AMENDED AND RESTATED
--------------------
EXTENDIBLE REVOLVING TERM CREDIT FACILITY
-----------------------------------------
This Agreement amends and restates in full the Extendible Revolving
Term Credit Facility dated September 15, 1995 and the Amended and Restated
Extendible Revolving Term Credit Facility Agreement dated July 4, 1996 between
the Borrower and the Lender.
May 29, 1997
BORROWER: Norcen Energy Resources Limited (Norcen).
- --------
FACILITY: Extendible Revolving Term Credit Facility (the
- -------- "Facility").
AMOUNT: Cdn. $100,000,000 or the U.S. dollar equivalent.
- ------
PURPOSE: For general corporate purposes, including commercial paper
- ------- backstop, capital expenditures, short term working capital
needs, refinancing existing bank indebtedness and for
Permitted Acquisitions.
LENDER: Royal Bank of Canada
- ------
AVAILABILITY
PERIOD: The Facility will revolve and fluctuate for a period of
- ------------ 364 days ("Revolving Period"), subject to renewal as
provided below, followed by a 2 year non-revolving term
loan ("Term Period") with a bullet payment at the end of
the Term Period.
REPAYMENT: Revolving Period
- --------- ----------------
The Revolving Period ends May 28, 1998. The Revolving
Period may be extended from time to time at the Lender's
sole discretion for up to 364 days, within 30 days after
the Borrower's written request which may not be made more
than twice in any 12 month period. The Borrower's request
for extension will include a restatement of the
Representations and Warranties. No response from the
Lender within 30 days of the request shall mean that an
extension is not granted.
2
Term Period
-----------
The Term Period commences on the day after the last day of
the Revolving Period and ends two years thereafter. Any
undrawn portion of the Facility will be canceled at the
end of the Revolving Period. Any prepayment during the
Term Period will constitute a permanent reduction of the
Facility. For greater certainty, the rollover of a B/A or
Libor Loan does not constitute a prepayment during the
Term Period.
REPAYMENT: The Borrower will repay all borrowings and other amounts
- --------- outstanding hereunder in full on the last day of the Term
Period, and the commitment shall reduce to zero on such
date. The Borrower will ensure that Libor Loans and B/A's
mature, and L/C's and L/G's expire, on or before such
date.
RANKING: All amounts outstanding under the Facility will be senior
- ------- unsecured obligations of the Borrower ranking pari passu
with all existing and future Senior Debt of the Borrower,
other than indebtedness secured by Permitted Encumbrances.
The Facility will at all times rank senior to any existing
or future Subordinated Indebtedness.
AVAILMENTS: The Facility will be available by way of the following:
- ----------
o Canadian dollar prime loans ("Cdn. Prime Rate Loans");
o US dollar base rate loans ("USBR Loans")'
o Canadian dollar bankers' acceptances ("B/A's");
o US dollar London interbank offer rate loans ("Libor
Loans"); and
o US dollar or Canadian dollar letters of credit ("L/C's)
or guarantee ("L/G's).
CURRENCY EXCESS: If at any time the Canadian dollar equivalent of all
- --------------- outstanding advances based on the noon (Toronto time) Bank
of Canada exchange rate exceeds the available facility
amount (a "Currency Excess"), the Borrower will repay
forthwith Cdn. Prime Rate
3
Loans or USBR Loans until such time as the Currency Excess
is eliminated. If a Currency Excess remains after
repayment of all Cdn. Prime Rate Loans or USBR Loans, then
the Borrower will:
1) collateralize dollar for dollar the Currency Excess
Canadian or US dollar deposits;
2) repay any Libor Loans, as well as any expenses
associated with breaking a Libor Loan, prior to
maturity; or
3) any combination of the foregoing.
BORROWING AND
NOTICE PROVISIONS: A) The Borrower may borrow as follows:
- -----------------
o Cdn. Prime Rate Loans in minimum amounts of C$1
million and multiples of $100,000 thereafter;
o USBR Loans in minimum amounts of US$1 million and
multiples of $100,000 thereafter;
o advances of B/A's will, subject to availability, be
issued for periods of 30, 60, 90, 120 or 180 days,
or such other period as is agreed to by the Lender,
in minimum amounts of C$1 million and multiples of
C$100,000 thereafter unless otherwise determined by
the market for B/A's; and
o Libor Loans, with maturities of 1, 2, 3 or 6 months,
or such other period as is agreed to by the Lender,
in minimum amounts of US$1 million and multiples
thereof.
B) The following notice provisions will apply to
drawdowns, repayments, rollovers and conversions:
Prime Rate/USBR Loans
o up to $20,000,000: same Business Day 9:00 a.m.
notice is required; and
o over $20,000,000: 9:00 a.m. one Business Day prior
notice is required.
4
B/A's
To the extent that the Borrower markets the B/A's,
customary notice is required. Should the Borrower request
the Lender to market the B/A's then the following notice
provisions shall apply:
o same Business Day 9:00 notice is required.
o one Business Day 9:00 a.m. notice is required for the
rollover of B/A's, regardless of size.
B/A's will be issued and dealt with in accordance with the
Lender's usual practices, and must be repaid, rolled over,
or converted to another borrowing on their maturity dates.
LIBOR Loans
o 3 banking days (in London and Calgary) prior notice.
The Borrower may repay any part of the outstanding amount
without penalty subject to applicable notice periods and
provided that B/A's and Libor Loans may be repaid on
maturity dates only, unless, in the case of Libor Loans,
the Borrower pays the expenses associated with breaking
the Libor Loan prior to maturity.
ACCOUNTS: The Lender's records will constitute prima facie evidence
- -------- of amounts outstanding hereunder.
INTEREST RATES: The Borrower shall pay interest or fees on all borrowings
- --------------- hereunder at the following rates:
During Revolving Period: - Libor + 40 bp
- BA Rate + 40 bp
- USBR
- Canadian Prime
5
Letters of Credit ("L/C")
and Letters of Guarantee
("L/G"): - Financial L/C and/or L/G - 50
bp
- Non-Financial or Performance
L/C and L/G - 25 bp.
- All L/C and L/G's may be
renewed annually at the
discretion of the Lender for
an additional 1 year term.
During Term Period: - All rates increase by 12.5 bp
prorated on commencement of
the Term Period.
Interest on Cdn. Prime Rate and USBR Loans is payable
monthly in arrears on the last Business Day of each month,
on the basis of a year of 365 days. Interest on Libor
Loans is payable in arrears on the last day of the
interest period thereof, or every 3 months if such
interest period exceeds 3 months, on the basis of a year
of 360 days. Stamping fees on B/A's are payable in advance
on the acceptance thereof, calculated on the face amount
of each B/A on the basis of the number of days in its term
in a year of 365 days. Fees in respect of L/C's and L/G's
are payable in advance on issuance thereof, calculated on
the maximum amount available to be drawn thereunder on the
basis of the number of days in its term in a year of 365
days.
Any interest rate based on a period less than a year
expressed as an annual rate for purposes of the Interest
Act (Canada) is equivalent to such determined rate
multiplied by the actual number of days in the calendar
year in which same is to be ascertained and divided by the
number of days in the period upon which it is based.
The Borrower will pay interest on all overdue amounts
(including overdue interest) at Cdn. Prime (for Canadian
Dollars) and USBR (for U.S. Dollars), plus 1% per annum.
All overdue interest is calculated on a daily basis and
will be payable both before and after default, maturity
and judgment.
FEES: Standby fees of 10 bp will be paid quarterly in arrears on
- ---- the undrawn portion of the Facility during the Revolving
Period. For these purposes the amount of borrowings
outstanding in US
6
Dollars will be notionally converted to Cdn. Dollars at
the exchange rate in effect on the Business Day prior to
the due date for payment.
EVIDENCE OF INDEBTEDNESS:
- ------------------------
The Bank shall open and maintain at the Branch of Account
accounts and records evidencing the principal amount of
each Borrowing, the payment of principal and interest and
all other amounts owing to the Bank under this Agreement.
The Bank's accounts and records constitute, in the absence
of manifest error, conclusive evidence of the indebtedness
of the Borrower to the Bank.
EXPENSES: The Borrower will pay all reasonable costs and expenses
- -------- (including legal fees) incurred in connection with the
review of the Facility Documents, the preservation and/or
enforcement of any of the rights of the Lender under the
Facility Documents, and loss or expenses (including legal
fees) incurred by the Lender as a consequence of any
failure to pay any stamp, registration or other tax to
which the Facility may be subject.
CONDITIONS
PRECEDENT: A) Conditions precedent to implementation of the terms and
- ---------- conditions herein contained are the following:
1) officer's certificate stating that the
Representations and Warranties are true and accurate
in all material respects;
2) internal legal opinion stating that this Facility
Agreement is valid, binding and legally enforceable.
B) Conditions precedent to subsequent drawdowns,
rollovers and conversions will be as follows:
1) receipt of applicable notice; and
2) no Event of Default or Potential Event of Default
has occurred or would occur as a result of such
drawdown, rollover or conversion.
7
REPRESENTATIONS
AND WARRANTIES: The borrower represents and warrants as follows:
- ---------------
1) it is duly incorporated, validly existing, and duly
registered where required;
2) it has all corporate power and legal capacity to carry
on business and own assets;
3) it has all corporate power and authorization to execute
and deliver the Facility Documents and to perform its
covenants under the Facility Documents;
4) the Facility Documents have been duly executed and
delivered by the Borrower;
5) the Facility Documents create legal, valid, binding and
enforceable obligations of the Borrower;
6) the most recent audited consolidated financial
statements of the Borrower (initially December 31,
1996), fairly present the consolidated financial
condition of the Borrower, as at such date and the
results of operations for the year ended, in accordance
with GAAP consistently applied, and since the most
recent audited financial statements of the Borrower,
there has been no material adverse change in the
consolidated financial position or business operations
of the Borrower;
7) the Borrower has in full force and effect such
insurance policies in amounts covering the properties
and operations of the Borrower as are customarily held
by similar corporations engaged in the same or similar
businesses in the localities where the Borrower's
properties and operations are located;
8) there is no pending or threatened action, suit,
litigation, judgment or proceeding that has a
reasonable likelihood of materially adversely affecting
the Borrower's ability to repay or perform its
obligations under the Facility Documents other than as
disclosed in writing by the Borrower on or prior to the
execution of the Facility Documents;
8
9) there is no known material environmental liability,
actual or contingent which has not been provided for
in the financial statements of Borrower in accordance
with GAAP; it is in compliance with environmental laws
in all material respects; all necessary material
permits, licenses and other consents required under
environmental laws have been received and are in good
standing, and its properties are not the subject of any
outstanding or threatened order or judgment alleging
violation of environmental laws which if enforced
against the Borrower would have a material adverse
effect on the financial condition, operations or
business of the Borrower;
10) it has unencumbered ownership and clear title to
its assets except for Permitted Encumbrances;
11) all amounts outstanding under the Facility rank at
least pari passu in right of payment with the
Borrower's other most senior unsecured Indebtedness,
other than Indebtedness which is a preferred claim
arising by operation of law or a Permitted Encumbrance;
12) no Event of Default or Potential Event of Default
has occurred and is continuing; and
13) neither the execution and delivery of the Facility
Documents nor compliance with the terms and provisions
thereof will conflict with, result in a breach of, or
constitute a default under any law or regulation, any
court order, judgment or decree, or any agreement or
instrument binding upon the Borrower.
GENERAL COVENANTS: The Borrower will:
- -----------------
1) pay all amounts owing under the Facility Documents when
due;
2) perform its obligations under the Facility Documents;
3) maintain its current corporate existence as a Canadian
corporation;
4) supply to the Lender on a regular basis:
9
a) annual audited consolidated financial statements of
the Borrower prepared in accordance with GAAP, as
soon as available but in any event within 120 days
of the end of each fiscal year;
b) quarterly unaudited consolidated financial
statements of the Borrower prepared in accordance
with GAAP, as soon as available but in any event
within 90 days of the end of the first 3 fiscal
quarters of each fiscal year, in all cases stating
comparative figures for the corresponding date and
period in the previous fiscal year;
c) a compliance certificate as per Exhibit A within 120
days of the fiscal year end and within 90 days of
the end of the first 3 quarters of each fiscal year
showing the calculation of all Financial Ratios and
including an officer's certificate stating that no
Event of Default or Potential Event of Default has
occurred;
d) Annual information forms or notices of material
change which are required to be filed by the
Borrower with any regulatory authority or securities
exchange;
5) maintain the Interest Coverage Ratio and the Senior
Debt to Capital Ratio (the "Financial Ratios") as
follows:
a) Interest Coverage Ratio on a rolling 4 quarter basis
to be greater than 2.50 times;
b) Senior Debt to Total Capital Ratio to be maintained
below .60:1,
all Financial Ratios to be calculated quarterly on a
consolidated basis, in accordance with GAAP;
6) carry on and conduct its business in a proper and
efficient manner and in compliance with applicable laws
in all material respects;
7) maintain insurance policies covering its material
properties and operations as is customarily maintained
by similar corporations engaged in the same or similar
business;
8) not liquidate, dissolve or wind-up or take any steps or
proceedings in connection therewith;
10
9) not permit a merger with or into, or a consolidation
or amalgamation with, or transfer all or substantially
all its assets to, another entity, other than a merger
or amalgamation between the Borrower and a Wholly-Owned
Subsidiary, or between Wholly-Owned Subsidiaries:
a) if an Event of Default or Potential Event of Default
exists or would occur and be continuing immediately
before and after giving effect to the transaction;
and
b) unless the successor corporation:
i) agrees to be bound by the Facility Documents;
ii) acknowledges the continuing validity and
enforceability of the Facility Documents;
iii) represents and warrants that the transaction
will not adversely affect the rights and
benefits afforded the Lender under the Facility
Documents;
iv) represents and warrants that the
creditworthiness of the resulting, surviving or
transferee entity is not materially weaker than
the Borrower prior to such action; and
v) provides legal opinions confirming the matters
set forth in paragraphs i), ii), and iii)
above;
10) not permit any lien, mortgage, charge, hypothec, pledge
or any other security interest or encumbrance on its
property or assets, except for Permitted Encumbrances,
unless at the same time or prior to securing any other
Indebtedness, the Borrower grants security for this
Facility which ranks equally and rateably with the
other Indebtedness; and
11) promptly advise the Lender in writing of any Event of
Default or any Potential Event of Default.
ENVIRONMENTAL
INDEMNITY The Borrower will indemnify the Lender for losses or damages
- ------------- incurred as a result of environmental matters that are
attached to the Lender as a result hereof.
11
EVENTS OF DEFAULT: Events of Default are as follows:
- -----------------
1) nonpayment of principal when due;
2) nonpayment of interest, stamping fees, L/C fees,
or L/G fees due to the Lender for 5 days after the
due date. Nonpayment of standby fees or other fees
due to the Lender in either case for 5 days after
notice of nonpayment;
3) nonpayment of other amounts under the Facility
Documents within 30 days after notice from the
Lender;
4) breach of covenant or other written agreement
(e.g. L/C, L/G, and B/A's) under the Facility
Documents which remains unremedied for 30 days after
notice;
5) materially incorrect or misleading representation
or warranty under the Facility Documents when given;
6) if the Borrower defaults under any obligations to
pay any Indebtedness (excluding under this Agreement)
in an amount in aggregate in excess of $25,000,000 or
its equivalent in any other currency or causes or
permits to exist any default or event of default
under any agreement evidencing Indebtedness
(excluding this Agreement) if the effect of such
default or event of default is to accelerate, or
permit the acceleration of, the maturity of any such
obligations which are of an aggregate amount in
excess of $25,000,000, provided that an occurrence
under this clause will not be an Event of Default, if
within such period that is available under such
agreement for remedying such default or event of
default, such default or event of default is remedied
by the Borrower or duly waived by the relevant lender
in respect of such Indebtedness;
7) if the Borrower becomes insolvent, or institutes
proceedings for its winding-up or dissolution, or to
be adjudicated a voluntary bankrupt, or files an
application seeking reorganization, arrangement,
composition or any other similar relief under any
bankruptcy, arrangement or other similar law, or
files a proposal (or notice of intent to file a
proposal) under any bankruptcy law, or makes an
assignment for the benefit of creditors, or applies
for the appointment of a receiver or receiver-manager
over any of its property, or admits in writing its
inability to pay its debts
12
generally as they become due, or suspends transaction
of its usual business, or consents to any proceeding
in 8) below;
8) any application is filed or proceeding instituted
against the Borrower to have it adjudged a bankrupt
or insolvent or seeking reorganization, arrangement,
composition or other similar relief under any
bankruptcy, arrangement or any other similar law in
respect of the Borrower, or seeking the appointment
of a receiver, receiver-manager, administrator,
liquidator, trustee or assignee in bankruptcy or
insolvency of the Borrower or its property, or for
the winding-up or dissolution of its affairs, and
such application or proceeding remains in force
undischarged or unstayed for a period of 30 days or
more;
9) final judgment or order in excess of C$25 million
is rendered against the Borrower which is not, within
60 days after entry thereof, bonded, discharged or
stayed pending appeal, or is not discharged within 60
days after the expiration of such stay; or
10) a lien or security interest in excess of $25 million
is enforced against the property of the Borrower or
a Wholly-Owned Subsidiary.
Upon the occurrence and continuance of an Event of
Default: the Lender may declare all Indebtedness under
the Facility to be due and payable, whereupon the same
shall be due and payable, and the Lender will have no
obligation to make further advances, rollovers or
conversions; the Lender will have a right of set off upon
the occurrence and continuance of an Event of Default;
all Libor Loans and USBR Loans may, at the Lender's sole
discretion, be converted to Cdn Prime Rate Loans at any
time and B/A's, L/C's and L/G's must be collateralized by
the Borrower in an escrow account; interest on overdue
amounts shall be payable as provided in "Interest Rates"
above; and, upon the occurrence and continuance of an
Event of Default the Lender may arrange for an
environmental audit at the expense of the Borrower.
INCREASED COSTS
AND CHANGE OF LAW: Increased costs and compensation for reduced return
- ----------------- to the Lender in providing and maintaining the
Facility including those costs arising from capital
adequacy requirements and change of law shall be for
the account of the Borrower. The Lender will not
13
be obliged to provide advances if rendered illegal or if
market conditions make advances unavailable or
impracticable.
ASSIGNMENT: The Lender reserves the right to sell, assign, transfer
- ---------- or grant participation in the Facility, in whole or in
part, with the consent of the Borrower (such consent not
to be unreasonably withheld) provided that consent of the
Borrower will not be required after an Event of Default
or Potential Event of Default. Assignments will be
permitted in minimum amounts equal to the lesser of (i)
C$10,000,000; and (ii) the remaining commitment of the
Lender.
The Borrower agrees to execute such further documentation
as the Lender may request for the purpose of any
assignment, sale or transfer of the Facility.
CANCELLATION: The undrawn portion of the-Credit Facility may be
- ------------ cancelled without penalty upon three Business Days
notice.
GOVERNING LAW: Governing law will be the laws of the Province of Alberta
- ------------- and Canada applicable therein. Parties submit to Alberta
courts.
JUDGMENT
CURRENCIES: In order to obtain judgments, the Lender can convert
- ---------- currencies to Canadian dollars on a customary basis.
In witness whereof the parties hereto, by executing this document, have agreed
to the terms and conditions as presented herein, with the intention that this
document will form a binding contract between them. Dated on 30 day of May,
1997.
ROYAL BANK OF CANADA
Per: /s/
--------------------------
Per: /s/
--------------------------
NORCEN ENERGY RESOURCES LIMITED
Per: /s/ Robert J. Waters
--------------------------
Robert J. Waters
Treasurer
Per: /s/
--------------------------
14
DEFINITIONS
-----------
"B/A Rate" means the discount rate at which the Lender's B/A's are purchased by
the Lender or sold into the market by the Borrower.
"Business Day" is a day, other than a Saturday or Sunday, on which the Lender is
open for business in Calgary, Alberta, Toronto, Ontario and New York, New York,
and with respect to Libor Loans, in London, England.
"Cashflow" means, in respect of the Borrower, the aggregate of Consolidated Net
Earnings, Consolidated Interest Expense, Taxes and Non-Cash Items, all without
duplication and determined in accordance with GAAP.
"Cdn. Prime" means the rate of interest per annum, based on a 365 day year,
established and reported by the Lender to the Bank of Canada from time to time
as its reference rate of interest for determination of interest rates which the
Lender charges to customers of varying degrees of creditworthiness in Canada for
Canadian dollar loans made by it in Canada. For purposes of this Facility, the
Cdn. Prime will be the higher of the stated rate by the Lender or CDOR plus 1%.
"CDOR" means the average yield to maturity for bankers' acceptances which is
quoted on Reuter's Canadian Discount Offer Rate screen at 10:00 a.m. Toronto
time on the applicable date of advance for B/A's having a term to maturity of 1
month.
"Consolidated Interest Expense" means consolidated interest, whether expensed or
capitalized, in respect of Indebtedness determined in accordance with GAAP.
"Consolidated Net Earnings" means consolidated net income or loss as reported on
the Borrower's consolidated statement of earnings excluding income from
discontinued operations determined in accordance with GAAP.
"Consolidated Tangible Net Worth" means, on a consolidated basis determined in
accordance with GAAP, at any time, the sum of:
a) the Borrower's total shareholder equity; and
b) Subordinated Indebtedness;
less:
c) any amounts of goodwill attributable to the Borrower.
"Facility Documents" means:
a) this letter agreement between the Borrower and the Lender; and
b) such other documents and certificates which in the opinion of
the Lender, acting reasonably, are required to fully document or
satisfy the terms and conditions herein contained.
15
"Fed Funds Rate" means, for any day, the rate set forth in the Federal Reserve
Bank of New York's weekly statistical release designated at H.15(519), opposite
the caption "Federal Funds (Effective)" for that day, or (if that day is not a
Business Day) for the next preceding Business Day.
"Funded Debt" means, all Indebtedness payable more than one year from the date
of creation thereof including current maturities of such Indebtedness and
Indebtedness which by its terms is renewable to a due date beyond one year;
excluding Subordinated Indebtedness.
"GAAP" means generally accepted accounting principles which are in effect from
time to time in Canada.
"Guarantees" means an undertaking to become liable for indebtedness for borrowed
money as presented on consolidated financial statements of Borrower.
"Hostile Acquisition" means an offer to acquire shares of a corporation, which
is required to be reported to an applicable securities regulatory authority,
where the board of directors of the target corporation has not approved such
offer nor recommended to the shareholders of the corporation that they sell
their shares pursuant to the proposed offer.
"Indebtedness" means all items in the consolidated financial statements of the
Borrower classified as liabilities for money borrowed in accordance with GAAP
(and will include capitalized leases, and Guarantees or endorsements (other than
of notes, bills and cheques presented to banks for collection or deposit in the
ordinary course of business) of indebtedness of others by the Borrower or
Subsidiaries, to the extent required by GAAP).
"Interest Coverage Ratio" means Cashflow divided by Consolidated Interest
Expense.
"Libor" means the rate of interest per annum, based on a 360 day year, as
determined by the Lender (rounded upwards, if necessary to the nearest whole
multiple of 1/16th of 1%) at which the Lender, in accordance with its normal
practice, would be prepared to offer U.S. dollar deposits to leading banks in
the Interbank Euro Currency Market, London, England at approximately 10:00 a.m.
(New York time) on the second Business Day before the first day of, in an amount
similar to, and for the period similar to the interest period of, a requested
Libor Loan.
"Non-Cash Items" means depreciation, depletion, amortization, foreign exchange
translation gains or losses and other non-cash items included in the calculation
of Consolidated Net Earnings as reported on the Borrower's consolidated
statement of earnings as determined in accordance with GAAP.
"Permitted Acquisition" means a direct or indirect acquisition by the Borrower
which is not a Hostile Acquisition.
"Permitted Encumbrances" means:
16
a) any security interest, except on fixed assets or on shares of any
Subsidiary or affiliate, given in the ordinary course of business to
any bank or other financial institution, to secure indebtedness payable
on demand or maturing within 12 months of the date that such
indebtedness is originally incurred provided that the total indebtedness
so secured does not exceed $25 million;
b) any Purchase Money Mortgage;
c) Risk Management Liens where the aggregate value of all cash and
securities will not at any time exceed $25 million;
d) any security interest on any petroleum and natural gas right, tangible
assets associated therewith or the products derived therefrom or the
proceeds of sale of such products, to secure production payments,
royalties, carried interests and similar obligations or to secure
obligations in connection with or necessarily incidental to commitments
or purchase and sale of, or the transportation or distribution of,
products derived from the petroleum and natural gas right, including
without limitation forward sales;
e) any security interest on any resource property of the Borrower that has
not been in commercial production during the 12-month period ending on
the date hereof or has not been in commercial production during the
12-month period ending at the time of the imposition of such security to
secure any indebtedness incurred for the development or improvement
thereof or the development or improvement of any other resource property
of the Borrower that has not been in commercial production during the
12-month period ending on the date hereof or has not been in commercial
production during the 12-month period ending at the time of the
imposition of such security;
f) any security interest in favour of the government of any country in
which the Borrower owns assets or carries on business or the government
of any province, state, municipality or other political subdivision in
any such country, or any department or agency of any such government,
given pursuant to a contract, concession, lease, license, franchise,
grant, permit or other instrument pertaining to such assets or business
or required by applicable laws;
g) liens for taxes, assessments or other governmental charges not yet due
or, if due, the validity of which is being contested in good faith, and
liens for the excess of the amount of any past due taxes for which a
final assessment has not been received over the amount of such taxes as
estimated and paid by the Borrower;
h) unless it constitutes an Event of Default, the lien of any judgment
rendered or claim filed against the Borrower, which is being contested
in good faith by the Borrower;
17
i) undetermined or inchoate liens and charges (including builders',
mechanics', warehousemen's carriers' and other similar liens) incidental
to construction or current operations which relate to obligations not
due or delinquent or which are being contested in good faith by the
Borrower;
j) liens incurred or created in the ordinary course of business on any
particular petroleum and natural gas right and or on any tangible assets
associated therewith as security, in favour of any other person who is
conducting the exploration, exploitation, development or operation of
the property or asset to which such petroleum and natural gas right
relates, to secure payment by the Borrower of its proportion of the
costs and expenses of such exploration, exploitation, development or
operation incurred by such other person;
k) any security interest given by the Borrower to a public utility or
municipality or governmental or other public authority when required by
such utility or municipality or other authority in connection with
utility or municipal services required for the operations of the
Borrower in the ordinary course of its business;
l) any security on a lease or other instrument permitting the extraction of
substances other than crude oil, natural gas, natural gas liquids and
related products by the Borrower, provided that any such lease does not
interfere with the enjoyment by the Borrower of any petroleum and
natural gas right;
m) any renewal, refunding or extension of any security interest or
encumbrance referred to in the foregoing clauses a) or l) or of any
security interest or encumbrance on any property in existence at the
time of acquisition thereof, in which the indebtedness thereby secured
after such renewal, refunding or extension is not increased and the
security interest or encumbrance is limited in its recourse to the
property originally subject thereto and any improvements thereon; and
n) any security interest or encumbrance, other than those referred to in
the foregoing clauses a) to m), created by the Borrower if, after giving
effect to the creation of such security interest or encumbrance, the
aggregate principal amount of the indebtedness secured thereby would not
be greater than C$25,000,000.
"Potential Event of Default" means an event that would constitute an Event of
Default with the giving of notice, lapse or time or both.
"Purchase Money Mortgage" means any mortgage, charge, hypothec, pledge or other
security or encumbrance created upon any real or personal property acquired by
the Borrower after the date hereof (or previously acquired and substantially
unimproved) to secure or securing the whole or any part of the purchase price of
such property (or, in the case of previously acquired and substantially
unimproved property, the cost of the improvement thereof) or the repayment of
money borrowed to pay the whole or any part of such purchase price or cost, or
any vendor's
18
privilege or lien on such property securing all or any part of such purchase
price or cost, including title retention agreements and leases in the nature of
title retention agreements.
"Risk Management Liens" means liens on cash or marketable securities of the
Borrower granted in connection with any interest rate, foreign exchange or
commodity risk management arrangements provided:
a) the Borrower reasonably expects to produce sufficient commodities of
the type in question in the ordinary course of business to fulfill such
contracts; and
b) the obligations secured by such liens are not due and delinquent.
"Senior Debt" means all Funded Debt that ranks senior to Subordinated
Indebtedness.
"Senior Debt to Total Capital Ratio" means Senior Debt divided by Total Capital.
"Subordinated Indebtedness" means Indebtedness that is subordinate in all
circumstances including bankruptcy, in right of payment to Indebtedness under
this Facility and Senior Debt.
"Subsidiary" means any corporation a majority of the shares carrying voting
rights of which are at the time owned or controlled directly or indirectly by
the Borrower.
"Taxes" means income taxes on the Borrower's consolidated statement of earnings
determined in accordance with GAAP.
"Total Capital" means Senior Debt plus Consolidated Tangible Net Worth.
"USBR" or "US Base Rate" means the rate of interest per annum, based on a 365
day year, established by the Lender from time to time as a reference rate for
the determination of interest rates that the Lender charges to customers of
varying degrees of creditworthiness for US dollar loans made by it in Canada.
For purposes of this Facility, the US Base Rate will be the higher of the stated
rate by the Lender or the Fed Funds Rate plus 1%.
"Wholly-Owned Subsidiary" means any Subsidiary in which all of the issued and
outstanding voting shares of each class of its capital are owned directly or
indirectly by the Borrower except that director's qualifying shares need not be
so owned.