<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 10, 1998
DEVON ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
OKLAHOMA 1-10067 1474008
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification Number)
20 NORTH BROADWAY, SUITE 1500, OKLAHOMA CITY, OK 73102
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (405) 235-3611
Page 1 of __ total pages
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
THE COMBINATION
On December 10, 1998, Devon Energy Corporation ("Devon") acquired all
68.5 million common shares of Northstar Energy Corporation ("Northstar"). The
Northstar common shares were acquired in exchange for approximately 16.1 million
exchangeable shares (the "Exchangeable Shares"). Devon also assumed Northstar's
$312.6 million of long-term debt outstanding. The Exchangeable Shares were
issued by Northstar, but are exchangeable at any time into Devon's common shares
on a one-for-one basis. Prior to such exchange, the Exchangeable Shares have
rights identical to those of Devon's common shares, including dividend, voting
and liquidation rights. The issuance of the Exchangeable Shares for the
Northstar common shares is hereafter referred to as the "Combination." The
Combination was approved by Devon's shareholders at a special meeting held on
December 9, 1998. The Combination was approved by Northstar's shareholders at a
special meeting held on December 10, 1998.
PROPERTIES ACQUIRED
The Combination significantly expands Devon's oil and gas property
base. Northstar's properties had estimated proved reserves as of December 31,
1997, of 128 million barrels of oil equivalent ("MMBoe"). This total included
31.7 million barrels of oil, 550.1 billion cubic feet of natural gas and 4.6
million barrels of natural gas liquids. The addition of the Northstar proved
reserves increased Devon's year-end 1997 total proved reserves by 70%. Northstar
also had approximately 1.6 million net undeveloped acres as of the end of 1997.
This is over three times Devon's year-end 1997 net undeveloped acreage prior to
the Combination.
All of Northstar's oil and gas properties, including undeveloped
acreage, are located in Canada, with the majority in Alberta. After the
Combination, 54% of Devon's pro forma year-end 1997 proved reserves were located
in the United States and 46% were located in Canada. The oil/gas mix of such pro
forma reserves was 38% oil and natural gas liquids and 62% natural gas.
FINANCIAL EFFECTS OF THE COMBINATION
The Combination is being accounted for under the pooling-of-interests
method of accounting for business combinations. Under the pooling-of-interests
method, the assets, liabilities and operating results of Devon for all prior
periods will be restated to include Northstar's historical assets, liabilities
and operating results stated in accordance with U.S. generally accepted
accounting principles ("GAAP").
Item 7 of this report includes a pro forma balance sheet as of
September 30, 1998, and pro forma statements of operations for the nine month
periods ended September 30, 1998 and 1997, and for the years ended December 31,
1997, 1996 and 1995. The pro forma financial statements combine the accounts of
Devon and Northstar, and are presented in U.S. dollars and under U.S. GAAP. Item
7 also includes the historical
2
<PAGE> 3
consolidated financial statements of Northstar for such periods. Such
historical financial statements are presented in Canadian dollars and under
Canadian GAAP. The significant differences between U.S. and Canadian GAAP are
disclosed in note 13 to Northstar's consolidated financial statements.
NEW LONG-TERM CREDIT FACILITIES
In connection with the closing of the Combination, Devon entered
into new long-term credit facilities aggregating $400 million. The new
facilities replace Devon's previous long-term credit facilities that totaled
$208 million. The new facilities include a U.S. facility of $205 million and a
Canadian facility of $195 million. At closing, $114.7 million was drawn
against the facilities ($20.0 million in the U.S. and $94.7 million in Canada).
Also at closing, in addition to the $114.7 million of debt borrowed under the
new credit facilities, Devon assumed Northstar's $225 million of long-term,
fixed rate debt.
The new credit facilities are unsecured "balance sheet" facilities, and
contain financial covenants similar to Devon's previous facilities.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Consolidated Financial Statements of Northstar Energy Corporation:
Auditors' Report to the Shareholders
Consolidated Balance Sheets
Consolidated Statements of Earnings
Consolidated Statements of Retained Earnings
Consolidated Statements of Cash Flow
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information:
Devon-Northstar Unaudited Pro Forma Combined Financial
Information:
Unaudited Pro Forma Combined Balance Sheet
Unaudited Pro Forma Combined Statements of Operations
Notes to Unaudited Pro Forma Combined Financial
Statements
Unaudited U.S. GAAP Financial Information - Northstar:
Unaudited U.S. GAAP Balance Sheet - Northstar
Unaudited U.S. GAAP Statements of Operations -
Northstar
Notes to Unaudited U.S. GAAP Financial Statements -
Northstar
3
<PAGE> 4
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2 Amended and Restated Combination Agreement between the
Registrant and Northstar Energy Corporation dated June
29, 1998 (incorporated by reference to Annex B to
Registrant's definitive proxy statement for a special
meeting of shareholders, filed November 6, 1998).
3 Registrant's Amended and Restated Certificate of
Incorporation
4.1 Support Agreement, dated December 10, 1998, between the
Registrant and Northstar Energy Corporation
4.2 Provisions Attaching to the Exchangeable Shares
9 Voting and Exchange Trust Agreement, dated December 10,
1998, by and between the Registrant, Northstar Energy
Corporation and CIBC Mellon Trust Company
10.1 US Credit Agreement, dated December 11, 1998, among the
Registrant, as US Borrower, NationsBank, N.A., as
Administrative Agent, NationsBanc Montgomery
Securities, L.L.C., as Arranger, Bank One, Texas, N.A.,
as Syndication Agent, Bank of Montreal, as
Documentation Agent, First Union, as Co-Documentation
Agent, and Certain Financial Institutions, as Lenders
10.2 Canadian Credit Agreement, dated December 11, 1998,
among Northstar Energy Corporation and Devon Energy
Canada Corporation, as Canadian Borrowers, Bank of
America Canada, as Administrative Agent, NationsBanc
Montgomery Securities, L.L.C., as Arranger, First Chicago
Capital Markets, Inc., as Syndication Agent, Bank of Montreal,
as Documentation Agent, First Union, as Co-Documentation
Agent, and Certain Financial Institutions, as Lenders
23 Consent of Deloitte & Touche LLP
</TABLE>
4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DEVON ENERGY CORPORATION
Date: December 22, 1998 By /s/ Danny J. Heatly
----------------------
Danny J. Heatly
Controller
5
<PAGE> 6
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Northstar Energy
Corporation as at December 31, 1997 and 1996 and the consolidated statements of
earnings, retained earnings and cash flow for each of the years in the three
year period ended December 31, 1997. These consolidated financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at December 31,
1997 and 1996, and the results of its operations and the changes in its cash
flow for each of the years in the three year period ended December 31, 1997 in
accordance with Canadian generally accepted accounting principles.
Accounting principles generally accepted in Canada vary in certain
significant respects from accounting principles generally accepted in the United
States. The application of the latter would have affected the determination of
net earnings and cash flows for each of the years in the three year period ended
December 31, 1997 and the determination of shareholders' equity at December 31,
1997 and 1996 to the extent summarized in Note 13.
(SIGNED) DELOITTE & TOUCHE
------------------------------------
Deloitte & Touche
Chartered Accountants
Calgary, Canada
March 19, 1998
(except Note 12
which is as of
December 10, 1998)
6
<PAGE> 7
NORTHSTAR ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AS AT AS AT DECEMBER 31,
SEPTEMBER 30, -----------------------
1998 1997 1996
------------- ---------- ----------
(UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Current assets
Cash and short-term investments....................... $ -- $ -- $ 33,859
Accounts receivable................................... 59,417 73,044 79,486
Investments (note 3).................................. 2,954 61,477 187
Nevis gas plant and B.C. pipeline (note 11)........... -- -- 138,113
Property disposition proceeds receivable (note 4)..... -- -- 64,500
Note receivable (note 3).............................. 34,813 -- --
---------- ---------- ----------
97,184 134,521 316,145
Capital assets (note 4)................................. 1,061,727 1,037,350 875,226
Deferred charges and investments (note 3)............... 29,063 6,291 53,513
---------- ---------- ----------
$1,187,974 $1,178,162 $1,244,884
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities.............. $ 59,707 $ 81,431 $ 84,032
Short-term bank loan (note 5)......................... 34,813 -- --
Current portion of long-term debt..................... -- 70,000 170,973
Current portion of deferred revenue................... 1,322 1,322 1,322
---------- ---------- ----------
95,842 152,753 256,327
Long-term debt (note 5)................................. 463,102 435,141 184,896
Deferred revenue (note 6)............................... 9,487 12,040 14,861
Provision for future site restoration (note 4).......... 19,829 17,372 14,662
Deferred income taxes................................... 174,491 168,761 136,066
---------- ---------- ----------
762,751 786,067 606,812
Shareholders' equity (note 8)........................... 425,223 392,095 638,072
---------- ---------- ----------
$1,187,974 $1,178,162 $1,244,884
========== ========== ==========
</TABLE>
Approved on behalf of the board
<TABLE>
<S> <C>
(SIGNED) JOHN A. HAGG (SIGNED) A. GORDON STOLLERY
- ----------------------------------------------------- -----------------------------------------------------
John A. Hagg A. Gordon Stollery
Director Director
</TABLE>
7
<PAGE> 8
NORTHSTAR ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------- ---------------------------------
1998 1997 1997 1996 1995
----------- ----------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues
Oil and gas sales.................... $189,132 $233,228 $313,275 $334,128 $261,119
Net royalties........................ (26,100) (46,716) (57,776) (63,138) (43,372)
-------- -------- -------- -------- --------
163,032 186,512 255,499 270,990 217,747
Interest and other income............ 3,174 1,985 2,138 14,576 10,258
Gain on sale of assets (note 11)..... 40,241 40,677 40,671 14,453 --
Equity earnings (note 3)............. -- 6,102 8,578 8,111 1,905
-------- -------- -------- -------- --------
206,447 235,276 306,886 308,130 229,910
-------- -------- -------- -------- --------
Expenses
Operating............................ 43,854 37,854 53,274 56,940 47,852
General and administrative........... 11,248 10,847 12,494 7,639 8,969
Interest on long-term debt........... 23,742 15,684 27,302 17,105 12,392
Foreign exchange loss on repayment of
$US debt (note 5)................. -- -- 4,003 -- --
Depletion and depreciation (note
4)................................ 90,549 86,698 118,815 119,828 101,353
Income and capital taxes (note 9).... 7,511 38,120 40,933 44,556 22,766
-------- -------- -------- -------- --------
176,904 189,203 256,821 246,068 193,332
-------- -------- -------- -------- --------
Net earnings................. $ 29,543 $ 46,073 $ 50,065 $ 62,062 $ 36,578
======== ======== ======== ======== ========
Earnings per share -- basic............ $ 0.43 $ 0.61 $ 0.68 $ 0.72 $ 0.45
-- fully diluted... $ 0.41 $ 0.59 $ 0.66 $ 0.70 $ 0.44
</TABLE>
8
<PAGE> 9
NORTHSTAR ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------
1998 1997 1997 1996 1995
----------- ----------- ---------- --------- ---------
(UNAUDITED) (UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C> <C> <C>
Retained earnings, beginning of
period.............................. $ 77,723 $246,443 $ 246,443 $186,975 $152,908
Net earnings.......................... 29,543 46,073 50,065 62,062 36,578
Repurchase of common shares (note
8).................................. -- (206,353) (206,353) -- --
Merger costs, net of deferred taxes
(note 1)............................ -- (12,384) (12,432) -- --
Dividends............................. -- -- -- (2,594) (2,511)
-------- -------- --------- -------- --------
Retained earnings, end of period...... $107,266 $ 73,779 $ 77,723 $246,443 $186,975
======== ======== ========= ======== ========
</TABLE>
9
<PAGE> 10
NORTHSTAR ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------- ---------------------------------
1998 1997 1997 1996 1995
----------- ----------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C> <C> <C>
Provided by operating activities
Cash flow from operations (note 10)... $ 87,448 $ 125,255 $ 167,044 $ 205,307 $ 157,096
Change in non-cash trade accounts..... (8,097) (21,422) 3,841 (4,531) (9,810)
-------- --------- --------- --------- ---------
79,351 103,833 170,885 200,776 147,286
-------- --------- --------- --------- ---------
Provided by (used for) financing
activities
Long-term debt, net................... (64,944) 108,183 141,240 143,759 191,704
Common shares issued for cash......... 3,585 16,582 16,777 55,950 14,030
Common shares repurchased............. -- (300,387) (300,387) -- --
Merger costs.......................... -- (17,370) (17,453) -- --
Deferred revenue...................... (2,553) (3,789) (2,821) (6,926) 5,060
Dividends............................. -- -- -- (2,594) (2,511)
-------- --------- --------- --------- ---------
(63,912) (196,781) (162,644) 190,189 208,283
-------- --------- --------- --------- ---------
Provided by (used for) investing
activities
Capital assets........................ (110,799) (184,687) (275,777) (193,663) (329,777)
Investments and other assets.......... -- -- (6,750) (10,799) (20,699)
Proceeds on sale of assets............ 97,030 243,776 243,284 23,125 --
Site restoration...................... (1,670) -- (2,857) (1,852) (1,038)
Acquisition of Nevis gas plant (note
11)................................ -- -- -- (119,295) --
Changes in non-cash working capital
related to investing activities.... -- -- -- (64,500) (16,750)
-------- --------- --------- --------- ---------
(15,439) 59,089 (42,100) (366,984) (368,264)
-------- --------- --------- --------- ---------
Increase (decrease) in cash position.... -- (33,859) (33,859) 23,981 (12,695)
Cash position, beginning of period...... -- 33,859 33,859 9,878 22,573
-------- --------- --------- --------- ---------
Cash position, end of period............ $ -- $ -- $ -- $ 33,859 $ 9,878
======== ========= ========= ========= =========
</TABLE>
10
<PAGE> 11
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(INFORMATION AS AT SEPTEMBER 30, 1998 AND FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1997 IS UNAUDITED)
Northstar Energy Corporation ("the Company" or "Northstar") operates in the
oil and gas industry in Canada. The consolidated financial statements of the
Company are stated in Canadian dollars and have been prepared by management in
accordance with accounting principles generally accepted in Canada, consistently
applied. These consolidated financial statements have, in management's opinion,
been properly prepared within reasonable limits of materiality and in light of
information available up to March 19, 1998. Significant accounting policies are
summarized in Note 2.
NOTE 1 -- BASIS OF PRESENTATION
On March 14, 1997, pursuant to an offer to purchase all of the shares of
Morrison Petroleums Ltd. ("Morrison") set out in an information circular dated
February 21, 1997, the Company entered into a business combination with
Morrison, a company operating in the oil and gas industry primarily in western
Canada. In March 1997 Northstar issued a total of 46,146,933 common shares, at a
rate of 0.7 Northstar common share for each Morrison share, following which the
former shareholders of Morrison held 53 percent and the former shareholders of
Northstar held 47 percent of the then outstanding common shares of the combined
company. On March 14, 1997, the closing market price of the Northstar common
shares was $14.70 per share.
The nature of the business combination was such that neither of the
combining companies could be identified as the acquirer for accounting purposes.
Accordingly, the business combination has been accounted for using the
pooling-of-interest method of accounting whereby the consolidated financial
statements reflect the combined historical carrying values of the assets,
liabilities and shareholders' equity, and the historical operating results of
Northstar and Morrison for each of the periods presented. The accounting
policies of both companies were substantially identical and changes were not
required to the numbers previously reported by the two companies. However,
certain prior year information has been reclassified to conform to the current
method of presentation.
The book value of the assets and liabilities brought into the combination
by each of the combining companies approximate those at March 31, 1997, which
are set out below:
<TABLE>
<CAPTION>
NORTHSTAR MORRISON
--------- ---------
(THOUSANDS)
<S> <C> <C>
Assets
Current assets............................................ $ 46,443 $ 101,424
Capital assets............................................ 384,156 548,161
Investments and other assets.............................. 28,950 29,120
-------- ---------
459,549 678,705
-------- ---------
Liabilities
Current liabilities....................................... (44,267) (51,594)
Long-term debt............................................ (83,058) (103,823)
Deferred revenue.......................................... (6,156) (7,488)
Deferred obligations...................................... (6,652) (8,873)
Deferred income taxes..................................... (45,215) (112,289)
-------- ---------
$274,201 $ 394,638
======== =========
</TABLE>
11
<PAGE> 12
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The revenues and net income of Northstar and Morrison for the period
January 1, 1997 to March 31, 1997 are set out below:
<TABLE>
<CAPTION>
NORTHSTAR MORRISON
--------- --------
(THOUSANDS)
<S> <C> <C>
Revenues, net of royalties.................................. $38,920 $26,751
Net earnings................................................ $ 9,411 $28,515(1)
======= =======
</TABLE>
- ---------------
(1) Includes an after-tax gain on sale of assets of $24.9 million.
Costs of $17.8 million ($12.4 million net of deferred income taxes),
consisting mainly of professional and advisory fees, employee severance charges
and other costs directly related to the business combination have been charged
to retained earnings in the current period.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all of its subsidiaries. The accounts of Mountain Energy Inc. ("Mountain
Energy"), a corporation in which both Northstar and Morrison Middlefield
Resources Limited ("MMRL") each have a 50% interest, is accounted for using the
proportionate consolidation basis. Substantially all of the Company's petroleum
and natural gas operations are conducted jointly with others and these financial
statements reflect only the Company's proportionate interest in such activities.
SHORT-TERM INVESTMENTS
Short-term investments consist of readily marketable Canadian government
bonds and similar investments and are recorded at the lower of cost and market
value.
EQUITY INVESTMENTS
The Company holds a 48% interest in West Windsor Power (an Ontario General
Partnership) ("West Windsor Power") and, accordingly, accounts for this
investment using the equity method. Those direct costs relating to the
investment incurred by the Company are amortized over the estimated useful life
of the cogeneration plant owned by the partnership, which is estimated to be 30
years.
The Company also accounts for its 21.5% interest in MMRL under the equity
method.
EXPLORATION AND DEVELOPMENT COSTS
The Company follows the full cost method whereby exploration and
development costs are capitalized. Those costs include direct acquisition,
exploration and development costs together with applicable overhead and carrying
charges, net of government incentives and tax credits. Interest expense is not
capitalized except for interest on financing which is directly related to the
pre-production phase of major development projects. Proceeds from disposals are
normally deducted from net capital costs without recognition of gains or losses.
Costs subject to depletion under the full cost method include estimated
future site restoration costs. This estimate includes the cost of production
equipment removal and environmental clean-up based upon regulations and economic
considerations applicable at year-end. The annual provision for future
restoration costs is included with depletion and depreciation.
A ceiling test is employed annually to ensure costs accumulated by the
Company do not exceed estimated future cash flows from proven reserves and the
cost of undeveloped properties. For the purposes of this test,
12
<PAGE> 13
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
future cash flows are determined using year-end prices and costs, including
deductions for applicable overhead, financing and income tax expenses. The
Company periodically performs an impairment test relative to the capitalized
cost of undeveloped properties.
DEPLETION AND DEPRECIATION
Petroleum and natural gas properties, excluding undeveloped properties, are
depleted using the unit-of-production method based on estimated proven reserves
before deduction of royalties and after conversion to units of common measure
based on relative energy content. Processing facilities are depreciated based on
the estimated reserve life of each facility. Other assets are depreciated or
amortized based on various rates relating to the estimated useful life of each
asset.
REVENUE RECOGNITION
Payments received for undelivered gas are initially deferred and are
recognized as revenue when deliveries are made or on the expiry of the period
allowed for such deliveries.
FOREIGN CURRENCY TRANSLATION
Revenues and expenses arising in foreign currencies are translated at the
average rate of exchange during the month in which the transaction occurred.
Monetary assets and liabilities denominated in foreign currencies are translated
at exchange rates in effect at the balance sheet date. Exchange gains and losses
are included in income, except for unrealized exchange gains or losses arising
on translation of long-term debt, which are deferred and amortized over the term
of the debt.
COMMODITY PRICE SWAPS
The Company has entered into oil and natural gas price and foreign exchange
rate swap contracts to mitigate the effects of price and foreign exchange
fluctuations on its earnings.
Gains and losses arising from the swaps are deferred and reported as
adjustments to revenues at the time of sale of the related products (see
Financial Instruments, Note 7). The carrying amounts of these instruments are
included in accounts receivable in the case of contracts in a net receivable
position and accounts payable in the case of contracts in a net payable
position.
MEASUREMENT UNCERTAINTY
The amounts recorded for depletion, depreciation and amortization of
capital assets and the provision for future site restoration and reclamation
costs are based on estimates. The ceiling test is based on estimates of proved
reserves, production rates, oil and gas prices, future costs and other relevant
assumptions. By their nature, these estimates are subject to measurement
uncertainty and the effect on the financial statements of changes in such
estimates in future periods could be significant.
13
<PAGE> 14
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- DEFERRED CHARGES AND INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------
1998 1997 1996
------------- ------- -------
(THOUSANDS)
<S> <C> <C> <C>
West Windsor Power -- investment........................... $ -- $11,744 $10,211
-- direct costs..................... -- 16,175 16,075
------- ------- -------
-- 27,919 26,286
Less: amortization....................................... -- 1,142 606
------- ------- -------
-- 26,777 25,680
MMRL (market value December 31, 1997 -- $44,277; December
31, 1996 -- $38,098)..................................... -- 29,754 20,362
Other investments.......................................... 2,954 4,946 4,749
------- ------- -------
Total investments.......................................... 2,954 61,477 50,791
Land....................................................... 948 971 971
Deferred foreign exchange.................................. 25,925 4,801 712
Deferred charges, net of accumulated amortization.......... 2,190 519 1,226
------- ------- -------
32,017 67,768 53,700
Less: investments classified as current assets........... 2,954 61,477 187
------- ------- -------
$29,063 $ 6,291 $53,513
======= ======= =======
</TABLE>
In March 1998, the Company completed the sale of its investment in West
Windsor Power for consideration of $72.3 million, resulting in a pre-tax gain of
approximately $40 million. The proceeds received include two non-interest
bearing notes receivable of $36 million and $36.3 million. The $36 million note
was purchased by a chartered bank on a discounted basis, and the proceeds of
$35.8 million were applied against long-term bank debt. The $36.3 million note
receivable has been recorded on the balance sheet at its discounted value of
$34.8 million. This note was used to secure a new short-term bank loan of $34.8
million which was applied against long-term bank debt (Note 5).
West Windsor Power owns and operates a 109 megawatt cogeneration plant
located in Windsor, Ontario which produces power which is sold to Ontario Hydro
under a 20 year contract. The plant commenced commercial operations in November
1995.
The partnership's interest in its cogeneration facility was financed by way
of a non-recourse term loan to the partnership through a syndicate of
international banks. Security for the loan was limited to the assets of the
partnership, with no recourse to other assets of the Company or its partners. In
connection with the construction of the plant and financing, the Company
contributed $14.7 million of equity (December 31, 1997 and 1996 -- $14.7
million). The Company also issued irrevocable letters of credit amounting to
$6.2 million in favour of the financing syndicate.
The Company capitalized $NIL, $NIL, $0.1 million, $3.0 million and $0.1
million during the nine month periods ended September 30, 1998 and 1997, and the
years ended December 31, 1997, 1996 and 1995, respectively of direct costs, net
of development fees, in connection with its investment in the partnership.
Equity income recorded from the Company's investment in West Windsor Power
amounted to $NIL and $3.7 million for the nine month periods ended September 30,
1998 and 1997, and $5.7 million, $3.9 million and $1.0 million for the years
ended December 31, 1997, 1996 and 1995 respectively.
On July 31, 1998, the Company completed the exchange of its shares and
options of MMRL for MMRL's 50% interest in Mountain Energy which owns certain of
MMRL's Canadian oil and gas properties. The transaction was effective June 30,
1998. Under the terms of the agreement, Northstar no longer acts as co-manager
of MMRL and has not received management fees effective June 1, 1998. Prior to
the July 31,
14
<PAGE> 15
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1998 exchange, the investment in MMRL represented the cost, together with equity
earnings, of the Company's investment in the common shares of MMRL. The Company
had accounted for its interest in MMRL under the equity method with effect from
January 6, 1995. At that time the Company's cost was less than MMRL's underlying
net book value by $1.5 million. This difference was being amortized to earnings
over the life of the related oil and natural gas reserves. The Company was a
co-manager of MMRL and received management fees for services provided to MMRL.
Management fees earned in the nine month periods ended September 30, 1998 and
1997 amounted to $0.3 million and $3.7 million, respectively, and in the years
ended December 31, 1997, 1996 and 1995 amounted to $4.4 million, $4.1 million
and $1.9 million, respectively. At September 30, 1998 MMRL owed Northstar $0.5
million (December 31, 1997 -- $0.7 million; December 31, 1996 -- $0.2 million
due to MMRL) in respect of activities managed by Northstar.
On January 31, 1996, the Company increased its investment in common shares
of MMRL through the exercise of warrants to purchase common shares.
Substantially all of the warrants held by other warrant holders of MMRL were
exercised prior to their expiry on January 31, 1996, following which Northstar's
interest in MMRL was diluted. A dilution gain of $1.4 million was recorded on
the deemed disposition of a portion of Northstar's investment in MMRL and is
included in equity income. Equity income recorded from the Company's investment
in MMRL amounted to $NIL, $2.4 million, $2.9 million, $4.2 million and $0.9
million for the nine month periods ended September 30, 1998 and 1997, and for
the years ended December 31, 1997, 1996 and 1995, respectively.
Other investments at September 30, 1998 include marketable securities with
an aggregate cost of $2.2 million; (December 31, 1997 -- $3.3 million; December
31, 1996 -- $1.5 million) which have a market value of $2.4 million (December
31, 1997 -- $5.6 million; December 31, 1996 -- $2.5 million).
Northstar's other investments, including the cost of the investment in
MMRL, were classified as current assets at December 31, 1997 due to Northstar's
intention to sell these investments in 1998.
NOTE 4 -- CAPITAL ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
--------------------------------------- ---------------------------------------
ACCUMULATED ACCUMULATED
DEPLETION AND DEPLETION AND
COST DEPRECIATION NET COST DEPRECIATION NET
---------- ------------- ---------- ---------- ------------- ----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Petroleum and natural
gas properties...... $1,552,709 $591,757 $ 960,952 $1,440,909 $511,171 $ 929,738
Natural gas
processing
facilities.......... 120,772 27,280 93,492 123,456 24,126 99,330
Other assets......... 20,496 13,213 7,283 20,295 12,013 8,282
---------- -------- ---------- ---------- -------- ----------
$1,693,977 $632,250 $1,061,727 $1,584,660 $547,310 $1,037,350
========== ======== ========== ========== ======== ==========
<CAPTION>
DECEMBER 31, 1996
-------------------------------------
ACCUMULATED
DEPLETION AND
COST DEPRECIATION NET
---------- ------------- --------
(THOUSANDS)
<S> <C> <C> <C>
Petroleum and natural
gas properties...... $1,173,468 $405,930 $767,538
Natural gas
processing
facilities.......... 116,694 18,160 98,534
Other assets......... 18,803 9,649 9,154
---------- -------- --------
$1,308,965 $433,739 $875,226
========== ======== ========
</TABLE>
Undeveloped acreage and related seismic costs not subject to depletion
amounted to $78.8 million at September 30, 1998 and December 31, 1997, and $73.5
million at December 31, 1996.
The provision for future estimated site reclamation costs amounted to $4.1
million, $5.0 million, $5.9 million, $6.3 million and $4.2 million for the nine
month periods ended September 30, 1998 and 1997 and for the years ended December
31, 1997, 1996 and 1995, respectively.
In December 1996, the Company entered into agreements relating to the sale
of certain non-core oil and natural gas properties. Proceeds aggregating $64.5
million were receivable at December 31, 1996 in respect of dispositions which
closed in January 1997. The amounts receivable in respect of these sales have
been removed from property, plant and equipment and classified as a current
asset. No gains or losses were attributable to these dispositions.
15
<PAGE> 16
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- SHORT-TERM BANK LOAN AND LONG-TERM DEBT
In March 1998, Northstar arranged a short-term non-revolving bank loan in
the amount of $34.8 million with a Canadian chartered bank. The loan is
repayable in full on January 4, 1999 and is secured by the note receivable in
connection with the sale of West Windsor Power.
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------
1998 1997 1996
------------- -------- --------
(THOUSANDS)
<S> <C> <C> <C>
6.79% senior notes due March 2, 2009 (US$150,000)........ $228,885 $ -- $ --
6.76% senior notes due July 19, 2005 (US$75,000)......... 114,443 107,183 102,720
7.03% senior notes due November 7, 2005 (US$60,000)...... -- 85,746 82,176
Bank debt................................................ 119,774 312,212 121,680
Promissory note payable and preferred shares of Mountain
Energy................................................. -- -- 44,290
Capital lease obligation................................. -- -- 5,003
-------- -------- --------
463,102 505,141 355,869
Less: portion classified as current...................... -- 70,000 170,973
-------- -------- --------
$463,102 $435,141 $184,896
======== ======== ========
</TABLE>
On March 2, 1998, Northstar issued US$150 million senior notes by way of a
private placement. The notes, which are unsecured, bear interest at 6.79% and
are repayable in three equal annual installments of US$50 million commencing in
2007. Proceeds received from the notes were used to repay US$60 million
outstanding under the Company's 7.03% senior notes and the balance was applied
to bank debt. Foreign exchange losses and other charges which had previously
been deferred in respect of the 7.03% senior notes were charged to earnings at
December 31, 1997.
The 6.76% senior notes, which are unsecured, were issued in 1995 pursuant
to a private placement with institutional investors in the United States. The
notes bear interest at the annual interest rates disclosed above and are
repayable in five annual installments of US$15 million, commencing in 2001.
In 1997, Northstar arranged an extendible revolving term credit facility in
the amount of $300 million with a syndicate of Canadian banks and a separate $60
million extendible operating credit facility with a Canadian chartered bank.
These facilities, which are unsecured, are renewable annually by mutual
agreement. In the event that the facilities are not renewed by the lenders, any
borrowings outstanding become repayable in equal consecutive quarterly
installments over a 66 month period commencing four months after the renewal
date. The facilities provide for various interest rate and Bankers Acceptance
fee options, which are based on market rates in effect from time to time and the
Company's debt to cash flow ratio. During the third quarter of 1998, the
extendible revolving long-term credit facility and the extendible operating
credit facility were reduced to $90 million and $60 million, respectively, at
the request of the Company. At June 30, 1998, borrowings under these facilities
amounted to $125.0 million and bore interest at an average interest rate of
6.33%. In March 1998, following the receipt of proceeds on the sale of the
cogeneration investment, long-term bank debt was reduced by approximately $70.0
million. Accordingly, this amount has been classified as a current liability at
December 31, 1997. Bank debt outstanding at December 31, 1996 was classified as
current due to its repayment in January 1997 with proceeds received on the sale
of the Nevis gas plant and the B.C. pipeline to the Morrison Facilities Income
Fund.
16
<PAGE> 17
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The promissory note payable and preferred shares of Mountain Energy
represented Northstar's proportionate share of obligations of Mountain Energy in
connection with an oil and natural gas property purchase completed by that
company. The preferred shares, which were entitled to dividends at 2.2% per
annum, were redeemed by Mountain Energy in 1997. The promissory note, of which
Northstar's share was $11.4 million, bore interest at 5.25% per annum and was
repaid in 1997.
In October 1997, the Company exercised its buyout option under a capital
lease obligation in respect of certain gas plant equipment which bore interest
at 8.75% per annum. At December 31, 1996, the capitalized cost of the leased
equipment was $9.4 million and accumulated depreciation amounted to $3.8
million.
NOTE 6 -- DEFERRED REVENUE
Included in deferred revenue at September 30, 1998, and December 31, 1997
and 1996 is $5.2 million, $6.6 million, and $8.4 million, respectively,
representing amounts received on foreign exchange and crude oil and natural gas
price forward sale agreements. These amounts will be recognized in income during
the period 1998 to 2000, the terms of the related forward sale agreements.
Deferred revenue also includes at September 30, 1998 and at December 31,
1997 and 1996, $5.8 million, $6.7 million, and $7.8 million, respectively, in
respect of a prepaid gas sales contract. Under the contract, the Company is
required to sell 26 billion cubic feet of natural gas to a United States-based
purchaser over an estimated 12 year period, which commenced November 1, 1990. In
addition to amounts paid by the purchaser for the natural gas sold under the
contract, the contract requires the purchaser to pay operating fees and Crown
royalties associated with contracted production. Cumulative natural gas
deliveries pursuant to the contract to September 30, 1998 amounted to 16.7
billion cubic feet. Estimated deliveries for 1998 are 2.2 billion cubic feet, in
respect of which $1.3 million has been classified as a current liability.
The Company's obligation to deliver natural gas under the contract is
secured by a fixed charge on certain natural gas reserves. In management's
opinion, the Company has available production capacity in excess of the
contracted volumes. Therefore, delivery obligations will be satisfied from
production, and no repayments will be required.
NOTE 7 -- FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS
FINANCIAL INSTRUMENTS
Northstar has entered into contracts to manage its exposure to fluctuations
in oil and natural gas prices and foreign exchange rates. The Company is exposed
to credit risk to the extent of non-performance by counterparties to the
contracts. However, the Company minimizes this risk by only entering into
agreements with highly rated major international financial institutions. Maximum
exposure to credit losses on these financial instruments approximates their fair
value as disclosed below.
OIL AND NATURAL GAS PRICES
At September 30, 1998, the Company had sold forward approximately 7,000
Bbls per day of remaining 1998 crude oil and liquids production, representing
approximately 41 percent of first nine months of 1998 production levels.
Approximately 6,000 Bbls per day have been sold at an average price of US$19.02
per Bbl and 1,000 Bbls per day have been sold at a price of Cdn$24.13 per Bbl.
Approximately 500 Bbls per day of 1999 production has been sold at an average
price of US$20.01 per Bbl. In addition, the Company has sold call options in
respect of 13,700 Bbls per day of production during the period October to
December 1998 and 7,500 Bbls per day during the period January to December 1999.
The options are exercisable by the holder at an average price of US$19.54 per
Bbl and US$20.03 per Bbl, respectively.
17
<PAGE> 18
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Northstar has also sold forward approximately 30 MMcf per day of 1998
natural gas production (representing approximately 16 percent of the first nine
months of 1998 production levels) at an average price of $2.05 per Mcf.
Production sold forward in respect of subsequent years approximates 23 MMcf per
day in 1999, 5 MMcf per day in 2000, 5 MMcf per day in 2001 and 4 MMcf per day
in 2002, at $2.27, $1.88, $2.64 and $2.66 per Mcf, respectively. In addition,
the Company has entered into indexed base swap arrangements in respect of 10
MMcf per day of 1998 natural gas production, 5 MMcf per day of 1999 production
and 5 MMcf per day for the period January 1, 2000 to March 31, 2002 and has also
sold call options in respect of 25 MMcf per day of production during the month
of October 1998 and 5 MMcf per day during the period November 1999 to October
2000. The options are exercisable by the holder at an average price of $2.37 and
$2.53 per Mcf, respectively.
FOREIGN EXCHANGE
To reduce the exposure to exchange rate fluctuations on US dollar revenues,
the Company has entered into exchange rate contracts to sell US$60 million
during each of the years 1998 and 1999 at an average rate of US$0.732 and
US$0.726, respectively, and US$30 million in 2000 at US$0.727. Of the amount
hedged in 1999 and 2000, U.S. $10 million is extendable, at the option of the
counter party, for an additional one-year period at rates of U.S. $0.713 and
U.S. $0.710, respectively.
CARRYING AMOUNTS AND ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS
Northstar's financial instruments recognized on the consolidated balance
sheets consist of cash, marketable securities, accounts receivable, investments,
accounts payable and long-term debt. With the exception of investments, the fair
values of all financial instruments classified as current assets or current
liabilities approximate their carrying amounts due to the short-term maturity of
these instruments. The following table summarizes estimated fair value of
commodity and foreign exchange contracts, investments and non-current financial
instruments:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------- --------------------- ----------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- --------- --------- ----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Crude oil
contracts.......... $ (1,173) $ 3,300 $ 221 $ 4,900 $ (313) $ (7,021)
Natural gas
contracts.......... (442) (8,500) (357) 200 139 (3,244)
Foreign exchange
contracts.......... (1,989) (18,100) (483) (7,200) -- 2,500
Cogeneration
investment......... -- -- 26,777 72,400 25,680 Note below
Investments.......... 2,954 3,175 34,700 51,602 25,111 52,630
Long-term debt....... $(463,102) $(486,349) $(435,141) $(444,926) $(184,896) $ (182,361)
</TABLE>
The fair value of crude oil and natural gas contracts is based on quotes
provided by brokers while the fair value of investments is determined primarily
on the basis of market quotes. The fair value of long-term debt has been
estimated by discounting the principal and interest payments at rates available
to the Company for debt of similar terms and maturity. The fair value of the
cogeneration investment at December 31, 1997 is based on the selling price
negotiated with the purchaser in a sale completed in March 1998. At December 31,
1996, management estimated that the fair value of the cogeneration investment
was in excess of its carrying value.
COMMODITY CONTRACTS
In addition to the financial instruments set out above, Northstar has also
entered into fixed price natural gas sales contracts for approximately 49.7 MMcf
per day in 1998 at an average price of $2.05 per Mcf, 57.7 MMcf per day in 1999
at an average price of $2.07 per Mcf and 53.1 MMcf per day for the years 2000 to
18
<PAGE> 19
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2002 at average prices between $2.24 and $2.33 per Mcf. Another 32 MMcf per day
of natural gas production has been sold under five to ten year contracts at an
initial price of $1.87 per Mcf, escalating at approximately 4% for the duration
of the contracts.
NOTE 8 -- SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
SEPTEMBER 30, 1998 1997 1996
--------------------- ---------------------- ---------------------
NUMBER OF NUMBER OF NUMBER OF
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- -------- ----------- -------- ---------- --------
(THOUSANDS FOR DOLLAR AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Common shares
Authorized: unlimited number of
shares issued:
Beginning of period........... 67,963,722 $314,372 86,956,189 $391,629 81,790,738 $334,712
On exercise of stock options
and employee retirement
savings plan................ 505,963 3,585 1,697,060 16,777 897,761 7,467
Shares repurchased............ -- -- (20,689,527) (94,034)
Public share offering......... -- -- -- -- 3,500,000 48,691
Under flow through share
agreements.................. -- -- -- -- 767,690 759
---------- -------- ----------- -------- ---------- --------
End of period................. 68,469,685 317,957 67,963,722 314,372 86,956,189 391,629
Retained earnings................. -- 107,266 -- 77,723 -- 246,443
---------- -------- ----------- -------- ---------- --------
-- $425,223 -- $392,095 -- $638,072
========== ======== =========== ======== ========== ========
</TABLE>
On April 16, 1997, pursuant to an issuer bid, the Company repurchased
20,689,527 of its common shares at a price of $14.50 per share. The aggregate
cost of the repurchase amounted to $300.4 million, of which $94.0 million was
charged to share capital. The remaining $206.4 million, representing the amount
paid in excess of the average carrying value of the common shares repurchased,
was charged to retained earnings.
On February 23, 1996, the Company issued 3,500,000 common shares for
proceeds of $47.8 million net of issue costs.
Under the flow through share agreements, subscribers are entitled to
deduct, for income tax purposes, the expenditures made by the Company on
qualifying oil and gas activities from funds subscribed and the Company retains
the right to the oil and gas properties to which the expenditures relate. The
Company has recorded as share capital the share subscriptions received, less the
tax effect of subsequent oil and gas expenditures not being deductible for
income tax purposes by the Company. Flow through shares issued in 1996 include
701,750 common shares for which the related subscriptions of $8.0 million were
received and included in share capital in 1995. The shares were issued in 1996
after the qualifying expenditures had been incurred.
STOCK OPTIONS
As at September 30, 1998, the Company had reserved 4,593,150 common shares
under stock option agreements granted to employees pursuant to Northstar's stock
option plan. Options in respect of an additional 963,479 common shares were also
outstanding, resulting from conversion privileges granted to former Morrison
option holders at the time of the merger. All options are exercisable at prices
ranging from $4.76 to $15.50 per share at various times during the period ending
2004. The weighted average exercise price for these options is approximately
$11.14. Options in respect of 2,016,179 common shares were vested at September
30, 1998.
19
<PAGE> 20
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PREFERRED SHARES
The authorized capital of the Company includes 100 million First Preferred
Shares and 100 million Second Preferred Shares, of which none are currently
issued or outstanding.
NOTE 9 -- INCOME AND CAPITAL TAXES
The income tax provision differs from the amount that would be computed by
applying the combined Canadian federal and provincial income tax rate of 44.6%
(1996 -- 44.8%, 1995 -- 44.2%) to earnings before taxes. The reasons for this
difference are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------------------- -----------------------------------------------------
1998 1997 1997 1996 1995
---------------- --------------- ---------------- ---------------- ---------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings before taxes........... $ 37,054 100.0% $84,193 100.0% $ 90,998 100.0% $106,618 100.0% $59,344 100.0%
-------- ----- ------- ----- -------- ----- -------- ----- ------- -----
Computed "expected" income
taxes......................... 16,534 44.6 37,567 44.6 $ 40,603 44.6 $ 47,775 44.8 26,209 44.2
Non-deductible crown payments... 9,809 26.5 17,364 20.6 20,935 23.0 22,603 21.2 15,114 25.4
Resource allowance.............. (10,434) (28.2) (14,851) (17.6) (21,163) (23.3) (23,049) (21.6) (17,198) (29.0)
Alberta royalty tax credit...... (467) (1.3) (745) (0.9) (937) (1.0) (1,390) (1.3) (1,393) (2.3)
Non-deductible depletion........ 1,882 5.1 1,416 1.7 2,254 2.5 (65) (0.1) (1,558) (2.6)
Non-taxable portion of capital
gains......................... (11,689) (31.5) (2,457) (2.9) (1,920) (2.1) (1,913) (1.8) -- --
Other........................... 95 0.3 (2,512) (3.0) (1,665) (1.8) (2,232) (2.1) (104) (0.2)
-------- ----- ------- ----- -------- ----- -------- ----- ------- -----
Deferred income taxes........... 5,730 15.5 35,782 42.5 38,107 41.9 41,729 39.1 21,070 35.5
Capital taxes................... 1,781 4.8 2,338 2.8 2,826 3.1 2,827 2.7 1,696 2.9
-------- ----- ------- ----- -------- ----- -------- ----- ------- -----
$ 7,511 20.3% $38,120 45.3% $ 40,933 45.0% $ 44,556 41.8% $22,766 38.4%
======== ===== ======= ===== ======== ===== ======== ===== ======= =====
</TABLE>
NOTE 10 -- CASH FLOW FROM OPERATIONS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net earnings................................ $ 29,543 $ 46,073 $ 50,065 $ 62,062 $ 36,578
Non cash items: -- depletion and
depreciation................ 90,549 86,098 118,815 119,828 101,353
-- deferred income taxes... 5,730 35,782 38,107 41,729 21,070
-- gain on sale of
assets...................... (40,241) (40,677) (40,671) (14,453) --
-- equity earnings......... -- (6,102) (8,578) (8,111) (1,905)
-- cash distribution from
West Windsor Power
earnings................ -- 3,481 4,632 4,057 --
-- amortization of
deferred charges.......... 1,867 -- 671 195 --
-- foreign exchange loss on
repayment of $US debt... -- -- 4,003 -- --
-------- -------- -------- -------- --------
Cash flow from operations................... $ 87,448 $125,255 $167,044 $205,307 $157,096
======== ======== ======== ======== ========
</TABLE>
NOTE 11 -- NEVIS GAS PLANT AND B.C. PIPELINE
On January 28, 1997, the Company completed the sale of its 100 percent
interest in both the Nevis gas plant and a crude oil pipeline system in
northeastern British Columbia to a wholly owned subsidiary of the Morrison
Facilities Income Fund ("the Fund") for a net cash consideration of $178.8
million. A gain of $40.7 million was recorded in 1997 related to this
disposition. The Fund, which raised the proceeds through a public issue of trust
units, is an unincorporated trust governed by the laws of Alberta. Northstar
does not hold any trust units in the Fund but has entered into management and
administration agreements with the Fund
20
<PAGE> 21
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and its subsidiary. Under these agreements, Northstar provides management and
other services to the Fund, for which it earned a management fee of $0.7 million
in 1997. Included in accounts receivable at December 31, 1997 is an amount of
$1.1 million due from the Fund in respect of costs incurred by Northstar on
behalf of the Fund.
At December 31, 1996, the cost of the assets subsequently sold to the Fund
was $142.1 million and accumulated depreciation thereon amounted to $4.0
million. The net book value of $138.1 million was classified as a current asset.
In November 1996, a gain of $14.5 million was recorded on the sale of an
investment in CGGS Canadian Gas Gathering Systems Inc. ("CGGS"), a private
company formerly managed by the Company. All of the shares of CGGS, including
those held by the Company, were acquired by a third party on November 16, 1996.
Prior to the sale of CGGS, the Company was entitled to receive fees upon the
acquisition by CGGS of producing natural gas properties, gas plants and related
gas gathering systems as well as fees for management services provided to CGGS.
Fees earned from CGGS during the year ended December 31, 1996 amounted to $3.3
million.
NOTE 12 -- SUBSEQUENT EVENT
On June 29, 1998 Northstar reached an agreement with Devon Energy
Corporation, an oil and gas exploration and development company based in
Oklahoma, to merge the two companies. On December 10, 1998, following the
approval of both companies' shareholders and certain other regulatory and court
approvals, the merger was closed. Under the agreement, Northstar shareholders
received .235 Devon common equivalent shares.
NOTE 13 -- CANADIAN AND UNITED STATES DIFFERENCES IN ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with Canadian
generally accepted accounting principles (GAAP). As indicated below, in certain
aspects GAAP as applied in the United States differs from Canadian GAAP.
(a) Under U.S. GAAP, the business combination with Morrison Petroleums Ltd.
in March 1997 would have been accounted for as a purchase, with Morrison being
deemed the acquirer, rather than as a pooling-of-interests. Under the purchase
method of accounting, the consideration paid is based on the fair value of the
Northstar shares deemed to have been issued to the former Northstar shareholders
and the purchase price including the fair value of assumed liabilities would be
allocated to the assets acquired. Under the purchase method of accounting,
results of operations of the acquired entity are included in the purchaser's
results from the date of acquisition; whereas, under the pooling-of-interests
method, all periods prior to the combination are restated to show the combined
historical results of the entities being pooled.
Accounting for the acquisition of Northstar under the purchase method
resulted in an additional amount being allocated to the oil and gas properties
acquired. Such higher costs of capital assets resulted in a corresponding
increase in the provision for depletion.
(b) Under the full cost method of accounting, as prescribed by the U.S.
Securities and Exchange Commission, the costs capitalized in a cost center are
limited to an amount equal to the present value of future net revenues from
proved reserves discounted at 10 percent plus the lower of cost or estimated
fair value of unproven properties. Under Canadian GAAP, future net revenue is
not discounted but projected financing and general and administration costs are
deducted. Due to this difference, the Northstar acquisition being accounted for
as a purchase and significant oil and gas price declines, an adjustment to
reflect a reduction in the carrying amount of oil and gas property costs at
December 31, 1997 and 1995 was required under U.S. GAAP. Additionally, an
adjustment to reflect Northstar's share of a reduction in the carrying amount of
oil and gas property costs of Mountain Energy, Inc., an equity investee of
Northstar was required in 1997.
21
<PAGE> 22
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reductions to the carrying amount of oil and gas property costs in 1997
and 1995, along with reductions that were also required in 1994 and 1991,
resulted in decreases to Northstar's historical provisions for depreciation and
depletion expense in periods subsequent to the write-downs.
(c) U.S. GAAP requires the use of the liability method of accounting for
income taxes. Under this method, deferred income taxes are recognized, at
current enacted rates, to reflect the expected future tax consequences arising
from the differences between the financial statement basis and tax basis of
assets and liabilities. Under Canadian GAAP, deferred income taxes are accounted
for using the deferred method.
Effective January 1, 1993, Morrison adopted the liability method for
reporting income taxes under SFAS 109 for U.S. GAAP purposes. This change
resulted in a reduction of deferred income taxes and a corresponding increase in
retained earnings.
(d) U.S. GAAP requires that an interest in a corporate joint venture of
which a joint venturer exercises significant influence, but which is not
controlled by the venturer, be accounted for under the equity method of
accounting. Under Canadian GAAP, such investments are accounted for using the
proportionate consolidation method.
(e) U.S. GAAP requires that gains and losses arising from the translation
of all long-term monetary assets and liabilities denominated in foreign
currencies be recognized in earnings in the periods in which such gains or
losses occur. Under Canadian GAAP, foreign exchange gains and losses on the
translation of long-term monetary assets and liabilities with a fixed and
ascertainable life extending beyond the following year are not recognized in
earnings immediately, but are amortized on a systematic and rational basis over
the remaining life of the related asset or liability.
(f) Basic earnings per share under Canada GAAP and U.S. GAAP are calculated
in the same manner. Diluted earnings per share under U.S. GAAP reflects the
potential dilution that could occur if options were exercised (calculated using
the treasury stock method) or if convertible securities were converted to common
stock. Potential dilution under Canadian GAAP is not based on the treasury stock
method.
22
<PAGE> 23
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following presents material differences between Canadian GAAP and U.S.
GAAP balance sheet presentation.
CAPITAL ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------
1998 1997 1996
------------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C>
As reported, Canadian GAAP.............................. $1,061,727 $1,037,350 $ 875,226
Accounting for Morrison transaction under the purchase
method(a)............................................. 439,606 388,384 (363,224)
Adjustment in carrying value of properties(b)........... (998,412) (998,412) (149,672)
Adjustment to account for interest in oil and gas
corporation under equity method of accounting(d)...... (11,092) (48,897) (43,434)
Adjustment for other differences........................ (13,177) (10,438) (8,389)
---------- ---------- ---------
Capital assets, U.S. GAAP............................... $ 478,652 $ 367,987 $ 310,507
========== ========== =========
STOCKHOLDER'S EQUITY
Reconciliation of stockholders' equity:
Total stockholders' equity under Canadian GAAP........ $ 425,223 $ 392,095 $ 638,072
Accounting for Morrison transaction under the purchase
method(a).......................................... 332,014 315,376 (264,178)
Adjustment in carrying value of properties(b)......... (647,296) (624,450) (83,079)
Adjustment to account for interest in oil and gas
corporation under equity method of accounting(d)... (11,092) (10,473) (635)
Adjustment for conversion to US GAAP method for
accounting for income taxes(c)..................... 18,703 7,957 (6,829)
Adjustment to record foreign currency transaction
gains and losses in accordance with U.S. GAAP(e)... (25,926) (4,801) (693)
---------- ---------- ---------
Total stockholders' equity under U.S. GAAP.... $ 91,626 $ 75,704 $ 282,658
========== ========== =========
</TABLE>
SHARE CAPITAL
The following information would have been presented on the face of the balance
sheet:
The common shares had no par value at September 30, 1998.
An unlimited number of common shares were authorized at September 30,
1998.
Common shares issued were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------------
1998 1997 1996
------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
68,469,685 67,963,722 45,687,565
</TABLE>
23
<PAGE> 24
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following reconciles differences between Canadian GAAP and U.S. GAAP
statement of earnings presentation.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------
1998 1997 1997 1996 1995
----------- ----------- --------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net earnings, as reported............. $29,543 $ 46,073 $ 50,065 $ 62,062 $ 36,578
Decrease for Morrison transaction
under the purchase method(a)........ (40,241) (31,650) (51,969) $(43,357) (27,111)
Write-down of oil and gas assets
required under U.S. ceiling
test(b)............................. -- -- (865,883) -- (133,015)
Decrease in depletion and depreciation
expense due to prior periods'
write-downs of oil and gas assets
required under U.S. ceiling
test(b)............................. 51,222 9,175 17,143 18,688 4,102
Decrease for adjustment to account for
interest in oil and gas corporation
under the equity method of
accounting including share of
write-down of investee(d)........... (619) (9,154) (9,838) (635) --
Adjustment for foreign currency
transaction losses(e)............... (21,125) (563) (4,108) (272) (421)
Tax effect of above adjustments....... (17,188) 3,031 330,281 9,067 65,223
Decrease for conversion to U.S. GAAP
method for accounting for income
taxes(c)............................ 10,745 7,600 14,814 (803) (715)
------- -------- --------- -------- --------
Net earnings (loss) in accordance with
U.S. GAAP........................... $12,337 $ 24,512 $(519,495) $ 44,750 $(55,359)
======= ======== ========= ======== ========
Net earnings per common share:
Basic............................... $ 0.18 $ 0.38 $ (8.24) $ 0.99 $ (1.25)
Diluted............................. $ 0.18 $ 0.37 $ (8.24) $ 0.99 $ (1.25)
</TABLE>
Basic earnings per share under Canada GAAP and U.S. GAAP are calculated in
the same manner. Diluted earnings per share under U.S. GAAP reflect the
potential dilution that could occur if options were exercised (calculated using
the treasury stock method) or if convertible securities were converted to common
stock. Potential dilution under Canadian GAAP is not based on the treasury stock
method.
For U.S. reporting, the information contained in the consolidated statement
of operations and retained earnings would be combined to develop a complete
statement of shareholders' equity.
24
<PAGE> 25
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effect of U.S. GAAP on retained earnings would be as follows:
<TABLE>
<S> <C>
Retained earnings under Canadian GAAP, December 31, 1994.... $ 152,908
Impact of purchase accounting treatment for business
combination with Morrison.................................
December 31, 1995......................................... (48,804)
Decrease for cumulative effect of write-down of oil and gas
assets under U.S. ceiling test............................ (21,975)
Decrease for conversion to U.S. GAAP method for accounting
for income taxes(c)....................................... (5,311)
---------
Retained earnings at December 31, 1994 restated under U.S.
GAAP...................................................... 76,818
Net income (loss) under U.S. GAAP for the years ended:
December 31, 1995........................................... (55,359)
December 31, 1996........................................... 44,750
December 31, 1997........................................... (519,495)
Dividends paid.............................................. (5,105)
---------
Retained earnings (deficit) at December 31, 1997 under U.S.
GAAP...................................................... (458,391)
Net income under U.S. GAAP for the nine months ended
September 30, 1998 (unaudited)............................ 12,337
---------
Retained earnings (deficit) at September 30, 1998 restated
under U.S. GAAP (unaudited)............................... $(446,054)
=========
</TABLE>
The U.S. GAAP cash flows would be as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- ---------------------------------
1998 1997 1997 1996 1995
----------- ----------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities under Canadian
GAAP.......................... $ 79,351 103,833 $ 170,885 $ 200,776 $ 147,286
- - Reclassification of certain
financing and investing
activities to operating
activities.................... (4,223) (4,229) (4,898) (6,738) 5,748
- - Accounting for Morrison
transaction under purchase
method........................ -- (33,022) (33,022) (113,357) (69,630)
- - Adjustment to account for oil
and gas company under equity
method of accounting.......... 2,491 (7,404) (15,553) (2,141) --
-------- --------- --------- --------- ---------
Cash flows from operating
activities under U.S. GAAP.... 77,619 59,178 117,412 78,540 83,404
-------- --------- --------- --------- ---------
Cash flows from investing
activities under Canadian
GAAP.......................... (15,439) 59,089 (42,100) (366,984) (368,264)
- - Accounting for Morrison
transaction under purchase
method........................ -- 46,107 46,024 117,940 174,440
- - Reclassification of certain
investing activities to
operating activities.......... 1,670 767 2,404 953 585
- - Adjustment to account for oil
and gas company under equity
method of accounting.......... (2,839) (35,731) (28,811) 45,263 --
-------- --------- --------- --------- ---------
Cash flows from investing
activities under U.S. GAAP.... (16,608) 70,232 (22,483) (202,828) (193,239)
-------- --------- --------- --------- ---------
</TABLE>
25
<PAGE> 26
NORTHSTAR ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- ---------------------------------
1998 1997 1997 1996 1995
----------- ----------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from financing
activities under Canadian
GAAP.......................... (63,912) (196,781) (162,644) 190,189 208,283
- - Reclassification of certain
financing activities to
operating activities.......... 2,553 3,462 2,494 5,785 (6,333)
- - Accounting for Morrison
transaction under purchase
method........................ -- 14,106 14,189 (31,774) (99,347)
- - Adjustment to account for oil
and gas company under equity
method of accounting.......... 348 44,303 45,532 (44,290) --
-------- --------- --------- --------- ---------
Cash flows from financing
activities under U.S. GAAP.... (61,011) (134,910) (100,429) 119,910 102,603
-------- --------- --------- --------- ---------
</TABLE>
Cash flows reported under U.S. GAAP differ from those reported under
Canadian GAAP in certain respects.
Site restoration costs and deferred revenue which are shown as investing
and financing activities, respectively, under Canadian GAAP are shown as
operating activities under U.S. GAAP.
Changes in activities related to a corporate joint venture which is
accounted for using the proportionate consolidation method under Canadian GAAP
have been removed and restated to reflect accounting for the investment under
the equity method of accounting for U.S. GAAP purposes.
Under Canadian GAAP, the Morrison combination has been shown as a
pooling-of-interests. For U.S. GAAP, this transaction has been accounted for as
a purchase.
NOTE 14 -- RECLASSIFICATION OF THE PRIOR YEAR'S BALANCES
Certain balances from the prior year's consolidated financial statements
have been reclassified to conform with the current year's presentation.
26
<PAGE> 27
DEVON-NORTHSTAR
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Set forth below is certain unaudited pro forma combined financial
information with respect to the Combination. Such information gives effect to
the Combination under the pooling-of-interests method of accounting under U.S.
GAAP. Accordingly, the unaudited pro forma combined balance sheet has been
presented as if Devon and Northstar were combined at the date of such pro forma
balance sheet. The unaudited pro forma combined statements of operations have
been presented as if Devon and were combined as of the beginning of the earliest
period presented.
The following unaudited pro forma combined financial statements should be
read in conjunction with the notes thereto immediately following such unaudited
pro forma combined financial statements, and the consolidated financial
statements and related notes of Devon included in Devon's Form 10-K for the year
ended December 31, 1997, and Devon's Form 10-Q for the quarter ended September
30, 1998. The following unaudited pro forma combined financial statements should
also be read in conjunction with the consolidated financial statements and
related notes of Northstar, which are included elsewhere herein. The unaudited
pro forma combined financial information is presented for illustrative purposes
only and is not necessarily indicative of actual results of operations or
financial position that would have been achieved had the Combination been
consummated at the beginning of the earliest period presented. The unaudited pro
forma combined financial information is also not necessarily indicative of
future results.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINATION DEVON-
RELATED NORTHSTAR
NORTHSTAR PRO FORMA PRO FORMA
DEVON U.S. GAAP(1) ADJUSTMENTS(2) COMBINED
-------- ------------ -------------- ----------
<S> <C> <C> <C> <C>
Assets:
Current assets......................... $ 51,069 $ 63,695 $(13,000)(a) $ 101,764
Oil and gas properties, net............ 651,441 308,936 960,377
Other property and equipment, net...... 21,000 4,773 25,773
Deferred income taxes.................. -- 53,553 (53,553)(b) --
Other assets, net...................... 13,839 1,645 15,484
-------- --------- -------- ----------
Total assets................... $737,349 $ 432,602 $(66,553) $1,103,398
======== ========= ======== ==========
Liabilities:
Current liabilities.................... $ 23,623 $ 62,815 $ 86,438
Revenues and royalties due to others... 2,970 6,218 9,188
Other liabilities...................... 24,343 -- 24,343
Long-term debt......................... -- 303,517 303,517
Deferred income taxes.................. 67,588 -- $(53,553)(b) 14,035
Company-obligated mandatorily
redeemable convertible preferred
securities of subsidiary trust
holding solely 6.5% convertible
junior subordinated debentures of
Devon Energy Corporation............ 149,500 -- 149,500
Stockholders' equity:
Preferred stock........................ -- -- --
Common stock........................... 3,232 -- 1,609(c) 4,841
Additional paid-in capital............. 392,937 397,178 (1,609)(c) 788,506
Retained earnings (deficit)............ 79,769 (316,760) (13,000)(a) (249,991)
Accumulated other comprehensive
earnings (loss) -- foreign currency
translation adjustments............. (6,613) (20,366) (26,979)
-------- --------- -------- ----------
Total stockholders' equity..... 469,325 60,052 (13,000) 516,377
-------- --------- -------- ----------
Total liabilities and
stockholders' equity......... $737,349 $ 432,602 $(66,553) $1,103,398
======== ========= ======== ==========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
27
<PAGE> 28
DEVON-NORTHSTAR
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DEVON-
NORTHSTAR
NORTHSTAR PRO FORMA
DEVON U.S. GAAP(1) COMBINED
-------- ------------ ---------
<S> <C> <C> <C>
Revenues:
Oil sales................................................ $ 65,470 $ 45,931 $111,401
Gas sales................................................ 102,770 54,524 157,294
Natural gas liquids sales................................ 11,120 2,469 13,589
Other.................................................... 5,146 10,652 15,798(4)
-------- -------- --------
Total revenues................................... 184,506 113,576 298,082
-------- -------- --------
Costs and expenses:
Lease operating expenses................................. 55,306 30,492 85,798
Production taxes......................................... 9,786 1,030 10,816
Depreciation, depletion and amortization................. 68,197 24,716 92,913
General and administrative expenses...................... 9,907 7,773 17,680
Interest expense......................................... 184 16,160 16,344
Deferred effect of changes in foreign currency exchange
rate on long-term debt................................ -- 15,433 15,433
Distributions on preferred securities of subsidiary
trust................................................. 7,288 -- 7,288
Reduction of carrying value of oil and gas properties.... 126,900 -- 126,900
-------- -------- --------
Total costs and expenses......................... 277,568 95,604 373,172
-------- -------- --------
Earnings (loss) before income taxes........................ (93,062) 17,972 (75,090)
Income tax expense (benefit):
Current.................................................. 5,482 1,032 6,514
Deferred................................................. (33,215) 8,408 (24,807)
-------- -------- --------
Total income tax expense (benefit)............... (27,733) 9,440 (18,293)
-------- -------- --------
Net earnings (loss)........................................ $(65,329) $ 8,532 $(56,797)
======== ======== ========
Net earnings (loss) per average common share outstanding:
Basic.................................................... $ (2.02) $ (1.17)
Diluted.................................................. $ (2.02) $ (1.17)
Weighted average common shares outstanding -- basic........ 32,320 48,362
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
28
<PAGE> 29
DEVON-NORTHSTAR
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DEVON-
NORTHSTAR
NORTHSTAR PRO FORMA
DEVON U.S. GAAP(1) COMBINED
-------- ------------ ---------
<S> <C> <C> <C>
Revenues:
Oil sales............................................. $100,857 $ 53,016 $153,873
Gas sales............................................. 107,458 44,413 151,871
Natural gas liquids sales............................. 16,534 1,380 17,914
Other................................................. 5,563 37,176 42,739(4)
-------- -------- --------
Total revenues................................ 230,412 135,985 366,397
-------- -------- --------
Costs and expenses:
Lease operating expenses.............................. 46,156 24,711 70,867
Production taxes...................................... 13,165 803 13,968
Depreciation, depletion and amortization.............. 60,389 55,751 116,140
General and administrative expenses................... 9,229 9,564 18,793
Interest expense...................................... 249 10,192 10,441
Deferred effect of changes in foreign currency
exchange rate on long-term debt.................... -- 406 406
Distributions on preferred securities of subsidiary
trust.............................................. 7,288 -- 7,288
-------- -------- --------
Total costs and expenses...................... 136,476 101,427 237,903
-------- -------- --------
Earnings before income taxes............................ 93,936 34,558 128,494
Income tax expense:
Current............................................... 14,091 1,465 15,556
Deferred.............................................. 23,484 15,414 38,898
-------- -------- --------
Total income tax expense...................... 37,585 16,879 54,454
-------- -------- --------
Net earnings............................................ $ 56,361 $ 17,679 $ 74,040
======== ======== ========
Net earnings per average common share outstanding:
Basic................................................. $ 1.75 $ 1.59
Diluted............................................... $ 1.62 $ 1.51
Weighted average common shares outstanding-basic........ 32,181 46,628
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
29
<PAGE> 30
DEVON-NORTHSTAR
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DEVON-
NORTHSTAR
NORTHSTAR PRO FORMA
DEVON U.S. GAAP(1) COMBINED
-------- ------------ ---------
<S> <C> <C> <C>
Revenues:
Oil sales.............................................. $133,445 $ 74,280 $ 207,725
Gas sales.............................................. 150,549 68,910 219,459
Natural gas liquids sales.............................. 21,754 3,166 24,920
Other.................................................. 7,392 40,163 47,555(4)
-------- --------- ---------
Total revenues................................. 313,140 186,519 499,659
-------- --------- ---------
Costs and expenses:
Lease operating expenses............................... 65,655 35,242 100,897
Production taxes....................................... 17,924 1,303 19,227
Depreciation, depletion and amortization............... 85,307 83,801 169,108
General and administrative expenses.................... 12,922 11,459 24,381
Interest expense....................................... 274 18,514 18,788
Deferred effect of changes in foreign currency exchange
rate on long-term debt.............................. -- 5,860 5,860
Distributions on preferred securities of subsidiary
trust............................................... 9,717 -- 9,717
Reduction of carrying value of oil and gas
properties.......................................... -- 625,514 625,514
-------- --------- ---------
Total costs and expenses....................... 191,799 781,693 973,492
-------- --------- ---------
Earnings (loss) before income taxes...................... 121,341 (595,174) (473,833)
Income tax expense (benefit):
Current................................................ 25,202 1,655 26,857
Deferred............................................... 20,847 (221,546) (200,699)
-------- --------- ---------
Total income tax expense (benefit)............. 46,049 (219,891) (173,842)
-------- --------- ---------
Net earnings (loss)...................................... $ 75,292 $(375,283) $(299,991)
======== ========= =========
Net earnings (loss) per average common share outstanding:
Basic.................................................. $ 2.34 $ (6.38)
Diluted................................................ $ 2.17 $ (6.38)
Weighted average common shares outstanding -- basic...... 32,216 47,040
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
30
<PAGE> 31
DEVON-NORTHSTAR
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DEVON-
NORTHSTAR
NORTHSTAR PRO FORMA
DEVON U.S. GAAP(1) COMBINED
-------- ------------ ---------
<S> <C> <C> <C>
Revenues:
Oil sales............................................. $ 80,142 $ 55,881 $136,023
Gas sales............................................. 68,049 33,394 101,443
Natural gas liquids sales............................. 14,367 4,932 19,299
Other................................................. 1,459 33,111 34,570(4)
-------- -------- --------
Total revenues................................ 164,017 127,318 291,335
-------- -------- --------
Costs and expenses:
Lease operating expenses.............................. 31,568 27,166 58,734
Production taxes...................................... 10,658 222 10,880
Depreciation, depletion and amortization.............. 43,361 26,946 70,307
General and administrative expenses................... 9,101 6,010 15,111
Interest expense...................................... 5,277 7,385 12,662
Deferred effect of changes in foreign currency
exchange rate on long-term debt.................... -- 199 199
Distributions on preferred securities of subsidiary
trust.............................................. 4,753 -- 4,753
-------- -------- --------
Total costs and expenses...................... 104,718 67,928 172,646
-------- -------- --------
Earnings before income taxes............................ 59,299 59,390 118,689
Income tax expense:
Current............................................... 6,709 1,125 7,834
Deferred.............................................. 17,789 25,463 43,252
-------- -------- --------
Total income tax expense...................... 24,498 26,588 51,086
-------- -------- --------
Net earnings............................................ $ 34,801 $ 32,802 $ 67,603
======== ======== ========
Net earnings per average common share outstanding:
Basic................................................. $ 1.57 $ 2.06
Diluted............................................... $ 1.52 $ 1.99
Weighted average common shares outstanding -- basic..... 22,160 32,812
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
31
<PAGE> 32
DEVON-NORTHSTAR
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DEVON-
NORTHSTAR
NORTHSTAR PRO FORMA
DEVON U.S. GAAP(1) COMBINED
-------- ------------ ---------
<S> <C> <C> <C>
Revenues:
Oil sales............................................. $ 55,290 $ 60,316 $115,606
Gas sales............................................. 50,732 20,462 71,194
Natural gas liquids sales............................. 6,404 2,687 9,091
Other................................................. 877 13,375 14,252(4)
-------- -------- --------
Total revenues................................ 113,303 96,840 210,143
-------- -------- --------
Costs and expenses:
Lease operating expenses.............................. 27,289 24,435 51,724
Production taxes...................................... 6,832 220 7,052
Depreciation, depletion and amortization.............. 38,090 35,350 73,440
General and administrative expenses................... 8,419 6,487 14,906
Interest expense...................................... 7,051 3,834 10,885
Deferred effect of changes in foreign currency
exchange rate on long-term debt.................... -- 307 307
Reduction of carrying value of oil and gas
properties......................................... -- 97,061 97,061
-------- -------- --------
Total costs and expenses...................... 87,681 167,694 255,375
-------- -------- --------
Earnings (loss) before income taxes..................... 25,622 (70,854) (45,232)
Income tax expense (benefit):
Current............................................... 4,495 797 5,292
Deferred.............................................. 6,625 (31,256) (24,631)
-------- -------- --------
Total income tax expense (benefit)............ 11,120 (30,459) (19,339)
-------- -------- --------
Net earnings (loss)..................................... $ 14,502 $(40,395) $(25,893)
======== ======== ========
Net earnings (loss) per average common share
outstanding:
Basic................................................. $ 0.66 $ (0.80)
Diluted............................................... $ 0.65 $ (0.80)
Weighted average common shares outstanding -- basic..... 22,074 32,473
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
32
<PAGE> 33
DEVON-NORTHSTAR
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma combined financial information is
presented to reflect the consummation of the Combination as described elsewhere
herein. The pro forma combined balance sheet and statements of operations are
presented under the pooling-of-interests method of accounting under U.S. GAAP.
Accordingly, the unaudited pro forma combined balance sheet has been presented
as if Devon and Northstar were combined at the date of such pro forma balance
sheet. The unaudited pro forma combined statements of operations have been
prepared as if Devon and Northstar were combined as of the beginning of the
earliest period presented.
The accompanying unaudited pro forma combined financial information has
been prepared based on estimates and assumptions deemed by Devon to be
appropriate and does not purport to be indicative of the financial position or
results of operations which would actually have been attained if the Combination
had been consummated as presented in such statements or which may be obtained in
the future. In addition, future results may vary significantly from the results
reflected in such statements due to normal oil and natural gas production
declines, changes in prices received for oil, gas and NGLs, future acquisitions
and other factors.
The unaudited pro forma combined financial information should be read in
conjunction with the historical consolidated financial statements and related
notes thereto for Devon included in Devon's Form 10-K for the year ended
December 31, 1997, and Devon's Form 10-Q for the quarter ended September 30,
1998. The unaudited pro forma combined financial information should also be read
in conjunction with the historical consolidated financial statements and related
notes for Northstar which are included elsewhere herein.
The historical consolidated financial statements for Northstar were
prepared under Canadian GAAP and in Canadian dollars. For these unaudited pro
forma combined financial statements, the historical financial information of
Northstar has been converted to U.S. dollars using the September 30, 1998,
exchange rate for the balance sheet and the average exchange rates for the nine
month periods ended September 30, 1998 and 1997, and the years 1997, 1996 and
1995, for the statements of operations. These unaudited pro forma financial
statements also present the historical Northstar financial statements under U.S.
GAAP. See "Unaudited U.S. GAAP Financial Information -- Northstar" for more
complete information on Northstar's U.S. GAAP financial data, including the
adjustments made to convert Northstar's historical data from Canadian GAAP and
Canadian dollars to U.S. GAAP and U.S. dollars. Also, see Note 13 to Northstar's
historical consolidated financial statements included elsewhere herein for a
description of the adjustments to convert Northstar's financial statements from
Canadian GAAP to U.S. GAAP. In addition, certain reclassifications have been
made to Northstar's historical consolidated financial statements to conform to
Devon's financial statement presentation.
In March, 1997, Northstar acquired all the outstanding common shares of
Morrison by issuing approximately 46.1 million Northstar Common Shares. The
Northstar Common Shares received by the Morrison shareholders represented
approximately 53% of the combined company's outstanding shares. Therefore, under
U.S. GAAP, this transaction would be accounted for as a reverse acquisition of
Northstar by Morrison. Accordingly, the results presented for periods through
March, 1997 for Northstar using U.S. GAAP represent the historical results of
Morrison, the "accounting acquirer." Because Northstar was the "legal acquirer,"
the financial results and other information for periods through March, 1997, are
referred to as "Northstar's" results and information, even though they represent
the historical results of Morrison. For periods subsequent to March, 1997, the
results presented for Northstar using U.S. GAAP represent the historical results
of Morrison, combined with the results of Northstar after valuing Northstar's
March, 1997, assets and liabilities at fair value, rather than historical book
value.
33
<PAGE> 34
DEVON-NORTHSTAR
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
Under Canadian GAAP, the Morrison transaction was accounted for under the
pooling-of-interests method of accounting. Accordingly, for Northstar's results
presented using Canadian GAAP, the historical results of Northstar and Morrison
have been combined for all periods presented.
2. PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma combined balance sheet includes the
following adjustments:
(a) To record payment of estimated business combination costs of $13
million, representing primarily professional and advisory fees directly
related to the Combination. These one-time business combination costs are
not reflected in the pro forma statements of operations since they are
non-recurring in nature. These costs were expensed by Devon in the fourth
quarter when the Combination was consummated.
(b) To reclassify deferred tax assets against deferred tax
liabilities.
(c) To record the issuance of 16,090,376 shares, par value $0.10, of
Devon common stock in exchange for all 68,469,685 shares of Northstar
common shares outstanding on September 30, 1998, based upon an exchange
ratio which is indirectly equivalent to 0.235 shares of Devon common stock
for each Northstar common share and assuming all Exchangeable Shares are
exchanged for Devon common stock on such basis.
The unaudited pro forma combined statements of operations reflect no
adjustments to the historical statements of Devon or the U.S. GAAP statements of
Northstar. Northstar's historical statements are adjusted for differences
between Canadian GAAP and U.S. GAAP, and for differences between Northstar's and
Devon's presentation, in the "Unaudited U.S. GAAP Financial
Information -- Northstar" immediately following these notes.
3. COMMON SHARES OUTSTANDING
Net earnings per average common share outstanding have been calculated
based upon the pro forma weighted average number of shares outstanding for each
period presented. For computing pro forma basic net earnings per share, Devon's
historical weighted average number of shares outstanding was increased in each
period by the weighted average number of Northstar common shares outstanding,
multiplied by the exchange ratio of 0.235. For computing pro forma diluted
earnings per share, Devon's historical weighted average number of diluted shares
was further increased by the dilutive effect of Northstar's stock options that
Devon assumed under the Combination. For the nine month periods ended September
30, 1998 and 1997 and the years ended December 31, 1997, 1996 and 1995, the
additional number of diluted shares added for the effect of Northstar options
assumed were 174,000, 150,000, 282,000, 17,000, and 21,000 shares, respectively.
34
<PAGE> 35
DEVON-NORTHSTAR
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
4. OTHER REVENUE
Devon-Northstar pro forma combined other revenues consists of the following
items:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ---------------------------
1998 1997 1997 1996 1995
-------- -------- ------- ------- -------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Third party gas processing income............ $ 4,324 $ 5,916 $ 7,318 $ 6,313 $ 1,465
Gain from termination of gas contract........ 5,047 -- -- -- --
Management contract termination fee.......... 2,765 -- -- -- --
Gain (loss) on sale of assets................ 93 29,536 29,573 10,598 (273)
Management and administration fees........... 884 3,947 4,963 6,209 4,579
Alberta royalty tax credits.................. 1,418 1,573 2,137 1,191 1,076
Marketing revenues........................... (3) 175 165 688 1,273
Pipeline revenues............................ -- -- -- 3,455 3,179
Earnings (loss) from investments in
unconsolidated subsidiaries................ (902) (884) 382 3,559 684
Interest and other........................... 2,172 2,476 3,017 2,557 2,269
------- ------- ------- ------- -------
Total.............................. $15,798 $42,739 $47,555 $34,570 $14,252
======= ======= ======= ======= =======
</TABLE>
In the nine month period ended September 30, 1998, Northstar U.S. GAAP
other revenues included $0.8 million of management and administration fees.
However, the arrangements under which such fees were generated were terminated
during the second quarter of 1998. Northstar received $2.8 million in June 1998
related to the termination of such management arrangements. Also in June 1998,
Northstar received a one-time payment of $5.0 million from a gas purchaser for
the termination of a gas contract.
5. DEPRECIATION, DEPLETION AND AMORTIZATION RATE
Following is a comparison of Devon's combined depreciation, depletion and
amortization rate per Boe for its U.S. and Canadian full cost pools on an
historical basis before the Combination and on a pro forma basis after the
Combination.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------- -----------------------
1998 1997 1997 1996 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Historical rate prior to the Combination........... $4.29 $3.86 $4.08 $3.88 $3.65
Pro forma rate after the Combination............... $3.28 $4.62 $4.86 $3.69 $4.04
</TABLE>
The pro forma rates after the Combination for the nine months ended
September 30, 1998, and the years 1997 and 1995 do not include the effects of
reductions of the carrying value of oil and gas properties under ceiling
limitations of its full cost pool in accordance with SEC rules and regulations.
The reductions totaled $126.9 million in the nine months ended September 30,
1998, $625.5 million in the year 1997 and $97.1 million in the year 1995. The
amounts of these reductions per Boe were $4.64 per Boe in the nine months ended
September 30, 1998, $45.36 per Boe in 1997 and $12.74 per Boe in the year 1995.
35
<PAGE> 36
DEVON-NORTHSTAR
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
6. SUPPLEMENTAL PRO FORMA INFORMATION ON OIL AND GAS OPERATIONS
The following pro forma supplemental information regarding oil and gas
operations is presented pursuant to the disclosure requirements promulgated by
the SEC and Statement of Financial Accounting Standards No. 69, "Disclosures
About Oil and Gas Producing Activities."
Pro Forma Capitalized Costs
The following table sets forth the aggregate amount of pro forma
capitalized costs relating to oil and gas producing activities and the aggregate
amount of related accumulated depreciation, depletion and amortization assuming
the Combination was consummated as of December 31, 1997.
<TABLE>
<S> <C>
Oil and gas properties:
Subject to amortization................................... $ 2,304,808,000
Not subject to amortization............................... 130,747,000
---------------
2,435,555,000
Accumulated depreciation, depletion and amortization...... (1,466,336,000)
---------------
Net capitalized costs..................................... $ 969,219,000
===============
Share of equity method investee's net capitalized costs..... $ 48,131,000
===============
</TABLE>
Pro Forma Results of Operations for Oil and Gas Producing Activities
The following tables include pro forma revenues and expenses associated
directly with oil and gas producing activities for the years ended December 31,
1997, 1996 and 1995, assuming the Combination was consummated at the beginning
of 1995. The following information does not include any allocation of pro forma
interest costs or general corporate overhead and, therefore, is not necessarily
indicative of the contribution to net earnings of oil and gas operations. Income
tax expense has been calculated by applying statutory income tax rates to oil
and gas sales after deducting costs, including depreciation, depletion and
amortization and reductions of carrying value of oil and gas properties, and
after giving effect to permanent differences and tax credits.
<TABLE>
<CAPTION>
TOTAL
-------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Oil, gas and natural gas liquids ("NGLs") sales... $ 452,104,000 $256,765,000 $195,890,000
Production and operating expenses................. (120,124,000) (69,614,000) (58,776,000)
Depreciation, depletion and amortization.......... (164,977,000) (67,832,000) (71,376,000)
Reduction of carrying value of oil and gas
properties...................................... (625,514,000) -- (97,061,000)
Income tax (expense) benefit...................... 159,511,000 (45,870,000) 17,016,000
------------- ------------ ------------
Results of operations for oil and gas producing
activities...................................... $(299,000,000) $ 73,449,000 $(14,307,000)
============= ============ ============
Share of equity method investee's results of
operations for oil and gas producing
activities...................................... $ (1,981,000) $ 620,000 $ --
============= ============ ============
</TABLE>
36
<PAGE> 37
DEVON-NORTHSTAR
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
DOMESTIC
------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Oil, gas and NGLs sales............................ $273,860,000 $162,558,000 $112,425,000
Production and operating expenses.................. (75,758,000) (42,226,000) (34,121,000)
Depreciation, depletion and amortization........... (73,091,000) (41,538,000) (36,640,000)
Income tax expense................................. (44,648,000) (27,796,000) (15,536,000)
------------ ------------ ------------
Results of operations for oil and gas producing
activities....................................... $ 80,363,000 $ 50,998,000 $ 26,128,000
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
CANADA
-------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Oil, gas and NGLs sales........................... $ 178,244,000 $ 94,207,000 $ 83,465,000
Production and operating expenses................. (44,366,000) (27,388,000) (24,655,000)
Depreciation, depletion and amortization.......... (91,886,000) (26,294,000) (34,736,000)
Reduction of carrying value of oil and gas
properties...................................... (625,514,000) -- (97,061,000)
Income tax (expense) benefit...................... 204,159,000 (18,074,000) 32,552,000
------------- ------------ ------------
Results of operations for oil and gas producing
activities...................................... $(379,363,000) $ 22,451,000 $(40,435,000)
============= ============ ============
Share of equity method investee's results of
operations for oil and gas producing
activities...................................... $ (1,981,000) $ 620,000 $ --
============= ============ ============
</TABLE>
37
<PAGE> 38
DEVON-NORTHSTAR
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
Pro Forma Quantities of Oil and Gas Reserves
Set forth below is a pro forma summary of the changes in the net quantities
of crude oil, natural gas and NGLs reserves for the three year period ended
December 31, 1997. The following information assumes the Combination was
effective as of the end of 1994.
<TABLE>
<CAPTION>
TOTAL
----------------------------------------
OIL (BBLS) GAS (MCF) NGLs (Bbls)
----------- ------------ -----------
<S> <C> <C> <C>
Actual Devon proved reserves as of December 31,
1994............................................... 42,165,000 347,560,000 5,442,000
Actual Northstar proved reserves as of December 31,
1994............................................ 15,779,000 191,600,000 2,223,000
----------- ------------ ----------
Pro forma Devon proved reserves as of December 31,
1994............................................... 57,944,000 539,160,000 7,665,000
Revisions of previous estimates.................... 2,250,000 (2,683,000) 532,000
Extensions and discoveries......................... 4,661,000 82,445,000 773,000
Purchase of reserves............................... 1,879,000 109,085,000 3,680,000
Production......................................... (7,130,000) (58,234,000) (831,000)
Sale of reserves................................... (605,000) (20,027,000) (269,000)
----------- ------------ ----------
Pro forma proved reserves as of December 31, 1995.... 58,999,000 649,746,000 11,550,000
Revisions of previous estimates.................... 4,982,000 (31,569,000) 1,022,000
Extensions and discoveries......................... 4,433,000 149,049,000 1,154,000
Purchase of reserves............................... 21,189,000 252,122,000 2,130,000
Production......................................... (6,780,000) (62,186,000) (1,255,000)
Sale of reserves................................... (2,668,000) (58,843,000) (411,000)
----------- ------------ ----------
Pro forma proved reserves as of December 31, 1996.... 80,155,000 898,319,000 14,190,000
Revisions of previous estimates.................... 42,000 (46,390,000) 1,544,000
Extensions and discoveries......................... 9,387,000 145,508,000 424,000
Purchase of reserves............................... 19,396,000 275,592,000 2,914,000
Production......................................... (11,783,000) (121,810,000) (1,891,000)
Sale of reserves................................... (156,000) (615,000) (3,000)
----------- ------------ ----------
Pro forma proved reserves as of December 31, 1997.... 97,041,000 1,150,604,000 17,178,000
=========== ============ ==========
Pro forma proved developed reserves as of:
December 31, 1994.................................. 34,497,000 515,902,000 5,346,000
December 31, 1995.................................. 43,236,000 597,564,000 8,230,000
December 31, 1996.................................. 72,330,000 810,465,000 12,563,000
December 31, 1997.................................. 88,258,000 984,374,000 16,332,000
Share of equity method investee's proved reserves as
of:
December 31, 1996.................................. 3,435,000 12,730,000 360,000
December 31, 1997.................................. 3,064,000 15,560,000 261,000
Share of equity method investee's proved developed
reserves as of:
December 31, 1996.................................. 2,665,000 12,433,000 347,000
December 31, 1997.................................. 2,543,000 15,356,000 254,000
</TABLE>
38
<PAGE> 39
DEVON-NORTHSTAR
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
DOMESTIC
--------------------------------------
OIL (BBLS) GAS (MCF) NGLS (BBLS)
---------- ----------- -----------
<S> <C> <C> <C>
Actual Devon proved reserves as of December 31, 1994... 42,165,000 347,560,000 5,442,000
Actual Northstar proved reserves as of December 31,
1994.............................................. -- -- --
---------- ----------- ----------
Pro forma Devon proved reserves as of December 31,
1994................................................. 42,165,000 347,560,000 5,442,000
Revisions of previous estimates...................... 1,127,000 (7,431,000) 535,000
Extensions and discoveries........................... 2,959,000 9,645,000 472,000
Purchase of reserves................................. 1,852,000 59,585,000 3,665,000
Production........................................... (3,300,000) (36,886,000) (600,000)
Sale of reserves..................................... (337,000) (8,627,000) (45,000)
---------- ----------- ----------
Pro forma proved reserves as of December 31, 1995...... 44,466,000 363,846,000 9,469,000
Revisions of previous estimates...................... 2,365,000 4,359,000 1,096,000
Extensions and discoveries........................... 3,680,000 14,849,000 852,000
Purchase of reserves................................. 13,659,000 209,064,000 1,246,000
Production........................................... (3,816,000) (35,714,000) (952,000)
Sale of reserves..................................... (403,000) (1,743,000) (16,000)
---------- ----------- ----------
Pro forma proved reserves as of December 31, 1996...... 59,951,000 554,661,000 11,695,000
Revisions of previous estimates...................... (1,358,000) (21,124,000) 1,531,000
Extensions and discoveries........................... 7,394,000 94,925,000 301,000
Purchase of reserves................................. 1,126,000 992,000 16,000
Production........................................... (6,055,000) (61,015,000) (1,468,000)
Sale of reserves..................................... (156,000) (615,000) (3,000)
---------- ----------- ----------
Pro forma proved reserves as of December 31, 1997...... 60,902,000 567,824,000 12,072,000
========== =========== ==========
Pro forma proved developed reserves as of:
December 31, 1994.................................... 18,718,000 324,302,000 3,123,000
December 31, 1995.................................... 28,703,000 311,664,000 6,149,000
December 31, 1996.................................... 52,672,000 529,407,000 10,328,000
December 31, 1997.................................... 53,059,000 462,082,000 11,289,000
</TABLE>
39
<PAGE> 40
DEVON-NORTHSTAR
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
CANADA
--------------------------------------
OIL (BBLS) GAS (MCF) NGLS (BBLS)
---------- ----------- -----------
<S> <C> <C> <C>
Actual Devon proved reserves as of December 31, 1994... -- -- --
Actual Northstar proved reserves as of December 31,
1994.............................................. 15,779,000 191,600,000 2,223,000
---------- ----------- ---------
Pro forma Devon proved reserves as of December 31,
1994................................................. 15,779,000 191,600,000 2,223,000
Revisions of previous estimates...................... 1,123,000 4,748,000 (3,000)
Extensions and discoveries........................... 1,702,000 72,800,000 301,000
Purchase of reserves................................. 27,000 49,500,000 15,000
Production........................................... (3,830,000) (21,348,000) (231,000)
Sale of reserves..................................... (268,000) (11,400,000) (224,000)
---------- ----------- ---------
Pro forma proved reserves as of December 31, 1995...... 14,533,000 285,900,000 2,081,000
Revisions of previous estimates...................... 2,617,000 (35,928,000) (74,000)
Extensions and discoveries........................... 753,000 134,200,000 302,000
Purchase of reserves................................. 7,530,000 43,058,000 884,000
Production........................................... (2,964,000) (26,472,000) (303,000)
Sale of reserves..................................... (2,265,000) (57,100,000) (395,000)
---------- ----------- ---------
Pro forma proved reserves as of December 31, 1996...... 20,204,000 343,658,000 2,495,000
Revisions of previous estimates...................... 1,400,000 (25,266,000) 13,000
Extensions and discoveries........................... 1,993,000 50,583,000 123,000
Purchase of reserves................................. 18,270,000 274,600,000 2,898,000
Production........................................... (5,728,000) (60,795,000) (423,000)
Sale of reserves..................................... -- -- --
---------- ----------- ---------
Pro forma proved reserves as of December 31, 1997...... 36,139,000 582,780,000 5,106,000
========== =========== =========
Pro forma proved developed reserves as of:
December 31, 1994.................................... 15,779,000 191,600,000 2,223,000
December 31, 1995.................................... 14,533,000 285,900,000 2,081,000
December 31, 1996.................................... 19,658,000 281,058,000 2,235,000
December 31, 1997.................................... 35,199,000 522,292,000 5,043,000
Share of equity method investee's proved reserves as
of:
December 31, 1996.................................... 3,435,000 12,730,000 360,000
December 31, 1997.................................... 3,064,000 15,560,000 261,000
Share of equity method investee's proved developed
reserves as of:
December 31, 1996.................................... 2,665,000 12,433,000 347,000
December 31, 1997.................................... 2,543,000 15,356,000 254,000
</TABLE>
40
<PAGE> 41
DEVON-NORTHSTAR
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
Pro Forma Standardized Measure of Discounted Future Net Cash Flows
The accompanying tables reflect the pro forma standardized measure of
discounted future net cash flows relating to Devon's interest in proved oil, gas
and NGLs reserves as of December 31, 1997, 1996 and 1995, assuming the
Combination was effective as of the beginning of 1995.
<TABLE>
<CAPTION>
TOTAL
--------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995
--------------- --------------- --------------
<S> <C> <C> <C>
Future cash inflows......................... $ 3,728,815,000 $ 4,972,804,000 $2,050,722,000
Future costs:
Development............................... (120,277,000) (90,638,000) (71,190,000)
Production................................ (1,386,943,000) (1,377,410,000) (762,839,000)
Future income tax expense................... (399,972,000) (953,748,000) (153,431,000)
--------------- --------------- --------------
Future net cash flows....................... 1,821,623,000 2,551,008,000 1,063,262,000
10% discount to reflect timing of cash
flows..................................... (720,947,000) (1,096,034,000) (420,857,000)
--------------- --------------- --------------
Standardized measure of discounted future
net cash flows............................ $ 1,100,676,000 $ 1,454,974,000 $ 642,405,000
=============== =============== ==============
Discounted future net cash flows before
income taxes.............................. $ 1,340,644,000 $ 1,999,748,000 $ 730,753,000
=============== =============== ==============
Share of equity method investee's
standardized measure of discounted future
net cash flows............................ $ 34,172,000 $ 41,634,000 $ --
=============== =============== ==============
Share of equity method investee's discounted
future net cash flows before income
taxes..................................... $ 45,777,000 $ 64,619,000 $ --
=============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
DOMESTIC
-------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995
-------------- --------------- --------------
<S> <C> <C> <C>
Future cash inflows.......................... $2,304,602,000 $ 3,712,956,000 $1,476,418,000
Future costs:
Development................................ (83,350,000) (54,064,000) (52,327,000)
Production................................. (806,130,000) (1,013,750,000) (496,279,000)
Future income tax expense.................... (269,880,000) (713,182,000) (153,431,000)
-------------- --------------- --------------
Future net cash flows........................ 1,145,242,000 1,931,960,000 774,381,000
10% discount to reflect timing of cash
flows...................................... (481,263,000) (846,174,000) (328,481,000)
-------------- --------------- --------------
Standardized measure of discounted future net
cash flows................................. $ 663,979,000 $ 1,085,786,000 $ 445,900,000
============== =============== ==============
Discounted future net cash flows before
income taxes............................... $ 820,448,000 $ 1,486,603,000 $ 534,248,000
============== =============== ==============
</TABLE>
41
<PAGE> 42
DEVON-NORTHSTAR
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
CANADA
-----------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Future cash inflows............................ $1,424,213,000 $1,259,848,000 $ 574,304,000
Future costs:
Development.................................. (36,927,000) (36,574,000) (18,863,000)
Production................................... (580,813,000) (363,660,000) (266,560,000)
Future income tax expense...................... (130,092,000) (240,566,000) --
-------------- -------------- -------------
Future net cash flows.......................... 676,381,000 619,048,000 288,881,000
10% discount to reflect timing of cash flows... (239,684,000) (249,860,000) (92,376,000)
-------------- -------------- -------------
Standardized measure of discounted future net
cash flows................................... $ 436,697,000 $ 369,188,000 $ 196,505,000
============== ============== =============
Discounted future net cash flows before income
taxes........................................ $ 520,196,000 $ 513,145,000 $ 196,505,000
============== ============== =============
Share of equity method investee's standardized
measure of discounted future net cash
flows........................................ $ 34,172,000 41,634,000 --
============== ============== =============
Share of equity method investee's discounted
future net cash flows before income taxes.... $ 45,777,000 $ 64,619,000 $ --
============== ============== =============
</TABLE>
Future cash inflows are computed by applying year-end prices (averaging
$16.22 per barrel of oil, adjusted for transportation and other charges, $1.64
per Mcf of gas and $13.32 per barrel of NGLs at December 31, 1997) to the
year-end quantities of proved reserves, except in those instances where fixed
and determinable price changes are provided by contractual arrangements in
existence at year-end. In addition to the future gas revenues calculated at
$1.64 per Mcf, Devon's total future gas revenues also include the future tax
credit payments to be received and recorded as gas revenues pursuant to the San
Juan Basin Transaction described in Note 3 to Devon's consolidated financial
statements included in its 1997 annual report on Form 10-K. Devon's future total
and domestic cash inflows as of December 31, 1997, shown in the tables above
include $35.2 million related to these tax credit payments from 1998 through
2002. This amount has been calculated using the assumption that the year-end
1997 tax credit rate of $1.05 per MMBtu remains constant.
Future development and production costs are computed by estimating the
expenditures to be incurred in developing and producing proved oil and gas
reserves at the end of the year, based on year-end costs and assuming
continuation of existing economic conditions.
Future income tax expenses are computed by applying the appropriate
statutory tax rates to the future pretax net cash flows relating to proved
reserves, net of the tax basis of the properties involved. The future income tax
expenses give effect to permanent differences and tax credits, but do not
reflect the impact of future operations.
42
<PAGE> 43
DEVON-NORTHSTAR
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
Pro Forma Changes Relating to the Standardized Measure of Discounted Future
Net Cash Flows
Principal changes in the total U.S. and Canadian combined standardized
measure of discounted future net cash flows attributable to Devon's proved
reserves are shown in the following table. The following reconciliation assumes
that the Combination was effective as of the end of 1994.
<TABLE>
<CAPTION>
TOTAL
-----------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Devon's actual beginning balance as of December
31, 1994....................................... $ 358,206,000
Northstar's actual beginning balance as of
December 31, 1994........................... 168,459,000
-------------
Pro forma beginning balance...................... $1,454,974,000 $ 642,405,000 526,665,000
Sales of oil, gas and NGLs, net of production
costs.......................................... (331,980,000) (187,151,000) (137,114,000)
Net changes in prices and production costs....... (890,534,000) 763,909,000 55,163,000
Extensions, discoveries, and improved recovery,
net of future development costs................ 75,698,000 145,310,000 45,256,000
Purchase of reserves, net of future development
costs.......................................... 246,173,000 578,099,000 63,943,000
Development costs incurred during the period
which reduced future development costs......... 62,868,000 63,123,000 56,287,000
Revisions of quantity estimates.................. (12,251,000) 35,852,000 17,501,000
Sales of reserves in place....................... (1,395,000) (81,452,000) (14,939,000)
Accretion of discount............................ 198,401,000 73,000,000 59,584,000
Net change in income taxes....................... 300,684,000 (456,426,000) (23,906,000)
Other, primarily changes in timing............... (1,962,000) (121,695,000) (6,035,000)
-------------- -------------- -------------
Pro forma ending balance......................... $1,100,676,000 $1,454,974,000 $ 642,405,000
============== ============== =============
</TABLE>
43
<PAGE> 44
UNAUDITED U.S. GAAP FINANCIAL INFORMATION -- NORTHSTAR
Set forth below is certain unaudited U.S. GAAP financial information with
respect to Northstar prior to the Combination. Such unaudited U.S. GAAP
financial information converts Northstar's historical information, which is
presented under Canadian GAAP and Canadian dollars, to U.S. GAAP and U.S.
dollars, and conforms to Devon presentation.
The following unaudited U.S. GAAP financial statements should be read in
conjunction with the notes thereto immediately following such unaudited U.S.
GAAP financial statements, and the consolidated financial statements and related
notes of Northstar which are included elsewhere herein.
In March, 1997, Northstar acquired all the outstanding common shares of
Morrison by issuing approximately 46.1 million Northstar common shares. Under
Canadian GAAP, the Morrison transaction was accounted for under the
pooling-of-interests method of accounting. Accordingly, the information
presented in the following unaudited U.S. GAAP financial statements as
"Northstar Historical" represents Northstar's historical results presented using
Canadian GAAP, whereby the historical results of Northstar and Morrison have
been combined for all periods presented.
The Northstar common shares received by the Morrison shareholders
represented approximately 53% of the combined company's outstanding shares.
Therefore, under U.S. GAAP, the Morrison transaction would be accounted for as a
reverse acquisition of Northstar by Morrison. Accordingly, for the following
unaudited U.S. GAAP financial statements, the results presented for periods
through March, 1997 as "Northstar Using U.S. GAAP," represent the historical
results of Morrison, the "accounting acquirer." Because Northstar was the "legal
acquirer," the financial results for periods through March, 1997, are referred
to as "Northstar's" results, even though they represent the historical results
of Morrison. For periods subsequent to March, 1997, the results presented as
"Northstar Using U.S. GAAP" represent the historical results of Morrison,
combined with the results of Northstar after valuing Northstar's March, 1997,
assets and liabilities at fair value, rather than historical book value.
UNAUDITED U.S. GAAP BALANCE SHEET -- NORTHSTAR
SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
U.S. GAAP NORTHSTAR CONVERTED
NORTHSTAR AND OTHER USING TO
HISTORICAL ADJUSTMENTS(3) U.S. GAAP U.S.$(4)
----------- -------------- ---------- ---------
<S> <C> <C> <C> <C>
Assets:
Current assets......................................... C$ 97,184 C$ -- C$ 97,184 $ 63,695
Oil and gas properties, net............................ 1,054,445 423,819(a) 471,370 308,936
(998,412)(b)
(8,482)(d)
Other property and equipment, net...................... 7,282 -- 7,282 4,773
Deferred income taxes.................................. -- 81,711(c) 81,711 53,553
Other assets, net...................................... 29,063 (627)(a) 2,510 1,645
(25,926)(d)
----------- ---------- ---------- ---------
Total assets..................................... C$1,187,974 C$(527,917) C$660,057 $ 432,602
=========== ========== ========== =========
Liabilities:
Current liabilities.................................... C$ 95,842 C$ -- C$ 95,842 $ 62,815
Deferred revenue....................................... 9,487 -- 9,487 6,218
Other liabilities...................................... 19,829 (6,652)(a) -- --
(13,177)(d)
Long-term debt......................................... 463,102 -- 463,102 303,517
Deferred income taxes.................................. 174,491 129,421(a) -- --
(303,912)(c)
Stockholders' equity:
Stockholders' equity -- Northstar...................... 317,957 219,723(a) -- --
(537,680)(d)
Additional paid-in capital............................. -- 537,680(d) 537,680 397,178
Retained earnings (deficit)............................ 107,266 80,700(a) (446,054) (316,760)
(998,412)(b)
385,623(c)
(21,231)(d)
Accumulated other comprehensive earnings
(loss) -- foreign currency translation adjustments... -- -- -- (20,366)
----------- ---------- ---------- ---------
Total stockholders' equity....................... 425,223 (333,597) 91,626 60,052
----------- ---------- ---------- ---------
Total liabilities and stockholders' equity....... C$1,187,974 C$(527,917) C$660,057 $ 432,602
=========== ========== ========== =========
</TABLE>
See accompanying notes to unaudited U.S. GAAP financial statements.
44
<PAGE> 45
UNAUDITED U.S. GAAP STATEMENT OF OPERATIONS -- NORTHSTAR
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
U.S. GAAP NORTHSTAR CONVERTED
NORTHSTAR AND OTHER USING TO
HISTORICAL ADJUSTMENTS(3) U.S. GAAP U.S.$(4)
---------- -------------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil sales................................ C $81,881 C $(10,922)(e) $C 67,527 $45,931
(3,432)(i)
Gas sales................................ 104,094 (22,592)(e) 80,115 54,524
(1,387)(i)
Natural gas liquids sales................ 3,157 577(e) 3,625 2,469
(109)(i)
Less royalties........................... (26,100) 26,100(e) -- --
Other.................................... 43,415 11,818(e) 15,468 10,652
(1,780)(f)
(1,304)(i)
(40,241)(h)
--------- --------- --------- -------
Total revenues................... 206,447 (39,712) 166,735 113,576
--------- --------- --------- -------
Costs and expenses:
Lease operating expenses................. 43,854 2,867(e) 44,785 30,492
(1,936)(i)
Production taxes......................... -- 1,511(e) 1,511 1,030
Depreciation, depletion and
amortization.......................... 90,549 (2,990)(i) 36,337 24,716
(51,222)(j)
General and administrative expenses...... 11,248 603(e) 11,430 7,773
(421)(i)
Interest expense......................... 23,742 -- 23,742 16,160
Deferred effect of changes in foreign
currency exchange rate on long-term
debt.................................. -- 22,905(f) 22,905 15,433
--------- --------- --------- -------
Total costs and expenses......... 169,393 (28,683) 140,710 95,604
--------- --------- --------- -------
Earnings before income taxes............... 37,054 (11,029) 26,025 17,972
Income tax expense:
Current.................................. 1,781 (266)(i) 1,515 1,032
Deferred................................. 5,730 12,100(k) 12,173 8,408
(5,657)(h)
--------- --------- --------- -------
Total income tax expense......... 7,511 6,177 13,688 9,440
--------- --------- --------- -------
Net earnings............................... C $29,543 C $(17,206) $C 12,337 $ 8,532
========= ========= ========= =======
Net earnings per average common share
outstanding:
Basic.................................... C $ 0.43 $C 0.18 $ 0.12
Diluted.................................. C $ 0.41 $C 0.18 $ 0.12
Weighted average common shares
outstanding.............................. 68,263 68,263 68,263
</TABLE>
See accompanying notes to unaudited U.S. GAAP financial statements.
45
<PAGE> 46
UNAUDITED U.S. GAAP STATEMENT OF OPERATIONS -- NORTHSTAR
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
U.S. GAAP NORTHSTAR CONVERTED
NORTHSTAR AND OTHER USING TO
HISTORICAL ADJUSTMENTS(3) U.S. GAAP U.S.$(4)
---------- -------------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil sales................................. C$126,246 C$(19,526)(e) C$73,454 $53,016
(25,517)(h)
(7,749)(i)
Gas sales................................. 101,245 (13,660)(e) 61,535 44,413
(23,295)(h)
(2,755)(i)
Natural gas liquids sales................. 5,737 (1,628)(e) 1,916 1,380
(2,005)(h)
(188)(i)
Less royalties............................ (46,716) 34,819(e) -- --
11,897(h)
Other..................................... 48,764 10,355(e) 51,534 37,176
(2,025)(h)
(5,560)(i)
--------- --------- -------- -------
Total revenues.................... 235,276 (46,837) 188,439 135,985
--------- --------- -------- -------
Costs and expenses:
Lease operating expenses.................. 37,854 4,930(e) 34,241 24,711
(6,316)(h)
(2,227)(i)
Production taxes.......................... -- 1,306(e) 1,113 803
(193)(i)
Depreciation, depletion and
amortization........................... 86,698 (14,811)(h) 77,242 55,751
(4,678)(i)
10,033(j)
General and administrative expenses....... 10,847 4,124(e) 13,251 9,564
(1,720)(h)
Interest expense.......................... 15,684 (1,564)(h) 14,120 10,192
Deferred effect of changes in foreign
currency exchange rate on long-term
debt................................... -- 563(f) 563 406
--------- --------- -------- -------
Total costs and expenses.......... 151,083 (10,553) 140,530 101,427
--------- --------- -------- -------
Earnings before income taxes................ 84,193 (36,284) 47,909 34,558
Income tax expense (benefit):
Current................................... 2,338 (308)(h) 2,030 1,465
Deferred.................................. 35,782 (6,815)(h) 21,367 15,414
(7,600)(k)
--------- --------- -------- -------
Total income tax expense
(benefit)....................... 38,120 (14,723) 23,397 16,879
--------- --------- -------- -------
Net earnings................................ C$ 46,073 C$(21,561) C$24,512 $17,679
========= ========= ======== =======
Net earnings per average common share
outstanding:
Basic..................................... C$ 0.61 C$ 0.40 $ 0.29
Diluted................................... C$ 0.59 C$ 0.39 $ 0.28
Weighted average common shares
outstanding............................... 75,377 61,477 61,477
</TABLE>
See accompanying notes to unaudited U.S. GAAP financial statements.
46
<PAGE> 47
UNAUDITED U.S. GAAP STATEMENT OF OPERATIONS -- NORTHSTAR
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
U.S. GAAP NORTHSTAR CONVERTED
NORTHSTAR AND OTHER USING TO
HISTORICAL ADJUSTMENTS(3) U.S. GAAP U.S.$(4)
---------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil sales.............................. C$165,385 C$ (26,868)(e) C$ 102,824 $ 74,280
(25,517)(h)
(10,176)(i)
Gas sales.............................. 139,776 (17,549)(e) 95,391 68,910
(23,295)(h)
(3,541)(i)
Natural gas liquids sales.............. 8,114 (1,390)(e) 4,382 3,166
(2,005)(h)
(337)(i)
Less royalties......................... (57,776) 45,879(e) -- --
11,897(h)
Other.................................. 51,387 12,517(e) 55,596 40,163
(2,025)(h)
(6,283)(i)
--------- ---------- ----------- ---------
Total revenues................. 306,886 (48,693) 258,193 186,519
--------- ---------- ----------- ---------
Costs and expenses:
Lease operating expenses............... 53,274 5,602(e) 48,784 35,242
(6,316)(h)
(3,776)(i)
Production taxes....................... -- 1,804(e) 1,804 1,303
Depreciation, depletion and
amortization........................ 118,815 20,624(h) 116,003 83,801
(6,293)(i)
(17,143)(j)
General and administrative expenses.... 12,494 5,183(e) 15,863 11,459
(1,720)(h)
(94)(i)
Interest expense....................... 31,305 (1,564)(h) 25,629 18,514
(109)(i)
(4,003)(f)
Deferred effect of changes in foreign
currency exchange rate on long-term
debt................................ -- 8,111(f) 8,111 5,860
Reduction of carrying value of oil and
gas properties...................... -- 865,883(j) 865,883 625,514
--------- ---------- ----------- ---------
Total costs and expenses....... 215,888 866,189 1,082,077 781,693
--------- ---------- ----------- ---------
Earnings (loss) before income taxes...... 90,998 (914,882) (823,884) (595,174)
Income tax expense (benefit):
Current................................ 2,826 (308)(h) 2,291 1,655
(227)(i)
Deferred............................... 38,107 (6,815)(h) (306,680) (221,546)
(337,972)(k)
--------- ---------- ----------- ---------
Total income tax expense
(benefit).................... 40,933 (345,322) (304,389) (219,891)
--------- ---------- ----------- ---------
Net earnings (loss)...................... C$ 50,065 C$(569,560) C$ (519,495) $(375,283)
========= ========== =========== =========
Net earnings (loss) per average common
share outstanding:
Basic.................................. C$ 0.68 C$ (8.24) $ (5.95)
Diluted................................ C$ 0.66 C$ (8.24) $ (5.95)
Weighted average common shares
outstanding............................ 73,505 63,080 63,080
</TABLE>
See accompanying notes to unaudited U.S. GAAP financial statements.
47
<PAGE> 48
UNAUDITED U.S. GAAP STATEMENT OF OPERATIONS -- NORTHSTAR
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
U.S. GAAP NORTHSTAR CONVERTED
NORTHSTAR AND OTHER USING TO
HISTORICAL ADJUSTMENTS(3) U.S. GAAP U.S.$(4)
---------- -------------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil sales............................. C$195,497 C$ (22,253)(e) C$ 76,236 $ 55,881
(94,238)(g)
(2,770)(i)
Gas sales............................. 123,504 (8,995)(e) 45,559 33,394
(68,256)(g)
(694)(i)
Natural gas liquids sales............. 15,127 (1,612)(e) 6,728 4,932
(6,619)(g)
(168)(i)
Less royalties........................ (63,138) 31,538 (e) -- --
31,600 (g)
Other................................. 37,140 11,800 (e) 45,172 33,111
(4,448)(g)
680 (i)
--------- ---------- --------- --------
Total revenues................ 308,130 (134,435) 173,695 127,318
--------- ---------- --------- --------
Costs and expenses: 4,392 (e)
Lease operating expenses.............. 56,940 (23,633)(g) 37,062 27,166
(637)(i)
Production taxes...................... -- 303 (e) 303 222
Depreciation, depletion and
amortization....................... 119,828 (62,911)(g) 36,761 26,946
(1,468)(i)
(18,688)(j)
General and administrative expenses... 7,639 5,783 (e) 8,199 6,010
(5,169)(g)
(54)(i)
Interest expense...................... 17,105 (6,891)(g) 10,075 7,385
(139)(i)
Deferred effect of changes in foreign
currency exchange rate on long-term
debt............................... -- 272 (f) 272 199
--------- ---------- --------- --------
Total costs and expenses...... 201,512 (108,840) 92,672 67,928
--------- ---------- --------- --------
Earnings before income taxes............ 106,618 (25,595) 81,023 59,390
Income tax expense (benefit):
Current............................... 2,827 (1,273)(g) 1,535 1,125
(19)(i)
Deferred.............................. 41,729 (16,192)(g) 34,738 25,463
9,201 (k)
--------- ---------- --------- --------
Total income tax expense
(benefit)................... 44,556 (8,283) 36,273 26,588
--------- ---------- --------- --------
Net earnings............................ C$ 62,062 C$ (17,312) C$ 44,750 $ 32,802
========= ========== ========= ========
Net earnings per average common share
outstanding:
Basic................................. C$ 0.72 C$ 0.99 $ 0.72
Diluted............................... C$ 0.70 C$ 0.99 $ 0.72
Weighted average common shares
outstanding........................... 85,832 45,326 45,326
</TABLE>
See accompanying notes to unaudited U.S. GAAP financial statements.
48
<PAGE> 49
UNAUDITED U.S. GAAP STATEMENT OF OPERATIONS -- NORTHSTAR
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
U.S. GAAP NORTHSTAR CONVERTED
NORTHSTAR AND OTHER USING TO
HISTORICAL ADJUSTMENTS(3) U.S. GAAP U.S.$(4)
---------- -------------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil sales............................ C$156,755 C$ (21,530)(e) C$ 82,658 $ 60,316
(52,567)(g)
Gas sales............................ 93,221 (3,246)(e) 28,041 20,462
(61,934)(g)
Natural gas liquids sales............ 11,143 (1,590)(e) 3,682 2,687
(5,871)(g)
Less royalties....................... (43,372) 25,193(e) -- --
18,179(g)
Other................................ 12,163 7,251(e) 18,330 13,375
(1,084)(g)
--------- ---------- --------- --------
Total revenues............... 229,910 (97,199) 132,711 96,840
--------- ---------- --------- --------
Costs and expenses:
Lease operating expenses............. 47,852 2,008(e) 33,486 24,435
(16,374)(g)
Production taxes..................... -- 301(e) 301 220
Depreciation, depletion and
amortization...................... 101,353 (48,806)(g) 48,445 35,350
(4,102)(j)
General and administrative
expenses.......................... 8,969 3,769(e) 8,890 6,487
(3,848)(g)
Interest expense..................... 12,392 (7,138)(g) 5,254 3,834
Deferred effect of changes in foreign
currency exchange rate on
long-term debt.................... -- 421(f) 421 307
Reduction of carrying value of oil
and gas properties................ -- 133,015(j) 133,015 97,061
--------- ---------- --------- --------
Total costs and expenses..... 170,566 59,246 229,812 167,694
--------- ---------- --------- --------
Earnings before income taxes........... 59,344 (156,445) (97,101) (70,854)
Income tax expense (benefit):
Current.............................. 1,696 (604)(g) 1,092 797
Deferred............................. 21,070 (7,100)(g) (42,834) (31,256)
(56,804)(k)
--------- ---------- --------- --------
Total income tax expense
(benefit).................. 22,766 (64,508) (41,742) (30,459)
--------- ---------- --------- --------
Net earnings........................... C$ 36,578 C$ (91,937) C$(55,359) $(40,395)
========= ========== ========= ========
Net earnings per average common share
outstanding:
Basic................................ C$ 0.45 C$ (1.25) $ (0.91)
Diluted.............................. C$ 0.44 C$ (1.25) $ (0.91)
Weighted average common shares
outstanding.......................... 81,270 44,250 44,250
</TABLE>
See accompanying notes to unaudited U.S. GAAP financial statements.
49
<PAGE> 50
NOTES TO UNAUDITED U.S. GAAP
FINANCIAL STATEMENTS -- NORTHSTAR
JUNE 30, 1998 AND 1997, AND DECEMBER 31, 1997, 1996 AND 1995
1. BASIS OF PRESENTATION
The accompanying unaudited U.S. GAAP financial information of Northstar is
presented to reflect Northstar's financial information under U.S. GAAP and U.S.
dollars and in conformity with Devon's financial statement presentation. The
unaudited U.S. GAAP financial information should be read in conjunction with the
historical consolidated financial statements and related notes thereto for
Northstar that are included elsewhere herein.
The historical consolidated financial statement information for Northstar
was prepared under Canadian GAAP and in Canadian dollars. For these unaudited
U.S. GAAP financial statements, the historical financial information of
Northstar have been converted to U.S. dollars using the September 30, 1998,
exchange rate for the balance sheet and the average exchange rates for the nine
month periods ended September 30, 1998 and 1997 and the years 1997, 1996 and
1995, for the statements of operations. These unaudited U.S. GAAP financial
statements also contain certain adjustments to conform the historical Northstar
financial statements to U.S. GAAP as described in the following notes. Also, see
Note 13 to Northstar's historical consolidated financial statements included
elsewhere herein for a description of the adjustments to convert Northstar's
financial statements from Canadian GAAP to U.S. GAAP. In addition, certain
reclassifications have been made to Northstar's historical consolidated
financial statements to conform to Devon's financial statement presentation.
2. NORTHSTAR -- MORRISON BUSINESS COMBINATION
In March, 1997, Northstar acquired all the outstanding common shares of
Morrison by issuing approximately 46.1 million Northstar common shares. Under
Canadian GAAP, this acquisition was accounted for as a pooling-of-interests.
Accordingly, Northstar's historical financial position as of September 30, 1998,
and its historical financial results for the nine month periods ended September
30, 1998 and 1997, and for the years ended December 31, 1997, 1996 and 1995, are
presented as if Northstar and Morrison had been combined for all periods
presented.
The Northstar common shares received by the Morrison shareholders
represented approximately 53% of the combined company's outstanding shares.
Therefore, under U.S. GAAP, the Morrison transaction would be accounted for as a
reverse acquisition of Northstar by Morrison. Accordingly, for the accompanying
unaudited U.S. GAAP financial statements, the results presented for periods
through March, 1997 as "Northstar Using U.S. GAAP," represent the historical
results of Morrison, the "accounting acquirer." Because Northstar was the "legal
acquirer," the financial results for periods through March, 1997, are referred
to as "Northstar's" results, even though they represent the historical results
of Morrison. For periods subsequent to March, 1997, the results presented as
"Northstar Using U.S. GAAP" represent the historical results of Morrison,
combined with the results of Northstar after valuing Northstar's March, 1997,
assets and liabilities at fair value, rather than historical book value.
Because of the significant difference in accounting for this acquisition
between Canadian GAAP and U.S. GAAP, the accompanying unaudited U.S. GAAP
financial statements of Northstar include a number of adjustments concerning the
Morrison acquisition. Those adjustments are described in detail in the following
Note 3.
3. U.S. GAAP ADJUSTMENTS
The accompanying U.S. GAAP balance sheet includes the following
adjustments:
(a) To adjust for the effect of accounting for the Morrison
transaction using the reverse acquisition purchase method of accounting
under U.S. GAAP as opposed to the pooling-of-interests method that was used
under Canadian GAAP.
50
<PAGE> 51
NOTES TO UNAUDITED U.S. GAAP
FINANCIAL STATEMENTS -- NORTHSTAR -- (CONTINUED)
(b) To adjust for the cumulative effect of reductions to the carrying
value of Northstar's oil and gas properties using the U.S. GAAP full cost
ceiling limitations set forth by SEC rules and regulations for the full
cost method of accounting for oil and gas operations.
(c) To adjust for the effect of deferred income tax accounting under
U.S. GAAP.
(d) To adjust for other miscellaneous differences between Canadian
GAAP and U.S. GAAP, including reclassifying accrued site restoration costs
from other liabilities to accumulated depreciation, depletion and
amortization to conform to Devon's presentation.
The accompanying U.S. GAAP statements of operations include the following
adjustments:
(e) To allocate oil, gas and NGLs royalty payments to oil, gas and
NGLs revenues in accordance with U.S. GAAP; to reclassify third party gas
processing revenues from lease operating expenses to other revenues to
conform to Devon's presentation; to reclassify gain from gas contract
terminations from gas sales to other revenues to conform to Devon's
presentation; and to reclassify management fees earned from general and
administrative expenses to other revenues to conform to Devon's
presentation
(f) To record foreign currency transaction gains and losses in
accordance with U.S. GAAP.
(g) To remove the 1996 and 1995 results of Northstar originally
recorded as a pooling-of-interests under Canadian GAAP.
(h) To remove the first quarter 1997 results of Northstar originally
recorded as a pooling-of-interests under Canadian GAAP, and adjust the last
nine months of 1997 and the first nine months of 1998 for the effect of
recording the Morrison transaction using the reverse acquisition purchase
method of accounting under U.S. GAAP.
(i) To adjust for the effect of accounting for Northstar's 50%
interest in a Canadian oil and gas corporation using the equity method
under U.S. GAAP. For Canadian GAAP, this interest is proportionately
consolidated.
(j) To record a C$865.9 million (U.S.$625.5 million) and a C$133.0
million (U.S.$97.1 million) reduction of the carrying value of oil and gas
properties as of December 31, 1997 and 1995, respectively, in accordance
with the full cost ceiling limitation set forth by SEC rules and
regulations for the full cost method of accounting for oil and gas
operations. The deferred tax benefits of these reductions to oil and gas
properties were C$315.0 million (U.S.$227.6 million) in 1997 and C$59.3
million (U.S.$43.3 million) in 1995.
As a result of the reductions of the carrying values of oil and gas
properties in 1997 and 1995, as well as 1994 and 1991, reductions of
Northstar's historical depreciation, depletion and amortization expense are
reflected in periods subsequent to the reductions.
(k) To adjust the historical income tax expense for (1) the effects of
the U.S. GAAP adjustments described above, and (2) to convert to the income
tax accounting method as prescribed by U.S. GAAP.
4. CONVERSION TO U.S. DOLLARS
For the September 30, 1998, U.S. GAAP balance sheet, the stockholders'
equity balance was adjusted using historical exchange rates in effect at the
time of the various capital transactions. All other accounts were adjusted using
the September 30, 1998, exchange rate of C$1.00 to U.S.$0.66.
51
<PAGE> 52
NOTES TO UNAUDITED U.S. GAAP
FINANCIAL STATEMENTS -- NORTHSTAR -- (CONTINUED)
For the U.S. GAAP statements of operations for the nine month periods ended
September 30, 1998 and 1997, Canadian dollars were converted to U.S. dollars
using exchange rates of $0.69 and $0.72, respectively. For the U.S. GAAP
statements of operations for the years ended December 31, 1997, 1996 and 1995,
Canadian dollars were converted to U.S. dollars using exchange rates of $0.72,
$0.73 and $0.73, respectively. The exchange rates used for all periods were
calculated using the averages of the monthly exchange rates during such periods.
52
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
2 Amended and Restated Combination Agreement between the
Registrant and Northstar Energy Corporation dated June 29,
1998 (incorporated by reference to Annex B to Registrant's
definitive proxy statement for a special meeting of
shareholders, filed November 6, 1998)
3 Registrant's Amended and Restated Certificate of
Incorporation
4.1 Support Agreement, dated December 10, 1998, between the
Registrant and Northstar Energy Corporation
4.2 Provisions Attaching to the Exchangeable Shares
9 Voting and Exchange Trust Agreement, dated December 10
1998, by and between the Registrant, Northstar Energy
Corporation and CIBC Mellon Trust Company
10.1 US Credit Agreement, dated December 11, 1998, among the
Registrant, as US Borrower, NationsBank, N.A., as
Administrative Agent, NationsBanc Montgomery
Securities, L.L.C., as Arranger, Bank One, Texas, N.A.,
as Syndication Agent, Bank of Montreal, as Documentation
Agent, First Union, as Co-Documentation Agent, and Certain
Financial Institutions, as Lenders
10.2 Canadian Credit Agreement, dated December 11, 1998,
among Northstar Energy Corporation and Devon Energy
Canada Corporation, as Canadian Borrowers, Bank of
America Canada, as Administrative Agent, NationsBanc
Montgomery Securities, L.L.C., as Arranger, First Chicago
Capital Markets, Inc., as Syndication Agent, Bank of
Montreal, as Documentation Agent, First Union, as Co-
Documentation Agent, and Certain Financial Institutions,
as Lenders
23 Consent of Deloitte & Touche LLP
</TABLE>
<PAGE> 1
EXHIBIT 3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
The undersigned, J. Larry Nichols and Marian J. Moon, certify that they are
the President and Chief Executive Officer and Corporate Secretary, respectively,
of Devon Energy Corporation, a corporation organized and existing under the laws
of the State of Oklahoma (the "Corporation"), and do hereby further certify as
follows:
1. The name of this Corporation is Devon Energy Corporation.
2. The name under which the Corporation was originally incorporated
was Devon Oklahoma Corporation. The original Certificate of Incorporation
of the Corporation was filed with the Secretary of State of Oklahoma on
April 13, 1995, with amendments thereto filed on June 7, 1995 and December
31, 1996.
3. This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 1077 and 1080 of the
Oklahoma General Corporation Act (the "Act") by the affirmative vote of the
holders of not less than a majority of the outstanding stock of the
Corporation entitled to vote thereon at a special meeting duly called and
held in accordance with the provisions of the Act.
4. The text of the Certificate of Incorporation of the Corporation is
amended and restated to read in its entirety as follows:
FIRST. The name of the Corporation is:
DEVON ENERGY CORPORATION
SECOND. The address, including the street, number, city and county, of the
Corporation's registered office in this state is 735 First National Building,
Oklahoma City, Oklahoma 73102; the name of the Corporation's registered agent at
such address is The Corporation Company.
THIRD. The nature of the business and the purpose of the Corporation shall
be any and all lawful acts or activities for which a corporation may be
organized under the general corporation law of Oklahoma.
FOURTH. The total number of shares of capital stock which the Corporation
shall have authority to issue is 403,000,001 shares, consisting of 3,000,000
shares of Preferred Stock, par value $1.00 per share, and 400,000,000 shares of
Common stock, par value $.10 per share and one share of Special Voting Stock,
par value $.10 per share. Except as otherwise provided herein or as otherwise
required by applicable law, all shares of Special Voting Stock and Common Stock
shall be identical in all respects and shall entitle the holders thereof to the
same rights and privileges, subject to the same qualifications, limitations and
restrictions. The preferences, qualifications, limitations, restrictions and the
special or relative rights in respect of the shares of each class are as
follows:
DIVISION A
EXPRESS TERMS OF THE PREFERRED STOCK
Section 1. The Preferred Stock may be issued from time to time in one or
more series. All shares of Preferred Stock shall be of equal rank and shall be
identical, except in respect of the matters that may be fixed and determined by
the board of directors as hereinafter provided, and each share of each series
shall be identical with all other shares of such series, except as to the date
from which dividends are cumulative. The board of directors hereby is authorized
to cause such shares to be issued in one or more series and with respect to each
such series prior to the issuance thereof to fix and determine the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
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<PAGE> 2
The authority of the board with respect to each series shall include but
not be limited to, determination of the following:
(a) The designation of the series, which may be by distinguishing
number, letter or title.
(b) The number of shares of the series, which number the board of
directors may (except where otherwise provided in the creation of the
series) increase or decrease (but not below the number of shares thereof
then outstanding).
(c) The annual dividend rate or amount of the series, if any, and
whether dividends shall be cumulative or non-cumulative.
(d) The dates at which dividends, if declared, shall be payable, and
the dates from which dividends shall be cumulative, if at all, and the
relative rights of priority, if any, of payment of dividends on shares of
that series.
(e) The redemption rights, if any, for shares of the series and the
terms and conditions of such redemption, including the date or dates upon
or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary with different conditions and
at different redemption dates.
(f) The voting rights of such shares, if any, and the terms of and
limitations on such voting rights.
(g) The terms and amount of any sinking fund provided for the purpose
of redemption or purchase of shares of the series.
(h) The amounts payable on shares of the series and rights with
respect to such shares in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation,
and the relative rights of priority, if any, of payment of shares of that
series.
(i) Whether the shares of the series shall be convertible into shares
of any other class or classes of securities or of any other series of the
same or any other class or classes of stock, or any other security, of the
Corporation or any other corporation, and, if so, the conversion price or
prices, any adjustments thereof, and all other terms and conditions upon
which such conversion may be made.
(j) Restrictions, if any, on the issuance of shares of the same series
or of any other class or series.
DIVISION B
EXPRESS TERMS OF THE COMMON STOCK
The Common Stock shall be subject to the express terms of the Preferred
Stock and any series thereof. Each share of Common Stock shall be equal to every
other share of Common Stock. The holders of shares of Common Stock shall be
entitled to one vote for each share of such stock upon all matters presented to
the stockholders.
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<PAGE> 3
DIVISION C
EXPRESS TERMS OF THE SPECIAL VOTING STOCK
Each outstanding share of Special Voting Stock shall be entitled at any
relevant date to the number of votes determined in accordance with the "Plan of
Arrangement" (as that term is defined in that certain Amended and Restated
Combination Agreement dated as of June 29, 1998 (as amended and restated from
time to time, the "Combination Agreement"), by and between the Corporation and
Northstar Energy Corporation) on all matters presented to the stockholders. No
dividend or distribution of assets shall be paid to the holders of Special
Voting Stock. The Special Voting Stock is not convertible into any other class
or series of the capital stock of the Corporation or into cash, property or
other rights, and may not be redeemed. Any shares of Special Voting Stock
purchased or otherwise acquired by the Corporation shall be deemed retired and
shall be canceled and may not thereafter be reissued or otherwise disposed of by
the Corporation. At such time as the Special Voting Stock has no votes attached
to it because there are no "Exchangeable Shares" (as that term is defined in the
Combination Agreement) outstanding, the Special Voting Stock shall be canceled.
In respect of all matters concerning the voting of shares, the Common Stock and
the Special Voting Stock shall vote as a single class and such voting rights
shall be identical in all respects.
FIFTH. The name and address of the incorporator is as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
- ---- ---------------
<S> <C>
Jerry A. Warren Tenth Floor
Leadership Square
Oklahoma City, Oklahoma 73102
</TABLE>
SIXTH. The number of directors which shall constitute the whole board shall
not be less than three nor more than fifteen, and shall be determined by
resolution adopted by a vote of two-thirds ( 2/3) of the entire board, or at an
annual meeting of stockholders by the affirmative vote of the holders of capital
stock entitled to cast sixty-six and two-thirds percent (66 2/3%) of the votes
entitled to be cast at the meeting. No reduction in number shall have the effect
of removing any director prior to the expiration of his term. The provisions of
this Article shall not be altered, amended or repealed except by the affirmative
vote of the holders of capital stock entitled to cast at least sixty-six and
two-thirds percent (66 2/3%) of the votes entitled to be cast.
SEVENTH. For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation, its directors and its stockholders or any
class thereof, as the case may be, it is further provided that:
(a) No election of directors need be by written ballot.
(b) Except as otherwise provided herein, the power to adopt, amend or
repeal the bylaws is conferred on the board of directors.
EIGHTH. The Corporation elects that the Control Share Act as set forth in
Section 1145 through 1155 of Title 18 of the Oklahoma Statutes shall not apply
to the corporation. Furthermore, the Corporation elects not to be governed by
Section 1090.3 of Title 18 of the Oklahoma Statutes.
NINTH. No director of the Corporation shall be personally liable to the
Corporation or its stockholders for damages for breach of fiduciary duty as a
director, except for personal liability:
(a) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(b) under Section 1053 of the Oklahoma General Corporation Act;
(c) for any breach of the director's duty of loyalty to the
Corporation or its stockholders; or
(d) for any transaction from which the director derived an improper
personal benefit.
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<PAGE> 4
TENTH. No action required to be taken or which may be taken at any annual
or special meeting of shareholders of the Corporation may be taken without a
meeting, and the power of shareholders to consent in writing without a meeting
to the taking of any action is specifically denied.
ELEVENTH.
(a) Notwithstanding any other provisions of Title 18 of the Oklahoma
Statutes, the Corporation shall not engage in any business combination with
any current or former interested shareholder for a period of three (3)
years following the date that such person became an interested shareholder,
unless:
(i) prior to the date on which a person becomes an interested
shareholder, the board of directors of the Corporation approved either
the business combination or the transaction which resulted in the person
becoming an interested shareholder;
(ii) upon consummation of the transaction which resulted in the
person becoming an interested shareholder, the interested shareholder
owned of record or beneficially capital stock having at least
eighty-five percent (85%) of all voting power of the Corporation at the
time the transaction commenced, excluding for purposes of determining
such voting power the votes attributable to those shares owned of record
or beneficially by:
a. persons who are directors and also officers, and
b. employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer;
or
(iii) on or subsequent to such date, the business combination is
approved by the continuing board of directors and authorized at an
annual or special meeting of shareholders, and not by written consent,
by the affirmative vote of at least sixty-six and two-thirds percent
(66 2/3%) of all voting power which is not attributable to shares owned
of record or beneficially by the interested shareholder.
(b) The restrictions contained in this section shall not apply if:
(i) the business combination is proposed prior to the consummation
of the business transaction and subsequent to the earlier of the public
announcement or the notice required hereunder of, a proposed transaction
which:
a. constitutes one of the transactions described in subparagraph
(ii) of this paragraph,
b. is with or by a person who either was not an interested
shareholder during the previous three (3) years or who became an
interested shareholder with the approval of the Corporation's board
of directors, and
c. is approved or not opposed by a majority of the members of
the board of directors then in office, but not less than one, who
were directors prior to any person becoming an interested shareholder
during the previous three (3) years or were recommended for election
or elected to succeed such directors by a majority of such directors;
(ii) the proposed transactions referred to in subparagraph (i) of
this paragraph are limited to:
a. a share acquisition pursuant to Section 1090.1 of Title 18 of
the Oklahoma Statutes, or a merger or consolidation of the
Corporation, except for a merger in respect of which pursuant to
subsection F of Section 1081 of Title 18 of the Oklahoma Statutes, no
vote of the shareholders of the Corporation is required, or
b. a sale, lease, exchange, mortgage, pledge, transfer or other
disposition, in one transaction or a series of transactions, whether
as part of a dissolution or otherwise, of assets of the Corporation
or of any direct or indirect majority-owned subsidiary of the
Corporation, other
4
<PAGE> 5
than to any direct or indirect wholly-owned subsidiary or to the
Corporation, having an aggregate market value equal to fifty percent
(50%) or more of either the aggregate market value of all the assets
of the Corporation determined on a consolidated basis or the
aggregate market value of all the outstanding stock of the
Corporation, or
c. a proposed tender or exchange offer for outstanding stock of
the Corporation which represents fifty percent (50%) or more of all
voting power of the Corporation, or
(iii) a person becomes an interested shareholder inadvertently and:
a. as soon as practicable divests sufficient shares so that the
person ceases to be an interested shareholder, and
b. would not, at any time within the three (3) year period
immediately prior to a business combination between the Corporation
and such person, have been an interested shareholder but for the
inadvertent acquisition.
The Corporation shall give not less than twenty (20) days notice to
all interested shareholders prior to the consummation of any of the
transactions described in divisions (i) or (ii) of this subparagraph.
(c) As used in this section only:
(i) "affiliate" means a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, another person;
(ii) "all voting power" means the aggregate number of votes which
the holders of all classes of capital stock of the Corporation would be
entitled to cast in an election of directors generally;
(iii) "associate", when used to indicate a relationship with any
person, means:
a. any corporation or organization of which such person is a
director, officer or partner or is, of record or beneficially, the
owner of outstanding stock of the Corporation having twenty percent
(20%) or more of all voting power of the Corporation,
b. any trust or other estate in which such person has at least a
twenty percent (20%) beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity, and
c. any relative or spouse of such person, or any relative of
such spouse, who has the same residence of such person;
(iv) "beneficial ownership" shall have the meaning ascribed to such
term by Rule 13d-3 under the Securities Exchange Act of 1934, 15 U.S.C.
Section 78a et seq., as amended, except that a person shall be deemed to
be the owner or beneficial owner of securities of which he has the right
to acquire ownership either immediately or only after the passage of any
time or the giving of notice or both; provided, however, that a person
shall not be deemed the owner or beneficial owner of any stock if:
a. the agreement, arrangement or understanding to vote such
stock arises solely from a revocable proxy or consent given in
response to a proxy or consent solicitation made to more than ten
persons, or
b. the stock is tendered pursuant to a tender or exchange offer
made by such person or any of such person's affiliates or associates,
until such tendered stock is accepted for purchase or exchange;
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<PAGE> 6
(v) "business combination", when used in reference to any
corporation and any interested shareholder of such corporation, means:
a. any merger or consolidation of the corporation or any direct
or indirect majority-owned subsidiary of the corporation with:
(1) the interested shareholder, or
(2) any other corporation if the merger or consolidation is
caused by the interested shareholder and as a result of such
merger or consolidation subsection (a) of this section is not
applicable to the surviving corporation,
b. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition, in one transaction or a series of transactions,
except as proportionately as a shareholder of such corporation, to or
with the interested shareholder, whether as part of a dissolution or
otherwise, of assets of the corporation or of any direct or indirect
majority-owned subsidiary of the corporation which assets have an
aggregate market value equal to ten percent (10%) or more of either
the aggregate market value of all the assets of the corporation
determined on a consolidated basis or the aggregate market value of
all the outstanding stock of the corporation,
c. any transaction which results in the issuance or transfer by
the corporation or by any direct or indirect majority-owned
subsidiary of the corporation of any stock of the corporation or of
such subsidiary to the interested shareholder, except:
(1) pursuant to the exercise, exchange or conversion of
securities exercisable for, exchangeable for or convertible into
stock of such corporation or any such subsidiary which securities
were outstanding prior to the time that the interested
shareholder became such,
(2) pursuant to a dividend or distribution paid or made, or
the exercise, exchange or conversion of securities exercisable
for, exchangeable for or convertible into stock of such
corporation or any such subsidiary which security is distributed,
pro rata to all holders of a class or series of stock of such
corporation subsequent to the time the interested shareholder
became such, or
(3) pursuant to an exchange offer by the corporation to
purchase stock made on the same terms to all holders of said
stock; provided, however, that in no case under divisions (2) and
(3) of this subparagraph shall there be an increase in the
interested shareholder's proportionate share of the stock of any
class or series of the corporation or of all voting power of the
corporation,
d. any transaction involving the corporation or any direct or
indirect majority-owned subsidiary of the corporation which has the
effect, directly or indirectly, of increasing the proportionate share
of the stock of any class or series, or securities convertible into
the stock of any class or series, or all voting power, of the
corporation or of any such subsidiary which is owned by the
interested shareholder, except as a result of immaterial changes due
to fractional share adjustments or as a result of any purchase or
redemption of any shares of stock not caused, directly or indirectly,
by the interested shareholder,
e. any receipt by the interested shareholder of the benefit,
directly or indirectly, except proportionately as a shareholder of
such corporation, of any loans, advances, guarantees, pledges, or
other financial benefits, other than those expressly permitted in
subparagraphs a. through d. of this paragraph, provided by or through
the corporation or any direct or indirect majority-owned subsidiary,
or
f. any share acquisition pursuant to Section 1090.1 of Title 18
of the Oklahoma Statutes;
6
<PAGE> 7
(vi) "control", including the terms "controlling", "controlled by"
and "under common control with", means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting stock, by contract, or otherwise. A person who owns, of record or
beneficially, outstanding stock of the corporation having twenty percent
(20%) or more of all voting power of the corporation shall be presumed
to have control of such corporation, in the absence of proof by a
preponderance of the evidence to the contrary. Notwithstanding the
foregoing, a presumption of control shall not apply where such person
holds stock, in good faith and not for the purpose of circumventing this
section, as an agent, bank, broker, nominee, custodian or trustee for
one or more owners who do not individually or as a group have control of
such corporation;
(vii) "group" means two or more persons who agree to act together
for the purpose of acquiring, holding, voting or disposing of securities
of the corporation;
(viii) a. "interested shareholder" means:
(1) any person, other than the Corporation and any direct or
indirect majority-owned subsidiary of the Corporation, that:
(a) owns of record or beneficially outstanding stock of the
Corporation having fifteen percent (15%) or more of all voting
power of the Corporation, or
(b) is an affiliate or associate of the Corporation and
owned of record or beneficially outstanding stock of the
Corporation having fifteen percent (15%) or more of all voting
power of the Corporation at any time within the three-year period
immediately prior to the date on which it is sought to be
determined whether such person is an interested shareholder, and
(2) the affiliates and associates of such person;
b. the term "interested shareholder" shall not include any person
whose ownership of shares in excess of the fifteen percent (15%)
limitation set forth herein is the result of action taken solely by the
Corporation, provided that such person shall be an interested
shareholder if thereafter he acquires additional shares of voting stock
of the Corporation, except as a result of further corporate action not
caused, directly or indirectly, by such person;
c. for the purpose of determining whether a person is an interested
shareholder, the stock of the Corporation deemed to be outstanding shall
include stock owned of record or beneficially by such person, but shall
not include any other unissued stock of the Corporation which may be
issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise;
(ix) "person" means any individual, corporation, partnership,
unincorporated association, any other entity, any group and any member
of a group.
TWELFTH. The board of directors shall be divided into three classes as
nearly equal in number as possible with the term of office of one class expiring
each year. Of the directors chosen at the first stockholders' meeting, the term
of office of those of the first class shall expire at the first annual meeting
after their election; the term of office of those of the second class shall
expire at the second annual meeting after their election; and the term of office
of those of the third class shall expire at the third annual meeting after their
election. At each annual meeting held after such classification and election,
directors shall be chosen for a full term of three years to succeed those whose
terms expire. When the number of directors is changed any newly created
directorship or any decrease in directorship shall be so apportioned among the
classes as to make all classes as nearly equal in number as possible. When the
number of directors is increased by the board of directors, there shall be no
classification of the additional directors until the next annual meeting of
stockholders.
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<PAGE> 8
Subject to the rights, if any, of the holders of Preferred Stock to elect
directors, vacancies and newly created directorships resulting from any increase
in the authorized number of directors shall be filled by a majority of the
directors then in office, though less than a quorum, or by a sole remaining
director. The directors so chosen shall hold office until the next annual
election of the class for which each such director has been chosen and until his
successor is duly elected and qualified, or until his earlier resignation or
removal. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of an incumbent director.
THIRTEENTH.
(a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture or other enterprise against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good faith and
in a manner which he reasonably believed to be in or not opposed to the
best interest of the Corporation and with respect to any criminal action or
proceeding had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorney's fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit, if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interest of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the court in which such
action or suit was brought shall determine, upon application, that despite
the adjudication of liability, but in the view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for
such expenses which the court shall deem proper.
(c) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized herein.
(d) The Corporation may purchase (upon resolution duly adopted by the
board of directors) and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether
or not the Corporation would have the power to indemnify him against such
liability.
(e) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of
any action, suit, or proceeding referred to herein or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
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<PAGE> 9
(f) Every such person shall be entitled, without demand by him upon
the Corporation or any action by the Corporation, to enforce his right to
such indemnity in an action at law against the Corporation. The right of
indemnification and advancement of expenses hereinabove provided shall not
be deemed exclusive of any rights to which any such person may now or
hereafter be otherwise entitled and specifically, without limiting the
generality of the foregoing, shall not be deemed exclusive of any rights
pursuant to statute or otherwise, of any such person in any such action,
suit or proceeding to have assessed or allowed in his favor against the
Corporation or otherwise, his costs and expenses incurred therein or in
connection therewith or any part thereof.
FOURTEENTH. The provisions of this Article and Articles NINTH through
THIRTEENTH of this Amended and Restated Certificate of Incorporation shall not
be altered, amended or repealed except by the affirmative vote of the holders of
capital stock entitled to cast at least 80% of the votes entitled to be cast
thereon.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by J. Larry Nichols, its President and
Chief Executive Officer, and attested by Marian J. Moon, its Secretary this 10th
day of December, 1998.
/s/ J. LARRY NICHOLS
------------------------------------
J. Larry Nichols,
President and Chief Executive
Officer
ATTEST:
/s/ MARIAN J. MOON
- --------------------------------
Marian J. Moon,
Corporate Secretary
9
<PAGE> 1
EXHIBIT 4.1
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT is entered into as of December 10, 1998, between
Devon Energy Corporation, an Oklahoma corporation ("Devon"), and Northstar
Energy Corporation, an Alberta corporation ("Northstar").
RECITALS
WHEREAS, pursuant to an Amended and Restated Combination Agreement dated as
of June 29, 1998, by and between Devon and Northstar (such agreement, as it may
be amended or restated, is hereinafter referred to as the "Combination
Agreement"), the parties agreed that on the Effective Date (as defined in the
Combination Agreement), Devon and Northstar would execute and deliver a Support
Agreement containing the terms and conditions set forth in Exhibit D to the
Combination Agreement together with such other terms and conditions as may be
agreed to by the parties to the Combination Agreement acting reasonably.
WHEREAS, pursuant to an arrangement (the "Arrangement") effected by
Articles of Arrangement dated December 10, 1998 filed pursuant to the Business
Corporations Act (Alberta) (or any successor or other corporate statute by which
Northstar may in the future be governed) (the "Act") each issued and outstanding
common share of Northstar (a "Northstar Common Share") was exchanged for issued
and outstanding Exchangeable Shares of Northstar (the "Exchangeable Shares").
WHEREAS, the Articles of Amendment of Northstar set forth the rights,
privileges, restrictions and conditions (collectively, the "Exchangeable Share
Provisions") attaching to the Exchangeable Shares.
WHEREAS, the parties hereto desire to make appropriate provision and to
establish a procedure whereby Devon will take certain actions and make certain
payments and deliveries necessary to ensure that Northstar will be able to make
certain payments and to deliver or cause to be delivered shares of Devon Common
Stock in satisfaction of the obligations of Northstar under the Exchangeable
Share Provisions with respect to the payment and satisfaction of dividends,
Liquidation Amounts, Retraction Prices and Redemption Prices, all in accordance
with the Exchangeable Share Provisions.
NOW, THEREFORE, in consideration of the respective covenants and agreements
provided in this agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS
Each term denoted herein by initial capital letters and not otherwise
defined herein shall have the meaning attributed thereto in the Exchangeable
Share Provisions, unless the context requires otherwise.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this agreement into articles, sections and paragraphs and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this agreement.
1.3 NUMBER, GENDER, ETC.
Words importing the singular number only shall include the plural and vice
versa. Words importing the use of any gender shall include all genders.
1
<PAGE> 2
1.4 DATE FOR ANY ACTION
If any date on which any action is required to be taken under this
agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
ARTICLE 2
COVENANTS OF DEVON AND NORTHSTAR
2.1 COVENANTS OF DEVON REGARDING EXCHANGEABLE SHARES
So long as any Exchangeable Shares are outstanding, Devon will:
(a) not declare or pay any dividend on Devon Common Stock unless (i)
Northstar will have sufficient assets, funds and other property available
to enable the due declaration and the due and punctual payment in
accordance with applicable law of an equivalent dividend on the
Exchangeable Shares and (ii) subsection 2.1(b) shall be complied with in
connection with such dividend;
(b) cause Northstar to declare simultaneously with the declaration of
any dividend on Devon Common Stock an equivalent dividend on the
Exchangeable Shares and, when such dividend is paid on Devon Common Stock,
cause Northstar to pay simultaneously therewith such equivalent dividend on
the Exchangeable Shares, in each case in accordance with the Exchangeable
Share Provisions;
(c) advise Northstar sufficiently in advance of the declaration by
Devon of any dividend on Devon Common Stock and take all such other actions
as are necessary, in cooperation with Northstar, to ensure that the
respective declaration date, record date and payment date for a dividend on
the Exchangeable Shares shall be the same as the record date, declaration
date and payment date for the corresponding dividend on Devon Common Stock
and that such dividend on the Exchangeable Shares will correspond with any
requirement of the principal stock exchange on which the Exchangeable
Shares are listed;
(d) ensure that the record date for any dividend declared on Devon
Common Stock is not less than ten Business Days after the declaration date
for such dividend;
(e) take all such actions and do all such things as are necessary or
desirable to enable and permit Northstar, in accordance with applicable
law, to pay and otherwise perform its obligations with respect to the
satisfaction of the Liquidation Amount in respect of each issued and
outstanding Exchangeable Share upon the liquidation, dissolution or
winding-up of Northstar or any other distribution of the assets of
Northstar for the purpose of winding-up its affairs, including without
limitation all such actions and all such things as are necessary or
desirable to enable and permit Northstar to cause to be delivered shares of
Devon Common Stock to the holders of Exchangeable Shares in accordance with
the provisions of Article 5 of the Exchangeable Share Provisions;
(f) take all such actions and do all such things as are necessary or
desirable to enable and permit Northstar, in accordance with applicable
law, to pay and otherwise perform its obligations with respect to the
satisfaction of the Retraction Price and the Redemption Price, including
without limitation all such actions and all such things as are necessary or
desirable to enable and permit Northstar to cause to be delivered shares of
Devon Common Stock to the holders of Exchangeable Shares, upon the
retraction or redemption of the Exchangeable Shares in accordance with the
provisions of Article 6 or Article 7 of the Exchangeable Share Provisions,
as the case may be; and
(g) not exercise its vote as a direct or indirect shareholder to
initiate the voluntary liquidation, dissolution or winding-up of Northstar
nor take any action or omit to take any action that is designed to result
in the liquidation, dissolution or winding-up of Northstar.
2.2 SEGREGATION OF FUNDS
Devon will cause Northstar to deposit a sufficient amount of funds in a
separate account and segregate a sufficient amount of such assets and other
property as is necessary to enable Northstar to pay or otherwise
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satisfy the applicable dividends, Liquidation Amount, Retraction Price or
Redemption Price, in each case for the benefit of holders from time to time of
the Exchangeable Shares, and Northstar will use such funds, assets and other
property so segregated exclusively for the payment of dividends and the payment
or other satisfaction of the Liquidation Amount, the Retraction Price or the
Redemption Price, as applicable, net of any corresponding withholding tax
obligations and for the remittance of such withholding tax obligations.
2.3 RESERVATION OF SHARES OF DEVON COMMON STOCK
Devon hereby represents, warrants and covenants that it has irrevocably
reserved for issuance and will at all times keep available, free from
pre-emptive and other rights, out of its authorized and unissued capital stock
such number of shares of Devon Common Stock (or other shares or securities into
which Devon Common Stock may be reclassified or changed as contemplated by
section 2.7 hereof) (i) as is equal to the sum of (A) the number of Exchangeable
Shares issued and outstanding from time to time and (B) the number of
Exchangeable Shares issuable upon the exercise of all rights to acquire
Exchangeable Shares outstanding from time to time and (ii) as are now and may
hereafter be required to enable and permit Northstar to meet its obligations
hereunder, under the Voting and Exchange Trust Agreement, under the Exchangeable
Share Provisions and under any other security or commitment pursuant to the
Arrangement with respect to which Devon may now or hereafter be required to
issue shares of Devon Common Stock.
2.4 NOTIFICATION OF CERTAIN EVENTS
In order to assist Devon to comply with its obligations hereunder,
Northstar will give Devon notice of each of the following events at the time set
forth below:
(a) immediately, in the event of any determination by the Board of
Directors of Northstar to take any action which would require a vote of the
holders of Exchangeable Shares for approval;
(b) immediately, upon the earlier of (i) receipt by Northstar of
notice of, and (ii) Northstar otherwise becoming aware of, any threatened
or instituted claim, suit, petition or other proceedings with respect to
the involuntary liquidation, dissolution or winding-up of Northstar or to
effect any other distribution of the assets of Northstar among its
shareholders for the purpose of winding-up its affairs;
(c) immediately, upon receipt by Northstar of a Retraction Request (as
defined in the Exchangeable Share Provisions);
(d) at least 130 days prior to any Automatic Redemption Date
determined by the Board of Directors of Northstar in accordance with clause
(b) of the definition of Automatic Redemption Date in the Exchangeable
Share Provisions;
(e) as soon as practicable upon the issuance by Northstar of any
Exchangeable Shares or rights to acquire Exchangeable Shares; and
(f) in the event of any determination by the Board of Directors of
Northstar to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to Northstar or to effect any other distribution
of the assets of Northstar among its shareholders for the purpose of
winding-up its affairs, at least 60 days prior to the proposed effective
date of such liquidation, dissolution, winding-up or other distribution.
2.5 DELIVERY OF SHARES OF DEVON COMMON STOCK
In furtherance of its obligations hereunder, upon notice of any event which
requires Northstar to cause to be delivered shares of Devon Common Stock to any
holder of Exchangeable Shares, Devon shall forthwith issue and deliver the
requisite shares of Devon Common Stock to or to the order of the former holder
of the surrendered Exchangeable Shares, as Northstar shall direct. All such
shares of Devon Common Stock shall be duly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim, encumbrance,
security interest or adverse claim or interest.
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2.6 QUALIFICATION OF SHARES OF DEVON COMMON STOCK
Devon covenants that if any shares of Devon Common Stock (or other shares
or securities into which Devon Common Stock may be reclassified or changed as
contemplated by Section 2.7 hereof) to be issued and delivered hereunder
(including for greater certainty, pursuant to the Exchangeable Share Provisions,
or pursuant to the Exchange Put Right, the Exchange Right or the Automatic
Exchange Rights (all as defined in the Voting and Exchange Trust Agreement))
require registration or qualification with or approval of or the filing of any
document including any prospectus or similar document, the taking of any
proceeding with or the obtaining of any order, ruling or consent from any
governmental or regulatory authority under any Canadian or United States
federal, provincial or state law or regulation or pursuant to the rules and
regulations of any regulatory authority, or the fulfillment of any other legal
requirement (collectively, the "Applicable Laws") before such shares (or other
shares or securities into which Devon Common Stock may be reclassified or
changed as contemplated by Section 2.7 hereof) may be issued and delivered by
Devon to the initial holder thereof (other than Northstar) or in order that such
shares may be freely traded thereafter (other than any restrictions on transfer
by reason of a holder being a "control person" of Devon for purposes of Canadian
federal or provincial securities law or an "affiliate" of Devon for purposes of
United States federal or state securities law), Devon will in good faith
expeditiously take all such actions and do all such things as are necessary to
cause such shares of Devon Common Stock (or other shares or securities into
which Devon Common Stock may be reclassified or changed as contemplated by
Section 2.7 hereof) to be and remain duly registered, qualified or approved.
Devon represents and warrants that it has in good faith taken all actions and
done all things as are necessary under Applicable Laws as they exist on the date
hereof to cause the shares of Devon Common Stock (or other shares or securities
into which Devon Common Stock may be reclassified or changed as contemplated by
Section 2.7 hereof) to be issued and delivered hereunder (including, for greater
certainty, pursuant to the Exchangeable Share Provisions, or pursuant to the
Exchange Put Right, the Exchange Right and the Automatic Exchange Rights) to be
freely tradeable thereafter (other than restrictions on transfer by reason of a
holder being a "control person" of Devon for the purposes of Canadian federal
and provincial securities law or an "affiliate" of Devon for purposes of United
States federal or state securities law). Devon will in good faith expeditiously
take all such actions and do all such things as are necessary to cause all
shares of Devon Common Stock (or other shares or securities into which Devon
Common Stock may be reclassified or changed as contemplated by Section 2.7
hereof) to be delivered hereunder (including, for greater certainty, pursuant to
Exchangeable Share Provisions, or pursuant to the Exchange Put Right, the
Exchange Right or the Automatic Exchange Rights) to be listed, quoted or posted
for trading on all stock exchanges and quotation systems on which such shares
are listed, quoted or posted for trading at such time. Devon will in good faith
expeditiously take all such action and do all such things as are necessary to
cause all Exchangeable Shares to be and to continue to be listed and posted for
trading on The Toronto Stock Exchange or, in the event that a listing on The
Toronto Stock Exchange is not available, on another recognized Canadian stock
exchange.
2.7 EQUIVALENCE
(a) Devon will not:
(i) issue or distribute shares of Devon Common Stock (or securities
exchangeable for or convertible into or carrying rights to acquire shares
of Devon Common Stock) to the holders of all or substantially all of the
then outstanding shares of Devon Common Stock by way of stock dividend or
other distribution; or
(ii) issue or distribute rights, options or warrants to the holders of
all or substantially all of the then outstanding shares of Devon Common
Stock entitling them to subscribe for or to purchase shares of Devon Common
Stock (or securities exchangeable for or convertible into or carrying
rights to acquire shares of Devon Common Stock); or
(iii) issue or distribute to the holders of all or substantially all
of the then outstanding shares of Devon Common Stock (A) shares or
securities of Devon of any class other than Devon Common Stock (other than
shares convertible into or exchangeable for or carrying rights to acquire
shares of Devon
4
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Common Stock), (B) rights, options or warrants other than those referred to
in subsection 2.7 (a) (ii) above, (C) evidences of indebtedness of Devon or
(D) assets of Devon;
unless
(iv) one or both of Devon and Northstar is permitted under applicable
law to issue or distribute the economic equivalent on a per share basis of
such rights, options, warrants, securities, shares, evidences of
indebtedness or other assets to the holders of the Exchangeable Shares; and
(v) one or both of Devon and Northstar shall issue or distribute the
economic equivalent on a per share basis of such rights, options, warrants,
securities, shares, evidences of indebtedness or other assets
simultaneously to the holders of the Exchangeable Shares.
(b) Devon will not:
(i) subdivide, redivide or change the then outstanding shares of Devon
Common Stock into a greater number of shares of Devon Common Stock; or
(ii) reduce, combine or consolidate or change the then outstanding
shares of Devon Common Stock into a lesser number of shares of Devon Common
Stock; or
(iii) reclassify or otherwise change the shares of Devon Common Stock
or effect an amalgamation, merger, reorganization or other transaction
involving or affecting the shares of Devon Common Stock;
unless
(iv) Northstar is permitted under applicable law to simultaneously
make the same or an economically equivalent change to, or in the rights of
the holders of, the Exchangeable Shares; and
(v) the same or an economically equivalent change is simultaneously
made to, or in the rights of the holders of, the Exchangeable Shares.
(c) Devon will ensure that the record date for any event referred to in
section 2.7 (a) or 2.7(b) above, or (if no record date is applicable for such
event) the effective date for any such event, is not less than 20 Business Days
after the date on which such event is declared or announced by Devon (with
simultaneous notice thereof to be given by Devon to Northstar).
2.8 TENDER OFFERS, ETC.
In the event that a tender offer, share exchange offer, issuer bid,
take-over bid or similar transaction with respect to Devon Common Stock (an
"Offer") is proposed by Devon or is proposed to Devon or its shareholders and is
recommended by the Board of Directors of Devon, or is otherwise effected or to
be effected with the consent or approval of the Board of Directors of Devon,
Devon shall, in good faith, take all such actions and do all such things as are
necessary or desirable to enable and permit holders of Exchangeable Shares to
participate in such Offer to the same extent and on an equivalent basis as the
holders of shares of Devon Common Stock, without discrimination, including,
without limiting the generality of the foregoing, Devon will use its good faith
efforts expeditiously to (and shall, in the case of a transaction proposed by
Devon or where Devon is a participant in the negotiation thereof) ensure that
holders of Exchangeable Shares may participate in all such Offers without being
required to retract Exchangeable Shares as against Northstar (or, if so
required, to ensure that any such retraction shall be effective only upon, and
shall be conditional upon, the closing of the Offer and only to the extent
necessary to tender or deposit to the Offer).
2.9 OWNERSHIP OF OUTSTANDING SHARES
Without the prior approval of Northstar and the prior approval of the
holders of the Exchangeable Shares given in accordance with Section 10.2 of the
Exchangeable Share Provisions, Devon covenants and agrees in favor of Northstar
that, as long as any outstanding Exchangeable Shares are owned by any person or
entity other than Devon or any of its Subsidiaries, Devon will be and remain the
direct or indirect beneficial owner of all issued and outstanding Northstar
Common Shares and of at least 50.1% of all other outstanding securities
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of Northstar carrying or entitled to voting rights in any circumstances
generally for the election of directors, in each case other than the
Exchangeable Shares.
2.10 DEVON NOT TO VOTE EXCHANGEABLE SHARES
Devon covenants and agrees that it will appoint and cause to be appointed
proxy holders with respect to all Exchangeable Shares held by Devon and its
Subsidiaries for the sole purpose of attending each meeting of holders of
Exchangeable Shares in order to be counted as part of the quorum for each such
meeting. Devon further covenants and agrees that it will not, and will cause its
Subsidiaries not to, exercise any voting rights which may be exercisable by
holders of Exchangeable Shares from time to time pursuant to the Exchangeable
Share Provisions or pursuant to the provisions of the Act with respect to any
Exchangeable Shares held by it or by its Subsidiaries in respect of any matter
considered at any meeting of holders of Exchangeable Shares.
2.11 DUE PERFORMANCE
On and after the Effective Date, Devon shall duly and timely perform all of
its obligations provided for in connection with the Plan of Arrangement,
including any obligations that may arise upon the exercise of Devon's rights
under the Exchangeable Share Provisions.
ARTICLE 3
GENERAL
3.1 TERM
This agreement shall come into force and be effective as of the date hereof
and shall terminate and be of no further force and effect at such time as no
Exchangeable Shares (or securities or rights convertible into or exchangeable
for or carrying rights to acquire Exchangeable Shares) are held by any party
other than Devon and any of its Subsidiaries.
3.2 CHANGES IN CAPITAL OF DEVON AND NORTHSTAR
Notwithstanding the provisions of section 3.4 hereof, at all times after
the occurrence of any event effected pursuant to section 2.7 or 2.8 hereof, as a
result of which either Devon Common Stock or the Exchangeable Shares or both are
in any way changed, this agreement shall forthwith be amended and modified as
necessary in order that it shall apply with full force and effect, mutatis
mutandis, to all new securities into which Devon Common Stock or the
Exchangeable Shares or both are so changed, and the parties hereto shall as soon
as possible execute and deliver an agreement in writing giving effect to and
evidencing such necessary amendments and modifications.
3.3 SEVERABILITY
If any provision of this agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
agreement shall not in any way be affected or impaired thereby and this
agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions.
3.4 AMENDMENTS, MODIFICATIONS, ETC.
This agreement may not be amended, modified or waived except by an
agreement in writing executed by Northstar and Devon and approved by the holders
of the Exchangeable Shares in accordance with Section 10.2 of the Exchangeable
Share Provisions.
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3.5 MINISTERIAL AMENDMENTS
Notwithstanding the provisions of section 3.4, the parties to this
agreement may in writing, at any time and from time to time, without the
approval of the holders of the Exchangeable Shares, amend or modify this
agreement for the purposes of:
(a) adding to the covenants of either or both parties for the
protection of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with this
agreement as may be necessary or desirable with respect to matters or
questions which, in the opinion of the board of directors of each of
Northstar and Devon, it may be expedient to make, provided that each such
board of directors shall be of the opinion that such amendments or
modifications will not be prejudicial to the interests of the holders of
the Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of counsel
to Northstar and Devon, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error; provided that the boards of
directors of each of Northstar and Devon shall be of the opinion that such
changes or corrections will not be prejudicial to the interests of the
holders of the Exchangeable Shares.
3.6 MEETING TO CONSIDER AMENDMENTS
Northstar, at the request of Devon, shall call a meeting or meetings of the
holders of the Exchangeable Shares for the purpose of considering any proposed
amendment or modification requiring approval of such shareholders. Any such
meeting or meetings shall be called and held in accordance with the by-laws of
Northstar, the Exchangeable Share Provisions and all Applicable Laws.
3.7 AMENDMENTS ONLY IN WRITING
No amendment to or modification or waiver of any of the provisions of this
agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by both of the parties hereto.
3.8 INUREMENT
This agreement shall be binding upon and inure to the benefit of the
parties hereto and the holders, from time to time, of Exchangeable Shares and
each of their respective heirs, successors and assigns.
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3.9 NOTICES TO PARTIES
All notices and other communications between the parties shall be in
writing and shall be deemed to have been given if delivered personally or by
confirmed telecopy to the parties at the following addresses (or at such other
address for either such party as shall be specified in like notice):
(a) if to Devon to:
Devon Energy Corporation
20 North Broadway
Suite 1500
Oklahoma City, Oklahoma
73102-8260
Attention: President
Facsimile No. 405-552-8171
(b) if to Northstar to:
Northstar Energy Corporation
3000, 400 -- 3rd Avenue S.W.
Calgary, Alberta
T2P 4H2
Attention: President
Facsimile No. 403-213-8100
Any notice or other communication given personally shall be deemed to have
been given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof,
unless such day is not a Business Day, in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
3.10 COUNTERPARTS
This agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which taken together shall constitute one and the
same instrument.
3.11 JURISDICTION
This agreement shall be construed and enforced in accordance with the laws
of the Province of Alberta and the federal laws of Canada applicable therein.
3.12 ATTORNMENT
Devon agrees that any action or proceeding arising out of or relating to
this agreement may be instituted in the courts of the Province of Alberta,
waives any objection which it may have now or hereafter to the venue of any such
action or proceeding, irrevocably submits to the jurisdiction of such courts in
any such action or proceeding, agrees to be bound by any judgment of such courts
and not to seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby appoints Northstar
at its registered office in the Province of Alberta as Devon's attorney for
service of process.
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IN WITNESS WHEREOF, Devon and Northstar have caused this agreement to be
signed by their respective officers thereunder duly authorized, all as of the
date first written above.
DEVON ENERGY CORPORATION
By: /s/ DUKE R. LIGON
----------------------------------
By: /s/ MARIAN J. MOON
----------------------------------
NORTHSTAR ENERGY CORPORATION
By: /s/ JOHN A. HAGG
----------------------------------
By: /s/ MURRAY T. BROWN
----------------------------------
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EXHIBIT 4.2
PROVISIONS ATTACHING TO THE EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of the Corporation shall have the
following rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these rights, privileges, restrictions and
conditions:
"Act" means the Business Corporations Act (Alberta), as amended,
consolidated or reenacted from time to time.
"Aggregate Equivalent Vote Amount" means, with respect to any matter,
proposition or question on which holders of Devon Common Stock are entitled to
vote, consent or otherwise act, the product of (i) the number of Exchangeable
Shares then issued and outstanding and held by holders (other than Devon and its
Subsidiaries) multiplied by (ii) the number of votes to which a holder of one
share of Devon Common Stock is entitled with respect to such matter, proposition
or question.
"Automatic Redemption Date" means the date for the automatic redemption by
the Corporation of Exchangeable Shares pursuant to Article 7 of these share
provisions, which date shall be the first to occur of (a) the date, if any,
selected pursuant to this clause (a) by the Board of Directors of the
Corporation, such date to be no earlier than the 10th anniversary of the
Effective Date of the Arrangement, (b) the date selected by the Board of
Directors of the Corporation (such date to be no earlier than the third
anniversary of the Effective Date of the Arrangement) at a time when less than
5% of the number of Exchangeable Shares issuable on the Effective Date (other
than Exchangeable Shares held by Devon and its Subsidiaries, and as such number
of shares may be adjusted as deemed appropriate by the Board of Directors to
give effect to any subdivision or consolidation of or stock dividend on the
Exchangeable Shares, any issuance or distribution of rights to acquire
Exchangeable Shares or securities exchangeable for or convertible into or
carrying rights to acquire Exchangeable Shares, any issue or distribution of
other securities or rights or evidences of indebtedness or assets, or any other
capital reorganization or other transaction involving or affecting the
Exchangeable Shares) are outstanding, (c) the Business Day prior to the record
date for any meeting or vote of the shareholders of the Corporation to consider
any matter on which the holders of Exchangeable Shares would be entitled to vote
as shareholders of the Corporation, but excluding any meeting or vote as
described in clause (d) below, (d) the Business Day following the day on which
the holders of Exchangeable Shares fail to take the necessary action at a
meeting or other vote of holders of Exchangeable Shares, if and to the extent
such action is required, to approve or disapprove, as applicable, any change to,
or in the rights of the holders of, Exchangeable Shares, if the approval or
disapproval, as applicable, of such change would be required to maintain the
economic and legal equivalence of the Exchangeable Shares and the Devon Common
Stock or (e) the date on which the share purchase rights issued pursuant to the
Rights Agreement, dated as of April 17, 1995, as amended, between Devon and
First National Bank of Boston (or pursuant to any similar successor or
replacement rights agreement) would separate from the shares of Devon Common
Stock and become exercisable.
"Board of Directors" means the board of directors of the Corporation and any
committee thereof acting within its authority.
"Business Day" means any day other than a Saturday, a Sunday or a day when
banks are not open for business in either or both of Oklahoma City, Oklahoma and
Calgary, Alberta.
"Common Shares" means the common shares in the capital of the Corporation.
"Corporation" means Northstar Energy Corporation, a corporation organized
and existing under the Act and includes any successor corporation.
"Current Market Price" means, in respect of a share of Devon Common Stock on
any date, the average of the closing sale prices per share (computed and rounded
to the third decimal point) of shares of Devon Common Stock during the period of
20 consecutive trading days ending not more than five trading days before such
date on the American Stock Exchange, or, if Devon Common Stock is not then
traded on the American Stock Exchange, on such
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other principal U.S. stock exchange or automated quotation system on which the
Devon Common Stock is listed or quoted, as the case may be, as may be selected
by the Board of Directors for such purpose; provided, however, that if, in the
opinion of the Board of Directors the public distribution or trading activity of
Devon Common Stock during such period does not create a market which reflects
the fair market value of a share of Devon Common Stock, then the Current Market
Price of a share of Devon Common Stock shall be determined by the Board of
Directors based upon the advice of such qualified independent financial advisors
as the Board of Directors may deem to be appropriate, and provided further than
any such selection, opinion or determination by the Board of Directors shall be
conclusive and binding.
"Devon" means Devon Energy Corporation, a corporation organized and existing
under the laws of the State of Oklahoma and includes any successor corporation.
"Devon Call Notice" has the meaning provided in Section 6.3.
"Devon Common Stock" means the shares of common stock of Devon, with a par
value of U.S. $0.10 per share, having voting rights of one vote per share, and
any other securities resulting from the application of Section 2.7 of the
Support Agreement.
"Devon Dividend Declaration Date" means the date on which the board of
directors of Devon declares any dividend on the Devon Common Stock.
"Devon Special Share" means the one share of Special Voting Stock of Devon,
with a par value of U.S. $0.10, and having voting rights at meetings of holders
of Devon Common Stock equal to the Aggregate Equivalent Voting Amount.
"Exchange Put Date" has the meaning provided in Section 8.2.
"Exchange Put Right" has the meaning provided in Section 8.1.
"Exchangeable Share Consideration" means, for any acquisition of or
redemption of or distribution of assets of the Corporation in respect of or
purchase pursuant to these share provisions, the Plan of Arrangement, the
Support Agreement or the Voting and Exchange Trust Agreement:
a. certificates representing the aggregate number of shares of Devon
Common Stock deliverable in connection with such action;
b. a cheque or cheques payable at par at any branch of the bankers of
the payor in the amount of all declared, payable and unpaid, and all
undeclared but payable, cash dividends deliverable in connection with such
action; and
c. such stock or other property constituting any declared and unpaid,
and all undeclared but payable, non-cash dividends deliverable in connection
with such action,
provided that (i) that part of the consideration which represents (a) above,
shall be fully paid and satisfied by the delivery of one share of Devon Common
Stock for each one Exchangeable Share, such share to be duly issued as a fully
paid and non-assessable share, (ii) that part of the consideration which
represents (c), above, unpaid shall be fully paid and satisfied by delivery of
such non-cash items, and (iii) any such consideration shall be delivered free
and clear of any lien, claim, encumbrance, security interest or adverse claim or
interest less any tax required to be deducted and withheld therefrom and without
interest.
"Exchangeable Share Price" means, for each Exchangeable Share, an amount
equal to the aggregate of:
a. the Current Market Price of a share of Devon Common Stock; plus
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b. an additional amount equal to the full amount of all cash dividends
declared, payable and unpaid on such Exchangeable Share; plus
c. an additional amount equal to all dividends declared and payable on
Devon Common Stock which have not been declared on Exchangeable Shares in
accordance herewith; plus
d. an additional amount representing non-cash dividends declared,
payable and unpaid on such Exchangeable Share.
"Exchangeable Shares" means the Exchangeable Shares of the Corporation
having the rights, privileges, restrictions and conditions set forth herein.
"Liquidation Amount" has the meaning provided in Section 5.1.
"Liquidation Call Right" has the meaning provided in the Plan of
Arrangement.
"Liquidation Date" has the meaning provided in Section 5.1.
"Plan of Arrangement" means the plan of arrangement involving and affecting
the Corporation, Devon and the holders of common shares and options of the
Corporation under section 186 of the Act contemplated in the Combination
Agreement by and among Devon and the Corporation, dated as of June 29, 1998, as
amended and restated from time to time.
"Purchase Price" has the meaning provided in Section 6.3.
"Redemption Call Purchase Price" has the meaning provided in the Plan of
Arrangement.
"Redemption Call Right" has the meaning provided in the Plan of Arrangement.
"Redemption Price" has the meaning provided in Section 7.1.
"Retracted Shares" has the meaning provided in subsection 6.1(a).
"Retraction Call Right" has the meaning provided in subsection 6.1(c).
"Retraction Date" has the meaning provided in subsection 6.1(b).
"Retraction Price" has the meaning provided in Section 6.1.
"Retraction Request" has the meaning provided in Section 6.1.
"Subsidiary", in relation to any person, means any body corporate,
partnership, joint venture, association or other entity of which more than 50%
of the total voting power of shares of stock or units of ownership or beneficial
interest entitled to vote in the election of directors (or members of a
comparable governing body) is owned or controlled, directly or indirectly, by
such person.
"Support Agreement" means the Support Agreement between Devon and the
Corporation, made as of December 10, 1998.
"Transfer Agent" means the duly appointed transfer agent for the time being
of the Exchangeable Shares, and, if there is more than one such transfer agent,
then the principal Canadian transfer agent.
"Trustee" means the Trustee appointed under the Voting and Exchange Trust
Agreement, and any successor trustee.
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"Voting and Exchange Trust Agreement" means the Voting and Exchange Trust
Agreement among the Corporation, Devon and the Trustee, made as of December 10 ,
1998.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall be entitled to a preference over the
Common Shares and any other shares ranking junior to the Exchangeable Shares,
with respect to the payment of dividends and the distribution of assets in the
event of the liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or any other distribution of the assets of the
Corporation among its shareholders for the purpose of winding-up its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive and the
Board of Directors shall, subject to applicable law, on each Devon Dividend
Declaration Date, declare a dividend on each Exchangeable Share (a) in the case
of a cash dividend declared on the Devon Common Stock, in an amount in cash for
each Exchangeable Share equal to the cash dividend declared on each share of
Devon Common Stock, (b) in the case of a stock dividend declared on the Devon
Common Stock to be paid in Devon Common Stock, in such number of Exchangeable
Shares for each Exchangeable Share as is equal to the number of shares of Devon
Common Stock to be paid on each share of Devon Common Stock, (c) in the case of
a dividend declared on the Devon Common Stock in property other than cash or
securities of Devon, in such type and amount of property for each Exchangeable
Share as is the same as the type and amount of property declared as a dividend
on each share of Devon Common Stock or (d) in the case of a dividend declared on
the Devon Common Stock to be paid in securities of Devon other than Devon Common
Stock, in such number of either such securities or economically equivalent
securities of the Corporation, as the Board of Directors determines, for each
Exchangeable Share as is equal to the number of securities of Devon to be paid
on each share of Devon Common Stock. Such dividends shall be paid out of money,
assets or property of the Corporation properly applicable to the payment of
dividends, or out of authorized but unissued shares of the Corporation.
3.2 Cheques of the Corporation payable at par at any branch of the bankers
of the Corporation shall be issued in respect of any cash dividends contemplated
by subsection 3.1(a) hereof and the sending of such a cheque to each holder of
an Exchangeable Share (less any tax required to be deducted and withheld from
such dividends paid or credited by the Corporation) shall satisfy the cash
dividends represented thereby unless the cheque is not paid on presentation.
Certificates registered in the name of the registered holder of Exchangeable
Shares shall be issued or transferred in respect of any stock dividends
contemplated by subsections 3.1(b) or (d) hereof and the sending of such a
certificate to each holder of an Exchangeable Share shall satisfy the stock
dividend represented thereby or dividend payable in other securities represented
thereby. Such other type and amount of property in respect of any dividends
contemplated by subsection 3.1(c) hereof shall be issued, distributed or
transferred by the Corporation in such manner as it shall determine and the
issuance, distribution or transfer thereof by the Corporation to each holder of
an Exchangeable Share shall satisfy the dividend represented thereby. In all
cases, any such dividends shall be subject to any reduction or adjustment for
tax required to be deducted and withheld from such dividends paid or credited by
the Corporation. No holder of an Exchangeable Share shall be entitled to recover
by action or other legal process against the Corporation any dividend which is
represented by a cheque that has not been duly presented to the Corporation's
bankers for payment or which otherwise remains unclaimed for a period of six
years from the date on which such dividend was payable.
3.3 The record date for the determination of the holders of Exchangeable
Shares entitled to receive payment of, and the payment date for, any dividend
declared on the Exchangeable Shares under Section 3.1 hereof shall be the same
dates as the record date and payment date, respectively, for the corresponding
dividend declared on the Devon Common Stock.
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3.4 If on any payment date for any dividends declared on the Exchangeable
Shares under Section 3.1 hereof the dividends are not paid in full on all of the
Exchangeable Shares then outstanding, any such dividends which remain unpaid
shall be paid on a subsequent date or dates determined by the Board of Directors
on which the Corporation shall have sufficient moneys, assets or property
properly applicable to the payment of such dividends.
3.5 Except as provided in this Article 3, the holders of Exchangeable Shares
shall not be entitled to receive dividends in respect thereof.
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, the
Corporation shall not at any time without, but may at any time with, the
approval of the holders of the Exchangeable Shares given as specified in Article
10 of these share provisions:
a. pay any dividends on the Common Shares, or any other shares ranking
junior to the Exchangeable Shares, other than stock dividends payable in any
such other shares ranking junior to the Exchangeable Shares;
b. redeem or purchase or make any capital distribution in respect of
Common Shares or any other shares ranking junior to the Exchangeable Shares
with respect to the payment of dividends or on any liquidation distribution;
c. redeem or purchase any other shares of the Corporation ranking
equally with the Exchangeable Shares with respect of the payment of
dividends or on any liquidation distribution; or
d. amend the articles or by-laws of the Corporation, in either case in
any manner that would affect the rights or privileges of the holders of the
Exchangeable Shares.
The restrictions in subsections 4.1(a), 4.1(b) and 4.1(c) above shall not
apply if all dividends on the outstanding Exchangeable Shares corresponding to
dividends declared with a record date on or following the effective date of the
Plan of Arrangement on the Devon Common Stock shall have been declared on the
Exchangeable Shares and paid in full. Nothing herein shall be interpreted to
restrict the Corporation from issuing additional Common Shares.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding-up its affairs, a holder of Exchangeable
Shares shall be entitled, subject to applicable law, to receive from the assets
of the Corporation in respect of each Exchangeable Share held by such holder on
the effective date of such liquidation, dissolution or winding-up (the
"Liquidation Date"), before any distribution of any part of the assets of the
Corporation to the holders of the Common Shares or any other shares ranking
junior to the Exchangeable Shares, an amount equal to the Exchangeable Share
Price applicable on the last Business Day prior to the Liquidation Date (the
"Liquidation Amount") in accordance with Section 5.2. In connection with payment
of the Liquidation Amount, the Corporation shall be entitled to liquidate some
of the Devon Common Stock which would otherwise be deliverable as Exchangeable
Share Consideration to the particular holder of Exchangeable Shares in order to
fund any statutory withholding tax obligation.
5.2 On or promptly after the Liquidation Date, and subject to the exercise
by Devon of the Liquidation Call Right, the Corporation shall cause to be
delivered to the holders of the Exchangeable Shares the Liquidation Amount for
each such Exchangeable Share upon presentation and surrender of the certificates
representing such Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
applicable law and the by-laws of the Corporation and such additional documents
and instruments as the
<PAGE> 6
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Transfer Agent may reasonably require, at the registered office of the
Corporation or at any office of the Transfer Agent as may be specified by the
Corporation in Schedule A hereto or by notice to the holders of the Exchangeable
Shares. Payment of the total Liquidation Amount for such Exchangeable Shares
shall be made by delivery to each holder, at the address of the holder recorded
in the securities register of the Corporation for the Exchangeable Shares or by
holding for pick up by the holder at the registered office of the Corporation or
at any office of the Transfer Agent as may be specified by the Corporation in
Schedule A hereto or by notice to the holders of Exchangeable Shares, on behalf
of the Corporation of the Exchangeable Share Consideration representing the
total Liquidation Amount. On and after the Liquidation Date, the holders of the
Exchangeable Shares shall cease to be holders of such Exchangeable Shares and
shall not be entitled to exercise any of the rights of holders in respect
thereof, other than the right to receive their proportionate part of the total
Liquidation Amount, unless payment of the total Liquidation Amount for such
Exchangeable Shares shall not be made upon presentation and surrender of share
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Liquidation Amount
has been paid in the manner hereinbefore provided. The Corporation shall have
the right at any time on or after the Liquidation Date to deposit or cause to be
deposited the Exchangeable Share Consideration in respect of the Exchangeable
Shares represented by certificates that have not at the Liquidation Date been
surrendered by the holders thereof in a custodial account or for safe keeping,
in the case of non-cash items, with any chartered bank or trust company in
Canada. Upon such deposit being made, the rights of the holders of Exchangeable
Shares after such deposit shall be limited to receiving their proportionate part
of the total Liquidation Amount for such Exchangeable Shares so deposited,
against presentation and surrender of the said certificates held by them,
respectively, in accordance with the foregoing provisions. Upon such payment or
deposit of such Exchangeable Share Consideration, the holders of the
Exchangeable Shares shall thereafter be considered and deemed for all purposes
to be the holders of the Devon Common Stock delivered to them. Notwithstanding
the foregoing, until such payment or deposit of such Exchangeable Share
Consideration, the holder shall be deemed to still be a holder of Exchangeable
Shares for purposes of all voting rights with respect thereto under the Voting
and Exchange Trust Agreement.
5.3 After the Corporation has satisfied its obligations to pay the holders
of the Exchangeable Shares the Liquidation Amount per Exchangeable Share, such
holders shall not be entitled to share in any further distribution of the assets
of the Corporation.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time, subject
to the exercise by Devon of the Retraction Call Right and otherwise upon
compliance with the provisions of this Article 6, to require the Corporation to
redeem any or all of the Exchangeable Shares registered in the name of such
holder for an amount equal to the Exchangeable Share Price applicable on the
last Business Day prior to the Retraction Date (the "Retraction Price") in
accordance with Section 6.4. In connection with payment of the Retraction Price,
the Corporation shall be entitled to liquidate some of the Devon Common Stock
that would otherwise be deliverable as Exchangeable Share Consideration to the
particular holder of Exchangeable Shares in order to fund any statutory
withholding tax obligation. To effect such redemption, the holder shall present
and surrender at the registered office of the Corporation or at any office of
the Transfer Agent as may be specified by the Corporation in Schedule A hereto
or by notice to the holders of Exchangeable Shares the certificate or
certificates representing the Exchangeable Shares which the holder desires to
have the Corporation redeem, together with such other documents and instruments
as may be required to effect a transfer of Exchangeable Shares under applicable
law and the by-laws of the Corporation and such additional documents and
instruments as the Transfer Agent may reasonably require, and together with a
duly executed statement (the "Retraction Request") in the form of Schedule "A"
hereto or in such other form as may be acceptable to the Corporation:
a. specifying that the holder desires to have all or any number
specified therein of the Exchangeable Shares represented by such certificate
or certificates (the "Retracted Shares") redeemed by the Corporation;
b. stating the Business Day on which the holder desires to have the
Corporation redeem the Retracted Shares (the "Retraction Date"), provided
that the Retraction Date shall be not less than five Business Days nor more
than
<PAGE> 7
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10 Business Days after the date on which the Retraction Request is received
by the Corporation and further provided that, in the event that no such
Business Day is specified by the holder in the Retraction Request, the
Retraction Date shall be deemed to be the tenth Business Day after the date
on which the Retraction Request is received by the Corporation; and
c. acknowledging the overriding right (the "Retraction Call Right") of
Devon to purchase all but not less than all the Retracted Shares directly
from the holder and that the Retraction Request shall be deemed to be a
revocable offer by the holder to sell the Retracted Shares in accordance
with the Retraction Call Right on the terms and conditions set out in
Section 6.3 below.
6.2 Subject to the exercise by Devon of the Retraction Call Right, upon
receipt by the Corporation or the Transfer Agent in the manner specified in
Section 6.1 hereof of a certificate or certificates representing the number of
Exchangeable Shares which the holder desires to have the Corporation redeem,
together with a Retraction Request, and provided that the Retraction Request is
not revoked by the holder in the manner specified in Section 6.7, the
Corporation shall redeem the Retracted Shares effective at the close of business
on the Retraction Date and shall cause to be delivered to such holder the total
Retraction Price with respect to such shares in accordance with Section 6.4
hereof. If only a part of the Exchangeable Shares represented by any certificate
are redeemed or purchased by Devon pursuant to the Retraction Call right, a new
certificate for the balance of such Exchangeable Shares shall be issued to the
holder at the expense of the Corporation.
6.3 Upon receipt by the Corporation of a Retraction Request, the Corporation
shall immediately notify Devon thereof. In order to exercise the Retraction Call
Right, Devon must notify the Corporation in writing of its determination to do
so (the "Devon Call Notice") within two Business Days of such notification. If
Devon does not so notify the Corporation within such two Business Days, the
Corporation will notify the holder as soon as possible thereafter that Devon
will not exercise the Retraction Call Right. If Devon delivers the Devon Call
Notice within such two Business Days, and provided that the Retraction Request
is not revoked by the holder in the manner specified in Section 6.7, the
Retraction Request shall thereupon be considered only to be an offer by the
holder to sell the Retracted Shares to Devon in accordance with the Retraction
Call Right. In such event, the Corporation shall not redeem the Retracted Shares
and Devon shall purchase from such holder and such holder shall sell to Devon on
the Retraction Date the Retracted Shares for a purchase price per share (the
"Purchase Price") equal to the Retraction Price. For the purposes of completing
a purchase pursuant to the Retraction Call Right, Devon shall deposit with the
Transfer Agent, on or before the Retraction Date, the Exchangeable Share
Consideration representing the total Purchase Price. Provided that such
Exchangeable Share Consideration has been so deposited with the Transfer Agent,
the closing of the purchase and sale of the Retracted Shares pursuant to the
Retraction Call Right shall be deemed to have occurred as at the close of
business on the Retraction Date and, for greater certainty, no redemption by the
Corporation of such Retracted Shares shall take place on the Retraction Date. In
the event that Devon does not deliver a Devon Call Notice within two Business
Days or otherwise comply with these Exchangeable Share provisions in respect
thereto, and provided that Retraction Request is not revoked by the holder in
the manner specified in Section 6.7, the Corporation shall redeem the Retracted
Shares on the Retraction Date and in the manner otherwise contemplated in this
Article 6.
6.4 The Corporation or Devon, as the case may be, shall deliver or cause the
Transfer Agent to deliver to the relevant holder, at the address of the holder
recorded in the securities register of the Corporation for the Exchangeable
Shares or at the address specified in the holder's Retraction Request or by
holding for pick up by the holder at the registered office of the Corporation or
at any office of the Transfer Agent as may be specified by the Corporation in
Schedule A hereto or by notice to the holders of Exchangeable Shares, the
Exchangeable Share Consideration representing the total Retraction Price or the
total Purchase Price, as the case may be, and such delivery of such Exchangeable
Share Consideration to the Transfer Agent shall be deemed to be payment of and
shall satisfy and discharge all liability for the total Retraction Price or
total Purchase Price, as the case may be, except as to any cheque included
therein which is not paid on due presentation.
6.5 On and after the close of business on the Retraction Date, the holder of
the Retracted Shares shall cease to be a holder of such Retracted Shares and
shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive such holder's proportionate part of the
total Retraction Price or total Purchase Price, as the case may be, unless upon
presentation and surrender of certificates in accordance with the foregoing
provisions,
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payment of the total Retraction Price or the total Purchase Price, as the case
may be, shall not be made, in which case the rights of such holder shall remain
unaffected until the Exchangeable Share Consideration representing the total
Retraction Price or the total Purchase Price, as the case may be, has been paid
in the manner hereinbefore provided. On and after the close of business on the
Retraction Date, provided that presentation and surrender of certificates and
payment of the Exchangeable Share Consideration representing the total
Retraction Price or the total Purchase Price, as the case may be, has been made
in accordance with the foregoing provisions, the holder of the Retracted Shares
so redeemed by the Corporation or purchased by Devon shall thereafter be
considered and deemed for all purposes to be a holder of the Devon Common Stock
delivered to it. Notwithstanding the foregoing, until such payment of such
Exchangeable Share Consideration to the holder, the holder shall be deemed to
still be a holder of Exchangeable Shares for purposes of all voting rights with
respect thereto under the Voting and Exchange Trust Agreement.
6.6 Notwithstanding any other provision of this Article 6, the Corporation
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to liquidity or solvency requirements or other provisions of
applicable law. If the Corporation believes that on any Retraction Date it would
not be permitted by any of such provisions to redeem the Retracted Shares
tendered for redemption on such date, and provided that Devon shall not have
exercised the Retraction Call Right with respect to the Retracted Shares, the
Corporation shall only be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent of the maximum number that may be
so redeemed (rounded down to a whole number of shares) as would not be contrary
to such provisions and shall notify the holder at least two Business Days prior
to the Retraction Date as to the number of Retracted Shares which will not be
redeemed by the Corporation. In any case in which the redemption by the
Corporation of Retracted Shares would be contrary to liquidity or solvency
requirements or other provisions of applicable law, the Corporation shall redeem
Retracted Shares in accordance with Section 6.2 of these share provisions on a
pro rata basis and shall issue to each holder of Retracted Shares a new
certificate, at the expense of the Corporation, representing the Retracted
Shares not redeemed by the Corporation pursuant to Section 6.2 hereof. Provided
that the Retraction Request is not revoked by the holder in the manner specified
in Section 6.7, the holder of any such Retracted Shares not redeemed by the
Corporation pursuant to Section 6.2 of these share provisions as a result of
liquidity or solvency requirements or applicable law shall be deemed by giving
the Retraction Request to require Devon to purchase such Retracted Shares from
such holder on the Retraction Date or as soon as practicable thereafter on
payment by Devon to such holder of the Purchase Price for each such Retracted
Share, all as more specifically provided in the Voting and Exchange Trust
Agreement, and Devon shall make such purchase.
6.7 A holder of Retracted Shares may, by notice in writing given by the
holder to the Corporation before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to Devon shall be deemed to have been revoked.
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION
7.1 Subject to applicable law, and if Devon does not exercise the Redemption
Call Right, the Corporation shall on the Automatic Redemption Date redeem the
whole of the then outstanding Exchangeable Shares for an amount equal to the
Exchangeable Share Price applicable on the last Business Day prior to the
Automatic Redemption Date (the "Redemption Price") in accordance with Section
7.3. In connection with payment of the Redemption Price, the Corporation shall
be entitled to liquidate some of the Devon Common Stock which would otherwise be
deliverable as Exchangeable Share Consideration to the particular holder of
Exchangeable Shares in order to fund any statutory withholding tax obligation.
7.2 In any case of a redemption of Exchangeable Shares under this Article 7,
the Corporation, or the Transfer Agent on behalf of the Corporation, shall, at
least 45 days before an Automatic Redemption Date or before a possible Automatic
Redemption Date which may result from a failure of the holders of Exchangeable
Shares to take necessary action as described in clause (d) of the definition of
Automatic Redemption Date send or cause to be sent to each holder of
Exchangeable Shares a notice in writing of the redemption or possible redemption
by the Corporation or the
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purchase by Devon under the Redemption Call Right, as the case may be, of the
Exchangeable Shares held by such holder. Such notice shall set out the formula
for determining the Redemption Price or the Redemption Call Purchase Price, as
the case may be, the Automatic Redemption Date and, if applicable, particulars
of the Redemption Call Right. In the case of any notice given in connection with
a possible Automatic Redemption Date, such notice will be given contingently and
will be withdrawn if the contingency does not occur.
7.3 On or after the Automatic Redemption Date and subject to the exercise by
Devon of the Redemption Call Right, the Corporation shall cause to be delivered
to the holders of the Exchangeable Shares to be redeemed the Redemption Price
for each such Exchangeable Share upon presentation and surrender at the
registered office of the Corporation or at any office of the Transfer Agent as
may be specified by the Corporation in such notice of the certificates
representing such Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
applicable law and the by-laws of the Corporation and such additional documents
and instruments as the Transfer Agent may reasonably require. Payment of the
total Redemption Price for such Exchangeable Shares shall be made by delivery to
each holder, at the address of the holder recorded in the securities register or
at any office of the Transfer Agent as may be specified by the Corporation in
such notice, on behalf of the Corporation, of the Exchangeable Share
Consideration representing the total Redemption Price. On and after the
Automatic Redemption Date, the holders of the Exchangeable Shares called for
redemption shall cease to be holders of such Exchangeable Shares and shall not
be entitled to exercise any of the rights of holders in respect thereof, other
than the right to receive their proportionate part of the total Redemption
Price, unless payment of the total Redemption Price for such Exchangeable Shares
shall not be made upon presentation and surrender of certificates in accordance
with the foregoing provisions, in which case the rights of the holders shall
remain unaffected until the total Redemption Price has been paid in the manner
hereinbefore provided. The Corporation shall have the right at any time after
the sending of notice of its intention to redeem the Exchangeable Shares as
aforesaid to deposit or cause to be deposited the Exchangeable Share
Consideration with respect to the Exchangeable Shares so called for redemption,
or of such of the said Exchangeable Shares represented by certificates that have
not at the date of such deposit been surrendered by the holders thereof in
connection with such redemption, in a custodial account or for safe keeping, in
the case of non-cash items, with any chartered bank or trust company in Canada
named in such notice. Upon the later of such deposit being made and the
Automatic Redemption Date, the Exchangeable Shares in respect whereof such
deposit shall have been made shall be redeemed and the rights of the holders
thereof after such deposit or Automatic Redemption Date, as the case may be,
shall be limited to receiving their proportionate part of the total Redemption
Price for such Exchangeable Shares so deposited, against presentation and
surrender of the said certificates held by them, respectively, in accordance
with the foregoing provisions. Upon such payment or deposit of such Exchangeable
Share Consideration, the holders of the Exchangeable Shares shall thereafter be
considered and deemed for all purposes to be holders of the Devon Common Stock
delivered to them. Notwithstanding the foregoing, until such payment or deposit
of such Exchangeable Share Consideration is made, the holder shall be deemed to
still be a holder of Exchangeable Shares for purposes of all voting rights with
respect thereto under the Voting and Exchange Trust Agreement.
ARTICLE 8
EXCHANGE PUT RIGHT
8.1 Upon and subject to the terms and conditions contained in these share
provisions and the Voting and Exchange Trust Agreement:
a. a holder of Exchangeable Shares shall have the right (the "Exchange
Put Right") at any time to require Devon to purchase all or any part of the
Exchangeable Shares of the holder; and
b. upon the exercise by the holder of the Exchange Put Right and
provided that, at the time of purchase, the Exchangeable Shares are listed
on a recognized Canadian stock exchange, the holder shall be required to
sell to Devon, and Devon shall be required to purchase from the holder, that
number of Exchangeable Shares in respect of which the Exchange Put Right is
exercised, in consideration of the payment by Devon of the Exchangeable
Share Price applicable thereto (which shall be the Exchangeable Share Price
applicable on the last Business Day prior to receipt of notice required
under section 8.2) and delivery by or on behalf of Devon of the Exchangeable
Share
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Consideration representing the total applicable Exchangeable Share Price. In
connection with payment of the Exchangeable Share Consideration, the
Corporation shall be entitled to liquidate some of the Devon Common Stock
which would otherwise be deliverable to the particular holder of
Exchangeable Shares in order to fund any statutory withholding tax
obligation.
8.2 The Exchange Put Right provided in section 8.1 hereof and in Article 5
of the Voting and Exchange Trust Agreement may be exercised at any time by
notice in writing given by the holder to and received by the Trustee (the date
of such receipt, the "Exchange Put Date") and accompanied by presentation and
surrender of the certificates representing such Exchangeable Shares, together
with such documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of the Corporation and such
additional documents and instruments as the Trustee may reasonably require, at
the principal transfer offices in Calgary, Alberta and Toronto, Ontario of the
Trustee, or at such other office or offices of the Trustee or of other persons
designated by the Trustee for that purpose as may from time to time be
maintained by the Trustee for that purpose. Such notice may be (i) in the form
of the panel, if any, on the certificates representing Exchangeable Shares, (ii)
in the form of the notice and election contained in any letter of transmittal
distributed or made available by the Corporation for that purpose, or (iii) in
other form satisfactory to the Trustee (or such other persons aforesaid), shall
stipulate the number of Exchangeable Shares in respect of which the right is
exercised (which may not exceed the number of shares represented by certificates
surrendered to the Trustee), shall be irrevocable unless the exchange is not
completed in accordance herewith and with the Voting and Exchange Trust
Agreement and shall constitute the holder's authorization to the Trustee (and
such other persons aforesaid) to effect the exchange on behalf of the holder.
8.3 The completion of the sale and purchase referred to in section 8.1 shall
be required to occur, and Devon shall be required to take all actions on its
part necessary to permit it to occur, not later than the close of business on
the third Business Day following the Exchange Put Date.
8.4 The surrender by the holder of Exchangeable Shares under section 8.2
shall constitute the representation, warranty and covenant of the holder that
the Exchangeable Shares so purchased are sold free and clear of any lien,
encumbrance, security interest or adverse claim or interest.
8.5 If a part only of the Exchangeable Shares represented by any certificate
are to be sold and purchased pursuant to the exercise of the Exchange Put Right,
a new certificate for the balance of such Exchangeable Shares shall be issued to
the holder at the expense of the Corporation.
8.6 Upon receipt by the Trustee of the notice, certificates and other
documents or instruments required by section 8.2, the Trustee shall deliver or
cause to be delivered, on behalf of Devon and subject to receipt by the Trustee
from Devon of the applicable Exchangeable Share Consideration, to the relevant
holder at the address of the holder specified in the notice or by holding for
pick-up by the holder at the registered office of the Corporation or at any
office of the Trustee (or other persons aforesaid) maintained for that purpose,
the Exchangeable Share Consideration representing the total applicable
Exchangeable Share Price, within the time stipulated in section 8.3. Delivery by
Devon to the Trustee of such Exchangeable Share Consideration shall be deemed to
be payment of and shall satisfy and discharge all liability for the total
applicable Exchangeable Share Price, except as to any cheque included therein
which is not paid on due presentation.
8.7 On and after the close of business on the Exchange Put Date, the holder
of the Exchangeable Shares in respect of which the Exchange Put Right is
exercised shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive the total applicable
Exchangeable Share Price, unless upon presentation and surrender of certificates
in accordance with the foregoing provisions, payment of the Exchangeable Share
Consideration shall not be made, in which case the rights of such holder shall
remain unaffected until such payment has been made. On and after the close of
business on the Exchange Put Date provided that presentation and surrender of
certificates and payment of the Exchangeable Share Consideration has been made
in accordance with the foregoing provisions, the holder of the Exchangeable
Shares so purchased by Devon shall thereafter be considered and deemed for all
purposes to be a holder of the Devon Common Stock delivered to it.
Notwithstanding the foregoing, until payment of the Exchangeable Share
Consideration to the holder, the holder shall be deemed to still be a holder of
Exchangeable Shares for purposes of all voting rights with respect thereto under
the Voting and Exchange Trust Agreement.
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ARTICLE 9
VOTING RIGHTS
9.1 Except as required by applicable law and the provisions hereof, the
holders of the Exchangeable Shares shall not be entitled as such to receive
notice of or to attend any meeting of the shareholders of the Corporation or to
vote at any such meeting.
ARTICLE 10
AMENDMENT AND APPROVAL
10.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed but, except as
hereinafter provided, only with the approval of the holders of the Exchangeable
Shares given as hereinafter specified.
10.2 Any approval given by the holders of the Exchangeable Shares to add to,
change or remove any right, privilege, restriction or condition attaching to the
Exchangeable Shares or any other matter requiring the approval or consent of the
holders of the Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with applicable law subject to a
minimum requirement that such approval be evidenced by resolution passed by not
less than 66 2/3% of the votes cast on such resolution by persons represented in
person or by proxy at a meeting of holders of Exchangeable Shares (excluding
Exchangeable Shares beneficially owned by Devon or its Subsidiaries) duly called
and held at which the holders of at least 25% of the outstanding Exchangeable
Shares at that time are present or represented by proxy. If at any such meeting
the holders of at least 25% of the outstanding Exchangeable Shares at that time
are not present or represented by proxy within one-half hour after the time
appointed for such meeting, then the meeting shall be adjourned to such date not
less than 10 days thereafter and to such time and place as may be designated by
the Chairman of such meeting. At such adjourned meeting, the holders of
Exchangeable Shares present or represented by proxy thereat may transact the
business for which the meeting was originally called and a resolution passed
thereat by the affirmative vote of not less than 66 2/3% of the votes cast on
such resolution by persons represented in person or by proxy at such meeting
(excluding Exchangeable Shares beneficially owned by Devon or its Subsidiaries)
shall constitute the approval or consent of the holders of the Exchangeable
Shares. For the purposes of this section, any spoiled votes, illegible votes,
defective votes and abstinences shall be deemed to be votes not cast.
ARTICLE 11
RECIPROCAL CHANGES, ETC. IN RESPECT OF DEVON COMMON STOCK
11.1
a. Each holder of an Exchangeable Share acknowledges that the Support
Agreement provides, in part, that Devon will not:
i. issue or distribute shares of Devon Common Stock (or securities
exchangeable for or convertible into or carry rights to acquire shares of
Devon Common Stock) to the holders of all or substantially all of the then
outstanding shares of Devon Common Stock by way of stock dividend or other
distribution; or
ii. issue or distribute rights, options or warrants to the holders of
all or substantially all of the then outstanding shares of Devon Common
Stock entitling them to subscribe for or to purchase shares of Devon Common
Stock (or securities exchangeable for or convertible into or carrying rights
to acquire shares of Devon Common Stock); or
iii. issue or distribute to the holders of all or substantially all of
the then outstanding shares of Devon Common Stock (A) shares or securities
of Devon of any class other than Devon Common Stock (other than shares
convertible
<PAGE> 12
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into or exchangeable for or carrying rights to acquire shares of Devon
Common Stock), (B) rights, options or warrants other than those referred to
in subsection 11.1(a)(ii) above, (C) evidences of indebtedness of Devon or
(D) assets of Devon;
unless
iv. one or both of Devon and the Corporation is permitted under
applicable law to issue or distribute the economic equivalent on a per share
basis of such rights, options, warrants, securities, shares, evidences of
indebtedness or other assets to the holders of the Exchangeable Shares; and
v. one or both of Devon and the Corporation shall issue or distribute
the economic equivalent on a per share basis of such rights, options,
warrants, securities, shares, evidences of indebtedness or other assets
simultaneously to the holders of the Exchangeable Shares.
b. Each holder of an Exchangeable Share acknowledges that the Support
Agreement further provides, in part, that Devon will not:
i. subdivide, redivide or change the then outstanding shares of Devon
Common Stock into a greater number of shares of Devon Common Stock; or
ii. reduce, combine or consolidate or change the then outstanding shares
of Devon Common Stock into a lesser number of shares of Devon Common Stock;
or
iii. reclassify or otherwise change the shares of Devon Common Stock or
effect an amalgamation, merger, reorganization or other transaction
involving or affecting the shares of Devon Common Stock;
unless
iv. the Corporation is permitted under applicable law to simultaneously
make the same or an economically equivalent change to, or in the rights of
the holders of, the Exchangeable Shares; and
v. the same or an economically equivalent change is simultaneously made
to, or in the rights of the holders of, the Exchangeable Shares.
The Support Agreement further provides, in part, that, with the exception of
certain ministerial amendments, the aforesaid provisions of the Support
Agreement shall not be changed without the approval of the holders of the
Exchangeable Shares given in accordance with Article 10 of these share
provisions.
ARTICLE 12
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
12.1 The Corporation will take all such actions and do all such things as
shall be necessary or advisable to perform and comply with and to ensure
performance and compliance by Devon with all provisions of the Support
Agreement, the Voting Trust and Exchange Agreement and Devon's Amended and
Restated Certificate of Incorporation applicable to the Corporation and Devon,
respectively, in accordance with the terms thereof including, without
limitation, taking all such actions and doing all such things as shall be
necessary or advisable to enforce to the fullest extent possible for the direct
benefit of the Corporation all rights and benefits in favour of the Corporation
under or pursuant thereto.
12.2 The Corporation shall not propose, agree to or otherwise give effect to
any amendment to, or waiver or forgiveness of its rights or obligations under,
the Support Agreement, the Voting Trust and Exchange Agreement or Devon's
Amended and Restated Certificate of Incorporation without the approval of the
holders of the Exchangeable Shares given in accordance with Article 10 of these
share provisions other than such amendments, waivers and/or forgiveness as may
be necessary or advisable for the purpose of:
<PAGE> 13
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a. adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the holders of
Exchangeable Shares; or
b. making such provisions or modifications not inconsistent with such
agreement or certificate as may be necessary or desirable with respect to
matters or questions arising thereunder which, in the opinion of the Board
of Directors, it may be expedient to make, provided that the Board of
Directors shall be of the opinion, after consultation with counsel, that
such provisions and modifications will not be prejudicial to the interests
of the holders of the Exchangeable Shares; or
c. making such changes in or corrections to such agreement or
certificate which, on the advice of counsel to the Corporation, are required
for the purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or manifest error
contained therein, provided that the Board of Directors shall be of the
opinion, after consultation with counsel, that such changes or corrections
will not be prejudicial to the interests of the holders of the Exchangeable
Shares.
ARTICLE 13
LEGEND
13.1 The certificates evidencing the Exchangeable Shares shall contain or
have affixed thereto a legend, in form and on terms approved by the Board of
Directors, with respect to the Support Agreement, the provisions of the Plan of
Arrangement relating to the Liquidation Call Right, the Retraction Call Right
and the Redemption Call Right, and the Voting and Exchange Trust Agreement
(including the provisions with respect to the voting rights and exchange
provisions thereunder).
ARTICLE 14
MISCELLANEOUS
14.1 Any notice, request or other communication to be given to the
Corporation by a holder of Exchangeable Shares shall be in writing and shall be
valid and effective if given by mail (postage prepaid) or by telecopy or by
delivery to the registered office of the Corporation and addressed to the
attention of the President. Any such notice, request or other communication, if
given by mail, telecopy or delivery, shall only be deemed to have been given and
received upon actual receipt thereof by the Corporation.
14.2 Any presentation and surrender by a holder of Exchangeable Shares to
the Corporation or the Transfer Agent of certificates representing Exchangeable
Shares in connection with the liquidation, dissolution or winding-up of the
Corporation or the retraction, redemption or exchange of Exchangeable Shares
shall be made by registered mail (postage prepaid) or by delivery to the
registered office of the Corporation or to such office of the Transfer Agent as
may be specified by the Corporation, in each case addressed to the attention of
the President of the Corporation. Any such presentation and surrender of
certificates shall only be deemed to have been made and to be effective upon
actual receipt thereof by the Corporation or the Transfer Agent, as the case may
be, and the method of any such presentation and surrender of certificates shall
be at the sole risk of the holder.
14.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of the Corporation shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by delivery
to the address of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder not being so
recorded, then at the last address of such holder known to the Corporation. Any
such notice, request or other communication, if given by mail, shall be deemed
to have been given and received on the fifth Business Day following the date of
mailing and, if given by delivery, shall be deemed to have been given and
received on the date of delivery. Accidental failure or omission to give any
notice, request or other communication to one or more holders of Exchangeable
Shares shall not invalidate or otherwise alter or affect any action or
proceeding to be or intended to be taken by the Corporation.
<PAGE> 14
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14.4 For greater certainty, the Corporation shall not be required for any
purpose under these share provisions to recognize or take account of persons who
are not so recorded in such securities register.
14.5 All Exchangeable Shares acquired by the Corporation upon the redemption
or retraction thereof shall be canceled.
<PAGE> 1
EXHIBIT 9
VOTING AND EXCHANGE TRUST AGREEMENT
THIS VOTING AND EXCHANGE TRUST AGREEMENT is entered into as of December 10,
1998, by and between Devon Energy Corporation, an Oklahoma corporation
("Devon"), Northstar Energy Corporation, an Alberta corporation ("Northstar"),
and CIBC Mellon Trust Company, a Canadian trust company ("Trustee").
WHEREAS, pursuant to an Amended and Restated Combination Agreement dated as
of June 29, 1998 by and between Devon and Northstar (such agreement as it may be
amended or restated is hereinafter referred to as the "Combination Agreement"),
the parties agreed that on the Effective Date (as defined in the Combination
Agreement), Devon and Northstar would execute and deliver a Voting and Exchange
Trust Agreement containing the terms and conditions set forth in Exhibit E to
the Combination Agreement together with such other terms and conditions as may
be agreed to by the parties to the Combination Agreement acting reasonably.
WHEREAS, pursuant to an arrangement (the "Arrangement") effected by
Articles of Arrangement dated December 10, 1998 filed pursuant to the Business
Corporations Act (Alberta) (or any successor or other corporate statute by which
Northstar may in the future be governed) (the "Act"), each issued and
outstanding common share of Northstar (a "Northstar Common Share") was exchanged
for issued and outstanding Exchangeable Shares of Northstar (the "Exchangeable
Shares").
WHEREAS, the Articles of Amendment of Northstar set forth the rights,
privileges, restrictions and conditions attaching to the Exchangeable Shares
(collectively, the "Exchangeable Share Provisions").
WHEREAS, Devon is to provide voting rights in Devon to each holder (other
than Devon and its Subsidiaries) from time to time of Exchangeable Shares, such
voting rights per Exchangeable Share to be equivalent to the voting rights per
share of Devon Common Stock.
WHEREAS, Devon is to grant to and in favor of the holders (other than Devon
and its Subsidiaries) from time to time of Exchangeable Shares the right, in the
circumstances set forth herein, to require Devon to purchase from each such
holder all or any part of the Exchangeable Shares held by the holder.
WHEREAS, the parties desire to make appropriate provision and to establish
a procedure whereby voting rights in Devon shall be exercisable by holders
(other than Devon and its Subsidiaries) from time to time of Exchangeable Shares
by and through the Trustee, which will hold legal title to one share of Devon
Special Voting Stock (the "Devon Special Voting Stock") to which voting rights
attach for the benefit of such holders and whereby the rights to require Devon
to purchase Exchangeable Shares from the holders thereof (other than Devon and
its Subsidiaries) shall be exercisable by such holders from time to time of
Exchangeable Shares by and through the Trustee, which will hold legal title to
such rights for the benefit of such holders.
WHEREAS, these recitals and any statements of fact in this agreement are
made by Devon and Northstar and not by the Trustee.
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<PAGE> 2
NOW THEREFORE, in consideration of the respective covenants and agreements
provided in this agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this agreement, the following terms shall have the following meanings:
"Aggregate Equivalent Vote Amount" means, with respect to any matter,
proposition or question on which holders of Devon Common Stock are entitled to
vote, consent or otherwise act, the product of (i) the number of shares of
Exchangeable Shares issued and outstanding and held by Holders multiplied by
(ii) the Equivalent Vote Amount.
"Arrangement" has the meaning provided in the recitals hereto.
"Automatic Exchange Rights" means the benefit of the obligation of Devon to
effect the automatic exchange of shares of Devon Common Stock for Exchangeable
Shares pursuant to Section 5.12 hereof.
"Board of Directors" means the Board of Directors of Northstar or Devon, as
the case may be.
"Business Day" means any day other than a Saturday, a Sunday or a day when
the office of the Trustee is not open for business in Calgary, Alberta.
"Devon Common Stock" has the meaning provided in the Exchangeable Share
Provisions.
"Devon Consent" has the meaning provided in Section 4.2 hereof.
"Devon Meeting" has the meaning provided in Section 4.2 hereof.
"Devon Special Voting Stock" has the meaning provided in the recitals
hereto.
"Devon Successor" has the meaning provided in subsection 11.1(a) hereof.
"Equivalent Vote Amount" means, with respect any matter, proposition or
question on which holders of Devon Common Stock are entitled to vote, consent or
otherwise act, the number of votes to which a holder of one share of Devon
Common Stock is entitled with respect to such matter, proposition or question.
"Exchange Put Right" has the meaning provided in the Exchangeable Share
Provisions.
"Exchange Right" has the meaning provided in Article 5 hereof.
"Exchangeable Share Consideration" has the meaning provided in the
Exchangeable Share Provisions.
"Exchangeable Share Price" has the meaning provided in the Exchangeable
Share Provisions.
"Exchangeable Share Provisions" has the meaning provided in the recitals
hereto.
"Exchangeable Shares" has the meaning provided in the recitals hereto.
"Holder Votes" has the meaning provided in Section 4.2 hereof.
"Holders" means the registered holders from time to time of Exchangeable
Shares, other than Devon and its Subsidiaries.
"Insolvency Event" means the institution by Northstar of any proceeding to
be adjudicated a bankrupt or insolvent or to be dissolved or wound-up, or the
consent of Northstar to the institution of bankruptcy, insolvency, dissolution
or winding-up proceedings against it, or the filing of a petition, answer or
consent seeking dissolution or winding-up under any bankruptcy, insolvency or
analogous laws, including without limitation the Companies Creditors Arrangement
Act (Canada) and the Bankruptcy and Insolvency Act
2
<PAGE> 3
(Canada), and the failure by Northstar to contest in good faith any such
proceedings commenced in respect of Northstar within 15 days of becoming aware
thereof, or the consent by Northstar to the filing of any such petition or to
the appointment of a receiver, or the making by Northstar of a general
assignment for the benefit of creditors, or the admission in writing by
Northstar of its inability to pay its debts generally as they become due, or
Northstar's not being permitted, pursuant to liquidity or solvency requirements
of applicable law, to redeem any Retracted Shares pursuant to Section 6.6 of the
Exchangeable Share Provisions.
"Liquidation Call Right" has the meaning provided in the Exchangeable Share
Provisions.
"Liquidation Event" has the meaning provided in subsection 5.12(b) hereof.
"Liquidation Event Effective Time" has the meaning provided in subsection
5.12(c) hereof.
"List" has the meaning provided in Section 4.6 hereof.
"Officer's Certificate" means, with respect to Devon or Northstar, as the
case may be, a certificate signed by any one of the Chairman of the Board, the
Vice-Chairman of the Board (if there be one), the President or any
Vice-President of Devon or Northstar, as the case may be.
"Person" includes an individual, body corporate, partnership, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"Plan of Arrangement" has the meaning provided in the Exchangeable Share
Provisions.
"Redemption Call Right" has the meaning provided in the Exchangeable Share
Provisions.
"Retracted Shares" has the meaning provided in Section 5.7 hereof.
"Retraction Call Right" has the meaning provided in the Exchangeable Share
Provisions.
"Subsidiary" has the meaning provided in the Exchangeable Share Provisions.
"Support Agreement" means that certain support agreement made as of even
date hereof by and between Devon and Northstar.
"Trust" means the trust created by this agreement.
"Trust Estate" means the Voting Share, any other securities, the Exchange
Put Right, the Exchange Right, the Automatic Exchange Rights and any money or
other property which may be held by the Trustee from time to time pursuant to
this agreement.
"Trustee" means CIBC Mellon Trust Company and, subject to the provisions of
Article 10 hereof, includes any successor trustee or permitted assigns.
"Voting Rights" means the voting rights attached to the Voting Share.
"Voting Share" means the one share of Devon Special Voting Stock, U.S.
$0.10 par value, issued by Devon to and deposited with the Trustee, which
entitles the holder of record to a number of votes at meetings of holders of
Devon Common Stock equal to the Aggregate Equivalent Vote Amount.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this agreement into articles, sections and paragraphs and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this agreement.
1.3 NUMBER, GENDER, ETC.
Words importing the singular number only shall include the plural and vice
versa. Words importing the use of any gender shall include all genders.
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1.4 DATE FOR ANY ACTION
If any date on which any action is required to be taken under this
agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
1.5 PAYMENTS
All payments to be made hereunder will be made without interest and less
any tax required by Canadian law to be deducted or withheld.
ARTICLE 2
PURPOSE OF AGREEMENT
The purpose of this agreement is to create the Trust for the benefit of the
Holders, as herein provided. The Trustee will hold the Voting Share in order to
enable the Trustee to exercise the Voting Rights and will hold the Exchange Put
Right, the Exchange Right and the Automatic Exchange Rights in order to enable
the Trustee to exercise such rights, in each case as trustee for and on behalf
of the Holders as provided in this agreement.
ARTICLE 3
VOTING SHARE
3.1 ISSUANCE AND OWNERSHIP OF THE VOTING SHARE
Devon hereby issues to and deposits with the Trustee the Voting Share to be
hereafter held of record by the Trustee as trustee for and on behalf of, and for
the use and benefit of, the Holders and in accordance with the provisions of
this agreement. Devon hereby acknowledges receipt from the Trustee as trustee
for and on behalf of the Holders of good and valuable consideration (and the
adequacy thereof) for the issuance of the Voting Share by Devon to the Trustee.
During the term of the Trust and subject to the terms and conditions of this
agreement, the Trustee shall possess and be vested with full legal ownership of
the Voting Share and shall be entitled to exercise all of the rights and powers
of an owner with respect to the Voting Share, provided that the Trustee shall:
(a) hold the Voting Share and the legal title thereto as trustee
solely for the use and benefit of the Holders in accordance with the
provisions of this agreement; and
(b) except as specifically authorized by this agreement, have no power
or authority to sell, transfer, vote or otherwise deal in or with the
Voting Share, and the Voting Share shall not be used or disposed of by the
Trustee for any purpose other than the purposes for which this Trust is
created pursuant to this agreement.
3.2 LEGENDED SHARE CERTIFICATES
Northstar will cause each certificate representing Exchangeable Shares to
bear an appropriate legend notifying the Holders of their right to instruct the
Trustee with respect to the exercise of the Voting Rights with respect to the
Exchangeable Shares held by a Holder.
3.3 SAFE KEEPING OF CERTIFICATE
The certificate representing the Voting Share shall at all times be held in
safe keeping by the Trustee or its agent.
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ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1 VOTING RIGHTS
The Trustee, as the holder of record of the Voting Share, shall be entitled
to all of the Voting Rights, including the right to consent to or to vote in
person or by proxy the Voting Share, on any matter, question or proposition
whatsoever that may properly come before the stockholders of Devon at a Devon
Meeting or in connection with a Devon Consent (in each case, as hereinafter
defined). The Voting Rights shall be and remain vested in and exercised by the
Trustee. Subject to Section 7.15 hereof, the Trustee shall exercise the Voting
Rights only on the basis of instructions received pursuant to this Article 4
from Holders entitled to instruct the Trustee as to the voting thereof at the
time at which a Devon Consent is sought or a Devon Meeting is held. To the
extent that no instructions are received from a Holder with respect to the
Voting Rights to which such Holder is entitled, the Trustee shall not exercise
or permit the exercise of such Holder s Voting Rights.
4.2 NUMBER OF VOTES
With respect to all meetings of stockholders of Devon at which holders of
shares of Devon Common Stock are entitled to vote (a "Devon Meeting") and with
respect to all written consents sought by Devon from its stockholders including
the holders of shares of Devon Common Stock (a "Devon Consent"), each Holder
shall be entitled to instruct the Trustee to cast and exercise, in the manner
instructed, a number of votes equal to the Equivalent Vote Amount for each
Exchangeable Share owned of record by such Holder on the record date established
by Devon or by applicable law for such Devon Meeting or Devon Consent, as the
case may be, (the "Holder Votes") in respect of each matter, question or
proposition to be voted on at such Devon Meeting or to be consented to in
connection with such Devon Consent.
4.3 MAILINGS TO SHAREHOLDERS
With respect to each Devon Meeting and Devon Consent, the Trustee will mail
or cause to be mailed (or otherwise communicate in the same manner as Devon
utilizes in communications to holders of Devon Common Stock, subject to the
Trustee's ability to provide this method of communication and upon being advised
in writing of such method) to each of the Holders named in the List on the same
day as the initial mailing or notice (or other communication) with respect
thereto is given by Devon to its stockholders:
(a) a copy of such notice, together with any proxy or information
statement and related materials to be provided to stockholders of Devon;
(b) a statement that such Holder is entitled to instruct the Trustee
as to the exercise of the Holder Votes with respect to such Devon Meeting
or Devon Consent, as the case may be, or, pursuant to Section 4.7 hereof,
to attend such Devon Meeting and to exercise personally the Holder Votes
thereat;
(c) a statement as to the manner in which such instructions may be
given to the Trustee, including an express indication that instructions may
be given to the Trustee to give:
(i) a proxy to such Holder or such Holder's designee to exercise
personally the Holder Votes; or
(ii) a proxy to a designated agent or other representative of the
management of Devon to exercise such Holder Votes;
(d) a statement that if no such instructions are received from the
Holder, the Holder Votes to which such Holder is entitled will not be
exercised;
(e) a form of direction whereby the Holder may so direct and instruct
the Trustee as contemplated herein; and
(f) a statement of (i) the time and date by which such instructions
must be received by the Trustee in order to be binding upon it, which in
the case of a Devon Meeting shall not be earlier than the close of
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<PAGE> 6
business on the Business Day prior to such meeting, and (ii) the method for
revoking or amending such instructions.
The materials referred to above are to be provided by Devon to the Trustee,
but shall be subject to review and comment by the Trustee.
For the purpose of determining Holder Votes to which a Holder is entitled
in respect of any such Devon Meeting or Devon Consent, the number of
Exchangeable Shares owned of record by the Holder shall be determined at the
close of business on the record date established by Devon or by applicable law
for purposes of determining stockholders entitled to vote at such Devon Meeting
or to give written consent in connection with such Devon Consent. Devon will
notify the Trustee in writing of any decision of the board of directors of Devon
with respect to the calling of any such Devon Meeting or the seeking of any such
Devon Consent and shall provide all necessary information and materials to the
Trustee in each case promptly and in any event in sufficient time to enable the
Trustee to perform its obligations contemplated by this Section 4.3.
4.4 COPIES OF STOCKHOLDER INFORMATION
Devon will deliver to the Trustee copies of all proxy materials, (including
notices of Devon Meetings, but excluding proxies to vote shares of Devon Common
Stock), information statements, reports (including without limitation all
interim and annual financial statements) and other written communications that
are to be distributed from time to time to holders of Devon Common Stock in
sufficient quantities and in sufficient time so as to enable the Trustee to send
those materials to each Holder at the same time as such materials are first sent
to holders of Devon Common Stock. The Trustee will mail or otherwise send to
each Holder, at the expense of Devon, copies of all such materials (and all
materials specifically directed to the Holders or to the Trustee for the benefit
of the Holders by Devon) received by the Trustee from Devon at the same time as
such materials are first sent to holders of Devon Common Stock. The Trustee will
make copies of all such materials available for inspection by any Holder at the
Trustee s principal transfer office in the cities of Calgary and Toronto.
4.5 OTHER MATERIALS
Immediately after receipt by Devon or any stockholder of Devon of any
material sent or given generally to the holders of Devon Common Stock by or on
behalf of a third party, including without limitation dissident proxy and
information circulars (and related information and material) and tender and
exchange offer circulars (and related information and material), Devon shall use
its best efforts to obtain and deliver to the Trustee copies thereof in
sufficient quantities so as to enable the Trustee to forward such material
(unless the same has been provided directly to Holders by such third party) to
each Holder as soon as possible thereafter. As soon as practicable after receipt
thereof, the Trustee will mail or otherwise send to each Holder, at the expense
of Devon, copies of all such materials received by the Trustee from Devon. The
Trustee will also make copies of all such materials available for inspection by
any Holder at the Trustee s principal transfer office in the cities of Calgary
and Toronto.
4.6 LIST OF PERSONS ENTITLED TO VOTE
Northstar shall, (i) prior to each annual, general or special Devon Meeting
or the seeking of any Devon Consent and (ii) forthwith upon each request made at
any time by the Trustee in writing, prepare or cause to be prepared a list (a
"List") of the names and addresses of the Holders arranged in alphabetical order
and showing the number of Exchangeable Shares held of record by each such
Holder, in each case at the close of business on the date specified by the
Trustee in such request or, in the case of a List prepared in connection with a
Devon Meeting or a Devon Consent, at the close of business on the record date
established by Devon or pursuant to applicable law for determining the holders
of Devon Common Stock entitled to receive notice of and/or to vote at such Devon
Meeting or to give consent in connection with such Devon Consent. Each such List
shall be delivered to the Trustee promptly after receipt by Northstar of such
request or the record date for such meeting or seeking of consent, as the case
may be, and in any event within sufficient time as to enable the Trustee to
perform its obligations under this agreement. Devon agrees to give Northstar
written notice (with a
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copy to the Trustee) of the calling of any Devon Meeting or the seeking of any
Devon Consent, together with the record dates therefor, sufficiently prior to
the date of the calling of such meeting or seeking of such consent so as to
enable Northstar to perform its obligations under this Section 4.6.
4.7 ENTITLEMENT TO DIRECT VOTES
Any Holder named in a List prepared in connection with any Devon Meeting or
any Devon Consent will be entitled (i) to instruct the Trustee in the manner
described in Section 4.3 hereof with respect to the exercise of the Holder Votes
to which such Holder is entitled or (ii) to attend such meeting and personally
to exercise thereat (or to exercise with respect to any written consent), as the
proxy of the Trustee, the Holder Votes to which such Holder is entitled.
4.8 VOTING BY TRUSTEE, AND ATTENDANCE OF TRUSTEE REPRESENTATIVE, AT MEETING.
(a) In connection with each Devon Meeting and Devon Consent, the Trustee
shall exercise, either in person or by proxy, in accordance with the
instructions received from a Holder pursuant to Section 4.3 hereof, the Holder
Votes as to which such Holder is entitled to direct the vote (or any lesser
number thereof as may be set forth in the instructions); provided, however, that
such written instructions are received by the Trustee from the Holder prior to
the time and date fixed by it for receipt of such instructions in the notice
given by the Trustee to the Holder pursuant to Section 4.3 hereof.
(b) The Trustee shall cause such representatives as are empowered by it to
sign and deliver, on behalf of the Trustee, proxies for Voting Rights to attend
each Devon Meeting. Upon submission by a Holder (or its designee) of
identification satisfactory to the Trustee's representatives, and at the
Holder's request, such representatives shall sign and deliver to such Holder (or
its designee) a proxy to exercise personally the Holder Votes as to which such
Holder is otherwise entitled hereunder to direct the vote, if such Holder
either:
(i) has not previously given the Trustee instructions pursuant to
Section 4.3 hereof in respect of such meeting, or
(ii) submits to the Trustee s representatives written revocation of
any such previous instructions.
At such meeting, the Holder exercising such Holder Votes shall have the
same rights as the Trustee to speak at the meeting in respect of any matter,
question or proposition, to vote by way of ballot at the meeting in respect of
any matter, question or proposition and to vote at such meeting by way of a show
of hands in respect of any matter, question or proposition.
4.9 DISTRIBUTION OF WRITTEN MATERIALS
Any written materials to be distributed by the Trustee to the Holders
pursuant to this agreement shall be delivered or sent by mail (or otherwise
communicated in the same manner as Devon utilizes in communications to holders
of Devon Common Stock subject to the Trustee's ability to provide this method of
communication and upon being advised in writing of such method) to each Holder
at its address as shown on the books of Northstar. Northstar shall provide or
cause to be provided to the Trustee for this purpose, on a timely basis and
without charge or other expense:
(a) current lists of the Holders; and
(b) on the request of the Trustee, mailing labels to enable the
Trustee to carry out its duties under this agreement.
The materials referred to above are to be provided by Northstar to the
Trustee, but shall be subject to review and comment by the Trustee.
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4.10 TERMINATION OF VOTING RIGHTS
Except as otherwise provided herein or in the Exchangeable Share
Provisions, all of the rights of a Holder with respect to the Holder Votes
exercisable in respect of the Exchangeable Shares held by such Holder, including
the right to instruct the Trustee as to the voting of or to vote personally such
Holder Votes, shall be deemed to be surrendered by the Holder to Devon, and such
Holder Votes and the Voting Rights represented thereby shall cease immediately,
upon the delivery by such Holder to the Trustee of the certificates representing
such Exchangeable Shares in connection with the exercise by the Holder of the
Exchange Put Right or the Exchange Right or the occurrence of the automatic
exchange of Exchangeable Shares for shares of Devon Common Stock, as specified
in Article 5 hereof (unless in any case Devon shall not have delivered the
Exchangeable Share Consideration deliverable in exchange therefor to the Trustee
for delivery to the Holders), or upon the redemption of Exchangeable Shares
pursuant to Article 6 or Article 7 of the Exchangeable Share Provisions, or upon
the effective date of the liquidation, dissolution or winding-up of Northstar or
any other distribution of the assets of Northstar among its shareholders for the
purpose of winding up its affairs pursuant to Article 5 of the Exchangeable
Share Provisions, or upon the purchase of Exchangeable Shares from the holder
thereof by Devon pursuant to the exercise by Devon of the Retraction Call Right,
the Redemption Call Right or the Liquidation Call Right.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 GRANT AND OWNERSHIP OF THE EXCHANGE PUT RIGHT, EXCHANGE RIGHT AND AUTOMATIC
EXCHANGE RIGHT
Devon hereby grants to the Trustee as trustee for and on behalf of, and for
the use and benefit of, the Holders:
(a) the Exchange Put Right;
(b) the right (the "Exchange Right"), upon the occurrence and during
the continuance of an Insolvency Event, to require Devon to purchase from
each or any Holder all or any part of the Exchangeable Shares held by the
Holders; and
(c) the Automatic Exchange Rights,
all in accordance with the provisions of this agreement and the Exchangeable
Share Provisions, as the case may be. Devon hereby acknowledges receipt from the
Trustee as trustee for and on behalf of the Holders of good and valuable
consideration (and the adequacy thereof) for the grant of the Exchange Put
Right, the Exchange Right and the Automatic Exchange Rights by Devon to the
Trustee. During the term of the Trust and subject to the terms and conditions of
this agreement, the Trustee shall possess and be vested with full legal
ownership of the Exchange Put Right, the Exchange Right and the Automatic
Exchange Rights and shall be entitled to exercise all of the rights and powers
of an owner with respect to the Exchange Put Right, the Exchange Right and the
Automatic Exchange Rights, provided that the Trustee shall:
(d) hold the Exchange Put Right, the Exchange Right and the Automatic
Exchange Rights and the legal title thereto as trustee solely for the use
and benefit of the Holders in accordance with the provisions of this
agreement; and
(e) except as specifically authorized by this agreement, have no power
or authority to exercise or otherwise deal in or with the Exchange Put
Right, the Exchange Right or the Automatic Exchange Rights, and the Trustee
shall not exercise any such rights for any purpose other than the purposes
for which this Trust is created pursuant to this agreement.
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5.2 LEGENDED SHARE CERTIFICATES
Northstar will cause each certificate representing Exchangeable Shares to
bear an appropriate legend notifying the Holders of:
(a) their right to instruct the Trustee with respect to the exercise
of the Exchange Put Right and the Exchange Right in respect of the
Exchangeable Shares held by a Holder; and
(b) the Automatic Exchange Rights.
5.3 GENERAL EXERCISE OF EXCHANGE PUT RIGHT AND EXCHANGE RIGHT
The Exchange Put Right and the Exchange Right shall be and remain vested in
and exercised by the Trustee. Subject to Section 7.15 hereof, the Trustee shall
exercise the Exchange Put Right and the Exchange Right only on the basis of
instructions received pursuant to this Article 5 from Holders entitled to
instruct the Trustee as to the exercise thereof. To the extent that no
instructions are received from a Holder with respect to the Exchange Put Right
and the Exchange Right, the Trustee shall not exercise or permit the exercise of
the Exchange Put Right and the Exchange Right.
5.4 PURCHASE PRICE
The purchase price payable by Devon for each Exchangeable Share to be
purchased by Devon (i) under the Exchange Put Right shall be the amount
determined under the Exchangeable Share Provisions, and (ii) under the Exchange
Right shall be an amount equal to the Exchangeable Share Price on the last
Business Day prior to the day of closing of the purchase and sale of such
Exchangeable Share under the Exchange Right. In connection with each exercise of
the Exchange Right, Devon will provide to the Trustee an Officer s Certificate
setting forth the calculation of the applicable Exchangeable Share Price for
each Exchangeable Share. The applicable Exchangeable Share Price for each such
Exchangeable Share so purchased may be satisfied only by Devon's issuing and
delivering or causing to be delivered to the Trustee, on behalf of the relevant
Holder, the applicable Exchangeable Share Consideration representing the total
applicable Exchangeable Share Price.
5.5 EXERCISE INSTRUCTIONS FOR EXCHANGE RIGHT
Subject to the terms and conditions herein set forth, a Holder shall be
entitled, upon the occurrence and during the continuance of an Insolvency Event,
to instruct the Trustee to exercise the Exchange Right with respect to all or
any part of the Exchangeable Shares registered in the name of such Holder on the
books of Northstar. To cause the exercise of the Exchange Right by the Trustee,
the Holder shall deliver to the Trustee, in person or by certified or registered
mail, at its principal transfer offices in Calgary, Alberta and Toronto, Ontario
or at such other places in Canada as the Trustee may from time to time designate
by written notice to the Holders, the certificates representing the Exchangeable
Shares which such Holder desires Devon to purchase, duly endorsed in blank, and
accompanied by such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under applicable law and the by-laws of
Northstar and such additional documents and instruments as the Trustee may
reasonably require, together with:
(a) a duly completed form of notice of exercise of the Exchange Right,
contained on the reverse of or attached to the Exchangeable Share
certificates, stating:
(i) that the Holder thereby instructs the Trustee to exercise the
Exchange Right so as to require Devon to purchase from the Holder the
number of Exchangeable Shares specified therein,
(ii) that such Holder has good title to and owns all such
Exchangeable Shares to be acquired by Devon free and clear of all liens,
claims, encumbrances, security interests and adverse claims or
interests,
(iii) the names in which the certificates representing Devon
Common Stock issuable in connection with the exercise of the Exchange
Right are to be issued, and
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(iv) the names and addresses of the persons to whom the
Exchangeable Share Consideration should be delivered; and
(b) payment (or evidence satisfactory to the Trustee, Northstar and
Devon of payment) of the taxes (if any) payable as contemplated by Section
5.8 of this agreement.
If only a part of the Exchangeable Shares represented by any certificate or
certificates delivered to the Trustee are to be purchased by Devon under the
Exchange Right, a new certificate for the balance of such Exchangeable Shares
shall be issued to the Holder at the expense of Northstar.
5.6 DELIVERY OF EXCHANGEABLE SHARE CONSIDERATION; EFFECT OF EXERCISE
As soon as practicable after receipt of the certificates representing the
Exchangeable Shares which the Holder desires Devon to purchase under the
Exchange Put Right or the Exchange Right (together with such documents and
instruments of transfer and a duly completed form of notice of exercise of the
Exchange Put Right or the Exchange Right), duly endorsed for transfer to Devon,
the Trustee shall notify Devon and Northstar of its receipt of the same, which
notice to Devon and Northstar shall constitute exercise of the Exchange Put
Right or the Exchange Right by the Trustee on behalf of the Holder of such
Exchangeable Shares, and Devon shall immediately thereafter deliver or cause to
be delivered to the Trustee, for delivery to the Holder of such Exchangeable
Shares (or to such other persons, if any, properly designated by such Holder),
the Exchangeable Share Consideration deliverable in connection with the exercise
of the Exchange Put Right or the Exchange Right; provided, however, that no such
delivery shall be made unless and until the Holder requesting the same shall
have paid (or provided evidence satisfactory to the Trustee, Northstar and Devon
of the payment of) the taxes (if any) payable as contemplated by Section 5.8 of
this agreement. Immediately upon the giving of notice by the Trustee to Devon
and Northstar of the exercise of the Exchange Put Right or the Exchange Right,
as provided in this Section 5.6, (i) the closing of the transaction of purchase
and sale contemplated by the Exchange Put Right or the Exchange Right shall be
deemed to have occurred, (ii) Devon shall be required to take all action
necessary to permit it to occur, including delivery to the Trustee of the
relevant Exchangeable Share Consideration, no later than the close of business
on the third Business Day following the receipt by the Trustee of notice,
certificates and other documents as aforesaid and (iii) the Holder of such
Exchangeable Shares shall be deemed to have transferred to Devon all of its
right, title and interest in and to such Exchangeable Shares and the related
interest in the Trust Estate, shall cease to be a holder of such Exchangeable
Shares and shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive his proportionate part of the
total purchase price therefor, unless such Exchangeable Share Consideration is
not delivered by Devon to the Trustee by the date specified above, in which case
the rights of the Holder shall remain unaffected until such Exchangeable Share
Consideration is delivered by Devon and any cheque included therein is paid.
Concurrently with such Holder ceasing to be a holder of Exchangeable Shares, the
Holder shall be considered and deemed for all purposes to be the holder of the
shares of Devon Common Stock delivered to it pursuant to the Exchange Put Right
or the Exchange Right. Notwithstanding the foregoing, until the Exchangeable
Share Consideration is delivered to the Holder, the Holder shall be deemed to
still be a holder of the sold Exchangeable Shares for purposes of voting rights
with respect thereto under this agreement.
5.7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION
In the event that a Holder has exercised its right under Article 6 of the
Exchangeable Share Provisions to require Northstar to redeem any or all of the
Exchangeable Shares held by the Holder (the "Retracted Shares") and is notified
by Northstar pursuant to Section 6.6 of the Exchangeable Share Provisions that
Northstar will not be permitted as a result of liquidity or solvency provisions
of applicable law to redeem all such Retracted Shares, subject to receipt by the
Trustee of written notice to that effect from Northstar and provided that Devon
shall not have exercised the Retraction Call Right with respect to the Retracted
Shares and that the Holder has not revoked the retraction request delivered by
the Holder to Northstar pursuant to Section 6.1 of the Exchangeable Share
Provisions, the retraction request will constitute and will be deemed to
constitute notice from the Holder to the Trustee instructing the Trustee to
exercise the Exchange Right with
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respect to those Retracted Shares which Northstar is unable to redeem. In any
such event, Northstar hereby agrees with the Trustee and in favour of the Holder
immediately to notify the Trustee of such prohibition against Northstar's
redeeming all of the Retracted Shares and immediately to forward or cause to be
forwarded to the Trustee all relevant materials delivered by the Holder to
Northstar or to the transfer agent of the Exchangeable Shares (including without
limitation a copy of the retraction request delivered pursuant to Section 6.1 of
the Exchangeable Share Provisions) in connection with such proposed redemption
of the Retracted Shares, and the Trustee will thereupon exercise the Exchange
Right with respect to the Retracted Shares which Northstar is not permitted to
redeem and will require Devon to purchase such shares in accordance with the
provisions of this Article 5.
5.8 STAMP OR OTHER TRANSFER TAXES
Upon any sale of Exchangeable Shares to Devon pursuant to the Exchange Put
Right, the Exchange Right or the Automatic Exchange Rights, the share
certificate or certificates representing Devon Common Stock to be delivered as
Exchangeable Share Consideration in connection with the payment of the total
purchase price therefor shall be issued in the name of the Holder of the
Exchangeable Shares so sold or in such names as such Holder may otherwise direct
in writing without charge to the holder of the Exchangeable Shares so sold,
provided, however, that such Holder:
(a) shall pay (and neither Devon, Northstar nor the Trustee shall be
required to pay) any documentary, stamp, transfer or other similar taxes
that may be payable in respect of any transfer involved in the issuance or
delivery of such shares to a person other than such Holder; or
(b) shall have established to the satisfaction of the Trustee, Devon
and Northstar that such taxes, if any, have been paid.
5.9 NOTICE OF INSOLVENCY EVENT
Immediately upon the occurrence of an Insolvency Event or any event which
with the giving of notice or the passage of time or both would be an Insolvency
Event, Northstar and Devon shall give written notice thereof to the Trustee. As
soon as practicable after receiving notice from Northstar or Devon of the
occurrence of an Insolvency Event, the Trustee will mail to each Holder, at the
expense of Devon with funds provided in advance, a notice of such Insolvency
Event in the form provided by Devon, which notice shall contain a brief
statement of the right of the Holders with respect to the Exchange Right.
5.10 QUALIFICATION OF DEVON COMMON STOCK
Devon covenants that if any shares of Devon Common Stock to be issued and
delivered pursuant to the Exchange Put Right, the Exchange Right or the
Automatic Exchange Rights require registration or qualification with or approval
of or the filing of any document including any prospectus or similar document,
the taking of any proceeding with or the obtaining of any order, ruling or
consent from any governmental or regulatory authority under any Canadian or
United States federal, provincial or state law or regulation or pursuant to the
rules and regulations of any regulatory authority, or the fulfillment of any
other legal requirement (collectively, the "Applicable Laws") before such shares
may be issued and delivered by Devon to the initial holder thereof (other than
Northstar) or in order that such shares may be freely traded thereafter (other
than any restrictions on transfer by reason of a holder being a "control person"
of Devon for purposes of Canadian federal or provincial securities law or an
"affiliate" of Devon for purposes of United States federal or state securities
law), Devon will in good faith expeditiously take all such actions and do all
such things as are necessary to cause such shares of Devon Common Stock to be
and remain duly registered, qualified or approved. Devon represents and warrants
that it has in good faith taken all actions and done all things as are necessary
under Applicable Laws as they exist on the date hereof to cause the shares of
Devon Common Stock to be issued and delivered pursuant to the Exchange Put
Right, the Exchange Right and the Automatic Exchange Rights and to be freely
tradeable thereafter (other than restrictions on transfer by reason of a holder
being a "control person" of Devon for the purposes of Canadian federal and
provincial securities law or an "affiliate" of Devon for the purposes of United
States federal or state securities law). Devon will in good faith
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expeditiously take all such actions and do all such things as are necessary to
cause all shares of Devon Common Stock to be delivered pursuant to the Exchange
Put Right, the Exchange Right or the Automatic Exchange Rights to be listed,
quoted or posted for trading on all stock exchanges and quotation systems on
which such shares are listed, quoted or posted for trading at such time.
5.11 RESERVATION OF SHARES OF DEVON COMMON STOCK
Devon hereby represents, warrants and covenants that it has irrevocably
reserved for issuance and will at all times keep available, free from
pre-emptive and other rights, out of its authorized and unissued capital stock
such number of shares of Devon Common Stock:
(a) as is equal to the sum of
(i) the number of Exchangeable Shares issued and outstanding from
time to time, and
(ii) the number of Exchangeable Shares issuable upon the exercise
of all rights to acquire Exchangeable Shares outstanding from time to
time; and
(b) as are now and may hereafter be required to enable and permit
Northstar to meet its obligations hereunder, under the Amended and Restated
Certificate of Incorporation of Devon, under the Support Agreement, under
the Exchangeable Share Provisions and under any other security or
commitment pursuant to the Arrangement with respect to which Devon may now
or hereafter be required to issue shares of Devon Common Stock.
5.12 AUTOMATIC EXCHANGE ON LIQUIDATION OF DEVON
(a) Devon will give the Trustee written notice of each of the following
events at the time set forth below:
(i) in the event of any determination by the board of directors of
Devon to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to Devon or to effect any other distribution of
assets of Devon among its stockholders for the purpose of winding-up its
affairs, at least 60 days prior to the proposed effective date of such
liquidation, dissolution, winding-up or other distribution; and
(ii) immediately, upon the earlier of
A. receipt by Devon of notice of, and
B. Devon's otherwise becoming aware of any threatened or
instituted claim, suit, petition or other proceedings with respect to
the involuntary liquidation, dissolution or winding-up of Devon or to
effect any other distribution of assets of Devon among its stockholders
for the purpose of winding-up its affairs.
(b) Immediately following receipt by the Trustee from Devon of notice of
any event (a "Liquidation Event") contemplated by Section 5.12(a) above, the
Trustee will give notice thereof to the Holders. Such notice will be provided by
Devon to the Trustee and shall include a brief description of the automatic
exchange of Exchangeable Shares for shares of Devon Common Stock provided for in
Section 5.12(c) below.
(c) In order that the Holders will be able to participate on a pro rata
basis with the holders of Devon Common Stock in the distribution of assets of
Devon in connection with a Liquidation Event, immediately prior to the effective
time (the "Liquidation Event Effective Time") of a Liquidation Event, all of the
then outstanding Exchangeable Shares shall be automatically exchanged for shares
of Devon Common Stock. To effect such automatic exchange, Devon shall be deemed
to have purchased each Exchangeable Share outstanding immediately prior to the
Liquidation Event Effective Time and held by Holders, and each Holder shall be
deemed to have sold the Exchangeable Shares held by it at such time, for a
purchase price per share equal to the Exchangeable Share Price applicable at
such time. In connection with such automatic exchange, Devon will provide to the
Trustee an Officer's Certificate setting forth the calculation of the purchase
price for each Exchangeable Share.
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(d) The closing of the transaction of purchase and sale contemplated by
Section 5.12(c) above shall be deemed to have occurred immediately prior to the
Liquidation Event Effective Time, and each Holder of Exchangeable Shares shall
be deemed to have transferred to Devon all of the Holder's right, title and
interest in and to such Exchangeable Shares and the related interest in the
Trust Estate and shall cease to be a holder of such Exchangeable Shares, and
Devon shall deliver to the Holder the Exchangeable Share Consideration
deliverable upon the automatic exchange of Exchangeable Shares. Concurrently
with such Holder's ceasing to be a holder of Exchangeable Shares, the Holder
shall be considered and deemed for all purposes to be the holder of the shares
of Devon Common Stock issued to it pursuant to the automatic exchange of
Exchangeable Shares for Devon Common Stock, and the certificates held by the
Holder previously representing the Exchangeable Shares exchanged by the Holder
with Devon pursuant to such automatic exchange shall thereafter be deemed to
represent the shares of Devon Common Stock issued to the Holder by Devon
pursuant to such automatic exchange. Upon the request of a Holder and the
surrender by the Holder of Exchangeable Share certificates deemed to represent
shares of Devon Common Stock, duly endorsed in blank and accompanied by such
instruments of transfer as Devon may reasonably require, Devon shall deliver or
cause to be delivered to the Holder certificates representing the shares of
Devon Common Stock of which the Holder is the holder. Notwithstanding the
foregoing, until each Holder is actually entered on the register of holders of
Devon Common Stock, such Holder shall be deemed to still be a holder of the
transferred Exchangeable Shares for purposes of all voting rights with respect
thereto under this agreement.
ARTICLE 6
RESTRICTIONS ON ISSUANCE OF DEVON SPECIAL VOTING STOCK
During the term of this agreement, Devon will not issue any shares of Devon
Special Voting Stock in addition to the Voting Share.
ARTICLE 7
CONCERNING THE TRUSTEE
7.1 POWERS AND DUTIES OF THE TRUSTEE
The rights, powers and authorities of the Trustee under this agreement, in
its capacity as trustee of the Trust, shall include:
(a) receipt and deposit of the Voting Share from Devon as trustee for
and on behalf of the Holders in accordance with the provisions of this
agreement;
(b) granting proxies and distributing materials to Holders as provided
in this agreement;
(c) voting the Holder Votes in accordance with the provisions of this
agreement;
(d) receiving the grant of the Exchange Put Right, the Exchange Right
and the Automatic Exchange Rights from Devon as trustee for and on behalf
of the Holders in accordance with the provisions of this agreement;
(e) exercising the Exchange Put Right and the Exchange Right and
enforcing the benefit of the Automatic Exchange Rights, in each case in
accordance with the provisions of this agreement, and in connection
therewith receiving from Holders Exchangeable Shares and other requisite
documents and distributing to such Holders the shares of Devon Common Stock
and cheques, if any, to which such Holders are entitled upon the exercise
of the Exchange Put Right and the Exchange Right or pursuant to the
Automatic Exchange Rights, as the case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of the
Trust Estate as provided in this agreement;
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(h) taking action at the direction of a Holder or Holders to enforce
the obligations of Devon under this agreement; and
(i) taking such other actions and doing such other things as are
specifically provided in this agreement.
In the exercise of such rights, powers and authorities, the Trustee shall
have (and is granted) such incidental and additional rights, powers and
authority not in conflict with any of the provisions of this agreement as the
Trustee, acting in good faith and in the reasonable exercise of its discretion,
may deem necessary, appropriate or desirable to effect the purpose of the Trust.
Any exercise of such discretionary rights, powers and authorities by the Trustee
shall be final, conclusive and binding upon all persons. For greater certainty,
the Trustee shall have only those duties as are set out specifically in this
agreement. The Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith with a view to the best interests
of the Holders and shall exercise the care, diligence and skill that a
reasonably prudent trustee would exercise in comparable circumstances. The
Trustee shall not be bound to give any notice or do or take any act, action or
proceeding by virtue of the powers conferred on it hereby unless and until it
shall be specifically required to do so under the terms hereof nor shall the
Trustee be required to take any notice of, or to do or to take any act, action
or proceeding as a result of any default or breach of any provision hereunder,
unless and until notified in writing of such default or breach, which notices
shall distinctly specify the default or breach desired to be brought to the
attention of the Trustee and in the absence of such notice the Trustee may for
all purposes of this agreement conclusively assume that no default or breach has
been made in the observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained herein.
7.2 NO CONFLICT OF INTEREST
The Trustee represents to Northstar and Devon that at the date of execution
and delivery of this agreement there exists no material conflict of interest in
the role of the Trustee as a fiduciary hereunder and the role of the Trustee in
any other capacity. The Trustee shall, within 90 days after it becomes aware
that such a material conflict of interest exists, either eliminate such material
conflict of interest or resign in the manner and with the effect specified in
Article 10 hereof. If, notwithstanding the foregoing provisions of this Section
7.2, the Trustee has such a material conflict of interest, the validity and
enforceability of this agreement shall not be affected in any manner whatsoever
by reason only of the existence of such material conflict of interest. If the
Trustee contravenes the foregoing provisions of this Section 7.2, any interested
party may apply to the superior court of the province in which Northstar has its
registered office for an order that the Trustee be replaced as trustee
hereunder.
7.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC.
Northstar and Devon irrevocably authorize the Trustee, from time to time,
to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent registrar or
transfer agent, of the Exchangeable Shares and Devon Common Stock; and
(b) requisition, from time to time,
(i) from any such registrar or transfer agent any information
readily available from the records maintained by it which the Trustee
may reasonably require for the discharge of its duties and
responsibilities under this agreement, and
(ii) from the transfer agent of Devon Common Stock, and any
subsequent transfer agent of such shares, to complete the exercise
from time to time of the Exchange Put Right, the Exchange Right and
the Automatic Exchange Rights in the manner specified in Article 5
hereof, the share certificates issuable upon such exercise.
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Northstar and Devon irrevocably authorize their respective registrars and
transfer agents to comply with all such requests. Devon covenants that it will
supply its transfer agent with duly executed share certificates for the purpose
of completing the exercise from time to time of the Exchange Put Right, the
Exchange Right and the Automatic Exchange Rights, in each case pursuant to
Article 5 hereof.
7.4 BOOKS AND RECORDS
The Trustee shall keep available for inspection by Devon and Northstar, at
the Trustee's principal transfer office in Calgary, Alberta, correct and
complete books and records of account relating to the Trustee's actions under
this agreement, including without limitation all information relating to
mailings and instructions to and from Holders and all transactions pursuant to
the Voting Rights, the Exchange Put Right, the Exchange Right and the Automatic
Exchange Rights for the term of this agreement. On or before March 31, 1999, and
on or before March 31 in every year thereafter, so long as the Voting Share is
on deposit with the Trustee, the Trustee shall transmit to Devon and Northstar a
brief report, dated as of the preceding December 31, with respect to:
(a) the property and funds comprising the Trust Estate as of that
date;
(b) the number of exercises of the Exchange Put Right and the Exchange
Right, if any, and the aggregate number of Exchangeable Shares received by
the Trustee on behalf of Holders in consideration of the issue and delivery
by Devon of shares of Devon Common Stock in connection with the Exchange
Put Right and the Exchange Right, during the calendar year ended on such
date; and
(c) all other actions taken by the Trustee in the performance of its
duties under this agreement which it had not previously reported.
7.5 INCOME TAX RETURNS AND REPORTS
The Trustee shall, to the extent necessary, prepare and file on behalf of
the Trust appropriate United States and Canadian income tax returns and any
other returns or reports as may be required by applicable law or pursuant to the
rules and regulations of any securities exchange or other trading system through
which the Exchangeable Shares are traded and, in connection therewith, may
obtain the advice and assistance of such experts as the Trustee may consider
necessary or advisable. If requested by the Trustee, Devon shall retain such
experts for purposes of providing such advice and assistance.
7.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE
The Trustee shall exercise any or all of the rights, duties, powers or
authorities vested in it by this agreement at the request, order or direction of
any Holder upon such Holder's furnishing to the Trustee reasonable funding,
security and indemnity against the costs, expenses and liabilities which may be
incurred by the Trustee therein or thereby; provided that no Holder shall be
obligated to furnish to the Trustee any such funding, security or indemnity in
connection with the exercise by the Trustee of any of its rights, duties, powers
and authorities with respect to the Voting Share pursuant to Article 4 hereof,
subject to Section 7.15 hereof, and with respect to the Exchange Put Right and
the Exchange Right pursuant to Article 5 hereof, subject to Section 7.15 hereof,
and with respect to the Automatic Exchange Rights pursuant to Article 5 hereof.
None of the provisions contained in this agreement shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
exercise of any of its rights, powers, duties or authorities unless funded,
given funds, security and indemnified as aforesaid.
7.7 ACTIONS BY HOLDERS
No Holder shall have the right to institute any action, suit or proceeding
or to exercise any other remedy authorized by this agreement for the purpose of
enforcing any of its rights or for the execution of any trust or power hereunder
unless the Holder has requested the Trustee to take or institute such action,
suit or proceeding and furnished the Trustee with the funding, security and
indemnity referred to in Section 7.6 hereof and the Trustee shall have failed to
act within a reasonable time thereafter. In such case, but not
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otherwise, the Holder shall be entitled to take proceedings in any court of
competent jurisdiction such as the Trustee might have taken; it being understood
and intended that no one or more Holders shall have any right in any manner
whatsoever to affect, disturb or prejudice the rights hereby created by any such
action, or to enforce any right hereunder or under the Voting Rights, the
Exchange Put Right, the Exchange Right or the Automatic Exchange Rights, except
subject to the conditions and in the manner herein provided, and that all powers
and trusts hereunder shall be exercised and all proceedings at law shall be
instituted, had and maintained by the Trustee, except only as herein provided,
and in any event for the equal benefit of all Holders.
7.8 RELIANCE UPON DECLARATIONS
The Trustee shall not be considered to be in contravention of any of its
rights, powers, duties and authorities hereunder if, when required, it acts and
relies in good faith upon lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or documents
furnished pursuant to the provisions hereof or required by the Trustee to be
furnished to it in the exercise of its rights, powers, duties and authorities
hereunder, and such lists, mailing labels, notices, statutory declarations,
certificates, opinions, reports or other papers or documents comply with the
provisions of Section 7.9 hereof, if applicable, and with any other applicable
provisions of this agreement.
7.9 EVIDENCE AND AUTHORITY TO TRUSTEE
Northstar and/or Devon shall furnish to the Trustee evidence of compliance
with the conditions provided for in this agreement relating to any action or
step required or permitted to be taken by Northstar and/or Devon or the Trustee
under this agreement or as a result of any obligation imposed under this
agreement, including, without limitation, in respect of the Voting Rights or the
Exchange Put Right, the Exchange Right or the Automatic Exchange Rights and the
taking of any other action to be taken by the Trustee at the request of or on
the application of Northstar and/or Devon forthwith if and when:
(a) such evidence is required by any other section of this agreement
to be furnished to the Trustee in accordance with the terms of this Section
7.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this agreement, gives Northstar and/or Devon written
notice requiring it to furnish such evidence in relation to any particular
action or obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of Northstar and/or
Devon or a statutory declaration or a certificate made by persons entitled to
sign an Officer's Certificate stating that any such condition has been complied
with in accordance with the terms of this agreement.
Whenever such evidence relates to a matter other than the Voting Rights or
the Exchange Put Right, the Exchange Right or the Automatic Exchange Rights, and
except as otherwise specifically provided herein, such evidence may consist of a
report or opinion of any solicitor, auditor, accountant, appraiser, valuer,
engineer or other expert or any other person whose qualifications give authority
to a statement made by him, provided that, if such report or opinion is
furnished by a director, officer or employee of Northstar and/or Devon, it shall
be in the form of an Officer's Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or report furnished to the
Trustee as evidence of compliance with a condition provided for in this
agreement shall include a statement by the person giving the evidence:
(i) the condition in question;
A. describing the nature and scope of the examination or
investigation upon which such person based the statutory declaration,
certificate, statement or opinion; and
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<PAGE> 17
B. declaring that such person has made such examination or
investigation as such person believes is necessary to enable such person
to make the statements or give the opinions contained or expressed
therein.
7.10 EXPERTS, ADVISERS AND AGENTS
The Trustee may:
(a) in relation to these presents act and rely on the opinion or
advice of or information obtained from or prepared by any solicitor,
auditor, accountant, appraiser, valuer, engineer or other expert, whether
retained by the Trustee or by Northstar and/or Devon or otherwise, and may
employ such assistants as may be necessary to the proper determination and
discharge of its powers and duties and determination of its rights
hereunder and may pay proper and reasonable compensation for all such legal
and other advice or assistance as aforesaid; and
(b) retain or employ such agents and other assistants as it may
reasonably require for the proper determination and discharge of its powers
and duties hereunder, and may pay reasonable remuneration for all services
performed for it (and shall be entitled to receive reasonable remuneration
for all services performed by it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and expenses made or incurred by
it in the determination and discharge of its duties hereunder and in the
management of the Trust.
7.11 INVESTMENT OF MONEYS HELD BY TRUSTEE
Unless herein otherwise expressly provided, any of the funds held by the
Trustee may be deposited in a trust account in the name of the Trustee (which
may be held with the Trustee or an affiliate or related party of the Trustee),
which account shall be interest bearing. Upon the written direction of
Northstar, the Trustee shall invest in its name such funds in Authorized
Investments (as defined herein) in accordance with such direction. Any direction
by Northstar to the Trustee as to the investment of the funds shall be in
writing and shall be provided to the Trustee no later than 9:00 a.m. on the day
on which the investment is to be made. Any such direction received by the
Trustee after 9:00 a.m. or received on a non-Business Day, shall be deemed to
have been given prior to 9:00 a.m. the next Business Day. "Authorized
Investments" means short term interest bearing or discount debt obligations
issued or guaranteed by the Government of Canada or a Province of Canada or a
Canadian chartered bank (which may include an affiliate or related party of the
Trustee, including without limitation the Mellon Bank Canada and the Canadian
Imperial Bank of Commerce) provided that each such obligation is rated at least
RI (middle) by DBRS Inc. or an equivalent rating by Canadian Bond Rating
Service.
7.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY
The Trustee shall not be required to give any bond or security in respect
of the execution of the trusts, rights, duties, powers and authorities of this
agreement or otherwise in respect of the premises.
7.13 TRUSTEE NOT BOUND TO ACT ON REQUEST
Except as in this agreement otherwise specifically provided, the Trustee
shall not be bound to act in accordance with any direction or request of
Northstar and/or Devon or of the directors thereof until a duly authenticated
copy of the instrument or resolution containing such direction or request shall
have been delivered to the Trustee, and the Trustee shall be empowered to act
and rely upon any such copy purporting to be authenticated and believed by the
Trustee to be genuine.
7.14 AUTHORITY TO CARRY ON BUSINESS
The Trustee represents to Northstar and Devon that at the date of execution
and delivery by it of this agreement it is authorized to carry on the business
of a trust company in the Province of Alberta but if, notwithstanding the
provisions of this Section 7.14, it ceases to be so authorized to carry on
business, the validity and enforceability of this agreement and the Voting
Rights, the Exchange Put Right, the Exchange
17
<PAGE> 18
Right and the Automatic Exchange Rights shall not be affected in any manner
whatsoever by reason only of such event; provided, however, the Trustee shall,
within 90 days after ceasing to be authorized to carry on the business of a
trust company in the Province of Alberta, either become so authorized or resign
in the manner and with the effect specified in Article 10 hereof.
7.15 CONFLICTING CLAIMS
If conflicting claims or demands are made or asserted with respect to any
interest of any Holder in any Exchangeable Shares, including any disagreement
between the heirs, representatives, successors or assigns succeeding to all or
any part of the interest of any Holder in any Exchangeable Shares resulting in
conflicting claims or demands being made in connection with such interest, then
the Trustee shall be entitled, at its sole discretion, to refuse to recognize or
to comply with any such claim or demand. In so refusing, the Trustee may elect
not to exercise any Voting Rights, Exchange Put Right, Exchange Right or
Automatic Exchange Rights subject to such conflicting claims or demands and, in
so doing, the Trustee shall not be or become liable to any person on account of
such election or its failure or refusal to comply with any such conflicting
claims or demands. The Trustee shall be entitled to continue to refrain from
acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting
Rights, Exchange Put Right, Exchange Right or Automatic Exchange Rights
subject to such conflicting claims or demands have been adjudicated by a
final judgment of a court of competent jurisdiction; or
(b) all differences with respect to the Voting Rights, Exchange Put
Right, Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands have been conclusively settled by a valid
written agreement binding on all such adverse claimants, and the Trustee
shall have been furnished with an executed copy of such agreement.
If the Trustee elects to recognize any claim or comply with any demand made
by any such adverse claimant, it may in its discretion require such claimant to
furnish such surety bond or other security satisfactory to the Trustee as it
shall deem appropriate fully to indemnify it as between all conflicting claims
or demands.
7.16 ACCEPTANCE OF TRUST
The Trustee hereby accepts the Trust created and provided for by and in
this agreement and agrees to perform the same upon the terms and conditions
herein set forth and to hold all rights, privileges and benefits conferred
hereby and by law in trust for the various persons who shall from time to time
be Holders, subject to all the terms and conditions herein set forth.
ARTICLE 8
COMPENSATION
Devon and Northstar jointly and severally agree to pay to the Trustee
reasonable compensation for all of the services rendered by it under this
agreement and will reimburse the Trustee for all reasonable expenses (including
but not limited to taxes, compensation paid to counsel, experts, agents and
advisors, and travel expenses) and disbursements, including the cost and expense
of any suit or litigation of any character and any proceedings before any
governmental agency, reasonably incurred by the Trustee in connection with its
rights and duties under this agreement; provided that Devon and Northstar shall
have no obligation to reimburse the Trustee for any expenses or disbursements
paid, incurred or suffered by the Trustee in any suit or litigation in which the
Trustee is determined to have acted in bad faith or with negligence or willful
misconduct.
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ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 INDEMNIFICATION OF THE TRUSTEE
Devon and Northstar jointly and severally agree to indemnify and hold
harmless the Trustee and each of its directors, officers, employees and agents
appointed and acting in accordance with this agreement (collectively, the
"Indemnified Parties") against all claims, losses, damages, costs, penalties,
fines and reasonable expenses (including reasonable expenses of the Trustee's
legal counsel) which, without fraud, negligence, willful misconduct or bad faith
on the part of such Indemnified Party, may be paid, incurred or suffered by the
Indemnified Party by reason of or as a result of the Trustee's acceptance or
administration of the Trust, its compliance with its duties set forth in this
agreement, or any written or oral instructions (to be confirmed in writing)
delivered to the Trustee by Devon or Northstar pursuant hereto. In no case shall
Devon or Northstar be liable under this indemnity for any claim against any of
the Indemnified Parties unless Devon and Northstar shall be notified by the
Trustee of the written assertion of a claim or of any action commenced against
the Indemnified Parties, promptly after any of the Indemnified Parties shall
have received any such written assertion of a claim or shall have been served
with a summons or other first legal process giving information as to the nature
and basis of the claim. Subject to (ii) below, Devon and Northstar shall be
entitled to participate at their own expense in the defense and, if Devon or
Northstar so elect at any time after receipt of such notice, either of them may
assume the defense of any suit brought to enforce any such claim. The Trustee
shall have the right to employ separate counsel in any such suit and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of the Trustee unless: (i) the employment of such counsel has been
authorized by Devon or Northstar, such authorization not to be unreasonably
withheld; or (ii) the named parties to any such suit include both the Trustee
and Devon or Northstar and the Trustee shall have been advised by counsel
acceptable to Devon or Northstar that there may be one or more legal defenses
available to the Trustee that are different from or in addition to those
available to Devon or Northstar and that an actual or potential conflict of
interest exists (in which case Devon and Northstar shall not have the right to
assume the defense of such suit on behalf of the Trustee, but shall be liable to
pay the reasonable fees and expenses of counsel for the Trustee). This indemnity
shall survive the resignation or removal of the Trustee and the termination of
the trust.
9.2 LIMITATION OF LIABILITY
The Trustee shall not be held liable for any loss which may occur by reason
of depreciation of the value of any part of the Trust Estate or any loss
incurred on any investment of funds pursuant to this agreement, except to the
extent that such loss is attributable to the fraud, negligence, willful
misconduct or bad faith on the part of the Trustee.
ARTICLE 10
CHANGE OF TRUSTEE
10.1 RESIGNATION
The Trustee, or any trustee hereafter appointed, may at any time resign by
giving written notice of such resignation to Devon and Northstar specifying the
date on which it desires to resign, provided that such notice shall never be
given less than 60 days before such desired resignation date unless Devon and
Northstar otherwise agree and provided further that such resignation shall not
take effect until the date of the appointment of a successor trustee and the
acceptance of such appointment by the successor trustee. Upon receiving such
notice of resignation, Devon and Northstar shall promptly appoint a successor
trustee by written instrument, in duplicate, one copy of which shall be
delivered to the resigning trustee and one copy to the successor trustee.
Failing acceptance by a successor trustee, a successor trustee may be appointed
by an order of the superior court of the province in which Northstar has its
registered office upon application of one or more of the parties hereto. Should
the retiring Trustee apply for the appointment of a successor trustee by an
order of court of competent jurisdiction it shall be at the joint and several
expense of Devon and Northstar.
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10.2 REMOVAL
The Trustee, or any trustee hereafter appointed, may be removed with or
without cause, at any time on 60 days prior notice by written instrument
executed by Devon and Northstar, in duplicate, one copy of which shall be
delivered to the trustee so removed and one copy to the successor trustee;
provided that, in connection with such removal, provision is made for a
replacement trustee similar to that contemplated in Section 10.1.
10.3 SUCCESSOR TRUSTEE
Any successor trustee appointed as provided under this agreement shall
execute, acknowledge and deliver to Devon and Northstar and to its predecessor
trustee an instrument accepting such appointment. Thereupon the resignation or
removal of the predecessor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, duties and obligations of its predecessor under this
agreement, with like effect as if originally named as trustee in this agreement.
However, on the written request of Devon and Northstar or of the successor
trustee, the trustee ceasing to act shall, upon payment of any amounts then due
it pursuant to the provisions of this agreement, execute and deliver an
instrument transferring to such successor trustee all the rights and powers of
the trustee so ceasing to act. Upon the request of any such successor trustee,
Devon, Northstar and such predecessor trustee shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers.
10.4 NOTICE OF SUCCESSOR TRUSTEE
Upon acceptance of appointment by a successor trustee as provided herein,
Devon and Northstar shall cause to be mailed notice of the succession of such
trustee hereunder to each Holder specified in a List. If Devon or Northstar
shall fail to cause such notice to be mailed within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of Devon and Northstar.
ARTICLE 11
DEVON SUCCESSORS
11.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC.
Devon shall not enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer, sale, lease or
otherwise) whereby all or substantially all of its undertaking, property and
assets would become the property of any other Person or, in the case of a
merger, of the continuing corporation resulting therefrom, but may do so if:
(a) such other Person or continuing corporation (the "Devon
Successor"), by operation of law, becomes, without further action, bound by
the terms and provisions of this agreement or, if not so bound, executes,
prior to or contemporaneously with the consummation of such transaction an
agreement supplemental hereto and such other instruments (if any) as are
satisfactory to the Trustee relying on the opinion of legal counsel to the
Trustee are necessary or advisable to evidence the assumption by the Devon
Successor of liability for all moneys payable and property deliverable
hereunder, the covenant of such Devon Successor to pay and deliver or cause
to be delivered the same and its agreement to observe and perform all the
covenants and obligations of Devon under this agreement; and
(b) such transaction shall, to the satisfaction of the Trustee relying
on the opinion of legal counsel to the Trustee, be upon such terms which
substantially preserve and do not impair in any material respect any of the
rights, duties, powers and authorities of the Trustee or of the Holders as
a whole hereunder.
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11.2 VESTING OF POWERS IN SUCCESSOR
Whenever the conditions of Section 11.1 hereof have been duly observed and
performed, the Trustee, if required by Section 11.1 hereof, the Devon Successor
and Northstar shall execute and deliver the supplemental agreement provided for
in Article 12 hereof, and thereupon the Devon Successor shall possess and from
time to time may exercise each and every right and power of Devon under this
agreement in the name of Devon or otherwise and any act or proceeding by any
provision of this agreement required to be done or performed by the board of
directors of Devon or any officers of Devon may be done and performed with like
force and effect by the directors or officers of such Devon Successor.
11.3 WHOLLY-OWNED SUBSIDIARIES
Nothing herein shall be construed as preventing the amalgamation or merger
of any wholly-owned subsidiary of Devon with or into Devon or the winding-up,
liquidation or dissolution of any wholly-owned subsidiary of Devon provided that
all of the assets of such subsidiary are transferred to Devon or another
wholly-owned subsidiary of Devon, and any such transactions are expressly
permitted by this Article 11.
ARTICLE 12
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
12.1 AMENDMENTS, MODIFICATIONS, ETC.
Subject to Sections 12.2 and 12.4, this agreement may not be amended,
modified or waived except by an agreement in writing executed by Northstar,
Devon and the Trustee and approved by the Holders in accordance with Section
10.2 of the Exchangeable Share Provisions. No amendment to or modification or
waiver of any of the provisions of this agreement otherwise permitted hereunder
shall be effective unless made in writing and signed by all of the parties
hereto.
12.2 MINISTERIAL AMENDMENTS
Notwithstanding the provisions of Section 12.1 hereof, the parties to this
agreement may in writing, at any time and from time to time, without the
approval of the Holders, amend or modify this agreement for the purposes of:
(a) adding to the covenants of any or all of the parties hereto for
the protection of the Holders hereunder subject to the receipt by the
Trustee of an opinion of counsel that the addition of the proposed covenant
is not prejudicial to the interests of the holders as a whole or the
Trustee;
(b) making such amendments or modifications not inconsistent with this
agreement as may be necessary or desirable with respect to matters or
questions which, in the opinion of the board of directors of each of Devon
and Northstar and in the opinion of the Trustee relying on the opinion of
counsel, having in mind the best interests of the Holders as a whole, it
may be expedient to make, provided that such boards of directors and the
Trustee and its counsel shall be of the opinion that such amendments and
modifications will not be prejudicial to the interests of the Holders as a
whole; or
(c) making such changes or corrections which, on the advice of counsel
to Northstar, Devon and the Trustee, are required for the purpose of curing
or correcting any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error; provided that the Trustee and its
counsel and the board of directors of each of Northstar and Devon shall be
of the opinion that such changes or corrections will not be prejudicial to
the interests of the Holders as a whole.
12.3 MEETING TO CONSIDER AMENDMENTS
Northstar, at the request of Devon, shall call a meeting or meetings of the
Holders for the purpose of considering any proposed amendment or modification
requiring approval pursuant hereto. Any such meeting
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or meetings shall be called and held in accordance with the by-laws of
Northstar, the Exchangeable Share Provisions and all applicable laws.
12.4 CHANGES IN CAPITAL OF DEVON AND NORTHSTAR
At all times after the occurrence of any event effected pursuant to Section
2.7 or Section 2.8 of the Support Agreement, as a result of which either Devon
Common Stock or the Exchangeable Shares or both are in any way changed, this
agreement shall forthwith be amended and modified as necessary in order that it
shall apply with full force and effect, mutatis mutandis, to all new securities
into which Devon Common Stock or the Exchangeable Shares or both are so changed,
and the parties hereto shall execute and deliver a supplemental agreement giving
effect to and evidencing such necessary amendments and modifications.
12.5 EXECUTION OF SUPPLEMENTAL AGREEMENTS
From time to time, Northstar (when authorized by a resolution of its Board
of Directors), Devon (when authorized by a resolution of its board of directors)
and the Trustee may, subject to the provisions of these presents, and they
shall, when so directed by these presents, execute and deliver by their proper
officers, agreements or other instruments supplemental hereto, which thereafter
shall form part hereof, for any one or more of the following purposes:
(a) evidencing the succession of any Devon Successors to Devon and the
covenants of and obligations assumed by each such Devon Successor in
accordance with the provisions of Article 11 and the successor of any
successor trustee in accordance with the provisions of Article 10;
(b) making any additions to, deletions from or alterations of the
provisions of this agreement or the Voting Rights, the Exchange Put Right,
the Exchange Right or the Automatic Exchange Rights which, in the opinion
of the Trustee and its counsel, will not be prejudicial to the interests of
the Holders as a whole or are in the opinion of counsel to the Trustee
necessary or advisable in order to incorporate, reflect or comply with any
legislation the provisions of which apply to Devon, Northstar, the Trustee
or this agreement; and
(c) for any other purposes not inconsistent with the provisions of
this agreement, including without limitation to make or evidence any
amendment or modification to this agreement as contemplated hereby,
provided that, in the opinion of counsel to the Trustee, the rights of the
Trustee and the Holders as a whole will not be prejudiced thereby.
ARTICLE 13
TERMINATION
13.1 TERM
The Trust created by this agreement shall continue until the earliest to
occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Holder;
(b) each of Northstar and Devon elects in writing to terminate the
Trust and such termination is approved by the Holders of the Exchangeable
Shares in accordance with Section 10.1 of the Exchangeable Share
Provisions; and
(c) 21 years after the death of the last survivor of the descendants
of His Majesty King George VI of the United Kingdom of Great Britain and
Northern Ireland living on the date of the creation of the Trust.
13.2 SURVIVAL OF AGREEMENT
This agreement shall survive any termination of the Trust and shall
continue until there are no Exchangeable Shares outstanding held by a Holder;
provided, however, that the provisions of Articles 8 and 9 hereof shall survive
any such termination of this agreement.
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ARTICLE 14
GENERAL
14.1 SEVERABILITY
If any provision of this agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
agreement shall not in any way be affected or impaired thereby, and the
agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions.
14.2 INUREMENT
This agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns and to the
benefit of the Holders.
14.3 NOTICES TO PARTIES
All notices and other communications between the parties hereunder shall be
in writing and shall be deemed to have been given if delivered personally or by
confirmed telecopy to the parties at the following addresses (or at such other
address for such party as shall be specified in like notice):
(a) if to Devon to:
Devon Energy Corporation
20 North Broadway
Suite 1500
Oklahoma City, Oklahoma
73102-8260
Attention: President
Facsimile No. 405-552-8171
(b) if to Northstar to:
Northstar Energy Corporation
3000, 400 -- 3rd Avenue S.W.
Calgary, Alberta
T2P 4H2
Attention: President
Facsimile No. 403-213-8100
(c) if to the Trustee to:
CIBC Melon Trust Company
600, 333 -- 7th Avenue S.W.
Calgary, Alberta T2P 2Z1
Attention: Corporate Trust Department
Facsimile No. 403-264-2100
Any notice or other communication given personally shall be deemed to have
been given and received upon delivery thereof, and if given by telecopy shall be
deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it shall be deemed to have been
given and received upon the immediately following Business Day.
14.4 NOTICE TO HOLDERS
Any and all notices to be given and any documents to be sent to any Holders
may be given or sent to the address of such Holder shown on the register of
Holders of Exchangeable Shares in any manner permitted by the Exchangeable Share
Provisions and shall be deemed to be received (if given or sent in such manner)
at
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the time specified in such Exchangeable Share Provisions, the provisions of
which Exchangeable Share Provisions shall apply mutatis mutandis to notices or
documents as aforesaid sent to such Holders.
14.5 RISK OF PAYMENTS BY POST
Whenever payments are to be made or documents are to be sent to any Holder
by the Trustee, by Northstar or by Devon or by such Holder to the Trustee or to
Devon or Northstar, the making of such payment or sending of such document sent
through the mail shall be at the risk of Northstar or Devon, in the case of
payments made or documents sent by the Trustee or Northstar or Devon, and the
Holder, in the case of payments made or documents sent by the Holder.
14.6 COUNTERPARTS
This agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.
14.7 JURISDICTION
This agreement shall be construed and enforced in accordance with the laws
of the Province of Alberta and the federal laws of Canada applicable therein.
14.8 ATTORNMENT
Devon agrees that any action or proceeding arising out of or relating to
this agreement may be instituted in the courts of Alberta, waives any objection
which it may have now or hereafter to the venue of any such action or
proceeding, irrevocably submits to the jurisdiction of such courts in any such
action or proceeding, agrees to be bound by any judgment of such courts and
agrees not to seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby appoints Northstar
at its registered office in the Province of Alberta as Devon's attorney for
service of process.
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IN WITNESS WHEREOF, the parties hereby have caused this agreement to be
duly executed as of the date first above written.
DEVON ENERGY CORPORATION
By: /s/ DUKE R. LIGON
----------------------------------
By: /s/ MARIAN J. MOON
----------------------------------
NORTHSTAR ENERGY CORPORATION
By: /s/ JOHN A. HAGG
----------------------------------
By: /s/ MURRAY T. BROWN
----------------------------------
CIBC MELLON TRUST COMPANY
By: /s/ RHONDA L. MACLEOD
----------------------------------
By: /s/ JACQUIE FISHER
----------------------------------
25
<PAGE> 1
EXHIBIT 10.1
[EXECUTION]
===============================================================================
US CREDIT AGREEMENT
-------------------------------------------------------
DEVON ENERGY CORPORATION
as US Borrower
NATIONSBANK, N.A.
as Administrative Agent
NATIONSBANC MONTGOMERY SECURITIES, L.L.C.
as Arranger
FIRST CHICAGO CAPITAL MARKETS, INC.
as Syndication Agent
BANK OF MONTREAL
as Documentation Agent
FIRST UNION
as Co-Documentation Agent
and CERTAIN FINANCIAL INSTITUTIONS
as Lenders
-------------------------------------------------------
US $205,000,000
December 11, 1998
==============================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
CREDIT AGREEMENT..................................................................................................1
ARTICLE I - The US Loans..........................................................................................1
Section 1.1. Commitments to Lend; US Notes..........................................................1
Section 1.2. Requests for New US Loans..............................................................4
Section 1.3. Continuations and Conversions of Existing US Loans.....................................5
Section 1.4. Use of Proceeds........................................................................6
Section 1.5. Interest Rates and Fees................................................................6
Section 1.6. Prepayments............................................................................8
Section 1.7. Competitive Bid Loans..................................................................8
ARTICLE II - Letters of Credit...................................................................................11
Section 2.1. Letters of Credit.....................................................................11
Section 2.2. Requesting Letters of Credit..........................................................12
Section 2.3. Reimbursement and Participations......................................................12
Section 2.4. Letter of Credit Fees.................................................................13
Section 2.5. No Duty to Inquire....................................................................13
Section 2.6. LC Collateral.........................................................................14
ARTICLE III - Payments to Lenders................................................................................15
Section 3.1. General Procedures....................................................................15
Section 3.2. Increased Cost and Reduced Return.....................................................16
Section 3.3. Limitation on Types of US Loans.......................................................18
Section 3.4. Illegality............................................................................18
Section 3.5. Treatment of Affected US Loans........................................................19
Section 3.6. Compensation..........................................................................19
Section 3.7. Change of Applicable Lending Office...................................................20
Section 3.8. Replacement of Lenders................................................................20
Section 3.9. Taxes.................................................................................20
Section 3.10. Currency Conversion and Currency Indemnity............................................22
ARTICLE IV - Conditions Precedent to Lending.....................................................................23
Section 4.1. Documents to be Delivered.............................................................23
Section 4.2. Additional Conditions Precedent to First US Loan or First Letter of
Credit................................................................................24
Section 4.3. Additional Conditions Precedent to all US Loan and Letters of Credit..................25
ARTICLE V - Representations and Warranties.......................................................................25
Section 5.1. No Default............................................................................25
Section 5.2. Organization and Good Standing........................................................25
Section 5.3. Authorization.........................................................................26
Section 5.4. No Conflicts or Consents..............................................................26
</TABLE>
i
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<TABLE>
<S> <C>
Section 5.5. Enforceable Obligations...............................................................26
Section 5.6. Full Disclosure.......................................................................26
Section 5.7. Litigation............................................................................27
Section 5.8. ERISA Plans and Liabilities...........................................................27
Section 5.9. Environmental and Other Laws..........................................................27
Section 5.10. Names and Places of Business..........................................................27
Section 5.11. US Borrower's Subsidiaries............................................................28
Section 5.12. Title to Properties; Licenses.........................................................28
Section 5.13. Government Regulation.................................................................28
Section 5.14. Insider...............................................................................28
Section 5.15. Solvency..............................................................................28
Section 5.16. Year 2000 Compliance..................................................................29
ARTICLE VI - Affirmative Covenants of US Borrower................................................................29
Section 6.1. Payment and Performance...............................................................29
Section 6.2. Books, Financial Statements and Reports...............................................29
Section 6.3. Other Information and Inspections.....................................................30
Section 6.4. Notice of Material Events and Change of Address.......................................31
Section 6.5. Maintenance of Properties.............................................................31
Section 6.6. Maintenance of Existence and Qualifications...........................................31
Section 6.7. Payment of Trade Liabilities, Taxes, etc..............................................31
Section 6.8. Insurance.............................................................................32
Section 6.9. Performance on US Borrower's Behalf...................................................32
Section 6.10. Interest..............................................................................32
Section 6.11. Compliance with Law...................................................................32
Section 6.12. Environmental Matters.................................................................32
Section 6.13. Bank Accounts; Offset.................................................................33
Section 6.14. Year 2000 Compliance..................................................................33
ARTICLE VII - Negative Covenants of US Borrower..................................................................33
Section 7.1. Indebtedness..........................................................................33
Section 7.2. Limitation on Liens...................................................................35
Section 7.3. Limitation on Mergers.................................................................35
Section 7.4. Limitation on Issuance of Securities by Subsidiaries of US Borrower...................35
Section 7.5. Limitation on Restricted Payments.....................................................36
Section 7.6. Transactions with Affiliates..........................................................36
Section 7.7. Prohibited Contracts; ERISA...........................................................36
Section 7.8. Funded Debt to Total Capitalization...................................................36
Section 7.9. Funded Debt to EBITDA.................................................................36
Section 7.10. Devon Trust; Devon Trust Securities...................................................36
ARTICLE VIII - Events of Default and Remedies....................................................................38
Section 8.1. Events of Default.....................................................................38
Section 8.2. Remedies..............................................................................40
</TABLE>
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<TABLE>
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ARTICLE IX - US Agent............................................................................................40
Section 9.1. Appointment, Powers, and Immunities...................................................40
Section 9.2. Reliance by US Agent..................................................................41
Section 9.3. Defaults..............................................................................41
Section 9.4. Rights as Lender......................................................................41
Section 9.5. Indemnification.......................................................................42
Section 9.6. Non-Reliance on US Agent and Other Lenders............................................42
Section 9.7. Rights as Lender......................................................................42
Section 9.8. Sharing of Set-Offs and Other Payments................................................43
Section 9.9. Investments...........................................................................43
Section 9.10. Benefit of Article IX.................................................................43
Section 9.11. Resignation...........................................................................43
Section 9.12. Lenders to Remain Pro Rata............................................................44
ARTICLE X - Miscellaneous........................................................................................44
Section 10.1. Waivers and Amendments; Acknowledgments...............................................44
Section 10.2. Survival of Agreements; Cumulative Nature.............................................46
Section 10.3. Notices...............................................................................46
Section 10.4. Payment of Expenses; Indemnity........................................................47
Section 10.5. Parties in Interest...................................................................48
Section 10.6. Assignments and Participations........................................................48
Section 10.7. Confidentiality.......................................................................50
Section 10.8. Governing Law; Submission to Process..................................................50
Section 10.9. Limitation on Interest................................................................50
Section 10.10. Termination; Limited Survival.........................................................51
Section 10.11. Severability..........................................................................52
Section 10.12. Counterparts; Fax.....................................................................52
Section 10.13. Waiver of Jury Trial, Punitive Damages, etc...........................................52
Section 10.14. Defined Terms.........................................................................52
Section 10.15. Annex I, Exhibits and Schedules; Additional Definitions...............................52
Section 10.16. Amendment of Defined Instruments......................................................52
Section 10.17. References and Titles.................................................................53
Section 10.18. Calculations and Determinations.......................................................53
Section 10.19. Construction of Indemnities and Releases..............................................53
Section 10.20. Termination of Existing Agreement.....................................................53
</TABLE>
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Schedules and Exhibits:
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Annex I - Defined Terms
Annex II - Lenders Schedule
Schedule 1 - Disclosure Schedule
Exhibit A-1 - Tranche A Promissory Note
Exhibit A-2 - Tranche B Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Opinion of Counsel for Restricted Persons
Exhibit F - Assignment and Acceptance Agreement
Exhibit G - Letter of Credit Application and Agreement
Exhibit H - Competitive Bid Request
Exhibit I - Invitation to Bid
Exhibit J - Competitive Bid
Exhibit K - Competitive Bid Accept/Reject Letter
Exhibit L - Competitive Bid Note
</TABLE>
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of December 11, 1998, by and among
Devon Energy Corporation, an Oklahoma corporation (herein called "US Borrower"),
NationsBank, N.A., individually and as administrative agent (herein called "US
Agent") and the undersigned Lenders. In consideration of the mutual covenants
and agreements contained herein the parties hereto agree as follows:
ARTICLE I - The US Loans
Section 1.1. Commitments to Lend; US Notes.
(a) Tranche A. Subject to the terms and conditions hereof, each Lender
agrees to make loans to US Borrower (herein called such Lender's "Tranche A
Loans") upon US Borrower's request from time to time during the US Facility
Commitment Period, provided that (i) subject to Sections 3.3, 3.4 and 3.5, all
Lenders are requested to make Tranche A Loans of the same Type in accordance
with their respective Percentage Shares and as part of the same Borrowing, (ii)
such Lender's Percentage Share of the US Facility Usage shall never exceed such
Lender's Percentage Share of the US Maximum Credit Amount, and (iii) such
Lender's Percentage Share of the Tranche A Facility Usage shall never exceed
such Lender's Percentage Share of the Tranche A Maximum Credit Amount. The
aggregate amount of all Tranche A Loans in any Borrowing must be an integral
multiple of US $100,000 which equals or exceeds US $200,000 or must equal the
unadvanced portion of the US Maximum Credit Amount. The obligation of US
Borrower to repay to each Lender the aggregate amount of all Tranche A Loans
made by such Lender, together with interest accruing in connection therewith,
shall be evidenced by a single promissory note (herein called such Lender's
"Tranche A Note") made by US Borrower payable to the order of such Lender in the
form of Exhibit A-1 with appropriate insertions. The amount of principal owing
on any Lender's Tranche A Note at any given time shall be the aggregate amount
of all Tranche A Loans theretofore made by such Lender minus all payments of
principal theretofore received by such Lender on such Tranche A Note. Interest
on each Tranche A Note shall accrue and be due and payable as provided herein
and therein. Each Tranche A Note shall be due and payable as provided herein and
therein, and shall be due and payable in full on the US Facility Maturity Date.
Subject to the terms and conditions hereof, US Borrower may borrow, repay, and
reborrow Tranche A Loans under the US Agreement during the US Facility
Commitment Period. US Borrower may have no more than ten Borrowings of US Dollar
Eurodollar Loans (including Tranche A Loans and Tranche B Loans) outstanding at
any time.
(b) Tranche B. Subject to the terms and conditions hereof, each Lender
agrees to make loans to US Borrower (herein called such Lender's "Tranche B
Loans") upon US Borrower's request from time to time during the Tranche B
Revolving Period, provided that (i) subject to Sections 3.3, 3.4 and 3.5, all
Lenders are requested to make Tranche B Loans of the same Type in accordance
with their respective Percentage Shares and as part of the same Borrowing, (ii)
such Lender's Percentage Share of the US Facility Usage shall never exceed such
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Lender's Percentage Share of the US Maximum Credit Amount, and (iii) such
Lender's Percentage Share of the Tranche B Facility Usage shall never exceed
such Lender's Percentage Share of the Tranche B Maximum Credit Amount. The
aggregate amount of all Tranche B Loans in any Borrowing must be an integral
multiple of US $100,000 which equals or exceeds US $200,000 or must equal the
unadvanced portion of the US Maximum Credit Amount. The obligation of US
Borrower to repay to each Lender the aggregate amount of all Tranche B Loans
made by such Lender, together with interest accruing in connection therewith,
shall be evidenced by a single promissory note (herein called such Lender's
"Tranche B Note") made by US Borrower payable to the order of such Lender in the
form of Exhibit A-2 with appropriate insertions. The amount of principal owing
on any Lender's Tranche B Note at any given time shall be the aggregate amount
of all Tranche B Loans theretofore made by such Lender minus all payments of
principal theretofore received by such Lender on such Tranche B Note. Interest
on each Tranche B Note shall accrue and be due and payable as provided herein
and therein. Each Tranche B Note shall be due and payable as provided herein and
therein, and shall be due and payable in full on the Tranche B Maturity Date.
Subject to the terms and conditions hereof, US Borrower may borrow, repay, and
reborrow Tranche B Loans under the US Agreement during the Tranche B Revolving
Period. US Borrower may have no more than ten Borrowings of US Dollar Eurodollar
Loans (including Tranche A Loans and Tranche B Loans) outstanding at any time.
(c) Extension of Conversion Date.
(i) US Borrower may, at its option and from time to time
during the Tranche B Revolving Period, request an offer to extend the
Tranche B Revolving Period by delivering to US Agent a Request for an
Offer of Extension not more than sixty days prior to the then current
Tranche B Conversion Date. US Agent shall forthwith provide a copy of
the Request for an Offer of Extension to each of the Lenders. Upon
receipt by US Agent from US Borrower of an executed Request for an
Offer of Extension, each Lender shall, within thirty days after the
date US Agent receives such request from US Borrower, either:
(1) notify US Agent of its acceptance of the Request
for an Offer of Extension, and the terms and conditions, if
any, upon which such Lender is prepared to extend the Tranche
B Conversion Date; or
(2) notify US Agent that the Request for an Offer of
Extension has been denied, such notice to forthwith be
forwarded by US Agent to US Borrower to allow US Borrower to
seek a replacement lender pursuant to Section 1.1(e) (any
Lender giving notice of such denial is herein called a
"Non-Accepting Lender"). The failure of a Lender to so notify
US Agent within such thirty day period shall be deemed to be
notification by such Lender to US Agent that such Lender has
denied US Borrower's Request for an Offer of Extension.
(ii) Provided that all Lenders provide notice to US Agent
under Section 1.1(c)(i) that they accept the Request for an Offer of
Extension, or if there are Non- Accepting Lenders, such Lenders shall
have been repaid pursuant to Section 1.1(e) or
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replacement lenders shall have become parties hereto pursuant to
Section 1.1(e) and shall have accepted the Request for an Offer of
Extension, such acceptance having common terms and conditions, US Agent
shall deliver to US Borrower an Offer of Extension incorporating the
said terms and conditions. Such offer shall be open for acceptance by
US Borrower until the fifth Business Day immediately preceding the then
current Tranche B Conversion Date. Upon written notice by US Borrower
to US Agent accepting an outstanding Offer of Extension and agreeing to
the terms and conditions, if any, specified therein (the date of such
notice of acceptance in this Section 1.1 being called the "Extension
Date"), the Tranche B Conversion Date shall be extended to the date 364
days from the Extension Date and the terms and conditions specified in
such Offer of Extension shall be immediately effective.
(iii) US Borrower understands that the consideration of any
Request for an Offer of Extension constitutes an independent credit
decision which each Lender retains the absolute and unfettered
discretion to make and that no commitment in this regard is hereby
given by a Lender and that any offer to extend the Tranche B Conversion
Date may be on such terms and conditions in addition to those set out
herein as the extending Lenders stipulate.
(d) Conversion to Tranche B Term Loan. Effective at 11:59 p.m. Dallas,
Texas time on the day immediately preceding the Tranche B Conversion Date, (i)
each Lender's obligation to make new Tranche B Loans shall be canceled
automatically, and (ii) each Lender's Tranche B Loans shall become term loans
maturing on the Tranche B Maturity Date.
(e) Non-Accepting Lender. Provided that Lenders whose Percentage Shares
represent more than 50% but less than 100% of the US Maximum Credit Amount
provide notice to US Agent under Section 1.1(c)(i) that they accept the Request
for an Offer of Extension, on notice of US Borrower to US Agent, US Borrower
shall be entitled to choose any of the following in respect of each
Non-Accepting Lender prior to the expiration of the Tranche B Revolving Period,
provided that if US Borrower does not make an election prior to the expiration
of the Tranche B Revolving Period, US Borrower shall be deemed to have
irrevocably elected to exercise the provisions of Section 1.1(e)(i):
(i) the Non-Accepting Lender's obligations to make US Loans
shall be canceled as of the Extension Date, the US Maximum Credit
Amount shall be reduced by the amount so canceled, and on or prior to
the Extension Date the US Borrower shall repay in full all Obligations
then outstanding to the Non-Accepting Lender (as defined in Section
1.1(c)(i)(2)), or
(ii) replace the Non-Accepting Lender by reaching satisfactory
arrangements with one or more existing Lenders or new Lenders, for the
purchase, assignment and assumption of all Canadian Obligations and US
Obligations of the Non-Accepting Lender, provided that any new Lender,
with, if necessary, any Affiliate, shall take a pro rata assignment of
both Canadian Obligations and US Obligations, and such Non-
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Accepting Lender shall be obligated to sell such Obligations in
accordance with such satisfactory arrangements.
In connection with any such replacement of a Lender Party pursuant to this
Section 1.1(e), US Borrower shall pay all costs that would have been due to such
Lender Party pursuant to Section 3.6 if such Lender Party's US Loans had been
prepaid at the time of such replacement.
Section 1.2. Requests for New US Loans. US Borrower must give to US
Agent written notice (or telephonic notice promptly confirmed in writing) of any
requested Borrowing of new US Loans to be advanced by Lenders. Each such notice
constitutes a "Borrowing Notice" hereunder and must:
(a) specify the aggregate amount of any such Borrowing of new US Base
Rate Loans and the date on which such US Base Rate Loans are to be advanced, or
the aggregate amount of any such Borrowing of new US Dollar Eurodollar Loans,
the date on which such US Dollar Eurodollar Loans are to be advanced (which
shall be the first day of the Eurodollar Interest Period which is to apply
thereto), and the length of the applicable Eurodollar Interest Period; and
(b) be received by US Agent not later than 11:00 a.m., Dallas, Texas
time, on the day on which any such US Base Rate Loans are to be made, or the
second Business Day preceding the day on which any such US Dollar Eurodollar
Loans are to be made.
Each such written request or confirmation must be made in the form and substance
of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each
such telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by US Borrower as to the matters which are required
to be set out in such written confirmation. Upon receipt of any such Borrowing
Notice, US Agent shall give each Lender notice of the terms thereof not later
than 2:00 p.m., Dallas, Texas time on the day it receives such Borrowing Notice
from US Borrower if it receives such Borrowing Notice by 11:00 a.m., Dallas,
Texas time, otherwise on the next Business Day. If all conditions precedent to
such new US Loans have been met, each Lender will on the date requested promptly
remit to US Agent at US Agent's office in Dallas, Texas the amount of such
Lender's new US Loan in immediately available funds, and upon receipt of such
funds, unless to its actual knowledge any conditions precedent to such US Loans
have been neither met nor waived as provided herein, US Agent shall promptly
make such US Loans available to US Borrower. Unless US Agent shall have received
prompt notice from a Lender that such Lender will not make available to US Agent
such Lender's new US Loan, US Agent may in its discretion assume that such
Lender has made such US Loan available to US Agent in accordance with this
section and US Agent may if it chooses, in reliance upon such assumption, make
such US Loan available to US Borrower. If and to the extent such Lender shall
not so make its new US Loan available to US Agent, such Lender and US Borrower
severally agree to pay or repay to US Agent within three days after demand the
amount of such US Loan together with interest thereon, for each day from the
date such amount was made available to US Borrower until the date such amount is
paid or repaid to US Agent, with interest at (1) the Federal Funds Rate, if such
Lender is making such payment; provided that US Agent gave notice of the terms
of the Borrowing Notice to such Lender in accordance with the terms of
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this Section 1.2, and (2) the interest rate applicable at the time to the other
new US Loans made on such date, if US Borrower is making such repayment. If
neither such Lender nor US Borrower pays or repays to US Agent such amount
within such three-day period, US Agent shall in addition to such amount be
entitled to recover from such Lender and from US Borrower, on demand, interest
thereon at the Default Rate for US Base Rate Loans, calculated from the date
such amount was made available to US Borrower. The failure of any Lender to make
any new US Loan to be made by it hereunder shall not relieve any other Lender of
its obligation hereunder, if any, to make its new US Loan, but no Lender shall
be responsible for the failure of any other Lender to make any new US Loan to be
made by such other Lender.
Section 1.3. Continuations and Conversions of Existing US Loans. US
Borrower may make the following elections with respect to US Loans already
outstanding under this Agreement: to convert US Base Rate Loans to US Dollar
Eurodollar Loans, to convert US Dollar Eurodollar Loans to US Base Rate Loans on
the last day of the Eurodollar Interest Period applicable thereto, and to
continue US Dollar Eurodollar Loans beyond the expiration of such Eurodollar
Interest Period by designating a new Eurodollar Interest Period to take effect
at the time of such expiration. In making such elections, US Borrower may
combine existing Tranche A Loans made pursuant to separate Borrowings into one
new Borrowing or divide existing Tranche A Loans made pursuant to one Borrowing
into separate new Borrowings, or combine existing Tranche B Loans made pursuant
to separate Borrowings into one new Borrowing or divide existing Tranche B Loans
made pursuant to one Borrowing into separate new Borrowings, provided that US
Borrower may have no more than ten Borrowings of US Dollar Eurodollar Loans
outstanding at any time. To make any such election, US Borrower must give to US
Agent written notice (or telephonic notice promptly confirmed in writing) of any
such Conversion or Continuation of existing US Loans, with a separate notice
given for each new Borrowing. Each such notice constitutes a
"Continuation/Conversion Notice" hereunder and must:
(a) specify the existing US Loans made under this Agreement which are
to be continued or converted and whether such US Loans are Tranche A Loans or
Tranche B Loans;
(b) specify the aggregate amount of any Borrowing of US Base Rate Loans
into which such existing US Loans are to be continued or converted and the date
on which such Continuation or Conversion is to occur, or the aggregate amount of
any Borrowing of US Dollar Eurodollar Loans into which such existing US Dollar
Eurodollar Loans are to be continued or converted, the date on which such
Continuation or Conversion is to occur (which shall be the first day of the
Eurodollar Interest Period which is to apply to such US Dollar Eurodollar
Loans), and the length of the applicable Eurodollar Interest Period; and
(c) be received by US Agent not later than 10:00 a.m., Dallas, Texas
time, on the day on which any such Continuation or Conversion to US Base Rate
Loans is to occur, or the second Business Day preceding the day on which any
such Continuation or Conversion to US Dollar Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly
completed. Each such
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telephonic request shall be deemed a representation, warranty, acknowledgment
and agreement by US Borrower as to the matters which are required to be set out
in such written confirmation. Upon receipt of any such Continuation/Conversion
Notice, US Agent shall give each Lender prompt notice of the terms thereof. Each
Continuation/Conversion Notice shall be irrevocable and binding on US Borrower.
During the continuance of any Default, US Borrower may not make any election to
convert existing US Loans made under this Agreement into US Dollar Eurodollar
Loans or continue existing US Loans made under this Agreement as US Dollar
Eurodollar Loans. If (due to the existence of a Default or for any other reason)
US Borrower fails to timely and properly give any Continuation/Conversion Notice
with respect to a Borrowing of existing US Dollar Eurodollar Loans at least two
Business Days prior to the end of the Eurodollar Interest Period applicable
thereto, such US Dollar Eurodollar Loans shall automatically be converted into
US Base Rate Loans at the end of such Eurodollar Interest Period. No new funds
shall be repaid by US Borrower or advanced by any Lender in connection with any
Continuation or Conversion of existing US Loans pursuant to this section, and no
such Continuation or Conversion shall be deemed to be a new advance of funds for
any purpose; such Continuations and Conversions merely constitute a change in
the interest rate applicable to already outstanding US Loans.
Section 1.4. Use of Proceeds. US Borrower shall use all US Loans made
under this Agreement to pay in full on the Closing Date all indebtedness
outstanding under the Existing Agreement and thereafter to refinance existing
indebtedness (including any commercial paper issued by or for the account of US
Borrower), to finance capital expenditures, to refinance Matured US LC
Obligations outstanding under this Agreement, and provide working capital for
its operations and for other general business purposes. US Borrower shall use
all Letters of Credit for its general corporate purposes. In no event shall the
funds from any US Loan or any Letter of Credit be used directly or indirectly by
any Person for personal, family, household or agricultural purposes or for the
purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or
carrying any "margin stock" (as such term is defined in Regulation U promulgated
by the Board of Governors of the Federal Reserve System) or to extend credit to
others directly or indirectly for the purpose of purchasing or carrying any such
margin stock. US Borrower represents and warrants that US Borrower is not
engaged principally, or as one of US Borrower's important activities, in the
business of extending credit to others for the purpose of purchasing or carrying
such margin stock.
Section 1.5. Interest Rates and Fees.
(a) Tranche A Loans. The following interest and fees shall be payable
with respect to Tranche A Loans:
(i) Interest. Each Tranche A Loan that is a US Base Rate Loan
shall bear interest on each day outstanding at the US Base Rate in
effect on such day. Each Tranche A Loan that is a US Dollar Eurodollar
Loan shall bear interest on each day during the related Eurodollar
Interest Period at the related Adjusted US Dollar Eurodollar Rate in
effect on such day.
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(ii) Facility Fees. In consideration of each Lender's
commitment to make Tranche A Loans under this Agreement, US Borrower
will pay to US Agent for the account of each Lender a facility fee
determined on a daily basis by applying the Facility Fee Rate to such
Lender's Percentage Share of the Tranche A Maximum Credit Amount on
each day during the US Facility Commitment Period. This facility fee
shall be due and payable in arrears on the last day of each Fiscal
Quarter and at the end of the US Facility Commitment Period.
(b) Tranche B Loans. The following interest and fees shall be payable
with respect to Tranche B Loans:
(i) Interest. Each Tranche B Loan that is a US Base Rate Loan
shall bear interest on each day outstanding at the US Base Rate in
effect on such day. Each Tranche B Loan that is a US Dollar Eurodollar
Loan shall bear interest on each day during the related Eurodollar
Interest Period at the related Adjusted US Dollar Eurodollar Rate in
effect on such day.
(ii) Facility Fees. In consideration of each Lender's
commitment to make Tranche B Loans under this Agreement, US Borrower
will pay to US Agent for the account of each Lender a facility fee
determined on a daily basis by applying the Tranche B Facility Fee Rate
to such Lender's Percentage Share of the Tranche B Maximum Credit
Amount on each day during the period from the date hereof until the
Tranche B Maturity Date. This facility fee shall be due and payable in
arrears on the last day of each Fiscal Quarter and on the Tranche B
Maturity Date.
(c) Utilization Fees. In consideration of each Lender's commitment to
make US Loans under this Agreement, US Borrower will pay to US Agent for the
account of each Lender a utilization fee for each day during the US Facility
Commitment Period that the US Facility Usage exceeds fifty percent (50%) of the
US Maximum Credit Amount. The amount of the utilization fee shall be determined
on a daily basis by applying a rate of 15 Basis Points per annum to such
Lender's Percentage Share of the US Facility Usage on each such day. This
utilization fee shall be due and payable in arrears on each Interest Payment
Date for US Base Rate Loans and at the end of the US Facility Commitment Period.
(d) Competitive Bid Loans. Each Competitive Bid Loan shall bear
interest on each day outstanding at the Competitive Bid Rate for such
Competitive Bid Loan.
(e) All US Loans. Notwithstanding the foregoing, if an Event of Default
has occurred and is continuing, all US Loans shall bear interest on each day
outstanding at the applicable Default Rate. Past due payments of principal and
interest shall bear interest at the rates and in the manner set forth in the US
Notes.
(f) US Agent's Fees. In addition to all other amounts due to US Agent
under the US Loan Documents, US Borrower will pay fees to US Agent as described
in a letter agreement dated September 30, 1998 between US Agent and US Borrower.
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Section 1.6. Prepayments.
(a) Optional Prepayments. US Borrower may, upon giving notice to US
Agent by 11:00 a.m., Dallas, Texas time on the Business Day of prepayment, from
time to time and without premium or penalty prepay the US Notes, including
Competitive Bid Notes, in whole or in part, so long as all partial prepayments
of principal concurrently paid on the US Notes are in increments of US $100,000
and in an aggregate amount greater than or equal to US $200,000, and so long as
US Borrower pays all amounts owing in connection with the prepayment of any US
Dollar Eurodollar Loan owing under Section 3.6. US Agent shall give each Lender
notice thereof by 2:00 p.m. Dallas, Texas time on the date such notice is
received from US Borrower. Each prepayment of principal under this section shall
be accompanied by all interest then accrued and unpaid on the principal so
prepaid. Any principal or interest prepaid pursuant to this section shall be in
addition to, and not in lieu of, all payments otherwise required to be paid
under the US Loan Documents at the time of such prepayment. Unless otherwise
designated by US Borrower, any prepayment of Competitive Bid Loans shall be
applied to the outstanding Competitive Bid Loans in order of shortest maturity.
(b) Mandatory Prepayments of Tranche A Loans. If the Tranche A Facility
Usage exceeds the Tranche A Maximum Credit Amount, US Borrower shall immediately
prepay the principal of the Tranche A Loans in an amount at least equal to such
excess.
(c) Mandatory Prepayments of Tranche B Loans. If the aggregate amount
of the outstanding Tranche B Loans ever exceeds the Tranche B Maximum Credit
Amount, US Borrower shall immediately prepay the principal of the Tranche B
Loans in an amount at least equal to such excess.
(d) Procedures. Each prepayment of principal under this section shall
be accompanied by all interest then accrued and unpaid on the principal so
prepaid. Any principal or interest prepaid pursuant to this section shall be in
addition to, and not in lieu of, all payments otherwise required to be paid
under the US Loan Documents at the time of such prepayment.
Section 1.7. Competitive Bid Loans.
(a) US Borrower may request that each Lender submit Competitive Bids
(on a several basis) to US Borrower on any Business Day during the US Facility
Commitment Period, provided that all Lenders are requested to make a Competitive
Bid on the same basis at the same time. In order to request Competitive Bids, US
Borrower shall deliver by hand or facsimile to US Agent a Competitive Bid
Request, to be received by US Agent not later than 9:00 a.m., Dallas, Texas time
one Business Day before the date specified for a proposed Competitive Bid Loan.
A Competitive Bid Request that does not conform substantially to the format of
Exhibit H may be rejected in US Agent's sole discretion, and US Agent shall
promptly notify US Borrower of such rejection by facsimile. After receiving an
acceptable Competitive Bid Request, US Agent shall no later than 12:00 noon,
Dallas, Texas time on the date such Competitive Bid
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Request is received by US Agent, by facsimile deliver to Lenders an Invitation
to Bid substantially in the form of Exhibit I with respect thereto.
(b) Each Lender may, in its sole discretion, make one or more
Competitive Bids to US Agent responsive to each Competitive Bid Request given by
US Borrower. Each Competitive Bid by a Lender must be received by US Agent by
facsimile not later than 9:00 a.m., Dallas, Texas time on the date specified for
a proposed Competitive Bid Loan. Multiple bids may be accepted by US Agent.
Competitive Bids that do not conform substantially to the format of Exhibit J
may be rejected by US Agent after conferring with, and upon the instruction of,
US Borrower, and US Agent shall notify the bidding Lender of such rejection as
soon as practicable. If any Lender shall elect not to make a Competitive Bid,
such Lender shall so notify US Agent by facsimile not later than 9:00 a.m.,
Dallas, Texas time, on the date specified for a Competitive Bid Loan; provided,
however, that failure by any Lender to give such notice shall not cause such
Lender to be obligated to make any Competitive Bid Loan and by such failure such
Lender shall be deemed to have rejected such Competitive Bid. A Competitive Bid
submitted by a Lender shall be irrevocable.
(c) Promptly, and in no event later than 9:30 a.m., Dallas, Texas time,
on the date specified for a proposed Competitive Bid Loan, US Agent shall notify
US Borrower by facsimile of all the Competitive Bids made, the Competitive Bid
Rate and the principal amount of each Competitive Bid Loan in respect of which a
Competitive Bid was made, and the identity of each Lender that made each
Competitive Bid. US Agent shall send a copy of all Competitive Bids to US
Borrower for its records as soon as practicable after completion of the bidding
process.
(d) US Borrower may, subject only to the provisions hereof, accept or
reject any Competitive Bid. US Borrower shall notify US Agent by facsimile
pursuant to a Competitive Bid Accept/Reject Letter whether and to what extent US
Borrower has decided to accept or reject any or all of the Competitive Bids, not
later than 10:00 a.m., Dallas, Texas time, on the date specified for a proposed
Competitive Bid Loan; provided, however, that:
(i) the failure by US Borrower to accept or reject any
Competitive Bid within the time period specified herein shall be deemed
to be a rejection of such Competitive Bid,
(ii) the aggregate amount of the Competitive Bids accepted by
US Borrower shall not exceed the principal amount specified in the
Competitive Bid Request,
(iii) the aggregate amount of all outstanding US Loans and US
LC Obligations shall never exceed the US Maximum Credit Amount,
(iv) if US Borrower shall accept a Competitive Bid or
Competitive Bids made at a particular Competitive Bid Rate, but the
amount of such Competitive Bid or Competitive Bids shall cause the
total amount of Competitive Bids to be accepted by US Borrower to
exceed the amount specified in the Competitive Bid Request, then US
Borrower shall accept a portion of such Competitive Bid or Competitive
Bids in an
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amount equal to the amount specified in the Competitive Bid Request
less the amount of all other Competitive Bids accepted with respect to
such Competitive Bid Request, which acceptance, in the case of multiple
Competitive Bids at such Competitive Bid Rate, shall be made pro rata
in accordance with the amount of each such Competitive Bid at such
Competitive Bid Rate, and
(v) no Competitive Bid shall be accepted for a Competitive Bid
Loan unless such Competitive Bid Loan is in a minimum principal amount
of US $5,000,000 or a higher integral multiple thereof; provided,
however, that if a Competitive Bid Loan must be in an amount less than
US $5,000,000 because of the provisions of clause (iv) above, such
Competitive Bid Loan may be for a minimum of US $1,000,000 or any
higher integral multiple thereof, and in calculating the pro rata
allocation of acceptances or portions of multiple bids at a particular
Competitive Bid Rate pursuant to clause (iv), the amounts shall be
rounded to integral multiples of US $1,000,000 in a manner which shall
be in the sole and absolute discretion of US Borrower.
(e) Promptly on each date US Borrower accepts a Competitive Bid, US
Agent shall notify each Lender whether or not its Competitive Bid has been
accepted (and if so, in what amount and at what Competitive Bid Rate) by
facsimile transmission sent by US Agent, and each successful bidder will
thereupon become bound, subject to the other applicable conditions hereof, to
make the Competitive Bid Loan in respect of which its Competitive Bid has been
accepted. After completing the notifications referred to in the immediately
preceding sentence, US Agent shall notify each Lender of the aggregate principal
amount of all Competitive Bids accepted. Each Lender which is to make a
Competitive Bid Loan shall, before 11:00 a.m., Dallas, Texas time, on the
borrowing date specified in the Competitive Bid Request applicable thereto, make
available to US Agent in immediately available funds the amount of each
Competitive Bid Loan to be made by such Lender, and US Agent shall promptly
deposit such funds to an account designated by US Borrower. As soon as
practicable thereafter, US Agent shall notify each Lender of the aggregate
amount of Competitive Bid Loans advanced, the respective Competitive Bid
Interest Periods thereof and Competitive Bid Rate applicable thereto.
(f) The obligation of US Borrower to repay to each Lender the aggregate
amount of all Competitive Bid Loans made by such Lender, together with interest
accruing in connection therewith, shall be evidenced by promissory notes
(respectively, such Lender's "Competitive Bid Note") made by US Borrower payable
to the order of such Lender in the form of Exhibit L, with appropriate
insertions. The amount of principal owing on any Lender's Competitive Bid Note
at any given time shall be the aggregate amount of all Competitive Bid Loans
theretofore made by such Lender thereunder minus all payments of principal
theretofore received by such Lender thereon. Interest on each Competitive Bid
Note shall accrue and be due and payable as provided herein and therein. US
Borrower shall repay on the final day of the Competitive Bid Interest Period of
each Competitive Bid Loan (such date being that specified by US Borrower for
repayment of such Competitive Bid Loan in the related Competitive Bid Request
and such date being no later than six months after the date of the Competitive
Bid Loan) the then unpaid principal amount of such Competitive Bid Loan. Subject
to Section 1.6 and the payment of
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amounts described in Section 3.6, US Borrower shall have the right to prepay any
principal amount of any Competitive Bid Loan.
(g) No Competitive Bid Loan shall be made within five Business Days
after the date of any other Competitive Bid Loan, unless US Borrower and US
Agent shall mutually agree otherwise. If US Agent shall at any time elect to
submit a Competitive Bid in its capacity as a Lender, it shall submit such bid
directly to US Borrower requesting such Competitive Bid one quarter of an hour
earlier than the latest time at which the other Lenders are required to submit
their bids to US Agent.
ARTICLE II - Letters of Credit
Section 2.1. Letters of Credit. Subject to the terms and conditions
hereof, US Borrower may during the US Facility Commitment Period request US LC
Issuer to issue one or more Letters of Credit, provided that, after taking such
Letter of Credit into account:
(a) the Tranche A Facility Usage does not exceed the Tranche A Maximum
Credit Amount at such time;
(b) the aggregate amount of US LC Obligations arising from Letters of
Credit issued under this Agreement at such time does not exceed the US LC
Sublimit;
(c) the expiration date of such Letter of Credit is prior to the end of
the US Facility Commitment Period;
(d) such Letter of Credit is to be used for general corporate purposes
of US Borrower;
(e) such Letter of Credit is not directly or indirectly used to assure
payment of or otherwise support any Indebtedness of any Person other than
Indebtedness of any Restricted Person permitted by this Agreement;
(f) the issuance of such Letter of Credit will be in compliance with
all applicable governmental restrictions, policies, and guidelines and will not
subject US LC Issuer to any cost which is not reimbursable under Article III;
(g) the form and terms of such Letter of Credit are acceptable to US LC
Issuer in its reasonable discretion; and
(h) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
US LC Issuer will honor any such request if the foregoing conditions (a) through
(h) (in the following Section 2.2 called the "LC Conditions") have been met as
of the date of issuance of such Letter of Credit. US LC Issuer may choose to
honor any such request for any other Letter of
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Credit but has no obligation to do so and may refuse to issue any other
requested Letter of Credit for any reason which US LC Issuer in its sole
discretion deems relevant. Upon the execution and delivery of this Agreement by
each of the parties hereto, any letters of credit issued under the Existing
Agreement and outstanding as of the date hereof shall be deemed Letters of
Credit issued hereunder as of the date hereof and shall be subject to the terms
and conditions hereof, including without limitation US Borrower's reimbursement
obligations under Section 2.3 and Lenders' participation obligations under
Section 2.3.
Section 2.2. Requesting Letters of Credit. US Borrower must make
written application for any Letter of Credit at least three Business Days before
the date on which US Borrower desires for US LC Issuer to issue such Letter of
Credit. By making any such written application US Borrower shall be deemed to
have represented and warranted that the LC Conditions described in Section 2.1
will be met as of the date of issuance of such Letter of Credit. Each such
written application for a Letter of Credit must be made in writing in the form
and substance of Exhibit G, the terms and provisions of which are hereby
incorporated herein by reference (or in such other form as may mutually be
agreed upon by US LC Issuer and US Borrower). Two Business Days after the LC
Conditions for a Letter of Credit have been met as described in Section 2.1 (or
if US LC Issuer otherwise desires to issue such Letter of Credit), US LC Issuer
will issue such Letter of Credit at US LC Issuer's office in Dallas, Texas. If
any provisions of any LC Application conflict with any provisions of this
Agreement, the provisions of this Agreement shall govern and control.
Section 2.3. Reimbursement and Participations.
(a) Reimbursement by US Borrower. If the beneficiary of any Letter of
Credit issued hereunder makes a draft or other demand for payment thereunder
then Tranche A Loans that are US Base Rate Loans shall be made by Lenders to US
Borrower in the amount of such draft or demand notwithstanding the fact that one
or more conditions precedent to the making of such US Base Rate Loans may not
have been satisfied. Such US Base Rate Loans shall be made concurrently with US
LC Issuer's payment of such draft or demand without any request therefor by US
Borrower and shall be immediately used by US LC Issuer to repay the amount of
the resulting Matured US LC Obligation.
(b) Participation by Lenders. US LC Issuer irrevocably agrees to grant
and hereby grants to each Lender, and to induce US LC Issuer to issue Letters of
Credit hereunder, each Lender irrevocably agrees to accept and purchase and
hereby accepts and purchases from US LC Issuer, on the terms and conditions
hereinafter stated and for such Lender's own account and risk, an undivided
interest equal to such Lender's Percentage Share of US LC Issuer's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
Matured US LC Obligation paid by US LC Issuer thereunder. Each Lender
unconditionally and irrevocably agrees with US LC Issuer that, if a Matured US
LC Obligation is paid under any Letter of Credit issued hereunder for which US
LC Issuer is not reimbursed in full, whether pursuant to Section 2.3(a) above or
otherwise, such Lender shall (in all circumstances and without set-off or
counterclaim) pay to US LC Issuer on demand, in immediately available funds at
US LC Issuer's address for notices hereunder, such Lender's Percentage Share of
such Matured US LC
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Obligation (or any portion thereof which has not been reimbursed by US
Borrower). Each Lender's obligation to pay US LC Issuer pursuant to the terms of
this subsection is irrevocable and unconditional. If any amount required to be
paid by any Lender to US LC Issuer pursuant to this subsection is paid by such
Lender to US LC Issuer within three Business Days after the date such payment is
due, US LC Issuer shall in addition to such amount be entitled to recover from
such Lender, on demand, interest thereon calculated from such due date at the
Federal Funds Rate. If any amount required to be paid by any Lender to US LC
Issuer pursuant to this subsection is not paid by such Lender to US LC Issuer
within three Business Days after the date such payment is due, US LC Issuer
shall in addition to such amount be entitled to recover from such Lender, on
demand, interest thereon calculated from such due date at the Default Rate.
(c) Distributions to Participants. Whenever US LC Issuer has in
accordance with this section received from any Lender payment of such Lender's
Percentage Share of any Matured US LC Obligation, if US LC Issuer thereafter
receives any payment of such Matured US LC Obligation or any payment of interest
thereon (whether directly from US Borrower or by application of LC Collateral or
otherwise, and excluding only interest for any period prior to US LC Issuer's
demand that such Lender make such payment of its Percentage Share), US LC Issuer
will distribute to such Lender its Percentage Share of the amounts so received
by US LC Issuer; provided, however, that if any such payment received by US LC
Issuer must thereafter be returned by US LC Issuer, such Lender shall return to
US LC Issuer the portion thereof which US LC Issuer has previously distributed
to it.
(d) Calculations. A written advice setting forth in reasonable detail
the amounts owing under this section, submitted by US LC Issuer to US Borrower
or any Lender from time to time, shall be conclusive, absent manifest error, as
to the amounts thereof.
Section 2.4. Letter of Credit Fees. In consideration of US LC Issuer's
issuance of any Letter of Credit, US Borrower agrees to pay (a) to US LC Issuer
for its own account, a letter of credit fronting fee at a rate equal to 12.5
Basis Points multiplied by the face amount of such Letter of Credit, payable on
the date of issuance, and (b) to US Agent, for the account of all Lenders in
accordance with their respective Percentage Shares, a letter of credit issuance
fee calculated by applying the Applicable Margin to the face amount of all
Letters of Credit outstanding on each day, payable in arrears on the last day of
each Fiscal Quarter.
Section 2.5. No Duty to Inquire.
(a) Drafts and Demands. US LC Issuer is authorized and instructed to
accept and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance or
payment or thereafter. US LC Issuer is under no duty to determine the proper
identity of anyone presenting such a draft or making such a demand (whether by
tested telex or otherwise) as the officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by US LC Issuer to any such
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. US BORROWER RELEASES EACH LENDER PARTY
FROM, AND AGREES TO HOLD EACH LENDER PARTY HARMLESS
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AND INDEMNIFIED AGAINST, ANY LIABILITY OR CLAIM IN CONNECTION WITH OR ARISING
OUT OF THE SUBJECT MATTER OF THIS SECTIOn, WHICH INDEMNITY SHALL APPLY WHETHER
OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN
WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER
PARTY, provided only that no Lender Party shall be entitled to indemnification
for that portion, if any, of any liability or claim which is proximately caused
by its own individual gross negligence or willful misconduct, as determined in a
final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
extended by its terms or by Law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of any Restricted Person,
or if the amount of any Letter of Credit is increased at the request of any
Restricted Person, this Agreement shall be binding upon all Restricted Persons
with respect to such Letter of Credit as so extended, increased or otherwise
modified, with respect to drafts and property covered thereby, and with respect
to any action taken by US LC Issuer, US LC Issuer's correspondents, or any
Lender Party in accordance with such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
that it is transferable, US LC Issuer shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
US LC Issuer be charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers, and payment by
US LC Issuer to any purported transferee or transferees as determined by US LC
Issuer is hereby authorized and approved, and US BORROWER RELEASES EACH LENDER
PARTY FROM, AND AGREES TO HOLD EACH LENDER PARTY HARMLESS AND INDEMNIFIED
AGAINST, ANY LIABILITY OR CLAIM IN CONNECTION WITH OR ARISING OUT OF THE
FOREGOING, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR
CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, provided only that no
Lender Party shall be entitled to indemnification for that portion, if any, of
any liability or claim which is proximately caused by its own individual gross
negligence or willful misconduct, as determined in a final judgment.
Section 2.6. LC Collateral.
(a) US LC Obligations in Excess of US Maximum Credit Amount. If, after
the making of all mandatory prepayments required under Section 1.6(b), the US LC
Obligations outstanding under the US Agreement will exceed the Tranche A Maximum
Credit Amount, then in addition to prepayment of the entire principal balance of
the US Loans US Borrower will immediately pay to US LC Issuer an amount equal to
such excess. US LC Issuer will hold such amount as security for the remaining US
LC Obligations outstanding under the US Agreement (all such amounts held as
security for US LC Obligations being herein collectively called "LC Collateral")
and the other US Obligations, and such collateral may be applied from time to
time
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to any Matured US LC Obligations or other US Obligations which are due and
payable. Neither this subsection nor the following subsection shall, however,
limit or impair any rights which US LC Issuer may have under any other document
or agreement relating to any Letter of Credit, LC Collateral or US LC
Obligation, including any LC Application, or any rights which any Lender Party
may have to otherwise apply any payments by US Borrower and any LC Collateral
under Section 3.1.
(b) Acceleration of US LC Obligations. If the US Obligations or any
part thereof become immediately due and payable pursuant to Section 8.1 then,
unless Required Lenders otherwise specifically elect to the contrary (which
election may thereafter be retracted by Required Lenders at any time), all US LC
Obligations shall become immediately due and payable without regard to whether
or not actual drawings or payments on the Letters of Credit have occurred, and
US Borrower shall be obligated to pay to US LC Issuer immediately an amount
equal to the aggregate US LC Obligations which are then outstanding.
(c) Investment of LC Collateral. Pending application thereof, all LC
Collateral shall be invested by US LC Issuer in such Investments as US LC Issuer
may choose in its sole discretion. All interest on (and other proceeds of) such
Investments shall be reinvested or applied to Matured US LC Obligations or other
US Obligations which are due and payable. When all US Obligations have been
satisfied in full, including all US LC Obligations, all Letters of Credit have
expired or been terminated, and all of US Borrower's reimbursement obligations
in connection therewith have been satisfied in full, US LC Issuer shall release
any remaining LC Collateral. US Borrower hereby assigns and grants to US LC
Issuer a continuing security interest in all LC Collateral paid by it to US LC
Issuer, all Investments purchased with such LC Collateral, and all proceeds
thereof to secure its Matured US LC Obligations and the other US Obligations
hereunder, each US Note, and the other US Loan Documents. US Borrower further
agrees that US LC Issuer shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code as adopted in the State of Texas with
respect to such security interest and that an Event of Default under this
Agreement shall constitute a default for purposes of such security interest.
When US Borrower is required to provide LC Collateral for any reason and fails
to do so on the day when required, US LC Issuer may without notice to US
Borrower or any other Restricted Person provide such LC Collateral (whether by
transfers from other accounts maintained with US LC Issuer, or otherwise) using
any available funds of US Borrower or any other Person also liable to make such
payments.
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. US Borrower will make each payment
which it owes under the US Loan Documents to US Agent for the account of the
Lender Party to whom such payment is owed, in lawful money of the United States
of America, without set-off, deduction or counterclaim, and in immediately
available funds. Each such payment must be received by US Agent not later than
11:00 a.m., Dallas, Texas time, on the date such payment becomes due and
payable. Any payment received by US Agent after such time will be deemed to have
been made on the next following Business Day. Should any such payment become due
and payable on a day
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other than a Business Day, the maturity of such payment shall be extended to the
next succeeding Business Day, and, in the case of a payment of principal or past
due interest, interest shall accrue and be payable thereon for the period of
such extension as provided in the US Loan Document under which such payment is
due. Each payment under a US Loan Document shall be due and payable at the place
provided therein and, if no specific place of payment is provided, shall be due
and payable at the place of payment of US Agent's US Note. When US Agent
collects or receives money on account of the US Obligations, US Agent shall
distribute all money so collected or received by 2:00 p.m. Dallas, Texas time on
the Business Day received, if received by 11:00 a.m. Dallas, Texas time,
otherwise on the day of deemed receipt, and each Lender Party shall apply all
such money so distributed, as follows:
(a) first, for the payment of all US Obligations which are then due
(and if such money is insufficient to pay all such US Obligations, first to any
reimbursements due US Agent under Section 6.9 or 10.4, then to any reimbursement
due any other Lender Party under Section 10.4, and then to the partial payment
of all other US Obligations then due in proportion to the amounts thereof, or as
Lender Parties shall otherwise agree);
(b) then for the prepayment of amounts owing under the US Loan
Documents (other than principal on the US Notes) if so specified by US Borrower;
(c) then for the prepayment of principal on the US Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(d) last, for the payment or prepayment of any other US Obligations.
All payments applied to principal or interest on any US Note shall be applied
first to any interest then due and payable, then to principal then due and
payable, and last to any prepayment of principal and interest in compliance with
Sections 1.6 and 2.1. All distributions of amounts described in any of
subsections (b), (c) or (d) above shall be made by US Agent pro rata to each
Lender Party then owed US Obligations described in such subsection in proportion
to all amounts owed to all Lender Parties which are described in such
subsection; provided that if any Lender then owes payments to US LC Issuer for
the purchase of a participation under Section 2.3(b) or to US Agent under
Section 9.9, any amounts otherwise distributable under this section to such
Lender shall be deemed to belong to US LC Issuer, or US Agent, respectively, to
the extent of such unpaid payments, and US Agent shall apply such amounts to
make such unpaid payments rather than distribute such amounts to such Lender.
Section 3.2. Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable Law,
rule, or regulation, or any change in any applicable Law, rule, or regulation,
or any change in the interpretation or administration thereof by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender Party (or
its Applicable Lending Office) with any request or directive (whether or not
having the force of Law) of any such Governmental Authority, central bank, or
comparable agency:
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(i) shall subject such Lender Party (or its Applicable Lending
Office) to any tax, duty, or other charge with respect to any US Dollar
Eurodollar Loans or Competitive Bid Loans, or its obligation to make US
Dollar Eurodollar Loans, or change the basis of taxation of any amounts
payable to such Lender Party (or its Applicable Lending Office) under
this Agreement or its Note in respect of any US Dollar Eurodollar Loans
or Competitive Bid Loans (other than taxes (including franchise taxes)
imposed on the overall net income of such Lender Party by the
jurisdiction in which such Lender Party has its principal office or
such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than the
Reserve Requirement utilized in the determination of the Adjusted US
Dollar Eurodollar Rate) relating to any extensions of credit or other
assets of, or any deposits with or other liabilities or commitments of,
such Lender Party (or its Applicable Lending Office), including the
commitment of such Lender Party hereunder; or
(iii) shall impose on such Lender Party (or its Applicable
Lending Office) or the London interbank market any other condition
affecting this Agreement or its US Notes or any of such extensions of
credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
Party (or its Applicable Lending Office) of making, converting into, continuing,
or maintaining any US Dollar Eurodollar Loans or Competitive Bid Loans or to
reduce any sum received or receivable by such Lender Party (or its Applicable
Lending Office) under this Agreement or its US Notes with respect to any US
Dollar Eurodollar Loans or Competitive Bid Loans, then US Borrower shall pay to
such Lender Party on demand such amount or amounts as will compensate such
Lender Party for such increased cost or reduction. If any Lender Party requests
compensation by US Borrower under this Section 3.2(a), US Borrower may, by
notice to such Lender Party (with a copy to US Agent), suspend the obligation of
such Lender Party to make or continue US Loans of the Type with respect to which
such compensation is requested, or to convert US Loans of any other Type into US
Loans of such Type, until the event or condition giving rise to such request
ceases to be in effect (in which case the provisions of Section 3.5 shall be
applicable); provided that such suspension shall not affect the right of such
Lender Party to receive the compensation so requested.
(b) If, after the date hereof, any Lender Party shall have determined
that the adoption of any applicable Law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any Governmental Authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of Law) of
any such Governmental Authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender Party or any corporation controlling such Lender Party as a consequence
the obligations of such Lender Party hereunder to a level below that which such
Lender Party or such corporation could have achieved but for such adoption,
change, request, or directive (taking into consideration its policies with
respect to capital
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adequacy), then from time to time upon demand US Borrower shall pay such Lender
Party such additional amount or amounts as will compensate such Lender Party for
such reduction, but only to the extent that such Lender Party has not been
compensated therefor by any increase in the Adjusted US Dollar Eurodollar Rate;
provided that if such Lender Party fails to give notice to US Borrower of any
additional costs within ninety (90) days after it has actual knowledge thereof,
such Lender Party shall not be entitled to compensation for such additional
costs incurred more than ninety (90) days prior to the date on which notice is
given by such Lender Party.
(c) US LC Issuer and each Lender Party shall promptly notify US
Borrower and US Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle US LC Issuer or such Lender Party to
compensation pursuant to this Section and will designate a different Applicable
Lending Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such Lender Party, be
otherwise disadvantageous to it. US LC Issuer or any Lender Party claiming
compensation under this Section shall furnish to US Borrower and US Agent a
statement setting forth the additional amount or amounts to be paid to it
hereunder which shall be conclusive in the absence of manifest error. In
determining such amount, US LC Issuer or such Lender Party shall act in good
faith and may use any reasonable averaging and attribution methods.
Section 3.3. Limitation on Types of US Loans. If on or prior to the
first day of any Eurodollar Interest Period for any US Dollar Eurodollar Loan:
(a) US Agent determines (which determination shall be conclusive) that
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the US Dollar Eurodollar Rate for
such Eurodollar Interest Period; or
(b) the Required Lenders determine (which determination shall be
conclusive) and notify US Agent that the Adjusted US Dollar Eurodollar Rate will
not adequately and fairly reflect the cost to the Lenders of funding US Dollar
Eurodollar Loans or for such Eurodollar Interest Period;
then US Agent shall give US Borrower prompt notice thereof specifying the
relevant amounts or periods, and so long as such condition remains in effect,
the Lender Parties shall be under no obligation to make additional US Dollar
Eurodollar Loans, continue US Dollar Eurodollar Loans or convert US Base Rate
Loans into US Dollar Eurodollar Loans, and US Borrower shall, on the last day(s)
of the then current Eurodollar Interest Period(s) for the outstanding US Dollar
Eurodollar Loans, either prepay such US Loans or convert such US Loans into US
Base Rate Loans in accordance with the terms of this Agreement.
Section 3.4. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender Party or its
Applicable Lending Office to make, maintain, or fund US Dollar Eurodollar Loans
hereunder, then such Lender Party shall promptly notify US Borrower thereof and
such Lender Party's obligation to make or continue US Dollar Eurodollar Loans
and to convert US Base Rate Loans into US Dollar Eurodollar Loans shall be
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suspended until such time as such Lender Party may again make, maintain, and
fund US Dollar Eurodollar Loans (in which case the provisions of Section 3.5
shall be applicable).
Section 3.5. Treatment of Affected US Loans. If the obligation of any
Lender Party to make a particular Type of Loan or to continue, or to convert US
Loans of any other Type into, US Loans of a particular Type shall be suspended
pursuant to Sections 3.2, 3.3 or 3.4 hereof (US Loans of such Type being herein
called "Affected Loans" and such Type being herein called the "Affected Type"),
such Lender Party's Affected Loans shall be automatically converted into US Base
Rate Loans on the last day(s) of the then current Interest Period(s) for
Affected Loans (or, in the case of a Conversion required by Section 3.4 hereof,
on such earlier date as such Lender Party may specify to US Borrower with a copy
to US Agent) and, unless and until such Lender Party gives notice as provided
below that the circumstances specified in Sections 3.2, 3.3 or 3.4 hereof that
gave rise to such Conversion no longer exist:
(a) to the extent that such Lender Party's Affected Loans have been so
converted, all payments and prepayments of principal that would otherwise be
applied to such Lender Party's Affected Loans shall be applied instead to its US
Base Rate Loans; and
(b) all US Loans that would otherwise be made or continued by such
Lender Party as US Loans of the Affected Type shall be made or continued instead
as US Base Rate Loans, and all US Loans of such Lender Party that would
otherwise be converted into US Loans of the Affected Type shall be converted
instead into (or shall remain as) US Base Rate Loans.
If such Lender Party gives notice to US Borrower (with a copy to US Agent) that
the circumstances specified in Section 3.2, 3.3 or 3.4 hereof that gave rise to
the Conversion of such Lender Party's Affected Loans pursuant to this Section no
longer exist (which such Lender Party agrees to do promptly upon such
circumstances ceasing to exist) at a time when US Loans of the Affected Type
made by other Lender Parties are outstanding, such Lender Party's US Base Rate
Loans shall be automatically converted, on the first day(s) of the next
succeeding Interest Period(s) for such outstanding US Loans of the Affected
Type, to the extent necessary so that, after giving effect thereto, all US Loans
held by the Lender Parties holding US Loans of the Affected Type and by such
Lender Party are held pro rata (as to principal amounts, Types, and Interest
Periods) in accordance with their Percentage Shares of the US Maximum Credit
Amount.
Section 3.6. Compensation. Upon the request of any Lender Party, US
Borrower shall pay to such Lender Party such amount or amounts as shall be
sufficient (in the reasonable opinion of such Lender Party) to compensate it for
any loss, cost, or expense (including loss of anticipated profits) incurred by
it as a result of:
(a) any payment, prepayment, or Conversion of a US Dollar Eurodollar
Loan for any reason (including, without limitation, the acceleration of the US
Loans pursuant to Section 8.1) on a date other than the last day of the Interest
Period for such US Loan; or
(b) any failure by US Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Article IV to be
satisfied) to borrow, convert,
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continue, or prepay a US Dollar Eurodollar Loan on the date for such borrowing,
Conversion, Continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, Continuation, or Conversion under this Agreement.
Section 3.7. Change of Applicable Lending Office. Each Lender Party
agrees that, upon the occurrence of any event giving rise to the operation of
Sections 3.2 through 3.5 with respect to such Lender Party, it will, if
requested by US Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender Party) to designate another Applicable Lending
Office, provided that such designation is made on such terms that such Lender
Party and its Applicable Lending Office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such section. Nothing in this section shall affect
or postpone any of the obligations of US Borrower or the rights of any Lender
Party provided in Sections 3.2 through 3.5.
Section 3.8. Replacement of Lenders. If any Lender Party seeks
reimbursement for increased costs under Sections 3.2 through 3.5, or if a US
Borrower is required to increase any such payment under Section 3.9, then within
ninety days thereafter -- provided no Event of Default then exists -- US
Borrower shall have the right (unless such Lender Party withdraws its request
for additional compensation) to replace such Lender Party by requiring such
Lender Party to assign its US Loans, US Notes, US LC Obligations, Canadian
Advances, Canadian Notes, Canadian LC Obligations and its commitments hereunder
and under the Canadian Agreement to an Eligible Transferee reasonably acceptable
to all Borrowers, provided that: (a) all Obligations of Borrowers owing to such
Lender Party being replaced (including such increased costs, but excluding
principal and accrued interest on the US Notes and the Canadian Notes being
assigned) shall be paid in full to such Lender Party concurrently with such
assignment, and (b) the replacement Eligible Transferee shall purchase the
foregoing by paying to such Lender Party a price equal to the principal amount
thereof plus accrued and unpaid interest thereon. In connection with any such
assignment US Borrower, US Agent, such Lender Party and the replacement Eligible
Transferee shall otherwise comply with Section 10.5. Notwithstanding the
foregoing rights of US Borrower under this section, however, US Borrower may not
replace any Lender Party which seeks reimbursement for increased costs under
Section 3.2 through 3.5 unless US Borrower is at the same time replacing all
Lender Parties which are then seeking such compensation. In connection with any
such replacement of a Lender Party, US Borrower shall pay all costs that would
have been due to such Lender Party pursuant to Section 3.6 if such Lender
Party's US Loans had been prepaid at the time of such replacement.
Section 3.9. Taxes. (a) Any and all payments by US Borrower to or for
the account of any Lender Party, US Agent or US LC Issuer hereunder or under any
other US Loan Document shall be made free and clear of and without deduction for
any and all present or future taxes, duties, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender Party, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the Laws of which such Lender Party (or
its Applicable Lending Office) is organized or is a resident for tax purposes or
any political subdivision thereof (all such NON-EXCLUDED taxes, duties, levies,
imposts, deductions, charges, withholdings, and liabilities being hereinafter in
this section 3.9 referred to as "Taxes"). If US
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Borrower shall be required by Law to deduct any Taxes from or in respect of any
sum payable under this Agreement or any other US Loan Document to any Lender
Party, (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this section) such Lender Party receives an amount equal to the
sum it would have received had no such deductions been made, (ii) US Borrower
shall make such deductions, and (iii) US Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable Law.
(b) In addition, US Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this Agreement
or any other US Loan Document or from the execution or delivery of, or otherwise
with respect to, this Agreement or any other US Loan Document (hereinafter in
this Section 3.9 referred to as "Other Taxes").
(c) US Borrower agrees to indemnify each Lender Party, US Agent and US
LC Issuer for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this section) paid by such Lender Party or US Agent (as
the case may be) and any liability (including penalties, interest, and expenses)
arising therefrom or with respect thereto.
(d) Each Lender Party organized under the Laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Lender Party listed on the signature pages
hereof and on or prior to the date on which it becomes a Lender Party in the
case of each other Lender Party, and from time to time thereafter if requested
in writing by US Borrower or US Agent (but only so long as such Lender Party
remains lawfully able to do so), shall provide US Borrower and US Agent with a
properly executed (i) Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender Party is entitled to benefits under an income tax
treaty to which the United States is a party which reduces the rate of
withholding tax on payments of interest or certifying that the income receivable
pursuant to this Agreement is effectively connected with the conduct of a trade
or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, and (iii) any other form or certificate required by any taxing
authority (including any certificate required by Sections 871(h) and 881(c) of
the Internal Revenue Code), certifying that such Lender Party is entitled to an
exemption from or a reduced rate of tax on payments pursuant to this Agreement
or any of the other US Loan Documents.
(e) For any period with respect to which a Lender Party has failed to
provide US Borrower and US Agent with the appropriate form pursuant to Section
3.9(d) (unless such failure is due to a change in treaty, Law, or regulation
occurring subsequent to the date on which a form originally was required to be
provided), such Lender Party shall not be entitled to indemnification under
Sections 3.9(a), 3.9(b) or 3.9(c) with respect to Taxes imposed by the United
States; provided, however, that should a Lender Party, which is otherwise exempt
from or subject to a reduced rate of withholding tax, become subject to Taxes
because of its failure to deliver a form required hereunder, US Borrower shall
take such steps as such Lender Party shall reasonably
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request to assist such Lender Party to recover such Taxes. Further, US Borrower
shall not be required to indemnify such Lender Party for any withholding taxes
which US Borrower is required to withhold and remit in respect of any principal,
interest or other amount paid or payable by US Borrower to or for account of any
Lender Party hereunder or under any other US Loan Document.
(f) If US Borrower is required to pay additional amounts to or for the
account of any Lender Party pursuant to this Section, then such Lender Party
will agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Lender Party, is not otherwise disadvantageous to such Lender Party and in the
event Lender Party is reimbursed for an amount paid by US Borrower pursuant to
this Section, it shall promptly return such amount to US Borrower.
(g) Within thirty (30) days after the date of any payment of Taxes, US
Borrower shall furnish to US Agent the original or a certified copy of a receipt
evidencing such payment.
(h) Without prejudice to the survival of any other agreement of US
Borrower hereunder, the agreements and obligations of US Borrower contained in
this section shall survive the termination of the US Facility Commitment Period
and the payment in full of the US Notes.
Section 3.10. Currency Conversion and Currency Indemnity.
(a) Restricted Persons shall make payment relative to any US Obligation
in the currency (the "Agreed Currency") in which the US Obligation was incurred.
If any payment is received on account of any US Obligation in any currency (the
"Other Currency") other than the Agreed Currency (whether voluntarily or
pursuant to an order or judgment or the enforcement thereof or the realization
of any security or the liquidation of such Restricted Person or otherwise
howsoever), such payment shall constitute a discharge of the liability of a
Restricted Person hereunder and under the other US Loan Documents in respect of
such US Obligation only to the extent of the amount of the Agreed Currency which
the relevant Lender Parties are able to purchase with the amount of the Other
Currency received by it on the Business Day next following such receipt in
accordance with its normal procedures and after deducting any premium and costs
of exchange.
(b) If, for the purpose of obtaining or enforcing judgment in any court
in any jurisdiction, it becomes necessary to convert into a particular currency
(the"Judgment Currency") any amount due in the Agreed Currency then the
conversion shall be made on the basis of the rate of exchange prevailing on the
next Business Day following the date such judgment is given and in any event
each Restricted Person shall be obligated to pay the Lender Parties any
deficiency in accordance with Section 3.10(c). For the foregoing purposes "rate
of exchange" means the rate at which the relevant Lender Parties, as applicable,
in accordance with their normal banking procedures are able on the relevant date
to purchase the Agreed Currency with the Judgment Currency after deducting any
premium and costs of exchange.
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(c) If (i) any Lender Party receives any payment or payments on account
of the liability of a Restricted Person hereunder pursuant to any judgment or
order in any Other Currency, and (ii) the amount of the Agreed Currency which
the relevant Lender Party is able to purchase on the Business Day next following
such receipt with the proceeds of such payment or payments in accordance with
its normal procedures and after deducting any premiums and costs of exchange is
less than the amount of the Agreed Currency due in respect of such US
Obligations immediately prior to such judgment or order, then US Borrower on
demand shall, and US Borrower hereby agrees to, indemnify and save such Lender
Party harmless from and against any loss, cost or expense arising out of or in
connection with such deficiency. The agreement of indemnity provided for in this
Section 3.10(c) shall constitute an obligation separate and independent from all
other obligations contained in this Agreement, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by the Lender Parties or any of them from time to time, and shall continue in
full force and effect notwithstanding any judgment or order for a liquidated sum
in respect of an amount due hereunder or under any judgment or order.
ARTICLE IV - Conditions Precedent to Lending
Section 4.1. Documents to be Delivered. No Lender has any obligation to
make its first US Loan, and US LC Issuer has no obligation to issue the first
Letter of Credit, unless US Agent shall have received all of the following, at
US Agent's office in Dallas, Texas, duly executed and delivered and in form,
substance and date satisfactory to US Agent:
(a) This Agreement and any other documents that Lenders are to execute
in connection herewith.
(b) Each US Note.
(c) Certain certificates of US Borrower including:
(i) An "Omnibus Certificate" of the Secretary or Assistant
Secretary and of the Chairman of the Board, President, or Vice
President - Finance of US Borrower, which shall contain the names and
signatures of the officers of US Borrower authorized to execute US Loan
Documents and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (1) a copy of
resolutions duly adopted by the Board of Directors of US Borrower and
in full force and effect at the time this Agreement is entered into,
authorizing the execution of this Agreement and the other US Loan
Documents delivered or to be delivered in connection herewith and the
consummation of the transactions contemplated herein and therein, (2) a
copy of the charter documents of US Borrower and all amendments
thereto, certified by the appropriate official of the State of
Oklahoma, and (3) a copy of any bylaws of US Borrower; and
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(ii) A "Compliance Certificate" of the Chairman of the Board
or President and of the Vice President - Finance of US Borrower, of
even date with such US Loan or such Letter of Credit, in which such
officers certify to the satisfaction of the conditions set out in
subsections (a), (b), and (c) of Section 4.3.
(d) certificate (or certificates) of the due formation, valid existence
and good standing of US Borrower in the State of Oklahoma, issued by the
appropriate official of such State.
(e) A favorable opinion of McAfee & Taft, a professional corporation,
counsel for Restricted Persons, substantially in the form set forth in Exhibit E
and a favorable opinion of Thompson & Knight, P.C. covering the matters
requested by US Agent.
(f) The Initial Financial Statements.
(g) A copy of each Acquisition Document.
Section 4.2. Additional Conditions Precedent to First US Loan or First
Letter of Credit. No Lender has any obligation to make its first US Loan, and US
LC Issuer has no obligation to issue the first Letter of Credit, unless on the
date thereof:
(a) US Borrower shall have consummated the transactions contemplated
under the Acquisition Documents, and acquired, directly or indirectly, one
hundred percent (100%) of the
outstanding common shares of Northstar Energy.
(b) All approvals, if any, required under the Hart-Scott Rodino
Antitrust Improvement Act of 1976, as amended, in connection with the
transactions contemplated by the Acquisition Documents, shall have been
obtained.
(c) All commitment, facility, agency, legal and other fees required to
be paid or reimbursed to any Lender pursuant to any US Loan Documents or any
commitment agreement
heretofore entered into shall have been paid.
(d) No event which would reasonably be expected to have a Material
Adverse Effect shall have occurred since September 30, 1998.
(e) US Borrower shall have certified to US Agent and Lenders that the
Initial Financial Statements fairly present US Borrower's Consolidated financial
position at the respective dates thereof and the Consolidated results of US
Borrower's operations and US Borrower's Consolidated cash flows for the
respective periods thereof.
(f) US Borrower shall have certified to US Agent and Lenders that no
Restricted Person has any outstanding Liabilities of any kind (including
contingent obligations, tax assessments, and unusual forward or long-term
commitments) which are, in the aggregate, material to US Borrower or material
with respect to US Borrower's Consolidated financial
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condition and not shown in the Initial Financial Statements or disclosed in the
Disclosure Schedule.
(g) All legal matters relating to the US Loan Documents and the
consummation of the transactions contemplated thereby shall be satisfactory to
Thompson & Knight, a Professional Corporation, counsel to US Agent.
Section 4.3. Additional Conditions Precedent to all US Loan and Letters
of Credit. No Lender has any obligation to make any US Loan (including its
first), and US LC Issuer has no obligation to issue any Letter of Credit
(including its first), unless the following conditions precedent have been
satisfied:
(a) All representations and warranties made by any Restricted Person in
any US Loan Document shall be true on and as of the date of such US Loan or the
date of issuance of such Letter of Credit (except to the extent that the facts
upon which such representations are based have been changed by the extension of
credit hereunder) as if such representations and warranties had been made as of
the date of such US Loan or the date of issuance of such Letter of Credit.
(b) No Default shall exist at the date of such US Loan or the date of
issuance of such Letter of Credit.
(c) The making of such US Loan or the issuance of such Letter of Credit
shall not be prohibited by any Law and shall not subject any Lender or any US LC
Issuer to any material penalty under or pursuant to any such Law.
ARTICLE V - Representations and Warranties
To confirm each Lender's understanding concerning Restricted Persons
and Restricted Persons' businesses, properties and obligations and to induce
each Lender to enter into this Agreement and to extend credit hereunder, US
Borrower represents and warrants to each Lender that:
Section 5.1. No Default. No event has occurred and is continuing
which constitutes a Default.
Section 5.2. Organization and Good Standing. Each Restricted Person is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby. Each
Restricted Person is duly qualified, in good standing, and authorized to do
business in all other jurisdictions within the United States wherein the
character of the properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary except where failure to so
qualify would not have a Material Adverse Effect. Each Restricted Person has
taken all actions and procedures customarily taken in order to enter, for the
purpose of conducting business or owning property, each jurisdiction
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outside the United States wherein the character of the properties owned or held
by it or the nature of the business transacted by it makes such actions and
procedures desirable except where failure to so qualify would not have a
Material Adverse Effect.
Section 5.3. Authorization. US Borrower and Canadian Borrowers have
duly taken all action necessary to authorize the execution and delivery by it of
the Loan Documents to which it is a party and to authorize the consummation of
the transactions contemplated thereby and the performance of its obligations
thereunder. US Borrower is duly authorized to borrow funds hereunder.
Section 5.4. No Conflicts or Consents. The execution and delivery by
the various Restricted Persons of the Loan Documents to which each is a party,
the performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (i) conflict with any provision of (A) any Law, (B) the
organizational documents of any Restricted Person, or (C) any agreement,
judgment, license, order or permit applicable to or binding upon any Restricted
Person unless such conflict would not reasonably be expected to have a Material
Adverse Effect, or (ii)
result in the acceleration of any Indebtedness owed by any Restricted Person
which would reasonably be expected to have a Material Adverse Effect, or (iii)
result in or require the creation of any Lien upon any assets or properties of
any Restricted Person which would reasonably be expected to have a Material
Adverse Effect, except as expressly contemplated or permitted in the Loan
Documents. Except as expressly contemplated in the Loan Documents no consent,
approval, authorization or order of, and no notice to or filing with, any
Tribunal or third party is required in connection with the execution, delivery
or performance by any Restricted Person of any Loan Document or to consummate
any transactions contemplated by the Loan Documents, unless failure to obtain
such consent would not reasonably be expected to have a Material Adverse Effect.
Section 5.5. Enforceable Obligations. This Agreement is, and the other
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Restricted Person which is a party hereto or
thereto, enforceable in accordance with their terms except as such enforcement
may be limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights.
Section 5.6. Full Disclosure. No certificate, statement or other
information delivered herewith or heretofore by any Restricted Person to any
Lender in connection with the negotiation of this Agreement or in connection
with any transaction contemplated hereby contains any untrue statement of a
material fact or omits to state any material fact known to any Restricted Person
(other than industry-wide risks normally associated with the types of businesses
conducted by Restricted Persons) necessary to make the statements contained
herein or therein not misleading as of the date made or deemed made. There is no
fact known to any Restricted Person (other than industry-wide risks normally
associated with the types of businesses conducted by Restricted Persons) that
has not been disclosed to each Lender in writing which would reasonably be
expected to have a Material Adverse Effect.
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Section 5.7. Litigation. Except as disclosed in the Initial Financial
Statements or in the Disclosure Schedule: (a) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Restricted Person threatened, against any Restricted Person
before any Tribunal which would reasonably be expected to have a Material
Adverse Effect, and (b) there are no outstanding judgments, injunctions, writs,
rulings or orders by any such Tribunal against any Restricted Person which would
reasonably be expected to have a Material Adverse Effect.
Section 5.8. ERISA Plans and Liabilities. All currently existing ERISA
Plans are listed in the Disclosure Schedule. Except as disclosed in the Initial
Financial Statements or in the Disclosure Schedule, no Termination Event has
occurred with respect to any ERISA Plan and all ERISA Affiliates are in
compliance with ERISA in all material respects. No ERISA Affiliate is required
to contribute to, or has any other absolute or contingent liability in respect
of, any "multiemployer plan" as defined in Section 4001 of ERISA. Except as set
forth in the Disclosure Schedule: (a) no "accumulated funding deficiency" (as
defined in Section 412(a) of the Internal Revenue Code) exists with respect to
any ERISA Plan, whether or not waived by the Secretary of the Treasury or his
delegate, and (b) the current value of each ERISA Plan's benefits does not
exceed the current value of such ERISA Plan's assets available for the payment
of such benefits by more than US $25,000,000.
Section 5.9. Environmental and Other Laws. Except as disclosed in the
Disclosure Schedule: (a) Restricted Persons are conducting their businesses in
material compliance with all applicable Laws, including Environmental Laws, and
have and are in compliance with all licenses and permits required under any such
Laws, unless failure to so comply would not reasonably be expected to have a
Material Adverse Effect; (b) none of the operations or properties of any
Restricted Person is the subject of federal, state or local investigation
evaluating whether any material remedial action is needed to respond to a
release of any Hazardous Materials into the environment or to the improper
storage or disposal (including storage or disposal at offsite locations) of any
Hazardous Materials, unless such remedial action would not reasonably be
expected to have a Material Adverse Effect; and (c) no Restricted Person (and to
the best knowledge of US Borrower, no other Person) has filed any notice under
any Law indicating that any Restricted Person is responsible for the improper
release into the environment, or the improper storage or disposal, of any
material amount of any Hazardous Materials or that any Hazardous Materials have
been improperly released, or are improperly stored or disposed of, upon any
property of any Restricted Person, unless such failure to so comply would not
reasonably be expected to have a Material Adverse Effect.
Section 5.10. Names and Places of Business. No Restricted Person has,
during the preceding five years, had, been known by, or used any other trade or
fictitious name, except as disclosed in the Disclosure Schedule. Except as
otherwise indicated in the Disclosure Schedule, the chief executive office and
principal place of business of each Restricted Person are (and for the preceding
five years have been) located at the address of US Borrower set out on the
signature pages hereto. Except as indicated in the Disclosure Schedule, no
Restricted Person has any other office or place of business.
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Section 5.11. US Borrower's Subsidiaries. US Borrower does not
presently have any Subsidiary or own any stock in any other corporation or
association except those listed in the Disclosure Schedule. Neither US Borrower
nor any Restricted Person is a member of any general or limited partnership,
limited liability company, joint venture formed under the laws of the United
States or any State thereof or association of any type whatsoever except those
listed in the Disclosure Schedule and associations, joint ventures or other
relationships (a) which are established pursuant to a standard form operating
agreement or similar agreement or which are partnerships for purposes of federal
income taxation only, (b) which are not corporations or partnerships (or subject
to the Uniform Partnership Act) under applicable state Law, and (c) whose
businesses are limited to the exploration, development and operation of oil, gas
or mineral properties, pipelines or gathering systems and interests owned
directly by the parties in such associations, joint ventures or relationships.
US Borrower owns, directly or indirectly, the equity interest in each of its
Subsidiaries which is indicated in the Disclosure Schedule.
Section 5.12. Title to Properties; Licenses. Each Restricted Person has
good and defensible title to all of its material properties and assets, free and
clear of all Liens other than Permitted Liens and of all impediments to the use
of such properties and assets in such Restricted Person's business except to the
extent failure to have such title would not have a Material Adverse Effect. Each
Restricted Person possesses all licenses, permits, franchises, patents,
copyrights, trademarks and trade names, and other intellectual property (or
otherwise possesses the right to use such intellectual property without
violation of the rights of any other Person) which are necessary to carry out
its business as presently conducted and as presently proposed to be conducted
hereafter, and no Restricted Person is in violation in any material respect of
the terms under which it possesses such intellectual property or the right to
use such intellectual property except to the extent failure to possess such
licenses, permits, franchises, and intellectual property would not have a
Material Adverse Effect.
Section 5.13. Government Regulation. Neither US Borrower nor any other
Restricted Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or any
other Law which regulates the incurring by such Person of Indebtedness,
including Laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
Section 5.14. Insider. Except as disclosed on the Disclosure Schedule,
no Restricted Person, nor any Person having "control" (as that term is defined
in 12 U.S.C. ss. 375b(9) or in regulations promulgated pursuant thereto) of any
Restricted Person, is a "director" or an "executive officer" or "principal
shareholder" (as those terms are defined in 12 U.S.C. ss. 375b(8) or (9) or in
regulations promulgated pursuant thereto) of any Lender, of a bank holding
company of which any Lender is a Subsidiary or of any Subsidiary of a bank
holding company of which any Lender is a Subsidiary.
Section 5.15. Solvency. Upon giving effect to the issuance of the US
Notes, the execution of the US Loan Documents by US Borrower and the
consummation of the transactions
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contemplated hereby, US Borrower will be solvent (as such term is used in
applicable bankruptcy, liquidation, receivership, insolvency or similar Laws).
Section 5.16. Year 2000 Compliance. US Borrower has (a) initiated a
review and assessment of all areas within its and each of its Subsidiaries'
business and operations (including those affected by suppliers and vendors) that
could be adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by US Borrower and its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (b)developed a plan and timeline
for addressing the Year 2000 Problem on a timely basis, and (c) to date,
implemented that plan in accordance with that timetable. US Borrower reasonably
believes that all computer applications (including those of its suppliers and
vendors) that are material to its or any of its Subsidiaries' business and
operations will on a timely basis be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (that is, be "Year 2000
compliant"), except to the extent that a failure to do so would not reasonably
be expected to have a Material Adverse Effect.
ARTICLE VI - Affirmative Covenants of US Borrower
To conform with the terms and conditions under which each Lender is
willing to have credit outstanding to US Borrower, and to induce each Lender to
enter into this Agreement and extend credit hereunder, US Borrower warrants,
covenants and agrees that until the full and final payment of the Obligations
and the termination of this Agreement, unless Required Lenders have previously
agreed otherwise:
Section 6.1. Payment and Performance. US Borrower will pay all amounts
due under the US Loan Documents in accordance with the terms thereof and will
observe, perform and comply with every covenant, term and condition expressed or
implied in the US Loan Documents. US Borrower will cause each other Restricted
Person to observe, perform and comply with every such term, covenant and
condition in any Loan Document.
Section 6.2. Books, Financial Statements and Reports. Each Restricted
Person will at all times maintain full and accurate books of account and
records. US Borrower will maintain and will cause its Subsidiaries to maintain a
standard system of accounting, will maintain its Fiscal Year, and will furnish
the following statements and reports to each Lender Party at US Borrower's
expense:
(a) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, complete Consolidated financial statements of
US Borrower together with all notes thereto, prepared in reasonable detail in
accordance with US GAAP, together with an unqualified opinion, based on an audit
using generally accepted auditing standards, by KPMG Peat Marwick L.L.P., or
other independent certified public accountants selected by US Borrower and
acceptable to US Agent, stating that such Consolidated financial statements have
been so prepared. These financial statements shall contain a Consolidated
balance sheet as of the end of such Fiscal Year and Consolidated statements of
earnings, of cash flows, and of changes in
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owners' equity for such Fiscal Year, each setting forth in comparative form the
corresponding figures for the preceding Fiscal Year. In addition, within ninety
(90) days after the end of each Fiscal Year US Borrower will furnish to US Agent
and each Lender a certificate in the form of Exhibit D signed by the President,
Vice President - Finance or Controller of US Borrower, stating that such
financial statements are accurate and complete, stating that such Person has
reviewed the US Loan Documents, containing all calculations required to be made
to show compliance or non-compliance with the provisions of Sections 7.8 and
7.9, and further stating that there is no condition or event at the end of such
Fiscal Year or at the time of such certificate which constitutes a Default and
specifying the nature and period of existence of any such condition or event.
(b) As soon as available, and in any event within forty-five (45) days
after the end of each Fiscal Quarter, US Borrower's Consolidated and
consolidating balance sheet and income statement as of the end of such Fiscal
Quarter and a Consolidated statement of cash flows for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal Quarter, all
in reasonable detail and prepared in accordance with US GAAP, subject to changes
resulting from normal year-end adjustments. In addition US Borrower will,
together with each such set of financial statements, furnish a certificate in
the form of Exhibit D signed by the President, Vice President - Finance or
Controller of US Borrower stating that such financial statements are accurate
and complete (subject to normal year-end adjustments), stating that such Person
has reviewed the US Loan Documents, containing all calculations required to be
made by US Borrower to show compliance or non-compliance with the provisions of
Sections 7.8 and 7.9 and further stating that there is no condition or event at
the end of such Fiscal Quarter or at the time of such certificate which
constitutes a Default and specifying the nature and period of existence of any
such condition or event.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by any Restricted Person
to its stockholders and all registration statements, periodic reports and other
statements and schedules filed by any Restricted Person with any securities
exchange, the Securities and Exchange Commission or any similar Governmental
Authority, including any information or estimates with respect to US Borrower's
oil and gas business (including its exploration, development and production
activities) which are required to be furnished in US Borrower's annual report
pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as
amended.
Section 6.3. Other Information and Inspections. Each Restricted Person
will furnish to each Lender any information which US Agent may from time to time
reasonably request concerning any covenant, provision or condition of the Loan
Documents or any matter in connection with Restricted Persons' businesses and
operations. Each Restricted Person will permit representatives appointed by US
Agent (including independent accountants, auditors, agents, attorneys,
appraisers and any other Persons) to visit and inspect upon prior written notice
during normal business hours any of such Restricted Person's property, including
its books of account, other books and records, and any facilities or other
business assets, and to make extra copies therefrom and photocopies and
photographs thereof, and to write down and record any information such
representatives obtain, and each Restricted Person shall permit US Agent or its
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representatives to investigate and verify the accuracy of the information
furnished to US Agent or any Lender in connection with the Loan Documents and to
discuss all such matters with its officers, employees and representatives.
Section 6.4. Notice of Material Events and Change of Address. US
Borrower will promptly notify each Lender in writing, stating that such notice
is being given pursuant to this Agreement, of:
(a) the occurrence of any event which would have a Material Adverse
Effect,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness owed by any
Restricted Person having a principal balance of more than US $25,000,000, or of
any default by any Restricted Person under any indenture, mortgage, agreement,
contract or other instrument to which any of them is a party or by which any of
them or any of their properties is bound, if such default would have a Material
Adverse Effect,
(d) the occurrence of any Termination Event,
(e) any claim of US $25,000,000 or more, any notice of potential
liability under any Environmental Laws which might exceed such amount, or any
other material adverse claim asserted against any Restricted Person or with
respect to any Restricted Person's properties, and
(f) the filing of any suit or proceeding against any Restricted Person
in which an adverse decision would have a Material Adverse Effect.
US Borrower will also notify US Agent and US Agent's counsel in writing promptly
in the event that any Restricted Person changes its name or the location of its
chief executive office.
Section 6.5. Maintenance of Properties. Each Restricted Person will
maintain, preserve, protect, and keep all property used or useful in the conduct
of its business in good condition, and will from time to time make all repairs,
renewals and replacements needed to enable the business and operations carried
on in connection therewith to be promptly and advantageously conducted at all
times.
Section 6.6. Maintenance of Existence and Qualifications. Each
Restricted Person will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by applicable Law, except where the
failure so to qualify will not have a Material Adverse Effect.
Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted
Person will (a) timely file all required tax returns; (b) timely pay all taxes,
assessments, and other governmental charges or levies imposed upon it or upon
its income, profits or property; and (c) maintain appropriate accruals and
reserves for all of the foregoing in accordance with US
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GAAP. Each Restricted Person may, however, delay paying or discharging any of
the foregoing so long as it is in good faith contesting the validity thereof by
appropriate proceedings and has set aside on its books adequate reserves
therefor.
Section 6.8. Insurance. Each Restricted Person will keep or cause to be
kept insured in accordance with industry standards by financially sound and
reputable insurers, its surface equipment and other property of a character
usually insured by similar Persons engaged in the same or similar businesses.
Section 6.9. Performance on US Borrower's Behalf. If any Restricted
Person fails to pay any taxes, insurance premiums, expenses, attorneys' fees or
other amounts it is required to pay under any US Loan Document, US Agent may pay
the same, and shall use its best efforts to give at least five (5) Business Days
notice to US Borrower prior to making any such payment; provided, however, that
any failure by US Agent to so notify US Borrower shall not limit or otherwise
impair US Agent's ability to make any such payment. US Borrower shall
immediately reimburse US Agent for any such payments and each amount paid by US
Agent shall constitute an US Obligation owed hereunder which is due and payable
on the date such amount is paid by US Agent.
Section 6.10. Interest. US Borrower hereby promises to each Lender
Party to pay interest at the Default Rate applicable to Base Rate Loans on all
US Obligations (including US Obligations to pay fees or to reimburse or
indemnify any Lender) which US Borrower has in this Agreement promised to pay to
such Lender Party and which are not paid when due. Such interest shall accrue
from the date such US Obligations become due until they are paid.
Section 6.11. Compliance with Law. Each Restricted Person will conduct
its business and affairs in compliance with all Laws applicable thereto except
to the extent failure to do so would not reasonably be expected to have a
Material Adverse Effect.
Section 6.12. Environmental Matters.
(a) Each Restricted Person will comply in all material respects with
all Environmental Laws now or hereafter applicable to such Restricted Person, as
well as all contractual obligations and agreements with respect to environmental
remediation or other environmental matters, and shall obtain, at or prior to the
time required by applicable Environmental Laws, all environmental, health and
safety permits, licenses and other authorizations necessary for its operations
and will maintain such authorizations in full force and effect, unless such
failure to so comply would not reasonably be expected to have a Material Adverse
Effect.
(b) will promptly furnish to US Agent all written notices of violation,
orders, claims, citations, complaints, penalty assessments, suits or other
proceedings received by US Borrower, or of which it has notice, pending or
threatened against US Borrower, by any Governmental Authority with respect to
any alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations in connection with its ownership or use of
its
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properties or the operation of its business which involve a potential liability
or claim in excess of US $25,000,000.
Section 6.13. Bank Accounts; Offset. To secure the repayment of the
Obligations US Borrower hereby grants to each Lender a right of offset, each of
which shall be in addition to all other interests, liens, and rights of any
Lender at common Law, under the Loan Documents, or otherwise, and each of which
shall be upon and against (a) any and all moneys, securities or other property
(and the proceeds therefrom) of US Borrower now or hereafter held or received by
or in transit to any Lender from or for the account of US Borrower, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and
all deposits (general or special, time or demand, provisional or final) of US
Borrower with any Lender, and (c) any other credits and claims of US Borrower at
any time existing against any Lender, including claims under certificates of
deposit. At any time and from time to time after the occurrence of any Default,
each Lender is hereby authorized to offset against the Obligations then due and
payable (in either case without notice to US Borrower), any and all items
hereinabove referred to. To the extent that US Borrower has accounts designated
as royalty or joint interest owner accounts, the foregoing right of offset shall
not extend to funds in such accounts which belong to, or otherwise arise from
payments to US Borrower for the account of, third party royalty or joint
interest owners.
Section 6.14. Year 2000 Compliance. US Borrower will promptly notify US
Agent in the event US Borrower discovers or determines that any computer
application (including those of its suppliers and vendors) that is material to
its or any of its Subsidiaries' business and operations that will not be Year
2000 compliant on a timely basis, except to the extent that such failure would
not reasonably be expected to have a Material Adverse Effect.
ARTICLE VII - Negative Covenants of US Borrower
To conform with the terms and conditions under which each Lender is
willing to have credit outstanding to US Borrower, and to induce each Lender to
enter into this Agreement and make the US Loans, US Borrower warrants, covenants
and agrees that until the full and final payment of the Obligations and the
termination of this Agreement, unless Required Lenders have previously agreed
otherwise:
Section 7.1. Indebtedness. No Restricted Person (other than US
Borrower) will in any manner owe or be liable for Indebtedness except:
(a) the US Obligations and the Canadian Obligations.
(b) capital lease obligations (excluding oil, gas or mineral leases)
entered into in the ordinary course of such Restricted Person's business in
arm's length transactions at competitive market rates under competitive terms
and conditions in all respects, provided that the obligations required to be
paid in any Fiscal Year under any such capital leases do not in the aggregate
exceed US $25,000,000 for all Restricted Persons.
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(c) unsecured Liabilities owed among Restricted Persons.
(d) guaranties by one Restricted Person of Liabilities owed by another
Restricted Person, if such Liabilities either (i) are not Indebtedness, or (ii)
are allowed under subsections (a), (b) or (c) of this Section 7.1.
(e) Indebtedness of the Restricted Persons for plugging and abandonment
bonds or for letters of credit issued by any Lender in place thereof which are
required by regulatory authorities in the area of operations, and Indebtedness
of the Restricted Persons for other bonds or letters of credit issued by any
Lender which are required by such regulatory authorities with respect to other
normal oil and gas operations.
(f) obligations under the Subordinated US Borrower Indenture, the
Subordinated US Borrower Debentures and the Subordinated US Borrower Guarantee;
(g) non-recourse Indebtedness as to which no Restricted Person (i)
provides any guaranty or credit support of any kind (including any undertaking,
guarantee, indemnity, agreement or instrument that would constitute
Indebtedness) or (ii) is directly or indirectly liable (as a guarantor or
otherwise); provided, that after giving effect to such Indebtedness outstanding
from time to time, US Borrower is not in violation of Sections 7.8 and 7.9.
(h) the following long-term institutional Indebtedness of Northstar
Energy:
(i) US $150,000,000 indebtedness to The Prudential Insurance
Company of America pursuant to a Note Agreement dated as of March 2,
1998 including the following guarantees of such indebtedness: (1)
guarantees both dated March 2, 1998 made by Northstar Energy
Partnership and David Limited Partnership; (2) guarantee dated as of
July 31, 1998 made by 728098 Alberta Ltd.; and (3) any other guarantees
of Subsidiaries of Northstar Energy executed after the date hereof
pursuant to the terms of such Note Agreement.
(ii) US $75,000,000 indebtedness to certain institutional
investors pursuant to a Note Agreement dated as of July 19, 1995, as
amended from time to time, including the following guarantees of such
indebtedness: (1) guarantee dated as of July 31, 1998 made by Northstar
Energy Partnership; (2) guarantee dated as of July 31, 1998 made by
728098 Alberta Ltd.; and (3) any other guarantee of Subsidiaries of
Northstar Energy executed after the date hereof pursuant to the terms
of such Note Agreement.
including any refinancing of the above institutional indebtedness on
similar terms taking into account current market conditions.
(i) Indebtedness that is subordinated to the US Obligations and the
Canadian Obligations on terms acceptable to Required Lenders.
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(j) Indebtedness in the amount of C $36,323,766 owing to The
Toronto-Dominion Bank due January 1, 1999 relating to the West Windsor
Cogeneration Plant sale.
(k) Indebtedness in the approximate amount of C $6,000,000 owed to
Indeck Gas Supply Corporation by Northstar Energy pursuant to a Gas Sales and
Purchase Agreement dated as of March 9, 1989, as heretofore or hereafter amended
from time to time.
(l) Acquired Debt.
(m) Indebtedness under Hedging Contracts permitted under Section 7.11.
(n) Indebtedness in the amount of US $15,000,000 to Bank of America
Canada payable on demand by Northstar Energy and guaranteed by Canadian
Guarantor.
(o) miscellaneous items of Indebtedness of all Restricted Persons
(other than US Borrower) not described in subsections (a) through (n) which do
not in the aggregate exceed US $50,000,000 (with Canadian Borrowers and their
Subsidiaries which are Restricted Persons having no more than US $20,000,000) in
principal amount at any one time outstanding.
Section 7.2. Limitation on Liens. Except for Permitted Liens, no
Restricted Person will create, assume or permit to exist any Lien upon any of
the properties or assets which it now owns or hereafter acquires. No Restricted
Person will allow the filing or continued existence of any financing statement
describing as collateral any assets or property of such Restricted Person, other
than financing statements which describe only collateral subject to a Lien
permitted under this section and which name as secured party or lessor only the
holder of such Lien.
Section 7.3. Limitation on Mergers. No Restricted Person will merge or
consolidate with or into any other Person except that any Subsidiary of US
Borrower may be merged into or consolidated with (a) another Subsidiary of US
Borrower, or (b) US Borrower, so long as US Borrower is the surviving business
entity.
Section 7.4. Limitation on Issuance of Securities by Subsidiaries of
US Borrower.
(a) No Restricted Subsidiary of US Borrower (other than Devon Trust)
will issue any additional shares of its capital stock, additional partnership
interests or other securities or any options, warrants or other rights to
acquire such additional shares, partnership interests or other securities except
to another Restricted Person of which such issuer is already directly or
indirectly a Subsidiary of US Borrower unless such securities are being issued
to acquire a business, directly or indirectly through the use of the proceeds of
such issuance, and such securities are convertible into the common or similar
securities of US Borrower, including the issuance of the exchangeable shares of
Northstar Energy issued pursuant to the Acquisition Documents. Northstar Energy
may also issue stock options to its employees from time to time in the form of
exchangeable shares of Northstar Energy, provided that such shares are
convertible into common shares or similar securities of US Borrower and provided
further that such options are granted under a stock option plan of Northstar
Energy and/or US Borrower.
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(b) Devon Trust will not issue any securities except common securities
to US Borrower and the Devon Trust Securities. Devon Nevada will at all times
remain a wholly-owned direct or indirect Subsidiary of US Borrower, US Borrower
will at all times own all of the outstanding common securities of Devon Trust.
Section 7.5. Limitation on Restricted Payments. Except as permitted
below in this section, no Restricted Person shall directly or indirectly (i)
make any Restricted Distribution, or (ii) any Restricted Investment (the above
being herein collectively referred to as "Restricted Payments"), unless the
aggregate amount of Restricted Payments made during any Fiscal Year never
exceeds ten percent (10%) of the book value of the Consolidated Assets of US
Borrower.
Section 7.6. Transactions with Affiliates. No Restricted Person will
engage in any material transaction with any of its Affiliates on terms which are
less favorable in any material respect to it than those which would have been
obtainable at the time in arm's-length dealing with Persons other than such
Affiliates, provided that such restriction shall not apply to transactions among
US Borrower and the other Restricted Persons that are wholly-owned, directly or
indirectly, by US Borrower.
Section 7.7. Prohibited Contracts; ERISA. Except as expressly provided
for in the US Loan Documents and in the Support Agreement dated December 10,
1998 between the US Borrower and Northstar Energy, no Restricted Person will,
directly or indirectly, enter into, create, or otherwise allow to exist any
contract or other consensual restriction on the ability of any Restricted Person
that is a Subsidiary of US Borrower: (a) to pay dividends or make other
distributions to US Borrower, (b) to redeem equity interests held in it by US
Borrower, (c) to repay loans and other indebtedness owing by it to US Borrower,
or (d) to transfer any of its assets to US Borrower. No ERISA Affiliate will
incur any obligation to contribute to any "multiemployer plan" as defined in
Section 4001 of ERISA.
Section 7.8. Funded Debt to Total Capitalization. At the end of each
Fiscal Quarter, the ratio of US Borrower's Consolidated Total Funded Debt to US
Borrower's Total Capitalization will never exceed sixty percent (60%).
Section 7.9. Funded Debt to EBITDA. At the end of each Fiscal Quarter,
the ratio of US Borrower's Consolidated Total Funded Debt to EBITDA, calculated
for the four consecutive Fiscal Quarters then ended, will never exceed 3.75 to
1.
Section 7.10. Devon Trust; Devon Trust Securities. Devon Trust shall
exist for the exclusive purposes of (a) issuing the Devon Trust Securities, (b)
investing the gross proceeds of the Devon Trust Securities in the Subordinated
US Borrower Debentures and (c) engaging in only those other activities necessary
or incidental thereto. US Borrower shall exercise its option to defer interest
payments on the Subordinated US Borrower Debentures rather than default on such
interest payments. Devon Trust shall not be dissolved without prior written
notice by US Borrower to Required Lenders. Devon Trust shall not redeem the
Devon Trust Securities prior to their stated maturity, and US Borrower shall not
prepay or redeem the Subordinated US Borrower Debentures prior to their stated
maturity, unless both immediately before and
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immediately after any such proposed prepayment or redemption, US Borrower is in
compliance with Sections 7.8 and 7.9 and no Default under Section 8.1(a), 8.1(f)
or 8.1(h) is continuing.
Section 7.11. Hedging Contracts. No Restricted Person will be a party
to or in any manner be liable on any Hedging Contract, unless such contracts
qualify under US GAAP as a hedge of oil and gas production, floating rate
Indebtedness or foreign currency needs (and not as a speculative investment),
such contracts are entered into in the ordinary course of the Restricted
Persons' businesses, and
(i) if such contracts are entered into with the purpose and
effect of fixing prices on oil or gas expected to be produced by
Restricted Persons:
(A) such contracts for any single month (determined,
in the case of contracts that are not settled on a monthly
basis, by a monthly proration acceptable to US Agent) do not,
in the aggregate, cover amounts greater than seventy-five
percent (75%) of the Restricted Persons' aggregate Projected
Oil and Gas Production anticipated to be sold in the ordinary
course of the Restricted Persons' businesses for such month;
(B) such contracts do not require any Restricted
Person to provide any Lien to secure US Borrower's obligations
thereunder, other than Liens on cash or cash equivalents in an
aggregate amount not more than US $50,000,000; and
(C) each such contract is with a counterparty or has
a guarantor of the obligation of the counterparty who (unless
such counterparty is US Agent, any Lender or any of their
Affiliates) at the time the contract is made has long-term
obligations rated AA or better by S&P, Aa2 or better by
Moody's, A+ or better by CBRS, or AA or better by DBRS or is
an investment grade-rated industry participant.
As used in this subsection (i), the term "Projected Oil and Gas
Production" means the projected production of oil or gas (measured by
volume unit or BTU equivalent, not sales price) for the term of the
contracts or a particular month, as applicable, from properties and
interests owned by any Restricted Person which have attributable to
them proved oil or gas reserves.
(ii) if such contracts are entered into with the purpose and
effect of fixing interest rates on a principal amount of indebtedness
of such Restricted Person that is accruing interest at a variable rate,
the aggregate notional amount of such contracts never exceeds the
anticipated outstanding principal balance of the indebtedness to be
hedged by such contracts or an average of such principal balances
calculated using a generally accepted method of matching interest swap
contracts to declining principal balances, and the floating rate index
of each such contract generally matches the index used to determine the
floating rates of interest on the corresponding indebtedness to be
hedged by such contract.
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ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following events
constitutes an Event of Default under this Agreement:
(a) Any Restricted Person fails to pay any principal component of any
US Obligation when due and payable or fails to pay any other US Obligation
within three (3) days after the date when due and payable, whether at a date for
the payment of a fixed installment or as a contingent or other payment becomes
due and payable or as a result of acceleration or otherwise;
(b) Any "default" or "event of default" occurs under any US Loan
Document which defines either such term, and the same is not remedied within the
applicable period of grace (if any) provided in such Loan Document;
(c) Any Restricted Person fails (other than as referred to in
subsections (a) or (b) above) to duly observe, perform or comply with any
covenant, agreement, condition or provision of any US Loan Document, and such
failure remains unremedied for a period of thirty (30) days after notice of such
failure is given by US Agent to US Borrower;
(d) Any representation or warranty previously, presently or hereafter
made in writing by or on behalf of any Restricted Person in connection with any
US Loan Document shall prove to have been false or incorrect in any material
respect on any date on or as of which made provided that if such falsity or lack
of correctness is capable of being remedied or cured within a 30-day period, US
Borrower shall (subject to the other provisions of this Section 8.1) have a
period of 30 days after written notice thereof has been given to US Borrower by
US Agent within which to remedy or cure such lack of correctness, or this
Agreement or any US Note is asserted to be or at any time ceases to be valid,
binding and enforceable in any material respect as warranted in Section 5.5 for
any reason other than its release or subordination by US Agent;
(e) Any Restricted Person (i) fails to duly pay any Indebtedness in
excess of US $25,000,000 constituting principal or interest owed by it with
respect to borrowed money or money otherwise owed under any note, bond, or
similar instrument, including without limitation the Subordinated US Borrower
Debentures, the Subordinated US Borrower Indenture, the Subordinated US Borrower
Guarantee and the Devon Trust Securities, or (ii) breaches or defaults in the
performance of any agreement or instrument by which any such Indebtedness is
issued, evidenced, governed, or secured, other than a breach or default
described in clause (i) above, and any such failure, breach or default results
in the acceleration of such Indebtedness;
(f) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess of US
$25,000,000 exists with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, or (ii) any Termination Event occurs
with respect to any ERISA Plan and the then current value of such ERISA Plan's
benefit liabilities exceeds the then current value of such ERISA Plan's assets
available for the payment of such benefit liabilities by more than US
$25,000,000 (or in the case
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of a Termination Event involving the withdrawal of a substantial employer, the
withdrawing employer's proportionate share of such excess exceeds such amount);
(g) Any Change in Control occurs;
(h) US Borrower or any other Restricted Person having assets with a
book value of at least US $25,000,000:
(i) suffers the entry against it of a judgment, decree or
order for relief by a Tribunal of competent jurisdiction in an
involuntary proceeding commenced under any applicable bankruptcy,
insolvency or other similar Law of any jurisdiction now or hereafter in
effect, including the federal Bankruptcy Code, as from time to time
amended, or has any such proceeding commenced against it which remains
undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended; or
applies for or consents to the entry of an order for relief in an
involuntary case under any such Law; or makes a general assignment for
the benefit of creditors; or fails generally to pay (or admits in
writing its inability to pay) its debts as such debts become due; or
takes corporate or other action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its property in a
proceeding brought against or initiated by it, and such appointment or
taking possession is neither made ineffective nor discharged within
thirty days after the making thereof, or such appointment or taking
possession is at any time consented to, requested by, or acquiesced to
by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in an amount that exceeds (x) the valid and
collectible insurance in respect thereof or (y) the amount of an
indemnity with respect thereto reasonably acceptable to the Required
Lenders by US $25,000,000 or more, unless the same is discharged within
thirty days after the date of entry thereof or an appeal or appropriate
proceeding for review thereof is taken within such period and a stay of
execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or similar process
to be issued by any Tribunal against all or any part of its property
having a book value of at least US $25,000,000, and such writ or
warrant of attachment or any similar process is not stayed or released
within thirty days after the entry or levy thereof or after any stay is
vacated or set aside; and
(i) Any "Event of Default" occurs under the Canadian Agreement.
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Upon the occurrence of an Event of Default described in subsection (h)(i),
(h)(ii) or (h)(iii) of this section with respect to US Borrower, all of the US
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by US Borrower and each Restricted Person who at any
time ratifies or approves this Agreement. Upon any such acceleration, any
obligation of any Lender and any obligation of US LC Issuer to issue Letters of
Credit hereunder to make any further US Loans shall be permanently terminated.
During the continuance of any other Event of Default, US Agent at any time and
from time to time may (and upon written instructions from Required Lenders, US
Agent shall), without notice to US Borrower or any other Restricted Person, do
either or both of the following: (1) terminate any obligation of Lenders to make
US Loans hereunder, and any obligation of US LC Issuer to issue Letters of
Credit hereunder, and (2) declare any or all of the US Obligations immediately
due and payable, and all such US Obligations shall thereupon be immediately due
and payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby expressly waived by US Borrower and each
Restricted Person who at any time ratifies or approves this Agreement.
Section 8.2. Remedies. If any Default shall occur and be continuing,
each Lender Party may protect and enforce its rights under the US Loan Documents
by any appropriate proceedings, including proceedings for specific performance
of any covenant or agreement contained in any Loan Document, and each Lender
Party may enforce the payment of any US Obligations due it or enforce any other
legal or equitable right which it may have. All rights, remedies and powers
conferred upon Lender Parties under the US Loan Documents shall be deemed
cumulative and not exclusive of any other rights, remedies or powers available
under the US Loan Documents or at Law or in equity.
ARTICLE IX - US Agent
Section 9.1. Appointment, Powers, and Immunities. Each Lender hereby
irrevocably appoints and authorizes US Agent to act as its agent under this
Agreement and the other US Loan Documents with such powers and discretion as are
specifically delegated to US Agent by the terms of this Agreement and the other
US Loan Documents, together with such other powers as are reasonably incidental
thereto. US Agent (which term as used in this sentence and in Section 9.5 and
the first sentence of Section 9.6 hereof shall include its Affiliates and its
own and its Affiliates' officers, directors, employees, and agents): (a) shall
not have any duties or responsibilities except those expressly set forth in this
Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not
be responsible to the Lenders for any recital, statement, representation, or
warranty (whether written or oral) made in or in connection with any Loan
Document or any certificate or other document referred to or provided for in, or
received by any of them under, any Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability, or sufficiency of any Loan Document,
or any other document referred to or
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provided for therein or for any failure by any Restricted Person or any other
Person to perform any of its obligations thereunder; (c) shall not be
responsible for or have any duty to ascertain, inquire into, or verify the
performance or observance of any covenants or agreements by any Restricted
Person or the satisfaction of any condition or to inspect the property
(including the books and records) of any Restricted Person or any of its
Subsidiaries or Affiliates; (d) shall not be required to initiate or conduct any
litigation or collection proceedings under any Loan Document; and (e) shall not
be responsible for any action taken or omitted to be taken by it under or in
connection with any Loan Document, except for its own gross negligence or
willful misconduct. US Agent may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
Section 9.2. Reliance by US Agent. US Agent shall be entitled to rely
upon any certification, notice, instrument, writing, or other communication
(including, without limitation, any thereof by telephone or telecopy) believed
by it to be genuine and correct and to have been signed, sent or made by or on
behalf of the proper Person or Persons, and upon advice and statements of legal
counsel (including counsel for any Restricted Person), independent accountants,
and other experts selected by US Agent. US Agent may deem and treat the payee of
any Note as the holder thereof for all purposes hereof unless and until US Agent
receives and accepts an Assignment and Acceptance executed in accordance with
Section 10.6 hereof. As to any matters not expressly provided for by this
Agreement, US Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding on all of the
Lenders; provided, however, that US Agent shall not be required to take any
action that exposes US Agent to personal liability or that is contrary to any
Loan Document or applicable Law or unless it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking any such action.
Section 9.3. Defaults. US Agent shall not be deemed to have knowledge
or notice of the occurrence of a Default or Event of Default unless US Agent has
received written notice from a Lender or US Borrower specifying such Default or
Event of Default and stating that such notice is a "Notice of Default". In the
event that US Agent receives such a notice of the occurrence of a Default or
Event of Default, US Agent shall give prompt notice thereof to the Lenders. US
Agent shall (subject to Section 9.1 hereof) take such action with respect to
such Default or Event of Default as shall reasonably be directed by the Required
Lenders. Notwithstanding the foregoing, unless and until US Agent shall have
received such directions, US Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interest of the Lenders.
Section 9.4. Rights as Lender. With respect to its Percentage Share of
the US Maximum Credit Amount and the US Loans made by it, US Agent (and any
successor acting as US Agent) in its capacity as a Lender hereunder shall have
the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not acting as US Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include US Agent in its
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individual capacity. US Agent (and any successor acting as US Agent) and its
Affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make Investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with any
Restricted Person or any of its Subsidiaries or Affiliates as if it were not
acting as US Agent, and US Agent (and any successor acting as US Agent) and its
Affiliates may accept fees and other consideration from any Restricted Person or
any of its Subsidiaries or Affiliates for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
SECTION 9.5. INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY US AGENT
(TO THE EXTENT NOT REIMBURSED UNDER SECTION 10.4 HEREOF, BUT WITHOUT LIMITING
THE OBLIGATIONS OF US BORROWER UNDER SUCH SECTION) RATABLY IN ACCORDANCE WITH
THEIR RESPECTIVE PERCENTAGE SHARES, FOR ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES
(INCLUDING ATTORNEYS' FEES), OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER
THAT MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST US AGENT (INCLUDING BY
ANY LENDER) IN ANY WAY RELATING TO OR ARISING OUT OF ANY LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY OR ANY ACTION TAKEN OR OMITTED BY US AGENT
UNDER ANY LOAN DOCUMENT (INCLUDING ANY OF THE FOREGOING ARISING FROM THE
NEGLIGENCE OF US AGENT); provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Person to be indemnified. Without limitation of the foregoing,
each Lender agrees to reimburse US Agent promptly upon demand for its ratable
share of any costs or expenses payable by US Borrower under Section 10.4, to the
extent that US Agent is not promptly reimbursed for such costs and expenses by
US Borrower. The agreements contained in this section shall survive payment in
full of the US Loans and all other amounts payable under this Agreement.
Section 9.6. Non-Reliance on US Agent and Other Lenders. Each Lender
agrees that it has, independently and without reliance on US Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the US Borrower and its
Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon US Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under the US Loan Documents. Except for notices, reports, and other documents
and information expressly required to be furnished to the Lenders by US Agent
hereunder, US Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition, or business of any Restricted Person or any of its Subsidiaries or
Affiliates that may come into the possession of US Agent or any of its
Affiliates.
Section 9.7. Rights as Lender. In its capacity as a Lender, US Agent
shall have the same rights and obligations as any Lender and may exercise such
rights as though it were not US Agent. US Agent may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with any Restricted Person or their Affiliates, all as if it were
not US Agent hereunder and without any duty to account therefor to any other
Lender.
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Section 9.8. Sharing of Set-Offs and Other Payments. Each Lender Party
agrees that if it shall, whether through the exercise of rights under US Loan
Documents or rights of banker's lien, set off, or counterclaim against US
Borrower or otherwise, obtain payment of a portion of the aggregate Obligations
owed to it which, taking into account all distributions made by US Agent under
Section 3.1, causes such Lender Party to have received more than it would have
received had such payment been received by US Agent and distributed pursuant to
Section 3.1, then (a) it shall be deemed to have simultaneously purchased and
shall be obligated to purchase interests in the Obligations as necessary to
cause all Lender Parties to share all payments as provided for in Section 3.1,
and (b) such other adjustments shall be made from time to time as shall be
equitable to ensure that US Agent and all Lender Parties share all payments of
Obligations as provided in Section 3.1; provided, however, that nothing herein
contained shall in any way affect the right of any Lender Party to obtain
payment (whether by exercise of rights of banker's lien, set-off or counterclaim
or otherwise) of indebtedness other than the Obligations. US Borrower expressly
consents to the foregoing arrangements and agrees that any holder of any such
interest or other participation in the Obligations, whether or not acquired
pursuant to the foregoing arrangements, may to the fullest extent permitted by
Law exercise any and all rights of banker's lien, set-off, or counterclaim as
fully as if such holder were a holder of the Obligations in the amount of such
interest or other participation. If all or any part of any funds transferred
pursuant to this section is thereafter recovered from the seller under this
section which received the same, the purchase provided for in this section shall
be deemed to have been rescinded to the extent of such recovery, together with
interest, if any, if interest is required pursuant to the order of a Tribunal
order to be paid on account of the possession of such funds prior to such
recovery.
Section 9.9. Investments. Whenever US Agent in good faith determines
that it is uncertain about how to distribute to Lender Parties any funds which
it has received, or whenever US Agent in good faith determines that there is any
dispute among Lender Parties about how such funds should be distributed, US
Agent may choose to defer distribution of the funds which are the subject of
such uncertainty or dispute. If US Agent in good faith believes that the
uncertainty or dispute will not be promptly resolved, or if US Agent is
otherwise required to invest funds pending distribution to Lender Parties, US
Agent shall invest such funds pending distribution; all interest on any such
Investment shall be distributed upon the distribution of such Investment and in
the same proportion and to the same Persons as such Investment. All moneys
received by US Agent for distribution to Lender Parties (other than to the
Person who is US Agent in its separate capacity as a Lender Party) shall be held
by US Agent pending such distribution solely as US Agent for such Lender
Parties, and US Agent shall have no equitable title to any portion thereof.
Section 9.10. Benefit of Article IX. The provisions of this Article
(other than the following Section 9.11) are intended solely for the benefit of
Lender Parties, and no Restricted Person shall be entitled to rely on any such
provision or assert any such provision in a claim or defense against any Lender.
Lender Parties may waive or amend such provisions as they desire without any
notice to or consent of US Borrower or any Restricted Person.
Section 9.11. Resignation. US Agent may resign at any time by giving
written notice thereof to Lenders and US Borrower. Each such notice shall set
forth the date of such
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resignation. Upon any such resignation, Required Lenders shall have the right to
appoint a successor US Agent. A successor must be appointed for any retiring US
Agent, and such US Agent's resignation shall become effective when such
successor accepts such appointment. If, within thirty days after the date of the
retiring US Agent's resignation, no successor US Agent has been appointed and
has accepted such appointment, then the retiring US Agent may appoint a
successor US Agent, which shall be a commercial bank organized or licensed to
conduct a banking or trust business under the Laws of the United States of
America or of any state thereof and if no Default or Event of Default has
occurred and is continuing, retiring US Agent shall obtain the consent of US
Borrower. Upon the acceptance of any appointment as US Agent hereunder by a
successor US Agent, the retiring US Agent shall be discharged from its duties
and obligations under this Agreement and the other US Loan Documents. After any
retiring US Agent's resignation hereunder the provisions of this Article IX
shall continue to inure to its benefit as to any actions taken or omitted to be
taken by it while it was US Agent under the US Loan Documents.
Section 9.12. Lenders to Remain Pro Rata. It is the intent of all
parties hereto that, except for Competitive Bid Loans and matters related
thereto, the pro rata share of each Lender in the US Obligations and in the
Canadian Obligations shall be substantially the same at all times during the
term of this Agreement. Accordingly, the initial Percentage Share of each Lender
in the US Maximum Credit Amount will be the same as the initial Percentage Share
of such Lender in the Canadian Maximum Credit Amount. All subsequent assignments
and adjustments of the interests of the Lenders in the US Obligations and the
Canadian Obligations will be made so as to maintain such a pro rata arrangement;
provided that for the purposes of determining these pro rata shares, any
Percentage Share held by any Lender's Affiliates shall be included in
determining the interests of such Lender.
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by any Lender Party in exercising any right, power or
remedy which such Lender Party may have under any of the US Loan Documents shall
operate as a waiver thereof or of any other right, power or remedy, nor shall
any single or partial exercise by any Lender Party of any such right, power or
remedy preclude any other or further exercise thereof or of any other right,
power or remedy. No waiver of any provision of any US Loan Document and no
consent to any departure therefrom shall ever be effective unless it is in
writing and signed as provided below in this section, and then such waiver or
consent shall be effective only in the specific instances and for the purposes
for which given and to the extent specified in such writing. No notice to or
demand on any Restricted Person shall in any case of itself entitle any
Restricted Person to any other or further notice or demand in similar or other
circumstances. This Agreement and the other US Loan Documents set forth the
entire understanding between the parties hereto with respect to the transactions
contemplated herein and therein and supersede all prior discussions and
understandings with respect to the subject matter hereof and thereof, and no
waiver, consent,
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release, modification or amendment of or supplement to this Agreement or the
other US Loan Documents shall be valid or effective against any party hereto
unless the same is in writing and signed by (i) if such party is US Borrower, by
US Borrower, (ii) if such party is US Agent or US LC Issuer, by such party, and
(iii) if such party is a Lender, by such Lender or by US Agent on behalf of
Lenders with the written consent of Required Lenders (which consent has already
been given as to the termination of the US Loan Documents as provided in Section
10.10). Notwithstanding the foregoing or anything to the contrary herein, US
Agent shall not, without the prior consent of Majority Lenders, execute and
deliver on behalf of such Lender any waiver or amendment which would increase
the US Maximum Credit Amount hereunder. Notwithstanding the foregoing or
anything to the contrary herein, US Agent shall not, without the prior consent
of each individual Lender, execute and deliver on behalf of such Lender any
waiver or amendment which would: (1) waive any of the conditions specified in
Article IV, (2) increase the maximum amount which such Lender is committed
hereunder to lend, (3) reduce any fees payable to such Lender hereunder, or the
principal of, or interest on, such Lender's Note, (4) postpone any date fixed
for any payment of any such fees, principal or interest, (5) amend the
definition herein of "Required Lenders", "Majority Lenders", or otherwise change
the aggregate amount of Percentage Shares which is required for US Agent,
Lenders or any of them to take any particular action under the US Loan
Documents, (6) release US Borrower from its obligation to pay such Lender's
Note, or (7) amend this Section 10.1(a).
(b) Acknowledgments and Admissions. US Borrower hereby represents,
warrants, acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the US Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other US Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by US Agent or any Lender,
whether written, oral or implicit, other than as expressly set out in this
Agreement or in another Loan Document delivered on or after the date hereof,
(iii) there are no representations, warranties, covenants, undertakings or
agreements by any Lender as to the US Loan Documents except as expressly set out
in this Agreement or in another Loan Document delivered on or after the date
hereof, (iv) no Lender has any fiduciary obligation toward US Borrower with
respect to any Loan Document or the transactions contemplated thereby, (v) the
relationship pursuant to the US Loan Documents between US Borrower and the other
Restricted Persons, on one hand, and each Lender, on the other hand, is and
shall be solely that of debtor and creditor, respectively, (vi) no partnership
or joint venture exists with respect to the US Loan Documents between any
Restricted Person and any Lender, (vii) US Agent is not US Borrower's US Agent,
but US Agent for Lenders, (viii) without limiting any of the foregoing, US
Borrower is not relying upon any representation or covenant by any Lender, or
any representative thereof, and no such representation or covenant has been
made, that any Lender will, at the time of an Event of Default or Default, or at
any other time, waive, negotiate, discuss, or take or refrain from taking any
action permitted under the US Loan Documents with respect to any such Event of
Default or Default or any other provision of the US Loan Documents, and (ix) all
Lender Parties have relied upon the truthfulness of the acknowledgments in this
section in deciding to execute and deliver this Agreement and to become
obligated hereunder.
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(c) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER US LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.2. Survival of Agreements; Cumulative Nature. All of
Restricted Persons' various representations, warranties, covenants and
agreements in the US Loan Documents shall survive the execution and delivery of
this Agreement and the other US Loan Documents and the performance hereof and
thereof, including the making or granting of the US Loans and the delivery of
the US Notes and the other US Loan Documents, and shall further survive until
all of the US Obligations are paid in full to each Lender Party and all of
Lender Parties' obligations to US Borrower are terminated. All statements and
agreements contained in any certificate or other instrument delivered by any
Restricted Person to any Lender Party under any Loan Document shall be deemed
representations and warranties by US Borrower or agreements and covenants of US
Borrower under this Agreement. The representations, warranties, indemnities, and
covenants made by Restricted Persons in the US Loan Documents, and the rights,
powers, and privileges granted to Lender Parties in the US Loan Documents, are
cumulative, and, except for expressly specified waivers and consents, no Loan
Document shall be construed in the context of another to diminish, nullify, or
otherwise reduce the benefit to any Lender Party of any such representation,
warranty, indemnity, covenant, right, power or privilege. In particular and
without limitation, no exception set out in this Agreement to any
representation, warranty, indemnity, or covenant herein contained shall apply to
any similar representation, warranty, indemnity, or covenant contained in any
other Loan Document, and each such similar representation, warranty, indemnity,
or covenant shall be subject only to those exceptions which are expressly made
applicable to it by the terms of the various US Loan Documents.
Section 10.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that US Agent may give telephonic notices to the other Lender Parties), and
shall be deemed sufficiently given or furnished if delivered by personal
delivery, by facsimile or other electronic transmission, by delivery service
with proof of delivery, or by registered or certified United States mail,
postage prepaid, to US Borrower and Restricted Persons at the address of US
Borrower specified on the signature pages hereto and to each Lender Party at its
address specified on Annex II hereto (unless changed by similar notice in
writing given by the particular Person whose address is to be changed). Any such
notice or communication shall be deemed to have been given (a) in the case of
personal delivery or delivery service, as of the date of first attempted
delivery during normal business hours at the address provided herein, (b) in the
case of facsimile or other electronic transmission, upon receipt, or (c) in the
case of registered or certified United States mail, three
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days after deposit in the mail; provided, however, that no Borrowing Notice
shall become effective until actually received by US Agent.
Section 10.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions contemplated
by this Agreement are consummated, US Borrower will promptly (and in any event,
within 30 days after any invoice or other statement or notice) pay: (i) all
reasonable costs and expenses incurred by or on behalf of US Agent (including
without limitation, attorneys' fees) in connection with (1) the negotiation,
preparation, execution and delivery of the US Loan Documents, and any and all
consents, waivers or other documents or instruments relating thereto, (2) the
filing, recording, refiling and re-recording of any US Loan Documents and any
other documents or instruments or further assurances required to be filed or
recorded or refiled or re-recorded by the terms of any Loan Document, (3) the
borrowings hereunder and other action reasonably required in the course of
administration hereof, (4) monitoring or confirming (or preparation or
negotiation of any document related to) US Borrower's compliance with any
covenants or conditions contained in this Agreement or in any Loan Document, and
(ii) all reasonable costs and expenses incurred by or on behalf of any Lender
Party (including without limitation, attorneys' fees, consultants' fees and
accounting fees) in connection with the defense or enforcement of any of the US
Loan Documents (including this section) or the defense of any Lender Party's
exercise of its rights thereunder.
(B) INDEMNITY. US BORROWER AGREES TO INDEMNIFY EACH LENDER PARTY , UPON
DEMAND, FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES,
DAMAGES, PENALTIES, FINES, ACTIONS, JUDGMENTS, SUITS, SETTLEMENTS, COSTS,
EXPENSES OR DISBURSEMENTS (INCLUDING REASONABLE FEES OF ATTORNEYS, ACCOUNTANTS,
EXPERTS AND ADVISORS) OF ANY KIND OR NATURE WHATSOEVER (IN THIS SECTION
COLLECTIVELY CALLED "LIABILITIES AND COSTS") WHICH TO ANY EXTENT (IN WHOLE OR IN
PART) MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH LENDER PARTY
GROWING OUT OF, RESULTING FROM OR IN ANY OTHER WAY ASSOCIATED WITH THE US LOAN
DOCUMENTS AND THE TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT OR DEFENSE
THEREOF) AT ANY TIME ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN (WHETHER
ARISING IN CONTRACT OR IN TORT OR OTHERWISE AND INCLUDING ANY VIOLATION OR
NONCOMPLIANCE WITH ANY ENVIRONMENTAL LAWS BY ANY LENDER PARTY OR ANY OTHER
PERSON OR ANY LIABILITIES OR DUTIES OF ANY LENDER PARTY OR ANY OTHER PERSON WITH
RESPECT TO HAZARDOUS MATERIALS FOUND IN OR RELEASED INTO THE ENVIRONMENT). THE
FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS
ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR
THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART BY ANY NEGLIGENT ACT
OR OMISSION OF ANY KIND BY ANY LENDER PARTY,
provided only that no Lender Party shall be entitled under this section to
receive indemnification for that portion, if any, of any liabilities and costs
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment. If any
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Person (including US Borrower or any of its Affiliates) ever alleges such gross
negligence or willful misconduct by any Lender Party, the indemnification
provided for in this section shall nonetheless be paid upon demand, subject to
later adjustment or reimbursement, until such time as a court of competent
jurisdiction enters a final judgment as to the extent and effect of the alleged
gross negligence or willful misconduct. As used in this section the term "Lender
Party" shall refer not only to each Person designated as such in Section 1.1 but
also to each director, officer, agent, attorney, employee, representative and
Affiliate of such Person.
Section 10.5. Parties in Interest. All grants, covenants and agreements
contained in the US Loan Documents shall bind and inure to the benefit of the
parties thereto and their respective successors and assigns; provided, however,
that no Restricted Person may assign or transfer any of its rights or delegate
any of its duties or obligations under any Loan Document without the prior
consent of Required Lenders. Neither US Borrower nor any Affiliates of US
Borrower shall directly or indirectly purchase or otherwise retire any
Obligations owed to any Lender nor will any Lender accept any offer to do so,
unless each Lender shall have received substantially the same offer with respect
to the same Percentage Share of the Obligations owed to it. If US Borrower or
any Affiliate of US Borrower at any time purchases some but less than all of the
Obligations owed to all Lender Parties, such purchaser shall not be entitled to
any rights of any Lender under the US Loan Documents unless and until US
Borrower or its Affiliates have purchased all of the Obligations.
Section 10.6. Assignments and Participations.
(a) Each Lender may assign to one or more Eligible Transferees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its US Loans, its Note, and its Percentage Share
of the US Maximum Credit Amount); provided, however, that
(i) each such assignment shall be to an Eligible Transferee;
(ii) together with each such assignment of its rights and
obligations under this Agreement, such Lender shall assign the same
Percentage Share of its rights and obligations under the Canadian
Agreement to the same Eligible Transferee or an Affiliate of such
Eligible Transferee.
(iii) except in the case of such an assignment to another
Lender or an assignment of all of a Lender's rights and obligations
under this Agreement, any partial assignment of such Lender's rights
and obligations under this Agreement and under the Canadian Agreement
shall be in a collective amount at least equal to US $20,000,000 or an
integral multiple of US $5,000,000 in excess thereof;
(iv) each such assignment by a Lender shall be of a constant,
and not varying, percentage of all of its rights and obligations under
the US Loan Documents;
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(v) the parties to such assignment shall execute and deliver
to US Agent for its acceptance an Assignment and Acceptance in the form
of Exhibit F hereto, together with any Note subject to such assignment
and a processing fee of US $3,500; and
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this section, the assignor, US Agent
and US Borrower shall make appropriate arrangements so that, if required, new US
Notes are issued to the assignor and the assignee. If the assignee is not
incorporated under the Laws of the United States of America or a state thereof,
it shall deliver to US Borrower and US Agent certification as to exemption from
deduction or withholding of Taxes in accordance with Section 3.10.
(b) US Agent shall maintain at its address referred to in Section 10.3
a copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and their
Percentage Share of the US Maximum Credit Amount of, and principal amount of the
US Loans owing to, each Lender from time to time (the "Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and US Borrower, US Agent and the Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by US Borrower or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, US Agent shall, if such Assignment and Acceptance has
been completed and is in substantially the form of Exhibit F hereto, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the parties thereto.
(d) Each Lender may sell participations to one or more Persons that are
Eligible Transferees in all or a portion of its rights and obligations under
this Agreement (including all or a portion of its US Maximum Credit Amount and
its US Loans); provided, however, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participant shall be entitled to the benefit of the yield protection
provisions contained in Article III and the right of offset contained in Section
6.14, and (iv) US Borrower shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement, and such Lender shall retain the sole right to enforce the
obligations of US Borrower relating to its US Loans and its Note and to approve
any amendment, modification, or waiver of any provision of this Agreement (other
than amendments, modifications, or waivers decreasing the amount of principal of
or the rate at which interest is payable on such US Loans or Note, extending any
scheduled principal payment date or date fixed for the payment of interest on
such US Loans or Note, or extending its US Maximum Credit Amount).
49
<PAGE> 55
(e) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time assign and pledge all or any portion of its US Loans
and its Note to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank. No
such assignment shall release the assigning Lender from its obligations
hereunder.
(f) Any Lender may furnish any information concerning US Borrower or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 10.7 hereof.
Section 10.7. Confidentiality. US Agent and each Lender (each, a
"Lending Party") agrees to keep confidential any information furnished or made
available to it by US Borrower pursuant to this Agreement that is marked
confidential; provided that nothing herein shall prevent any Lending Party from
disclosing such information (a) to any other Lending Party or any Affiliate of
any Lending Party, or any officer, director, employee, US Agent, or advisor of
any Lending Party or Affiliate of any Lending Party, (b) to any other Person if
reasonably incidental to the administration of the credit facility provided
herein, (c) as required by any Law, rule, or regulation, (d) upon the order of
any court or administrative agency, (e) upon the request or demand of any
regulatory agency or authority, (f) that is or becomes available to the public
or that is or becomes available to any Lending Party other than as a result of a
disclosure by any Lending Party prohibited by this Agreement, (g) in connection
with any litigation to which such Lending Party or any of its Affiliates may be
a party, (h) to the extent necessary in connection with the exercise of any
remedy under this Agreement or any other Loan Document, and (i) subject to
provisions substantially similar to those contained in this section, to any
actual or proposed participant or assignee.
Section 10.8. Governing Law; Submission to Process. EXCEPT TO THE
EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN
DOCUMENT, THE US LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE
UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF
THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT
LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) DOES NOT APPLY TO THIS AGREEMENT
OR TO THE US NOTES. US BORROWER HEREBY IRREVOCABLY SUBMITS ITSELF AND EACH OTHER
RESTRICTED PERSON TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS SITTING IN THE STATE OF TEXAS AND AGREES AND CONSENTS THAT SERVICE OF
PROCESS MAY BE MADE UPON IT OR ANY RESTRICTED PERSON IN ANY LEGAL PROCEEDING
RELATING TO THE US LOAN DOCUMENTS OR THE OBLIGATIONS BY ANY MEANS ALLOWED UNDER
TEXAS OR FEDERAL LAW.
Section 10.9. Limitation on Interest. Lender Parties, Restricted
Persons and any other parties to the US Loan Documents intend to contract in
strict compliance with applicable usury Law from time to time in effect. In
furtherance thereof such Persons stipulate and agree that none of the terms and
provisions contained in the US Loan Documents shall ever be construed to create
a contract to pay, for the use, forbearance or detention of money, interest in
excess of the
50
<PAGE> 56
maximum amount of interest permitted to be charged by applicable Law from time
to time in effect. Neither any Restricted Person nor any present or future
guarantors, endorsers, or other Persons hereafter becoming liable for payment of
any Obligation shall ever be liable for unearned interest thereon or shall ever
be required to pay interest thereon in excess of the maximum amount that may be
lawfully charged under applicable Law from time to time in effect, and the
provisions of this section shall control over all other provisions of the US
Loan Documents which may be in conflict or apparent conflict herewith. Lender
Parties expressly disavow any intention to charge or collect excessive unearned
interest or finance charges in the event the maturity of any Obligation is
accelerated. If (a) the maturity of any Obligation is accelerated for any
reason, (b) any Obligation is prepaid and as a result any amounts held to
constitute interest are determined to be in excess of the legal maximum, or (c)
any Lender or any other holder of any or all of the Obligations shall otherwise
collect moneys which are determined to constitute interest which would otherwise
increase the interest on any or all of the Obligations to an amount in excess of
that permitted to be charged by applicable Law then in effect, then all sums
determined to constitute interest in excess of such legal limit shall, without
penalty, be promptly applied to reduce the then outstanding principal of the
related Obligations or, at such Lender's or holder's option, promptly returned
to US Borrower or the other payor thereof upon such determination. In
determining whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under applicable Law, Lender
Parties and Restricted Persons (and any other payors thereof) shall to the
greatest extent permitted under applicable Law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable Law in order to
lawfully charge the maximum amount of interest permitted under applicable Law.
In the event applicable Law provides for an interest ceiling under Chapter 303
of the Texas Finance Code (the "Texas Finance Code") as amended, for that day,
the ceiling shall be the "weekly ceiling" as defined in the Texas Finance Code;
provided that if any applicable Law permits greater interest, the Law permitting
the greatest interest shall apply. As used in this section the term "applicable
Law" means the Laws of the State of Texas or the Laws of the United States of
America, whichever Laws allow the greater interest, as such Laws now exist or
may be changed or amended or come into effect in the future.
Section 10.10. Termination; Limited Survival. In its sole and absolute
discretion US Borrower may at any time that no Obligations are owing elect in a
written notice delivered to US Agent to terminate this Agreement. Upon receipt
by US Agent of such a notice, if no Obligations are then owing this Agreement
and all other US Loan Documents shall thereupon be terminated and the parties
thereto released from all prospective obligations thereunder. Notwithstanding
the foregoing or anything herein to the contrary, any waivers or admissions made
by any Restricted Person in any Loan Document, any Obligations under Sections
3.2 through 3.6, and any obligations which any Person may have to indemnify or
compensate any Lender Party shall survive any termination of this Agreement or
any other Loan Document. At the request and expense of US Borrower, US Agent
shall prepare and execute all necessary instruments to reflect and effect such
termination of the US Loan Documents. US Agent is
51
<PAGE> 57
hereby authorized to execute all such instruments on behalf of all Lenders,
without the joinder of or further action by any Lender.
Section 10.11. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the US Loan Documents shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable Law.
Section 10.12. Counterparts; Fax. This Agreement may be separately
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
constitute one and the same Agreement. This Agreement and the US Loan Documents
may be validly executed and delivered by facsimile or other electronic
transmission.
Section 10.13. Waiver of Jury Trial, Punitive Damages, etc. US BORROWER
AND EACH LENDER PARTY HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE US LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, (C) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER US
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE
ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR
DELIVER TO ANY OTHER PARTY HERETO.
Section 10.14. Defined Terms. Capitalized terms and phrases used and
not otherwise defined herein shall for all purposes of this Agreement have the
meaning given to such terms and phrases in Annex I hereto.
Section 10.15. Annex I, Exhibits and Schedules; Additional Definitions.
Annex I and all Exhibits and Schedules attached to this Agreement are a part
hereof for all purposes.
Section 10.16. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
52
<PAGE> 58
Section 10.17. References and Titles. All references in this Agreement
to Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 10.18. Calculations and Determinations. All calculations under
the US Loan Documents of interest chargeable with respect to Eurodollar Loans
and of fees shall be made on the basis of actual days elapsed (including the
first day but excluding the last) and a year of 360 days. All other calculations
of interest made under the US Loan Documents shall be made on the basis of
actual days elapsed (including the first day but excluding the last) and a year
of 365 or 366 days, as appropriate. Each determination by a Lender Party of
amounts to be paid under Article III or any other matters which are to be
determined hereunder by a Lender Party (such as any US Dollar Eurodollar Rate,
Adjusted US Dollar Eurodollar Rate, Business Day, Interest Period, or Reserve
Requirement) shall, in the absence of manifest error, be conclusive and binding.
Unless otherwise expressly provided herein or unless Required Lenders otherwise
consent all financial statements and reports furnished to any Lender Party
hereunder shall be prepared and all financial computations and determinations
pursuant hereto shall be made in accordance with US GAAP.
Section 10.19. Construction of Indemnities and Releases. All
indemnification and release provisions of this Agreement shall be construed
broadly (and not narrowly) in favor of the Persons receiving indemnification
from or being released.
Section 10.20. Termination of Existing Agreement. Upon the payment in
full of all outstanding indebtedness owing under the Existing Agreement, the
Existing Agreement and the other loan documents executed pursuant thereto shall
be terminated and the parties thereto shall have no further obligations or
liabilities, covenants, or representations thereunder; provided, however, the
indemnification obligations provided in the Existing Agreement shall not be
terminated and shall survive the termination of the Existing Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 59
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
DEVON ENERGY CORPORATION
US Borrower
By: /s/ WILLIAM T. VAUGHN
------------------------------------
William T. Vaughn
Vice President - Finance
Address:
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102
Attention: Vice President - Finance
Telephone: (405) 235-3611
Fax: (405) 552-8120
<PAGE> 60
NATIONSBANK, N.A.,
Administrative Agent, US LC Issuer
and Lender
By: /s/ DALE T. WILSON
------------------------------------
Dale T. Wilson
Senior Vice President
Address:
901 Main Street, 64th Floor
Dallas, Texas 75202
Attention: Dale T. Wilson
Telephone: (214) 508-1246
Fax: (214) 508-1286
<PAGE> 61
BANK OF MONTREAL
Lender
By: /s/ MICHAEL P. STUCKEY
------------------------------------
Name: Michael P. Stuckey
Title: Managing Director, U.S.
Corporate Banking
<PAGE> 62
THE FIRST NATIONAL BANK OF
CHICAGO
Lender
By: /s/ RONALD L. DIESKER
------------------------------------
Name: Ronald L. Diesker
Title: Vice President
<PAGE> 63
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
Lender
By: /s/ DONNA J. GERMAN
------------------------------------
Name: Donna J. German
Title: Managing Director
<PAGE> 64
UMB OKLAHOMA BANK
Lender
By: /s/ RICHARD J. LEHRTER
------------------------------------
Name: Richard J. Lehrter
Title: Executive Vice President
<PAGE> 65
FIRST UNION NATIONAL BANK
Lender
By: /s/ ROBERT R. WETTEROFF
------------------------------------
Name: Robert R. Wetteroff
Title: Senior Vice President
<PAGE> 66
TORONTO-DOMINION (TEXAS), INC.
Lender
By: /s/ CAROL BRANDT
-----------------------------------
Name: Carol Brandt
Title: Vice President
<PAGE> 67
BANK OF OKLAHOMA, N.A.
Lender
By: /s/ JOHN N. HUFF
-----------------------------------
Name: John N. Huff
Title: Vice President
<PAGE> 68
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
Lender
By: /s/ KHEIL A. MCINTYRE
-----------------------------------
Name: Kheil A. McIntyre
Title: Vice President
By: /s/ ANTHONY J. ALESSANDRO
-----------------------------------
Name: Anthony J. Alessandro
Title: Associate
<PAGE> 69
THE BANK OF NEW YORK
Lender
By: /s/ RAYMOND J. PALMER
-----------------------------------
Name: Raymond J. Palmer
Title: Vice President
<PAGE> 70
ROYAL BANK OF CANADA
Lender
By: /s/ LINDA M. STEPHENS
----------------------------------
Name: Linda M. Stephens
Title: Senior Manager
<PAGE> 71
SUNTRUST BANK, ATLANTA
Lender
By: /s/ TODD C. DAVIS
-----------------------------------
Name: Todd C. Davis
Title: Assistant Vice President
By: /s/ DAVID J. EDGE
-----------------------------------
Name: David J. Edge
Title: Vice President
<PAGE> 72
[EXECUTION]
ANNEX I
DEFINED TERMS
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any assets acquired by such specified Person, and any refinancing of
the foregoing indebtedness on similar terms, taking into account current market
conditions.
"Acquisition Documents" means (a) the Amended and Restated Combination
Agreement dated as of June 29, 1998 and all schedules and exhibits thereto
pursuant to which US Borrower is acquiring all of the outstanding common shares
of Northstar Energy and (b) all other material agreements or instruments
delivered in connection therewith to consummate the acquisition contemplated
thereby.
"Adjusted Canadian Dollar Eurodollar Rate" means, for any Canadian
Dollar Eurodollar Loan for any Eurodollar Interest Period therefor, the per
annum rate equal to the sum of (a) the Applicable Margin plus (b) the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
Canadian Agent to be equal to the quotient obtained by dividing (i) the Canadian
Dollar Eurodollar Rate for such Canadian Dollar Eurodollar Loan for such
Eurodollar Interest Period by (ii) 1 minus the Reserve Requirement for such
Canadian Dollar Eurodollar Loan for such Interest Period. The Adjusted Canadian
Dollar Eurodollar Rate for any Canadian Dollar Eurodollar Loan shall change
whenever the Applicable Margin or the Reserve Requirement changes. No Adjusted
Canadian Dollar Eurodollar Rate charged by any Person shall ever exceed the
Highest Lawful Rate.
"Adjusted US Dollar Eurodollar Rate" means, for any US Dollar
Eurodollar Loan for any Eurodollar Interest Period therefor, the per annum rate
equal to the sum of (a) the Applicable Margin plus (b) the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Agent
to be equal to the quotient obtained by dividing (i) the US Dollar Eurodollar
Rate for such US Dollar Eurodollar Loan for such Eurodollar Interest Period by
(ii) 1 minus the Reserve Requirement for such US Dollar Eurodollar Loan for such
Interest Period. The Adjusted US Dollar Eurodollar Rate for any US Dollar
Eurodollar Loan shall change whenever the Applicable Margin or the Reserve
Requirement changes. No Adjusted US Dollar Eurodollar Rate charged by any Person
shall ever exceed the Highest Lawful Rate.
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control
<PAGE> 73
with, such Person. A Person shall be deemed to be "controlled by" any other
Person if such other Person possesses, directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing general
partners; or
(b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Applicable Currency" means (i) when used with respect to any US Loan
or US LC Obligations, US Dollars, and (ii) when used with respect to any
Canadian Prime Rate Loan, any Canadian Dollar Eurodollar Loan or any Bankers'
Acceptance, Canadian Dollars, and (iii) when used with respect to any Canadian
Base Rate Loan or an US Dollar Eurodollar Loan made under the Canadian
Agreement, US Dollars.
"Applicable Lending Office" means, 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 an Affiliate of such Lender) as such Lender may from
time to time specify to US Agent, Canadian Agent, and Borrowers by written
notice in accordance with the terms hereof as the office by which its Loans of
such Type are to be made and maintained.
"Applicable Margin" means
(a) except with respect to any Tranche B Loan, when used in the
Canadian Agreement and when used in the US Agreement on any
date, the number of Basis Points per annum set forth below
based on the Applicable Rating Level on such date:
<TABLE>
<CAPTION>
======================================
Applicable Applicable
Rating Level Margin
======================================
<S> <C>
Level I 27.0
--------------------------------------
Level II 30.0
--------------------------------------
Level III 40.0
--------------------------------------
Level IV 42.5
--------------------------------------
Level V 60.0
======================================
</TABLE>
2
<PAGE> 74
(b) when used with respect to any Tranche B Loan on any date, the
number of Basis Points per annum set forth below based on the
Applicable Rating Level on such date:
<TABLE>
<CAPTION>
======================================
Applicable Applicable
Rating Level Margin
======================================
<S> <C>
Level I 28.0
--------------------------------------
Level II 31.0
--------------------------------------
Level III 42.5
--------------------------------------
Level IV 45.0
--------------------------------------
Level V 62.5
======================================
</TABLE>
Changes in the Applicable Margin will occur automatically without prior notice
as changes in the Applicable Rating Level occur. US Agent will give notice
promptly to Borrowers and the Lenders of changes in the Applicable Margin.
"Applicable Rating Level" means for any day, the highest Rating Level
(as such term is defined below in this paragraph) issued by S&P, Duff & Phelps,
or Moody's, if Moody's shall have issued such a rating with respect to US
Borrower (collectively, in this definition called the "Designated Rating
Agencies"); provided that if at any time three Designated Rating Agencies have
ratings in effect with respect to US Borrower's Long-Term Debt and the Rating
Levels (as such terms are defined below in this paragraph) of at least two of
the three Designated Rating Agencies are not the same, "Applicable Rating Level"
shall mean the higher of the two lowest Rating Levels of the Designated Rating
Agencies. As used in this definition, (i) the term "Rating Level" means for any
day with respect to any of the Designated Rating Agencies, the rating level
described below (or its then equivalent) applicable on such day, issued by such
Designated Rating Agency, from time to time, with respect to US Borrower's
Long-Term Debt or if such rating is unavailable, equivalents thereof, including
counterparty ratings, implied ratings and corporate ratings; (ii) "US Borrower's
Long-Term Debt" means senior, unsecured, non-credit enhanced long-term
indebtedness for borrowed money of US Borrower, and (iii) ">" means a rating
equal to or more favorable than and "<" means a rating less favorable than.
3
<PAGE> 75
<TABLE>
<CAPTION>
======================================================================
Duff &
Rating Level S&P Phelps Moody's*
----------------------------------------------------------------------
<S> <C> <C> <C>
Level I >=A- >=A- >=A3
----------------------------------------------------------------------
Level II BBB+ BBB+ Baa1
----------------------------------------------------------------------
Level III BBB BBB Baa2
----------------------------------------------------------------------
Level IV BBB- BBB- Baa3
----------------------------------------------------------------------
Level V <BBB- <BBB- <Baa3
======================================================================
</TABLE>
*A Moody's rating is not currently available for US Borrower.
If any two of the Designated Rating Agencies shall not have in effect a rating
for US Borrower's Long-Term Debt or if the rating system of any of the
Designated Rating Agencies shall change, or if any of such Designated Rating
Agencies shall cease to be in the business of rating corporate debt obligations,
US Borrower and Required Lenders shall negotiate in good faith to amend this
definition to reflect such changed rating system or the unavailability of
ratings from such Designated Rating Agency, but until such an agreement shall be
reached, the Applicable Rating Level shall be based only upon the rating by the
remaining Designated Rating Agency.
"BA Discount Rate" means, in respect of a BA being accepted by a Lender
on any date, (i) for a Lender that is listed in Schedule I to the Bank Act
(Canada), the average bankers' acceptance rate as quoted on Reuters CDOR page
(or such other page as may, from time to time, replace such page on that service
for the purpose of displaying quotations for bankers' acceptances accepted by
leading Canadian financial institutions) at approximately 10:00 a.m. (Toronto
time) on such drawdown date for bankers' acceptances having a comparable
maturity date as the maturity date of such BA (the "CDOR Rate"); or, if such
rate is not available at or about such time, the average of the bankers'
acceptance rates (expressed to five decimal places) as quoted to the Agent by
the Schedule I BA Reference Banks as of 10:00 a.m. (Toronto time) on such
drawdown date for bankers' acceptances having a comparable maturity date as the
maturity date of such BA; and (ii) for a Lender that is listed in Schedule II to
the Bank Act (Canada), the rate established by the Canadian Agent to be the
lesser of (A) the CDOR Rate plus 10 Basis Points; and (B) the average of the
bankers' acceptance rates (expressed to five decimal places) as quoted to the
Canadian Agent by the Schedule II BA Reference Banks as of 10:00 a.m. (Toronto
time) on such drawdown date for bankers' acceptances having a comparable
maturity date as the maturity date of such BA;
"Bankers' Acceptance" or "BA" means a Canadian Dollar draft of either
Canadian Borrower, for a term selected by such Canadian Borrower of either 30,
60, 90 or 180 days (as reduced or extended by the Lender, acting reasonably, to
allow the maturity thereof to fall on a Business Day) payable in Canada.
4
<PAGE> 76
"Bankruptcy and Insolvency Act (Canada)" means the Bankruptcy and
Insolvency Act, S.C. 1992, c. 27, including the regulations made and, from time
to time, in force under that Act.
"Basis Point" means one one-hundredth of one percent (0.01%).
"Borrower" means any of US Borrower and Canadian Borrowers.
"Borrowing" means a borrowing of new Loans of a single Type pursuant to
Section 1.2 or a Continuation or Conversion of existing Loans into a single Type
(and, in the case of Eurodollar Loans, with the same Interest Period) pursuant
to Section 1.3 of the US Agreement or the Canadian Agreement or the acceptance
or purchase of Bankers' Acceptances issued by Canadian Borrowers under the
Canadian Agreement or the Continuation or Conversion of existing Banker's
Acceptances into Canadian Loans of a single Type in the case of Eurodollar Loans
with the same Interest Period pursuant to Section 1.3 of the Canadian Agreement.
"Borrowing Notice" means a written or telephonic request, or a written
confirmation, made by any Borrower which meets the requirements of Section 1.2
of the US Agreement or Section 1.2 of the Canadian Agreement.
"Business Day" means (a) with respect to the Canadian Agreement, a day,
other than a Saturday or Sunday, on which commercial banks are open for business
with the public in Dallas, Texas and Toronto, Ontario and (b) with respect to
the US Agreement, a day, other than a Saturday or Sunday, on which commercial
banks are open for business with the public in Dallas, Texas. Any Business Day
in any way relating to Eurodollar Loans (such as the day on which an Interest
Period begins or ends) must also be a day on which, in the judgment of US Agent
or Canadian Agent, as applicable, significant transactions in dollars are
carried out in the interbank eurocurrency market.
"Canadian Advances" has the meaning given to such term in Section 1.1
of the Canadian Agreement.
"Canadian Agent" means Bank of America Canada, as administrative agent
under the Canadian Agreement, and its successors and assigns in such capacity.
"Canadian Agreement" means that certain Credit Agreement dated the
Closing Date among Canadian Borrowers, Canadian Agent and Lenders, as it may be
amended, supplemented, restated or otherwise modified and in effect from time to
time.
"Canadian Base Rate Loan" means a Canadian Loan which bears interest at
the Canadian US Dollar Base Rate.
"Canadian Borrowers" means Northstar Energy and Devon Energy Canada.
"Canadian Dollar" or "C$" means the lawful currency of Canada.
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<PAGE> 77
"Canadian Dollar Eurodollar Loan" means a Canadian Loan that bears
interest at the Adjusted Canadian Dollar Eurodollar Rate.
"Canadian Dollar Eurodollar Rate" means, for any Canadian Dollar
Eurodollar Loan within a Borrowing and with respect to the related Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on the Dow Jones Market Service (formerly
Telerate Access Service) Page 3740 (or any successor page) as the London
interbank offered rate for deposits in Canadian Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, then such offered rate shall be otherwise independently
determined by Canadian Agent from an alternate, substantially similar
independent source available to Canadian Agent or shall be calculated by
Canadian Agent by a substantially similar methodology as that theretofore used
to determine such offered rate on Dow Jones Market Service, in the London
interbank eurodollar market for a period of time equal or comparable to the
related Interest Period and in an amount equal to or comparable to the principal
amount of the eurodollar portion to which such Interest Period relates.
"Canadian Facility Maturity Date" means the date which is five years
and one day after the Conversion Date.
"Canadian Facility Usage" means, at the time in question, the US Dollar
Exchange Equivalent of the aggregate amount of Canadian Loans, Canadian LC
Obligations, and BA's outstanding at such time.
"Canadian Guarantor" means US Borrower.
"Canadian LC Issuer" means Bank of America Canada in its capacity as
the issuer of Letters of Credit under the Canadian Agreement, and its successors
in such capacity. Canadian Agent may, with the consent of Canadian Borrowers and
the Lender in question, appoint any Canadian Resident Lender hereunder as a
Canadian LC Issuer in place of or in addition to Bank of America Canada.
"Canadian LC Obligations" means, at the time in question, the sum of
all Matured Canadian LC Obligations plus the maximum amounts which Canadian LC
Issuer might then or thereafter be called upon to advance under all Letters of
Credit then outstanding under the Canadian Agreement.
"Canadian LC Sublimit" means US $25,000,000.
"Canadian Loan Documents" means the Canadian Agreement, the Canadian
Notes, the Letters of Credit issued under the Canadian Agreement, the LC
Applications related thereto, the BA's, the Guaranty executed by Canadian
Guarantor, and all other agreements, certificates, documents, instruments and
writings at any time delivered in connection herewith or therewith (exclusive of
term sheets and commitment letters).
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"Canadian Loans" means the Canadian Revolver Loans, the Canadian Term
Loans into which such Revolving Loans may be converted and the Competitive Bid
Loans made under the Canadian Agreement.
"Canadian Maximum Credit Amount" means US $195,000,000 or the Canadian
Dollar Exchange Equivalent.
"Canadian Notes" means each Lender's "Canadian Note", as defined in
Section 1.1 of the Canadian Agreement, and the Competitive Bid Notes issued
under the Canadian Agreement.
"Canadian Obligations" means all Liabilities from time to time owing by
Canadian Borrowers to any Lender Party under or pursuant to any of the Canadian
Loan Documents, including all Canadian LC Obligations owing thereunder.
"Canadian Obligation" means any part of the Canadian Obligations.
"Canadian Prime Rate" means on any day a fluctuating rate of interest
per annum equal to the higher of (i) the rate of interest per annum most
recently announced by Bank of America Canada as its reference rate for Canadian
Dollar commercial loans made to a Person in Canada; and (ii) Bank of America
Canada's Discount Rate for Bankers' Acceptances having a maturity of thirty days
plus the Applicable Margin. No Canadian Prime Rate charged by any Person shall
ever exceed the Highest Lawful Rate
"Canadian Prime Rate Loan" means a Canadian Loan that bears interest at
the Canadian Prime Rate.
"Canadian Resident Lender" means each Lender identified as such on the
signature pages to the Canadian Agreement or any Assignment and Acceptance
executed by a new Lender, each being a Person that is not a non-resident of
Canada for the purposes of the Income Tax Act (Canada).
"Canadian Revolving Loans" has the meaning given it in Section 1.1 of
the Canadian Agreement.
"Canadian Revolving Period" means the period from and including the
Closing Date until the Conversion Date (or, if earlier, the day on which the
obligations of Lenders to make Canadian Loans or the obligations of Canadian LC
Issuer to issue Letters of Credit under the Canadian Agreement have been
terminated or the Canadian Notes first become due and payable in full).
"Canadian Term Loan" has the meaning given it in Section 1.7 of the
Canadian Agreement.
"Canadian Term Period" means the period from and including the day
immediately following the Conversion Date until and including the Canadian
Facility Maturity Date.
"Canadian US Dollar Base Rate" means for a day, the rate per annum
equal to the higher of (a) the Federal Funds Rate for such day plus one-half of
one percent (0.5%) and (b) the rate of
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<PAGE> 79
interest per annum most recently established by Bank of America Canada as its
reference rate for US Dollar commercial loans made to a Person in Canada. Any
change in the Canadian US Dollar Base Rate due to a change in the Bank of
America Canada's reference rate shall be effective on the effective date of such
change. No Canadian US Dollar Base Rate charged by any Person shall ever exceed
the Highest Lawful Rate.
"Cash Equivalents" means Investments in:
(a) marketable obligations, maturing within twelve months after
acquisition thereof, issued or unconditionally guaranteed by Canada or the
United States of America or an instrumentality or agency thereof and entitled to
the full faith and credit of Canada or the United States of America, as
applicable;
(b) demand deposits, and time deposits (including certificates of
deposit) maturing within twelve months from the date of deposit thereof, with a
domestic office (1) of US Agent or Canadian Agent or any Lender, or (2) of any
bank or trust company organized under the laws of Canada or the United States of
America or any Province or State therein, provided that (x) the full amount of
each such deposit in such bank or trust company is insured by the Federal
Deposit Insurance Corporation if applicable, or (y) such bank or trust company
has capital, surplus and undivided profits aggregating at least US $50,000,000,
and
(c) (1) publicly traded debt securities with an original term of 270
days or less or (2) interest bearing securities issued to the public by banks,
associated entities or similar institutions, which can be put to the issuer at
the investor's unconditional option within one month after acquisition, so long
as in each case such securities have a credit rating of at least A-1 from S&P or
P-1 from Moody's or A-1 [low] from CBRS or R-1 [low] from DBRS.
"CBRS" means CBRS Inc., or its successor.
"Change of Control" means the occurrence of either of the following
events: any Person (or syndicate or group of Persons which is deemed a "person"
for the purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) acquires more than thirty percent (30%) of the outstanding stock of US
Borrower having ordinary voting power (disregarding changes in voting power
based on the occurrence of contingencies) for the election of directors, or
during any period of twelve successive months a majority of the Persons who were
directors of US Borrower at the beginning of such period cease to be directors
of US Borrower.
"Closing Date" means December 11, 1998.
"Companies' Creditors Arrangement Act (Canada)" means the Companies'
Creditors Arrangement Act, R.S.C. 1985, c. C-36, including the regulations made
and from time to time in force under that Act.
"Competitive Bid" means (i) with respect to the US Agreement, a
response from any Lender to an Invitation to Bid, substantially in the form of
Exhibit J to the US Agreement and
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(ii) with respect to the Canadian Agreement, a response from any Canadian
Resident Lender to an Invitation to Bid, substantially in the form of Exhibit K
to the Canadian Agreement.
"Competitive Bid Accept/Reject Letter" means (i) with respect to the US
Agreement, a notice sent by US Borrower to US Agent, substantially in the form
of Exhibit K to the US Agreement, indicating its acceptance or rejection of
Competitive Bids from various Lenders and (ii) with respect to the Canadian
Agreement, a notice sent by the applicable Canadian Borrower to Canadian Agent,
substantially in the form of Exhibit L to the Canadian Agreement, indicating its
acceptance or rejection of Competitive Bids from various Lenders.
"Competitive Bid Interest Period" means, with respect to any
Competitive Bid Loan, a period from one day to one hundred eighty days as
specified in the Competitive Bid applicable thereto.
"Competitive Bid Loan" means (i) with respect to the US Agreement, a
loan from a Lender to US Borrower pursuant to the bidding procedure described in
Section 1.7 of the US Agreement and (ii) with respect to the Canadian Agreement,
a loan from a Canadian Resident Lender to the applicable Canadian Borrower
pursuant to the bidding procedure described in Section 1.9 of the Canadian
Agreement.
"Competitive Bid Note" (i) with respect to the US Agreement, a
"Competitive Bid Note" as defined in Section 1.7 of the US Agreement and (ii)
with respect to the Canadian Agreement, a "Competitive Bid Note" as defined in
Section 1.9 of the Canadian Agreement.
"Competitive Bid Rate" means, for any Competitive Bid Loan, the fixed
rate at which such Lender is willing to make such Competitive Bid Loan indicated
in its Competitive Bid. The Competitive Bid Rate shall in no event, however,
exceed the Highest Lawful Rate.
"Competitive Bid Request" means (i) with respect to the US Agreement, a
request by US Borrower in the form of Exhibit H to the US Agreement for Lenders
to submit Competitive Bids and (ii) with respect to the Canadian Agreement, a
request by the applicable Canadian Borrower in the form of Exhibit I to the
Canadian Agreement for Canadian Resident Lenders to submit Competitive Bids.
"Consolidated" refers to the consolidation of any Person, in accordance
with US GAAP, with its properly consolidated subsidiaries. References herein to
a Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated Assets" means the total assets of US Borrower and its
Restricted Subsidiaries which would be shown as assets on a Consolidated balance
sheet of US Borrower and its Restricted Subsidiaries prepared in accordance with
US GAAP, after eliminating all amounts properly attributable to minority
interest, if any, in the stock and surplus of the Restricted Subsidiaries.
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<PAGE> 81
"Consolidated Interest Expense" means, for any period, total interest
expense (including distributions on the Devon Trust Securities treated as
interest expense), whether paid or accrued, including without limitation all
commissions, discounts and other fees and charges owed with respect to Letters
of Credit.
"Continuation" (i) as used in the US Agreement shall refer to the
continuation pursuant to Section 1.3 thereof of a Eurodollar Loan as a
Eurodollar Loan from one Interest Period to the next Interest Period and (ii) as
used in the Canadian Agreement shall refer to the continuation pursuant to
Section 1.3 thereof of a Eurodollar Loan as a Eurodollar Loan from one Interest
Period to the next Interest Period or a rollover of a Banker's Acceptance at
maturity.
"Continuation/Conversion Notice" means (i) with respect to the US
Agreement, a written or telephonic request, or a written confirmation, made by
Borrower which meets the requirements of Section 1.3 of the US Agreement, and
(ii) with respect to the Canadian Agreement, a written or telephonic request, or
a written confirmation, made by the applicable Canadian Borrower which meets the
requirements of Section 1.3 of the Canadian Agreement.
"Conversion" (i) as used in the US Agreement shall refer to a
conversion pursuant to Section 1.3 or Article III of one Type of US Loan into
another Type of US Loan and (ii) as used in the Canadian Agreement shall refer
to a conversion pursuant to Section 1.3 or Article III of one Type of Canadian
Advance into another Type of Canadian Advance.
"Conversion Date" means the date which is 364 days after the Closing
Date, or such later day to which the Conversion Date is extended pursuant to
Section 1.6 of the Canadian Agreement.
"DBC" means DBC, Inc., an Oklahoma corporation.
"DBRS" means Dominion Bond Rating Service Limited, or its successor.
"Default" means any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Default Rate" means at the time in question (i) with respect to any US
Base Rate Loan, the rate two percent (2.0%) above the US Base Rate then in
effect, (ii) with respect to any US Dollar Eurodollar Loan, the rate two percent
(2%) above the Adjusted US Dollar Eurodollar Rate then in effect for such Loan,
(iii) with respect to any Canadian Prime Rate Loan, the rate two percent (2.0%)
above the Canadian Prime Rate then in effect for such Loan, (iv) with respect to
any Canadian Base Rate Loan, the rate two percent (2%) above the Canadian US
Dollar Base Rate then in effect for such Loan, (v) with respect to any Canadian
Dollar Eurodollar Loan, the rate two percent (2%) above the Adjusted Canadian
Dollar Eurodollar Rate then in effect for such Loan; and (vi) with respect to
any Competitive Bid Loan, the rate two percent (2%) above the Competitive Bid
Rate then in effect for such Loan. No Default Rate charged by any Person shall
ever exceed the Highest Lawful Rate.
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"Depository Bills and Notes Act (Canada)" means the Depository Bills
and Notes Act (Canada), R.S.C. 1998, c. 13, including the regulations made and,
from time to time, in force under that Act.
"Devon Energy Canada" means Devon Energy Canada Corporation, a Canadian
corporation organized under the laws of Alberta.
"Devon Nevada" means Devon Energy Corporation (Nevada), a Nevada
corporation.
"Devon Trust" means Devon Financing Trust, a statutory business trust
formed under the laws of the State of Delaware.
"Devon Trust Securities" means those certain Trust Convertible
Preferred Securities, issued by Devon Trust in an amount of 2,990,000.
"Disclosure Schedule" means (i) with respect to the US Agreement,
Schedule 1 thereto, and (ii) with respect to the Canadian Agreement, Schedule 1
thereto.
"Discount Proceeds" means, in respect of each Bankers' Acceptance,
funds in an amount which is equal to:
Face Amount
---------------
1 + (Rate x Term)
-----------
365
(where "Face Amount" is the principal amount of the Bankers' Acceptance being
purchased, "Rate" is the BA Discount Rate divided by 100 and "Term" is the
number of days in the term of the Bankers' Acceptance.)
"Distribution" means (a) any dividend or other distribution made by a
Restricted Person on or in respect of any stock, partnership interest, or other
equity interest in such Restricted Person (including any option or warrant to
buy such an equity interest), or (b) any payment made by a Restricted Person to
purchase, redeem, acquire or retire any stock, partnership interest, or other
equity interest in such Restricted Person (including any such option or
warrant).
"Domestic Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Domestic Lending Office" below its name on its
signature page to the Canadian Agreement or the US Agreement, or such other
office as such Lender may from time to time specify to any Borrower and Agent;
with respect to LC Issuer, the office, branch, or agency through which it issues
Letters of Credit; and, with respect to Agent, the office, branch, or agency
through which it administers this Agreement.
"Duff & Phelps" means Duff & Phelps Credit Rating Co., or its
successor.
"EBITDA" means, for any period, calculated on a Consolidated basis, the
sum of the amount for such period of Consolidated net income, Consolidated
Interest Expense, depreciation
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<PAGE> 83
expense, depletion expense, amortization expense, federal, state, and provincial
income taxes, exploitation and abandonment expense and other non-cash charges
and expenses.
"Eligible Transferee" means a Person which either (a) is a Lender or an
Affiliate of a Lender, or (b) is consented to as an Eligible Transferee by US
Agent or Canadian Agent, as applicable, and, so long as no Default or Event of
Default is continuing, by the Borrowers, in each case which consent will not be
unreasonably withheld; provided that the Borrowers' consent shall not be
required for a Person to be an "Eligible Transferee" for purposes of Section
10.6(d) of the US Agreement and Section 10.6(d) of the Canadian Agreement.
"Environmental Laws" means any and all Laws relating to the environment
or to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Affiliate" means US Borrower and all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control that, together with US Borrower, are treated as a single
employer under Section 414 of the Internal Revenue Code.
"ERISA Plan" means any employee pension benefit plan subject to Title
IV of ERISA maintained by any ERISA Affiliate with respect to which any
Restricted Person has a fixed or contingent liability.
"Eurodollar Interest Period" means, with respect to each particular
Eurodollar Loan in a Borrowing, the period specified in the Borrowing Notice or
Continuation/Conversion Notice applicable thereto, beginning on and including
the date specified in such Borrowing Notice or Continuation/Conversion Notice
(which must be a Business Day), and ending one, two, three, or six months
thereafter, as the applicable Borrower may elect in such notice; provided that:
(a) any Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day; (b) any Interest Period which
begins on the last Business Day in a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day in a calendar month;
and (c) notwithstanding the foregoing, any Interest Period which would otherwise
end after the last day of the US Facility Commitment Period or the Canadian
Revolving Period shall end on the last day of the US Facility Commitment Period
or the Canadian Revolving Period (or, if the last day of such period is not a
Business Day, on the next preceding Business Day).
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<PAGE> 84
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" below its
name on the signature page hereto (or, if no such office is specified, its
Domestic Lending Office), or such other office of such Lender as such Lender may
from time to time specify to Borrowers, Canadian Agent, and US Agent.
"Eurodollar Loan" means any Canadian Dollar Eurodollar Loan and any US
Dollar Eurodollar Loan.
"Event of Default" means (i) with respect to the US Agreement the
meaning given to such term in Section 8.1 thereof and (ii) with respect to the
Canadian Agreement the meaning given to such term in Section 8.1 thereof.
"Exchange Equivalent" in respect of one currency (the "Original
Currency"), being Canadian Dollars or U.S. Dollars, as the case may be, means,
at the date of determination, the amount of currency expressed in the other such
currency necessary to purchase, based on the Noon Rate on such date, the
specified amount of the Original Currency on such date.
"Existing Agreement" means that certain Credit Agreement dated as of
May 15, 1998 among US Borrower, Devon Nevada, US Agent, and certain lenders
named therein.
"Facility Fee Rate" means, on any date, the number of Basis Points per
annum set forth below based on the Applicable Rating Level on such date:
<TABLE>
<CAPTION>
============================================
Applicable Applicable
Rating Level Facility Fee Rate
--------------------------------------------
<S> <C>
Level I 8.0
--------------------------------------------
Level II 10.0
--------------------------------------------
Level III 12.5
--------------------------------------------
Level IV 17.5
--------------------------------------------
Level V 25.0
============================================
</TABLE>
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of one percent) 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 Dallas, Texas on the Business
Day next succeeding such day, provided that (i) 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 on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate quoted to US Agent on such day on such transactions as determined by US
Agent.
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<PAGE> 85
"Fiscal Quarter" means a three-month period ending on March 31, June
30, September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
"Governmental Authority" means any domestic or foreign, national,
federal, provincial, state, municipal or other local government or body and any
division, agency, ministry, commission, board or authority or any
quasi-governmental or private body exercising any statutory, regulatory,
expropriation or taxing authority under the authority of any of the foregoing,
and any domestic, foreign or international judicial, quasi-judicial, arbitration
or administrative court, tribunal, commission, board or panel acting under the
authority of any of the foregoing.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means (a) any agreement providing for options,
swaps, floors, caps, collars, forward sales or forward purchases involving
interest rates, commodities or commodity prices, equities, currencies, bonds, or
indexes based on any of the foregoing, (b) any option, futures or forward
contract traded on an exchange, and (c) any other derivative agreement or other
similar agreement or arrangement.
"Highest Lawful Rate" means, with respect to each Lender Party to whom
Obligations are owed, the maximum nonusurious rate of interest that such Lender
Party is permitted under applicable Law to contract for, take, charge, or
receive with respect to such Obligations. All determinations herein of the
Highest Lawful Rate, or of any interest rate determined by reference to the
Highest Lawful Rate, shall be made separately for each Lender Party as
appropriate to assure that the Loan Documents are not construed to obligate any
Person to pay interest to any Lender Party at a rate in excess of the Highest
Lawful Rate applicable to such Lender Party.
"Income Tax Act (Canada)" means the Income Tax Act, S.C. 1970-71-72, c.
63, including the regulations made and, from time to time, in force under that
Act.
"Indebtedness" of any Person means Liabilities in any of the following
categories:
(a) Liabilities for borrowed money,
(b) Liabilities constituting an obligation to pay the deferred purchase
price of property or services, other than customary payment terms taken in the
ordinary course of such Person's business,
(c) Liabilities evidenced by a bond, debenture, note or similar
instrument,
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<PAGE> 86
(d) Liabilities arising under conditional sales or other title
retention agreements or under leases capitalized in accordance with US GAAP, but
excluding customary oil, gas or mineral leases,
(e) Liabilities with respect to payments received in consideration of
oil, gas, or other minerals yet to be acquired or produced at the time of
payment (including obligations under "take-or-pay" contracts to deliver gas in
return for payments already received and the undischarged balance of any
production payment created by such Person or for the creation of which such
Person directly or indirectly received payment);
(f) Liabilities under Hedging Contracts,
(g) Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor, or
(h) Liabilities under direct or indirect guaranties of Liabilities of
any Person or constituting obligations to purchase or acquire or to otherwise
protect or insure a creditor against loss in respect of Indebtedness of the
types described in paragraphs (a) through (g) above of any Person (such as
obligations under working capital maintenance agreements, agreements to
keep-well, or agreements to purchase debt, assets, goods, securities or
services, but excluding endorsements in the ordinary course of business of
negotiable instruments in the course of collection),
provided, however, that the "Indebtedness" of any Person shall not include
Liabilities that were incurred by such Person on ordinary trade terms to
vendors, suppliers, or other Persons providing goods and services for use by
such Person in the ordinary course of its business, unless and until such
Liabilities are outstanding more than 90 days past the original invoice or
billing date therefor. Any Indebtedness owed by a partnership shall be deemed
Indebtedness of any partner in such partnership to the extent such partner has
any liability of any kind therefor.
"Initial Financial Statements" means (i) the audited annual
Consolidated financial statements of US Borrower dated as of December 31, 1997,
and (ii) the unaudited quarterly Consolidated financial statements of US
Borrower dated as of September 30, 1998.
"Interest Act (Canada)" means the Interest Act, R.S.C. 1985, c. I-15,
including the regulations made and, from time to time, in force under that Act.
"Interest Payment Date" means (a) with respect to each US Base Rate
Loan, Canadian US Dollar Base Rate Loan, and Canadian Prime Rate Loan, the last
day of each March, June, September and December beginning December 31, 1998, and
(b) with respect to each Eurodollar Loan, the last day of the Eurodollar
Interest Period that is applicable thereto and, if such Eurodollar Interest
Period is six months in length, the date specified by Agent which is
approximately three months after such Eurodollar Interest Period begins;
provided that the last day of each calendar month shall also be an Interest
Payment Date for each such Loan so long as any Event of Default exists under
Section 8.1 (a) or (b).
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<PAGE> 87
"Interest Period" means (i) with respect to any Eurodollar Loan, the
related Eurodollar Interest Period and (ii) with respect to any Competitive Bid
Loan, the related Competitive Bid Interest Period.
"Internal Revenue Code" means the United States Internal Revenue Code
of 1986, as amended from time to time and any successor statute or statutes.
"Investment" means any investment made directly or indirectly, in any
Person, whether by acquisition of shares of capital stock, indebtedness or other
obligations or securities or by loan, advance, capital contribution or otherwise
and whether made in cash, by the transfer of property, or by any other means.
"Invitation to Bid" means (i) with respect to the US Agreement, an
invitation by US Agent to each Lender, substantially in the form of Exhibit I
thereto, inviting such Lender to submit Competitive Bids in response to a
Competitive Bid Request under the US Agreement, and (ii) with respect to the
Canadian Agreement, an invitation by Canadian Agent to each Lender,
substantially in the form of Exhibit J thereto, inviting such Lender to submit
Competitive Bids in response to a Competitive Bid Request under the Canadian
Agreement.
"Judgment Interest Act (Alberta)" means the Judgment Interest Act, S.A.
1984 c. J-O.5, including the regulations made and, from time to time, in force
under that Act.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or Canada or any state,
province or political subdivision thereof or of any foreign country or any
department, province or other political subdivision thereof.
"LC Application" means any application for a Letter of Credit hereafter
made by any Borrower to US LC Issuer or Canadian LC Issuer.
"LC Collateral" (i) as used in the US Agreement, has the meaning given
to such term in Section 2.6 of the US Agreement and (ii) as used in the Canadian
Agreement, has the meaning given such term in Section 2.11 of the Canadian
Agreement.
"Lender Parties" means Agent, US LC Issuer, Canadian LC Issuer, and all
Lenders.
"Lenders" means each signatory to the US Agreement and the Canadian
Agreement (other than any Borrower), including NationsBank, N.A. and Bank of
America Canada in their capacity as a Lender hereunder rather than as US Agent
or Canadian Agent and US LC Issuer or Canadian LC Issuer, respectively, and the
successors of each such party as holder of a US Note or a Canadian Note.
"Lenders Schedule" means Annex II to the US Agreement and Annex II to
the Canadian Agreement which are the same.
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<PAGE> 88
"Letter of Credit" means any letter of credit issued by US LC Issuer
under the US Agreement or by Canadian LC Issuer under the Canadian Agreement at
the application of any Borrower.
"Liabilities" means, as to any Person, all indebtedness, liabilities
and obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to US GAAP.
"Lien" means, with respect to any property or assets, any lien,
mortgage, security interest, pledge, deposit, production payment, rights of a
vendor under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or
any other charge or encumbrance for security purposes, whether arising by Law or
agreement or otherwise, but excluding any right of offset. "Lien" also means any
filed financing statement, any registration of a pledge (such as with an issuer
of uncertificated securities), or any other arrangement or action which would
serve to perfect a Lien described in the preceding sentence, regardless of
whether such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Loan Documents" means, collectively, the Canadian Loan Documents and
the US Loan Documents.
"Loans" means, collectively, the Canadian Loans and the US Loans.
"Majority Lenders" means Lenders whose aggregate Percentage Shares
exceed sixty-six and two thirds percent (66 2/3%).
"Material Adverse Effect" means any event which would reasonably be
expected to have a material and adverse effect upon (a) US Borrower's
Consolidated financial condition, (b) US Borrower's Consolidated operations,
properties or prospects, considered as a whole, (c) US Borrower's ability to
timely pay the Obligations, or (d) the enforceability of the material terms of
any Loan Documents.
"Matured Canadian LC Obligations" means all amounts paid by Canadian LC
Issuer on drafts or demands for payment drawn or made under or purported to be
under any Letter of Credit issued under the Canadian Agreement and all other
amounts due and owing to Canadian LC Issuer under any LC Application for any
such Letter of Credit, to the extent the same have not been repaid to Canadian
LC Issuer (with the proceeds of Loans or otherwise).
"Matured US LC Obligations" means all amounts paid by US LC Issuer on
drafts or demands for payment drawn or made under or purported to be under any
Letter of Credit issued under the US Agreement and all other amounts due and
owing to US LC Issuer under any LC Application for any such Letter of Credit, to
the extent the same have not been repaid to US LC Issuer (with the proceeds of
Loans or otherwise).
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<PAGE> 89
"Maximum Canadian Drawing Amount" means at the time in question the sum
of the maximum amounts which Canadian LC Issuer might then or thereafter be
called upon to advance under all Letters of Credit issued pursuant to the
Canadian Agreement which are then outstanding.
"Maximum US Drawing Amount" means at the time in question the sum of
the maximum amounts which US LC Issuer might then or thereafter be called upon
to advance under all Letters of Credit issued pursuant to the US Agreement which
are then outstanding.
"Moody's" means Moody's Investor Service, Inc., or its successor.
"Net Proceeds" means with respect to any Bankers' Acceptance, the
Discount Proceeds less the amount equal to the applicable Stamping Fee Rate
multiplied by the face amount of such Bankers' Acceptance..
"Non-resident Lender" means any Lender which is not a Canadian Resident
Lender, and shall initially mean each Lender identified as such on the signature
pages to the Canadian Agreement or thereafter on any Assignment and Acceptance.
"Noon Rate" means, in relation to the conversion of one currency into
another currency, the rate of exchange for such conversion as quoted by the Bank
of Canada (or, if not so quoted, the spot rate of exchange quoted for wholesale
transactions made by Canadian Agent at Toronto, Ontario at approximately noon
(Toronto local time)).
"Northstar Energy" means Northstar Energy Corporation, an Alberta
corporation.
"Notes" mean, collectively, the Canadian Notes and the US Notes.
"Obligations" means, collectively, the US Obligations and the Canadian
Obligations.
"Offer of Extension" means (a) with respect to the Canadian Agreement,
a written offer by Canadian Agent, for and on behalf of Required Lenders, to
Canadian Borrowers to extend the Canadian Facility Revolving Period to a date
364 days from acceptance by Canadian Borrowers of such offer, and setting forth,
if applicable, the terms and conditions on which such extension is offered by
the Lenders and as may be accepted by Canadian Borrowers, and (b) with respect
to the US Agreement, a written offer by US Agent, for and on behalf of Required
Lenders, to US Borrower to extend the Tranche B Revolving Period to a date 364
days from acceptance by US Borrower of such offer, and setting forth, if
applicable, the terms and conditions on which such extension is offered by the
Lenders and as may be accepted by US Borrower.
"Percentage Share" means
(a) under the US Agreement with respect to any Lender (i) when used in
Article I or Article II of the US Agreement, in any Borrowing Notice thereunder
or when no US Loans are outstanding, the percentage set forth opposite such
Lender's name on the Lenders Schedule as modified by assignments of a Lender's
rights and obligations under the US Agreement made by
18
<PAGE> 90
or to such Lender in accordance with the terms of the US Agreement, and (ii)
when used otherwise, the percentage obtained by dividing (x) the sum of the
unpaid principal balance of such Lender's US Loans and such Lender's Percentage
Share of the US LC Obligations, by (y) the sum of the aggregate unpaid principal
balance of all US Loans at such time plus the aggregate amount of all US LC
Obligations outstanding at such time; and
(b) under the Canadian Agreement with respect to any Lender (i) when
used in Article I or Article II of the Canadian Agreement, in any Borrowing
Notice thereunder or when no Canadian Advances are outstanding, the percentage
set forth opposite such Lender's name on the Lenders Schedule as modified by
assignments of a Lender's rights and obligations under the Canadian Agreement
made by or to such Lender in accordance with the terms of the Canadian
Agreement, and (ii) when used otherwise, the percentage obtained by dividing (x)
the sum of the unpaid principal balance of such Lender's Canadian Advances and
such Lender's Percentage Share of the Canadian LC Obligations, by (y) the sum of
the aggregate unpaid principal balance of all Canadian Advances at such time
plus the aggregate amount of all Canadian LC Obligations outstanding at such
time.
"Permitted Distribution" means (i) any Distribution made by any
Restricted Person that is payable only in common stock of such Restricted
Person, and (ii) any other Distribution made by any Restricted Person to US
Borrower, Canadian Borrower or to any other Restricted Person that is a
wholly-owned Subsidiary of US Borrower.
"Permitted Investments" means (a) Cash Equivalents, (b) Investments in
Restricted Subsidiaries that are wholly-owned by US Borrower and in Canadian
Borrowers, and (c) US Borrower's Investments in Thunder Creek Gas Services
L.L.C. and Sage Creek Gas Processors, L.L.C., which are limited liability
companies involved in the methane gas and conventional gas production and
development in the Powder River basin of central Wyoming and are owned by a
Subsidiary of US Borrower and other industry partners (US Borrower will include
its pro rata share of these entities in its Consolidated financial statements),
(d) payments made for the purchase of oil and gas assets, leaseholds and
associated facilities and/or the purchase of equity interests in entities
involved in the oil and gas industry, all in accordance with US Borrower's
normal business practices; provided that no Default shall exist before or after
any such acquisition or Investment, and (e) Investments in any Person, so long
as such Person becomes a Restricted Subsidiary of US Borrower within one year
after the date such Investment is made.
"Permitted Liens" means:
(a) Liens for taxes, assessments or governmental charges which are not due
or delinquent, or the validity of which US Borrower or any Restricted
Subsidiary shall be contesting in good faith; provided US Borrower or
such Restricted Subsidiary shall have made adequate provision therefor
in accordance with US GAAP;
(b) the Lien of any judgment rendered, or claim filed, against US Borrower
or any Restricted Subsidiary which does not constitute an Event of
Default and which US Borrower or any such Restricted Subsidiary shall
be contesting in good faith; provided US Borrower or
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such Restricted Subsidiary shall have made adequate provision therefor
in accordance with US GAAP;
(c) Liens, privileges or other charges imposed or permitted by law such as
statutory liens and deemed trusts, carriers' liens, builders' liens,
materialmens' liens and other liens, privileges or other charges of a
similar nature which relate to obligations not due or delinquent,
including any lien or trust arising in connection with workers'
compensation, unemployment insurance, pension, employment and similar
laws or regulations;
(d) Liens arising in the ordinary course of and incidental to construction,
maintenance or current operations which have not been filed pursuant to
law against US Borrower or any Restricted Subsidiary or in respect of
which no steps or proceedings to enforce such lien have been initiated
or which relate to obligations which are not due or delinquent or if
due or delinquent, which US Borrower or such Restricted Subsidiary
shall be contesting in good faith; provided US Borrower or such
Restricted Subsidiary shall have made adequate provision therefor in
accordance with US GAAP;
(e) Liens incurred or created in the ordinary course of business and in
accordance with sound oil and gas industry practice in respect of the
exploration, development or operation of oil and gas properties or
related production or processing facilities or the transmission of
petroleum substances as security in favor of any other Person
conducting the exploration, development, operation or transmission of
the property to which such Liens relate, for US Borrower's or any of
its Restricted Subsidiaries' portion of the costs and expenses of such
exploration, development, operation or transmission, provided that such
costs or expenses are not due or delinquent or, if due or delinquent,
which US Borrower or such Restricted Subsidiary shall be contesting in
good faith; provided US Borrower or such Restricted Subsidiary shall
have made adequate provision therefor in accordance with US GAAP;
(f) overriding royalty interests, net profit interests, reversionary
interests and carried interests or other similar burdens on production
in respect of US Borrower's or any of its Restricted Subsidiaries' oil
and gas properties that are entered into with or granted to arm's
length third parties in the ordinary course of business and in
accordance with sound oil and gas industry practice in the area of
operation;
(g) Liens for penalties arising under non-participation provisions of
operating agreements in respect of US Borrower's or any of its
Restricted Subsidiaries' oil and gas properties if such Liens do not
materially detract from the value of any material part of the property
of US Borrower and its Subsidiaries taken as a whole;
(h) easements, rights-of-way, servitudes, zoning or other similar rights or
restrictions in respect of land held by US Borrower or any Restricted
Subsidiary (including, without limitation, rights-of-way and servitudes
for railways, sewers, drains, pipe lines, gas and water mains, electric
light and power and telephone or telegraph or cable television
conduits, poles, wires and cables) which, either alone or in the
aggregate, do not materially detract from the value of such land or
materially impair its use in the operation of the business of US
Borrower and its Restricted Subsidiaries taken as a whole;
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(i) security given by US Borrower or any Restricted Subsidiary to a public
utility or any Governmental Authority when required by such public
utility or Governmental Authority in the ordinary course of the
business of US Borrower or any Restricted Subsidiary in connection with
operations of US Borrower or any Restricted Subsidiary if such security
does not, either alone or in the aggregate, materially detract from the
value of any material part of the property of US Borrower and its
Restricted Subsidiaries taken as a whole;
(j) the right reserved to or vested in any Governmental Authority by the
terms of any lease, license, grant or permit or by any statutory or
regulatory provision to terminate any such lease, license, grant or
permit or to require annual or other periodic payments as a condition
of the continuance thereof;
(k) all reservations in the original grant of any lands and premises or any
interests therein and all statutory exceptions, qualifications and
reservations in respect of title;
(l) any Lien from time to time disclosed by US Borrower or any Restricted
Subsidiary to the US Agent or the Canadian Agent and which is consented
to by the Majority Lenders;
(m) any right of first refusal in favor of any Person granted in the
ordinary course of business with respect to all or any of the oil and
gas properties of US Borrower or any Restricted Subsidiary;
(n) Liens on cash or marketable securities of US Borrower or any Restricted
Subsidiary granted in connection with any Hedging Contract permitted
under the US Agreement;
(o) Liens in respect of Indebtedness permitted by Sections 7.1(b), 7.1(g)
and 7.1(k);
(p) Liens in favor of the US Agent or the Canadian Agent for the benefit of
the Lender Parties;
(q) Liens to collateralize moneys held in a cash collateral account by a
lender in respect of the prepayment of bankers' acceptances, letters of
credit or similar obligations accepted or issued by such lender but
only if at the time of such prepayment no default or event of default
has occurred and is continuing under the credit facility pursuant to
which the bankers' acceptances or letters of credit have been accepted
or issued;
(r) purchase money Liens upon or in any tangible personal property and
fixtures (including real property surface rights upon which such
fixtures are located and contractual rights and receivables relating to
such property) acquired by US Borrower or a Restricted Subsidiary in
the ordinary course of business to secure the purchase price of such
property or to secure Indebtedness incurred solely for the purpose of
financing the acquisition of such property, including any Liens
existing on such property at the time of its acquisition (other than
any such Lien created in contemplation of any such acquisition);
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<PAGE> 93
(s) the rights of buyers under production sale contracts related to US
Borrower's or a Restricted Subsidiary's share of petroleum substances
entered into in the ordinary course of business, provided that the
contracts create no rights (including any Lien) in favor of the buyer
or any other Person in, to or over any reserves of petroleum substances
or other assets of US Borrower or a Restricted Subsidiary, other than a
dedication of reserves (not by way of Lien or absolute assignment) on
usual industry terms;
(t) Liens arising in respect of operating leases of personal property under
which Canadian Borrowers or any of their Subsidiaries are lessees;
(u) Liens on property of a Person existing at the time such Person becomes
a Restricted Subsidiary, is merged into or consolidated with US
Borrower or any of its Subsidiaries; provided, such Liens were in
existence prior to the contemplation of such stock acquisition, merger
or consolidation and do not extend to any assets other than those of
the Person so acquired or merged into or consolidated with US Borrower
or any of its Subsidiaries.
(v) any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Lien referred
to in the preceding paragraphs (a) to (u) inclusive of this definition,
so long as any such extension, renewal or replacement of such Lien is
limited to all or any part of the same property that secured the Lien
extended, renewed or replaced (plus improvements on such property), the
indebtedness or obligation secured thereby is not increased and such
Lien is otherwise permitted by the applicable section above;
(w) in addition to Liens permitted by clauses (a) through (v) above, Liens
on property or assets if the aggregate Indebtedness secured thereby
does not exceed US $25,000,000.
provided that nothing in this definition shall in and of itself constitute or be
deemed to constitute an agreement or acknowledgment by the US Agent or the
Canadian Agent or any Lender that the Indebtedness subject to or secured by any
such Permitted Lien ranks (apart from the effect of any Lien included in or
inherent in any such Permitted Liens) in priority to the Obligations;
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture,
Tribunal, or any other legally recognizable entity.
"Rating Agency" means any of S & P or Moody's, or their respective
successors.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"Request for an Offer of Extension" means (a) with respect to the
Canadian Agreement, a written request made by Canadian Borrowers to the Lenders
to have Required Lenders issue an offer to Canadian Borrowers extending the
Canadian Revolving Period for a further 364 days, and (b) with respect to the US
Agreement, a written request made by US Borrower to the Lenders
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<PAGE> 94
to have Required Lenders issue an offer to US Borrower extending the Tranche B
Revolving Period for a further 364 days.
"Required Lenders" means Lenders whose aggregate Percentage Shares
equal or exceed fifty percent (50%).
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including any marginal, special, supplemental, or emergency reserves)
are required to be maintained under regulations issued from time to time by the
Board of Governors of the Federal Reserve System of the United States of America
(or any successor) by member banks of such Federal Reserve System against
"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks with respect to
(a) any category of liabilities which includes deposits by reference to which
the Adjusted US Dollar Eurodollar Rate or the Adjusted Canadian Dollar
Eurodollar Rate is to be determined, or (b) any category of extensions of credit
or other assets which include US Dollar Eurodollar Loans or Canadian Dollar
Eurodollar Loans.
"Restricted Distribution" means any Distribution that is not a
Permitted Distribution.
"Restricted Investment" means any Investment that is not a Permitted
Investment.
"Restricted Payments" has the meaning given to such term in Section 7.5
of the US Agreement.
"Restricted Person" means any of US Borrower and each Restricted
Subsidiary.
"Restricted Subsidiary" means each Canadian Borrower and any other
Subsidiary of US Borrower that is not an Unrestricted Subsidiary; provided, the
following Subsidiaries of US Borrower shall be deemed not to be Restricted
Subsidiaries:
(a) BN Co. A Limited Partnership, a New Mexico limited partnership;
(b) BN Coal, L.L.C., a New Mexico limited liability company;
(c) BN Non-Coal, L.L.C., a New Mexico limited liability company;
(d) Blackwood & Nicholls Co., a New Mexico limited partnership;
(e) Devon-Blanco Company, an Oklahoma general partnership;
(f) 172173 Canada Inc.;
(g) 410760 Alberta Ltd.;
(h) 653087 Alberta Ltd.;
(i) 661151 Alberta Ltd.;
(j) 728097 Alberta Ltd.;
(k) Foothills Partnership;
(l) Morrison Administration Corporation;
(m) Morrison Capital Inc.;
(n) Morrison Gas Gathering Inc.;
(o) Morrison Operating Company Ltd.;
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(p) Morrison Petroleums (Alberta) Ltd.;
(q) Polar Energy Marketing Corporation; and
(r) Saratoga Processing Company, Ltd.
"S & P" means Standard & Poor's Ratings Services (a division of McGraw
Hill Companies, Inc.), or its successor.
"Schedule I BA Reference Banks" means the Lenders listed in Schedule I
to the Bank Act (Canada) as are, at such time, designated by Canadian Agent,
with the prior consent of Canadian Borrowers (acting reasonably), as the
Schedule I BA reference Banks.
"Schedule II BA Reference Banks" means the Lenders listed in Schedule
II to the Bank Act (Canada) as are, at such time, designated by Canadian Agent,
with the prior consent of Canadian Borrowers (acting reasonably), as the
Schedule II BA Reference Banks.
"Stamping Fee Rate" means with respect to any Bankers' Acceptance
accepted by any Canadian Resident Lender at any time, the Applicable Margin then
in effect; provided that if an Event of Default has occurred and is continuing,
the Stamping Fee Rate shall be increased by two hundred (200) Basis Points.
"Subordinated US Borrower Debentures" means those certain Convertible
Junior Subordinated Debentures issued by US Borrower to Devon Trust pursuant to
the Subordinated US Borrower Indenture and subordinated to the Obligations, in
the aggregate principal amount of approximately US $154,500,000.
"Subordinated US Borrower Guarantee" means that certain Guarantee dated
July 1, 1996, by US Borrower in favor of the holders of the Devon Trust
Securities pursuant to the Subordinated US Borrower Indenture and subordinated
to the Obligations, guaranteeing certain payments to be made by Devon Trust
pursuant to the Devon Trust Securities.
"Subordinated US Borrower Indenture" means that certain Trust Indenture
dated July 1, 1996, between US Borrower and The Bank of New York, as indenture
trustee.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company, joint venture, or other
business or corporate entity, enterprise or
organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person,
provided that (a) associations, joint ventures or other relationships (i) which
are established pursuant to a standard form operating agreement or similar
agreement or which are partnerships for purposes of federal income taxation
only, (ii) which are not corporations or partnerships (or subject to the Uniform
Partnership Act) under applicable state Law, and (iii) whose businesses are
limited to the exploration, development and operation of oil, gas or mineral
properties, transportation and related facilities and interests owned directly
by the parties in such associations, joint ventures or relationships, shall not
be deemed to be "Subsidiaries" of such Person and (b) associations, joint
ventures or other relationships (i) which are not corporations or partnerships
under applicable provincial Law, and (ii) whose businesses are limited to the
exploration, development and operation of oil, gas or
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mineral properties, transportation and related facilities and interests owned
directly by the parties in such associations, joint ventures or relationships,
shall not be deemed to be "Subsidiaries" of such Person.
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation
under Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate
from an ERISA Plan during a plan year in which it was a "substantial employer"
as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of
intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment
as a termination under Section 4041 of ERISA, or (d) the institution of
proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, or (e) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any ERISA Plan.
"Total Capitalization" means the sum (without duplication) of (i) US
Borrower's Consolidated Total Funded Debt plus (ii) US Borrower's Consolidated
shareholder's equity plus (iii) 70% of the outstanding balance of the Devon
Trust Securities.
"Total Funded Debt" means (i) Liabilities referred to in clauses (a),
(b), (c), (d), and (e) of the definition of "Indebtedness", plus (ii) 30% of the
outstanding balance of the Devon Trust Securities.
"Tranche A Facility Usage" means, at the time in question, the
aggregate amount of Tranche A Loans and existing US LC Obligations outstanding
at such time under the US Agreement.
"Tranche A Loan" has the meaning given it in Section 1.1(a) of the US
Agreement.
"Tranche A Maximum Credit Amount" means $130,000,000.
"Tranche A Note" has the meaning given it in Section 1.1(a) of the US
Agreement.
"Tranche B Conversion Date" means the date which is 364 days after the
Closing Date, or such later day to which the Tranche B Conversion Date is
extended pursuant to Section 1.1 of the US Agreement.
"Tranche B Facility Fee Rate" means, on any date, the number of Basis
Points per annum set forth below based on the Applicable Rating Level on such
date:
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<PAGE> 97
<TABLE>
<CAPTION>
=============================================
Applicable Applicable Tranche B
Rating Level Facility Fee Rate
---------------------------------------------
<S> <C>
Level I 7.0
---------------------------------------------
Level II 9.0
---------------------------------------------
Level III 10.0
---------------------------------------------
Level IV 15.0
---------------------------------------------
Level V 22.5
=============================================
</TABLE>
"Tranche B Facility Usage" means, at the time in question, the
aggregate amount of Tranche B Loans outstanding at such time under the US
Agreement.
"Tranche B Loan" has the meaning given it in Section 1.1(b) of the US
Agreement.
"Tranche B Maturity Date" means the date which is two years after the
Tranche B Conversion Date.
"Tranche B Maximum Credit Amount" means $75,000,000.
"Tranche B Note" has the meaning given it in Section 1.1(b) of the US
Agreement.
"Tranche B Revolving Period" means the period from the Closing Date
until the Tranche B Conversion Date.
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency or
instrumentality of the United States of America or Canada or any state,
province, commonwealth, nation, territory, possession, county, parish, town,
township, village or municipality, whether now or hereafter constituted or
existing.
"Type" means (i) with respect to any US Loans, the characterization of
such US Loans as either US Base Rate Loans or US Dollar Eurodollar Loans and
(ii) with respect to any Canadian Advances, the characterization of such
Canadian Advances as Canadian Base Rate Loans, Canadian Prime Rate Loans, US
Dollar Eurodollar Loans, Canadian Dollar Eurodollar Loans or Bankers'
Acceptances.
"Unrestricted Subsidiary" means any corporation, association,
partnership, limited liability company, joint venture, or other business or
corporate entity, enterprise or organization in which US Borrower does not
presently own an interest (directly or indirectly) which hereafter becomes a
Subsidiary of US Borrower and which, within 90 days thereafter, is designated as
an Unrestricted Subsidiary by US Borrower to US Agent, provided that US Borrower
may not designate as an Unrestricted Subsidiary any Subsidiary in which it has
made an Investment of more than US $25,000,000 (directly or indirectly) by any
means other than newly issued stock or
26
<PAGE> 98
treasury stock of US Borrower, which may be used to make an Investment in
Unrestricted Subsidiaries without limit and provided further that in the event
the book value of the assets of any Unrestricted Subsidiary at any time exceeds
US $25,000,000, such Subsidiary shall cease to be an Unrestricted Subsidiary and
shall automatically become a Restricted Person.
"US Account" means an account established by Canadian Agent in New York
into which funds to be advanced to Canadian Borrowers by Lenders in US Dollars
and funds to be paid by Canadian Borrowers to Lenders in US Dollars will be
deposited.
"US Agent" means NationsBank, N.A., as administrative agent, under the
US Agreement and its successors and assigns in such capacity.
"US Agreement" means that certain Credit Agreement of even date
herewith among US Borrower, Agent and the Lenders, as it may be amended,
supplemented, restated or otherwise modified and in effect from time to time.
"US Base Rate" means, for any day, the rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus one-half of one percent
(0.5%) and (b) the US Reference Rate for such day. Any change in the US Base
Rate due to a change in the US Reference Rate or the Federal Funds Rate shall be
effective on the effective date of such change in the US Reference Rate or
Federal Funds Rate. No US Base Rate charged by any Person shall ever exceed the
Highest Lawful Rate.
"US Base Rate Loan" means a US Loan made in US Dollars which bears
interest at the US Base Rate.
"US Borrower" means Devon Energy Corporation, an Oklahoma corporation.
"US Dollar" or "US $" means the lawful currency of the United States of
America.
"US Dollar Equivalent" means, with respect to an amount denominated in
Canadian Dollars, the amount of US Dollars required to purchase the relevant
stated amount of Canadian Dollars on the date of determination.
"US Dollar Eurodollar Loan" means a US Loan or a Canadian Loan, in each
case, which bears interest at the Adjusted US Dollar Eurodollar Rate.
"US Dollar Eurodollar Rate" means, for any US Dollar Eurodollar Loan
within a Borrowing and with respect to the related Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on the Dow Jones Market Service (formerly Telerate Access Service)
Page 3750 (or any successor page) as the London interbank offered rate for
deposits in US Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period. If for any reason such rate is not available, the term "US
Dollar Eurodollar Rate" shall mean, for any US Dollar Eurodollar Loan within a
Borrowing and with respect to the related Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
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<PAGE> 99
appearing on Reuters Screen LIBO Page as the London interbank offered rate for
deposits of US Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%).
"US Facility Commitment Period" means the period from and including the
Closing Date until the US Facility Maturity Date (or, if earlier, the day on
which the obligations of Lenders to make US Loans hereunder or the obligations
of US LC Issuer to issue Letters of Credit hereunder have been terminated or the
US Notes first become due and payable in full).
"US Facility Maturity Date" means December 10, 2003.
"US Facility Usage" means, at the time in question, the aggregate
amount of US Loans and existing US LC Obligations outstanding at such time under
the US Agreement.
"US GAAP" means those generally accepted accounting principles and
practices which are recognized as such from time to time by the Financial
Accounting Standards Board (or any generally recognized successor) and which, in
the case of US Borrower and its Consolidated Subsidiaries, are applied for all
periods after the Closing Date in a manner consistent with the manner in which
such principles and practices were applied to the Initial Financial Statements.
"US LC Issuer" means NationsBank, N.A. in its capacity as the issuer of
Letters of Credit under the US Agreement, and its successors in such capacity.
"US LC Obligations" means, at the time in question, with respect to the
US Agreement, the sum of all Matured US LC Obligations plus the maximum amounts
which US LC Issuer might then or thereafter be called upon to advance under all
Letters of Credit then outstanding.
"US LC Sublimit" means US $25,000,000.
"US Loans" means the Tranche A Loans, the Tranche B Loans and
Competitive Bid Loans made under the US Agreement.
"US Loan Documents" means the US Agreement, the US Notes issued under
the US Agreement, the Letters of Credit issued under the US Agreement, the LC
Applications related thereto, and all other agreements, certificates, documents,
instruments and writings at any time delivered in connection herewith or
therewith (exclusive of term sheets and commitment letters).
"US Maximum Credit Amount" means the amount of US $205,000,000.
"US Notes" means the Tranche A Notes, the Tranche B Notes and the
Competitive Bid Notes issued under the US Agreement.
28
<PAGE> 100
"US Obligations" means all Liabilities from time to time owing by any
Restricted Person to any Lender Party under or pursuant to any of the US Loan
Documents, including all US LC Obligations owing thereunder. "US Obligation"
means any part of the US Obligations.
"US Reference Rate" means the per annum rate of interest established
from time to time by NationsBank, N.A. as its prime rate, which rate may not be
the lowest rate of interest charged by NationsBank, N.A. to its customers.
"Withholding Tax" has the meaning given it in Section 3.2(d) of the
Canadian Agreement.
29
<PAGE> 1
EXHIBIT 10.2
[EXECUTION]
================================================================================
CANADIAN CREDIT AGREEMENT
-------------------------------------------------------
NORTHSTAR ENERGY CORPORATION
and
DEVON ENERGY CANADA CORPORATION
as Canadian Borrowers
BANK OF AMERICA CANADA
as Administrative Agent
NATIONSBANC MONTGOMERY SECURITIES, L.L.C.
as Arranger
FIRST CHICAGO CAPITAL MARKETS, INC.
as Syndication Agent
BANK OF MONTREAL
as Documentation Agent
FIRST UNION
as Co-Documentation Agent
and CERTAIN FINANCIAL INSTITUTIONS
as Lenders
-------------------------------------------------------
US $195,000,000
December 11, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C> <C> <C>
CREDIT AGREEMENT..................................................................................................1
Section 1.1. Commitments to Make Advances; Canadian Notes...........................................1
Section 1.2. Requests for New Canadian Advances.....................................................1
Section 1.3. Continuations and Conversions of Existing Canadian Advances............................3
Section 1.4. Repayments.............................................................................4
Section 1.5. Interest Rates and Fees................................................................7
Section 1.6. Extension of Conversion Date...........................................................8
Section 1.7. Conversion to Canadian Term Loan.......................................................9
Section 1.8. Non-Accepting Lender...................................................................9
Section 1.9. Competitive Bid Loans.................................................................10
Section 1.10. Use of Proceeds.......................................................................12
ARTICLE II - Bankers' Acceptances and Letters of Credit..........................................................13
Section 2.1. Creation of Bankers' Acceptances......................................................13
Section 2.2. Terms of Acceptance by the Canadian Resident Lenders..................................13
Section 2.3. General Procedures for Bankers' Acceptances...........................................15
Section 2.4. Execution of Bankers' Acceptances.....................................................17
Section 2.5. Escrowed Funds........................................................................17
Section 2.6. Letters of Credit.....................................................................17
Section 2.7. Requesting Letters of Credit..........................................................18
Section 2.8. Reimbursement and Participations......................................................19
Section 2.9. Letter of Credit Fees.................................................................19
Section 2.10. No Duty to Inquire....................................................................19
Section 2.11. LC Collateral.........................................................................20
ARTICLE III - Payments to Lenders................................................................................21
Section 3.1. General Procedures....................................................................21
Section 3.2. Change in Law; Gross Up; Increased Cost and Reduced Return............................23
Section 3.3. Limitation on Types of Canadian Loans.................................................25
Section 3.4. Illegality............................................................................25
Section 3.5. Treatment of Affected Loans...........................................................25
Section 3.6. Compensation..........................................................................26
Section 3.7. Change of Applicable Lending Office...................................................27
Section 3.8. Replacement of Lenders................................................................27
Section 3.9. Other Taxes...........................................................................27
Section 3.10. Currency Conversion and Currency Indemnity............................................28
ARTICLE IV - Conditions Precedent to Advances....................................................................29
Section 4.1. Documents to be Delivered.............................................................29
Section 4.2. Additional Conditions Precedent to First Canadian Loan or First Letter
of Credit.............................................................................30
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Section 4.3. Additional Conditions Precedent to all Canadian Loans and Letters
of Credit.............................................................................31
ARTICLE V - Representations and Warranties.......................................................................31
Section 5.1. No Default............................................................................31
Section 5.2. Organization and Good Standing........................................................31
Section 5.3. Authorization.........................................................................32
Section 5.4. No Conflicts or Consents..............................................................32
Section 5.5. Enforceable Obligations...............................................................32
Section 5.6. Full Disclosure.......................................................................32
Section 5.7. Litigation............................................................................33
Section 5.8. Environmental and Other Laws..........................................................33
Section 5.9. Names and Places of Business..........................................................33
Section 5.10. Canadian Borrowers' Subsidiaries......................................................34
Section 5.11. Title to Properties; Licenses.........................................................34
Section 5.12. Solvency..............................................................................34
Section 5.13. Year 2000 Compliance..................................................................34
ARTICLE VI - Affirmative Covenants of Canadian Borrowers.........................................................35
Section 6.1. Payment and Performance...............................................................35
Section 6.2. Books, Financial Statements and Reports...............................................35
Section 6.3. Other Information and Inspections.....................................................36
Section 6.4. Notice of Material Events and Change of Address.......................................37
Section 6.5. Maintenance of Properties.............................................................37
Section 6.6. Maintenance of Existence and Qualifications...........................................37
Section 6.7. Payment of Trade Liabilities, Taxes, etc..............................................38
Section 6.8. Insurance.............................................................................38
Section 6.9. Performance on Canadian Borrowers' Behalf.............................................38
Section 6.10. Interest..............................................................................38
Section 6.11. Compliance with Law...................................................................38
Section 6.12. Environmental Matters.................................................................38
Section 6.13. Bank Accounts; Offset.................................................................39
Section 6.14. Year 2000 Compliance..................................................................39
ARTICLE VII - Negative Covenants of Canadian Borrowers...........................................................39
Section 7.1. Indebtedness..........................................................................40
Section 7.2. Limitation on Liens...................................................................41
Section 7.3. Limitation on Mergers.................................................................41
Section 7.4. Limitation on Issuance of Securities by Subsidiaries of US Borrower...................42
Section 7.5. Limitation on Restricted Payments.....................................................42
Section 7.6. Transactions with Affiliates..........................................................42
Section 7.7. Funded Debt to Total Capitalization...................................................42
Section 7.8. Funded Debt to EBITDA.................................................................42
Section 7.9. Hedging Contracts.....................................................................42
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ARTICLE VIII - Events of Default and Remedies....................................................................43
Section 8.1. Events of Default.....................................................................43
Section 8.2. Remedies..............................................................................46
ARTICLE IX - Canadian Agent......................................................................................46
Section 9.1. Appointment, Powers, and Immunities...................................................46
Section 9.2. Reliance by Canadian Agent............................................................47
Section 9.3. Defaults..............................................................................47
Section 9.4. Rights as Lender......................................................................47
Section 9.5. Indemnification.......................................................................48
Section 9.6. Non-Reliance on Canadian Agent and Other Lenders......................................48
Section 9.7. Rights as Lender......................................................................48
Section 9.8. Sharing of Set-Offs and Other Payments................................................48
Section 9.9. Investments...........................................................................49
Section 9.10. Benefit of Article IX.................................................................49
Section 9.11. Resignation...........................................................................49
Section 9.12. Lenders to Remain Pro Rata............................................................50
ARTICLE X - Miscellaneous........................................................................................50
Section 10.1. Waivers and Amendments; Acknowledgments...............................................50
Section 10.2. Survival of Agreements; Cumulative Nature.............................................52
Section 10.3. Notices...............................................................................52
Section 10.4. Payment of Expenses; Indemnity........................................................53
Section 10.5. Parties in Interest...................................................................54
Section 10.6. Assignments and Participations........................................................54
Section 10.7. Confidentiality.......................................................................56
Section 10.8. Governing Law; Submission to Process..................................................56
Section 10.9. Waiver of Judgment Interest Act (Alberta).............................................57
Section 10.10. Deemed Reinvestment Not Applicable....................................................57
Section 10.11. Limitation on Interest................................................................57
Section 10.12. Termination; Limited Survival.........................................................58
Section 10.13. Severability..........................................................................58
Section 10.14. Counterparts; Fax.....................................................................58
Section 10.15. Waiver of Jury Trial, Punitive Damages, etc...........................................59
Section 10.16. Defined Terms.........................................................................59
Section 10.17. Annex I, Exhibits and Schedules; Additional Definitions...............................59
Section 10.18. Amendment of Defined Instruments......................................................59
Section 10.19. References and Titles.................................................................59
Section 10.20. Calculations and Determinations.......................................................60
Section 10.21. Construction of Indemnities and Releases..............................................60
Section 10.22. Separate Obligations..................................................................60
</TABLE>
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<PAGE> 5
Schedules and Exhibits:
<TABLE>
<S> <C> <C>
Annex I - Defined Terms
Annex II - Lenders Schedule
Schedule 1 - Disclosure Schedule
Exhibit A - Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Opinion of Counsel for Restricted Persons
Exhibit F - Assignment and Acceptance Agreement
Exhibit G - Reserved
Exhibit H - Power of Attorney for BAs
Exhibit I - Competitive Bid Request
Exhibit J - Invitation to Bid
Exhibit K - Competitive Bid
Exhibit L - Competitive Bid Accept/Reject Letter
Exhibit M - Competitive Bid Note
</TABLE>
iv
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of December 11, 1998, by and among
Northstar Energy Corporation, an Alberta corporation, and Devon Energy Canada
Corporation, an Alberta corporation (herein collectively, called "Canadian
Borrowers"), Bank of America Canada, individually and as administrative agent
(herein called "Canadian Agent") and the undersigned Lenders. In consideration
of the mutual covenants and agreements contained herein the parties hereto agree
as follows:
ARTICLE I - Canadian Advances
Section 1.1. Commitments to Make Advances; Canadian Notes. Subject to
the terms and conditions hereof, each Lender agrees to extend credit to each
Canadian Borrower by advancing funds to the applicable Canadian Borrower
specified in a Borrowing Notice (herein called such Lender's "Canadian Revolving
Loans" and, with reference to Canadian Resident Lenders only, accepting or
purchasing drafts of Bankers' Acceptances issued under this Agreement by the
applicable Canadian Borrower specified in a Borrowing Notice (herein called such
Lender's "Bankers' Acceptances"; each Lender's Canadian Revolving Loans,
Canadian Term Loans, and Bankers' Acceptances are herein collectively called
such Lender's "Canadian Advances") upon Canadian Borrower's request from time to
time during the Canadian Revolving Period, provided that (i) subject to Sections
2.1, 2.2., 3.3, 3.4 and 3.5, all Lenders are requested to make Canadian Advances
of the same Type in accordance with their respective Percentage Shares and as
part of the same Borrowing and (ii) such Lender's Percentage Share of the
Canadian Facility Usage shall never exceed such Lender's Percentage Share of the
Canadian Maximum Credit Amount. The aggregate amount of all Canadian Loans in
any Borrowing must be an integral multiple of $100,000 in the Applicable
Currency which equals or exceeds $1,000,000 in the Applicable Currency or must
equal the unadvanced portion of the Canadian Maximum Credit Amount. Each
Canadian Borrower may have no more than ten Borrowings of Eurodollar Loans
outstanding at any time. The obligation of each Canadian Borrower to repay to
each Lender the aggregate amount of all Canadian Advances made by such Lender to
such Borrower, together with interest accruing in connection therewith, shall be
evidenced by a separate promissory note (herein called such Lender's "Canadian
Note") made, by each Canadian Borrower payable to the order of such Lender in
the form of Exhibit A with appropriate insertions. The amount of principal owing
on any Lender's Canadian Note at any given time shall be the aggregate amount of
all Canadian Advances theretofore made by such Lender minus all payments of
principal theretofore received by such Lender on such Canadian Note. Interest on
each Canadian Note shall accrue and be due and payable as provided herein and
therein. Each Canadian Note shall be due and payable as provided herein and
therein and shall be due and payable in full on the Canadian Facility Maturity
Date.
Section 1.2. Requests for New Canadian Advances. The applicable
Canadian Borrower must give to Canadian Agent written notice (or telephonic
notice promptly confirmed in writing) of any requested Borrowing of new Canadian
Loans and any requested Borrowing by
<PAGE> 7
way of new Bankers' Acceptances. Each such notice constitutes a "Borrowing
Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of new
Canadian Base Rate Loans and the date on which such Canadian Base Rate Loans are
to be advanced, (ii) the aggregate amount of any such Borrowing of Canadian
Prime Rate Loans and the date on which such Canadian Prime Rate Loans are to be
advanced, (iii) the aggregate amount of any such Borrowing of new US Dollar
Eurodollar Loans, the date on which such US Dollar Eurodollar Loans are to be
advanced (which shall be the first day of the Eurodollar Interest Period which
is to apply thereto), and the length of the applicable Eurodollar Interest
Period, (iv) the aggregate amount of any such Borrowing of new Canadian Dollar
Eurodollar Loans, the date on which such Canadian Dollar Eurodollar Loans are to
be advanced (which shall be the first day of the Eurodollar Interest Period
which is to apply thereto), and the length of the applicable Eurodollar Interest
Period, or (v) the aggregate amount of any such Borrowing by way of Bankers'
Acceptances (subject to Section 2.2(f)), and the date on which such Bankers'
Acceptances are to be accepted and the maturity of such Bankers' Acceptances;
and
(b) be received by Canadian Agent not later than 11:00 a.m., Toronto,
Ontario time, on (i) on the Business Day preceding the day on which any such
Canadian Base Rate Loans or Canadian Prime Rate Loans are to be made, (ii) the
third Business Day preceding the day on which any such Eurodollar Loans are to
be made or (iii) the third Business Day before such Bankers' Acceptances are to
be issued.
Each such written request or confirmation must be made in the form and substance
of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each
such telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by the applicable Canadian Borrower as to the
matters which are required to be set out in such written confirmation. Upon
receipt of any such Borrowing Notice, Canadian Agent shall give each Lender
prompt notice of the terms thereof not later than 5:00 p.m. Toronto, Ontario
time on the day it receives such Borrowing Notice from the applicable Canadian
Borrower if it receives such Borrowing Notice by 11:00 a.m., Toronto, Ontario
time, otherwise on the next Business Day. If all conditions precedent to such
new Canadian Advances have been met, (i) each Lender will on the date requested
promptly remit to Canadian Agent by 1:00 p.m. Toronto, Ontario time its Canadian
Advances made in Canadian Dollars to Canadian Agent's office in Toronto, Canada
and its Canadian Advances made in United States Dollars to the US Account in New
York, New York) in immediately available funds, and upon receipt of such funds,
unless to its actual knowledge any conditions precedent to such Canadian
Advances have been neither met nor waived as provided herein, Canadian Agent
shall promptly make such Canadian Advances available to the applicable Canadian
Borrower or (ii) each Canadian Resident Lender will accept drafts of Bankers'
Acceptances on the date requested in accordance with Sections 2.1 through 2.3.
Unless Canadian Agent shall have received prompt notice from a Lender that such
Lender will not make available to Canadian Agent such Lender's new Canadian
Advance, Canadian Agent may in its discretion assume that such Lender has made
such Canadian Advance available to Canadian Agent in accordance with this
section and Canadian Agent may if it chooses, in reliance upon such assumption,
make such Canadian Advance available to the applicable Canadian Borrower. If and
to the extent such Lender shall not so make its new Canadian Advance available
to Canadian Agent, such Lender and the applicable
2
<PAGE> 8
Canadian Borrower severally agree to pay or repay to Canadian Agent within three
days after demand the amount of such Canadian Advance together with interest
thereon, for each day from the date such amount was made available to the
applicable Canadian Borrower until the date such amount is paid or repaid to
Canadian Agent, with interest at (1) the Canadian Prime Rate, if such Lender is
making such payment and (2) the interest rate applicable at the time to the
other new Canadian Advances made on such date, if a Canadian Borrower is making
such repayment; provided that Canadian Agent gave notice of the terms of the
Borrowing Notice to such Lender in accordance with the terms of this Section
1.2. If neither such Lender nor such Canadian Borrower pays or repays to
Canadian Agent such amount within such three-day period, Canadian Agent shall in
addition to such amount be entitled to recover from such Lender and from the
applicable Canadian Borrower, on demand, interest on such Canadian Advance at
the Default Rate applicable thereto, calculated from the date such amount was
made available to such Canadian Borrower. The failure of any Lender to make any
new Canadian Advance to be made by it hereunder shall not relieve any other
Lender of its obligation hereunder, if any, to make its new Canadian Advance,
but no Lender shall be responsible for the failure of any other Lender to make
any new Canadian Advance to be made by such other Lender.
Section 1.3. Continuations and Conversions of Existing Canadian
Advances. Subject to the terms of Section 2.3 with respect to Bankers'
Acceptances, the applicable Canadian Borrower may make the following elections
with respect to Canadian Advances already outstanding under this Agreement: to
convert any Type of Canadian Advance to any other Type of Canadian Advance,
provided that any such Conversion of any Eurodollar Loan must be made on the
last day of the Eurodollar Interest Period applicable thereto and any such
Conversion of a Bankers' Acceptance must be made on the date of maturity
thereof; and to continue Eurodollar Loans beyond the expiration of such
Eurodollar Interest Period by designating a new Eurodollar Interest Period to
take effect at the time of such expiration, and to rollover any existing
Bankers' Acceptance by designating the new maturity date applicable thereto. In
making such elections, the applicable Canadian Borrower may combine existing
Canadian Advances made pursuant to separate Borrowings into one new Borrowing or
divide existing Canadian Advances made pursuant to one Borrowing into separate
new Borrowings, provided that Canadian Borrowers may have no more than ten
Borrowings of US Dollar Eurodollar Loans outstanding at any time and no more
than ten Borrowings of Canadian Dollar Eurodollar Loans outstanding at any time.
To make any such election, the applicable Canadian Borrower must give to
Canadian Agent written notice (or telephonic notice promptly confirmed in
writing) of any such Conversion or Continuation of existing Canadian Advances,
with a separate notice given for each new Borrowing. Each such notice
constitutes a "Continuation/Conversion Notice" hereunder and must:
(a) specify the existing Canadian Advances made under this Agreement
which are to be continued or converted;
(b) specify (i) the aggregate amount of any Borrowing of Canadian Base
Rate Loans or Canadian Prime Rate Loans into which such existing Canadian
Advances are to be continued
3
<PAGE> 9
or converted and the date on which such Continuation or Conversion is to occur,
or (ii) the aggregate amount of any Borrowing of Eurodollar Loans into which
such existing Canadian Advances are to be continued or converted, the date on
which such Continuation or Conversion is to occur (which shall be the first day
of the Eurodollar Interest Period which is to apply to such Eurodollar Loans),
and the length of the applicable Eurodollar Interest Period, or (iii) the amount
of any Borrowing of Bankers' Acceptances into which such existing Canadian
Advances are to be continued or converted, the date on which such Continuation
or Conversion is to occur, and the maturity of such Bankers' Acceptances; and
(c) be received by Canadian Agent not later than 11:00 a.m., Toronto,
Ontario time, on (i) the first Business Day preceding the day on which any such
Continuation or Conversion to Canadian Base Rate Loans or Canadian Prime Rate
Loans is to occur, or (ii) the third Business Day preceding the day on which any
such Continuation or Conversion to Eurodollar Loans is to occur, or (iii) on the
third Business Day preceding the day on which any such Continuation or
Conversion to Bankers' Acceptances is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by the applicable Canadian Borrower as to
the matters which are required to be set out in such written confirmation. Upon
receipt of any such Continuation/Conversion Notice, Canadian Agent shall give
each Lender prompt notice of the terms thereof. Each Continuation/Conversion
Notice shall be irrevocable and binding on the applicable Canadian Borrower.
During the continuance of any Default, Canadian Borrowers may not make any
election to convert existing Canadian Advances made under this Agreement into
Eurodollar Loans or Bankers' Acceptances or continue existing Eurodollar Loans
made under this Agreement as Eurodollar Loans or to rollover existing Bankers'
Acceptances into new Bankers' Acceptances. If (due to the existence of a Default
or for any other reason) the applicable Canadian Borrower fails to timely and
properly give or are prevented hereunder from giving any Continuation/Conversion
Notice with respect to a Borrowing of existing Eurodollar Loans at least three
days prior to the end of the Eurodollar Interest Period applicable thereto, such
Eurodollar Loans shall automatically be converted into Canadian Base Rate Loans
(in the case of US Dollar Eurodollar Loans) or Canadian Prime Rate Loans (in the
case of Canadian Dollar Eurodollar Loans) at the end of such Eurodollar Interest
Period. No new funds shall be repaid by the applicable Canadian Borrower or
advanced by any Lender in connection with any Continuation or Conversion of
existing Canadian Advances pursuant to this section, and no such Continuation or
Conversion shall be deemed to be a new advance of funds for any purpose; such
Continuations and Conversions merely constitute a change in terms of already
outstanding Advances and the interest rate applicable thereto.
Section 1.4. Repayments.
(a) During Canadian Revolving Period. Subject to the terms and
conditions hereof, either Canadian Borrower may borrow, repay, and reborrow
hereunder during the Canadian Revolving Period, so long as (i) the applicable
Canadian Borrower gives notice to Canadian
4
<PAGE> 10
Agent by 2:00 p.m., Toronto, Ontario time on the Business Day immediately
preceding the date of prepayment (and Canadian Agent shall give each Lender
notice thereof by 4:30 p.m. Toronto, Ontario time on the date such notice is
received from the applicable Borrower if it receives such Borrowing Notice by
11:00 a.m., Toronto, Ontario time, otherwise on the next Business Day) all
partial prepayments of principal concurrently paid on the Canadian Loans are
increments of $100,000 in the Applicable Currency and in an aggregate amount
greater than or equal to $1,000,000 in the Applicable Currency and (ii) the
applicable Canadian Borrower pays all amounts owing in connection with the
prepayment of any Eurodollar Loan owing under Section 3.6.
(b) During Canadian Term Period.
(i) Optional Prepayments. Either Canadian Borrower may, upon giving
notice to Canadian Agent by 2:00 p.m., Toronto, Ontario time on the
Business Day immediately preceding the date of prepayment (and Canadian
Agent shall give each Lender notice thereof by 5:00 p.m. Toronto,
Ontario time on the date such notice is received from the applicable
Canadian Borrower if it receives such notice by 11:00 a.m., Toronto,
Ontario time, otherwise on the next Business Day), from time to time
during the Term Period and without premium or penalty, prepay the
Canadian Loans including Competitive Bid Notes, in whole or in part, so
long as all partial prepayments of principal concurrently paid on the
Canadian Loans are in increments of $100,000 in the Applicable Currency
and in an aggregate amount greater than or equal to $1,000,000 in the
Applicable Currency and so long as Canadian Borrowers pay all amounts
owing in connection with the prepayment of any Eurodollar Loan owing
under Section 3.6. Each prepayment of principal under this section
shall be accompanied by all interest then accrued and unpaid on the
principal so prepaid, shall be in addition to, and not in lieu of, all
payments otherwise required to be paid under the Canadian Loan
Documents at the time of such prepayment, and shall first reduce the
semi-annual scheduled installments (other than the final installment)
during the Term Period in respect of Canadian Loans that are not
Competitive Bid Loans, then reduce the final installment in respect of
Canadian Loans that are not Competitive Bid Loans, and then, unless
otherwise designated by Canadian Borrowers, reduce the outstanding
Competitive Bid Loans in order of shortest maturity.
(ii) Scheduled Repayments of Principal. Subject to Section
1.4(b)(iii) during the Term Period, Borrower shall repay the principal
of the Canadian Loans that are not Competitive Bid Loans in equal
semi-annual installments, each in an amount equal to two and one-half
percent (2.5%) of the outstanding principal balance of the Canadian
Advances on the Conversion Date. Such installments shall be due and
payable on each June 30 and December 31 each year and in a final
installment due and payable on the Canadian Facility Maturity Date in
an amount equal to the entire unpaid principal balance of such Loans
outstanding on the Canadian Facility Maturity Date.
(iii) Income Tax Act (Canada). In no event shall either Canadian
Borrower be required to repay more than 25% of the principal amount (as
defined in the Income Tax
5
<PAGE> 11
Act (Canada)) of the Canadian Advances made to it prior to five years
and a day after the Conversion Date, including, but not limited to
payments under Section 1.4(b)(ii), 1.4(c) and 1.4(d).
(c) Mandatory Prepayments. Except to the extent permitted by Section
1.4(d) if the aggregate principal amount of the outstanding Canadian Obligations
ever exceeds the Canadian Maximum Credit Amount, Canadian Borrowers shall
immediately prepay the principal of the Canadian Loans outstanding under the
Canadian Agreement in an amount at least equal to such excess; provided that in
no event shall a Canadian Borrower ever be required to make any mandatory
prepayments or repayments in respect of a loan in an aggregate amount of more
than 25% of the principal amount of the loan prior to five years and a day after
the Conversion Date. Each prepayment of principal under this section shall be
accompanied by all interest then accrued and unpaid on the principal so prepaid.
Any principal or interest prepaid pursuant to this section shall be in addition
to, and not in lieu of, all payments otherwise required to be paid under the
Canadian Loan Documents at the time of such prepayment. Any mandatory prepayment
of any principal amount (for the purposes of this Section, as defined in the
Income Tax Act (Canada)) of the Canadian Loans made by a Canadian Borrower
pursuant to Sections 1.4(c) and 1.4(d) or otherwise, shall first reduce the
semi-annual scheduled installments (other than the final installment) during the
Term Period in respect of Canadian Loans that are not Competitive Bid Loans,
then reduce the final installment in respect of Canadian Loans that are not
Competitive Bid Loans, and then, unless otherwise designated by Canadian
Borrowers, reduce the outstanding Competitive Bid Loans in order of shortest
maturity. If such prepayment of Canadian Loans does not eliminate such mandatory
prepayment obligation, the further repayment shall apply to an escrow fund
maintained in accordance with Section 2.5.
(d) Currency Fluctuations. Notwithstanding any other provision of this
Agreement, if any Canadian Loan outstanding is denominated in C$, Canadian Agent
shall have the right to calculate the outstanding Canadian Obligations for all
purposes including making a determination from time to time of the available
undrawn portion of the Canadian Maximum Credit Amount. If following such
calculation, Canadian Agent determines that the outstanding Canadian Obligations
are greater than 105% of the Canadian Advances permitted hereby to be
outstanding at such time, then Canadian Agent shall so advise Canadian Borrowers
and Canadian Borrowers shall repay, on the later of five Business Days after
such advice and the next applicable Interest Payment Date immediately following
such date of calculation, an amount sufficient to eliminate the excess over and
above the aggregate amount of the Canadian Loans permitted hereby to be
outstanding at such time, together with all accrued interest on the amount so
paid.
Any mandatory prepayment of any principal amount (for the purposes of
this Section, as defined in the Income Tax Act (Canada)) made by a Canadian
Borrower pursuant to Sections 1.4(c) and 1.4(d) or otherwise in respect of a
particular loan, shall reduce the semi-annual scheduled installments (other than
the final installment) during the Term Period in respect of that loan in inverse
order of maturity. Such mandatory prepayments shall be applied to the Canadian
Loans (other than Bankers' Acceptances and Competitive Bid Loans) pro rata based
on outstanding principal; provided that if such prepayment of Canadian Loans
does not eliminate
6
<PAGE> 12
such mandatory prepayment obligation, the further repayments shall apply first
to Competitive Bid Loans in order of shortest maturity, and second to an escrow
fund maintained in accordance with Section 2.5.
Section 1.5. Interest Rates and Fees.
(a) Interest Rates. The Canadian Loans shall bear interest payable by
the applicable Canadian Borrower as follows and all accrued and unpaid interest
on the Canadian Loans shall be due and payable on the applicable Interest
Payment Date at the place set forth in the Canadian Notes:
(i) Each Canadian Base Rate Loan shall bear interest on each day
outstanding at the Canadian US Dollar Base Rate in effect on such day.
(ii) Each Canadian Prime Rate Loan shall bear interest on each day
outstanding at the Canadian Prime Rate in effect on such day.
(iii) Each US Dollar Eurodollar Loan shall bear interest on each
day during the related Eurodollar Interest Period at the related
Adjusted US Dollar Eurodollar Rate in effect on such day.
(iv) Each Canadian Dollar Eurodollar Loan shall bear interest on
each day during the related Eurodollar Interest Period at the related
Adjusted Canadian Dollar Eurodollar Rate in effect on such day.
(v) Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing, each Canadian Loan shall bear interest on
each day outstanding at the applicable Default Rate. Past due payments
of principal and interest shall bear interest at the rates and in the
manner set forth in the Canadian Notes.
(b) Facility Fees. In consideration of each Lender's commitment to make
Canadian Advances under this Agreement, Canadian Borrowers will pay to Canadian
Agent for the account of each Lender a facility fee determined on a daily basis
by applying the Facility Fee Rate to such Lender's Percentage Share of the
Canadian Maximum Credit Amount on each day during the Canadian Revolving Period.
This facility fee shall be due and payable in arrears on the last day of each
Fiscal Quarter and at the end of the Canadian Revolving Period.
(c) Utilization Fees. In consideration of each Lender's commitment to
make Canadian Advances under this Agreement, Canadian Borrowers will pay to
Canadian Agent for the account of each Lender a utilization fee determined on a
daily basis by applying a rate of 15 Basis Points per annum to such Lender's
Percentage Share of the Canadian Facility Usage on each day during the Canadian
Revolving Period on which the Canadian Facility Usage exceeds fifty percent
(50%) of the Canadian Maximum Credit Amount. This utilization fee shall be due
and payable in arrears on each Interest Payment Date for Canadian US Dollar Base
Rate Loans and at the end of the Canadian Revolving Period.
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(d) Stamping Fees. In consideration of each Canadian Resident Lender's
commitment to accept or participate in Bankers' Acceptances under this
Agreement, the applicable Canadian Borrower will pay to Canadian Agent for the
account of such Lender the Stamping Fee Rate multiplied by the face amount of
each Bankers' Acceptance accepted by such Lender under this Agreement calculated
for the number of days in the term of such Bankers' Acceptance. Such fee shall
be due and payable on the date on which such Bankers' Acceptances are accepted
and if such Canadian Resident Lender is purchasing such Bankers' Acceptance,
such fee shall be deducted from the Discount Proceeds paid to the applicable
Canadian Borrower
(e) Canadian Agent's Fees. In addition to all other amounts due to
Canadian Agent under the Canadian Loan Documents, Canadian Borrowers will pay
fees to Canadian Agent as described in a letter agreement of even date herewith
between Canadian Agent and Canadian Borrowers.
Section 1.6. Extension of Conversion Date.
(a) Canadian Borrowers may, at their option and from time to time
during the Canadian Revolving Period, request an offer to extend the Canadian
Revolving Period by delivering to Canadian Agent a Request for an Offer of
Extension not more than ninety days prior to the then current Conversion Date.
Canadian Agent shall forthwith provide a copy of the Request for an Offer of
Extension to each of the Lenders. Upon receipt by Canadian Agent from Canadian
Borrowers of an executed Request for an Offer of Extension, each Lender shall,
within thirty days after the date Canadian Agent receives such request from
Canadian Borrowers, either:
(i) notify Canadian Agent of its acceptance of the Request for an
Offer of Extension, and the terms and conditions, if any, upon which
such Lender is prepared to extend the Conversion Date; or
(ii) notify Canadian Agent that the Request for an Offer of
Extension has been denied, such notice to forthwith be forwarded by
Canadian Agent to Canadian Borrowers to allow Canadian Borrowers to
seek a replacement lender pursuant to Section 1.8 (any Lender giving
notice of such denial is herein called a "Non-Accepting Lender"). The
failure of a Lender to so notify Canadian Agent within such thirty day
period shall be deemed to be notification by such Lender to Canadian
Agent that such Lender has denied Canadian Borrowers' Request for an
Offer of Extension.
(b) Provided that all Lenders provide notice to Canadian Agent under
Section 1.6(a) that they accept the Request for an Offer of Extension, or if
there are Non-Accepting Lenders, such Lenders shall have been repaid pursuant to
Section 1.8 or replacement lenders shall have become parties hereto pursuant to
Section 1.8 and shall have accepted the Request for an Offer of Extension, such
acceptance having common terms and conditions, Canadian Agent shall deliver to
Canadian Borrowers an Offer of Extension incorporating the said terms and
conditions. Such offer shall be open for acceptance by Canadian Borrowers until
the fifth Business Day immediately preceding the then current Conversion Date.
Upon written notice by Canadian Borrowers to Canadian Agent accepting an
outstanding Offer of Extension and agreeing to the
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terms and conditions, if any, specified therein (the date of such notice of
acceptance in Section 1.6 and 1.8 being called the "Extension Date"), the
Conversion Date shall be extended to the date 364 days from the Extension Date
and the terms and conditions specified in such Offer of Extension shall be
immediately effective.
(c) Canadian Borrowers understand that the consideration of any Request
for an Offer of Extension constitutes an independent credit decision which each
Lender retains the absolute and unfettered discretion to make and that no
commitment in this regard is hereby given by a Lender and that any offer to
extend the Conversion Date may be on such terms and conditions in addition to
those set out herein as the extending Lenders stipulate.
Section 1.7. Conversion to Canadian Term Loan. Unless there is an
extension of the Canadian Revolving Period in accordance with Section 1.6,
effective at 11:59 p.m. Toronto, Ontario time on the day immediately preceding
the Conversion Date, and provided that no Event of Default shall have occurred
and be continuing, (i) each Lender's obligation to make new Canadian Advances
and Canadian LC Issuer's obligation to issue Letters of Credit hereunder shall
be canceled automatically, and (ii) each Lender's Canadian Loans shall become
term Canadian Loans ("Canadian Term Loans") maturing on the Canadian Facility
Maturity Date.
Section 1.8. Non-Accepting Lender. Provided that Lenders whose
Percentage Shares represent more than 50% but less than 100% of the Canadian
Maximum Credit Amount provide notice to Agent under Section 1.6(a) that they
accept the Request for an Offer of Extension, on notice of Canadian Borrowers to
Agent, Canadian Borrowers shall be entitled to choose any of the following in
respect of each Non-Accepting Lender prior to the expiration of the Canadian
Revolving Period, provided that if Canadian Borrowers do not make an election
prior to the expiration of the Canadian Revolving Period, Canadian Borrowers
shall be deemed to have irrevocably elected to exercise the provisions of
Section 1.8(b):
(a) (i) the Non-Accepting Lender's obligations to make Canadian
Advances shall be canceled as of the Extension Date, the Canadian Maximum Credit
Amount shall be reduced by the amount so canceled, and on or prior to the
Extension Date the Canadian Borrowers shall repay in full all Obligations then
outstanding to the Non-Accepting Lender (as defined in Section 1.6(a)(ii)) , or
(ii) replace the Non-Accepting Lender by reaching satisfactory arrangements with
one or more existing Lenders or new Lenders, for the purchase, assignment and
assumption of all Canadian Obligations and US Obligations of the Non-Accepting
Lender, provided that any new Lender, with, if necessary, any Affiliate, shall
take a pro rata assignment of both Canadian Obligations and US Obligations, and
such Non-Accepting Lender shall be obligated to sell such Obligations in
accordance with such satisfactory arrangements; or
(b) Canadian Borrowers may elect to revoke and cancel the Request for
an Offer of Extension by giving notice of such revocation and cancellation to
Agent (which shall promptly notify the Lenders thereof), and concurrently
therewith, shall have the option to (i) cancel the obligations of Lenders under
the Canadian Agreement and, subject to the notice requirements set forth in
Section 1.6(a) and to the provisions of Article III, repay in full all Canadian
Obligations,
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or (ii) have the outstanding Canadian Loans that are not Competitive Bid Loans
on the Conversion Date become term loans as provided in Section 1.7.
In connection with any such replacement of a Lender Party pursuant to this
Section 1.8, the applicable Canadian Borrower shall pay all costs that would
have been due to such Lender Party pursuant to Section 3.6 if such Lender
Party's Canadian Advances had been prepaid at the time of such replacement.
Section 1.9. Competitive Bid Loans.
(a) Either Canadian Borrower may request that each Canadian Resident
Lender submit Competitive Bids (on a several basis) to the applicable Canadian
Borrower on any Business Day during the Canadian Revolving Period, provided that
all Canadian Resident Lenders are requested to make a Competitive Bid on the
same basis at the same time. In order to request Competitive Bids, the
applicable Canadian Borrower shall deliver by hand or facsimile to Canadian
Agent a Competitive Bid Request, to be received by Canadian Agent not later than
9:00 a.m., Toronto, Ontario time one Business Day before the date specified for
a proposed Competitive Bid Loan. A Competitive Bid Request that does not conform
substantially to the format of Exhibit I may be rejected in Canadian Agent's
sole discretion, and Canadian Agent shall promptly notify the applicable
Canadian Borrower of such rejection by facsimile. After receiving an acceptable
Competitive Bid Request, Canadian Agent shall no later than 12:00 noon, Toronto,
Ontario time on the date such Competitive Bid Request is received by Canadian
Agent, by facsimile deliver to Canadian Resident Lenders an Invitation to Bid
substantially in the form of Exhibit J with respect thereto.
(b) Each Canadian Resident Lender may, in its sole discretion, make one
or more Competitive Bids to Canadian Agent responsive to each Competitive Bid
Request given by the applicable Canadian Borrower. Each Competitive Bid by a
Canadian Resident Lender must be received by Canadian Agent by facsimile not
later than 9:00 a.m., Toronto, Ontario time on the date specified for a proposed
Competitive Bid Loan. Multiple bids may be accepted by Canadian Agent.
Competitive Bids that do not conform substantially to the format of Exhibit K
may be rejected by Canadian Agent after conferring with, and upon the
instruction of, the applicable Canadian Borrower, and Canadian Agent shall
notify the bidding Canadian Resident Lender of such rejection as soon as
practicable. If any Canadian Resident Lender shall elect not to make a
Competitive Bid, such Canadian Resident Lender shall so notify Canadian Agent by
facsimile not later than 9:00 a.m., Toronto, Canada time, on the date specified
for a Competitive Bid Loan; provided, however, that failure by any Canadian
Resident Lender to give such notice shall not cause such Canadian Resident
Lender to be obligated to make any Competitive Bid Loan and by such failure such
Lender shall be deemed to have rejected such Competitive Bid. A Competitive Bid
submitted by a Canadian Resident Lender shall be irrevocable.
(c) Promptly, and in no event later than 9:30 a.m., Toronto, Ontario
time, on the date specified for a proposed Competitive Bid Loan, Canadian Agent
shall notify the applicable Canadian Borrower by facsimile of all the
Competitive Bids made, the Competitive Bid Rate and the principal amount of each
Competitive Bid Loan in respect of which a Competitive Bid was
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made, and the identity of each Canadian Resident Lender that made each
Competitive Bid. Canadian Agent shall send a copy of all Competitive Bids to the
applicable Canadian Borrower for its records as soon as practicable after
completion of the bidding process.
(d) The applicable Canadian Borrower may, subject only to the
provisions hereof, accept or reject any Competitive Bid. The applicable Canadian
Borrower shall notify Canadian Agent by facsimile pursuant to a Competitive Bid
Accept/Reject Letter whether and to what extent the applicable Canadian Borrower
has decided to accept or reject any or all of the Competitive Bids, not later
than 10:00 a.m., Toronto, Ontario time, on the date specified for a proposed
Competitive Bid Loan; provided, however, that:
(i) the failure by the applicable Canadian Borrower to accept or
reject any Competitive Bid within the time period specified herein
shall be deemed to be a rejection of such Competitive Bid,
(ii) the aggregate amount of the Competitive Bids accepted by the
applicable Canadian Borrower shall not exceed the principal amount
specified in the Competitive Bid Request,
(iii) the aggregate amount of all outstanding Canadian Loans and
Canadian LC Obligations shall never exceed the Canadian Maximum Credit
Amount,
(iv) if the applicable Canadian Borrower shall accept a Competitive
Bid or Competitive Bids made at a particular Competitive Bid Rate, but
the amount of such Competitive Bid or Competitive Bids shall cause the
total amount of Competitive Bids to be accepted by the applicable
Canadian Borrower to exceed the amount specified in the Competitive Bid
Request, then the applicable Canadian Borrower shall accept a portion
of such Competitive Bid or Competitive Bids in an amount equal to the
amount specified in the Competitive Bid Request less the amount of all
other Competitive Bids accepted with respect to such Competitive Bid
Request, which acceptance, in the case of multiple Competitive Bids at
such Competitive Bid Rate, shall be made pro rata in accordance with
the amount of each such Competitive Bid at such Competitive Bid Rate,
and
(v) no Competitive Bid shall be accepted for a Competitive Bid Loan
unless such Competitive Bid Loan is in a minimum principal amount of C
$ 5,000,000 or a higher integral multiple thereof; provided, however,
that if a Competitive Bid Loan must be in an amount less than C
$5,000,000 because of the provisions of clause (iv) above, such
Competitive Bid Loan may be for a minimum of C $1,000,000 or any higher
integral multiple thereof, and in calculating the pro rata allocation
of acceptances or portions of multiple bids at a particular Competitive
Bid Rate pursuant to clause (iv), the amounts shall be rounded to
integral multiples of C $1,000,000 in a manner which shall be in the
sole and absolute discretion of the applicable Canadian Borrower.
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(e) Promptly on each date the applicable Canadian Borrower accepts a
Competitive Bid, Canadian Agent shall notify each Canadian Resident Lender
whether or not its Competitive Bid has been accepted (and if so, in what amount
and at what Competitive Bid Rate) by facsimile transmission sent by Canadian
Agent, and each successful bidder will thereupon become bound, subject to the
other applicable conditions hereof, to make the Competitive Bid Loan in respect
of which its Competitive Bid has been accepted. After completing the
notifications referred to in the immediately preceding sentence, Canadian Agent
shall notify each Canadian Resident Lender of the aggregate principal amount of
all Competitive Bids accepted. Each Canadian Resident Lender which is to make a
Competitive Bid Loan shall, before 11:00 a.m., Toronto, Ontario time, on the
borrowing date specified in the Competitive Bid Request applicable thereto, make
available to Canadian Agent in immediately available funds the amount of each
Competitive Bid Loan to be made by such Canadian Resident Lender, and Canadian
Agent shall promptly deposit such funds to an account designated by the
applicable Canadian Borrower. As soon as practicable thereafter, Canadian Agent
shall notify each Canadian Resident Lender of the aggregate amount of
Competitive Bid Loans advanced, the respective Competitive Bid Interest Periods
thereof and Competitive Bid Rate applicable thereto.
(f) The obligation of the applicable Canadian Borrower to repay to each
Canadian Resident Lender the aggregate amount of all Competitive Bid Loans made
by such Canadian Resident Lender, together with interest accruing in connection
therewith, shall be evidenced by promissory notes (respectively, such Canadian
Resident Lender's "Competitive Bid Note") made by the applicable Canadian
Borrower payable to the order of such Canadian Resident Lender in the form of
Exhibit M, with appropriate insertions. The amount of principal owing on any
Canadian Resident Lender's Competitive Bid Note at any given time shall be the
aggregate amount of all Competitive Bid Loans theretofore made by such Canadian
Resident Lender thereunder minus all payments of principal theretofore received
by such Canadian Resident Lender thereon. Interest on each Competitive Bid Note
shall accrue and be due and payable as provided herein and therein. The
applicable Canadian Borrower shall repay on the final day of the Competitive Bid
Interest Period of each Competitive Bid Loan (such date being that specified by
the applicable Canadian Borrower for repayment of such Competitive Bid Loan in
the related Competitive Bid Request and such date being no later than six months
after the date of the Competitive Bid Loan) the then unpaid principal amount of
such Competitive Bid Loan. Subject to Section 1.4(b) and the payment of amounts
described in Section 3.6, the applicable Canadian Borrower shall have the right
to prepay any principal amount of any Competitive Bid Loan.
(g) No Competitive Bid Loan shall be made within five Business Days
after the date of any other Competitive Bid Loan, unless the applicable Canadian
Borrower and Canadian Agent shall mutually agree otherwise. If Canadian Agent
shall at any time elect to submit a Competitive Bid in its capacity as a
Canadian Resident Lender, it shall submit such bid directly to the applicable
Canadian Borrower requesting such Competitive Bid one quarter of an hour earlier
than the latest time at which the other Canadian Resident Lenders are required
to submit their bids to Canadian Agent.
Section 1.10. Use of Proceeds. Canadian Borrowers shall use all
Canadian Advances (i) to first, pay in full the Indebtedness of Northstar Energy
to Canadian Imperial Bank of Commerce pursuant to two Credit Agreements both
dated April 15, 1997, and thereafter (ii) to finance capital expenditures, (iii)
to refinance Matured Canadian LC Obligations outstanding
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under this Agreement, and (iv) provide working capital for its operations and
for other general business purposes. Canadian Borrowers shall use all Letters of
Credit for its general corporate purposes. In no event shall the funds from any
Canadian Loan or any Letter of Credit be used directly or indirectly by any
Person for personal, family, household or agricultural purposes or for the
purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or
carrying any "margin stock" (as such term is defined in Regulation U promulgated
by the Board of Governors of the Federal Reserve System) or to extend credit to
others directly or indirectly for the purpose of purchasing or carrying any such
margin stock. Each Canadian Borrower represents and warrants that such Canadian
Borrower is not engaged principally, or as one of such Canadian Borrower's
important activities, in the business of extending credit to others for the
purpose of purchasing or carrying such margin stock.
ARTICLE II - Bankers' Acceptances and Letters of Credit
Section 2.1. Creation of Bankers' Acceptances. Upon receipt of a
Borrowing Notice and subject to the provisions of this Agreement, each Canadian
Resident Lender shall accept, in accordance with its Percentage Share of the
requested Borrowing from time to time such Bankers' Acceptances as Canadian
Borrowers shall request provided that:
(a) Bankers' Acceptances shall be issued on a Business Day;
(b) each Bankers' Acceptance shall have a term of 30, 60, 90 or 180
days (excluding days of grace), as selected by Canadian Borrowers in the
relevant Borrowing Notice provided that each Bankers' Acceptance shall mature on
a Business Day;
(c) the face amount of each Bankers' Acceptance shall be not less than
C$100,000 and in multiples of C$100,000 for any amounts in excess thereof; and
(d) each Bankers' Acceptance shall be in a form acceptable to the
Canadian Resident Lenders.
Section 2.2. Terms of Acceptance by the Canadian Resident Lenders.
(a) Delivery and Payment. Subject to Sections 2.3 and 2.4, Canadian
Borrowers shall pre-sign and deliver to each Canadian Resident Lender bankers'
acceptance drafts in sufficient quantity to meet Canadian Borrowers'
requirements for anticipated Borrowings by way of Bankers' Acceptances. The
applicable Canadian Borrower shall, at its option, provide for payment to
Canadian Agent for the benefit of Canadian Resident Lenders of each Bankers'
Acceptance on the date on which a Bankers' Acceptance matures, either by payment
of the full face amount thereof or through utilization of a Conversion to
another Type of Borrowing in accordance with this Agreement, or through a
combination thereof. Each Canadian Borrower waives presentment for payment of
Bankers' Acceptances by Canadian Resident Lenders and shall not claim from
Canadian Resident Lenders any days of grace for the payment at maturity of
Bankers' Acceptances. Any amount owing by Canadian Borrowers in respect of any
Bankers'
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Acceptance which is not paid in accordance with the foregoing, shall, as and
from the date on which such Bankers' Acceptance matures, be deemed to be
outstanding hereunder as a Canadian Prime Rate Loan.
(b) No Liability. Canadian Agent and Canadian Resident Lenders shall
not be liable for any damage, loss or improper use of any bankers' acceptance
draft endorsed in blank except for any loss arising by reason of Canadian Agent
or a Canadian Resident Lender failing to use the same standard of care in the
custody of such bankers' acceptance drafts as Canadian Agent or such Canadian
Resident Lender use in the custody of their own property of a similar nature.
(c) Bankers' Acceptances Purchased by Canadian Resident Lenders. Where
the applicable Canadian Borrower so elects in the Borrowing Notice or
Continuation/Conversion Notice, a Canadian Resident Lender shall purchase
Bankers' Acceptances accepted by it for an amount equal to the Discount
Proceeds.
(d) Marketing. Where the applicable Canadian Borrower so elects in the
Borrowing Notice or Continuation/Conversion Notice, it shall be responsible for,
and shall make its own arrangements with respect to, the marketing of Bankers'
Acceptances.
(e) Power of Attorney. At the request of Canadian Borrowers, the
Canadian Resident Lenders and Canadian Borrowers shall enter into a Power of
Attorney, substantially in the form of Exhibit "H", to facilitate the execution
and sale of Bankers' Acceptances.
(f) Non-resident Lenders Participation in Borrowing of Bankers'
Acceptances by Making Canadian Dollar Eurodollar Loans. As part of each
Borrowing by way of Bankers' Acceptances from Canadian Resident Lenders, each
Non-resident Lender shall, with respect to its obligations to fund such
Borrowing, make a Canadian Dollar Eurodollar Loan by advancing Canadian Dollars
in the amount of its Percentage Share of such Borrowing having a Eurodollar
Interest Period that is substantially the same as the period to maturity of the
Bankers' Acceptances that are accepted in such Borrowing by Canadian Resident
Lenders in order that all Borrowings other than Competitive Bid Loans shall
remain pro rata during the term of this Agreement. Such Canadian Dollar
Eurodollar Loan shall otherwise be made on the terms set forth in Article I with
respect to such Type of Loan.
(g) Pro-Rata Treatment of Canadian Advances.
(i) Each Canadian Advance shall be made available by each Canadian
Lender and all repayments and reductions in respect thereof shall be
made and applied in a manner so that the Canadian Advances outstanding
hereunder to each Canadian Lender will, to the extent possible,
thereafter be pro rata in accordance with such Lender's Percentage
Share. The Canadian Agent is authorized by each Canadian Borrower and
each Lender to determine, in its sole and unfettered discretion, the
portion of each Canadian Advance and each Type of Canadian Advance to
be made available by each Canadian Lender and the application of
repayments and reductions of Canadian Advances to give effect to the
provisions of this Section, provided that no Lender shall, as a result
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of any such determination, have a Percentage Share of the Canadian
Advances which is in excess of its Percentage Share of the Canadian
Maximum Credit Amount.
(ii) In the event it is not practicable to allocate Bankers'
Acceptances to each Canadian Lender such that the aggregate amount of
Bankers' Acceptances required to be purchased by such Canadian Lender
hereunder is in a whole multiple of C $100,000, the Canadian Agent is
authorized by each Canadian Borrower and each Lender to make such
allocation as the Canadian Agent determines in its sole and unfettered
discretion may be equitable in the circumstances and, if the aggregate
amount of such Bankers' Acceptances is not a whole multiple of C
$100,000, then the Canadian Agent may allocate (on a basis considered
by it to be equitable) the excess of such Canadian Advance over the
next lowest whole multiple of C $100,000 to one Canadian Lender, which
shall purchase a Bankers' Acceptance with a face amount equal to the
excess and having the same term as the corresponding Bankers'
Acceptances. In no event shall the portion of the outstanding
Borrowings by way of Bankers' Acceptances of a Lender exceed such
Lenders' Percentage Share of the Aggregate Borrowings by way of
Bankers' Acceptances by more than C $100,000 as a result of such
exercise of discretion by the Canadian Agent.
(h) If during the term of any Bankers' Acceptance accepted by a Lender
hereunder the Applicable Margin changes or an Event of Default occurs and is
continuing, the fee paid to such Lender by the applicable Borrower pursuant to
Section 1.5(d) (in this paragraph called the "Initial Fee") with respect to such
Bankers' Acceptance shall be recalculated based upon such change in the
Applicable Margin or the existence of such Event of Default for the number of
days during the term of such Bankers' Acceptance that such change is applicable
or such Event of Default exists. If such recalculated amount is in excess of the
Initial Fee then such Canadian Borrower shall pay to such Lender the amount of
such excess, and if such recalculated amount is less than the Initial Fee, then
the amount of such reduction shall be credited to other amounts payable by such
Canadian Borrower to such Lender.
Section 2.3. General Procedures for Bankers' Acceptances.
(a) Notice. Canadian Borrowers may in the Borrowing Notice or in a
Continuation/Conversion Notice request a Borrowing by way of Bankers'
Acceptances and, if the Canadian Borrower is responsible for marketing of such
Bankers' Acceptances under Section 2.2(d), by subsequent notice to Canadian
Agent provide Canadian Agent, which shall in turn notify each Canadian Resident
Lender, with information as to the discount proceeds payable by the purchasers
of the Bankers' Acceptances and the party to whom delivery of the Bankers'
Acceptances by each Canadian Resident Lender is to be made against delivery to
each Canadian Resident Lender of the applicable discount proceeds, but if it
does not do so, Canadian Borrowers shall initiate a telephone call to Canadian
Agent by 10:00 a.m. Toronto, Ontario time on the date of advance, or the date of
the Continuation or Conversion, as applicable, and provide such information to
Canadian Agent. Such discount proceeds less the fee calculated in accordance
with Section 1.5(d) shall promptly be delivered to the Canadian Agent. Any such
telephone advice shall be subject to Section 1.2 and shall be confirmed by a
written notice of
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Canadian Borrowers to Canadian Agent prior to 2:00 p.m. Toronto, Ontario time on
the same day.
(b) Continuations. In the case of a Continuation of maturing Bankers'
Acceptances, issued by a Canadian Resident Lender, such Canadian Resident
Lender, in order to satisfy the continuing liability of Canadian Borrowers to
the Canadian Resident Lender for the face amount of the maturing Bankers'
Acceptances, shall retain for its own account the Net Proceeds of each new
Bankers' Acceptance issued by it in connection with such Continuation; and
Canadian Borrowers shall, on the maturity date of the maturing Bankers'
Acceptances, pay to Canadian Agent for the benefit of Canadian Resident Lenders
an amount equal to the difference between the face amount of the maturing
Bankers' Acceptances and the aggregate Net Proceeds of the new Bankers'
Acceptances.
(c) Conversion from Canadian Prime Rate Loans and Canadian Dollar
Eurodollar Loans. In the case of a Conversion from a Borrowing of Canadian Prime
Rate Loans or Canadian Dollar Eurodollar Loans into a Borrowing by way of
Bankers' Acceptances to be accepted by a Canadian Resident Lender pursuant to
Sections 2.1, 2.2 and 2.3, such Canadian Resident Lender, in order to satisfy
the continuing liability of Canadian Borrowers to it for the principal amount of
the Canadian Prime Rate Loans or Canadian Dollar Eurodollar Loans being
converted, shall retain for its own account the Discount Proceeds of each new
Bankers' Acceptance issued by it in connection with such Conversion; and
Canadian Borrowers shall, on the date of issuance of the Bankers' Acceptances,
pay to Canadian Agent for the benefit of Canadian Resident Lenders an amount
equal to the difference between the aggregate principal amount of the Canadian
Prime Rate Loans or Canadian Dollar Eurodollar Loans being converted owing to
the Canadian Resident Lenders and the aggregate Discount Proceeds of such
Bankers' Acceptances.
(d) Conversions to Canadian Loans in Canadian Dollars. In the case of a
Conversion of a Borrowing by way of Bankers' Acceptances into Canadian Loans,
each Canadian Resident Lender, in order to satisfy the liability of the
applicable Canadian Borrower to it for the face amount of the maturing Bankers'
Acceptances, shall record the obligation of the applicable Canadian Borrower to
it as a Canadian Prime Rate Loan, unless the applicable Canadian Borrower
provide for payment to Canadian Agent for the benefit of Canadian Resident
Lenders of the face amount of the maturing Bankers' Acceptance in some other
manner acceptable to Canadian Resident Lenders, including Conversion to another
Type of Canadian Loan pursuant to a Continuation/Conversion Notice.
(e) Conversion from or to Canadian Loans in U.S. Dollars. In the case
of a conversion of Bankers' Acceptances from or to a Canadian Base Rate Loans or
US Dollar Eurodollar Loans, the parties to which this Section applies shall
follow the notice procedures set out in Section 1.3 and the funding procedures
set out in Section 2.3 (c) and (d) without netting of funds.
(f) Authorization. Canadian Borrowers hereby authorize each Canadian
Resident Lender to complete, stamp, hold, sell, rediscount or otherwise dispose
of all Bankers'
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Acceptances accepted by it pursuant to this Section in accordance with the
instructions provided by Canadian Borrowers pursuant to Section 1.3, as
applicable.
(g) Depository Notes. The parties agree that in the administering of
Bankers' Acceptances, each Lender may avail itself of the debt clearing services
offered by a clearing house for depository notes pursuant to the Depository
Bills and Notes Act (Canada) and that the procedures set forth in Article II be
deemed amended to the extent necessary to comply with the requirements of such
debt clearing services.
Section 2.4. Execution of Bankers' Acceptances. The signatures of any
authorized signatory on Bankers' Acceptances may, at the option of Canadian
Borrowers, be reproduced in facsimile and such Bankers' Acceptances bearing such
facsimile signatures shall be binding on Canadian Borrowers as if they had been
manually signed by such authorized signatory. Notwithstanding that any person
whose signature appears on any Bankers' Acceptance as a signatory may no longer
be an authorized signatory of Canadian Borrowers at the date of issuance of a
Bankers' Acceptance, and notwithstanding that the signature affixed may be a
reproduction only, such signature shall nevertheless be valid and sufficient for
all purposes as if such authority had remained in force at the time of such
issuance and as if such signature had been manually applied, and any such
Bankers' Acceptance so signed shall be binding on Canadian Borrowers.
Section 2.5. Escrowed Funds. Upon the occurrence of an Event of Default
and an acceleration of the Canadian Obligations under Section 8.1 or upon a
prepayment permitted under Section 1.4, Canadian Borrowers shall forthwith pay
to Canadian Agent for deposit into an escrow account maintained by and in the
name of Canadian Agent for the benefit of Canadian Resident Lenders in
accordance with their Percentage Shares an amount equal to the Canadian Resident
Lenders' maximum potential liability (as determined by Canadian Agent) under
then outstanding Bankers' Acceptances (the "Escrow Funds"). The Escrow Funds
shall be held by Canadian Agent for set-off against future Canadian Obligations
of Canadian Borrowers and pending such application shall bear interest at the
rate declared by Canadian Agent from time to time as that payable by it in
respect of deposits for such amount and for such period relative to the maturity
date of the Bankers' Acceptances, as applicable. If such Event of Default is
either waived or cured in compliance with the terms of this Agreement, then the
Escrow Funds, together with any accrued interest to the date of release, shall
be forthwith released to Canadian Borrowers.
Section 2.6. Letters of Credit. Subject to the terms and conditions
hereof, any Canadian Borrower may during the Canadian Revolving Period request
Canadian LC Issuer to issue one or more Letters of Credit denominated in either
Canadian Dollars or US Dollars, provided that, after taking such Letter of
Credit into account:
(a) the Canadian Facility Usage does not exceed the Canadian Maximum
Credit Amount at such time;
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(b) the aggregate amount of Canadian LC Obligations arising from
Letters of Credit issued under this Agreement at such time does not exceed the
Canadian LC Sublimit;
(c) the expiration date of such Letter of Credit is prior to the end of
the Canadian Revolving Period;
(d) such Letter of Credit is to be used for general corporate purposes
of such Canadian Borrower;
(e) such Letter of Credit is not directly or indirectly used to assure
payment of or otherwise support any Indebtedness of any Person other than
Indebtedness of any Restricted Person permitted by this Agreement;
(f) the issuance of such Letter of Credit will be in compliance with
all applicable governmental restrictions, policies, and guidelines and will not
subject Canadian LC Issuer to any cost which is not reimbursable under Article
III;
(g) the form and terms of such Letter of Credit are acceptable to
Canadian LC Issuer in its reasonable discretion; and
(h) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
Canadian LC Issuer will honor any such request if the foregoing conditions (a)
through (h) (in this Section 2.6 called the "LC Conditions") have been met as of
the date of issuance of such Letter of Credit. Canadian LC Issuer may choose to
honor any such request for any other Letter of Credit but has no obligation to
do so and may refuse to issue any other requested Letter of Credit for any
reason which Canadian LC Issuer in its sole discretion deems relevant.
Section 2.7. Requesting Letters of Credit. The applicable Canadian
Borrower must make written application for any Letter of Credit at least three
Business Days before the date on which the applicable Canadian Borrower desires
for Canadian LC Issuer to issue such Letter of Credit. By making any such
written application the applicable Canadian Borrower shall be deemed to have
represented and warranted that the LC Conditions described in Section 2.6 will
be met as of the date of issuance of such Letter of Credit. Each such written
application for a Letter of Credit must be made in writing on Canadian LC
Issuer's standard form of Letter of Credit Application, the terms and provisions
of which are hereby incorporated herein by reference (or in such other form as
may mutually be agreed upon by Canadian LC Issuer and the applicable Canadian
Borrower). Three Business Days after the LC Conditions for a Letter of Credit
have been met as described in Section 2.6 (or if Canadian LC Issuer otherwise
desires to issue such Letter of Credit), Canadian LC Issuer will issue such
Letter of Credit at Canadian LC Issuer's office in Toronto, Ontario. If any
provisions of any LC Application conflict with any provisions of this Agreement,
the provisions of this Agreement shall govern and control.
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Section 2.8. Reimbursement and Participations.
(a) Reimbursement by Canadian Borrowers. Each Matured Canadian LC
Obligation arising from a Letter of Credit issued under the Canadian Agreement
shall constitute Canadian Prime Rate Loans made by Canadian LC Issuer to the
applicable Canadian Borrower even if any condition precedent to the making of
such a Loan shall not have been satisfied. Each Lender shall (in all
circumstances and without set-off or counterclaim) purchase from Canadian LC
Issuer its Percentage Share of such Canadian Prime Rate Loans and pay to
Canadian LC Issuer on demand on the date on which such Matured LC Obligation
arises, in immediately available funds at Canadian LC Issuer's address for
notices hereunder, such Lender's Percentage Share of such Matured Canadian LC
Obligation. Each Lender's obligation to pay Canadian LC Issuer pursuant to the
terms of this subsection is irrevocable and unconditional. If any amount
required to be paid by any Lender to Canadian LC Issuer pursuant to this
subsection is paid by such Lender to Canadian LC Issuer within three Business
Days after the date such payment is due, Canadian LC Issuer shall in addition to
such amount be entitled to recover from such Lender, on demand, interest thereon
calculated from such due date at the Canadian Prime Rate. If any amount required
to be paid by any Lender to Canadian LC Issuer pursuant to this subsection is
not paid by such Lender to Canadian LC Issuer within three Business Days after
the date such payment is due, Canadian LC Issuer shall in addition to such
amount be entitled to recover from such Lender, on demand, interest thereon
calculated from such due date at the Default Rate.
(b) Calculations. A written advice setting forth in reasonable detail
the amounts owing under this section, submitted by Canadian LC Issuer to
Canadian Borrowers or any Lender from time to time, shall be conclusive, absent
manifest error, as to the amounts thereof.
Section 2.9. Letter of Credit Fees. In consideration of Canadian LC
Issuer's issuance of any Letter of Credit, the applicable Canadian Borrower
agrees to pay (a) to Canadian LC Issuer for its own account, a letter of credit
fronting fee at a rate equal to 12.5 Basis Points multiplied by the face amount
of such Letter of Credit, payable on the date of issuance, and (b) to Canadian
Agent, for the account of all Lenders in accordance with their respective
Percentage Shares, a letter of credit issuance fee calculated by applying the
Applicable Margin to the face amount of all Letters of Credit outstanding on
each day, payable in arrears on the last day of each Fiscal Quarter. In
addition, the applicable Canadian Borrower will pay to LC Issuer its standard
drawing and other processing fees upon any drawing under a Letter of Credit.
Section 2.10. No Duty to Inquire.
(a) Drafts and Demands. Canadian LC Issuer is authorized and instructed
to accept and pay drafts and demands for payment under any Letter of Credit
without requiring, and without responsibility for, any determination as to the
existence of any event giving rise to said draft, either at the time of
acceptance or payment or thereafter. Canadian LC Issuer is under no duty to
determine the proper identity of anyone presenting such a draft or making such a
demand (whether by tested telex or otherwise) as the officer, representative or
agent of any beneficiary under any Letter of Credit, and payment by Canadian LC
Issuer to any such beneficiary when requested by any such purported officer,
representative or agent is hereby authorized and
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approved. CANADIAN BORROWERS RELEASE EACH LENDER PARTY FROM, AND AGREE TO HOLD
EACH LENDER PARTY HARMLESS AND INDEMNIFIED AGAINST, ANY LIABILITY OR CLAIM IN
CONNECTION WITH OR ARISING OUT OF THE SUBJECT MATTER OF THIS SECTIOn, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ANY LENDER PARTY, provided only that no Lender Party shall be
entitled to indemnification for that portion, if any, of any liability or claim
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
extended by its terms or by Law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of any Restricted Person,
or if the amount of any Letter of Credit is increased at the request of any
Restricted Person, this Agreement shall be binding upon all Restricted Persons
with respect to such Letter of Credit as so extended, increased or otherwise
modified, with respect to drafts and property covered thereby, and with respect
to any action taken by Canadian LC Issuer, Canadian LC Issuer's correspondents,
or any Lender Party in accordance with such extension, increase or other
modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
that it is transferable, Canadian LC Issuer shall have no duty to determine the
proper identity of anyone appearing as transferee of such Letter of Credit, nor
shall Canadian LC Issuer be charged with responsibility of any nature or
character for the validity or correctness of any transfer or successive
transfers, and payment by Canadian LC Issuer to any purported transferee or
transferees as determined by Canadian LC Issuer is hereby authorized and
approved, and CANADIAN BORROWERS RELEASE EACH LENDER PARTY FROM, AND AGREE TO
HOLD EACH LENDER PARTY HARMLESS AND INDEMNIFIED AGAINST, ANY LIABILITY OR CLAIM
IN CONNECTION WITH OR ARISING OUT OF THE FOREGOING, WHICH INDEMNITY SHALL APPLY
WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY
LENDER PARTY, provided only that no Lender Party shall be entitled to
indemnification for that portion, if any, of any liability or claim which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment.
Section 2.11. LC Collateral.
(a) Canadian LC Obligations in Excess of Canadian Maximum Credit
Amount. If, after the making of all mandatory prepayments required under Section
1.4(c), the outstanding Canadian LC Obligations will exceed Canadian Maximum
Credit Amount, then in addition to prepayment of the entire principal balance of
the Canadian Loans, Canadian Borrowers will immediately pay to Canadian LC
Issuer an amount equal to such excess. Canadian LC Issuer will hold such amount
to apply against the remaining Canadian LC Obligations outstanding
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under the Canadian Agreement (all such amounts held for Canadian LC Obligations
being herein collectively called "LC Collateral") and the other Canadian
Obligations, and such collateral may be applied from time to time to any Matured
Canadian LC Obligations or other Canadian Obligations which are due and payable.
Neither this subsection nor the following subsection shall, however, limit or
impair any rights which Canadian LC Issuer may have under any other document or
agreement relating to any Letter of Credit, LC Collateral or Canadian LC
Obligation, including any LC Application, or any rights which any Lender Party
may have to otherwise apply any payments by Canadian Borrowers and any LC
Collateral under Section 3.1.
(b) Acceleration of Canadian LC Obligations. If the Canadian
Obligations or any part thereof become immediately due and payable pursuant to
Section 8.1 then, unless Required Lenders otherwise specifically elect to the
contrary (which election may thereafter be retracted by Required Lenders at any
time), all Canadian LC Obligations shall become immediately due and payable
without regard to whether or not actual drawings or payments on the Letters of
Credit have occurred, and the applicable Canadian Borrower in respect of such
Canadian LC Obligations shall be obligated to pay to Canadian LC Issuer
immediately an amount equal to the aggregate Canadian LC Obligations which are
then outstanding.
(c) Investment of LC Collateral. Pending application thereof, all LC
Collateral shall be invested by Canadian LC Issuer in such Investments as
Canadian LC Issuer may choose in its sole discretion. All interest on (and other
proceeds of) such Investments shall be reinvested or applied to Matured Canadian
LC Obligations or other Canadian Obligations which are due and payable. When all
Canadian Obligations have been satisfied in full, including all Canadian LC
Obligations, all Letters of Credit have expired or been terminated, and all of
Canadian Borrowers's reimbursement obligations in connection therewith have been
satisfied in full, Canadian LC Issuer shall release any remaining LC Collateral.
Canadian Borrowers hereby assign and grant to Canadian LC Issuer a continuing
security interest in all LC Collateral paid by it to Canadian LC Issuer, all
Investments purchased with such LC Collateral, and all proceeds thereof to
secure its Matured Canadian LC Obligations and the other Canadian Obligations
hereunder, each Canadian Note, and the other US Loan Documents. Canadian
Borrowers further agree that Canadian LC Issuer shall have all of the rights and
remedies of a secured party under the Personal Property Security Act (Alberta)
with respect to such security interest and that an Event of Default under this
Agreement shall constitute a default for purposes of such security interest.
When Canadian Borrowers are required to provide LC Collateral for any reason and
fail to do so on the day when required, Canadian LC Issuer may without notice to
Canadian Borrowers or any other Restricted Person provide such LC Collateral
(whether by transfers from other accounts maintained with Canadian LC Issuer, or
otherwise) using any available funds of Canadian Borrowers or any other Person
also liable to make such payments.
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. Each Canadian Borrower will make each
payment which it owes under the Canadian Loan Documents to Canadian Agent in
Toronto, Canada, if such payment is being
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made in Canadian Dollars, or to the US Account, if such payment is being made in
US Dollars, in each case for the account of the Lender Party to whom such
payment is owed, without set-off, deduction or counterclaim, and in immediately
available funds, provided that any such payment may be made net of any deduction
or withholding for or on account of any withholding tax which such Canadian
Borrower is required at Law to withhold or deduct except as otherwise provided
in Section 3.2(d). Each such payment must be received by Canadian Agent not
later than 11:00 a.m., Toronto, Ontario time, on the date such payment becomes
due and payable. Any payment received by Canadian Agent after such time will be
deemed to have been made on the next following Business Day. Should any such
payment become due and payable on a day other than a Business Day, the maturity
of such payment shall be extended to the next succeeding Business Day, and, in
the case of a payment of principal or past due interest, interest shall accrue
and be payable thereon for the period of such extension as provided in the
Canadian Loan Document under which such payment is due. Each payment under a
Canadian Loan Document shall be due and payable at the place provided therein
and, if no specific place of payment is provided, shall be due and payable at
the place of payment of Canadian Agent's Canadian Note. When Canadian Agent
collects or receives money on account of the Canadian Obligations, Canadian
Agent shall distribute all money so collected or received by 2:00 p.m. Toronto,
Ontario time on the Business Day received, if received by 11:00 a.m. Toronto,
Ontario time, otherwise on the day of deemed receipt, and each Lender Party
shall apply all such money so distributed, as follows:
(a) first, for the payment of all Canadian Obligations which are then
due (and if such money is insufficient to pay all such Canadian Obligations,
first to any reimbursements due Canadian Agent under Section 6.9 or 10.4, then
to any reimbursement due any other Lender Party under Section 10.4, and then to
the partial payment of all other Canadian Obligations then due in proportion to
the amounts thereof, or as Lender Parties shall otherwise agree);
(b) then for the prepayment of amounts owing under the Canadian Loan
Documents (other than principal on the Canadian Notes) if so specified by
Canadian Borrowers;
(c) then for the prepayment of principal on the Canadian Notes that are
not Competitive Bid Notes, together with accrued and unpaid interest on the
principal so prepaid; and
(d) last, for the payment or prepayment of any other Canadian
Obligations.
All payments applied to principal or interest on any Canadian Note shall be
applied first to any interest then due and payable, then to principal then due
and payable, and last to any prepayment of principal and interest in compliance
with Sections 1.4 and 2.6. All distributions of amounts described in any of
subsections (b), (c) or (d) above shall be made by Canadian Agent pro rata to
each Lender Party then owed Canadian Obligations described in such subsection in
proportion to all amounts owed to all Lender Parties which are described in such
subsection; provided that if any Lender then owes payments to Canadian LC Issuer
for the purchase of a participation under Section 2.8(a) or to Canadian Agent
under Section 9.9, any amounts otherwise distributable under this section to
such Lender shall be deemed to belong to Canadian LC Issuer, or Canadian
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Agent, respectively, to the extent of such unpaid payments, and Canadian Agent
shall apply such amounts to make such unpaid payments rather than distribute
such amounts to such Lender.
Section 3.2. Change in Law; Gross Up; Increased Cost and Reduced
Return.
(a) If, after the date hereof, the adoption of any applicable Law,
rule, or regulation, or any change in any applicable Law, rule, or regulation,
or any change in the interpretation or administration thereof by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender Party (or
its Applicable Lending Office) with any request or directive (whether or not
having the force of Law) of any such Governmental Authority, central bank, or
comparable agency (the occurrence of any of the foregoing events being herein
referred to as a "Change in Law"):
(i) shall subject such Lender Party (or its Applicable Lending
Office) to any tax, duty, deduction or any other charge (other than
with respect to Withholding Tax as defined in Section 3.2(d)) with
respect to any Eurodollar Loans, Bankers' Acceptances or Competitive
Bid Loans, or its obligation to make Eurodollar Loans, accept Bankers'
Acceptances or issue Letters of Credit, or change the basis of taxation
of any amounts payable to such Lender Party (or its Applicable Lending
Office) under this Agreement or its Canadian Note in respect of any
Eurodollar Loans, Bankers' Acceptances or Competitive Bid Loans other
than taxes (including franchise taxes) imposed on the overall net
income or capital of such Lender Party by the jurisdiction under the
Laws of which such Lender Party (or its Applicable Lending Office) is
organized or is a resident for tax purposes or any political
subdivision thereof;
(ii) shall impose, modify, or deem applicable any reserve, special
deposit, assessment, or similar requirement (other than the Reserve
Requirement utilized in the determination of the Adjusted US Dollar
Eurodollar Rate and Adjusted Canadian Dollar Eurodollar Rate) relating
to any extensions of credit or other assets of, or any deposits with or
other liabilities or commitments of, such Lender Party (or its
Applicable Lending Office), including the commitment of such Lender
Party hereunder; or
(iii) shall impose on such Lender Party (or its Applicable Lending
Office) or the London interbank market any other condition affecting
this Agreement or its Canadian Notes or any of such extensions of
credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
Party (or its Applicable Lending Office) of making, converting into, continuing,
or maintaining any Eurodollar Loans, Bankers' Acceptances or Competitive Bid
Loans or to reduce any sum received or receivable by such Lender Party (or its
Applicable Lending Office) under this Agreement or its Canadian Notes with
respect to any Eurodollar Loans, Bankers' Acceptances or Competitive Bid Loans,
then the applicable Canadian Borrower shall pay to such Lender Party on demand
such amount or amounts as will compensate such Lender Party for such increased
cost or reduction. If any Lender Party requests compensation by Canadian
Borrowers under this Section 3.2(a), Canadian Borrowers may, by notice to such
Lender Party (with a copy to Canadian Agent),
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suspend the obligation of such Lender Party to make or continue Canadian
Advances of the Type with respect to which such compensation is requested, or to
convert Canadian Advances of any other Type into Canadian Advances of such Type,
until the event or condition giving rise to such request ceases to be in effect
(in which case the provisions of Section 3.5 shall be applicable); provided that
such suspension shall not affect the right of such Lender Party to receive the
compensation so requested.
(b) If, after the date hereof, Canadian LC Issuer or any Lender Party
shall have determined that the adoption of any applicable Law, rule, or
regulation regarding capital adequacy or any change therein or in the
interpretation or administration thereof by any Governmental Authority, central
bank, or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of Law) of any such Governmental Authority, central bank, or
comparable agency, has or would have the effect of reducing the rate of return
on the capital of such Lender Party or any corporation controlling such Lender
Party as a consequence of the obligations of such Lender Party hereunder to a
level below that which such Lender Party or such corporation could have achieved
but for such adoption, change, request, or directive (taking into consideration
its policies with respect to capital adequacy), then from time to time upon
demand the applicable Canadian Borrower shall pay to such Lender Party such
additional amount or amounts as will compensate such Lender Party for such
reduction, but only to the extent that such Lender Party has not been
compensated therefor by any increase in the Adjusted US Dollar Eurodollar Rate
or the Adjusted Canadian Dollar Eurodollar Rate; provided that if such Lender
Party fails to give notice to Canadian Borrowers of any additional costs within
ninety (90) days after it has actual knowledge thereof, such Lender Party shall
not be entitled to compensation for such additional costs incurred more than
ninety (90) days prior to the date on which notice is given by such Lender
Party.
(c) Each Lender Party shall promptly notify Canadian Borrowers and
Canadian Agent of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Lender Party to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender Party, be otherwise disadvantageous
to it. Any Lender Party claiming compensation under this Section shall furnish
to Canadian Borrowers and Canadian Agent a statement setting forth the
additional amount or amounts to be paid to it hereunder which shall be
conclusive in the absence of manifest error. In determining such amount, such
Lender Party shall act in good faith and may use any reasonable averaging and
attribution methods.
(d) If by reason of a Change in Law, Canadian Borrowers shall be
required to withhold and remit withholding taxes in respect of any principal,
interest, or other amount paid or payable by it to or for the account of any
Lender Party hereunder or under any other Canadian Loan Document (a "Withholding
Tax"), (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 3.2) such Lender Party receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
applicable Canadian Borrower shall
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make such deductions, and (iii) the applicable Canadian Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable Law.
(e) Except as provided in paragraph (d) of this Section 3.2, no
Canadian Borrower shall be required to compensate any Lender Party for any
Withholding Taxes which such Canadian Borrower is required to withhold and remit
in respect of any principal, interest, or other amount paid or payable by it to
or for the account of any Lender Party hereunder or under any other Canadian
Loan Document.
Section 3.3. Limitation on Types of Canadian Loans. If on or prior to
the first day of any Eurodollar Interest Period for any Eurodollar Loan:
(a) Canadian Agent determines (which determination shall be conclusive)
that by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the US Dollar Eurodollar Rate or
the Canadian Dollar Eurodollar Rate, as applicable, for such Eurodollar Interest
Period; or
(b) the Required Lenders determine (which determination shall be
conclusive) and notify Canadian Agent that the Adjusted US Dollar Eurodollar
Rate or the Adjusted Canadian Dollar Eurodollar Rate, as applicable, will not
adequately and fairly reflect the cost to the Lenders of funding Eurodollar
Loans or for such Eurodollar Interest Period;
then Canadian Agent shall give Canadian Borrowers prompt notice thereof
specifying the relevant amounts or periods, and so long as such condition
remains in effect, the Lender Parties shall be under no obligation to make
additional Canadian Loans, continue Eurodollar Loans or convert Canadian Base
Rate Loans or Canadian Dollar Prime Rate Loans into Eurodollar Loans, and
Canadian Borrowers shall, on the last day(s) of the then current Eurodollar
Interest Period(s) for the outstanding Eurodollar Loans, either prepay such
Canadian Loans or convert such Canadian Loans into Canadian Base Rate Loans,
Canadian Prime Rate Loans, or Bankers' Acceptances in accordance with the terms
of this Agreement.
Section 3.4. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender Party or its
Applicable Lending Office to make, maintain, or fund Eurodollar Loans hereunder,
then such Lender Party shall promptly notify Canadian Borrowers thereof and such
Lender Party's obligation to make or continue Eurodollar Loans and to convert
BA's, Canadian Base Rate Loans, Canadian Prime Rate Loans, or Bankers'
Acceptances into Eurodollar Loans shall be suspended until such time as such
Lender Party may again make, maintain, and fund Eurodollar Loans (in which case
the provisions of Section 3.5 shall be applicable).
Section 3.5. Treatment of Affected Loans. If the obligation of any
Lender Party to make a particular Type of Loan or to continue, or to convert
Canadian Loans of any other Type into, Canadian Loans of a particular Type shall
be suspended pursuant to Sections 3.2 and 3.4 hereof (Canadian Loans of such
Type being herein called "Affected Loans" and such Type being herein called the
"Affected Type"), such Lender Party's Affected Loans shall be automatically
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converted into Canadian Base Rate Loans with respect to US $ Loans or to
Canadian Prime Rate Loans with respect to C $ Loans on the last day(s) of the
then current Interest Period(s) for Affected Loans (or, in the case of a
Conversion required by Section 3.4 hereof, on such earlier date as such Lender
Party may specify to Canadian Borrowers with a copy to Canadian Agent) and,
unless and until such Lender Party gives notice as provided below that the
circumstances specified in Sections 3.2 or 3.4 hereof that gave rise to such
Conversion no longer exist:
(a) to the extent that such Lender Party's Affected Loans have been so
converted, all payments and prepayments of principal that would otherwise be
applied to such Lender Party's Affected Loans shall be applied instead to its
Canadian Base Rate Loans or Canadian Prime Rate Loans, as applicable; and
(b) all Canadian Loans that would otherwise be made or continued by
such Lender Party as Canadian Loans of the Affected Type shall be made or
continued instead as Canadian Base Rate Loans or Canadian Prime Rate Loans, as
applicable, and all Canadian Loans of such Lender Party that would otherwise be
converted into Canadian Loans of the Affected Type shall be converted instead
into (or shall remain as) Canadian Base Rate Loans or Canadian Prime Rate Loans,
as applicable.
If such Lender Party gives notice to Canadian Borrowers (with a copy to Canadian
Agent) that the circumstances specified in Section 3.2 or 3.4 hereof that gave
rise to the Conversion of such Lender Party's Affected Loans pursuant to this
Section no longer exist (which such Lender Party agrees to do promptly upon such
circumstances ceasing to exist) at a time when Canadian Loans of the Affected
Type made by other Lender Parties are outstanding, such Lender Party's Canadian
Base Rate Loans or Canadian Prime Rate Loans, as applicable, shall be
automatically converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Canadian Loans of the Affected Type, to the
extent necessary so that, after giving effect thereto, all Canadian Loans held
by the Lender Parties holding Canadian Loans of the Affected Type and by such
Lender Party are held pro rata (as to principal amounts, Types, and Interest
Periods) in accordance with their Percentage Shares of the Canadian Maximum
Credit Amount.
Section 3.6. Compensation. Upon the request of any Lender Party,
Canadian Borrowers shall pay to such Lender Party such amount or amounts as
shall be sufficient (in the reasonable opinion of such Lender Party) to
compensate it for any loss, cost, or expense (including loss of anticipated
profits) incurred by it as a result of:
(i) any payment, prepayment, or Conversion of a Eurodollar Loan or
Competitive Bid Loan for any reason (including, without limitation, the
acceleration of the Canadian Loans pursuant to Section 8.1) on a date
other than the last day of the Interest Period for such Loan; or
(ii) any failure by Canadian Borrowers for any reason (including,
without limitation, the failure of any condition precedent specified in
Article IV to be satisfied) to borrow, convert, continue, or prepay a
Eurodollar Loan on the date for such borrowing,
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Conversion, Continuation, or prepayment specified in the relevant
notice of borrowing, prepayment, Continuation, or Conversion under this
Agreement.
Section 3.7. Change of Applicable Lending Office. Each Lender Party
agrees that, upon the occurrence of any event giving rise to the operation of
Sections 3.2 through 3.5 with respect to such Lender Party, it will, if
requested by Canadian Borrowers, use reasonable efforts (subject to overall
policy considerations of such Lender Party) to designate another Applicable
Lending Office, provided that such designation is made on such terms that such
Lender Party and its Applicable Lending Office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such section. Nothing in this section
shall affect or postpone any of the obligations of Canadian Borrowers or the
rights of any Lender Party provided in Sections 3.2 through 3.5.
Section 3.8. Replacement of Lenders. If any Lender Party seeks
reimbursement for increased costs under Sections 3.2 through 3.5, or if a
Canadian Borrower is required to increase any sum payable under Section 3.2(d),
then within ninety (90) days thereafter -- provided no Event of Default then
exists -- Canadian Borrowers shall have the right (unless such Lender Party
withdraws its request for additional compensation) to replace such Lender Party
by requiring such Lender Party to assign its Canadian Advances, Canadian Notes,
Canadian LC Obligations, US Loans, US Notes, US LC Obligations and its
commitments hereunder and under the US Agreement to an Eligible Transferee
reasonably acceptable to all Borrowers, provided that: all Obligations of
Borrowers owing to such Lender Party being replaced (including such increased
costs, but excluding principal and accrued interest on the Canadian Notes and
the US Notes being assigned) shall be paid in full to such Lender Party
concurrently with such assignment, and the replacement Eligible Transferee shall
purchase the foregoing by paying to such Lender Party a price equal to the
principal amount thereof plus accrued and unpaid interest thereon. In connection
with any such assignment Canadian Borrowers, Canadian Agent, US Borrower, US
Agent, such Lender Party and the replacement Eligible Transferee shall otherwise
comply with Section 10.6. Notwithstanding the foregoing rights of Canadian
Borrowers under this section, however, Canadian Borrowers may not replace any
Lender Party which seeks reimbursement for increased costs under Section 3.2
through 3.5, or to which Canadian Borrowers are required to increase any sums
payable under Section 3.2(d), unless Canadian Borrowers are at the same time
replacing all Lender Parties which are then seeking such compensation or to
which such sums payable must be increased. In connection with any such
replacement of a Lender Party, the applicable Canadian Borrower shall pay all
costs that would have been due to such Lender Party pursuant to Section 3.6 if
such Lender Party's Canadian Advances had been prepaid at the time of such
replacement.
Section 3.9. Other Taxes.
(a) Canadian Borrowers agree to pay any and all present or future stamp
or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement or any
other Canadian Loan Document or from the execution or delivery of, or otherwise
with respect to, this Agreement or any other Canadian Loan Document (hereinafter
referred to as "Other Taxes").
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(b) Canadian Borrowers agree to indemnify each Lender Party for the
full amount of Other Taxes (including, without limitation, any Other Taxes
imposed or asserted by any jurisdiction on amounts payable under this section)
paid by such Lender Party or Canadian Agent (as the case may be) and any
liability (including penalties, interest, and expenses) arising therefrom or
with respect thereto.
(c) If Canadian Borrowers are required to pay additional amounts to or
for the account of any Lender Party pursuant to this Section 3.9, then such
Lender Party will agree to use reasonable efforts to change the jurisdiction of
its Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Lender Party, is not otherwise disadvantageous to such Lender Party.
(d) If a Lender Party is reimbursed for an amount paid by Canadian
Borrowers pursuant to this Section 3.9, it shall promptly return such amount to
Canadian Borrowers.
(e) Within thirty (30) days after the date of any payment of Other
Taxes, Canadian Borrowers shall furnish to Canadian Agent the original or a
certified copy of a receipt evidencing such payment.
(f) Without prejudice to the survival of any other agreement of
Canadian Borrowers hereunder, the agreements and obligations of Canadian
Borrowers contained in this section shall survive the termination of this
Agreement and the payment in full of the Canadian Notes.
Section 3.10. Currency Conversion and Currency Indemnity.
(a) Canadian Borrowers and Canadian Guarantor (collectively, for
purposes of this Section 3.10 herein referred to as "Obligors") shall make
payment relative to any Obligation in the currency (the "Agreed Currency") in
which the Obligation was incurred. If any payment is received on account of any
Obligation in any currency (the "Other Currency") other than the Agreed Currency
(whether voluntarily or pursuant to an order or judgment or the enforcement
thereof or the realization of any security or the liquidation of such Obligor or
otherwise howsoever), such payment shall constitute a discharge of the liability
of an Obligor hereunder and under the other Canadian Loan Documents in respect
of such Obligation only to the extent of the amount of the Agreed Currency which
the relevant Lender Parties are able to purchase with the amount of the Other
Currency received by it on the Business Day next following such receipt in
accordance with its normal procedures and after deducting any premium and costs
of exchange.
(b) If, for the purpose of obtaining or enforcing judgment in any court
in any jurisdiction, it becomes necessary to convert into a particular currency
(the "Judgment Currency") any amount due in the Agreed Currency then the
conversion shall be made on the basis of the rate of exchange prevailing on the
next Business Day following the date such judgment is given and in any event
each Obligor shall be obligated to pay the Lender Parties any deficiency in
accordance with Section 3.10(c). For the foregoing purposes "rate of exchange"
means the rate at which the relevant Lender Parties, as applicable, in
accordance with their normal banking
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procedures are able on the relevant date to purchase the Agreed Currency with
the Judgment Currency after deducting any premium and costs of exchange.
(c) If any Lender Party receives any payment or payments on account of
the liability of an Obligor hereunder pursuant to any judgment or order in any
Other Currency, and the amount of the Agreed Currency which the relevant Lender
Party is able to purchase on the Business Day next following such receipt with
the proceeds of such payment or payments in accordance with its normal
procedures and after deducting any premiums and costs of exchange is less than
the amount of the Agreed Currency due in respect of such Obligations immediately
prior to such judgment or order, then Canadian Borrowers on demand shall, and
Canadian Borrowers hereby agree to, indemnify and save such Lender Party
harmless from and against any loss, cost or expense arising out of or in
connection with such deficiency. The agreement of indemnity provided for in this
Section 3.10(c) shall constitute an obligation separate and independent from all
other obligations contained in this Agreement, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by the Lender Parties or any of them from time to time, and shall continue in
full force and effect notwithstanding any judgment or order for a liquidated sum
in respect of an amount due hereunder or under any judgment or order.
ARTICLE IV - Conditions Precedent to Advances
Section 4.1. Documents to be Delivered. No Lender has any obligation to
make its first Canadian Loan, and Canadian LC Issuer has no obligation to issue
the first Letter of Credit, unless Canadian Agent shall have received all of the
following, duly executed and delivered and in form, substance and date
satisfactory to Canadian Agent:
(a) This Agreement and any other documents that Lenders are to execute
in connection herewith.
(b) Each Canadian Note.
(c) The Guaranty of Canadian Guarantor.
(d) Certain certificates of Canadian Borrowers including:
(i) An "Omnibus Certificate" of the Secretary or Assistant
Secretary and of the Chairman of the Board, President, or Vice
President - Finance of each Canadian Borrower, which shall contain the
names and signatures of the officers of such Canadian Borrower
authorized to execute Canadian Loan Documents and which shall certify
to the truth, correctness and completeness of the following exhibits
attached thereto: (1) a copy of resolutions duly adopted by the Board
of Directors of such Canadian Borrower and in full force and effect at
the time this Agreement is entered into, authorizing the execution of
this Agreement and the other Canadian Loan Documents delivered or to be
delivered in connection herewith and the consummation of the
transactions contemplated herein
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and therein, (2) a copy of the charter documents of such Canadian
Borrower and all amendments thereto, certified by the appropriate
official of its jurisdiction of organization, and (3) a copy of any
bylaws of such Canadian Borrower; and
(ii) A "Compliance Certificate" of the Chairman of the Board
or President and of the Vice President - Finance of each Canadian
Borrower, of even date with such Canadian Loan or such Letter of
Credit, in which such officers certify to the satisfaction of the
conditions set out in subsections (a), (b) and (c) of Section 4.3.
(e) certificate (or certificates) of the due formation, valid existence
and good standing of each Canadian Borrower in its jurisdiction of organization,
issued by the appropriate official of such jurisdiction.
(f) A favorable opinion of Bennett Jones, counsel for Restricted
Persons, substantially in the form set forth in Exhibit E and a favorable
opinion of Blake, Cassels & Graydon covering the matters requested by Canadian
Agent..
(g) The Initial Financial Statements.
(h) A copy of each Acquisition Document.
Section 4.2. Additional Conditions Precedent to First Canadian Loan or
First Letter of Credit. No Lender has any obligation to make its first Canadian
Loan, and Canadian LC Issuer has no obligation to issue the first Letter of
Credit, unless on the date thereof:
(a) US Borrower shall have consummated the transactions contemplated
under the Acquisition Documents, and acquired, directly or indirectly, one
hundred percent (100%) of the outstanding common shares of Northstar Energy;
(b) All approvals, if any, required under the Hart-Scott Rodino
Antitrust Improvement Act of 1976, as amended, in connection with the
transactions contemplated by the Acquisition Documents, shall have been
obtained.
(c) All commitment, facility, agency, legal and other fees required to
be paid or reimbursed to any Lender pursuant to any Canadian Loan Documents or
any commitment
agreement heretofore entered into shall have been paid.
(d) No event which would reasonably be expected to have a Material
Adverse Effect shall have occurred since September 30, 1998.
(e) US Borrower shall have certified to Canadian Agent and Lenders that
the Initial Financial Statements fairly present US Borrower's Consolidated
financial position at the respective dates thereof and the Consolidated results
of US Borrower's operations and US Borrower's Consolidated cash flows for the
respective periods thereof.
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(f) US Borrower shall have certified to Canadian Agent and Lenders that
no Restricted Person has any outstanding Liabilities of any kind (including
contingent obligations, tax assessments, and unusual forward or long-term
commitments) which are, in the aggregate, material to US Borrower or material
with respect to US Borrower's Consolidated financial condition and not shown in
the Initial Financial Statements or disclosed in the Disclosure Schedule.
(g) All legal matters relating to the Canadian Loan Documents and the
consummation of the transactions contemplated thereby shall be satisfactory to
Thompson & Knight, a Professional Corporation, US counsel to Canadian Agent, and
Blake, Cassels & Graydon, Canadian counsel to Canadian Agent.
Section 4.3. Additional Conditions Precedent to all Canadian Loans and
Letters of Credit. No Lender has any obligation to make any Canadian Loan
(including its first), and Canadian LC Issuer has no obligation to issue any
Letter of Credit (including its first), unless the following conditions
precedent have been satisfied:
(a) All representations and warranties made by any Restricted Person in
any Canadian Loan Document shall be true on and as of the date of such Canadian
Loan or the date of issuance of such Letter of Credit (except to the extent that
the facts upon which such representations are based have been changed by the
extension of credit hereunder) as if such representations and warranties had
been made as of the date of such Canadian Loan or the date of issuance of such
Letter of Credit.
(b) No Default shall exist at the date of such Canadian Loan or the
date of issuance of such Letter of Credit.
(c) The making of such Canadian Loan or the issuance of such Letter of
Credit shall not be prohibited by any Law and shall not subject any Lender or
any LC Issuer to any material penalty under or pursuant to any such Law.
ARTICLE V - Representations and Warranties
To confirm each Lender's understanding concerning Restricted Persons
and Restricted Persons' businesses, properties and obligations and to induce
each Lender to enter into this Agreement and to extend credit hereunder, each
Canadian Borrower represents and warrants to each Lender that:
Section 5.1. No Default. No event has occurred and is continuing which
constitutes a Default.
Section 5.2. Organization and Good Standing. Each Canadian Borrower and
each Subsidiary of a Canadian Borrower that is a Restricted Person is duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers
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required to carry on its business and enter into and carry out the transactions
contemplated hereby. Each Canadian Borrower and each Subsidiary of a Canadian
Borrower that is a Restricted Person is duly qualified, in good standing, and
authorized to do business in all other jurisdictions within Canada wherein the
character of the properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary except where failure to so
qualify would not have a Material Adverse Effect. Each Canadian Borrower and
each Subsidiary of a Canadian Borrower that is a Restricted Person has taken all
actions and procedures customarily taken in order to enter, for the purpose of
conducting business or owning property, each jurisdiction outside Canada wherein
the character of the properties owned or held by it or the nature of the
business transacted by it makes such actions and procedures desirable except
where failure to so qualify would not have a Material Adverse Effect.
Section 5.3. Authorization. Each Canadian Borrower has duly taken all
action necessary to authorize the execution and delivery by it of the Canadian
Loan Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Each Canadian Borrower is duly authorized to borrow funds hereunder.
Section 5.4. No Conflicts or Consents. The execution and delivery by
each Canadian Borrower and each Subsidiary of a Canadian Borrower that is a
Restricted Person of the Canadian Loan Documents to which each is a party, the
performance by each of its obligations under such Canadian Loan Documents, and
the consummation of the transactions contemplated by the various Canadian Loan
Documents, do not and will not (i) conflict with any provision of (A) any Law,
(B) the organizational documents or any unanimous shareholders agreement of any
Restricted Person, or (C) any agreement, judgment, license, order or permit
applicable to or binding upon any Restricted Person unless such conflict would
not reasonably be expected to have a Material Adverse Effect, or (ii) result in
the acceleration of any Indebtedness owed by any Restricted Person which would
reasonably be expected to have a Material Adverse Effect, or (iii) result in or
require the creation of any Lien upon any assets or properties of any Restricted
Person which would reasonably be expected to have a Material Adverse Effect,
except as expressly contemplated or permitted in the Canadian Loan Documents.
Except as expressly contemplated in the Canadian Loan Documents no consent,
approval, authorization or order of, and no notice to or filing with, any
Tribunal or third party is required in connection with the execution, delivery
or performance by any Restricted Person of any Canadian Loan Document or to
consummate any transactions contemplated by the Canadian Loan Documents, unless
failure to obtain such consent would not reasonably be expected to have a
Material Adverse Effect.
Section 5.5. Enforceable Obligations. This Agreement is, and the other
Canadian Loan Documents when duly executed and delivered will be, legal, valid
and binding obligations of each Restricted Person which is a party hereto or
thereto, enforceable in accordance with their terms except as such enforcement
may be limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights.
Section 5.6. Full Disclosure. No certificate, statement or other
information delivered herewith or heretofore by any Canadian Borrower or any
Subsidiary of a Canadian Borrower that
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is a Restricted Person to any Lender in connection with the negotiation of this
Agreement or in connection with any transaction contemplated hereby contains any
untrue statement of a material fact or omits to state any material fact known to
any such Person (other than industry-wide risks normally associated with the
types of businesses conducted by Restricted Persons) necessary to make the
statements contained herein or therein not misleading as of the date made or
deemed made. There is no fact known to any such Person (other than industry-wide
risks normally associated with the types of businesses conducted by Restricted
Persons) that has not been disclosed to each Lender in writing which would
reasonably be expected to have a Material Adverse Effect.
Section 5.7. Litigation. Except as disclosed in the Initial Financial
Statements or in the Disclosure Schedule: (a) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Canadian Borrower threatened, against any Canadian Borrower or
any Subsidiary of a Canadian Borrower that is a Restricted Person before any
Tribunal which would reasonably be expected to have a Material Adverse Effect,
and (b) there are no outstanding judgments, injunctions, writs, rulings or
orders by any such Tribunal against any Canadian Borrower which would reasonably
be expected to have a Material Adverse Effect.
Section 5.8. Environmental and Other Laws. Except as disclosed in the
Disclosure Schedule: (a) Canadian Borrowers and each Subsidiary of a Canadian
Borrower that is a Restricted Person are conducting their businesses in material
compliance with all applicable Laws, including Environmental Laws, and have and
are in compliance with all licenses and permits required under any such Laws,
unless failure to so comply would not reasonably be expected to have a Material
Adverse Effect; (b) none of the operations or properties of any Canadian
Borrowers and each Subsidiary of a Canadian Borrower that is a Restricted Person
is the subject of federal, provincial or local investigation evaluating whether
any material remedial action is needed to respond to a release of any Hazardous
Materials into the environment or to the improper storage or disposal (including
storage or disposal at offsite locations) of any Hazardous Materials, unless
such remedial action would not reasonably be expected to have a Material Adverse
Effect; and (c) neither any Canadian Borrower nor any Subsidiary of a Canadian
Borrower that is a Restricted Person (and to the best knowledge of Canadian
Borrowers, no other Person) has filed any notice under any Law indicating that
any such Person is responsible for the improper release into the environment, or
the improper storage or disposal, of any material amount of any Hazardous
Materials or that any Hazardous Materials have been improperly released, or are
improperly stored or disposed of, upon any property of any such Person, unless
such failure to so comply would not reasonably be expected to have a Material
Adverse Effect.
Section 5.9. Names and Places of Business. Neither Canadian Borrower
has, during the preceding five years, had, been known by, or used any other
trade or fictitious name, except as disclosed in the Disclosure Schedule. Except
as otherwise indicated in the Disclosure Schedule, the chief executive office
and principal place of business of each Canadian Borrower is (and for the
preceding five years have been) located at the address of such Canadian
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Borrower set out on the signature pages hereto. Except as indicated in the
Disclosure Schedule, no Canadian Borrower or any Subsidiary of a Canadian
Borrower that is a Restricted Person has any other office or place of business.
Section 5.10. Canadian Borrowers' Subsidiaries. No Canadian Borrower
presently has any Subsidiary or owns any stock in any other corporation or
association except those listed in the Disclosure Schedule. Neither any Canadian
Borrower nor any of its Restricted Subsidiaries is a member of any general or
limited partnership, limited liability company, joint venture or association of
any type whatsoever except (a) those listed in the Disclosure Schedule, (b)
associations, joint ventures or other relationships (i) which are established
pursuant to a standard form operating agreement or similar agreement or which
are partnerships for purposes of federal income taxation only, (ii) which are
not corporations or partnerships (or subject to the Uniform Partnership Act)
under applicable state Law, and (iii) whose businesses are limited to the
exploration, development and operation of oil, gas or mineral properties,
pipelines or gathering systems, transportation and related facilities and
interests owned directly by the parties in such associations, joint ventures or
relationships, and (c) associations, joint ventures or other relationships (i)
which are not corporations or partnerships under applicable provincial Law, and
(ii) whose businesses are limited to the exploration, development and operation
of oil, gas or mineral properties, pipelines or gathering systems,
transportation and related facilities and interests owned directly by the
parties in such associations, joint ventures or relationships. Each Canadian
Borrower owns, directly or indirectly, the equity interest in each of its
Subsidiaries which is indicated in the Disclosure Schedule.
Section 5.11. Title to Properties; Licenses. Each Canadian Borrower and
each Subsidiary of a Canadian Borrower that is a Restricted Person has good and
defensible title to all of its material properties and assets, free and clear of
all Liens other than Permitted Liens and of all impediments to the use of such
properties and assets in such Person's business except to the extent failure to
have such title would not have a Material Adverse Effect. Each Canadian Borrower
and each Subsidiary of a Canadian Borrower that is a Restricted Person possesses
all licenses, permits, franchises, patents, copyrights, trademarks and trade
names, and other intellectual property (or otherwise possesses the right to use
such intellectual property without violation of the rights of any other Person)
which are necessary to carry out its business as presently conducted and as
presently proposed to be conducted hereafter, and no such Person is in violation
in any material respect of the terms under which it possesses such intellectual
property or the right to use such intellectual property except to the extent
failure to possess such licenses, permits, franchises, and intellectual property
would not have a Material Adverse Effect.
Section 5.12. Solvency. Upon giving effect to the issuance of the
Canadian Notes, the execution of the Canadian Loan Documents by Canadian
Borrowers and the consummation of the transactions contemplated hereby, each
Canadian Borrower will be solvent (as such term is used in applicable
bankruptcy, liquidation, receivership, insolvency or similar Laws).
Section 5.13. Year 2000 Compliance. Each Canadian Borrower has (a)
initiated a review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those affected by suppliers and
vendors) that could be adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by such Canadian Borrower and
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its Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (b) developed a plan and timeline for addressing the Year 2000 Problem on
a timely basis, and (c) to date, implemented that plan in accordance with that
timetable. Each Canadian Borrower reasonably believes that all computer
applications (including those of its suppliers and vendors) that are material to
its or any of its Subsidiaries' business and operations will on a timely basis
be able to perform properly date- sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent
that a failure to do so would not reasonably be expected to have a Material
Adverse Effect.
ARTICLE VI - Affirmative Covenants of Canadian Borrowers
To conform with the terms and conditions under which each Lender is
willing to have credit outstanding to each Canadian Borrower, and to induce each
Lender to enter into this Agreement and extend credit hereunder, each Canadian
Borrower warrants, covenants and agrees that until the full and final payment of
the Obligations and the termination of this Agreement, unless Required Lenders
have previously agreed otherwise:
Section 6.1. Payment and Performance. Each Canadian Borrower will pay
all amounts due by it under the Canadian Loan Documents in accordance with the
terms thereof and will observe, perform and comply with every covenant, term and
condition expressed or implied in the Canadian Loan Documents to be binding upon
it. Each Canadian Borrower will cause each of its Subsidiaries which is a
Restricted Person to observe, perform and comply with every such term, covenant
and condition in any Loan Document.
Section 6.2. Books, Financial Statements and Reports. Each Canadian
Borrower will at all times maintain full and accurate books of account and
records. Each Canadian Borrower will maintain and will cause its Subsidiaries to
maintain a standard system of accounting, will maintain its Fiscal Year, and
will furnish (or will cause to be furnished) the following statements and
reports to each Lender Party at Canadian Borrowers' expense:
(a) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, complete Consolidated financial statements of
US Borrower together with all notes thereto, prepared in reasonable detail in
accordance with US GAAP, together with an unqualified opinion, based on an audit
using generally accepted auditing standards, by KPMG Peat Marwick L.L.P., or
other independent certified public accountants selected by US Borrower and
acceptable to US Agent, stating that such Consolidated financial statements have
been so prepared. These financial statements shall contain a Consolidated
balance sheet as of the end of such Fiscal Year and Consolidated statements of
earnings, of cash flows, and of changes in owners' equity for such Fiscal Year,
each setting forth in comparative form the corresponding figures for the
preceding Fiscal Year. In addition, within ninety (90) days after the end of
each Fiscal Year each Canadian Borrower will furnish to Canadian Agent and each
Lender a certificate in the form of Exhibit D signed by the President, Vice
President - Finance or Controller of US Borrower, stating that such financial
statements are accurate and complete,
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stating that such Person has reviewed the Canadian Loan Documents, containing
all calculations required to be made to show compliance or non-compliance with
the provisions of Sections 7.7 and 7.8, and further stating that there is no
condition or event at the end of such Fiscal Year or at the time of such
certificate which constitutes a Default and specifying the nature and period of
existence of any such condition or event.
(b) As soon as available, and in any event within forty-five (45) days
after the end of each Fiscal Quarter, US Borrower's Consolidated and
consolidating balance sheet and income statement as of the end of such Fiscal
Quarter and a Consolidated statement of cash flows for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal Quarter, all
in reasonable detail and prepared in accordance with US GAAP, subject to changes
resulting from normal year-end adjustments. In addition each Canadian Borrower
will, together with each such set of financial statements, furnish a certificate
in the form of Exhibit D signed by the President, Vice President - Finance or
Controller of such US Borrower stating that such financial statements are
accurate and complete (subject to normal year-end adjustments), stating that
such Person has reviewed the Canadian Loan Documents, containing all
calculations required to be made to show compliance or non-compliance with the
provisions of Sections 7.7 and 7.8 and further stating that there is no
condition or event at the end of such Fiscal Quarter or at the time of such
certificate which constitutes a Default and specifying the nature and period of
existence of any such condition or event.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by US Borrower or any of
its Subsidiaries that is a Restricted Person to its shareholders and all
registration statements, prospectuses, periodic reports and other statements and
schedules filed by any such Person with any exchange, any securities commission
or any similar Governmental Authority, including any information or estimates
with respect to US Borrower's oil and gas business (including its exploration,
development and production activities) which are required to be furnished in
such Canadian Borrower's annual report pursuant to securities legislation or the
rules, policies and requirements of any Governmental Authority.
Section 6.3. Other Information and Inspections. Each Canadian Borrower
and each Subsidiary of a Canadian Borrower that is a Restricted Person will
furnish to each Lender any information which Canadian Agent may from time to
time reasonably request concerning any covenant, provision or condition of the
Loan Documents or any matter in connection with such Persons' businesses and
operations. Each Canadian Borrower and each Subsidiary of a Canadian Borrower
that is a Restricted Person will permit representatives appointed by Canadian
Agent (including independent accountants, auditors, agents, lawyers, appraisers
and any other Persons) to visit and inspect upon prior written notice during
normal business hours any of such Restricted Person's property, including its
books of account, other books and records, and any facilities or other business
assets, and to make extra copies therefrom and photocopies and photographs
thereof, and to write down and record any information such representatives
obtain, and each Canadian Borrower and each Subsidiary of a Canadian Borrower
that is a Restricted Person shall permit Canadian Agent or its representatives
to investigate and verify the accuracy of the
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information furnished to Canadian Agent or any Lender in connection with the
Loan Documents and to discuss all such matters with its officers, employees and
representatives.
Section 6.4. Notice of Material Events and Change of Address. Canadian
Borrowers will promptly notify each Lender in writing, stating that such notice
is being given pursuant to this Agreement, of:
(a) the occurrence of any event which would have a Material Adverse
Effect,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness owed by any of
Canadian Borrowers or any of their Subsidiaries that are Restricted Persons
having a principal balance of more than US $25,000,000, or of any default by any
such Person under any indenture, mortgage, agreement, contract or other
instrument to which any of them is a party or by which any of them or any of
their properties is bound, if such default would have a Material Adverse Effect,
(d) the occurrence of any Termination Event,
(e) any claim of US $25,000,000 or more, any notice of potential
liability under any Environmental Laws which might exceed such amount, or any
other material adverse claim asserted against any of Canadian Borrowers or any
of their Subsidiaries that are Restricted Persons or with respect to any such
Person's properties, and
(f) the filing of any suit or proceeding against any Canadian Borrowers
or any of their Subsidiaries that are Restricted Person in which an adverse
decision would have a Material Adverse Effect.
Canadian Borrowers will also notify Canadian Agent and Canadian Agent's counsel
in writing promptly in the event that any Canadian Borrower or any of their
Subsidiaries that is a Restricted Person changes its name or the location of its
chief executive office.
Section 6.5. Maintenance of Properties. Each Canadian Borrower and each
Subsidiary of a Canadian Borrower that is a Restricted Person will maintain,
preserve, protect, and keep all property used or useful in the conduct of its
business in good condition, and will from time to time make all repairs,
renewals and replacements needed to enable the business and operations carried
on in connection therewith to be promptly and advantageously conducted at all
times.
Section 6.6. Maintenance of Existence and Qualifications. Each Canadian
Borrower and each Subsidiary of a Canadian Borrower that is a Restricted Person
will maintain and preserve its existence and its rights and franchises in full
force and effect and will qualify to do business in all states or jurisdictions
where required by applicable Law, except where the failure so to qualify will
not have a Material Adverse Effect.
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Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Canadian
Borrower and each Subsidiary of a Canadian Borrower that is a Restricted Person
will (a) timely file all required tax returns; (b) timely pay all taxes,
assessments, and other governmental charges or levies imposed upon it or upon
its income, profits or property; and (c) maintain appropriate accruals and
reserves for all of the foregoing in accordance with US GAAP. Such Restricted
Person may, however, delay paying or discharging any of the foregoing so long as
it is in good faith contesting the validity thereof by appropriate proceedings
and has set aside on its books adequate reserves therefor.
Section 6.8. Insurance. Each Canadian Borrower and each Subsidiary of a
Canadian Borrower that is a Restricted Person will keep or cause to be kept
insured in accordance with industry standards by financially sound and reputable
insurers, its surface equipment and other property of a character usually
insured by similar Persons engaged in the same or similar businesses.
Section 6.9. Performance on Canadian Borrowers' Behalf. If either
Canadian Borrower or any Subsidiary of a Canadian Borrower that is a Restricted
Person fails to pay any taxes, insurance premiums, expenses, lawyers' fees or
other amounts it is required to pay under any Canadian Loan Document, Canadian
Agent may pay the same, and shall use its best efforts to give at least five (5)
Business Days notice to Canadian Borrowers prior to making any such payment;
provided, however, that any failure by Canadian Agent to so notify Canadian
Borrowers shall not limit or otherwise impair Canadian Agent's ability to make
any such payment. Northstar Energy shall immediately reimburse Canadian Agent
for any such payments and each amount paid by Canadian Agent shall constitute a
Canadian Obligation owed hereunder which is due and payable on the date such
amount is paid by Canadian Agent.
Section 6.10. Interest. Each Canadian Borrower hereby promises to each
Lender Party to pay interest at the Default Rate applicable to Canadian Base
Rate Loans on all Canadian Obligations (including Canadian Obligations to pay
fees or to reimburse or indemnify any Lender) which such Canadian Borrower has
in this Agreement promised to pay to such Lender Party and which are not paid
when due. Such interest shall accrue from the date such Canadian Obligations
become due until they are paid.
Section 6.11. Compliance with Law. Each Canadian Borrower and each
Subsidiary of a Canadian Borrower that is a Restricted Person will conduct its
business and affairs in compliance with all Laws applicable thereto except to
the extent failure to do so would not reasonably be expected to have a Material
Adverse Effect.
Section 6.12. Environmental Matters.
(a) Each Canadian Borrower and each Subsidiary of a Canadian Borrower
that is a Restricted Person will comply in all material respects with all
Environmental Laws now or hereafter applicable to such Restricted Person, as
well as all contractual obligations and agreements with respect to environmental
remediation or other environmental matters, and shall obtain, at or prior to the
time required by applicable Environmental Laws, all environmental,
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health and safety permits, licenses and other authorizations necessary for its
operations and will maintain such authorizations in full force and effect,
unless such failure to so comply would not reasonably be expected to have a
Material Adverse Effect.
(b) will promptly furnish to Canadian Agent all written notices of
violation, orders, claims, citations, complaints, penalty assessments, suits or
other proceedings received by such Canadian Borrower, or of which it has notice,
pending or threatened against such Canadian Borrower, by any Governmental
Authority with respect to any alleged violation of or non-compliance with any
Environmental Laws or any permits, licenses or authorizations in connection with
its ownership or use of its properties or the operation of its business which
involve a potential liability or claim in excess of US $25,000,000.
Section 6.13. Bank Accounts; Offset. To secure the repayment of the
Obligations each Canadian Borrower hereby grants to each Lender a right of
offset, each of which shall be in addition to all other interests, liens, and
rights of any Lender at common Law, under the Loan Documents, or otherwise, and
each of which shall be upon and against (a) any and all moneys, securities or
other property (and the proceeds therefrom) of such Canadian Borrower now or
hereafter held or received by or in transit to any Lender from or for the
account of such Canadian Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, (b) any and all deposits (general or
special, time or demand, provisional or final) of such Canadian Borrower with
any Lender, and (c) any other credits and claims of such Canadian Borrower at
any time existing against any Lender, including claims under certificates of
deposit. At any time and from time to time after the occurrence of any Default,
each Lender is hereby authorized to offset against the Obligations then due and
payable (in either case without notice to such Canadian Borrower), any and all
items hereinabove referred to. To the extent that such Canadian Borrower has
accounts designated as royalty or joint interest owner accounts, the foregoing
right of offset shall not extend to funds in such accounts which belong to, or
otherwise arise from payments to such Canadian Borrower for the account of,
third party royalty or joint interest owners.
Section 6.14. Year 2000 Compliance. Each Canadian Borrower will
promptly notify Canadian Agent in the event such Canadian Borrower discovers or
determines that any computer application (including those of its suppliers and
vendors) that is material to its or any of its Subsidiaries' business and
operations that will not be Year 2000 compliant on a timely basis, except to the
extent that such failure would not reasonably be expected to have a Material
Adverse Effect.
ARTICLE VII - Negative Covenants of Canadian Borrowers
To conform with the terms and conditions under which each Lender is
willing to have credit outstanding to each Canadian Borrower, and to induce each
Lender to enter into this Agreement and make the Canadian Loans, each Canadian
Borrower warrants, covenants and agrees that until the full and final payment of
the Obligations and the termination of this Agreement, unless Required Lenders
have previously agreed otherwise:
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Section 7.1. Indebtedness. Neither any Canadian Borrower nor any
Subsidiary of a Canadian Borrower that is a Restricted Person (other than US
Borrower) will in any manner owe or be liable for Indebtedness except:
(a) the US Obligations and the Canadian Obligations.
(b) capital lease obligations (excluding oil, gas or mineral leases)
entered into in the ordinary course of such Restricted Person's business in
arm's length transactions at competitive market rates under competitive terms
and conditions in all respects, provided that the obligations required to be
paid in any Fiscal Year under any such capital leases do not in the aggregate
exceed US $25,000,000 for all Restricted Persons.
(c) unsecured Liabilities owed among Restricted Persons.
(d) guaranties by one Restricted Person of Liabilities owed by another
Restricted Person, if such Liabilities either (i) are not Indebtedness, or (ii)
are allowed under subsections (a), (b) or (c) of this Section 7.1.
(e) Indebtedness of the Restricted Persons for plugging and abandonment
bonds or for letters of credit issued by any Lender in place thereof which are
required by regulatory authorities in the area of operations, and Indebtedness
of the Restricted Persons for other bonds or letters of credit issued by any
Lender which are required by such regulatory authorities with respect to other
normal oil and gas operations.
(f) obligations under the Subordinated US Borrower Indenture, the
Subordinated US Borrower Debentures and the Subordinated US Borrower Guarantee;
(g) non-recourse Indebtedness as to which no Restricted Person (i)
provides any guaranty or credit support of any kind (including any undertaking,
guarantee, indemnity, agreement or instrument that would constitute
Indebtedness) or (ii) is directly or indirectly liable (as a guarantor or
otherwise); provided, that after giving effect to such Indebtedness outstanding
from time to time, US Borrower is not in violation of Sections 7.7 and 7.8.
(h) the following long-term institutional Indebtedness of Northstar
Energy:
(i) US $150,000,000 indebtedness to The Prudential Insurance
Company of America pursuant to a Note Agreement dated as of March 2,
1998 including the following guarantees of such indebtedness: (1)
guarantees both dated March 2, 1998 made by Northstar Energy
Partnership and David Limited Partnership; (2) guarantee dated as of
July 31, 1998 made by 728098 Alberta Ltd.; and (3) any other guarantees
of Subsidiaries of Northstar Energy executed after the date hereof
pursuant to the terms of such Note Agreement.
(ii) US $75,000,000 indebtedness to certain institutional investors
pursuant to a Note Agreement dated as of July 19, 1995, as amended from
time to time, including the
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following guarantees of such indebtedness: (1) guarantee dated as of
July 31, 1998 made by Northstar Energy Partnership; (2) guarantee dated
as of July 31, 1998 made by 728098 Alberta Ltd.; and (3) any other
guarantee of Subsidiaries of Northstar Energy executed after the date
hereof pursuant to the terms of such Note Agreement.
including any refinancing of the above institutional indebtedness on
similar terms taking into account current market conditions.
(i) Indebtedness that is subordinated to the US Obligations and the
Canadian Obligations on terms acceptable to Required Lenders.
(j) Indebtedness in the amount of C $36,323,766 owing to The
Toronto-Dominion Bank due January 1, 1999 relating to the West Windsor
Cogeneration Plant sale.
(k) Indebtedness in the approximate amount of C $6,000,000 owed to
Indeck Gas Supply Corporation by Northstar Energy pursuant to a Gas Sales and
Purchase Agreement dated as of March 9, 1989, as heretofore or hereafter amended
from time to time.
(l) Acquired Debt.
(m) Indebtedness under Hedging Contracts permitted under Section 7.9.
(n) Indebtedness in the amount of US $15,000,000 to Bank of America
Canada payable on demand by Northstar Energy and guaranteed by Canadian
Guarantor.
(o) miscellaneous items of Indebtedness of all Restricted Persons
(other than US Borrower) not described in subsections (a) through (n) which do
not in the aggregate exceed US $50,000,000 (with Canadian Borrowers and their
Subsidiaries which are Restricted Persons having no more than US $20,000,000) in
principal amount at any one time outstanding.
Section 7.2. Limitation on Liens. Except for Permitted Liens, neither
any Canadian Borrower nor any Subsidiary of a Canadian Borrower that is a
Restricted Person will create, assume or permit to exist any Lien upon any of
the properties or assets which it now owns or hereafter acquires. Neither any
Canadian Borrower nor any Subsidiary of a Canadian Borrower that is a Restricted
Person will allow the filing or continued existence of any financing statement
describing as collateral any assets or property of such Restricted Person, other
than financing statements which describe only collateral subject to a Lien
permitted under this section and which name as secured party or lessor only the
holder of such Lien.
Section 7.3. Limitation on Mergers. Neither any Canadian Borrower nor
any Subsidiary of a Canadian Borrower that is a Restricted Person will merge or
consolidate with or into any other Person except that any Subsidiary of US
Borrower may be merged into or consolidated with (a) another Subsidiary of US
Borrower, or (b) US Borrower, so long as US Borrower is the surviving business
entity.
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Section 7.4. Limitation on Issuance of Securities by Subsidiaries of US
Borrower. Neither any Canadian Borrower nor any Subsidiary of a Canadian
Borrower that is a Restricted Person will issue any additional shares of its
capital stock, additional partnership interests or other securities or any
options, warrants or other rights to acquire such additional shares, partnership
interests or other securities except to another Restricted Person of which such
issuer is already directly or indirectly a Subsidiary of US Borrower unless such
securities are being issued to acquire a business, directly or indirectly
through the use of the proceeds of such issuance, and such securities are
convertible into the common shares or similar securities of US Borrower,
including the issuance of the exchangeable shares of Northstar Energy issued
pursuant to the Acquisition Documents. Northstar Energy may also issue stock
options to its employees from time to time in the form of exchangeable shares of
Northstar Energy, provided that such shares are convertible into common shares
or similar securities of US Borrower and provided further that such options are
granted under a stock option plan of Northstar Energy and/or US Borrower.
Section 7.5. Limitation on Restricted Payments. Except as permitted
below in this section, neither any Canadian Borrower nor any Subsidiary of a
Canadian Borrower that is a Restricted Person shall directly or indirectly (i)
make any Restricted Distribution, or (ii) any Restricted Investment (the above
being herein collectively referred to as "Restricted Payments"), unless the
aggregate amount of Restricted Payments made during any Fiscal Year never
exceeds ten percent (10%) of the book value of the Consolidated Assets of US
Borrower.
Section 7.6. Transactions with Affiliates. Neither any Canadian
Borrower nor any Subsidiary of a Canadian Borrower that is a Restricted Person
will engage in any material transaction with any of its Affiliates on terms
which are less favorable in any material respect to it than those which would
have been obtainable at the time in arm's-length dealing with Persons other than
such Affiliates, provided that such restriction shall not apply to transactions
among such Restricted Persons that are wholly-owned, directly or indirectly, by
US Borrower.
Section 7.7. Funded Debt to Total Capitalization. At the end of each
Fiscal Quarter, the ratio of US Borrower's Consolidated Total Funded Debt to US
Borrower's Total Capitalization will never exceed sixty percent (60%).
Section 7.8. Funded Debt to EBITDA. At the end of each Fiscal Quarter,
the ratio of US Borrower's Consolidated Total Funded Debt to EBITDA, calculated
for the four consecutive Fiscal Quarters then ended, will never exceed 3.75 to
1.
Section 7.9. Hedging Contracts. Neither any Canadian Borrower nor any
Subsidiary of a Canadian Borrower that is a Restricted Person will be a party to
or in any manner be liable on any Hedging Contract, unless such contracts
qualify under US GAAP as a hedge of oil and gas production, floating rate
Indebtedness or foreign currency needs (and not as a speculative investment),
such contracts are entered into in the ordinary course of the Restricted
Persons' businesses, and
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(i) if such contracts are entered into with the purpose and
effect of fixing prices on oil or gas expected to be produced by
Restricted Persons:
(A) such contracts for any single month (determined, in
the case of contracts that are not settled on a monthly basis,
by a monthly proration acceptable to US Agent) do not, in the
aggregate, cover amounts greater than seventy-five percent
(75%) of the Restricted Persons' aggregate Projected Oil and
Gas Production anticipated to be sold in the ordinary course
of the Restricted Persons' businesses for such month;
(B) such contracts do not require any Restricted Person to
provide any Lien to secure US Borrower's obligations
thereunder, other than Liens on cash or cash equivalents in an
aggregate amount not more than US $50,000,000; and
(C) each such contract is with a counterparty or has a
guarantor of the obligation of the counterparty who (unless
such counterparty is US Agent, any Lender or any of their
Affiliates) at the time the contract is made has long-term
obligations rated AA or better by S&P, Aa2 or better by
Moody's, A+ or better by CBRS, or AA or better by DBRS or is
an investment grade-rated industry participant.
As used in this subsection (i), the term "Projected Oil and Gas
Production" means the projected production of oil or gas (measured by
volume unit or BTU equivalent, not sales price) for the term of the
contracts or a particular month, as applicable, from properties and
interests owned by any Restricted Person which have attributable to
them proved oil or gas reserves.
(ii) if such contracts are entered into with the purpose and
effect of fixing interest rates on a principal amount of indebtedness
of such Restricted Person that is accruing interest at a variable rate,
the aggregate notional amount of such contracts never exceeds the
anticipated outstanding principal balance of the indebtedness to be
hedged by such contracts or an average of such principal balances
calculated using a generally accepted method of matching interest swap
contracts to declining principal balances, and the floating rate index
of each such contract generally matches the index used to determine the
floating rates of interest on the corresponding indebtedness to be
hedged by such contract.
ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following events
constitutes an Event of Default under this Agreement:
(a) Any Restricted Person fails to pay any principal component of any
Canadian Obligation when due and payable or fails to pay any other Canadian
Obligation within three (3)
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days after the date when due and payable, whether at a date for the payment of a
fixed installment or as a contingent or other payment becomes due and payable or
as a result of acceleration or otherwise;
(b) Any "default" or "event of default" occurs under any Canadian Loan
Document which defines either such term, and the same is not remedied within the
applicable period of grace (if any) provided in such Loan Document;
(c) Any Restricted Person fails (other than as referred to in
subsections (a) or (b) above) to duly observe, perform or comply with any
covenant, agreement, condition or provision of any Canadian Loan Document, and
such failure remains unremedied for a period of thirty (30) days after notice of
such failure is given by Canadian Agent to Canadian Borrower;
(d) Any representation or warranty previously, presently or hereafter
made in writing by or on behalf of any Restricted Person in connection with any
Canadian Loan Document shall prove to have been false or incorrect in any
material respect on any date on or as of which made; provided, that if such
falsity or lack of correctness is capable of being remedied or cured within a
30-day period, Canadian Borrowers shall (subject to the other provisions of this
Section 8.1) have a period of 30 days after written notice thereof has been
given to Canadian Borrowers by Canadian Agent within which to remedy or cure
such lack of correctness, or this Agreement, any Canadian Note, or the Guaranty
executed by Canadian Guarantor is asserted to be or at any time ceases to be
valid, binding and enforceable in any material respect as warranted in Section
5.5 for any reason other than its release or subordination by Canadian Agent;
(e) Any Restricted Person (i) fails to duly pay any Indebtedness in
excess of US $25,000,000 constituting principal or interest owed by it with
respect to borrowed money or money otherwise owed under any note, bond, or
similar instrument, including without limitation the Subordinated US Borrower
Debentures, the Subordinated US Borrower Indenture, the Subordinated US Borrower
Guarantee and the Devon Trust Securities, or (ii) breaches or defaults in the
performance of any agreement or instrument by which any such Indebtedness is
issued, evidenced, governed, or secured, other than a breach or default
described in clause (i) above, and any such failure, breach or default results
in the acceleration of such Indebtedness;
(f) Any Change in Control occurs;
(g) Any "Event of Default" occurs under the US Agreement; and
(h) Any Canadian Borrower or any other Restricted Person having assets
with a book value of at least US $25,000,000:
(i) suffers the entry against it of a judgment, decree or order for
relief by a Tribunal of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or
other similar Law of any jurisdiction now or hereafter in effect,
including the Bankruptcy and Insolvency Act (Canada) and the Companies'
Creditors Arrangement Act (Canada), as each are from time to time
amended,
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or has any such proceeding commenced against it which remains
undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in effect,
including the Bankruptcy and Insolvency Act (Canada) and the Companies'
Creditors Arrangement Act (Canada), as each are from time to time
amended; or applies for or consents to the entry of an order for relief
in an involuntary case under any such Law; or makes a general
assignment for the benefit of creditors; or fails generally to pay (or
admits in writing its inability to pay) its debts as such debts become
due; or takes corporate or other action to authorize any of the
foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, receiver- manager, liquidator, assignee, custodian, trustee,
sequestrator or similar official of all or a substantial part of its
property in a proceeding brought against or initiated by it, and such
appointment or taking possession is neither made ineffective nor
discharged within thirty days after the making thereof, or such
appointment or taking possession is at any time consented to, requested
by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in an amount that exceeds (x) the valid and
collectible insurance in respect thereof or (y) the amount of an
indemnity with respect thereto reasonably acceptable to the Required
Lenders by US $25,000,000 or more, unless the same is discharged within
thirty days after the date of entry thereof or an appeal or appropriate
proceeding for review thereof is taken within such period and a stay of
execution pending such appeal is obtained; or
(v) suffers a levy of distress or execution or possession, or
a writ or warrant of attachment or any similar process to be issued by
any Tribunal against all or any part of its property having a book
value of at least US $25,000,000, and such writ or warrant of
attachment or any similar process is not stayed or released within
thirty days after the entry or levy thereof or after any stay is
vacated or set aside.
Upon the occurrence of an Event of Default described in subsection (h)(i),
(h)(ii) or (h)(iii) of this section with respect to Canadian Borrowers, all of
the Canadian Obligations shall thereupon be immediately due and payable, without
demand, presentment, notice of demand or of dishonor and nonpayment, protest,
notice of protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Canadian Borrowers and each Restricted Person who at
any time ratifies or approves this Agreement. Upon any such acceleration, any
obligation of any Lender to make any further Canadian Advances and any
obligation of Canadian LC Issuer to issue Letters of Credit hereunder shall be
permanently terminated. During the continuance of any other Event of Default,
Canadian Agent at any time and from time to time may (and upon written
instructions from Required Lenders, Canadian Agent shall), without notice to
Canadian Borrowers or any other Restricted Person, do either or both of the
following: (1) terminate any obligation of Lenders to make Canadian Advances
hereunder, and any obligation of Canadian LC Issuer to
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issue Letters of Credit hereunder, and (2) declare any or all of the Canadian
Obligations immediately due and payable, and all such Canadian Obligations shall
thereupon be immediately due and payable, without demand, presentment, notice of
demand or of dishonor and nonpayment, protest, notice of protest, notice of
intention to accelerate, declaration or notice of acceleration, or any other
notice or declaration of any kind, all of which are hereby expressly waived by
Canadian Borrowers and each Restricted Person who at any time ratifies or
approves this Agreement.
Section 8.2. Remedies. If any Default shall occur and be continuing,
each Lender Party may protect and enforce its rights under the Canadian Loan
Documents by any appropriate proceedings, including proceedings for specific
performance of any covenant or agreement contained in any Canadian Loan
Document, and each Lender Party may enforce the payment of any Canadian
Obligations due it or enforce any other legal or equitable right which it may
have. All rights, remedies and powers conferred upon Lender Parties under the
Canadian Loan Documents shall be deemed cumulative and not exclusive of any
other rights, remedies or powers available under the Canadian Loan Documents or
at Law or in equity.
ARTICLE IX - Canadian Agent
Section 9.1. Appointment, Powers, and Immunities. Each Lender hereby
irrevocably appoints and authorizes Canadian Agent to act as its agent under
this Agreement and the other Canadian Loan Documents with such powers and
discretion as are specifically delegated to Canadian Agent by the terms of this
Agreement and the other Canadian Loan Documents, together with such other powers
as are reasonably incidental thereto. Canadian Agent (which term as used in this
sentence and in Section 9.5 and the first sentence of Section 9.6 hereof shall
include its Affiliates and its own and its Affiliates' officers, directors,
employees, and agents): (a) shall not have any duties or responsibilities except
those expressly set forth in this Agreement and shall not be a trustee or
fiduciary for any Lender; (b) shall not be responsible to the Lenders for any
recital, statement, representation, or warranty (whether written or oral) made
in or in connection with any Canadian Loan Document or any certificate or other
document referred to or provided for in, or received by any of them under, any
Canadian Loan Document, or for the value, validity, effectiveness, genuineness,
enforceability, or sufficiency of any Canadian Loan Document, or any other
document referred to or provided for therein or for any failure by any
Restricted Person or any other Person to perform any of its obligations
thereunder; (c) shall not be responsible for or have any duty to ascertain,
inquire into, or verify the performance or observance of any covenants or
agreements by any Restricted Person or the satisfaction of any condition or to
inspect the property (including the books and records) of any Restricted Person
or any of its Subsidiaries or Affiliates; (d) shall not be required to initiate
or conduct any litigation or collection proceedings under any Canadian Loan
Document; and (e) shall not be responsible for any action taken or omitted to be
taken by it under or in connection with any Canadian Loan Document, except for
its own gross negligence or willful misconduct. Canadian Agent may employ agents
and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care.
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Section 9.2. Reliance by Canadian Agent. Canadian Agent shall be
entitled to rely upon any certification, notice, instrument, writing, or other
communication (including, without limitation, any thereof by telephone or
telecopy) believed by it to be genuine and correct and to have been signed, sent
or made by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel for any Restricted Person),
independent accountants, and other experts selected by Canadian Agent. Canadian
Agent may deem and treat the payee of any Canadian Note as the holder thereof
for all purposes hereof unless and until Canadian Agent receives and accepts an
Assignment and Acceptance executed in accordance with Section 10.6 hereof. As to
any matters not expressly provided for by this Agreement, Canadian Agent shall
not be required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully indemnified and
protected in so acting or refraining from acting) upon the instructions of the
Required Lenders, and such instructions shall be binding on all of the Lenders;
provided, however, that Canadian Agent shall not be required to take any action
that exposes Canadian Agent to personal liability or that is contrary to any
Canadian Loan Document or applicable Law or unless it shall first be indemnified
to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking any such action.
Section 9.3. Defaults. Canadian Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default or Event of Default unless
Canadian Agent has received written notice from a Lender or Canadian Borrowers
specifying such Default or Event of Default and stating that such notice is a
"Notice of Default". In the event that Canadian Agent receives such a notice of
the occurrence of a Default or Event of Default, Canadian Agent shall give
prompt notice thereof to the Lenders. Canadian Agent shall (subject to Section
9.1 hereof) take such action with respect to such Default or Event of Default as
shall reasonably be directed by the Required Lenders. Notwithstanding the
foregoing, unless and until Canadian Agent shall have received such directions,
Canadian Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interest of the Lenders.
Section 9.4. Rights as Lender. With respect to its Percentage Share of
the Canadian Maximum Credit Amount and the Canadian Loans made by it, Canadian
Agent (and any successor acting as Canadian Agent) in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting as Canadian Agent, and
the term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include Canadian Agent in its individual capacity. Canadian Agent (and any
successor acting as Canadian Agent) and its Affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to, make
Investments in, provide services to, and generally engage in any kind of
lending, trust, or other business with any Restricted Person or any of its
Subsidiaries or Affiliates as if it were not acting as Canadian Agent, and
Canadian Agent (and any successor acting as Canadian Agent) and its Affiliates
may accept fees and other consideration from any Restricted Person or any of its
Subsidiaries or Affiliates for services in connection with this Agreement or
otherwise without having to account for the same to the Lenders.
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SECTION 9.5. INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY CANADIAN
AGENT (TO THE EXTENT NOT REIMBURSED UNDER SECTION 10.4 HEREOF, BUT WITHOUT
LIMITING THE OBLIGATIONS OF CANADIAN BORROWERS UNDER SUCH SECTION) RATABLY IN
ACCORDANCE WITH THEIR RESPECTIVE PERCENTAGE SHARES, FOR ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES (INCLUDING LEGAL FEES), OR DISBURSEMENTS OF ANY KIND AND NATURE
WHATSOEVER THAT MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST CANADIAN
AGENT (INCLUDING BY ANY LENDER) IN ANY WAY RELATING TO OR ARISING OUT OF ANY
CANADIAN LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY OR ANY ACTION
TAKEN OR OMITTED BY CANADIAN AGENT UNDER ANY CANADIAN LOAN DOCUMENT (INCLUDING
ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF CANADIAN AGENT); provided
that no Lender shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the Person to be indemnified.
Without limitation of the foregoing, each Lender agrees to reimburse Canadian
Agent promptly upon demand for its ratable share of any costs or expenses
payable by Canadian Borrower under Section 10.4, to the extent that Canadian
Agent is not promptly reimbursed for such costs and expenses by Canadian
Borrowers. The agreements contained in this section shall survive payment in
full of the Canadian Loans and all other amounts payable under this Agreement.
Section 9.6. Non-Reliance on Canadian Agent and Other Lenders. Each
Lender agrees that it has, independently and without reliance on Canadian Agent
or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Canadian Borrowers and
their Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon Canadian Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under the Canadian Loan Documents. Except for notices, reports, and other
documents and information expressly required to be furnished to the Lenders by
Canadian Agent hereunder, Canadian Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition, or business of any Restricted
Person or any of its Subsidiaries or Affiliates that may come into the
possession of Canadian Agent or any of its Affiliates.
Section 9.7. Rights as Lender. In its capacity as a Lender, Canadian
Agent shall have the same rights and obligations as any Lender and may exercise
such rights as though it were not Canadian Agent. Canadian Agent may accept
deposits from, lend money to, act as trustee under indentures of, and generally
engage in any kind of business with any Restricted Person or their Affiliates,
all as if it were not Canadian Agent hereunder and without any duty to account
therefor to any other Lender.
Section 9.8. Sharing of Set-Offs and Other Payments. Each Lender Party
agrees that if it shall, whether through the exercise of rights under Canadian
Loan Documents or rights of banker's lien, set off, or counterclaim against
Canadian Borrowers or otherwise, obtain payment of a portion of the aggregate
Obligations owed to it which, taking into account all distributions made by
Canadian Agent under Section 3.1, causes such Lender Party to have received more
than it would have received had such payment been received by Canadian Agent and
distributed pursuant to Section 3.1, then (a) it shall be deemed to have
simultaneously purchased and shall
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be obligated to purchase interests in the Obligations as necessary to cause all
Lender Parties to share all payments as provided for in Section 3.1, and (b)
such other adjustments shall be made from time to time as shall be equitable to
ensure that Canadian Agent and all Lender Parties share all payments of
Obligations as provided in Section 3.1; provided, however, that nothing herein
contained shall in any way affect the right of any Lender Party to obtain
payment (whether by exercise of rights of banker's lien, set-off or counterclaim
or otherwise) of indebtedness other than the Obligations. Canadian Borrowers
expressly consent to the foregoing arrangements and agree that any holder of any
such interest or other participation in the Obligations, whether or not acquired
pursuant to the foregoing arrangements, may to the fullest extent permitted by
Law exercise any and all rights of banker's lien, set-off, or counterclaim as
fully as if such holder were a holder of the Obligations in the amount of such
interest or other participation. If all or any part of any funds transferred
pursuant to this section is thereafter recovered from the seller under this
section which received the same, the purchase provided for in this section shall
be deemed to have been rescinded to the extent of such recovery, together with
interest, if any, if interest is required pursuant to the order of a Tribunal
order to be paid on account of the possession of such funds prior to such
recovery.
Section 9.9. Investments. Whenever Canadian Agent in good faith
determines that it is uncertain about how to distribute to Lender Parties any
funds which it has received, or whenever Canadian Agent in good faith determines
that there is any dispute among Lender Parties about how such funds should be
distributed, Canadian Agent may choose to defer distribution of the funds which
are the subject of such uncertainty or dispute. If Canadian Agent in good faith
believes that the uncertainty or dispute will not be promptly resolved, or if
Canadian Agent is otherwise required to invest funds pending distribution to
Lender Parties, Canadian Agent shall invest such funds pending distribution; all
interest on any such Investment shall be distributed upon the distribution of
such Investment and in the same proportion and to the same Persons as such
Investment. All moneys received by Canadian Agent for distribution to Lender
Parties (other than to the Person who is Canadian Agent in its separate capacity
as a Lender Party) shall be held by Canadian Agent pending such distribution
solely as Canadian Agent for such Lender Parties, and Canadian Agent shall have
no equitable title to any portion thereof.
Section 9.10. Benefit of Article IX. The provisions of this Article
(other than the following Section 9.11) are intended solely for the benefit of
Lender Parties, and no Restricted Person shall be entitled to rely on any such
provision or assert any such provision in a claim or defense against any Lender.
Lender Parties may waive or amend such provisions as they desire without any
notice to or consent of Canadian Borrower or any Restricted Person.
Section 9.11. Resignation. Canadian Agent may resign at any time by
giving written notice thereof to Lenders and Canadian Borrowers. Each such
notice shall set forth the date of such resignation. Upon any such resignation,
Required Lenders shall have the right to appoint a successor Canadian Agent. A
successor must be appointed for any retiring Canadian Agent, and such Canadian
Agent's resignation shall become effective when such successor accepts such
appointment. If, within thirty days after the date of the retiring Canadian
Agent's resignation, no successor Canadian Agent has been appointed and has
accepted such appointment, then the retiring Canadian Agent may appoint a
successor Canadian Agent, which shall be a commercial
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bank organized or licensed to conduct a banking or trust business under the Laws
of Canada or of any province thereof and if no Default or Event of Default has
occurred and is continuing, retiring Canadian Agent shall obtain the consent of
Canadian Borrowers. Upon the acceptance of any appointment as Canadian Agent
hereunder by a successor Canadian Agent, the retiring Canadian Agent shall be
discharged from its duties and obligations under this Agreement and the other
Canadian Loan Documents. After any retiring Canadian Agent's resignation
hereunder the provisions of this Article IX shall continue to inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Canadian Agent under the Canadian Loan Documents.
Section 9.12. Lenders to Remain Pro Rata. It is the intent of all
parties hereto that, except for Competitive Bid Loans and matters related
thereto, the pro rata share of each Lender in the US Obligations and the
Canadian Obligations shall be substantially the same at all times during the
term of this Agreement. Accordingly, the initial Percentage Share of each Lender
in the US Maximum Credit Amount will be the same as the initial Percentage Share
of such Lender in the Canadian Maximum Credit Amount. All subsequent assignments
and adjustments of the interests of the Lenders in the US Obligations and the
Canadian Obligations will be made so as to maintain such a pro rata arrangement;
provided that for the purposes of determining these pro rata shares, any
Percentage Share held by any Lender's Affiliates shall be included in
determining the interests of such Lender.
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by any Lender Party in exercising any right, power or
remedy which such Lender Party may have under any of the Canadian Loan Documents
shall operate as a waiver thereof or of any other right, power or remedy, nor
shall any single or partial exercise by any Lender Party of any such right,
power or remedy preclude any other or further exercise thereof or of any other
right, power or remedy. No waiver of any provision of any Canadian Loan Document
and no consent to any departure therefrom shall ever be effective unless it is
in writing and signed as provided below in this section, and then such waiver or
consent shall be effective only in the specific instances and for the purposes
for which given and to the extent specified in such writing. No notice to or
demand on any Restricted Person shall in any case of itself entitle any
Restricted Person to any other or further notice or demand in similar or other
circumstances. This Agreement and the other Canadian Loan Documents set forth
the entire understanding between the parties hereto with respect to the
transactions contemplated herein and therein and supersede all prior discussions
and understandings with respect to the subject matter hereof and thereof, and no
waiver, consent, release, modification or amendment of or supplement to this
Agreement or the other Canadian Loan Documents shall be valid or effective
against any party hereto unless the same is in writing and signed by (i) if such
party is Canadian Borrowers, by Canadian Borrowers, (ii) if such party is
Canadian Agent or Canadian LC Issuer, by such party, and (iii) if such party is
a Lender, by such Lender or by Canadian Agent on behalf of Lenders with the
written consent of Required Lenders (which consent has already been given as to
the
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termination of the Canadian Loan Documents as provided in Section 10.10).
Notwithstanding the foregoing or anything to the contrary herein, Canadian Agent
shall not, without the prior consent of Majority Lenders, execute and deliver on
behalf of such Lender any waiver or amendment which would increase the Canadian
Maximum Credit Amount hereunder. Notwithstanding the foregoing or anything to
the contrary herein, Canadian Agent shall not, without the prior consent of each
individual Lender, execute and deliver on behalf of such Lender any waiver or
amendment which would: (1) waive any of the conditions specified in Article IV,
(2) increase the maximum amount which such Lender is committed hereunder to
lend, (3) reduce any fees payable to such Lender hereunder, or the principal of,
or interest on, such Lender's Note, (4) postpone any date fixed for any payment
of any such fees, principal or interest, (5) amend the definition herein of
"Required Lenders", "Majority Lenders", or otherwise change the aggregate amount
of Percentage Shares which is required for Canadian Agent, Lenders or any of
them to take any particular action under the Canadian Loan Documents, (6)
release Canadian Borrowers from their obligation to pay such Lender's Note, or
(7) amend this Section 10.1(a).
(b) Acknowledgments and Admissions. Canadian Borrower hereby
represents, warrants, acknowledges and admits that (i) it has been advised by
counsel in the negotiation, execution and delivery of the Canadian Loan
Documents to which it is a party, (ii) it has made an independent decision to
enter into this Agreement and the other Canadian Loan Documents to which it is a
party, without reliance on any representation, warranty, covenant or undertaking
by Canadian Agent or any Lender, whether written, oral or implicit, other than
as expressly set out in this Agreement or in another Canadian Loan Document
delivered on or after the date hereof, (iii) there are no representations,
warranties, covenants, undertakings or agreements by any Lender as to the
Canadian Loan Documents except as expressly set out in this Agreement or in
another Canadian Loan Document delivered on or after the date hereof, (iv) no
Lender has any fiduciary obligation toward such Canadian Borrower with respect
to any Canadian Loan Document or the transactions contemplated thereby, (v) the
relationship pursuant to the Canadian Loan Documents between such Canadian
Borrower and the other Restricted Persons, on one hand, and each Lender, on the
other hand, is and shall be solely that of debtor and creditor, respectively,
(vi) no partnership or joint venture exists with respect to the Canadian Loan
Documents between any Restricted Person and any Lender, (vii) Canadian Agent is
not such Canadian Borrower's Canadian Agent, but Canadian Agent for Lenders,
(viii) without limiting any of the foregoing, Canadian Borrower is not relying
upon any representation or covenant by any Lender, or any representative
thereof, and no such representation or covenant has been made, that any Lender
will, at the time of an Event of Default or Default, or at any other time,
waive, negotiate, discuss, or take or refrain from taking any action permitted
under the Canadian Loan Documents with respect to any such Event of Default or
Default or any other provision of the Canadian Loan Documents, and (ix) all
Lender Parties have relied upon the truthfulness of the acknowledgments in this
section in deciding to execute and deliver this Agreement and to become
obligated hereunder.
(c) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER CANADIAN
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
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(d) Annual Rates of Interest. For the purposes of the Interest Act
(Canada), whenever interest payable pursuant to this Agreement is calculated on
the basis of a period other than a calendar year (the "Interest Period"), each
rate of interest determined pursuant to such calculation expressed as an annual
rate is equivalent to such rate as so determined multiplied by the actual number
of days in the calendar year in which the same is to be ascertained and divided
by the number of days in the Interest Period.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.2. Survival of Agreements; Cumulative Nature. All of
Restricted Persons' various representations, warranties, covenants and
agreements in the Canadian Loan Documents shall survive the execution and
delivery of this Agreement and the other Canadian Loan Documents and the
performance hereof and thereof, including the making or granting of the Canadian
Loans and the delivery of the Canadian Notes and the other Canadian Loan
Documents, and shall further survive until all of the Canadian Obligations are
paid in full to each Lender Party and all of Lender Parties' obligations to
Canadian Borrowers are terminated. All statements and agreements contained in
any certificate or other instrument delivered by any Restricted Person to any
Lender Party under any Canadian Loan Document shall be deemed representations
and warranties by each Canadian Borrower or agreements and covenants of Canadian
Borrower under this Agreement. The representations, warranties, indemnities, and
covenants made by Restricted Persons in the Canadian Loan Documents, and the
rights, powers, and privileges granted to Lender Parties in the Canadian Loan
Documents, are cumulative, and, except for expressly specified waivers and
consents, no Canadian Loan Document shall be construed in the context of another
to diminish, nullify, or otherwise reduce the benefit to any Lender Party of any
such representation, warranty, indemnity, covenant, right, power or privilege.
In particular and without limitation, no exception set out in this Agreement to
any representation, warranty, indemnity, or covenant herein contained shall
apply to any similar representation, warranty, indemnity, or covenant contained
in any other Canadian Loan Document, and each such similar representation,
warranty, indemnity, or covenant shall be subject only to those exceptions which
are expressly made applicable to it by the terms of the various Canadian Loan
Documents.
Section 10.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Canadian Loan Document
shall be in writing, unless otherwise specifically provided in such Canadian
Loan Document (provided that Canadian Agent may give telephonic notices to the
other Lender Parties), and shall be deemed sufficiently given or furnished if
delivered by personal delivery, by facsimile or other electronic transmission,
by delivery service with proof of delivery, or by registered Canadian mail,
postage prepaid, to each Canadian Borrower and Restricted Persons at the address
of each Canadian Borrower specified on the signature pages hereto and to
Canadian Agent at its address specified on the signature pages hereto and to
each Lender Party at the address specified on Annex II (unless
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changed by similar notice in writing given by the particular Person whose
address is to be changed). Any such notice or communication shall be deemed to
have been given (a) in the case of personal delivery or delivery service, as of
the date of first attempted delivery during normal business hours at the address
provided herein, (b) in the case of facsimile or other electronic transmission,
upon receipt, or (c) in the case of registered Canadian mail, five Business Days
after deposit in the mail; provided, however, that no Borrowing Notice shall
become effective until actually received by Canadian Agent.
Section 10.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions contemplated
by this Agreement are consummated, Northstar Energy will promptly (and in any
event, within 30 days after any invoice or other statement or notice) pay: (i)
all reasonable costs and expenses incurred by or on behalf of Canadian Agent
(including without limitation, legal fees) in connection with (1) the
negotiation, preparation, execution and delivery of the Canadian Loan Documents,
and any and all consents, waivers or other documents or instruments relating
thereto, (2) the filing, recording, refiling and re-recording of any Canadian
Loan Documents and any other documents or instruments or further assurances
required to be filed or recorded or refiled or re-recorded by the terms of any
Canadian Loan Document, (3) the borrowings hereunder and other action reasonably
required in the course of administration hereof, (4) monitoring or confirming
(or preparation or negotiation of any document related to) Canadian Borrowers'
compliance with any covenants or conditions contained in this Agreement or in
any Canadian Loan Document, and (ii) all reasonable costs and expenses incurred
by or on behalf of any Lender Party (including without limitation, legal fees,
consultants' fees and accounting fees) in connection with the defense or
enforcement of any of the Canadian Loan Documents (including this section) or
the defense of any Lender Party's exercise of its rights thereunder.
(B) INDEMNITY. NORTHSTAR ENERGY AGREES TO INDEMNIFY EACH LENDER PARTY,
UPON DEMAND, FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, CLAIMS,
LOSSES, DAMAGES, PENALTIES, FINES, ACTIONS, JUDGMENTS, SUITS, SETTLEMENTS,
COSTS, EXPENSES OR DISBURSEMENTS, EXCLUDING PRINCIPAL AND INTEREST OWING BY
DEVON CANADA WITH RESPECT TO CANADIAN ADVANCES MADE TO DEVON CANADA, BUT
INCLUDING REASONABLE FEES OF LEGAL COUNSEL, ACCOUNTANTS, EXPERTS AND ADVISORS)
OF ANY KIND OR NATURE WHATSOEVER (IN THIS SECTION COLLECTIVELY CALLED
"LIABILITIES AND COSTS") WHICH TO ANY EXTENT (IN WHOLE OR IN PART) MAY BE
IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH LENDER PARTY GROWING OUT OF,
RESULTING FROM OR IN ANY OTHER WAY ASSOCIATED WITH THE CANADIAN LOAN DOCUMENTS
AND THE TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT OR DEFENSE THEREOF)
AT ANY TIME ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN (WHETHER ARISING IN
CONTRACT OR IN TORT OR OTHERWISE AND INCLUDING ANY VIOLATION OR NONCOMPLIANCE
WITH ANY ENVIRONMENTAL LAWS BY ANY LENDER PARTY OR ANY OTHER PERSON OR ANY
LIABILITIES OR DUTIES OF ANY LENDER PARTY OR ANY OTHER PERSON WITH RESPECT TO
HAZARDOUS MATERIALS FOUND IN OR RELEASED INTO THE ENVIRONMENT). THE FOREGOING
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY
WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF
STRICT LIABILITY
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OR CAUSED, IN WHOLE OR IN PART BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY
ANY LENDER PARTY,
provided only that no Lender Party shall be entitled under this section to
receive indemnification for that portion, if any, of any liabilities and costs
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment. If any Person (including Canadian
Borrowers or any of their Affiliates) ever alleges such gross negligence or
willful misconduct by any Lender Party, the indemnification provided for in this
section shall nonetheless be paid upon demand, subject to later adjustment or
reimbursement, until such time as a court of competent jurisdiction enters a
final judgment as to the extent and effect of the alleged gross negligence or
willful misconduct. As used in this section the term "Lender Party" shall refer
not only to each Person designated as such in Section 1.1 but also to each
director, officer, agent, attorney, employee, representative and Affiliate of
such Person.
Section 10.5. Parties in Interest. All grants, covenants and agreements
contained in the Canadian Loan Documents shall bind and inure to the benefit of
the parties thereto and their respective successors and assigns; provided,
however, that no Restricted Person may assign or transfer any of its rights or
delegate any of its duties or obligations under any Canadian Loan Document
without the prior consent of Required Lenders. No Canadian Borrower nor any
Affiliates of any Canadian Borrower shall directly or indirectly purchase or
otherwise retire any Obligations owed to any Lender nor will any Lender accept
any offer to do so, unless each Lender shall have received substantially the
same offer with respect to the same Percentage Share of the Obligations owed to
it. If Canadian Borrower or any Affiliate of any Canadian Borrower at any time
purchases some but less than all of the Obligations owed to all Lender Parties,
such purchaser shall not be entitled to any rights of any Lender under the
Canadian Loan Documents unless and until Canadian Borrowers or their Affiliates
have purchased all of the Obligations.
Section 10.6. Assignments and Participations.
(a) Each Lender may assign to one or more Eligible Transferees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Canadian Loans, its Note, and its Percentage
Share of the Canadian Maximum Credit Amount); provided, however, that
(i) each such assignment shall be to an Eligible Transferee;
(ii) together with each such assignment of its rights and
obligations under this Agreement, such Lender shall assign the same
Percentage Share of its rights and obligations under the US Agreement
to the same Eligible Transferee or an Affiliate of such Eligible
Transferee;
(iii) except in the case of such an assignment to another Lender or
an assignment of all of a Lender's rights and obligations under this
Agreement, any partial assignment of such Lender's rights and
obligations under this Agreement and under the
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US Agreement shall be in a collective amount at least equal to US
$20,000,000 or an integral multiple of US $5,000,000 in excess thereof;
(iv) each such assignment by a Lender shall be of a constant, and
not varying, percentage of all of its rights and obligations under the
Canadian Loan Documents; and
(v) the parties to such assignment shall execute and deliver to
Canadian Agent for its acceptance an Assignment and Acceptance in the
form of Exhibit F hereto, together with any Canadian Note subject to
such assignment and a processing fee of US$3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this section, the assignor, Canadian
Agent and Canadian Borrowers shall make appropriate arrangements so that, if
required, new Canadian Notes are issued to the assignor and the assignee. If the
assignee is not incorporated under the Laws of Canada or a province thereof, it
shall deliver to Canadian Borrowers and Canadian Agent certification as to
exemption from deduction or withholding of Taxes in accordance with Section 3.9
of the US Agreement.
(b) Canadian Agent shall maintain at its address referred to in Section
10.3 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders and
their Percentage Share of the Canadian Maximum Credit Amount of, and principal
amount of the Canadian Loans owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and Canadian Borrowers, Canadian Agent and the
Lenders may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by Canadian Borrowers or any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Canadian Note subject to such assignment and
payment of the processing fee, Canadian Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit F
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
parties thereto.
(d) Each Lender may sell participations to one or more Persons that are
Eligible Transferees in all or a portion of its rights and obligations under
this Agreement (including all or a portion of the Canadian Maximum Credit Amount
and its Canadian Loans); provided, however, that (i) such Lender's obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of
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such obligations, (iii) the participant shall be entitled to the benefit of the
yield protection provisions contained in Article III and the right of offset
contained in Section 6.13, and (iv) Canadian Borrowers shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and such Lender shall retain the sole right to
enforce the obligations of Canadian Borrowers relating to its Canadian Loans and
its Canadian Note and to approve any amendment, modification, or waiver of any
provision of this Agreement (other than amendments, modifications, or waivers
decreasing the amount of principal of or the rate at which interest is payable
on such Canadian Loans or Canadian Note, extending any scheduled principal
payment date or date fixed for the payment of interest on such Canadian Loans or
Canadian Note, or extending its Canadian Maximum Credit Amount).
(e) Notwithstanding any other provision set forth in this Agreement,
any Lender residing in the United States may at any time assign and pledge all
or any portion of its Canadian Advances and its Canadian Note to any Federal
Reserve Bank as collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Bank. No such assignment shall release
the assigning Lender from its obligations hereunder.
(f) Any Lender may furnish any information concerning Canadian
Borrowers or any of its Subsidiaries in the possession of such Lender from time
to time to assignees and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 10.7 hereof.
Section 10.7. Confidentiality. Canadian Agent and each Lender (each, a
"Lending Party") agrees to keep confidential any information furnished or made
available to it by Canadian Borrowers pursuant to this Agreement that is marked
confidential; provided that nothing herein shall prevent any Lending Party from
disclosing such information (a) to any other Lending Party or any Affiliate of
any Lending Party, or any officer, director, employee, agent, or advisor of any
Lending Party or Affiliate of any Lending Party, (b) to any other Person if
reasonably incidental to the administration of the credit facility provided
herein, (c) as required by any Law, rule, or regulation, (d) upon the order of
any Tribunal, (e) upon the request or demand of any regulatory agency or
authority, (f) that is or becomes available to the public or that is or becomes
available to any Lending Party other than as a result of a disclosure by any
Lending Party prohibited by this Agreement, (g) in connection with any
litigation to which such Lending Party or any of its Affiliates may be a party,
(h) to the extent necessary in connection with the exercise of any remedy under
this Agreement or any other Canadian Loan Document, and (i) subject to
provisions substantially similar to those contained in this section, to any
actual or proposed participant or assignee.
Section 10.8. Governing Law; Submission to Process. EXCEPT TO THE
EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A CANADIAN
LOAN DOCUMENT, THE CANADIAN LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND
INSTRUMENTS MADE UNDER THE LAWS OF THE PROVINCE OF ALBERTA AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
PROVINCE OF ALBERTA AND THE LAWS OF CANADA APPLICABLE THERETO, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HEREBY AGREES
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THAT ANY LEGAL ACTION OR PROCEEDING AGAINST SUCH CANADIAN BORROWER WITH RESPECT
TO THIS AGREEMENT, THE CANADIAN NOTES OR ANY OF THE CANADIAN LOAN DOCUMENTS MAY
BE BROUGHT IN THE COURTS OF THE PROVINCE OF ALBERTA AND EACH PARTY SUBMITS AND
ATTORNS TO, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY
WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE
SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF LENDER PARTIES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF LENDER PARTIES TO BRING PROCEEDINGS AGAINST
CANADIAN BORROWERS IN THE COURTS OF ANY OTHER JURISDICTION.
Section 10.9. Waiver of Judgment Interest Act (Alberta). To the extent
permitted by Law, the provisions of the Judgment Interest Act (Alberta) shall
not apply to the Canadian Loan Documents and are hereby expressly waived by
Canadian Borrowers.
Section 10.10. Deemed Reinvestment Not Applicable. For the purposes of
the Interest Act (Canada), the principle of deemed reinvestment of interest
shall not apply to any interest calculation under the Canadian Loan Documents,
and the rates of interest stipulated in this Agreement are intended to be
nominal rates and not effective rates or yields.
Section 10.11. Limitation on Interest. Lender Parties, Restricted
Persons and any other parties to the Canadian Loan Documents intend to contract
in strict compliance with applicable usury Law from time to time in effect. In
furtherance thereof such Persons stipulate and agree that none of the terms and
provisions contained in the Canadian Loan Documents shall ever be construed to
create a contract to pay, for the use, forbearance or detention of money,
interest in excess of the maximum amount of interest permitted to be charged by
applicable Law from time to time in effect. Neither any Restricted Person nor
any present or future guarantors, endorsers, or other Persons hereafter becoming
liable for payment of any Obligation shall ever be liable for unearned interest
thereon or shall ever be required to pay interest thereon in excess of the
maximum amount that may be lawfully charged under applicable Law from time to
time in effect, and the provisions of this section shall control over all other
provisions of the Canadian Loan Documents which may be in conflict or apparent
conflict herewith. Lender Parties expressly disavow any intention to charge or
collect excessive unearned interest or finance charges in the event the maturity
of any Obligation is accelerated. If (a) the maturity of any Obligation is
accelerated for any reason, (b) any Obligation is prepaid and as a result any
amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) any Lender or any other holder of any or all of the Obligations
shall otherwise collect moneys which are determined to constitute interest which
would otherwise increase the interest on any or all of the Obligations to an
amount in excess of that permitted to be charged by applicable Law then in
effect, then all sums determined to constitute interest in excess of such legal
limit shall, without penalty, be promptly applied to reduce the then outstanding
principal of the related Obligations or, at such Lender's or holder's option,
promptly returned to Canadian Borrowers or the other payor thereof upon such
determination. In determining whether or not the interest paid or payable, under
any specific circumstance, exceeds the maximum amount permitted under applicable
Law, Lender Parties and Restricted Persons (and any other payors thereof) shall
to the greatest extent permitted under applicable Law, and in accordance with
generally accepted actuarial practices and principles, (i) characterize any
non-principal payment as an expense, fee
57
<PAGE> 63
or premium rather than as interest, (ii) exclude voluntary prepayments and the
effects thereof, and (iii) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the instruments
evidencing the Obligations in accordance with the amounts outstanding from time
to time thereunder and the maximum legal rate of interest from time to time in
effect under applicable Law in order to lawfully charge the maximum amount of
interest permitted under applicable Law. In no event shall the aggregate
"interest" (as defined in section 347 of the Criminal Code (Canada)) payable
under the Canadian Loan Documents exceed the maximum effective annual rate of
interest on the "credit advanced" (as defined in that section) permitted under
that section and, if any payment, collection or demand pursuant to this
Agreement in respect of "interest" (as defined in that section) is determined to
be contrary to the provisions of that section, such payment, collection or
demand shall be deemed to have been made by mutual mistake of Canadian
Borrowers, Canadian Agent and Lenders and the amount of such excess payment or
collection shall be refunded to Canadian Borrowers. For purposes of the Canadian
Loan Documents, the effective annual rate of interest shall be determined in
accordance with generally accepted actuarial practices and principles over the
term applicable to the Canadian Obligations on the basis of annual compounding
of the lawfully permitted rate of interest and, in the event of dispute, a
certificate of a Fellow of the Canadian Institute of Actuaries appointed by
Canadian Agent shall be prima facie evidence, for the purposes of such
determination.
Section 10.12. Termination; Limited Survival. In their sole and
absolute discretion, Canadian Borrowers may at any time that no Obligations are
owing elect in a written notice delivered to Canadian Agent to terminate this
Agreement. Upon receipt by Canadian Agent of such a notice, if no Obligations
are then owing this Agreement and all other Canadian Loan Documents shall
thereupon be terminated and the parties thereto released from all prospective
obligations thereunder. Notwithstanding the foregoing or anything herein to the
contrary, any waivers or admissions made by any Restricted Person in any
Canadian Loan Document, any Obligations under Sections 3.2 through 3.6, and any
obligations which any Person may have to indemnify or compensate any Lender
Party shall survive any termination of this Agreement or any other Canadian Loan
Document. At the request and expense of Canadian Borrowers, Canadian Agent shall
prepare and execute all necessary instruments to reflect and effect such
termination of the Canadian Loan Documents. Canadian Agent is hereby authorized
to execute all such instruments on behalf of all Lenders, without the joinder of
or further action by any Lender.
Section 10.13. Severability. If any term or provision of any Canadian
Loan Document shall be determined to be illegal or unenforceable all other terms
and provisions of the Canadian Loan Documents shall nevertheless remain
effective and shall be enforced to the fullest extent permitted by applicable
Law.
Section 10.14. Counterparts; Fax. This Agreement may be separately
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
constitute one and the same Agreement. This Agreement and the Canadian Loan
Documents may be validly executed and delivered by facsimile or other electronic
transmission.
58
<PAGE> 64
Section 10.15. Waiver of Jury Trial, Punitive Damages, etc. EACH
CANADIAN BORROWER AND EACH LENDER PARTY HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY (a) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE CANADIAN LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED
THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (b) WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER
IN ANY SUCH LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, (c) CERTIFIES
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (d)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
CANADIAN LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
SECTION. AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL,
CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT
DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY
PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.
Section 10.16. Defined Terms. Capitalized terms and phrases used and
not otherwise defined herein shall for all purposes of this Agreement have the
meaning given to such terms and phrases in Annex I hereto.
Section 10.17. Annex I, Exhibits and Schedules; Additional Definitions.
Annex I and all Exhibits and Schedules attached to this Agreement are a part
hereof for all purposes.
Section 10.18. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 10.19. References and Titles. All references in this Agreement
to Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
59
<PAGE> 65
Section 10.20. Calculations and Determinations. All calculations under
the Canadian Loan Documents of interest chargeable with respect to Eurodollar
Loans and of fees shall be made on the basis of actual days elapsed (including
the first day but excluding the last) and a year of 360 days. All other
calculations of interest made under the Canadian Loan Documents shall be made on
the basis of actual days elapsed (including the first day but excluding the
last) and a year of 365 or 366 days, as appropriate. Each determination by a
Lender Party of amounts to be paid under Article III or any other matters which
are to be determined hereunder by a Lender Party (such as any US Dollar
Eurodollar Rate, Canadian Dollar Eurodollar Rate, Adjusted US Dollar Eurodollar
Rate, Adjusted Canadian Dollar Eurodollar Rate, Business Day, Interest Period,
or Reserve Requirement) shall, in the absence of manifest error, be conclusive
and binding. Unless otherwise expressly provided herein or unless Required
Lenders otherwise consent all financial statements and reports furnished to any
Lender Party hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in accordance with US GAAP.
Section 10.21. Construction of Indemnities and Releases. All
indemnification and release provisions of this Agreement shall be construed
broadly (and not narrowly) in favor of the Persons receiving indemnification
from or being released.
Section 10.22. Separate Obligations. All obligations of Northstar
Energy and Devon Canada under this Agreement and the other Canadian Loan
Documents are separate and individual obligations of Northstar Energy and Devon
Canada, respectively, and Northstar Energy shall not have any liabilities in
respect of Canadian Advances made by the Lenders to Devon Canada nor shall Devon
Canada have any liabilities in respect of Canadian Advances made to Northstar
Energy.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
60
<PAGE> 66
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
NORTHSTAR ENERGY CORPORATION
Canadian Borrower
By: /s/ PAUL BRERETON
----------------------------------------------
Name: Paul Brereton
Title: Vice President, Finance
Address:
3000, 400-3 Avenue SW
Calgary, AB T2P 4H2
Attention: Vice President - Finance
Telephone: (403)
------------------------
Fax: (403)
------------------------------
DEVON ENERGY CANADA CORPORATION
Canadian Borrower
By: /s/ PAUL BRERETON
-----------------------------------------------
Name: Paul Brereton
Title: Vice President, Finance
Address:
-----------------------------------------
-----------------------------------------
Attention: Vice President - Finance
Telephone:
-------------------------------
Fax:
-------------------------------------
<PAGE> 67
BANK OF AMERICA CANADA
Administrative Agent, Canadian LC Issuer
and Lender
By: /s/ RICHARD J. HALL
-----------------------------------------------
Name: Richard J. Hall
Title: Vice President
Address:
200 Front Street West, Suite 2700
Toronto, Canada M5V 3L2
Attention:
Telephone:
Fax:
<PAGE> 68
FIRST CHICAGO NBD BANK, CANADA
Lender
By: /s/ JEREMIAH A. HYNES, III
-----------------------------------------------
Name: Jeremiah A. Hynes, III
Title: First Vice President
<PAGE> 69
BANK OF MONTREAL
Lender
By: /s/ MICHAEL P. STUCKEY
--------------------------------------------------
Name: Michael P. Stuckey
Title: Managing Director, U.S. Corporate Banking
<PAGE> 70
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
Lender
By: /s/ DONNA J. GERMAN
-----------------------------------------------
Name: Donna J. German
Title: Managing Director
<PAGE> 71
UMB OKLAHOMA BANK
Lender
By: /s/ RICHARD J. LEHRTER
-----------------------------------------------
Name: Richard J. Lehrter
Title: Executive Vice President
<PAGE> 72
FIRST UNION NATIONAL BANK
Lender
By: /s/ ROBERT R. WETTEROFF
------------------------------------------------
Name: Robert R. Wetteroff
Title: Senior Vice President
<PAGE> 73
TORONTO-DOMINION BANK
Lender
By: /s/ CAROL BRANDT
------------------------------------------------
Name: Carol Brandt
Title: Vice President
<PAGE> 74
BANK OF OKLAHOMA, N.A.
Lender
By: /s/ JOHN N. HUFF
------------------------------------------------
Name: John N. Huff
Title: Vice President
<PAGE> 75
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
Lender
By: /s/ KHEIL A. MCINTYRE
------------------------------------------------
Name: Kheil A. McIntyre
Title: Vice President
By: /s/ ANTHONY J. ALESSANDRO
------------------------------------------------
Name: Anthony J. Alessandro
Title:
<PAGE> 76
THE BANK OF NEW YORK
Lender
By: /s/ RAYMOND J. PALMER
------------------------------------------------
Name: Raymond J. Palmer
Title: Vice President
<PAGE> 77
ROYAL BANK OF CANADA
Lender
By: /s/ IAN G. WILD
------------------------------------------------
Name: Ian G. Wild
Title: Senior Account Manager
<PAGE> 78
SUNTRUST BANK, ATLANTA
Lender
By: /s/ TODD C. DAVIS
------------------------------------------------
Name: Todd C. Davis
Title: Assistant Vice President
By: /s/ DAVID J. EDGE
------------------------------------------------
Name: David J. Edge
Title: Vice President
<PAGE> 79
[EXECUTION]
ANNEX I
DEFINED TERMS
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any assets acquired by such specified Person, and any refinancing of
the foregoing indebtedness on similar terms, taking into account current market
conditions.
"Acquisition Documents" means (a) the Amended and Restated Combination
Agreement dated as of June 29, 1998 and all schedules and exhibits thereto
pursuant to which US Borrower is acquiring all of the outstanding common shares
of Northstar Energy and (b) all other material agreements or instruments
delivered in connection therewith to consummate the acquisition contemplated
thereby.
"Adjusted Canadian Dollar Eurodollar Rate" means, for any Canadian
Dollar Eurodollar Loan for any Eurodollar Interest Period therefor, the per
annum rate equal to the sum of (a) the Applicable Margin plus (b) the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
Canadian Agent to be equal to the quotient obtained by dividing (i) the Canadian
Dollar Eurodollar Rate for such Canadian Dollar Eurodollar Loan for such
Eurodollar Interest Period by (ii) 1 minus the Reserve Requirement for such
Canadian Dollar Eurodollar Loan for such Interest Period. The Adjusted Canadian
Dollar Eurodollar Rate for any Canadian Dollar Eurodollar Loan shall change
whenever the Applicable Margin or the Reserve Requirement changes. No Adjusted
Canadian Dollar Eurodollar Rate charged by any Person shall ever exceed the
Highest Lawful Rate.
"Adjusted US Dollar Eurodollar Rate" means, for any US Dollar
Eurodollar Loan for any Eurodollar Interest Period therefor, the per annum rate
equal to the sum of (a) the Applicable Margin plus (b) the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Agent
to be equal to the quotient obtained by dividing (i) the US Dollar Eurodollar
Rate for such US Dollar Eurodollar Loan for such Eurodollar Interest Period by
(ii) 1 minus the Reserve Requirement for such US Dollar Eurodollar Loan for such
Interest Period. The Adjusted US Dollar Eurodollar Rate for any US Dollar
Eurodollar Loan shall change whenever the Applicable Margin or the Reserve
Requirement changes. No Adjusted US Dollar Eurodollar Rate charged by any Person
shall ever exceed the Highest Lawful Rate.
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control
<PAGE> 80
with, such Person. A Person shall be deemed to be "controlled by" any other
Person if such other Person possesses, directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing general
partners; or
(b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Applicable Currency" means (i) when used with respect to any US Loan
or US LC Obligations, US Dollars, and (ii) when used with respect to any
Canadian Prime Rate Loan, any Canadian Dollar Eurodollar Loan or any Bankers'
Acceptance, Canadian Dollars, and (iii) when used with respect to any Canadian
Base Rate Loan or an US Dollar Eurodollar Loan made under the Canadian
Agreement, US Dollars.
"Applicable Lending Office" means, 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 an Affiliate of such Lender) as such Lender may from
time to time specify to US Agent, Canadian Agent, and Borrowers by written
notice in accordance with the terms hereof as the office by which its Loans of
such Type are to be made and maintained.
"Applicable Margin" means
(a) except with respect to any Tranche B Loan, when used in the
Canadian Agreement and when used in the US Agreement on any
date, the number of Basis Points per annum set forth below
based on the Applicable Rating Level on such date:
<TABLE>
<CAPTION>
======================================
Applicable Applicable
Rating Level Margin
======================================
<S> <C>
Level I 27.0
--------------------------------------
Level II 30.0
--------------------------------------
Level III 40.0
--------------------------------------
Level IV 42.5
--------------------------------------
Level V 60.0
======================================
</TABLE>
2
<PAGE> 81
(b) when used with respect to any Tranche B Loan on any date, the
number of Basis Points per annum set forth below based on the
Applicable Rating Level on such date:
<TABLE>
<CAPTION>
======================================
Applicable Applicable
Rating Level Margin
======================================
<S> <C>
Level I 28.0
--------------------------------------
Level II 31.0
--------------------------------------
Level III 42.5
--------------------------------------
Level IV 45.0
--------------------------------------
Level V 62.5
======================================
</TABLE>
Changes in the Applicable Margin will occur automatically without prior notice
as changes in the Applicable Rating Level occur. US Agent will give notice
promptly to Borrowers and the Lenders of changes in the Applicable Margin.
"Applicable Rating Level" means for any day, the highest Rating Level
(as such term is defined below in this paragraph) issued by S&P, Duff & Phelps,
or Moody's, if Moody's shall have issued such a rating with respect to US
Borrower (collectively, in this definition called the "Designated Rating
Agencies"); provided that if at any time three Designated Rating Agencies have
ratings in effect with respect to US Borrower's Long-Term Debt and the Rating
Levels (as such terms are defined below in this paragraph) of at least two of
the three Designated Rating Agencies are not the same, "Applicable Rating Level"
shall mean the higher of the two lowest Rating Levels of the Designated Rating
Agencies. As used in this definition, (i) the term "Rating Level" means for any
day with respect to any of the Designated Rating Agencies, the rating level
described below (or its then equivalent) applicable on such day, issued by such
Designated Rating Agency, from time to time, with respect to US Borrower's
Long-Term Debt or if such rating is unavailable, equivalents thereof, including
counterparty ratings, implied ratings and corporate ratings; (ii) "US Borrower's
Long-Term Debt" means senior, unsecured, non-credit enhanced long-term
indebtedness for borrowed money of US Borrower, and (iii) ">" means a rating
equal to or more favorable than and "<" means a rating less favorable than.
3
<PAGE> 82
<TABLE>
<CAPTION>
======================================================================
Duff &
Rating Level S&P Phelps Moody's*
----------------------------------------------------------------------
<S> <C> <C> <C>
Level I >=A- >=A- >=A3
----------------------------------------------------------------------
Level II BBB+ BBB+ Baa1
----------------------------------------------------------------------
Level III BBB BBB Baa2
----------------------------------------------------------------------
Level IV BBB- BBB- Baa3
----------------------------------------------------------------------
Level V <BBB- <BBB- <Baa3
======================================================================
</TABLE>
*A Moody's rating is not currently available for US Borrower.
If any two of the Designated Rating Agencies shall not have in effect a rating
for US Borrower's Long-Term Debt or if the rating system of any of the
Designated Rating Agencies shall change, or if any of such Designated Rating
Agencies shall cease to be in the business of rating corporate debt obligations,
US Borrower and Required Lenders shall negotiate in good faith to amend this
definition to reflect such changed rating system or the unavailability of
ratings from such Designated Rating Agency, but until such an agreement shall be
reached, the Applicable Rating Level shall be based only upon the rating by the
remaining Designated Rating Agency.
"BA Discount Rate" means, in respect of a BA being accepted by a Lender
on any date, (i) for a Lender that is listed in Schedule I to the Bank Act
(Canada), the average bankers' acceptance rate as quoted on Reuters CDOR page
(or such other page as may, from time to time, replace such page on that service
for the purpose of displaying quotations for bankers' acceptances accepted by
leading Canadian financial institutions) at approximately 10:00 a.m. (Toronto
time) on such drawdown date for bankers' acceptances having a comparable
maturity date as the maturity date of such BA (the "CDOR Rate"); or, if such
rate is not available at or about such time, the average of the bankers'
acceptance rates (expressed to five decimal places) as quoted to the Agent by
the Schedule I BA Reference Banks as of 10:00 a.m. (Toronto time) on such
drawdown date for bankers' acceptances having a comparable maturity date as the
maturity date of such BA; and (ii) for a Lender that is listed in Schedule II to
the Bank Act (Canada), the rate established by the Canadian Agent to be the
lesser of (A) the CDOR Rate plus 10 Basis Points; and (B) the average of the
bankers' acceptance rates (expressed to five decimal places) as quoted to the
Canadian Agent by the Schedule II BA Reference Banks as of 10:00 a.m. (Toronto
time) on such drawdown date for bankers' acceptances having a comparable
maturity date as the maturity date of such BA;
"Bankers' Acceptance" or "BA" means a Canadian Dollar draft of either
Canadian Borrower, for a term selected by such Canadian Borrower of either 30,
60, 90 or 180 days (as reduced or extended by the Lender, acting reasonably, to
allow the maturity thereof to fall on a Business Day) payable in Canada.
4
<PAGE> 83
"Bankruptcy and Insolvency Act (Canada)" means the Bankruptcy and
Insolvency Act, S.C. 1992, c. 27, including the regulations made and, from time
to time, in force under that Act.
"Basis Point" means one one-hundredth of one percent (0.01%).
"Borrower" means any of US Borrower and Canadian Borrowers.
"Borrowing" means a borrowing of new Loans of a single Type pursuant to
Section 1.2 or a Continuation or Conversion of existing Loans into a single Type
(and, in the case of Eurodollar Loans, with the same Interest Period) pursuant
to Section 1.3 of the US Agreement or the Canadian Agreement or the acceptance
or purchase of Bankers' Acceptances issued by Canadian Borrowers under the
Canadian Agreement or the Continuation or Conversion of existing Banker's
Acceptances into Canadian Loans of a single Type in the case of Eurodollar Loans
with the same Interest Period pursuant to Section 1.3 of the Canadian Agreement.
"Borrowing Notice" means a written or telephonic request, or a written
confirmation, made by any Borrower which meets the requirements of Section 1.2
of the US Agreement or Section 1.2 of the Canadian Agreement.
"Business Day" means (a) with respect to the Canadian Agreement, a day,
other than a Saturday or Sunday, on which commercial banks are open for business
with the public in Dallas, Texas and Toronto, Ontario and (b) with respect to
the US Agreement, a day, other than a Saturday or Sunday, on which commercial
banks are open for business with the public in Dallas, Texas. Any Business Day
in any way relating to Eurodollar Loans (such as the day on which an Interest
Period begins or ends) must also be a day on which, in the judgment of US Agent
or Canadian Agent, as applicable, significant transactions in dollars are
carried out in the interbank eurocurrency market.
"Canadian Advances" has the meaning given to such term in Section 1.1
of the Canadian Agreement.
"Canadian Agent" means Bank of America Canada, as administrative agent
under the Canadian Agreement, and its successors and assigns in such capacity.
"Canadian Agreement" means that certain Credit Agreement dated the
Closing Date among Canadian Borrowers, Canadian Agent and Lenders, as it may be
amended, supplemented, restated or otherwise modified and in effect from time to
time.
"Canadian Base Rate Loan" means a Canadian Loan which bears interest at
the Canadian US Dollar Base Rate.
"Canadian Borrowers" means Northstar Energy and Devon Energy Canada.
"Canadian Dollar" or "C$" means the lawful currency of Canada.
5
<PAGE> 84
"Canadian Dollar Eurodollar Loan" means a Canadian Loan that bears
interest at the Adjusted Canadian Dollar Eurodollar Rate.
"Canadian Dollar Eurodollar Rate" means, for any Canadian Dollar
Eurodollar Loan within a Borrowing and with respect to the related Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on the Dow Jones Market Service (formerly
Telerate Access Service) Page 3740 (or any successor page) as the London
interbank offered rate for deposits in Canadian Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, then such offered rate shall be otherwise independently
determined by Canadian Agent from an alternate, substantially similar
independent source available to Canadian Agent or shall be calculated by
Canadian Agent by a substantially similar methodology as that theretofore used
to determine such offered rate on Dow Jones Market Service, in the London
interbank eurodollar market for a period of time equal or comparable to the
related Interest Period and in an amount equal to or comparable to the principal
amount of the eurodollar portion to which such Interest Period relates.
"Canadian Facility Maturity Date" means the date which is five years
and one day after the Conversion Date.
"Canadian Facility Usage" means, at the time in question, the US Dollar
Exchange Equivalent of the aggregate amount of Canadian Loans, Canadian LC
Obligations, and BA's outstanding at such time.
"Canadian Guarantor" means US Borrower.
"Canadian LC Issuer" means Bank of America Canada in its capacity as
the issuer of Letters of Credit under the Canadian Agreement, and its successors
in such capacity. Canadian Agent may, with the consent of Canadian Borrowers and
the Lender in question, appoint any Canadian Resident Lender hereunder as a
Canadian LC Issuer in place of or in addition to Bank of America Canada.
"Canadian LC Obligations" means, at the time in question, the sum of
all Matured Canadian LC Obligations plus the maximum amounts which Canadian LC
Issuer might then or thereafter be called upon to advance under all Letters of
Credit then outstanding under the Canadian Agreement.
"Canadian LC Sublimit" means US $25,000,000.
"Canadian Loan Documents" means the Canadian Agreement, the Canadian
Notes, the Letters of Credit issued under the Canadian Agreement, the LC
Applications related thereto, the BA's, the Guaranty executed by Canadian
Guarantor, and all other agreements, certificates, documents, instruments and
writings at any time delivered in connection herewith or therewith (exclusive of
term sheets and commitment letters).
6
<PAGE> 85
"Canadian Loans" means the Canadian Revolver Loans, the Canadian Term
Loans into which such Revolving Loans may be converted and the Competitive Bid
Loans made under the Canadian Agreement.
"Canadian Maximum Credit Amount" means US $195,000,000 or the Canadian
Dollar Exchange Equivalent.
"Canadian Notes" means each Lender's "Canadian Note", as defined in
Section 1.1 of the Canadian Agreement, and the Competitive Bid Notes issued
under the Canadian Agreement.
"Canadian Obligations" means all Liabilities from time to time owing by
Canadian Borrowers to any Lender Party under or pursuant to any of the Canadian
Loan Documents, including all Canadian LC Obligations owing thereunder.
"Canadian Obligation" means any part of the Canadian Obligations.
"Canadian Prime Rate" means on any day a fluctuating rate of interest
per annum equal to the higher of (i) the rate of interest per annum most
recently announced by Bank of America Canada as its reference rate for Canadian
Dollar commercial loans made to a Person in Canada; and (ii) Bank of America
Canada's Discount Rate for Bankers' Acceptances having a maturity of thirty days
plus the Applicable Margin. No Canadian Prime Rate charged by any Person shall
ever exceed the Highest Lawful Rate
"Canadian Prime Rate Loan" means a Canadian Loan that bears interest at
the Canadian Prime Rate.
"Canadian Resident Lender" means each Lender identified as such on the
signature pages to the Canadian Agreement or any Assignment and Acceptance
executed by a new Lender, each being a Person that is not a non-resident of
Canada for the purposes of the Income Tax Act (Canada).
"Canadian Revolving Loans" has the meaning given it in Section 1.1 of
the Canadian Agreement.
"Canadian Revolving Period" means the period from and including the
Closing Date until the Conversion Date (or, if earlier, the day on which the
obligations of Lenders to make Canadian Loans or the obligations of Canadian LC
Issuer to issue Letters of Credit under the Canadian Agreement have been
terminated or the Canadian Notes first become due and payable in full).
"Canadian Term Loan" has the meaning given it in Section 1.7 of the
Canadian Agreement.
"Canadian Term Period" means the period from and including the day
immediately following the Conversion Date until and including the Canadian
Facility Maturity Date.
"Canadian US Dollar Base Rate" means for a day, the rate per annum
equal to the higher of (a) the Federal Funds Rate for such day plus one-half of
one percent (0.5%) and (b) the rate of
7
<PAGE> 86
interest per annum most recently established by Bank of America Canada as its
reference rate for US Dollar commercial loans made to a Person in Canada. Any
change in the Canadian US Dollar Base Rate due to a change in the Bank of
America Canada's reference rate shall be effective on the effective date of such
change. No Canadian US Dollar Base Rate charged by any Person shall ever exceed
the Highest Lawful Rate.
"Cash Equivalents" means Investments in:
(a) marketable obligations, maturing within twelve months after
acquisition thereof, issued or unconditionally guaranteed by Canada or the
United States of America or an instrumentality or agency thereof and entitled to
the full faith and credit of Canada or the United States of America, as
applicable;
(b) demand deposits, and time deposits (including certificates of
deposit) maturing within twelve months from the date of deposit thereof, with a
domestic office (1) of US Agent or Canadian Agent or any Lender, or (2) of any
bank or trust company organized under the laws of Canada or the United States of
America or any Province or State therein, provided that (x) the full amount of
each such deposit in such bank or trust company is insured by the Federal
Deposit Insurance Corporation if applicable, or (y) such bank or trust company
has capital, surplus and undivided profits aggregating at least US $50,000,000,
and
(c) (1) publicly traded debt securities with an original term of 270
days or less or (2) interest bearing securities issued to the public by banks,
associated entities or similar institutions, which can be put to the issuer at
the investor's unconditional option within one month after acquisition, so long
as in each case such securities have a credit rating of at least A-1 from S&P or
P-1 from Moody's or A-1 [low] from CBRS or R-1 [low] from DBRS.
"CBRS" means CBRS Inc., or its successor.
"Change of Control" means the occurrence of either of the following
events: any Person (or syndicate or group of Persons which is deemed a "person"
for the purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) acquires more than thirty percent (30%) of the outstanding stock of US
Borrower having ordinary voting power (disregarding changes in voting power
based on the occurrence of contingencies) for the election of directors, or
during any period of twelve successive months a majority of the Persons who were
directors of US Borrower at the beginning of such period cease to be directors
of US Borrower.
"Closing Date" means December 11, 1998.
"Companies' Creditors Arrangement Act (Canada)" means the Companies'
Creditors Arrangement Act, R.S.C. 1985, c. C-36, including the regulations made
and from time to time in force under that Act.
"Competitive Bid" means (i) with respect to the US Agreement, a
response from any Lender to an Invitation to Bid, substantially in the form of
Exhibit J to the US Agreement and
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<PAGE> 87
(ii) with respect to the Canadian Agreement, a response from any Canadian
Resident Lender to an Invitation to Bid, substantially in the form of Exhibit K
to the Canadian Agreement.
"Competitive Bid Accept/Reject Letter" means (i) with respect to the US
Agreement, a notice sent by US Borrower to US Agent, substantially in the form
of Exhibit K to the US Agreement, indicating its acceptance or rejection of
Competitive Bids from various Lenders and (ii) with respect to the Canadian
Agreement, a notice sent by the applicable Canadian Borrower to Canadian Agent,
substantially in the form of Exhibit L to the Canadian Agreement, indicating its
acceptance or rejection of Competitive Bids from various Lenders.
"Competitive Bid Interest Period" means, with respect to any
Competitive Bid Loan, a period from one day to one hundred eighty days as
specified in the Competitive Bid applicable thereto.
"Competitive Bid Loan" means (i) with respect to the US Agreement, a
loan from a Lender to US Borrower pursuant to the bidding procedure described in
Section 1.7 of the US Agreement and (ii) with respect to the Canadian Agreement,
a loan from a Canadian Resident Lender to the applicable Canadian Borrower
pursuant to the bidding procedure described in Section 1.9 of the Canadian
Agreement.
"Competitive Bid Note" (i) with respect to the US Agreement, a
"Competitive Bid Note" as defined in Section 1.7 of the US Agreement and (ii)
with respect to the Canadian Agreement, a "Competitive Bid Note" as defined in
Section 1.9 of the Canadian Agreement.
"Competitive Bid Rate" means, for any Competitive Bid Loan, the fixed
rate at which such Lender is willing to make such Competitive Bid Loan indicated
in its Competitive Bid. The Competitive Bid Rate shall in no event, however,
exceed the Highest Lawful Rate.
"Competitive Bid Request" means (i) with respect to the US Agreement, a
request by US Borrower in the form of Exhibit H to the US Agreement for Lenders
to submit Competitive Bids and (ii) with respect to the Canadian Agreement, a
request by the applicable Canadian Borrower in the form of Exhibit I to the
Canadian Agreement for Canadian Resident Lenders to submit Competitive Bids.
"Consolidated" refers to the consolidation of any Person, in accordance
with US GAAP, with its properly consolidated subsidiaries. References herein to
a Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated Assets" means the total assets of US Borrower and its
Restricted Subsidiaries which would be shown as assets on a Consolidated balance
sheet of US Borrower and its Restricted Subsidiaries prepared in accordance with
US GAAP, after eliminating all amounts properly attributable to minority
interest, if any, in the stock and surplus of the Restricted Subsidiaries.
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<PAGE> 88
"Consolidated Interest Expense" means, for any period, total interest
expense (including distributions on the Devon Trust Securities treated as
interest expense), whether paid or accrued, including without limitation all
commissions, discounts and other fees and charges owed with respect to Letters
of Credit.
"Continuation" (i) as used in the US Agreement shall refer to the
continuation pursuant to Section 1.3 thereof of a Eurodollar Loan as a
Eurodollar Loan from one Interest Period to the next Interest Period and (ii) as
used in the Canadian Agreement shall refer to the continuation pursuant to
Section 1.3 thereof of a Eurodollar Loan as a Eurodollar Loan from one Interest
Period to the next Interest Period or a rollover of a Banker's Acceptance at
maturity.
"Continuation/Conversion Notice" means (i) with respect to the US
Agreement, a written or telephonic request, or a written confirmation, made by
Borrower which meets the requirements of Section 1.3 of the US Agreement, and
(ii) with respect to the Canadian Agreement, a written or telephonic request, or
a written confirmation, made by the applicable Canadian Borrower which meets the
requirements of Section 1.3 of the Canadian Agreement.
"Conversion" (i) as used in the US Agreement shall refer to a
conversion pursuant to Section 1.3 or Article III of one Type of US Loan into
another Type of US Loan and (ii) as used in the Canadian Agreement shall refer
to a conversion pursuant to Section 1.3 or Article III of one Type of Canadian
Advance into another Type of Canadian Advance.
"Conversion Date" means the date which is 364 days after the Closing
Date, or such later day to which the Conversion Date is extended pursuant to
Section 1.6 of the Canadian Agreement.
"DBC" means DBC, Inc., an Oklahoma corporation.
"DBRS" means Dominion Bond Rating Service Limited, or its successor.
"Default" means any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Default Rate" means at the time in question (i) with respect to any US
Base Rate Loan, the rate two percent (2.0%) above the US Base Rate then in
effect, (ii) with respect to any US Dollar Eurodollar Loan, the rate two percent
(2%) above the Adjusted US Dollar Eurodollar Rate then in effect for such Loan,
(iii) with respect to any Canadian Prime Rate Loan, the rate two percent (2.0%)
above the Canadian Prime Rate then in effect for such Loan, (iv) with respect to
any Canadian Base Rate Loan, the rate two percent (2%) above the Canadian US
Dollar Base Rate then in effect for such Loan, (v) with respect to any Canadian
Dollar Eurodollar Loan, the rate two percent (2%) above the Adjusted Canadian
Dollar Eurodollar Rate then in effect for such Loan; and (vi) with respect to
any Competitive Bid Loan, the rate two percent (2%) above the Competitive Bid
Rate then in effect for such Loan. No Default Rate charged by any Person shall
ever exceed the Highest Lawful Rate.
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<PAGE> 89
"Depository Bills and Notes Act (Canada)" means the Depository Bills
and Notes Act (Canada), R.S.C. 1998, c. 13, including the regulations made and,
from time to time, in force under that Act.
"Devon Energy Canada" means Devon Energy Canada Corporation, a Canadian
corporation organized under the laws of Alberta.
"Devon Nevada" means Devon Energy Corporation (Nevada), a Nevada
corporation.
"Devon Trust" means Devon Financing Trust, a statutory business trust
formed under the laws of the State of Delaware.
"Devon Trust Securities" means those certain Trust Convertible
Preferred Securities, issued by Devon Trust in an amount of 2,990,000.
"Disclosure Schedule" means (i) with respect to the US Agreement,
Schedule 1 thereto, and (ii) with respect to the Canadian Agreement, Schedule 1
thereto.
"Discount Proceeds" means, in respect of each Bankers' Acceptance,
funds in an amount which is equal to:
Face Amount
---------------
1 + (Rate x Term)
-----------
365
(where "Face Amount" is the principal amount of the Bankers' Acceptance being
purchased, "Rate" is the BA Discount Rate divided by 100 and "Term" is the
number of days in the term of the Bankers' Acceptance.)
"Distribution" means (a) any dividend or other distribution made by a
Restricted Person on or in respect of any stock, partnership interest, or other
equity interest in such Restricted Person (including any option or warrant to
buy such an equity interest), or (b) any payment made by a Restricted Person to
purchase, redeem, acquire or retire any stock, partnership interest, or other
equity interest in such Restricted Person (including any such option or
warrant).
"Domestic Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Domestic Lending Office" below its name on its
signature page to the Canadian Agreement or the US Agreement, or such other
office as such Lender may from time to time specify to any Borrower and Agent;
with respect to LC Issuer, the office, branch, or agency through which it issues
Letters of Credit; and, with respect to Agent, the office, branch, or agency
through which it administers this Agreement.
"Duff & Phelps" means Duff & Phelps Credit Rating Co., or its
successor.
"EBITDA" means, for any period, calculated on a Consolidated basis, the
sum of the amount for such period of Consolidated net income, Consolidated
Interest Expense, depreciation
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<PAGE> 90
expense, depletion expense, amortization expense, federal, state, and provincial
income taxes, exploitation and abandonment expense and other non-cash charges
and expenses.
"Eligible Transferee" means a Person which either (a) is a Lender or an
Affiliate of a Lender, or (b) is consented to as an Eligible Transferee by US
Agent or Canadian Agent, as applicable, and, so long as no Default or Event of
Default is continuing, by the Borrowers, in each case which consent will not be
unreasonably withheld; provided that the Borrowers' consent shall not be
required for a Person to be an "Eligible Transferee" for purposes of Section
10.6(d) of the US Agreement and Section 10.6(d) of the Canadian Agreement.
"Environmental Laws" means any and all Laws relating to the environment
or to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Affiliate" means US Borrower and all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control that, together with US Borrower, are treated as a single
employer under Section 414 of the Internal Revenue Code.
"ERISA Plan" means any employee pension benefit plan subject to Title
IV of ERISA maintained by any ERISA Affiliate with respect to which any
Restricted Person has a fixed or contingent liability.
"Eurodollar Interest Period" means, with respect to each particular
Eurodollar Loan in a Borrowing, the period specified in the Borrowing Notice or
Continuation/Conversion Notice applicable thereto, beginning on and including
the date specified in such Borrowing Notice or Continuation/Conversion Notice
(which must be a Business Day), and ending one, two, three, or six months
thereafter, as the applicable Borrower may elect in such notice; provided that:
(a) any Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day; (b) any Interest Period which
begins on the last Business Day in a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day in a calendar month;
and (c) notwithstanding the foregoing, any Interest Period which would otherwise
end after the last day of the US Facility Commitment Period or the Canadian
Revolving Period shall end on the last day of the US Facility Commitment Period
or the Canadian Revolving Period (or, if the last day of such period is not a
Business Day, on the next preceding Business Day).
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<PAGE> 91
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" below its
name on the signature page hereto (or, if no such office is specified, its
Domestic Lending Office), or such other office of such Lender as such Lender may
from time to time specify to Borrowers, Canadian Agent, and US Agent.
"Eurodollar Loan" means any Canadian Dollar Eurodollar Loan and any US
Dollar Eurodollar Loan.
"Event of Default" means (i) with respect to the US Agreement the
meaning given to such term in Section 8.1 thereof and (ii) with respect to the
Canadian Agreement the meaning given to such term in Section 8.1 thereof.
"Exchange Equivalent" in respect of one currency (the "Original
Currency"), being Canadian Dollars or U.S. Dollars, as the case may be, means,
at the date of determination, the amount of currency expressed in the other such
currency necessary to purchase, based on the Noon Rate on such date, the
specified amount of the Original Currency on such date.
"Existing Agreement" means that certain Credit Agreement dated as of
May 15, 1998 among US Borrower, Devon Nevada, US Agent, and certain lenders
named therein.
"Facility Fee Rate" means, on any date, the number of Basis Points per
annum set forth below based on the Applicable Rating Level on such date:
<TABLE>
<CAPTION>
============================================
Applicable Applicable
Rating Level Facility Fee Rate
--------------------------------------------
<S> <C>
Level I 8.0
--------------------------------------------
Level II 10.0
--------------------------------------------
Level III 12.5
--------------------------------------------
Level IV 17.5
--------------------------------------------
Level V 25.0
============================================
</TABLE>
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of one percent) 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 Dallas, Texas on the Business
Day next succeeding such day, provided that (i) 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 on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate quoted to US Agent on such day on such transactions as determined by US
Agent.
13
<PAGE> 92
"Fiscal Quarter" means a three-month period ending on March 31, June
30, September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
"Governmental Authority" means any domestic or foreign, national,
federal, provincial, state, municipal or other local government or body and any
division, agency, ministry, commission, board or authority or any
quasi-governmental or private body exercising any statutory, regulatory,
expropriation or taxing authority under the authority of any of the foregoing,
and any domestic, foreign or international judicial, quasi-judicial, arbitration
or administrative court, tribunal, commission, board or panel acting under the
authority of any of the foregoing.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means (a) any agreement providing for options,
swaps, floors, caps, collars, forward sales or forward purchases involving
interest rates, commodities or commodity prices, equities, currencies, bonds, or
indexes based on any of the foregoing, (b) any option, futures or forward
contract traded on an exchange, and (c) any other derivative agreement or other
similar agreement or arrangement.
"Highest Lawful Rate" means, with respect to each Lender Party to whom
Obligations are owed, the maximum nonusurious rate of interest that such Lender
Party is permitted under applicable Law to contract for, take, charge, or
receive with respect to such Obligations. All determinations herein of the
Highest Lawful Rate, or of any interest rate determined by reference to the
Highest Lawful Rate, shall be made separately for each Lender Party as
appropriate to assure that the Loan Documents are not construed to obligate any
Person to pay interest to any Lender Party at a rate in excess of the Highest
Lawful Rate applicable to such Lender Party.
"Income Tax Act (Canada)" means the Income Tax Act, S.C. 1970-71-72, c.
63, including the regulations made and, from time to time, in force under that
Act.
"Indebtedness" of any Person means Liabilities in any of the following
categories:
(a) Liabilities for borrowed money,
(b) Liabilities constituting an obligation to pay the deferred purchase
price of property or services, other than customary payment terms taken in the
ordinary course of such Person's business,
(c) Liabilities evidenced by a bond, debenture, note or similar
instrument,
14
<PAGE> 93
(d) Liabilities arising under conditional sales or other title
retention agreements or under leases capitalized in accordance with US GAAP, but
excluding customary oil, gas or mineral leases,
(e) Liabilities with respect to payments received in consideration of
oil, gas, or other minerals yet to be acquired or produced at the time of
payment (including obligations under "take-or-pay" contracts to deliver gas in
return for payments already received and the undischarged balance of any
production payment created by such Person or for the creation of which such
Person directly or indirectly received payment);
(f) Liabilities under Hedging Contracts,
(g) Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor, or
(h) Liabilities under direct or indirect guaranties of Liabilities of
any Person or constituting obligations to purchase or acquire or to otherwise
protect or insure a creditor against loss in respect of Indebtedness of the
types described in paragraphs (a) through (g) above of any Person (such as
obligations under working capital maintenance agreements, agreements to
keep-well, or agreements to purchase debt, assets, goods, securities or
services, but excluding endorsements in the ordinary course of business of
negotiable instruments in the course of collection),
provided, however, that the "Indebtedness" of any Person shall not include
Liabilities that were incurred by such Person on ordinary trade terms to
vendors, suppliers, or other Persons providing goods and services for use by
such Person in the ordinary course of its business, unless and until such
Liabilities are outstanding more than 90 days past the original invoice or
billing date therefor. Any Indebtedness owed by a partnership shall be deemed
Indebtedness of any partner in such partnership to the extent such partner has
any liability of any kind therefor.
"Initial Financial Statements" means (i) the audited annual
Consolidated financial statements of US Borrower dated as of December 31, 1997,
and (ii) the unaudited quarterly Consolidated financial statements of US
Borrower dated as of September 30, 1998.
"Interest Act (Canada)" means the Interest Act, R.S.C. 1985, c. I-15,
including the regulations made and, from time to time, in force under that Act.
"Interest Payment Date" means (a) with respect to each US Base Rate
Loan, Canadian US Dollar Base Rate Loan, and Canadian Prime Rate Loan, the last
day of each March, June, September and December beginning December 31, 1998, and
(b) with respect to each Eurodollar Loan, the last day of the Eurodollar
Interest Period that is applicable thereto and, if such Eurodollar Interest
Period is six months in length, the date specified by Agent which is
approximately three months after such Eurodollar Interest Period begins;
provided that the last day of each calendar month shall also be an Interest
Payment Date for each such Loan so long as any Event of Default exists under
Section 8.1 (a) or (b).
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<PAGE> 94
"Interest Period" means (i) with respect to any Eurodollar Loan, the
related Eurodollar Interest Period and (ii) with respect to any Competitive Bid
Loan, the related Competitive Bid Interest Period.
"Internal Revenue Code" means the United States Internal Revenue Code
of 1986, as amended from time to time and any successor statute or statutes.
"Investment" means any investment made directly or indirectly, in any
Person, whether by acquisition of shares of capital stock, indebtedness or other
obligations or securities or by loan, advance, capital contribution or otherwise
and whether made in cash, by the transfer of property, or by any other means.
"Invitation to Bid" means (i) with respect to the US Agreement, an
invitation by US Agent to each Lender, substantially in the form of Exhibit I
thereto, inviting such Lender to submit Competitive Bids in response to a
Competitive Bid Request under the US Agreement, and (ii) with respect to the
Canadian Agreement, an invitation by Canadian Agent to each Lender,
substantially in the form of Exhibit J thereto, inviting such Lender to submit
Competitive Bids in response to a Competitive Bid Request under the Canadian
Agreement.
"Judgment Interest Act (Alberta)" means the Judgment Interest Act, S.A.
1984 c. J-O.5, including the regulations made and, from time to time, in force
under that Act.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or Canada or any state,
province or political subdivision thereof or of any foreign country or any
department, province or other political subdivision thereof.
"LC Application" means any application for a Letter of Credit hereafter
made by any Borrower to US LC Issuer or Canadian LC Issuer.
"LC Collateral" (i) as used in the US Agreement, has the meaning given
to such term in Section 2.6 of the US Agreement and (ii) as used in the Canadian
Agreement, has the meaning given such term in Section 2.11 of the Canadian
Agreement.
"Lender Parties" means Agent, US LC Issuer, Canadian LC Issuer, and all
Lenders.
"Lenders" means each signatory to the US Agreement and the Canadian
Agreement (other than any Borrower), including NationsBank, N.A. and Bank of
America Canada in their capacity as a Lender hereunder rather than as US Agent
or Canadian Agent and US LC Issuer or Canadian LC Issuer, respectively, and the
successors of each such party as holder of a US Note or a Canadian Note.
"Lenders Schedule" means Annex II to the US Agreement and Annex II to
the Canadian Agreement which are the same.
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<PAGE> 95
"Letter of Credit" means any letter of credit issued by US LC Issuer
under the US Agreement or by Canadian LC Issuer under the Canadian Agreement at
the application of any Borrower.
"Liabilities" means, as to any Person, all indebtedness, liabilities
and obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to US GAAP.
"Lien" means, with respect to any property or assets, any lien,
mortgage, security interest, pledge, deposit, production payment, rights of a
vendor under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or
any other charge or encumbrance for security purposes, whether arising by Law or
agreement or otherwise, but excluding any right of offset. "Lien" also means any
filed financing statement, any registration of a pledge (such as with an issuer
of uncertificated securities), or any other arrangement or action which would
serve to perfect a Lien described in the preceding sentence, regardless of
whether such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Loan Documents" means, collectively, the Canadian Loan Documents and
the US Loan Documents.
"Loans" means, collectively, the Canadian Loans and the US Loans.
"Majority Lenders" means Lenders whose aggregate Percentage Shares
exceed sixty-six and two thirds percent (66 2/3%).
"Material Adverse Effect" means any event which would reasonably be
expected to have a material and adverse effect upon (a) US Borrower's
Consolidated financial condition, (b) US Borrower's Consolidated operations,
properties or prospects, considered as a whole, (c) US Borrower's ability to
timely pay the Obligations, or (d) the enforceability of the material terms of
any Loan Documents.
"Matured Canadian LC Obligations" means all amounts paid by Canadian LC
Issuer on drafts or demands for payment drawn or made under or purported to be
under any Letter of Credit issued under the Canadian Agreement and all other
amounts due and owing to Canadian LC Issuer under any LC Application for any
such Letter of Credit, to the extent the same have not been repaid to Canadian
LC Issuer (with the proceeds of Loans or otherwise).
"Matured US LC Obligations" means all amounts paid by US LC Issuer on
drafts or demands for payment drawn or made under or purported to be under any
Letter of Credit issued under the US Agreement and all other amounts due and
owing to US LC Issuer under any LC Application for any such Letter of Credit, to
the extent the same have not been repaid to US LC Issuer (with the proceeds of
Loans or otherwise).
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<PAGE> 96
"Maximum Canadian Drawing Amount" means at the time in question the sum
of the maximum amounts which Canadian LC Issuer might then or thereafter be
called upon to advance under all Letters of Credit issued pursuant to the
Canadian Agreement which are then outstanding.
"Maximum US Drawing Amount" means at the time in question the sum of
the maximum amounts which US LC Issuer might then or thereafter be called upon
to advance under all Letters of Credit issued pursuant to the US Agreement which
are then outstanding.
"Moody's" means Moody's Investor Service, Inc., or its successor.
"Net Proceeds" means with respect to any Bankers' Acceptance, the
Discount Proceeds less the amount equal to the applicable Stamping Fee Rate
multiplied by the face amount of such Bankers' Acceptance..
"Non-resident Lender" means any Lender which is not a Canadian Resident
Lender, and shall initially mean each Lender identified as such on the signature
pages to the Canadian Agreement or thereafter on any Assignment and Acceptance.
"Noon Rate" means, in relation to the conversion of one currency into
another currency, the rate of exchange for such conversion as quoted by the Bank
of Canada (or, if not so quoted, the spot rate of exchange quoted for wholesale
transactions made by Canadian Agent at Toronto, Ontario at approximately noon
(Toronto local time)).
"Northstar Energy" means Northstar Energy Corporation, an Alberta
corporation.
"Notes" mean, collectively, the Canadian Notes and the US Notes.
"Obligations" means, collectively, the US Obligations and the Canadian
Obligations.
"Offer of Extension" means (a) with respect to the Canadian Agreement,
a written offer by Canadian Agent, for and on behalf of Required Lenders, to
Canadian Borrowers to extend the Canadian Facility Revolving Period to a date
364 days from acceptance by Canadian Borrowers of such offer, and setting forth,
if applicable, the terms and conditions on which such extension is offered by
the Lenders and as may be accepted by Canadian Borrowers, and (b) with respect
to the US Agreement, a written offer by US Agent, for and on behalf of Required
Lenders, to US Borrower to extend the Tranche B Revolving Period to a date 364
days from acceptance by US Borrower of such offer, and setting forth, if
applicable, the terms and conditions on which such extension is offered by the
Lenders and as may be accepted by US Borrower.
"Percentage Share" means
(a) under the US Agreement with respect to any Lender (i) when used in
Article I or Article II of the US Agreement, in any Borrowing Notice thereunder
or when no US Loans are outstanding, the percentage set forth opposite such
Lender's name on the Lenders Schedule as modified by assignments of a Lender's
rights and obligations under the US Agreement made by
18
<PAGE> 97
or to such Lender in accordance with the terms of the US Agreement, and (ii)
when used otherwise, the percentage obtained by dividing (x) the sum of the
unpaid principal balance of such Lender's US Loans and such Lender's Percentage
Share of the US LC Obligations, by (y) the sum of the aggregate unpaid principal
balance of all US Loans at such time plus the aggregate amount of all US LC
Obligations outstanding at such time; and
(b) under the Canadian Agreement with respect to any Lender (i) when
used in Article I or Article II of the Canadian Agreement, in any Borrowing
Notice thereunder or when no Canadian Advances are outstanding, the percentage
set forth opposite such Lender's name on the Lenders Schedule as modified by
assignments of a Lender's rights and obligations under the Canadian Agreement
made by or to such Lender in accordance with the terms of the Canadian
Agreement, and (ii) when used otherwise, the percentage obtained by dividing (x)
the sum of the unpaid principal balance of such Lender's Canadian Advances and
such Lender's Percentage Share of the Canadian LC Obligations, by (y) the sum of
the aggregate unpaid principal balance of all Canadian Advances at such time
plus the aggregate amount of all Canadian LC Obligations outstanding at such
time.
"Permitted Distribution" means (i) any Distribution made by any
Restricted Person that is payable only in common stock of such Restricted
Person, and (ii) any other Distribution made by any Restricted Person to US
Borrower, Canadian Borrower or to any other Restricted Person that is a
wholly-owned Subsidiary of US Borrower.
"Permitted Investments" means (a) Cash Equivalents, (b) Investments in
Restricted Subsidiaries that are wholly-owned by US Borrower and in Canadian
Borrowers, and (c) US Borrower's Investments in Thunder Creek Gas Services
L.L.C. and Sage Creek Gas Processors, L.L.C., which are limited liability
companies involved in the methane gas and conventional gas production and
development in the Powder River basin of central Wyoming and are owned by a
Subsidiary of US Borrower and other industry partners (US Borrower will include
its pro rata share of these entities in its Consolidated financial statements),
(d) payments made for the purchase of oil and gas assets, leaseholds and
associated facilities and/or the purchase of equity interests in entities
involved in the oil and gas industry, all in accordance with US Borrower's
normal business practices; provided that no Default shall exist before or after
any such acquisition or Investment, and (e) Investments in any Person, so long
as such Person becomes a Restricted Subsidiary of US Borrower within one year
after the date such Investment is made.
"Permitted Liens" means:
(a) Liens for taxes, assessments or governmental charges which are not due
or delinquent, or the validity of which US Borrower or any Restricted
Subsidiary shall be contesting in good faith; provided US Borrower or
such Restricted Subsidiary shall have made adequate provision therefor
in accordance with US GAAP;
(b) the Lien of any judgment rendered, or claim filed, against US Borrower
or any Restricted Subsidiary which does not constitute an Event of
Default and which US Borrower or any such Restricted Subsidiary shall
be contesting in good faith; provided US Borrower or
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<PAGE> 98
such Restricted Subsidiary shall have made adequate provision therefor
in accordance with US GAAP;
(c) Liens, privileges or other charges imposed or permitted by law such as
statutory liens and deemed trusts, carriers' liens, builders' liens,
materialmens' liens and other liens, privileges or other charges of a
similar nature which relate to obligations not due or delinquent,
including any lien or trust arising in connection with workers'
compensation, unemployment insurance, pension, employment and similar
laws or regulations;
(d) Liens arising in the ordinary course of and incidental to construction,
maintenance or current operations which have not been filed pursuant to
law against US Borrower or any Restricted Subsidiary or in respect of
which no steps or proceedings to enforce such lien have been initiated
or which relate to obligations which are not due or delinquent or if
due or delinquent, which US Borrower or such Restricted Subsidiary
shall be contesting in good faith; provided US Borrower or such
Restricted Subsidiary shall have made adequate provision therefor in
accordance with US GAAP;
(e) Liens incurred or created in the ordinary course of business and in
accordance with sound oil and gas industry practice in respect of the
exploration, development or operation of oil and gas properties or
related production or processing facilities or the transmission of
petroleum substances as security in favor of any other Person
conducting the exploration, development, operation or transmission of
the property to which such Liens relate, for US Borrower's or any of
its Restricted Subsidiaries' portion of the costs and expenses of such
exploration, development, operation or transmission, provided that such
costs or expenses are not due or delinquent or, if due or delinquent,
which US Borrower or such Restricted Subsidiary shall be contesting in
good faith; provided US Borrower or such Restricted Subsidiary shall
have made adequate provision therefor in accordance with US GAAP;
(f) overriding royalty interests, net profit interests, reversionary
interests and carried interests or other similar burdens on production
in respect of US Borrower's or any of its Restricted Subsidiaries' oil
and gas properties that are entered into with or granted to arm's
length third parties in the ordinary course of business and in
accordance with sound oil and gas industry practice in the area of
operation;
(g) Liens for penalties arising under non-participation provisions of
operating agreements in respect of US Borrower's or any of its
Restricted Subsidiaries' oil and gas properties if such Liens do not
materially detract from the value of any material part of the property
of US Borrower and its Subsidiaries taken as a whole;
(h) easements, rights-of-way, servitudes, zoning or other similar rights or
restrictions in respect of land held by US Borrower or any Restricted
Subsidiary (including, without limitation, rights-of-way and servitudes
for railways, sewers, drains, pipe lines, gas and water mains, electric
light and power and telephone or telegraph or cable television
conduits, poles, wires and cables) which, either alone or in the
aggregate, do not materially detract from the value of such land or
materially impair its use in the operation of the business of US
Borrower and its Restricted Subsidiaries taken as a whole;
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<PAGE> 99
(i) security given by US Borrower or any Restricted Subsidiary to a public
utility or any Governmental Authority when required by such public
utility or Governmental Authority in the ordinary course of the
business of US Borrower or any Restricted Subsidiary in connection with
operations of US Borrower or any Restricted Subsidiary if such security
does not, either alone or in the aggregate, materially detract from the
value of any material part of the property of US Borrower and its
Restricted Subsidiaries taken as a whole;
(j) the right reserved to or vested in any Governmental Authority by the
terms of any lease, license, grant or permit or by any statutory or
regulatory provision to terminate any such lease, license, grant or
permit or to require annual or other periodic payments as a condition
of the continuance thereof;
(k) all reservations in the original grant of any lands and premises or any
interests therein and all statutory exceptions, qualifications and
reservations in respect of title;
(l) any Lien from time to time disclosed by US Borrower or any Restricted
Subsidiary to the US Agent or the Canadian Agent and which is consented
to by the Majority Lenders;
(m) any right of first refusal in favor of any Person granted in the
ordinary course of business with respect to all or any of the oil and
gas properties of US Borrower or any Restricted Subsidiary;
(n) Liens on cash or marketable securities of US Borrower or any Restricted
Subsidiary granted in connection with any Hedging Contract permitted
under the US Agreement;
(o) Liens in respect of Indebtedness permitted by Sections 7.1(b), 7.1(g)
and 7.1(k);
(p) Liens in favor of the US Agent or the Canadian Agent for the benefit of
the Lender Parties;
(q) Liens to collateralize moneys held in a cash collateral account by a
lender in respect of the prepayment of bankers' acceptances, letters of
credit or similar obligations accepted or issued by such lender but
only if at the time of such prepayment no default or event of default
has occurred and is continuing under the credit facility pursuant to
which the bankers' acceptances or letters of credit have been accepted
or issued;
(r) purchase money Liens upon or in any tangible personal property and
fixtures (including real property surface rights upon which such
fixtures are located and contractual rights and receivables relating to
such property) acquired by US Borrower or a Restricted Subsidiary in
the ordinary course of business to secure the purchase price of such
property or to secure Indebtedness incurred solely for the purpose of
financing the acquisition of such property, including any Liens
existing on such property at the time of its acquisition (other than
any such Lien created in contemplation of any such acquisition);
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<PAGE> 100
(s) the rights of buyers under production sale contracts related to US
Borrower's or a Restricted Subsidiary's share of petroleum substances
entered into in the ordinary course of business, provided that the
contracts create no rights (including any Lien) in favor of the buyer
or any other Person in, to or over any reserves of petroleum substances
or other assets of US Borrower or a Restricted Subsidiary, other than a
dedication of reserves (not by way of Lien or absolute assignment) on
usual industry terms;
(t) Liens arising in respect of operating leases of personal property under
which Canadian Borrowers or any of their Subsidiaries are lessees;
(u) Liens on property of a Person existing at the time such Person becomes
a Restricted Subsidiary, is merged into or consolidated with US
Borrower or any of its Subsidiaries; provided, such Liens were in
existence prior to the contemplation of such stock acquisition, merger
or consolidation and do not extend to any assets other than those of
the Person so acquired or merged into or consolidated with US Borrower
or any of its Subsidiaries.
(v) any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Lien referred
to in the preceding paragraphs (a) to (u) inclusive of this definition,
so long as any such extension, renewal or replacement of such Lien is
limited to all or any part of the same property that secured the Lien
extended, renewed or replaced (plus improvements on such property), the
indebtedness or obligation secured thereby is not increased and such
Lien is otherwise permitted by the applicable section above;
(w) in addition to Liens permitted by clauses (a) through (v) above, Liens
on property or assets if the aggregate Indebtedness secured thereby
does not exceed US $25,000,000.
provided that nothing in this definition shall in and of itself constitute or be
deemed to constitute an agreement or acknowledgment by the US Agent or the
Canadian Agent or any Lender that the Indebtedness subject to or secured by any
such Permitted Lien ranks (apart from the effect of any Lien included in or
inherent in any such Permitted Liens) in priority to the Obligations;
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture,
Tribunal, or any other legally recognizable entity.
"Rating Agency" means any of S & P or Moody's, or their respective
successors.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"Request for an Offer of Extension" means (a) with respect to the
Canadian Agreement, a written request made by Canadian Borrowers to the Lenders
to have Required Lenders issue an offer to Canadian Borrowers extending the
Canadian Revolving Period for a further 364 days, and (b) with respect to the US
Agreement, a written request made by US Borrower to the Lenders
22
<PAGE> 101
to have Required Lenders issue an offer to US Borrower extending the Tranche B
Revolving Period for a further 364 days.
"Required Lenders" means Lenders whose aggregate Percentage Shares
equal or exceed fifty percent (50%).
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including any marginal, special, supplemental, or emergency reserves)
are required to be maintained under regulations issued from time to time by the
Board of Governors of the Federal Reserve System of the United States of America
(or any successor) by member banks of such Federal Reserve System against
"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks with respect to
(a) any category of liabilities which includes deposits by reference to which
the Adjusted US Dollar Eurodollar Rate or the Adjusted Canadian Dollar
Eurodollar Rate is to be determined, or (b) any category of extensions of credit
or other assets which include US Dollar Eurodollar Loans or Canadian Dollar
Eurodollar Loans.
"Restricted Distribution" means any Distribution that is not a
Permitted Distribution.
"Restricted Investment" means any Investment that is not a Permitted
Investment.
"Restricted Payments" has the meaning given to such term in Section 7.5
of the US Agreement.
"Restricted Person" means any of US Borrower and each Restricted
Subsidiary.
"Restricted Subsidiary" means each Canadian Borrower and any other
Subsidiary of US Borrower that is not an Unrestricted Subsidiary; provided, the
following Subsidiaries of US Borrower shall be deemed not to be Restricted
Subsidiaries:
(a) BN Co. A Limited Partnership, a New Mexico limited partnership;
(b) BN Coal, L.L.C., a New Mexico limited liability company;
(c) BN Non-Coal, L.L.C., a New Mexico limited liability company;
(d) Blackwood & Nicholls Co., a New Mexico limited partnership;
(e) Devon-Blanco Company, an Oklahoma general partnership;
(f) 172173 Canada Inc.;
(g) 410760 Alberta Ltd.;
(h) 653087 Alberta Ltd.;
(i) 661151 Alberta Ltd.;
(j) 728097 Alberta Ltd.;
(k) Foothills Partnership;
(l) Morrison Administration Corporation;
(m) Morrison Capital Inc.;
(n) Morrison Gas Gathering Inc.;
(o) Morrison Operating Company Ltd.;
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<PAGE> 102
(p) Morrison Petroleums (Alberta) Ltd.;
(q) Polar Energy Marketing Corporation; and
(r) Saratoga Processing Company, Ltd.
"S & P" means Standard & Poor's Ratings Services (a division of McGraw
Hill Companies, Inc.), or its successor.
"Schedule I BA Reference Banks" means the Lenders listed in Schedule I
to the Bank Act (Canada) as are, at such time, designated by Canadian Agent,
with the prior consent of Canadian Borrowers (acting reasonably), as the
Schedule I BA reference Banks.
"Schedule II BA Reference Banks" means the Lenders listed in Schedule
II to the Bank Act (Canada) as are, at such time, designated by Canadian Agent,
with the prior consent of Canadian Borrowers (acting reasonably), as the
Schedule II BA Reference Banks.
"Stamping Fee Rate" means with respect to any Bankers' Acceptance
accepted by any Canadian Resident Lender at any time, the Applicable Margin then
in effect; provided that if an Event of Default has occurred and is continuing,
the Stamping Fee Rate shall be increased by two hundred (200) Basis Points.
"Subordinated US Borrower Debentures" means those certain Convertible
Junior Subordinated Debentures issued by US Borrower to Devon Trust pursuant to
the Subordinated US Borrower Indenture and subordinated to the Obligations, in
the aggregate principal amount of approximately US $154,500,000.
"Subordinated US Borrower Guarantee" means that certain Guarantee dated
July 1, 1996, by US Borrower in favor of the holders of the Devon Trust
Securities pursuant to the Subordinated US Borrower Indenture and subordinated
to the Obligations, guaranteeing certain payments to be made by Devon Trust
pursuant to the Devon Trust Securities.
"Subordinated US Borrower Indenture" means that certain Trust Indenture
dated July 1, 1996, between US Borrower and The Bank of New York, as indenture
trustee.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company, joint venture, or other
business or corporate entity, enterprise or
organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person,
provided that (a) associations, joint ventures or other relationships (i) which
are established pursuant to a standard form operating agreement or similar
agreement or which are partnerships for purposes of federal income taxation
only, (ii) which are not corporations or partnerships (or subject to the Uniform
Partnership Act) under applicable state Law, and (iii) whose businesses are
limited to the exploration, development and operation of oil, gas or mineral
properties, transportation and related facilities and interests owned directly
by the parties in such associations, joint ventures or relationships, shall not
be deemed to be "Subsidiaries" of such Person and (b) associations, joint
ventures or other relationships (i) which are not corporations or partnerships
under applicable provincial Law, and (ii) whose businesses are limited to the
exploration, development and operation of oil, gas or
24
<PAGE> 103
mineral properties, transportation and related facilities and interests owned
directly by the parties in such associations, joint ventures or relationships,
shall not be deemed to be "Subsidiaries" of such Person.
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation
under Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate
from an ERISA Plan during a plan year in which it was a "substantial employer"
as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of
intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment
as a termination under Section 4041 of ERISA, or (d) the institution of
proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, or (e) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any ERISA Plan.
"Total Capitalization" means the sum (without duplication) of (i) US
Borrower's Consolidated Total Funded Debt plus (ii) US Borrower's Consolidated
shareholder's equity plus (iii) 70% of the outstanding balance of the Devon
Trust Securities.
"Total Funded Debt" means (i) Liabilities referred to in clauses (a),
(b), (c), (d), and (e) of the definition of "Indebtedness", plus (ii) 30% of the
outstanding balance of the Devon Trust Securities.
"Tranche A Facility Usage" means, at the time in question, the
aggregate amount of Tranche A Loans and existing US LC Obligations outstanding
at such time under the US Agreement.
"Tranche A Loan" has the meaning given it in Section 1.1(a) of the US
Agreement.
"Tranche A Maximum Credit Amount" means $130,000,000.
"Tranche A Note" has the meaning given it in Section 1.1(a) of the US
Agreement.
"Tranche B Conversion Date" means the date which is 364 days after the
Closing Date, or such later day to which the Tranche B Conversion Date is
extended pursuant to Section 1.1 of the US Agreement.
"Tranche B Facility Fee Rate" means, on any date, the number of Basis
Points per annum set forth below based on the Applicable Rating Level on such
date:
25
<PAGE> 104
<TABLE>
<CAPTION>
=============================================
Applicable Applicable Tranche B
Rating Level Facility Fee Rate
---------------------------------------------
<S> <C>
Level I 7.0
---------------------------------------------
Level II 9.0
---------------------------------------------
Level III 10.0
---------------------------------------------
Level IV 15.0
---------------------------------------------
Level V 22.5
=============================================
</TABLE>
"Tranche B Facility Usage" means, at the time in question, the
aggregate amount of Tranche B Loans outstanding at such time under the US
Agreement.
"Tranche B Loan" has the meaning given it in Section 1.1(b) of the US
Agreement.
"Tranche B Maturity Date" means the date which is two years after the
Tranche B Conversion Date.
"Tranche B Maximum Credit Amount" means $75,000,000.
"Tranche B Note" has the meaning given it in Section 1.1(b) of the US
Agreement.
"Tranche B Revolving Period" means the period from the Closing Date
until the Tranche B Conversion Date.
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency or
instrumentality of the United States of America or Canada or any state,
province, commonwealth, nation, territory, possession, county, parish, town,
township, village or municipality, whether now or hereafter constituted or
existing.
"Type" means (i) with respect to any US Loans, the characterization of
such US Loans as either US Base Rate Loans or US Dollar Eurodollar Loans and
(ii) with respect to any Canadian Advances, the characterization of such
Canadian Advances as Canadian Base Rate Loans, Canadian Prime Rate Loans, US
Dollar Eurodollar Loans, Canadian Dollar Eurodollar Loans or Bankers'
Acceptances.
"Unrestricted Subsidiary" means any corporation, association,
partnership, limited liability company, joint venture, or other business or
corporate entity, enterprise or organization in which US Borrower does not
presently own an interest (directly or indirectly) which hereafter becomes a
Subsidiary of US Borrower and which, within 90 days thereafter, is designated as
an Unrestricted Subsidiary by US Borrower to US Agent, provided that US Borrower
may not designate as an Unrestricted Subsidiary any Subsidiary in which it has
made an Investment of more than US $25,000,000 (directly or indirectly) by any
means other than newly issued stock or
26
<PAGE> 105
treasury stock of US Borrower, which may be used to make an Investment in
Unrestricted Subsidiaries without limit and provided further that in the event
the book value of the assets of any Unrestricted Subsidiary at any time exceeds
US $25,000,000, such Subsidiary shall cease to be an Unrestricted Subsidiary and
shall automatically become a Restricted Person.
"US Account" means an account established by Canadian Agent in New York
into which funds to be advanced to Canadian Borrowers by Lenders in US Dollars
and funds to be paid by Canadian Borrowers to Lenders in US Dollars will be
deposited.
"US Agent" means NationsBank, N.A., as administrative agent, under the
US Agreement and its successors and assigns in such capacity.
"US Agreement" means that certain Credit Agreement of even date
herewith among US Borrower, Agent and the Lenders, as it may be amended,
supplemented, restated or otherwise modified and in effect from time to time.
"US Base Rate" means, for any day, the rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus one-half of one percent
(0.5%) and (b) the US Reference Rate for such day. Any change in the US Base
Rate due to a change in the US Reference Rate or the Federal Funds Rate shall be
effective on the effective date of such change in the US Reference Rate or
Federal Funds Rate. No US Base Rate charged by any Person shall ever exceed the
Highest Lawful Rate.
"US Base Rate Loan" means a US Loan made in US Dollars which bears
interest at the US Base Rate.
"US Borrower" means Devon Energy Corporation, an Oklahoma corporation.
"US Dollar" or "US $" means the lawful currency of the United States of
America.
"US Dollar Equivalent" means, with respect to an amount denominated in
Canadian Dollars, the amount of US Dollars required to purchase the relevant
stated amount of Canadian Dollars on the date of determination.
"US Dollar Eurodollar Loan" means a US Loan or a Canadian Loan, in each
case, which bears interest at the Adjusted US Dollar Eurodollar Rate.
"US Dollar Eurodollar Rate" means, for any US Dollar Eurodollar Loan
within a Borrowing and with respect to the related Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on the Dow Jones Market Service (formerly Telerate Access Service)
Page 3750 (or any successor page) as the London interbank offered rate for
deposits in US Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period. If for any reason such rate is not available, the term "US
Dollar Eurodollar Rate" shall mean, for any US Dollar Eurodollar Loan within a
Borrowing and with respect to the related Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
27
<PAGE> 106
appearing on Reuters Screen LIBO Page as the London interbank offered rate for
deposits of US Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%).
"US Facility Commitment Period" means the period from and including the
Closing Date until the US Facility Maturity Date (or, if earlier, the day on
which the obligations of Lenders to make US Loans hereunder or the obligations
of US LC Issuer to issue Letters of Credit hereunder have been terminated or the
US Notes first become due and payable in full).
"US Facility Maturity Date" means December 10, 2003.
"US Facility Usage" means, at the time in question, the aggregate
amount of US Loans and existing US LC Obligations outstanding at such time under
the US Agreement.
"US GAAP" means those generally accepted accounting principles and
practices which are recognized as such from time to time by the Financial
Accounting Standards Board (or any generally recognized successor) and which, in
the case of US Borrower and its Consolidated Subsidiaries, are applied for all
periods after the Closing Date in a manner consistent with the manner in which
such principles and practices were applied to the Initial Financial Statements.
"US LC Issuer" means NationsBank, N.A. in its capacity as the issuer of
Letters of Credit under the US Agreement, and its successors in such capacity.
"US LC Obligations" means, at the time in question, with respect to the
US Agreement, the sum of all Matured US LC Obligations plus the maximum amounts
which US LC Issuer might then or thereafter be called upon to advance under all
Letters of Credit then outstanding.
"US LC Sublimit" means US $25,000,000.
"US Loans" means the Tranche A Loans, the Tranche B Loans and
Competitive Bid Loans made under the US Agreement.
"US Loan Documents" means the US Agreement, the US Notes issued under
the US Agreement, the Letters of Credit issued under the US Agreement, the LC
Applications related thereto, and all other agreements, certificates, documents,
instruments and writings at any time delivered in connection herewith or
therewith (exclusive of term sheets and commitment letters).
"US Maximum Credit Amount" means the amount of US $205,000,000.
"US Notes" means the Tranche A Notes, the Tranche B Notes and the
Competitive Bid Notes issued under the US Agreement.
28
<PAGE> 107
"US Obligations" means all Liabilities from time to time owing by any
Restricted Person to any Lender Party under or pursuant to any of the US Loan
Documents, including all US LC Obligations owing thereunder. "US Obligation"
means any part of the US Obligations.
"US Reference Rate" means the per annum rate of interest established
from time to time by NationsBank, N.A. as its prime rate, which rate may not be
the lowest rate of interest charged by NationsBank, N.A. to its customers.
"Withholding Tax" has the meaning given it in Section 3.2(d) of the
Canadian Agreement.
29
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-32378, 33-67924, 333-48643 and 333-66873) on Form S-8 and Registration
Statements (Nos. 333-00815 and 333-66899) on Form S-3 of Devon Energy
Corporation of our report dated March 19, 1998 (except as to Note 12 which is as
of December 10, 1998) to the shareholders of Northstar Energy Corporation,
appearing in this Form 8-K.
/s/ Deloitte & Touche LLP
Chartered Accountants
Calgary, Alberta
Canada
December 22, 1998
