extent permitted by law, (i) the
other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favour of Saskco in order to
carry out the intentions of the parties hereto as nearly as may be possible
and (ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
7.13 RECEIPT. The Guarantor acknowledges receipt of the duplicate
original hereof and waives its rights to receive a copy of any financing,
financing change or other registration statement resulting from any
registration of this Agreement or any verification statement issued with
respect thereto where such waiver is not otherwise prohibited by law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the day and year first above written.
FOREST OIL CORPORATION
By: /s/ Kenton M. Scroggs
--------------------------------------
Kenton M. Scroggs
Vice President and Treasurer
Address for Notices:
1600 Broadway
Suite 2200
Denver, CO 80202
USA
Attention: Vice President and Treasurer
611852 SASKATCHEWAN LTD.
By: /s/ Kenneth B. Potter
--------------------------------------
Kenneth B. Potter
Secretary
Address for Notices:
611852 Saskatchewan Ltd.
c/o Canadian Forest Oil Ltd.
600-800 Sixth Avenue, S.W.
Calgary, Alberta T2P 3G3
Canada
Attention: Vice President-Finance
LIMITED RECOURSE SECURED GUARANTEED
<PAGE>
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with a copy to:
The Chase Manhattan Bank of Canada
150 King Street West
Suite 160
Toronto, Ontario M5H 1J9
Canada
Attention: Vice President, Corporate Finance
LIMITED RECOURSE SECURED GUARANTEED
<PAGE>
LIMITED RECOURSE
DEMAND DEBENTURE AND NEGATIVE PLEDGE
THIS DEBENTURE is issued as of April 1, 1997 by FOREST OIL
CORPORATION, a corporation under the laws of New York (the "CORPORATION").
ARTICLE 1
PROMISE TO PAY: PRINCIPAL AND INTEREST
1.1 PRINCIPAL
The Corporation, for value received, hereby acknowledges itself
indebted and promises to pay to or to the order of 611852 Saskatchewan Ltd.
(who and whose successors and assigns as holders of this Debenture are herein
called the "HOLDER"), ON DEMAND (or on such earlier date as the Obligations
hereby secured may become payable in accordance with Section 12.3), the
principal amount of Eighty Million Canadian dollars (C$80,000,000) at the
main office of the Holder at 600, 800 - 6th Avenue S.W., Calgary, Alberta or
at such other place as the Holder may designate from time to time by notice
in writing to the Corporation.
1.2 INTEREST
The Corporation shall pay to the Holder at the same place interest
on the Principal Amount at a rate equal to the Prime Rate plus two percent
(2%) per annum. Such interest shall accrue on a daily basis and shall be
calculated and payable monthly in arrears on the first Banking Day of each
month in respect of the immediately preceding calendar month, based on the
actual number of days elapsed. If payment of the Principal Amount is
demanded, or otherwise becomes payable in accordance with Section 12.3, all
accrued and unpaid interest shall also be payable on the date for payment of
the Principal Amount.
Each change in the Prime Rate shall, for the purposes hereof, be
effective at 12:01 a.m. on the date upon which such change occurs, without
any requirement for notice to the Corporation of such change.
ARTICLE 2
DEFINITIONS AND INTERPRETATION
2.1 DEFINITIONS
In this Debenture, unless there is something in the subject matter
or context inconsistent therewith:
"ALBERTA HYDROCARBON RIGHTS" shall have the meaning described thereto in
Section 4.1(a);
"APPLICABLE LAWS" means, in relation to any person, transaction or event:
<PAGE>
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(a) all applicable provisions of laws, statutes, rules and regulations
from time to time in effect of any Governmental/Judicial Body, and
(b) all judgments, orders, awards, decrees, official directives, writs and
injunctions from time to time in effect of any Governmental/Judicial
Body in an action, proceeding or matter in which the person is a party
or by which it or its property is bound or having application to the
transaction or event;
"BANKING DAY" means a day on which banks are open for business in Calgary,
Alberta, but does not include a Saturday or a Sunday;
"CREDIT AGREEMENT" means the Second Amended and Restated Credit Agreement
dated as of April 1, 1997 among Canadian Forest Oil Ltd., those "Subsidiary
Borrowers" (as defined therein) that become borrowers thereunder and the
Holder, as amended, restated or otherwise modified from time to time;
"EVENT OF DEFAULT" means any event or circumstance enumerated in
Section 12.2;
"FOREST PURCHASE AGREEMENT" means the Petroleum, Natural gas and General
Rights Conveyance dated as of April 1, 1997 between Canadian Forest Oil
Ltd., as seller, and the Corporation, as purchaser;
"GOVERNMENTAL/JUDICIAL BODY" means:
(a) any government, parliament or legislature, any regulatory or
administrative authority, agency, commission or board and any other
statute, rule or regulation making entity having jurisdiction in the
relevant circumstances,
(b) any person acting under the authority of any of the foregoing or under
a statute, rule or regulation thereof, and
(c) any judicial, administrative or arbitral court, authority, tribunal or
commission having jurisdiction in the relevant circumstances;
"HYDROCARBON RIGHTS" means any leasehold, license, permit, reservation,
working, royalty, profit, carried, fee, mineral or other interest, estate
or right in or in respect of any Hydrocarbons;
"HYDROCARBONS" means petroleum, natural gas and any other solid, liquid or
gaseous hydrocarbons (whether consisting of a single element or of two or
more elements in chemical combination or uncombined), and any other
substances (whether a hydrocarbon or not) produced in association
therewith, including oil-bearing shale, tar sands, crude oil, petroleum,
helium, sulphur and hydrogen sulphide, and any of the foregoing;
"LEASE" includes a sublease and any other agreements in the nature of a
lease;
<PAGE>
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"LIEN HEREOF" means the Security Interests created or expressed to be
created or required to be created by the Corporation pursuant to this
Debenture;
"LOAN DOCUMENTS" shall have the meaning ascribed thereto in Section 5.1;
"MATERIAL ADVERSE EFFECT" shall have the meaning ascribed thereto in
Section 9.5(a);
"MORTGAGED PROPERTY" means the property, assets and undertakings of the
Corporation which are subject to the lien hereof; such term shall be deemed
to refer to such property, assets and undertakings or any part thereof;
"OBLIGATIONS" means all of the indebtedness, liabilities and obligations,
present and future, matured or not, of the Corporation under this
Debenture, including payment of the Principal Amount, interest thereon and
interest on overdue interest, payment of all other amounts required to be
paid hereunder, and observance and performance of all other covenants,
indemnities, terms, conditions, agreements and other requirements herein
contained, both monetary and non-monetary;
"PERSON" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization, union, government or any
agency, department or instrumentality thereof, the executors or legal
representatives of an individual, or any other entity;
"PPSA" means the PERSONAL PROPERTY SECURITY ACT (Alberta);
"PRIME RATE" shall mean the greater of (i) the per annum floating rate of
interest established from time to time by The Chase Manhattan Bank of
Canada as the base rate it will use to determine rates of interest on
Canadian dollar loans to its customers in Canada and (ii) the sum of
(A) the discount rate expressed as a rate of interest per annum payable by
the purchasers of 30 day bills of exchange, duly completed and accepted by
The Chase Manhattan Bank of Canada, as established by The Chase Manhattan
Bank of Canada, and (B) 100 basis points;
"PRINCIPAL AMOUNT" means the principal amount payable by the Corporation
pursuant to Section 1.1 (or, subject to Section 3.2, so much thereof as
remains from time to time unpaid);
"RECEIVER" means any receiver or receivers of the Mortgaged Property
appointed by the Holder pursuant to this Debenture or by a court at the
request of the Holder; such term shall be deemed to refer to a receiver or
receiver-manager; and
"SECURITY INTEREST" means with respect to any property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such property (including advance payment or similar arrangements with
respect to minerals in place). For these purposes, property shall be
deemed to be subject to a Security Interest if a person has acquired or
holds that property subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention
agreement (other than an operating lease) relating to such property.
<PAGE>
-4-
Derivations of any of the foregoing defined terms shall have a corresponding
meaning.
2.2 HEADINGS AND REFERENCES
(a) The division of this Debenture into Articles and Sections and the
insertion of headings is for convenience of reference only and shall
not affect the construction or interpretation of this Debenture.
(b) The terms "this Debenture", "hereof", "hereunder" and similar
expressions refer to this Debenture and not to any particular Article,
Section or other portion hereof and include any amendments or
supplements hereto. Unless otherwise stated, references herein to
Articles, Sections and Schedules are to Articles, Sections and
Schedules of this Debenture.
2.3 NUMBER AND GENDER
Words importing the singular number shall include the plural and
vice versa, and words importing gender shall include the masculine, feminine
and neuter genders.
2.4 PER ANNUM CALCULATIONS; CURRENCY; TIME; "INCLUDING"
(a) Unless otherwise stated, interest specified as a rate "per annum"
shall be computed on the basis of a calendar year of 365 days or 366
days, as the case may be.
(b) The theory of "deemed reinvestment" shall not apply to the computation
of interest hereunder and no allowance, reduction or deduction shall
be made for the deemed reinvestment of interest in respect of any
payments hereunder. Calculation of interest hereunder shall be made
using the nominal rate method, and not the effective rate method, of
calculation.
(c) Unless otherwise stated, references herein to dollar amounts or $
shall be deemed to be references to Canadian dollars.
(d) Unless otherwise stated, references herein to time shall mean local
time in Calgary, Alberta.
(e) The word "including" shall not be construed to limit or restrict the
generality of the matter that precedes it.
2.5 STATUTE REFERENCES
References herein to a statute include, unless otherwise stated,
regulations passed or in force pursuant thereto and any amendments to such
statute or to such regulations from time to time, and any legislation or
regulations substantially replacing the same or substantially replacing any
specific provision to which such reference is made.
<PAGE>
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ARTICLE 3
DEPOSIT OF DEBENTURE
3.1 DEPOSIT OF DEBENTURE AS COLLATERAL SECURITY
This Debenture may be issued, pledged, hypothecated or deposited by
the Corporation as collateral security for any indebtedness, liabilities or
obligations (direct or indirect, present or future, absolute or contingent,
matured or not, extended or renewed) of the Corporation, and may only be
cancelled by the Corporation when physically redelivered by the Holder to the
Corporation upon satisfaction of all such liabilities, indebtedness or
obligations. While this Debenture is so issued, pledged, hypothecated or
deposited it shall not be redeemed by reason of the account of the
Corporation having ceased to be in debit, or by reason of the liabilities,
indebtedness or obligations in respect of which this Debenture is issued,
pledged, hypothecated or deposited being repaid or satisfied from time to
time.
3.2 DEBENTURE IS OUTSTANDING FOR FULL FACE AMOUNT
Notwithstanding anything in Sections 3.1, 3.3 or elsewhere
contained, this Debenture shall constitute a secured promise of the
Corporation to pay the full face Principal Amount referred to in Section 1.1
irrespective of whether any liabilities, indebtedness or obligations in
respect of which this Debenture may have been issued, pledged, hypothecated
or deposited as collateral security are less than such amount. The
Corporation agrees and confirms that no payment by the Corporation to the
Holder on account of any such liabilities, indebtedness or obligations shall
reduce the Principal Amount owing under this Debenture unless such payment is
specifically and expressly in writing appropriated by the Holder to this
Debenture.
3.3 DEBENTURE SECURES REVOLVING LINE
This Debenture secures, among other things, a revolving line of
credit in the aggregate principal amount of up to the Principal Amount, and
both present and future advances, and accordingly the Holder shall be
entitled to all priorities and advantages conferred pursuant to Section 106.1
of the LAND TITLES ACT (Alberta) and the PPSA.
ARTICLE 4
SECURITY
4.1 SECURITY FOR OBLIGATIONS
As continuing security for the due payment, observance and
performance of all Obligations of the Corporation, but subject to the
exception as to leaseholds hereinafter contained, the Corporation hereby:
(a) FLOATING CHARGE ON REAL PROPERTY: grants, assigns, transfers,
mortgages and charges as and by way of a first floating charge to and
in favour of the Holder, all of the Corporation's Hydrocarbon Rights
of whatsoever nature and kind, situate in the Province of Alberta, now
or hereafter owned by the Corporation or in which the
<PAGE>
-6-
Corporation now has or hereafter acquires any interest of any nature
whatsoever, INCLUDING the Corporation's present and after-acquired
right, title, estate and interest (whether freehold, leasehold, profit
a prendre or otherwise, and whether legal or equitable, corporeal or
incorporeal) in and to all real property related to such Hydrocarbon
Rights in Alberta and the buildings, structures, improvements,
expansions, erections, works and fixtures situate thereon, and
specifically including the Hydrocarbon Rights acquired by the
Corporation pursuant to the Forest Purchase Agreement (all such
property subject to this floating charge being herein referred to as
the "ALBERTA HYDROCARBON RIGHTS");
(b) PERSONAL PROPERTY: grants, assigns, conveys, transfers, mortgages and
charges as and by way of a first fixed and specific mortgage and
charge to and in favour of the Holder, and the Holder hereby takes a
continuing security interest in, all of the Corporation's present and
after-acquired personal property including all present and
after-acquired intellectual property and rights thereto and therein,
all present and after-acquired franchises, privileges, permits,
grants, licenses, consents, authorizations, contracts and agreements,
and all present and after-acquired goods, chattel paper, documents of
title, instruments, money and intangibles (including debts, accounts,
claims and receivables generated by the sale of any Alberta
Hydrocarbon Rights or any production of Hydrocarbons therefrom), as
any of such terms are defined in the PPSA, directly related to,
derived from or used or useful in connection with the Alberta
Hydrocarbon Rights and, in the case of tangible equipment and
facilities, situate in Alberta;
(c) INCREASES AND ADDITIONS: grants, assigns, conveys, transfers,
mortgages and charges as and by way of a first fixed and specific
mortgage and charge to and in favour of the Holder, and the Holder
hereby takes a continuing security interest in, all increases,
additions, accretions, attachments, parts, profits and accessions to
any of the foregoing personal property and situate in Alberta,
together with all substitutions for and replacements and renewals of
any of the foregoing personal property; and
(d) PROCEEDS: grants, assigns, conveys, transfers, mortgages and charges
as and by way of a first fixed and specific mortgage and charge to and
in favour of the Holder, and the Holder hereby takes a continuing
security interest in, all personal property derived directly or
indirectly as proceeds from any dealing with any of the foregoing
personal property (or any dealing with such proceeds), whether or not
of the same type, class or kind as the original property, and wherever
situate, including any right to an insurance payment or any other
payment as indemnity or compensation for loss or damage, and payments
made in the total or partial discharge of an intangible, chattel
paper, an instrument, a security, or a mortgage or charge in respect
of an interest in land.
The Corporation acknowledges that:
(i) value has been given;
(ii) the Corporation has rights in the Mortgaged Property;
<PAGE>
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(iii) the time of attachment of the lien hereof has not been
postponed; and
(iv) the lien hereof is effective forthwith on the Corporation's
execution of this Debenture.
4.2 HABENDUM
The Holder shall have and hold the Mortgaged Property and the
rights hereby conferred on the Holder for the use and purpose and with the
powers and authorities herein expressed.
4.3 HOLDER NOT LIABLE ON CORPORATION'S AGREEMENTS
Nothing contained in this Debenture shall be construed as rendering
the Holder liable, directly or indirectly, for any obligations of the
Corporation under any agreement, instrument, permit, lease, license or other
document subject to the lien hereof, or any judgment, decree or order of any
Governmental/Judicial Body.
4.4 CHARGE VALID IRRESPECTIVE OF ADVANCE OF MONEYS
The lien hereof shall be and be deemed to be effective whether or
not the moneys hereby secured or any part thereof shall be advanced before,
upon or after the date of execution and issuance of this Debenture.
ARTICLE 5
LIMITED RECOURSE
5.1 LIMITED RECOURSE
Notwithstanding anything else in this Debenture expressed or
implied or expressed or implied in any other agreement, document, instrument
or certificate entered into or to be entered into by, between or among any
persons (including the Corporation) in connection with any transactions to
which this Debenture or the Credit Agreement relates (all of the foregoing
agreements, documents, certificates and instruments, including this
Debenture, are herein collectively called the "LOAN DOCUMENTS"), it is
expressly understood and agreed that:
(a) the right of the Holder to recover from the Corporation any
indebtedness, obligations, liabilities, costs, expenses, or damages
owing by the Corporation under, in connection with or arising out of
the Loan Documents (whether by reason of breach or default under any
covenant, term, representation, warranty or other provision of any of
the Loan Documents or otherwise), or owing by the Corporation at law,
in equity or otherwise howsoever in connection with the Loan
Documents, shall be limited and restricted to the rights of the Holder
to realize upon the Mortgaged Property, and the obtaining of any
judgment in respect of the indebtedness, obligations, liabilities,
costs, expenses, or damages referred to above to the extent necessary
to effect such realization; and
<PAGE>
-8-
(b) the Holder shall have no recourse against the Corporation for the
deficiency, if any, which may exist after the Holder has realized upon
the Mortgaged Property pursuant to this Debenture.
All Loan Documents shall be deemed to incorporate the foregoing limitations
whether or not expressly set out therein. Each reference to the Holder and
the Corporation shall, for certainty, be deemed to include their respective
successors and assigns.
5.2 RIGHTS AGAINST OTHER PARTIES NOT AFFECTED
Nothing in Section 5.1 shall be construed as limiting the Holder's
rights to enforce the Loan Documents against any of the parties thereto other
than the Corporation.
ARTICLE 6
POSSESSION AND USE UNTIL DEFAULT
6.1 POSSESSION
Unless and until an Event of Default shall have occurred and is
continuing, the Corporation may, subject to the express terms hereof:
(a) possess, operate, manage, use and enjoy the Mortgaged Property and
control the conduct of its business, and take and use the incomes and
profits thereof, and
(b) exercise, enjoy and enforce all of its rights and remedies under any
agreement subject to the lien hereof;
but nothing herein shall be construed as subordinating the lien hereof to any
other present or future creditor of the Corporation, whether secured or
unsecured.
ARTICLE 7
LEASES
7.1 LAST DAY OF TERM EXCLUDED
The last day of the term of any lease, oral or written, or any
agreement therefor, now held or hereafter acquired by the Corporation shall
be excepted from the lien hereof and shall not form part of the Mortgaged
Property, but the Corporation shall stand possessed of such one day upon
trust for the Holder, to assign and dispose of the same as the Holder or any
assignee from the Holder of such lease or agreement shall direct. The Holder
may at any time after the occurrence and during the continuance of an Event
of Default remove the Corporation as trustee and appoint another in its place.
<PAGE>
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ARTICLE 8
RESTRICTIONS ON ASSIGNMENT
8.1 PROHIBITIONS ON ASSIGNMENT
If any lease, agreement, license or permit contains a clause which
provides in legal effect that it can not be encumbered in the manner herein
provided without the consent or approval of the other party thereto or the
issuer thereof, then the effectiveness of the lien hereof (vis-a-vis such
party or issuer only and in respect to such lease, agreement, license or
permit only) shall be conditional upon such consent or approval having been
obtained. The Corporation shall use its best efforts to obtain such consent
or approval forthwith, and the lien hereof, while effective as against the
Corporation and all other persons immediately, shall be effective against
such other party as soon as the required consent or approval is given, or
deemed or required to be given, whichever shall first occur.
For greater certainty, nothing in this Section 8.1 shall apply in
respect of any lease, agreement, license or permit or any payments thereunder
in respect of which Section 41(7) of the PPSA is applicable.
8.2 REALIZATION ON AGREEMENTS
Nothing in Section 8.1 or elsewhere in this Debenture shall be
construed as limiting the rights of the Holder or any Receiver to rely upon
provisions in any agreement or instrument subject to the lien hereof where
such provisions are more favourable to the Holder or a Receiver than those
contained herein (notwithstanding any inconsistency herewith), nor as
requiring the Holder or any Receiver to comply with any restrictions of the
nature referred to in Section 8.1 in connection with any realization on the
Mortgaged Property where such compliance is not otherwise required by the law
relating to realization of security.
ARTICLE 9
COVENANTS
9.1 NEGATIVE PLEDGE
The Corporation shall not create, incur, assume or suffer to exist
any Security Interest on the Mortgaged Property, whether now owned or
hereafter acquired, EXCEPT:
(a) Security Interests created pursuant to this Debenture;
(b) Security Interests imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if, unless the amount thereof is
not material with respect to it or its financial condition, adequate
reserves with respect thereto are maintained on its books in
accordance with GAAP;
<PAGE>
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(c) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
builder's or other like Security Interests arising in the ordinary
course of business that are not overdue for a period of more than 45
days or that are being contested in good faith and by appropriate
proceedings, and Security Interests securing judgments less than
C$1,000,000;
(d) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions
on the use of the Mortgaged Property or minor imperfections in title
thereto that, in the aggregate, are not material in amount, and that
do not in any case materially detract from the value of the Mortgaged
Property subject thereto or interfere with the ordinary conduct of the
business of the Corporation in respect of the Mortgaged Property;
(e) Security Interests for farm-in, farm-out, joint operating, area of
mutual interest agreements or similar agreements entered into by the
Corporation in the ordinary course of business which the Corporation
determines in good faith to be necessary for or advantageous to the
economic development of the Mortgaged Properties; PROVIDED any
farm-out agreements covering the Mortgaged Property (other than
property that is "Unrestricted Property" as defined in the Credit
Agreement) shall require the prior written consent of the Holder;
(f) any extension, renewal or replacement of the foregoing, PROVIDED that
the Security Interests permitted hereunder would not nor shall be
amended to cover any additional indebtedness or property (other than a
substitution of like property); and
(g) additional Security Interests upon the Mortgaged Property created
after the date hereof PROVIDED that the aggregate indebtedness secured
thereby and incurred on and after the date hereof together with
Security Interests granted by the Borrowers (as defined in the Credit
Agreement) under the Credit Agreement shall not exceed C$1,000,000 (or
its equivalent in other currencies) in the aggregate at any one time
outstanding.
9.2 TRANSFER OF MORTGAGED PROPERTY
The Corporation will not convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or a
substantial part of the Mortgaged Property, whether now owned or hereafter
acquired including, without limitation, receivables and leasehold interests,
but excluding:
(a) obsolete or worn-out Mortgaged Property, tools or equipment no longer
used or useful in its business so long as the sum of the amount
thereof plus the amount of any Property (as defined in the Credit
Agreement), tools or equipment no longer used or useful in any
Borrower's business, sold in any single fiscal year by (collectively)
the Corporation, Canadian Forest Oil Ltd. and the other Subsidiary
Borrowers shall not, in the aggregate, have a fair market value in
excess of C$1,000,000 (or the equivalent in other currencies);
<PAGE>
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(b) any hydrocarbons produced or sold in the ordinary course of business
and on ordinary business terms (excluding prepayment contracts or
similar agreements or any other sale or lease of interests in
hydrocarbons in the ground);
(c) other Mortgaged Properties (other than Unrestricted Properties)
provided that the sum of the fair market value of such other
properties and the fair market value of any Properties (as defined in
the Credit Agreement) conveyed, sold, leased, transferred or otherwise
disposed of by (collectively) the Corporation, Canadian Forest Oil
Ltd. and other Subsidiary Borrowers on or after the date hereof shall
not, in the aggregate, exceed C$7,500,000 (or the equivalent in other
currencies) (PROVIDED, if any single property or group of properties
disposed of as part of a single plan of disposition, sale, transfer,
lease or conveyance shall have a fair market value in excess of
C$1,000,000 (or the equivalent in other currencies), such disposition
shall not occur without the prior written consent of the Holder);
(d) the scheduled expiration of leases covering hydrocarbon producing
properties in accordance with their terms; and
(e) Unrestricted Properties (as defined in the Credit Agreement).
9.3 MAINTAIN INSURANCE
The Corporation will maintain insurance with financially sound and
reputable insurance companies with respect to the Mortgaged Property and
risks of a character usually maintained by corporations engaged in the same
or similar business similarly situated, against loss, damage and liability of
the kinds and in the amounts customarily maintained by such corporations.
9.4 LIMITATION ON SALE AND LEASEBACKS OF THE MORTGAGE PROPERTY
The Corporation will not enter into, renew or extend any
transaction or series of related transactions pursuant to which the
Corporation sells or transfers any of the Mortgaged Property in connection
with the leasing, or the release against installment payments, or as part of
an arrangement involving the leasing or resale against installment payments,
of such Mortgaged Property to the seller or transferor.
9.5 ENVIRONMENTAL MATTERS
(a) The Corporation will, in connection with the Mortgaged Property,
comply in all material respects with all Environmental Laws now or
hereafter applicable thereto and shall obtain, at or prior to the time
required by applicable Environmental Laws, all environmental, health
and safety permits, licenses and other authorizations necessary for
its operations in respect of the Mortgaged Property and maintain such
authorizations in full force and effect, except to the extent failure
to have any such permit, license or authorization would not have a
material adverse effect on (w) the ability of the Corporation to
perform its obligations under this Agreement, (x) the validity or
enforceability of the Agreement, (y) the rights of any Lender (as
defined
<PAGE>
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in the Credit Agreement) under this Agreement, or (z) the Mortgaged
Property (a "MATERIAL ADVERSE EFFECT").`
(b) The Corporation will promptly furnish to the Holder all written
notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings, administrative, civil or
criminal, at law or in equity, received by the Corporation or of which
it has notice, pending or threatened against the Corporation by any
governmental authority with respect to any alleged violation of or
non-compliance with any environmental laws or any permits, licenses or
authorizations in connection with its ownership or use of the
Mortgaged Property.
(c) The Corporation will promptly furnish to the Holder all requests for
information, notices of claim, demand letters, and other
notifications, received by the Corporation, to the effect that, in
connection with its ownership or use of the Mortgaged Property or the
conduct of its business, it may be potentially responsible with
respect to any investigation or clean-up of Hazardous Material on the
Mortgaged Property.
9.6 NO ACTION TO AFFECT PRIORITY
The Corporation shall not do anything to adversely affect the
priority of this Debenture.
9.7 FIXED CHARGE
The Corporation shall, upon the reasonable request by the Holder or
the Agent, grant a fixed mortgage and charge (in form and substance
satisfactory to the Holder and the Agent) to or for the benefit of the
Holder, as collateral security for the Corporation's obligations to the
Holder under this Debenture, on any of the Alberta Hydrocarbon Rights now
owned or hereafter acquired that are subject to a floating charge created by
this Debenture, free and clear of any other mortgages, charges, encumbrances
or other security interests except as provided in Section 9.1.
9.8 FURTHER ASSURANCES
The Corporation shall, after notice thereof from Holder or the
Agent, do all such further acts and things and execute and deliver all such
further documents as shall be reasonably requested by the Holder or the Agent
in order to give effect to this Debenture and shall cause the same to be
registered wherever, in the opinion of the Holder or the Agent, such
registration may be required or advisable to preserve, perfect or validate or
continue the perfected status of any deemed or other Security Interest
granted pursuant to this Debenture or to enable the Holder to exercise and
enforce its rights hereunder with respect to such deemed or other Security
Interest.
<PAGE>
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ARTICLE 10
APPLICATION OF PAYMENTS
10.1 APPLICATION OF PAYMENT
All payments made by the Corporation hereunder, whether before or
after the occurrence of an Event of Default, including any proceeds of
realization on security received by the Holder, shall be applied to the
Obligations in such order as the Holder determines in its discretion, and the
Corporation agrees not to direct any payment to be accepted in any order
contrary to this provision.
ARTICLE 11
TITLE CLAIMS
11.1 CLAIMS AGAINST TITLE
If the lien hereof, or the Corporation's title to, or the rights of
the Holder in or to, any material part of the Mortgaged Property shall be
endangered or shall be attacked directly or indirectly, or if any legal
proceedings are instituted against the Corporation with respect thereto, the
Corporation will promptly give written notice thereof to the Holder, and the
Corporation shall take all necessary and proper steps for the defence of the
Corporation's title to the Mortgaged Property and the lien of this Debenture
thereon and will take such action as is reasonably appropriate to the defence of
any such legal proceedings including the employment of counsel, the prosecution
or defence of litigation and the release or discharge of claims made against the
title to the Mortgaged Property or the lien hereof.
ARTICLE 12
DEMAND; EVENTS OF DEFAULT
12.1 OBLIGATIONS PAYABLE ON DEMAND
The Corporation agrees and acknowledges that the Obligations for the
payment of any money hereunder (including the Principal Amount) are payable by
the Corporation ON DEMAND by the Holder.
12.2 EVENTS OF DEFAULTS
The happening of any of the following events or circumstances shall be
an "EVENT OF DEFAULT":
(a) NON-PAYMENT ON DEMAND: the Corporation shall fail to pay the
Principal Amount or interest thereon when demanded by the Holder;
(b) INSOLVENCY (VOLUNTARY PROCEEDINGS): the Corporation shall (i) apply
for or consent to the appointment of, or the taking of possession by,
a receiver, custodian, trustee,
<PAGE>
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examiner or liquidator of itself or of all or any substantial part
of the Mortgaged Property, (ii) make a general assignment for the
benefit of its creditors, (iii) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up,
or composition or readjustment of debts, (iv) take any corporate
action for the purposes of effecting any of the foregoing, or (v) do
the equivalent of any of the foregoing under the laws of Canada;
(c) INSOLVENCY (INVOLUNTARY PROCEEDINGS): a proceeding or case shall be
commenced, without the application or consent of the Corporation, in
any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
receiver, custodian, trustee, examiner, liquidator or the like of such
Corporation or of all or any substantial part of the Mortgaged
Property, (iii) similar relief in respect of such Corporation under
the BANKRUPTCY AND INSOLVENCY ACT (Canada) or any other law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of 60 or more days, or (iv) the equivalent of any of the
foregoing under the laws of Canada; or
(d) any Event of Default (as defined in the Credit Agreement) shall occur
and be continuing.
12.3 AUTOMATIC ACCELERATION
Upon the occurrence of an Event of Default, all of the Obligations for
the payment of any money hereunder (including the Principal Amount and interest
thereon) shall automatically be and become immediately due and payable without
presentment, demand (except the demand referred to in Section 12.2(a)) or notice
of any kind, all of which are hereby waived by the Corporation.
12.4 NO WAIVER
No delay or omission of the Holder in exercising any right or power
accruing upon any Event of Default shall impair any such right or power or shall
be construed to be a waiver of any such default or acquiescence therein, and no
act or omission of the Holder shall extend to or be taken in any manner
whatsoever to affect any subsequent default hereunder or the Holder's rights
resulting therefrom.
12.5 WAIVER OF COVENANTS
The Holder may waive any breach by the Corporation of any of the
provisions contained in this Debenture or any failure by the Corporation in the
observance or performance of any covenant or condition required to be observed
or performed by the Corporation hereunder; provided that no such waiver or act
by the Holder shall be binding on the Holder or shall extend to
<PAGE>
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or be taken in any manner to affect any subsequent breach or failure or the
Holder's rights resulting therefrom.
ARTICLE 13
REMEDIES
13.1 REMEDIES
Upon the occurrence of an Event of Default, the lien hereof shall
immediately become enforceable. If the lien hereof becomes enforceable and the
Holder has determined to enforce the same, the Holder may itself (or through an
agent) to the fullest extent permitted by law, and a Receiver appointed by the
Holder pursuant to Section 13.2 hereof may:
(a) POSSESSION OF MORTGAGED PROPERTY AND POWER OF ENTRY: take possession
of the Mortgaged Property to the exclusion of the Corporation and to
that end the Corporation agrees that the Holder or Receiver may at any
time enter upon lands and premises comprising the Mortgaged Property
or where the Mortgaged Property may be found for the purpose of taking
possession of and/or removing the Mortgaged Property. In the event
that the Holder or Receiver takes possession of the Mortgaged
Property, it shall have the right to seize, repossess and maintain the
same upon the premises on which the Mortgaged Property may then be
situate without removal to other premises, and may dispose of the same
from such premises;
(b) POWER OF DISPOSITION: sell, lease or otherwise dispose of the
Mortgaged Property either as a whole or in separate parcels, units or
parts, by public sale (including public auction) or private or closed
tender or by private contract, with only those notices, if any, as are
required by Applicable Law, and with or without advertising and
without any other formality (except as otherwise required by
Applicable Law), and such sale, lease or disposition shall be on such
terms and conditions as to title, credit and otherwise and as to upset
or reserve bid or price as may seem advantageous to the Holder or
Receiver, and the Holder or Receiver shall not be required to accept
the highest or any bid or tender at any public sale. If such sale,
lease or disposition is made in whole or in part on credit or deferred
payment, there need only be applied against the Obligations the actual
cash received from time to time. The Holder may itself purchase or
lease the Mortgaged Property, unless prohibited from doing so by
Applicable Law. The Holder or Receiver may rescind or vary any
contract for the sale, lease or other disposition of the Mortgaged
Property and may resell or re-lease without being answerable for any
loss occasioned thereby, and may delay any disposition of the
Mortgaged Property in whole or in part;
(c) CARRYING ON BUSINESS: carry on or concur in the carrying on, or cease
the carrying on, of all or any part of the business or undertaking of
the Corporation in relation only to the Mortgaged Property and may to
the exclusion of the Corporation enter upon, occupy and use all or any
of the premises, buildings, plants and undertakings of or occupied or
used by the Corporation and forming part of the Mortgaged Property and
may use any or all of the machinery, equipment, tools and other assets
<PAGE>
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of the Corporation included in the Mortgaged Property for such time as
the Holder or Receiver sees fit, free of charge, to carry on the
business of the Corporation in relation to the Mortgaged Property and,
if applicable, to produce or manufacture or complete the production or
manufacture of any resources or products, to pack and ship or
transport the resources or products, to employ and discharge any
persons upon such terms and remuneration as it deems appropriate, and
generally to have the same rights and powers as the Corporation would
have in carrying on such business in relation to the Mortgaged
Property were it not in default hereunder;
(d) PAY ENCUMBRANCES: pay all or any part of any indebtedness of the
Corporation secured by a Security Interest against the Mortgaged
Property, whether prior to or subordinate to the lien hereof;
(e) FORECLOSURE: foreclose or otherwise realize upon the Mortgaged
Property pursuant to Applicable Law;
(f) DEAL WITH MORTGAGED PROPERTY: obtain, hold, maintain, release to
third parties, repair, replace, substitute, protect, preserve,
process, prepare, or otherwise deal with the Mortgaged Property in
such manner, upon such terms and conditions and at such time or times
as may seem advisable to the Holder or Receiver without notice to the
Corporation (except as otherwise required by Applicable Law);
(g) FILE PROOFS OF CLAIM: file such proofs of claim and other documents
as may be necessary or advisable in order to prove the claim of the
Holder in any bankruptcy, proposal, plan of arrangement, winding-up or
other proceeding relating to the Corporation or the Mortgaged
Property;
(h) COMMENCE ACTIONS: commence and proceed with any actions or judicial
proceedings seeking such legal and/or equitable remedies as the Holder
or Receiver deems advisable to protect and enforce its rights
hereunder;
(i) EXPENSES OF REALIZATION: charge on its own behalf and pay to others
amounts incurred (including legal fees on a solicitor and his own
client basis, and Receivers' and accounting fees) in or in connection
with any dealing with the Mortgaged Property or acts in respect
thereof referred to in the preceding paragraphs, and in connection
with the protection and enforcement of its rights hereunder (including
in connection with advice with regard to any of the foregoing); the
Holder or Receiver may deduct such amounts from the proceeds of
realization or may add such amounts to the Obligations, whereupon the
same shall be payable by the Corporation to the Holder on demand and
shall bear interest at the rate set forth herein in respect of the
Principal Amount calculated from the date incurred by the Holder or
Receiver to the date paid by the Corporation and such amounts and such
interest shall be secured by the lien hereof; and
(j) ENFORCEMENT: otherwise enforce this Debenture by any method permitted
by Applicable Law.
<PAGE>
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13.2 RECEIVER
(a) PRIVATE APPOINTMENT: The Holder may, at any time after the lien
hereof has become enforceable and whether or not the Holder shall
itself or through its agents have taken possession of the Mortgaged
Property or taken any other actions or steps with regard thereto,
appoint by instrument in writing a Receiver of the Mortgaged Property.
Any such Receiver shall have all of the powers, remedies and rights
set forth in Section 13.1, and the powers, remedies and rights of the
Holder hereunder, in addition to those possessed by a receiver or
receiver-manager, as applicable, at law or in equity, unless any of
such powers, remedies and rights are expressly limited in the
instrument appointing the Receiver or in amendments thereto. The
Holder may appoint one or more Receivers hereunder and may remove any
such Receiver or Receivers and appoint another or others in his or
their stead from time to time. Any Receiver appointed by the Holder
may but need not be appointed or supervised in any way by a court, and
may be appointed with or without bond or security. The Holder may
from time to time fix the remuneration of every such Receiver, and
direct the payment thereof out of the Mortgaged Property or the
proceeds thereof in priority to payment of the Obligations.
(b) RECEIVER'S CERTIFICATES: A Receiver appointed pursuant to
paragraph (a) may, with the consent in writing of the Holder, borrow
money for the maintenance, protection or preservation of the Mortgaged
Property or for the carrying on of the business or undertaking of the
Corporation, and any Receiver may issue certificates (in this
paragraph called "RECEIVER'S CERTIFICATES"), for such amounts as will
in the opinion of the Holder be sufficient for obtaining upon the
security of the Mortgaged Property the amounts from time to time
required, and such Receiver's Certificates may be payable either to
order or bearer and may be payable at such time or times as the Holder
may consider expedient, and shall bear such interest as shall therein
be provided and the Receiver may sell, deposit, pledge or otherwise
dispose of the same in such manner as the Holder may consider
advisable and may pay such commission on the sale thereof as he may
consider reasonable, and the amounts from time to time payable by
virtue of such Receiver's Certificates shall at the option of the
Holder be entitled to the security of the lien hereof in priority to
the Obligations.
(c) AGENT FOR CORPORATION: Any Receiver appointed pursuant to
paragraph (a) shall so far as concerns responsibility for its acts be
deemed the agent of the Corporation, and the Holder shall not be
responsible for any misconduct or negligence on the part of any such
Receiver.
(d) POWER OF ATTORNEY: To enable the Holder to exercise the powers
granted to it hereunder, the Corporation hereby irrevocably appoints
the Holder as its attorney and on its behalf to effect any sale, lease
or other disposition of the Mortgaged Property (including any real
property subject to the lien hereof), and to execute all instruments
and deeds, and do all acts, matters and things that may be necessary
or advisable in the name of or on behalf of the Corporation or
otherwise. The power of attorney hereby granted shall be effective
upon the occurrence of an Event of Default and shall continue
throughout the continuance of any Event of Default. Any deed, lease,
<PAGE>
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agreement or other instrument required to be signed under seal and
signed by the Holder under its seal pursuant hereto shall have the
same effect as if it were signed under the corporate seal of the
Corporation. The Holder shall have full power of substitution, and
may provide the Receiver with the power to exercise such rights as
attorney hereunder, and may at any time revoke any such substitution.
(e) COURT APPOINTMENT: The Holder may, in its sole discretion, either
before or after the private appointment of a Receiver hereunder,
institute proceedings in any court of competent jurisdiction for the
appointment of a Receiver of the Mortgaged Property, and in such case
the Receiver shall have the powers expressed in the order appointing
it, as such order may be varied from time to time.
(f) POWER OF DIRECTORS: Upon the appointment of any Receiver, all powers,
functions, rights and privileges of the directors of the Corporation
with respect only to the Mortgaged Property shall cease unless
specifically continued by the written consent of the Holder.
13.3 DEALING WITH SECURITY
(a) The Holder may grant renewals, extensions of time and other
indulgences, take, release and give up securities, accept
compositions, grant releases and discharges, perfect or fail to
perfect any securities, release the Mortgaged Property to third
parties and otherwise deal or fail to deal with the Corporation,
debtors of the Corporation, guarantors, sureties and others and with
the Mortgaged Property and other securities as the Holder may see fit,
all without prejudice to the liability of the Corporation to the
Holder or the Holder's rights and powers under this Debenture.
(b) Nothing in this Debenture shall be construed as requiring the Holder
to exercise all or any of its possession or realization rights
hereunder in respect of all or any particular part of the Mortgaged
Property. Such possession or realization rights may be exercised by
the Holder in such manner and in respect of all or any particular part
of the Mortgaged Property as the Holder may determine in its sole
discretion, and the Holder may specifically elect not to take
possession or control over, or appoint a Receiver in respect of, any
such assets while exercising all remedies available to it in respect
of any other Mortgaged Property. The Holder may also, of its own
volition, release or discharge from the lien hereof any Mortgaged
Property that it desires to release to the Corporation, and the
Corporation covenants to accept such release and execute any
acknowledgments as the Holder may require in respect thereof.
13.4 CASH COLLATERAL ACCOUNT
The Holder shall be entitled, when in its sole discretion it considers
doing so advantageous to it at any time during the term hereof (including in the
course of realizing on the lien hereof), to retain any realization proceeds in a
cash collateral account maintained by it, such cash collateral account to be
subject to the lien hereof, and amounts so retained ultimately to be applied
(with any accrued interest) to the Obligations.
<PAGE>
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13.5 VALIDITY OF SALE
No person dealing with the Holder or any Receiver shall be concerned
to inquire whether the lien hereof has become enforceable or whether the powers
which the Holder or any Receiver is purporting to exercise have become
exercisable or whether any money remains due on the security of the Mortgaged
Property or as to the necessity or expedience of the stipulations and conditions
subject to which any sale, lease or other disposition shall be made or otherwise
as to the propriety or regularity of any sale or any other dealing by the Holder
with the Mortgaged Property or to see to the application of any moneys paid to
the Holder or Receiver.
13.6 RIGHTS AND REMEDIES IN ADDITION
Each and every right, remedy and power conferred by this Article is in
supplement of and in addition to and not in substitution for any other right,
remedy or power the Holder or any Receiver may have from time to time under this
Article or elsewhere in this Debenture, or in any other agreement or under
Applicable Law at the time of the exercise of such right, remedy or power. The
Holder or Receiver may proceed by way of any action, suit, remedy or other
proceeding at law or in equity (including specific performance of any covenant
and injunctions against violations of any covenant) and no such remedy for the
enforcement of the rights of the Holder or Receiver shall be exclusive of or
dependent on any other such remedy. Any one or more of such remedies may from
time to time be exercised separately or in combination and in particular the
power of sale and other realization remedies contained herein may be exercised
without the Holder entering into possession of or exercising control over the
Mortgaged Property. Notwithstanding the foregoing, the Holder shall not be
bound to deal with the Mortgaged Property, to exercise any right or remedy as
aforesaid, or to preserve rights against other persons.
13.7 APPLICATION OF INSURANCE PROCEEDS
Any insurance monies received by the Holder pursuant to this Debenture
may at the option of the Holder be applied to rebuilding or repairing the
Mortgaged Property or any part thereof, or be paid to the Corporation, or any
such monies may be applied in the sole discretion of the Holder, in whole or in
part, to the repayment of the Obligations hereby secured or any part thereof
whether then due or not.
ARTICLE 14
LIMITATION OF LIABILITY
14.1 LIMITATION OF LIABILITY
(a) Subject to paragraph (c), the Holder and any Receiver shall not be
liable, accountable or responsible for any loss or damage suffered or
incurred by the Corporation as a result of:
(i) the failure by the Holder or a Receiver to exercise any rights or
remedies provided for herein, or to exercise any right or remedy
in lieu of any other right or remedy; or
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(ii) the taking and maintaining of possession by the Holder or a
Receiver of the Mortgaged Property pursuant to the terms of this
Debenture, or the carrying on of the business of the Corporation
as herein provided.
(b) Subject to paragraph (c), the Holder and any Receiver shall not be
liable, accountable or responsible:
(i) to account as mortgagee in possession or otherwise upon entry
into possession hereunder, other than for actual receipts;
(ii) to observe or perform, or to see to the observance or
performance by the Corporation of any agreements or obligations
to which the Corporation is a party or by which it is bound,
whether before or during any period when the Holder or a
Receiver has entered into possession hereunder;
(iii) for loss or damage to the Mortgaged Property while in the
possession of the Holder or a Receiver, the risk of which is
hereby expressly agreed to be on the Corporation;
(iv) to keep the Mortgaged Property identifiable or separate from
other property which it owns or holds, whether fungible or not,
while in the possession of the Holder or a Receiver; or
(v) in the case of chattel paper, a security or an instrument in the
possession of the Holder or a Receiver, to take any steps to
preserve rights against other persons.
(c) Notwithstanding any exclusion or limitation herein contained, to the
extent that the provisions of any statute impose a duty or onus upon a
person or restrict his rights or remedies in relation hereto, and such
provisions are under Applicable Law incapable of waiver or variance by
the Corporation, the provisions of such Applicable Law shall govern
and the affected provisions hereof shall be deemed to be amended to
the extent necessary to give effect to such Applicable Law without in
any way affecting any other provision hereof.
ARTICLE 15
ASSIGN FREE OF EQUITIES
15.1 PAYMENT FREE FROM EQUITIES
The Obligations shall be paid by the Corporation, and may be assigned
by the Holder, absolutely free and clear of all equities, rights of set-off,
claims, defences, counterclaims, rights or other matters whatsoever, whether
existing between the Holder and the Corporation and/or any third parties or
intermediate holders, and whether now existing or hereafter arising (before or
after notice to the Corporation of any assignment) which could impair or
adversely affect in any way the
<PAGE>
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entitlement of the Holder to enforce the Obligations strictly in accordance
with the terms and provisions hereof, subject always to Article 5.
ARTICLE 16
EXPENSES
16.1 EXPENSES
(a) All documents or information required to be furnished by the
Corporation to the Holder under this Debenture shall be supplied
without cost to the Holder.
(b) The Corporation shall pay to the Holder all reasonable out-of-pocket
costs and expenses, including all legal fees (on a solicitor and his
own client basis) and consultants' fees and other expenses incurred by
the Holder from time to time in the preparation, registration,
enforcement, realization and collection of or in respect of this
Debenture (including all reasonable out-of-pocket costs and expenses
associated with the Holder considering the provision of consents,
waivers or other acknowledgements hereunder). All such amounts shall
become part of the Obligations, shall be payable by the Corporation on
demand, shall bear interest at the rate set forth herein in respect of
the Principal Amount calculated from the date incurred by the Holder
to the date paid by the Corporation, and such amounts and interest
shall be secured by the lien hereof. This provision shall not be
construed to limit any other provisions of this Debenture dealing with
the charge-back to the Corporation of expenses incurred by the Holder.
ARTICLE 17
INTEREST ON OVERDUE AMOUNTS; CALCULATION OF INTEREST
17.1 INTEREST
(a) The Corporation shall pay interest on all unpaid amounts hereunder
(including interest on overdue interest, indemnities and expenses), on
demand, from the date such unpaid amount is due until such unpaid
amount is paid in full, calculated at the same rate per annum provided
herein in respect of the Principal Amount.
(b) In no event shall any interest or fee to be paid hereunder exceed the
maximum rate permitted by Applicable Law. In the event any such
interest rate or fee exceeds such maximum rate, such rate shall be
adjusted downward to the highest rate (expressed as a percentage per
annum) or fee that the parties could validly have agreed to by
contract on the date hereof under Applicable Law. It is further
agreed that any excess actually received by the Holder shall be
credited against the Principal Amount or, if the Principal Amount
shall have been or would thereby be paid in full, the remaining amount
shall be credited to the Corporation.
<PAGE>
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(c) All interest (including interest on overdue interest) payable by the
Corporation to the Holder hereunder shall accrue from day to day,
computed as provided herein, and shall be payable after as well as
before maturity, demand, default and judgment.
ARTICLE 18
EFFECTIVE NOTICE
18.1 NOTICE
Any and all notices or other communications required or permitted to
be given to the Corporation pursuant to this Debenture shall be in writing and
given in any of the following manners:
(a) by delivery to an officer or responsible employee of the Corporation,
in which case such notice or other communication shall conclusively be
deemed to have been given to the Corporation thereof at the time of
such service; or
(b) by telecopy to the Corporation at (303) 812-1510 in Denver in which
case such notice or other communication shall conclusively be deemed
to have been given to the Corporation thereof on the Banking Day sent,
if sent prior to 2:00 p.m., or on the Banking Day following the date
upon which it was sent, if sent at or after 2:00 p.m.
ARTICLE 19
MISCELLANEOUS
19.1 NO MERGER
Neither the taking of any judgment nor the exercise of any power of
seizure or sale shall operate to extinguish the liability of the Corporation to
make payment of, or to satisfy the Obligations, nor shall the acceptance of any
payment or alternate security constitute or create any novation, and the taking
of a judgment or judgments under any of the covenants herein contained shall not
operate as a merger of such covenants.
19.2 NO DISCHARGES UNLESS SPECIFICALLY PROVIDED
No postponement or partial release or discharge of the lien hereof in
respect of the Mortgaged Property shall in any way operate or be construed to
release or discharge the security hereby constituted in respect of the Mortgaged
Property except as therein specifically provided, or to release or discharge the
Corporation from its liability to the Holder to fully pay and satisfy the
Obligations.
19.3 PAYMENTS OR DELIVERIES DUE ON NON-BANKING DAYS
(a) If any payment to be made by the Corporation hereunder shall become
due and payable on a day which is not a Banking Day, such payment
shall be made on the
<PAGE>
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immediately following day which is a Banking Day, and any extension
of time shall in such case be included in computing interest payable
hereunder relating to such payment. All payments due hereunder shall
be made in immediately available funds before 11:00 a.m. on the due
date, and if made after 11:00 a.m. shall be deemed to have been made
on the next Banking Day.
(b) If any notice, certificate or other document is required to be
delivered by the Corporation hereunder on a day which is not a Banking
Day, such delivery may be made on the immediately following day which
is a Banking Day.
19.4 GOVERNING LAW
(a) This Debenture and any other documents or instruments delivered in
accordance herewith shall be governed by and interpreted in accordance
with the laws of Alberta and the laws of Canada applicable therein and
shall be treated as Alberta contracts.
(b) The Corporation agrees that the courts of Alberta shall have
jurisdiction to hear and determine any suit, action or proceeding and
to settle any disputes which may arise out of or in connection with
the aforesaid documents and it irrevocably submits to the
non-exclusive jurisdiction of such courts, without prejudice to the
rights of the Holder to take proceedings in any other jurisdictions,
whether concurrently or not.
19.5 ASSIGNMENT BY CORPORATION
The Corporation shall not and cannot assign its Obligations under this
Debenture, or take any steps or enter into any transaction of any nature which
would have that effect, without the prior written consent of the Holder.
Subject thereto, all Obligations of the Corporation hereunder shall bind the
Corporation and its successors and assigns.
19.6 ACKNOWLEDGEMENT BY THE CORPORATION
The Corporation acknowledges and agrees that this Debenture may be
assigned by the Holder, without the consent of and without notice to the
Corporation, to such person as the Holder may determine and, in such event such
person shall be entitled to all of the rights and remedies of the Holder
hereunder and the Holder shall be released and discharged from its obligations
hereunder and the Corporation agrees not to assert against any assignee of the
Holder and the rights of such assignee are not subject to any claims, defence,
demand, set-off or other rights, whether at law or in equity, that the
Corporation has or may have against the Holder.
19.7 TIME OF ESSENCE
Time is of the essence of this Debenture.
19.8 COPY RECEIVED
The Corporation acknowledges having received and retained a copy of
this Debenture. The Corporation waives its right to receive a copy of any
financing statement or
<PAGE>
-24-
financing change statement (and any verification statements issued in respect
thereof) that may be registered by the Holder from time to time in respect of
the lien hereof.
19.9 WAIVER OF PRESENTMENT
Except as provided herein, the Corporation waives presentment of this
Debenture for payment, diligence, notice of non-payment, protest and notice of
protest.
19.10 SEVERABILITY
If one or more of the provisions of this Debenture is, or is adjudged
to be, invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby, and such invalid, illegal or unenforceable
provision shall, to the extent permitted at law, be severable.
19.11 SECURITY IN ADDITION
The security hereby constituted is not in substitution for any other
security for the Obligations, or for any other agreement between the parties
whether or not creating any Security Interest in the Mortgaged Property whether
heretofore or hereafter made, and such security and such agreement shall be
deemed to be continued and not affected hereby unless expressly provided to the
contrary in a writing signed by the Corporation and the Holder. The taking of
any action or proceedings or refraining from so doing, or any other dealing with
any other security for the Obligations or any part thereof shall not release or
affect the lien hereof and none of the creation of this Debenture nor the taking
of any proceedings hereunder or thereunder for the realization of the security
hereby constituted shall release or affect any other security held by the Holder
for the payment or performance of the Obligations.
19.12 WAIVERS AND CONSENTS
No waiver of any provision hereof, or consent to any action or
inaction shall be effective unless the same is in writing and signed by the
party granting the same. Such waivers and consents shall not extend to any
matters other than those in respect of which the same were given, and the same
may be subject to such conditions as the party giving the same may stipulate.
19.13 HOLDER NOT BOUND TO ADVANCE
Neither the execution and delivery nor the registration of this
Debenture shall for any reason whatsoever obligate or bind the Holder to advance
any moneys or, having advanced a portion, obligate the Holder in any way to
advance the balance or any portion thereof, but nevertheless the lien hereof
shall take effect forthwith upon execution of this Debenture and shall operate
as security for the Obligations.
19.14 HOLDER EXCLUSIVELY ENTITLED
The Holder of this Debenture from time to time will be regarded as
exclusively entitled to the benefit of this Debenture, and all persons may act
accordingly.
<PAGE>
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19.15 NEGOTIABLE INSTRUMENT
This Debenture is to be treated as a negotiable instrument and all of
the rights hereunder are exercisable by any holder hereof, and all persons may
act accordingly.
19.16 DISCHARGE
Once the Corporation has permanently satisfied all of the Obligations,
the Holder shall, at the written request and expense of the Corporation,
discharge the lien hereof and execute and deliver to the Corporation such deeds
or other instruments as shall be required to give effect to such discharge,
other than those Obligations which by the terms hereof survive such discharge
and any termination.
19.17 FURTHER ASSURANCES
The Corporation shall, forthwith at the request of the Holder and at
the Corporation's sole cost and expense, do, execute and deliver or cause to be
done, executed and delivered to the Holder all acts and every such further
instrument as the Holder shall reasonably require to give effect to these
presents and shall cause this Debenture and each of those further instruments
to be registered, filed or recorded wherever, in the opinion of the Holder, such
registration, filing or recording may be required or advisable to preserve,
perfect or validate or continue the perfected status of any Security Interest
granted pursuant hereto or thereto or to enable the Holder to exercise and
enforce its rights hereunder or thereunder with respect to such Security
Interest and shall, where appropriate, duly endorse the same for transfer in
blank or as the Holder may direct and shall make all reasonable efforts to
forthwith deliver to the Holder any and all consents or other instruments or
documents necessary to comply with any restrictions on the transfer thereof in
order to transfer the same to the Holder.
The Corporation shall promptly notify the Holder of:
(a) any change in the name, address or other particulars in respect of the
Corporation for which the registration of a financing change statement
is required;
(b) the removal of any of the Mortgaged Property to any jurisdiction in
which any registration of, or in respect of, this Debenture may not be
effective to protect the lien hereof, and in the case of that removal
to provide the Holder with a written certificate stating the time of
removal, what is being removed and the intended new locality of that
part of the Mortgaged Property; and
(c) the Corporation's acquisition of any property that is not adequately
described in this Debenture.
19.18 ATTORNEY-IN-FACT
The Holder is hereby appointed the attorney-in-fact of the
Corporation for the purpose of carrying out the provisions of Section 19.17 and
taking any action and executing any
<PAGE>
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instruments which the Holder may deem necessary or advisable to accomplish
the purposes hereof, which appointment as attorney-in-fact is irrevocable and
coupled with an interest.
IN WITNESS WHEREOF the Corporation has executed this Debenture.
FOREST OIL CORPORATION
By: /s/ Kenton M. Scroggs
-----------------------------------
Name: Kenton M. Scroggs c/s
Title: Vice-President and Treasurer
<PAGE>
DEPOSIT AGREEMENT
THIS DEPOSIT AGREEMENT is made as of April 1, 1997 by FOREST OIL
CORPORATION, a corporation under the laws of New York (the "CORPORATION") in
favour of 611852 SASKATCHEWAN LTD. (who and whose successors and assigns are
herein called the "HOLDER").
WHEREAS:
The Corporation has issued a Guarantee in favour of the Holder
dated as of April 1, 1997 guaranteeing obligations in respect of credit
facilities established by the Holder in favour of Canadian Forest Oil Ltd.
and "Borrowing Subsidiaries" (such guarantee as amended, modified, restated
or supplemented from time to time is herein called the "GUARANTEE");
The Corporation has issued its Demand Debenture and Negative Pledge
dated as of April 1, 1997 in the principal amount of Cdn. $80,000,000 (such
debenture as amended, supplemented or reissued and all renewals thereof,
substitutions therefor, accretions thereto, interest thereon and proceeds
thereof is herein called the "DEBENTURE"); and
The Corporation has agreed to deposit the Debenture with the Holder
as general and continuing collateral security for the present and future
indebtedness and obligations of the Corporation under the Guarantee;
NOW THEREFORE in consideration of the premises and of the sum of
$10.00 now paid to the Corporation, the receipt and sufficiency of which are
hereby acknowledged, the Corporation agrees with the Holder as follows:
1. DEFINED TERMS; HEADINGS
(a) Terms and expressions which are defined in the Guarantee shall, when
used herein, and unless otherwise defined, have the meanings as
therein ascribed to them.
(b) The division of this Agreement into Sections and the insertion of
headings is for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
(c) The terms "this Agreement", "hereof", "hereunder" and similar
expressions refer to this Deposit Agreement and not to any particular
Section or other portion hereof and include any amendments or
supplements hereto. Unless otherwise stated, references herein to
Sections are to Sections of this Deposit Agreement.
(d) Words importing the singular number shall include the plural and vice
versa, and words importing gender shall include the masculine,
feminine and neuter genders.
(e) The word "including" shall not be construed to limit or restrict the
matter that precedes it.
<PAGE>
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2. DEPOSIT OF DEBENTURE
The Corporation hereby transfers, assigns, mortgages, charges,
hypothecates, grants a security interest in and pledges and delivers the
Debenture to and deposits the Debenture with the Holder to be held by the
Holder as general and continuing collateral security for the payment and
performance by the Corporation of all its obligations, indebtedness and
liabilities, present or future, direct or indirect, absolute or contingent,
matured or not, extended or renewed, pursuant to the Guarantee, wheresoever
and howsoever incurred and any ultimate unpaid balance thereunder and whether
the same are from time to time reduced and thereafter increased or entirely
extinguished and thereafter incurred again and whether the Corporation be
bound alone or with another or others and whether as principal or surety
(collectively, the "LIABILITIES").
The Corporation acknowledges that:
(a) value has been given;
(b) the Corporation has rights in the Debenture;
(c) the time of attachment of the security interest created by this
Agreement has not been postponed; and
(d) the security interest created by this Agreement is effective forthwith
on the Corporation's execution of this Agreement.
3. RIGHTS AS HOLDER TO ENFORCE DEBENTURE
The Holder is hereby authorized as the holder of the Debenture, and
without selling or purchasing the Debenture, to exercise any and all rights
of a holder of the Debenture, both before and after the occurrence of an
Event of Default (as defined in the Guarantee) or as defined in the Debenture
(in either case, an "EVENT OF DEFAULT"), to enforce all terms, covenants,
provisions and agreements therein contained, and after an Event of Default
has occurred and during its continuance, to enforce the security thereby
constituted and to exercise or cause to be exercised for its benefit all or
any of the remedies therein provided for the benefit of the holder of the
Debenture. Except as provided in Section 7 hereof, nothing herein shall be
deemed to suspend or otherwise modify or affect the obligations of the
Corporation or the rights of a holder of the Debenture, all as provided
therein.
The Holder shall not be responsible for any loss occasioned by any
sale or other dealing with the Debenture or by the retention of or failure to
sell or otherwise deal with the same and the Holder shall not be bound to
protect the Mortgaged Property (as that term is defined in the Debenture)
from depreciating in value or becoming worthless.
4. REALIZATION BY SALE
In addition to the foregoing rights and remedies, the Holder shall
be entitled, upon an Event of Default occurring and during its continuance,
to sell or otherwise dispose of the
<PAGE>
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Debenture by public sale (including public auction) or private or closed
tender or by private contract, with only those notices, if any, as are
required by Applicable Law, and with or without advertising and without any
other formality (except as otherwise required by Applicable Law), and such
sale or disposition shall be on such terms and conditions as to title, credit
and otherwise and as to upset or reserve bid or price as may seem
advantageous to the Holder, and the Holder shall not be required to accept
the highest or any bid or tender at any public sale. The Holder may itself
purchase the Debenture unless prohibited from doing so by Applicable Law.
The Holder may rescind or vary any contract for the sale or other disposition
of the Debenture and may resell the Debenture without being answerable for
any loss occasioned thereby, and may delay any sale or disposition of the
Debenture in whole or in part.
5. POWER OF ATTORNEY
To give full effect hereto, the Holder or any officer of the Holder
is hereby irrevocably appointed attorney of the Corporation, with full power
of substitution, for and in the name of the Corporation to sign and seal all
documents and to fill in all blanks in signed powers of attorney and
transfers necessary in order to complete the transfer of the Debenture to the
Holder or its officers or to any purchaser.
6. RECORDS OF HOLDER
The records of the Holder as to payment of any Liabilities being in
default or of any demand for payment having been made will be conclusive
evidence of such default or demand, absent manifest error.
7. SATISFACTION OF INTEREST
Full payment of interest under the Credit Agreement for any period
shall be deemed to satisfy the interest payable for that same period under
the Debenture.
8. CHARGES AND EXPENSES
The Corporation shall pay to the Holder all reasonable
out-of-pocket costs and expenses, including all legal fees (on a solicitor
and his own client basis) and other reasonable expenses incurred by the
Holder from time to time in the documentation, execution, registration,
enforcement, realization and collection of or in respect of this Agreement.
All such amounts shall become part of the Liabilities, shall be payable by
the Corporation on demand, shall bear interest at the rate set forth in the
Debenture in respect of the principal amount thereof calculated from the date
incurred by the Holder to the date paid by the Corporation, and such amounts
and interest shall be secured by the Debenture and be a first charge on the
proceeds of any such enforcement, realization or collection. This provision
shall not be construed to limit any other provisions of the Guarantee or the
Debenture dealing with the charge-back to the Corporation of expenses
incurred by the Holder.
<PAGE>
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9. REMEDIES NOT EXCLUSIVE
Each and every right, remedy and power conferred by this Agreement
is in supplement of and in addition to and not in substitution for any other
right, remedy or power the Holder may have from time to time under this
Agreement, the Guarantee, the Debenture or in any other agreement or under
the law in force at the time of the exercise of such right, remedy or power.
The Holder may proceed by way of any action, suit, remedy or other proceeding
at law or in equity and no such remedy for the enforcement of the rights of
the Holder shall be exclusive of or dependent on any other such remedy. Any
one or more of such remedies may from time to time be exercised separately or
in combination. Notwithstanding the foregoing, the Holder shall not be bound
to deal with the Debenture, to exercise any right or remedy as aforesaid, or
to preserve rights against other Persons.
The Holder shall not be obliged to exhaust its recourse against the
Corporation or any other Person or Persons, or against any other security it
may hold in respect of the Liabilities before realizing upon or otherwise
dealing with the Debenture in such manner as the Holder considers desirable.
10. EXTENSIONS
The Holder may grant renewals, extensions of time and other
indulgences, take, release and give up securities, accept compositions, grant
releases and discharges, perfect or fail to perfect any securities, and
otherwise deal or fail to deal with the Corporation, guarantors, sureties and
others and with the Debenture and other securities as the Holder may see fit,
all without prejudice to the liability of the Corporation to the Holder or
the Holder's rights and powers under this Agreement or the Debenture.
11. APPLICATION OF PROCEEDS
The proceeds of the Debenture may be applied by the Holder on
account of such part of the Liabilities as it chooses.
12. LIMITED RECOURSE
The Holder acknowledges that its recourse in respect of enforcing
the Guarantee is limited to realizing upon the Liens created by the Debenture
in accordance with the provisions of this Agreement and the Debenture, and
that the Corporation is not liable on the Guarantee or the Debenture for any
deficiency that may exist following such realization.
13. AMENDMENTS OR SUPPLEMENTAL DEBENTURES
Any amendments or supplements to the Debenture shall, upon
execution by the Corporation and delivery to the Holder, be deemed to be
deposited hereunder and included in the term "Debenture" for the purposes
hereof, unless expressly provided otherwise.
<PAGE>
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14. NO MERGER
Subject to Section 12, neither the taking of any judgment nor the
exercise of any power of sale shall operate to extinguish the liability of
the Corporation to make payment of, or to satisfy the Liabilities nor shall
the acceptance of any payment or alternate security constitute or create any
novation, and it is further agreed that the taking of a judgment or judgments
under any of the covenants herein contained shall not operate as a merger of
such covenants.
15. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance
with the laws of the Province of Alberta and the laws of Canada applicable
therein and shall be treated as an Alberta contract. The Corporation
irrevocably submits to the non-exclusive jurisdiction of the courts of the
Province of Alberta, without prejudice to the rights of the Holder to take
proceedings in any other jurisdictions.
16. ASSIGNMENT BY CORPORATION
The Corporation shall not and cannot assign its obligations under
this Agreement, or take any steps or enter into any transaction of any nature
which would have that effect, without the prior written consent of the
Holder. Subject thereto, all obligations of the Corporation hereunder shall
bind the Corporation and its successors and assigns.
17. ASSIGNMENT BY HOLDER
This Agreement shall extend to and enure to the benefit of the
Holder and its successors and assigns. The Holder may at any time assign
this Agreement in accordance with the provisions of the Credit Agreement.
18. COPY RECEIVED
The Corporation acknowledges having received from the Holder a copy
of this executed Agreement and waives its rights to receive a copy of any
financing, financing change or other registration statement resulting from
any registration of this Agreement or any verification statement issued with
respect thereto where such waiver is not otherwise prohibited by law.
19. SEVERABILITY
If one or more of the provisions of this Agreement is, or is
adjudged to be, invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby, and such invalid,
illegal or unenforceable provision shall, to the extent permitted at law, be
severable.
<PAGE>
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20. SECURITY IN ADDITION
The rights hereby constituted are in addition to and not in
substitution for any other security for the Liabilities, or for any other
agreement between the Corporation and the Holder whether or not creating any
security interest in all or part of the property of the Corporation whether
heretofore or hereafter made, and such security and such agreement shall be
deemed to be continued and not affected hereby unless expressly provided to
the contrary in a writing signed by the Corporation and the Holder. The
taking of any action or proceedings or refraining from so doing, or any other
dealing with any other security for the Liabilities or any part thereof shall
not release or affect this Agreement and neither the taking of any
proceedings hereunder or under the Debenture for the realization of any
security shall release or affect any other security held by the Holder for
the payment or performance of the Liabilities.
21. WAIVERS AND CONSENTS
No waiver of any provision hereof, or consent to any action or
inaction shall be effective unless the same is in writing and signed by the
party granting the same. Such waivers and consents shall not extend to any
matters other than those in respect of which the same were given, and the
same may be subject to such conditions as the party giving the same may
stipulate.
22. HOLDER NOT BOUND TO ADVANCE
Neither the execution and delivery nor the registration of the
Debenture or this Agreement shall for any reason whatsoever obligate or bind
the Holder to advance any moneys or, having advanced a portion, obligate the
Holder in any way to advance the balance or any further portion thereof; but
nevertheless this Agreement, the Debenture and the mortgages, charges and
security interests thereby constituted shall take effect forthwith upon
execution of the Debenture and shall operate as security for the Liabilities.
23. FURTHER ASSURANCES
The Corporation shall from time to time, whether before or after
default being made in the payment of any part of the Liabilities or the
occurrence of any default in the performance of any other obligation of the
Corporation to the Holder under the Guarantee, do all such acts and things
and execute and deliver all such deeds, transfers, assignments and
instruments as the Holder may require for perfecting the security constituted
hereby or by the Debenture, for facilitating the sale of the Debenture in
connection with any realization thereof and for exercising all powers,
authorities and discretions hereby conferred upon the Holder.
<PAGE>
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24. EFFECTIVE NOTICE
Any and all notices or other communications required or permitted
pursuant to this Agreement shall be in writing and shall be given in the
manner stipulated in the Debenture.
IN WITNESS WHEREOF the Corporation has executed this Agreement.
FOREST OIL CORPORATION
By: /s/ Kenton M. Scroggs
-----------------------------------
Kenton M. Scroggs (c/s)
Vice President and Treasurer
<PAGE>
BENNETT JONES VERCHERE
BARRISTERS AND SOLICITORS
4500 Bankers Hall East, 855-2nd Street, S.W., Calgary, Alberta, T2P 4K7
Tel: (403) 298-3100 Fax: (403) 265-7219
Our File No. 267-31
October 31, 1997
Forest Oil Corporation
Suite 2200
1600 Broadway
Denver, Colorado 80202
Ladies and Gentlemen:
RE: CANADIAN FOREST OIL LTD.
We are counsel to Canadian Forest Oil Ltd., an Alberta corporation (the
"Issuer"), in connection with the creation and issuance of the Issuer's 8 3/4%
Senior Subordinated Notes due 2007 (the "Notes") described in the
Registration Statement on Form S-4 (the "Registration Statement") to be filed
with the Securities and Exchange Commission (the "Commission") under the
SECURITIES ACT OF 1933, as amended (the "SECURITIES ACT").
We have examined originals or copies, certified or otherwise identified to
our satisfaction of (i) the Articles of Amalgamation and Bylaws of the
Issuer, (ii) the Indenture dated as of September 29, 1997 (the "Indenture")
by and among the Issuer, Forest Oil Corporation and State Street Bank and
Trust Company, as Trustee (the "Trustee") and (iii) such minutes of
Directors' meetings, certificates, statutes and other instruments and
documents as we considered appropriate for purposes of the opinions hereafter
expressed.
Based on the foregoing, we are of the opinion that the Issuer has full
corporate right, power and authority to execute and deliver the Indenture and
the Notes and each of such documents has been authorized, and when the Notes
have been duly executed, authenticated, issued and delivered in accordance
with the Indenture and upon receipt of the consideration therefor, the Notes
will be validly issued as fully paid securities of the Issuer.
The foregoing opinion is limited in all respects to the laws of Alberta,
Canada. We understand that Vinson & Elkins LLP, will be rendering a separate
opinion regarding the enforceability of the Indenture and Notes as they are
governed by the laws of the State of New York State.
<PAGE>
Page 2 Bennett Jones Verchere
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. By giving such consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of
the SECURITIES ACT or the rules and regulations of the Commission issued
thereunder.
Yours truly,
BENNETT JONES VERCHERE
CALGARY EDMONTON TORONTO OTTAWA MONTREAL
[VINSON & ELKINS L.L.P. Letterhead]
October 29, 1997
Forest Oil Corporation
1600 Broadway, Suite 2200
Denver, Colorado 80202
Ladies and Gentlemen:
We have acted as counsel to Forest Oil Corporation, a New York
corporation (the "Company") and Canadian Forest Oil Ltd., an
Alberta, Canada company (the "Issuer"), in connection with the
preparation of the Registration Statement on Form S-4 (the
"Registration Statement") to be filed with the Securities and
Exchange Commission (the "Commission") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the
Issuer's 8 3/4% Senior Subordinated Notes due 2007 (the "Notes"),
unconditionally guaranteed on a senior subordinated basis by the
Company (the "Guarantee").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of (i) the Restated Certificate of
Incorporation, as amended, and Bylaws, as amended, of the Company,
(ii) the Indenture dated as of September 29, 1997 (the "Indenture")
by and among the Issuer, the Company and State Street Bank and
Trust Company, as Trustee (the "Trustee") and (iii) such other
certificates, statutes and other instruments and documents as we
considered appropriate for purposes of the opinions hereafter
expressed.
In connection with this opinion, we have assumed that the
Registration Statement, and any amendments thereto (including
post-effective amendments), will have become effective and the
Notes will be issued and sold in compliance with applicable federal
and state securities laws and in the manner described in the
Registration Statement and the applicable Prospectus.
Based on the foregoing, we are of the opinion that when the
Indenture has been duly qualified under the Trust Indenture Act of
1939, as amended, and the Notes and the Guarantee have been duly
executed, authenticated, issued and delivered in accordance with
the provisions of the Indenture, such Notes will constitute valid
and binding obligations of the Issuer, enforceable against the
Issuer in accordance with their terms, except as such enforcement
is subject to any applicable bankruptcy, insolvency, reorganization
or other law relating to or affecting creditors' rights generally
and general principles of equity, and will be entitled to the
benefits of the Indenture and such Guarantee will constitute a
valid and binding obligation of the Company, enforceable against
the Company in
<PAGE>
Forest Oil Corporation
Page 2
October 29, 1997
accordance with its terms, except as such enforcement is subject to
any applicable bankruptcy, insolvency, reorganization or other law
relating to or affecting creditors' rights generally and general
principles of equity, and will be entitled to the benefits of the
Indenture
The foregoing opinion is limited in all respects to the laws
of the State of New York and federal laws. In rendering this
opinion we have relied on the opinion of Bennett Jones Vechere as
to the legality of the issuance of the Notes under Canadian law.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. By giving such consent, we do not
admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and
regulations of the Commission issued thereunder.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD]
October 29, 1997
Canadian Forest Oil Ltd
800 6th Avenue S.W., Suite 600
Calgary T2P 3G3
Canada
Forest Oil Corporation
1600 Broadway, Suite 2200
Denver, Colorado 80202
Canadian Forest Oil Ltd.
Offer to Exchange
8 3/4% Senior Subordinated Notes Due 2007
Ladies and Gentlemen:
As you requested, we have addressed certain of the United States federal
income tax consequences to Initial Purchasers of 8 3/4% Senior Subordinated
Notes due 2007 (the "Old Notes") issued by Canadian Forest Oil Ltd. and
unconditionally guaranteed on a senior subordinated basis by Forest Oil
Corporation (collectively with Canadian Forest Oil Ltd., the "Company") being
offered for Exchange Notes pursuant to the Exchange Offer and described in
the Registration Statement on Form S-4 dated October 29, 1997.
Ernst & Young LLP's opinion is limited to the United States federal income
tax considerations set forth in the section entitled "Certain United States
and Canadian Federal Income Tax Considerations" of the Registration
Statement. Ernst & Young's opinion is based upon the Internal Revenue Code of
1986, as amended, regulations promulgated thereunder, and judicial and
administrative rulings now outstanding and is subject to challenge by the
Internal Revenue Service with respect to the tax treatment of certain matters
discussed therein. Our opinion is also based, with respect to certain factual
matters, on disclosures made by the Company, in the Registration Statement,
which have not been independently verified by us and which, if incorrect or
incomplete, could change the tax consequences described in the Registration
Statement.
In our opinion, the discussion entitled "Certain U.S. Federal Income Tax
Considerations" contained in the Registration Statement under the caption
"Certain United States and
<PAGE>
October 29,1997 Page 2
Canadian Federal Income Tax Considerations" fairly summarizes the material
United States federal income tax consequences to Initial Purchasers who hold
Exchange Notes pursuant to the Exchange Offer.
Although subsequent legislation, administrative interpretations or judicial
decisions, correction or amplification of present factual representations by
the Company or changes in factual circumstances may render our opinion
incorrect, we assume no responsibility for updating the opinion beyond the
date of this letter.
We hereby consent to the use of our name in the Registration Statement and to
the filing of this opinion as part of the Registration Statement. This
consent does not constitute an admission that we are "experts" within the
meaning of such term as used in the Securities Act of 1913.
Very truly yours,
/s/ ERNST & YOUNG LLP
<PAGE>
[ERNST & YOUNG LETTERHEAD]
October 29, 1997
The Board of Directors of Canadian Forest Oil Ltd.
Dear Sirs:
RE: CANADIAN FOREST OIL LTD. 8 % SENIOR SUBORDINATED NOTE
You have requested our assistance in reviewing certain of the income tax
consequences to holders and Initial Purchasers as defined in the Registration
Statement of 8 3/4% Senior Subordinated Notes being offered by Canadian Forest
Oil Ltd. ("the Issuer") and unconditionally guaranteed on a senior subordinated
basis by Forest Oil Corporation ("the Exchange Notes"), and described in the
United States Form S-4 Registration Statement ("Registration Statement") dated
October 29, 1997, relating thereto.
Our opinions set forth below is based on the current provisions of the Income
Tax Act (Canada) ("the ITA") and the regulations thereunder, the current
published administrative practices of Revenue Canada, and all specific proposals
to amend the ITA and the regulations announced by or on behalf of the Canadian
Minister of Finance prior to the date hereof and the Advanced Income Tax Ruling
of Revenue Canada received August 22, 1997 and amended September 9, 1997 and
September 15, 1997. The opinion set forth below does not otherwise take into
account or anticipate changes in the law, whether by judicial, governmental or
legislative decision or action, or tax legislation or considerations of any
province or territory of Canada. Provisions of provincial income tax
legislation vary from province to province in Canada and in some cases differ
from federal income tax legislation. Our opinion is also based, as to certain
factual matters, on disclosures set forth in the Registration Statement which
have not been independently verified by us and which, if incorrect or
incomplete, could change the tax consequences described therein.
In our opinion, the discussion entitled "Certain Canadian Federal Income Tax
Considerations" contained in the Registration Statement insofar as it purports
to describe the material Canadian federal income tax considerations to a holder
of Exchange Notes who acquires such Exchange Notes pursuant to the Registration
Statement fairly summarizes the matters described therein.
As you are aware, provisions governing the application of the above taxes and
the regulations thereunder and the current published administrative practices of
the federal government which administers such taxes are subject to change. As a
result, any opinion expressed herein may not apply at a later date. We assume
no responsibility for updating the opinion beyond the date of this letter.
<PAGE>
-2-
We consent to the use of our name in the Registration Statement under the
caption "CERTAIN UNITED STATES AND CANADIAN FEDERAL INCOME TAX CONSIDERATIONS"
and to the filing of this opinion as part of the Registration Statement. This
consent does not constitute an admission that we are "experts" within the
meaning of such term as used in the Securities Act of 1933.
Yours truly,
/s/ ERNST & YOUNG, Chartered Accountants
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
Forest Oil Corporation
We consent to the use of our report dated February 12, 1997, relating to the
consolidated balance sheets of Forest Oil Corporation and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1996, which report appears in the
December 31, 1996, annual report on Form 10-K of Forest Oil Corporation and
is incorporated by reference and included in the Registration Statement on
Form S-4 of Forest Oil Corporation, and to the reference to our firm under
the heading "Experts" in the prospectus. Our report refers to a change in
the method of accounting for oil and gas sales in 1994.
KPMG PEAT MARWICK LLP
Denver, Colorado
October 30, 1997
<PAGE>
[Letterhead]
EXHIBIT 23.2
CONSENT
Board of Directors and Shareholders
Forest Oil Corporation:
We hereby consent to the reference to our firm as experts under the
heading "Reservoir Engineers" in the Resgistration Statement on Form S-4 and
to the inclusion of our name and reference to our report under the heading
"Summary Reserve and Operating Data" in the Registration Statement.
/s/ Ryder Scott Company
/s/ Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
October 31, 1997
<PAGE>
[Letterhead]
EXHIBIT 23.3
October 31, 1997
Board of Directors and Shareholders
Forest Oil Corporation:
We hereby consent to the reference to our firm as experts under the heading
"Reservoir Engineers" in the Registration Statement on Form S-4 and to the
inclusion of our name and reference to our report entitled "Canadian Forest
Oil Ltd., Evaluation of Oil & Gas Reserves, Based on CFOL Constant Price
Assumptions, U. S. $, As of January 1, 1997", dated January 29, 1997, under
the heading "Summary Reserve and Operating Data" in the Registration
Statement.
Sincerely,
MCDANIEL & ASSOCIATES CONSULTANTS LTD.
/s/ R. E. Hughes
- -------------------------
R. E. Hughes, P. Eng.
Vice Chairman
Calgary, Alberta
Dated: October 31, 1997
<PAGE>
[Letterhead]
EXHIBIT 23.4
CONSENT
Board of Directors and Shareholders
Forest Oil Corporation:
We hereby consent to the reference to our firm as experts under the heading
"Reservoir Engineers" in the Registration Statement on Form S-4 and to the
inclusion of our name and reference to our report under the heading "Summary
Reserve and Operating Data" in the Registration Statement.
Fekete Associates Inc.
Oil and Gas Reservoir Engineers
Calgary, Alberta
October 31, 1997
[STAMP]
<PAGE>
Exhibit 23.9
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
Forest Oil Corporation
We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Forest Oil Corporation of our report dated February 1, 1996
relating to the consolidated balance sheets of ATCOR Resources Ltd. at
December 31, 1995 and 1994, and the consolidated statements of earnings and
retained earnings and changes in financial position for each of the years in
the three year period ended December 31, 1995, which report appears in the
Current Report on Form 8K/A of Forest Oil Corporation dated January 28, 1997,
and to the reference to our firm under the heading "Experts" in the prospectus.
PRICE WATERHOUSE
Chartered Accountants
Calgary, Alberta
October 30, 1997
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-1867445
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
225 Franklin Street, Boston, Massachusetts 02110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
John R. Towers, Esq. Executive Assistant Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
---------------------
CANADIAN FOREST OIL LTD.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
ALBERTA, CANADA N/A
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
600, 800-6TH AVE. S.W.
CALGARY, ALBERTA
CANADA T2P 3G3
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
--------------------
8-3/4% SENIOR SUBORDINATED NOTES DUE 2007
(TITLE OF INDENTURE SECURITIES)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System,
Washington, D.C., Federal Deposit Insurance Corporation,
Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Boston Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement
of Eligibility and Qualification of Trustee (Form T-1) filed
with the Registration Statement of Morse Shoe, Inc. (File
No. 22-17940) and is incorporated herein by reference
thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on
file with the Securities and Exchange Commission as Exhibit
2 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by
reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as
Exhibit 4 to the Statement of Eligibility and Qualification
of Trustee (Form T-1) filed with the Registration Statement
of Eastern Edison Company (File No. 33-37823) and is
incorporated herein by reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS
IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 21st day of October, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /S/ KATHY A. LARIMORE
--------------------------------
KATHY A. LARIMORE
ASSISTANT VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by CANADIAN FOREST
OIL LTD. OF ITS 8-3/4% SENIOR SUBORDINATED NOTES DUE 2007, we hereby consent
that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /S/ KATHY A. LARIMORE
---------------------------------
KATHY A. LARIMORE
ASSISTANT VICE PRESIDENT
Dated: October 21, 1997
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business JUNE 30, 1997, published
in accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act and in accordance with a
call made by the Commissioner of Banks under General Laws, Chapter 172, Section
22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin . . . . . . . . . . . . . . . . . 1,842,337
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,771,397
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,596,119
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary . . . . . . . . . . . . . . . . . . . . . . . . 5,953,036
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . . 5,769,090
Allowance for loan and lease losses . . . . . . . 74,031
Allocated transfer risk reserve. . . . . . . . . . 0
Loans and leases, net of unearned income and allowances. . . . . . . . . . . . . . . 5,695,059
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 916,608
Premises and fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374,999
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 755
Investments in unconsolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 28,992
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . 99,209
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229,412
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,589,526
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,097,449
------------
------------
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,082,135
Noninterest-bearing . . . . . . . . . . . . . 8,932,019
Interest-bearing . . . . . . . . . . . . . . 2,150,116
In foreign offices and Edge subsidiary . . . . . . . . . . . . . . . . . . . . . . . 13,811,677
Noninterest-bearing . . . . . . . . . . . . . 112,281
Interest-bearing . . . . . . . . . . . . . . 13,699,396
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary . . . . . . . . . . . . . . . . . . . . . . . . 6,785,263
Demand notes issued to the US Treasury and Trading Liabilities . . . . . . . . . . . . . 755,676
Other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 716,013
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . 99,605
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841,566
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,091,935
------------
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . . . . . . . . . . 0
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,931
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437,183
Undivided profits and capital reserves/Net unrealized holding gains (losses) . . . . . . 1,542,695
Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . . . . (4,295)
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,005,514
------------
Total liabilities and equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . 36,097,449
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Assistant Vice President and Comptroller of the above
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE>
CANADIAN FOREST OIL LTD.
FOREST OIL CORPORATION
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
IN EXCHANGE FOR ALL OUTSTANDING
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _____________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE")
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE
<TABLE>
<CAPTION>
<S><C>
DELIVER TO THE EXCHANGE AGENT:
MARINE MIDLAND BANK
BY HAND/OVERNIGHT COURIER: BY MAIL:
Marine Midland Bank Marine Midland Bank
140 Broadway -- Level A 140 Broadway -- Level A
New York, New York 10005-1180 New York, New York 10005-1180
Attention: Corporate Trust Services Attention: Corporate Trust Services
(registered or certified mail recommended)
</TABLE>
BY FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(212) 658-2292
CONFIRM BY TELEPHONE:
(212) 658-5931
____________________
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated ____________, 1997 (the "Prospectus") of Canadian Forest Oil Ltd., an
Alberta, Canada company (the "Issuer") and Forest Oil Corporation, a New York
corporation (the "Company"), and this Letter of Transmittal (the "Letter of
Transmittal"), which together describe the offer of the Company and the Issuer
(the "Exchange Offer") to exchange the Issuer's 8 3/4% Senior Subordinated Notes
due 2007 (the "Exchange Notes"), which have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement of which the Prospectus is a part, for a like principal amount of the
Issuer's issued and outstanding 8 3/4% Senior Subordinated Notes due 2007 (the
"Old Notes"). Capitalized terms used but not defined herein have the respective
meaning given to them in the Prospectus.
The Company and the Issuer reserve the right, at any time or from time to
time, to extend the Exchange Offer at their discretion, in which event the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. The Company and the Issuer shall notify the holders of the Old Notes
of any extension by oral or written notice and will mail to the record holders
of Old Notes an announcement thereof, each prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
The term "business day" shall mean any day which is not a Saturday, Sunday or
day on which banks are authorized by law to close in the State of New York.
This Letter of Transmittal is to be used by a holder of Old Notes if
original Old Notes, if available, are to be forwarded herewith or an Agent's
Message is to be used if delivery of Old Notes is to be made by book-entry
transfer to the account
<PAGE>
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Procedures for Tendering"
and "Book-Entry Transfer." Holders of Old Notes whose Old Notes are not
immediately available, or who are unable to deliver their Old Notes and all
other documents required by this Letter of Transmittal to the Exchange Agent on
or prior to the Expiration Date, or who are unable to complete the procedure for
book-entry transfer on a timely basis, must tender their Old Notes according to
the guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 1.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Issuer or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space below is inadequate, list the registered numbers and principal amounts
on a separate signed schedule and affix the list to this Letter of Transmittal.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- -------------------------------------------------------------------------------------------------
<S><C>
Name(s) and Address(es) of Registered
Holder(s) Exactly as Name(s)
Appear(s) on Old Notes
(Please Fill In, If Blank) Old Note(s) Tendered
- ------------------------------------------------------------------------------------------------
Aggregate Principal Principal
Registered Amount Represented by Amount
Number(s)* Note(s) Tendered**
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Old Notes will be deemed to have tendered
the entire aggregate principal amount represented by such Old Notes. All tenders must be in
integral multiples of $1,000.
- -------------------------------------------------------------------------------------------------
</TABLE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):
Name of Tendering Institution:
------------------------------------------------
Account Number:
---------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------
<PAGE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered holder(s) of Old Notes:
--------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------
Window Ticket Number (if available):
------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
----------------------
Account Number (if delivered by book-entry transfer):
-------------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:
-------------------------------------------------------------------------
Address:
----------------------------------------------------------------------
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company and the Issuer for exchange the principal amount
of Old Notes indicated above. Subject to and effective upon the acceptance for
exchange of the principal amount of Old Notes tendered in accordance with this
Letter of Transmittal, the undersigned hereby exchanges, assigns and transfers
to the Issuer all right, title and interest in and to the Old Notes tendered for
exchange hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent, the agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Company and the
Issuer in connection with the Exchange Offer) with respect to the tendered Old
Notes with full power of substitution to (i) deliver such Old Notes, or transfer
ownership of such Old Notes on the account books maintained by the Book-Entry
Transfer Facility, to the Issuer and deliver all accompanying evidences of
transfer and authenticity, and (ii) present such Old Notes for transfer on the
books of the Issuer and receive all benefits and otherwise exercise all rights
of beneficial ownership of such Old Notes, all in accordance with the terms of
the Exchange Offer. The power of attorney granted in this paragraph shall be
deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that the Issuer will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are accepted
for exchange by the Issuer and the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
April 13, 1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available
June 5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC
No-Action Letter (available June 5, 1991), that the Exchange Notes issued in
exchange for the Old Notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than a
broker-dealer who purchased Old Notes exchanged for such Exchange Notes directly
from the Company and the Issuer to resell pursuant to Rule 144A or any other
available exemption under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders are not participating in, and have no arrangement with
any person to participate in, the distribution of such Exchange Notes. The
undersigned specifically represent(s) to the Company and the Issuer that (i) any
Exchange Notes acquired in exchange for Old Notes tendered hereby are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not the undersigned, (ii) the undersigned is not
participating in, and has no arrangement with any person to participate in, the
distribution of Exchange Notes, and (iii) neither the undersigned nor any such
other person is an "affiliate" (as defined in Rule 405 under the Securities Act)
of the Company or the Issuer or a broker-dealer tendering Old Notes acquired
directly from the Company and the Issuer.
<PAGE>
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Securities for its own account in exchange for Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. The undersigned
acknowledges that if the undersigned is participating in the Exchange Offer for
the purpose of distributing the Exchange Notes (i) the undersigned cannot rely
on the position of the staff of the SEC in the Morgan Stanley Letter and similar
SEC no-action letters, and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction of the Exchange
Notes, in which case the registration statement must contain the selling
security holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the SEC, and (ii) a broker-dealer that delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent, the Company or the Issuer to be
necessary or desirable to complete the exchange, assignment and transfer of the
Old Notes tendered hereby, including the transfer of such Old Notes on the
account books maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company and the Issuer shall be
deemed to have accepted for exchange validly tendered Old Notes when, as and if
the Company or the Issuer gives oral or written notice thereof to the Exchange
Agent. Any tendered Old Notes that are not accepted for exchange pursuant to
the Exchange Offer for any reason will be returned, without expense, to the
undersigned at the address shown below or at a different address as may be
indicated herein under "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the acceptance of properly tendered Old
Notes by the Company and the Issuer pursuant to the procedures described under
the caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Company and the Issuer upon the terms and subject to the
conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Old Notes accepted for
exchange and return any Old Notes not tendered or not exchanged, in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the Exchange Notes issued in
exchange for the Old Notes accepted for exchange and any Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s). In the event that
both "Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the Exchange Notes issued in exchange for the Old Notes
accepted for exchange in the name(s) of, and return any Old Notes not tendered
or not exchanged to, the person(s) so indicated. The undersigned recognizes
that the Company and the Issuer have no obligation pursuant to the "Special
Issuance Instructions" and "Special Delivery Instructions" to transfer any Old
Notes from the name of the registered holder(s) thereof if the Company and the
Issuer do not accept for exchange any of the Old Notes so tendered for exchange.
<PAGE>
- ------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Old Notes in a principal amount not tendered,
or Exchange Notes issued in exchange for Old Notes accepted for exchange, are to
be issued in the name of someone other than the undersigned, or (ii) if Old
Notes tendered by book-entry transfer which are not exchanged are to be returned
by credit to an account maintained at the Book-Entry Transfer Facility other
than the account indicated above.
Issue Exchange Notes and/or Old Notes to:
Name:
---------------------------------------------------------------------
(Please Type or Print)
- --------------------------------------------------------------------------
Address:
------------------------------------------------------------------
- --------------------------------------------------------------------------
(include Zip Code)
- --------------------------------------------------------------------------
(Tax Identification or Social Security Number)
/ / Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility set forth below:
Book-Entry Transfer Facility Account Number:
(Complete Substitute Form W-9)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Old Notes in a principal amount not tendered, or
Exchange Notes issued in exchange for Old Notes accepted for exchange, are to be
mailed or delivered to someone other than the undersigned, or to the undersigned
at an address other than that shown below the undersigned's signature.
Mail or deliver Exchange Notes and/or Old Notes to:
Name:
--------------------------------------------------------------------------
(Please Type or Print)
- -------------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(include Zip Code)
- -------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
- ------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
X
----------------------------------------------------------------------------
X
----------------------------------------------------------------------------
(Signature(s) of Registered Holders or Old Notes)
Dated ,1997
---------------------------------------
(The above lines must be signed by the registered holder(s) of Old Notes as
name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by a properly completed bond
power from the registered holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint holders, then all such holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Company
and the Issuer, submit evidence satisfactory to the Company and the Issuer of
such person's authority so to act. See Instruction 5 regarding the completion
of this Letter of Transmittal, printed below.)
Name(s):
-----------------------------------------------------------------------
(Please Type or Print)
Capacity:
----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SIGNATURE GUARANTEE
(If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:
----------------------------
(Authorized Signature)
- ------------------------------------------------------------------------------
(Title)
- ------------------------------------------------------------------------------
(Name of Firm)
- ------------------------------------------------------------------------------
(Address, Include Zip Code)
- ------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: , 1997
-------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES OR BOOK-ENTRY
CONFIRMATIONS. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or Agent's Message or facsimile hereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. The method of delivery of the tendered Old Notes,
this Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the holder and, except as otherwise
provided below, the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure delivery to the Exchange Agent
before the Expiration Date. No Letter of Transmittal or Old Notes should be
sent to the Company or the Issuer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old
Notes and whose Old Notes are not immediately available or who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date or who cannot complete
the procedure for book-entry transfer on a timely basis and deliver an Agent's
Message, must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus. Pursuant to such procedures: (1) such
tender must be made by or through a firm which is a member of a registered
national securities exchange or of the National Association of Securities
Dealers Inc., a commercial bank or a trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received from
the Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the holder of the Old Notes, the registration
number(s) of such Old Notes and the total principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that,
within five business days after the Expiration Date, this Letter of Transmittal
(or facsimile hereof) together with the Old Notes in proper form for transfer
(or a Book-Entry Confirmation) and any other documents required hereby, must be
deposited by the Eligible Institution with the Exchange Agent within five
business days after the Expiration Date; and (iii) the certificates for all
physically tendered shares of Old Notes, in proper form for transfer (or
Book-Entry Confirmation, as the case may be) and all other documents required
hereby are received by the Exchange Agent within five business days after the
Expiration Date.
Any holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice
of Guaranteed Delivery will be sent to holders who wish to tender their Old
Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. TENDER BY HOLDER. Only a holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such holder's name or obtain a properly completed bond power from the
registered holder.
4. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering holder should fill in the principal amount
tendered in the third column of the box entitled "Description of Old Notes
Tendered" above. The entire principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of all Old Notes is not tendered, then Old Notes
for the principal amount of Old Notes not tendered and Exchange Notes issued in
exchange for any Old Notes accepted will be sent to the holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, promptly after the Old Notes are accepted for
exchange.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or
facsimile hereof) is signed by the record holder(s) of the Old Notes tendered
hereby, the signature must correspond with the name(s) as written on the face of
the Old Notes without alteration, enlargement or any change whatsoever. If this
Letter of Transmittal (or facsimile hereof) is signed by a participant in the
Book-Entry Transfer Facility, the signature must correspond with the name as it
appears on the security position listing as the holder of the Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes listed and tendered hereby and the
Exchange Notes issued in exchange therefor are to be issued (or any untendered
principal amount of Old Notes
<PAGE>
is to be reissued) to the registered holder, the said holder need not and should
not endorse any tendered Old Notes, nor provide a separate bond power. In any
other case, such holder must either properly endorse the Old Notes tendered or
transmit a properly completed separate bond power with this Letter of
Transmittal, with the signatures on the endorsement or bond power guaranteed by
an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each
case signed as the name of the registered holder or holders appears on the
Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing,
and, unless waived by the Company or the Issuer, evidence satisfactory to the
Company and the Issuer of their authority to act must be submitted with this
Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Old Notes
tendered herein (or by a participant in the Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of the
tendered Old Notes) and the Exchange Notes are to be issued directly to such
registered holder(s) (or, if signed by a participant in the Book-Entry
Transfer Facility, deposited to such participant's account at such Book-Entry
Transfer Facility) and neither the box entitled "Special Delivery
Instructions" nor the box entitled "Special Registration Instructions" has
been completed, or (ii) such Old Notes are tendered for the account of an
Eligible Institution. In all other cases, all signatures on this Letter of
Transmittal (or facsimile hereof) must be guaranteed by an Eligible
Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate, in the applicable box or boxes, the name and address (or
account at the Book-Entry Transfer Facility) to which Exchange Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
7. TRANSFER TAXES. The Company and the Issuer will pay all transfer
taxes, if any, applicable to the exchange of Old Notes pursuant to the
Exchange Offer. If, however, Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are
to be registered or issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if tendered Old Notes
are registered in the name of any person other than the person signing this
Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of Old Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered holder
or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder of any Old Notes which are accepted for exchange must provide the
Issuer (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual is his or her social
security number. If the Issuer is not provided with the correct TIN, the
holder may be subject to a $50 penalty imposed by Internal Revenue Service.
(If withholding results in an over-payment of taxes, a refund may be
obtained). Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting
a TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to
backup withholding. If the Old Notes are registered in more than one name or
are not in the name of the actual owner, see the enclosed "Guidelines for
Certification of Taxpayer Identification Number of Substitute Form W-9" for
information on which TIN to report.
The Issuer reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Issuer's obligations regarding backup
withholding.
<PAGE>
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of
tendered Old Notes will be determined by the Company and the Issuer in their
sole discretion, which determination will be final and binding. The Company
and the Issuer reserve the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes their acceptance of which would, in the
opinion of the Company and the Issuer or their counsel, be unlawful. The
Company and the Issuer also reserve the absolute right to waive any
conditions of the Exchange Offer or defects or irregularities in tenders as
to particular Old Notes. The interpretation of the terms and conditions by
the Company and the Issuer of the Exchange Offer (which includes this Letter
of Transmittal and the instructions hereto) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Old Notes must be cured within such time as the Company and the
Issuer shall determine. Neither the Company, the Issuer, the Exchange Agent
nor any other person shall be under any duty to give notification of defects
or irregularities with regard to tenders of Old Notes nor shall any of them
incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company and the Issuer reserve the
absolute right to waive, in whole or part, any of the conditions to the
Exchange Offer set forth in the Prospectus.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal
will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose
Old Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL
HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
<PAGE>
<TABLE>
<CAPTION>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE Social Security Number
YOUR TIN IN THE BOX AT RIGHT OR Employer Identification Number
FORM W-9 AND CERTIFY BY SIGNING AND
DATING BELOW
------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
----------------------------------------------------------------------------------------------
PART 2 -- Certification -- Under penalties of perjury, I PART 3 --
certify that:
Awaiting TIN / /
(1) The number shown on this form
is my correct Taxpayer
Identification Number (or I
am waiting for a number to be
issued to me) and
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN) (2) I am not subject to backup Please complete
withholding either because I. the Certificate of
have not been notified by the Internal Awaiting Taxpayer
Revenue Service ("IRS") that I am subject to Identification Number below.
backup withholding as a result of failure to
report all interest or dividends, or the IRS
has notified me that I am no longer subject to
backup withholding.
----------------------------------------------------------
Certificate Instructions -- You must cross out item
(2) in Part 2 above if you have been notified by the
IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS
that you were subject to backup withholding you
received another notification from the IRS stating
that you are no longer subject to backup withholding,
do not cross out item (2).
, 1997
------------------------- -------------------
SIGNATURE DATE
- ---------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number to the payor within 60
days, 31% of all reportable payments made to me thereafter will be withheld
until I provide a number.
, 1997
- --------------------------------------- -------------------------
Signature Date
<PAGE>
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States citizen
or resident (or I am signing for a foreign corporation, partnership, estate or
trust).
, 1997
- ------------------------------------ ---------------------------
Signature Date
