Exhibit 10.38 GUARANTEE
KEYSPAN CORPORATION
IN FAVOUR OF
LENDERS TO
KEYSPAN ENERGY DEVELOPMENT CO.
GUARANTEE
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions...........................................................................................1
1.2 Headings and Guarantee References.....................................................................6
1.3 Number; Person........................................................................................6
1.4 Time; Including.......................................................................................6
1.5 Legislation...........................................................................................6
1.6 Administrative Agent for Guarantee Beneficiaries......................................................7
1.7 Accounting Principles.................................................................................7
ARTICLE 2
No collateral agreements
2.1 Acknowledgement.......................................................................................8
2.2 Subsidiary Assets Not Charged.........................................................................8
ARTICLE 3
Guarantee
3.1 Guarantee.............................................................................................9
3.2 Continuing Guarantee..................................................................................9
3.3 Other Guarantors......................................................................................9
3.4 Borrower..............................................................................................9
3.5 Acknowledgement of Continued Liability...............................................................10
3.6 Payment on Demand; Interest..........................................................................10
3.7 Statement of Obligations.............................................................................11
3.8 Not Bound to Exhaust Recourse........................................................................11
3.9 Corporate Authority..................................................................................11
3.10 Reinstatement........................................................................................12
3.11 Subrogation and Indemnity............................................................................12
3.12 Postponement of Claims...............................................................................12
3.13 Filing of Claims in Insolvency.......................................................................13
3.14 Appropriation........................................................................................13
3.15 Interest Act.........................................................................................13
ARTICLE 4
obligations not released
4.1 Obligations Absolute.................................................................................14
4.2 Security provided by the Borrower....................................................................16
4.3 Dealing with the Borrower............................................................................17
4.4 Extensions...........................................................................................17
4.5 Increased Commitments................................................................................18
ARTICLE 5
representations and warranties
5.1 Representations and Warranties By the Guarantor......................................................18
5.2 General..............................................................................................20
ARTICLE 6
covenants
6.1 Covenants of the Guarantor...........................................................................21
ARTICLE 7
expenses and INDEMNITY
7.1 Expenses.............................................................................................24
7.2 Indemnity............................................................................................25
ARTICLE 8
general
8.1 Notice...............................................................................................26
8.2 Governing Law and Jurisdiction.......................................................................27
8.3 Judgment Currency....................................................................................27
8.4 Payments Free and Clear of Taxes.....................................................................28
8.5 Prohibited Rate......................................................................................30
8.6 Assignment...........................................................................................30
8.7 Severability.........................................................................................31
8.8 Whole Agreement......................................................................................31
8.9 Amendments, Waivers and Consents.....................................................................31
8.10 Further Assurances...................................................................................31
8.11 Time of the Essence..................................................................................31
8.12 Separate Action......................................................................................32
8.13 Waiver and Acknowledgement...........................................................................32
8.14 No Merger............................................................................................32
8.15 Successors and Assigns...............................................................................33
8.16 Execution............................................................................................33
SCHEDULES
Schedule 1 Litigation Schedule
GUARANTEE
KEYSPAN CORPORATION
THIS GUARANTEE is made as of July 29th, 1999 by KeySpan Corporation, a
corporation duly organized and existing under the laws of the State of New York
(the "Guarantor"), in favour of the Guarantee Beneficiaries.
WHEREAS the Lenders have, pursuant to the Credit Agreement, made available
the Credit Facility to the Borrower;
AND WHEREAS the obligation of the Lenders to make the Credit Facility
available to the Borrower is conditional on, among other things, the execution
and delivery by the Guarantor of this Guarantee and, as consideration therefor
and in order to induce the Lenders to make the Credit Facility available to the
Borrower, the Guarantor has agreed with the Lenders and the Administrative Agent
to guarantee the due and punctual payment and discharge of the Guaranteed
Obligations in accordance with the provisions of this Guarantee;
AND WHEREAS the Borrower is an indirect wholly owned Subsidiary of the
Guarantor, and it is in the best interests of the Guarantor that the Credit
Facility be made available by the Lenders to the Borrower;
NOW THEREFORE, WITNESSETH THAT IN CONSIDERATION of the Lenders entering
into the Credit Agreement with the Borrower and for other good and valuable
consideration, the receipt and adequacy of which is acknowledged by the
Guarantor, the Guarantor covenants and agrees as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Guarantee, unless something in the subject matter or context is
inconsistent therewith:
"Administrative Agent" means Royal Bank of Canada, when acting in its
capacity as Administrative Agent under the Credit Agreement, and
includes any successor Administrative Agent appointed pursuant to
Section 13.10 of the Credit Agreement;
"Affiliate" has the meaning set forth in the Business Corporations Act
(Alberta);
"Applicable Environmental Laws" means those Applicable Laws which are
Environmental Laws;
"Applicable Law" means, with respect to any person, property,
transaction or event, all applicable provisions of laws, statutes,
regulations, rules, guidelines, by-laws, ordinances, treaties, orders,
policies, judgments, decrees and official directives of any
Governmental Authority or any person acting under any Governmental
Authority;
"Banking Day" means a day, excluding Saturday and Sunday, on which
banks generally are open for business in Calgary, Alberta, Canada and
New York, New York, United States of America;
"Borrower" means KeySpan Energy Development Co., an unlimited
liability company organized and existing under the laws of Nova
Scotia, Canada, and any successor thereto permitted pursuant to the
Credit Agreement;
"Borrower's Counsel" means the firm of Macleod Dixon, or such other
firm of legal counsel as the Borrower may from time to time designate;
"Canadian Dollars" and "Cdn $" mean the lawful money of Canada;
"Canadian Prime Rate" shall have the meaning given to it in the Credit
Agreement;
"Commitment" has the meaning given to it in the Credit Agreement;
"Consolidated Tangible Net Worth" of the Guarantor means, at any time:
(a) the total amount of common shareholders' equity of the Guarantor as
shown on the most current consolidated balance sheet of the Guarantor
at such time, as determined in accordance with GAAP; less (b) amounts
in respect of (i) goodwill, trademarks, licenses, patents, patent
rights, patent licenses, copyrights, trade names, organization
expenses, licenses, franchises, share issuance expenses and other
similar assets, and (ii) all other assets which are treated as
intangibles in accordance with GAAP;
"Credit Agreement" means the document entitled "Credit Agreement",
among the Borrower, the Lenders and the Administrative Agent, dated as
of July 29th, 1999, as amended, restated, replaced or substituted from
time to time, and includes all agreements and instruments entered into
by the Borrower pursuant thereto or in connection therewith;
"Credit Facility" means the extendible revolving/term credit facility
made available to the Borrower by the Lenders pursuant to, and subject
to the terms and conditions of, the Credit Agreement;
"Debt" means senior, unsecured long term debt;
"Environmental Laws" mean all applicable federal, provincial, state,
regional, municipal or local laws with respect to the environment or
environmental or public health and safety matters contained in
statutes, regulations, rules, by-laws, ordinances, treaties, orders,
judgments, decrees, approvals, notices, permits or policies, guidelines
or directives having the force of law;
"Equivalent Amount" means, on any date, the equivalent amount in
Canadian Dollars or United States Dollars, as the case may be, after
giving effect to a conversion of a specified amount of United States
Dollars to Canadian Dollars or of Canadian Dollars to United States
Dollars, as the case may be, at the noon spot rate of exchange for
Canadian interbank transactions established by the Bank of Canada for
the day in question, or, if such rate is for any reason unavailable, at
the spot rate quoted for wholesale transactions by the Administrative
Agent at approximately noon (Toronto time) on that date in accordance
with its normal practice;
"Event of Default" shall have the meaning given to it in the Credit
Agreement;
"Fiscal Quarter" means the first three months of a Fiscal Year, and
each successive period of three months in such Fiscal Year;
"Fiscal Year" means the fiscal year as adopted by the Guarantor from
time to time and which is currently the one year period commencing on
January 1 of each year and ending on December 31 of each year;
"GAAP" shall have the meaning given to it in Section 1.7;
"Governmental Authority" means:
(a) any government, parliament or legislature, any regulatory or
administrative authority, agency, commission or board (including any
board having jurisdiction in respect of public utilities) and any
other statute, rule or regulation making entity having jurisdiction in
the relevant circumstances;
(b) any person acting under authority of any of the foregoing or under a
statute, rule or regulation thereof; and
(c) any judicial, administrative or arbitral court, authority, tribunal or
commission having jurisdiction in the relevant circumstances;
"Guarantee" means this guarantee, as it may be amended, restated,
replaced or substituted from time to time;
"Guarantee Beneficiaries" means, collectively, the Administrative
Agent and the Lenders;
"Guaranteed Obligations" means all present and future indebtedness,
obligations and liabilities of the Borrower to the Guarantee
Beneficiaries or any of them under or relating to the Credit Agreement,
whether direct or indirect, absolute or contingent, matured or not,
liquidated or unliquidated, and whether incurred alone or with others,
and including, without limitation:
(a) indebtedness for principal (including obligations in respect of
bankers' acceptances), interest (both before and after maturity,
default and judgment), fees (including stamping fees and commitment
fees), costs and expenses (including breakage costs and enforcement
expenses) and indemnities; and
(b) obligations and liabilities under any order or judgment of any court
of competent jurisdiction arising out of or related to the Credit
Agreement;
"Lenders" means each of the financial institutions named on Schedule A
to the Credit Agreement as a Lender which has executed the Credit
Agreement, and any person which has become a party thereto as a Lender,
and includes Royal Bank of Canada in its capacity as a Lender, but
excluding any such financial institution, the Commitment of which has
been reduced to zero, and excluding the Administrative Agent in its
capacity as the Administrative Agent;
"Lenders' Counsel" means the firm of Stikeman, Elliott, or such other
firm of legal counsel as the Administrative Agent may from time to time
designate;
"Material Adverse Effect" means, with respect to the Guarantor, a
material adverse effect on:
(a) its business, condition (financial or otherwise), operations, assets
or properties, taken as a whole; provided that a Material Adverse
Effect with respect to the Guarantor shall occur under this paragraph
(a) only if there has been a Material Adverse Effect on the Guarantor
and its Subsidiaries taken as a whole;
(b) the validity or enforceability of this Guarantee;
(c) the ability of the Guarantor to perform its obligations under this
Guarantee;
(d) the rights or remedies of the Guarantee Beneficiaries or any one or
more of them under this Guarantee; or
(e) the ability of the Guarantor to pay any amounts payable by it under
this Guarantee or under any other documents provided to or that the
Guarantor enters into with the Guaranteed Beneficiaries or any one or
more of them in connection with the Credit Agreement or this
Guarantee;
"Moody's" means Moody's Investors Services, Inc., and its successors;
"person" includes an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization, government or
any agency or instrumentality thereof, or any other entity;
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc., and its successors;
"Security Interest" means a mortgage, pledge, deposit by way of
security, charge, hypothec, assignment by way of security, security
interest, lien (whether statutory, equitable or at common law), title
retention agreement, lease with option to purchase, right of set-off
(if created for the purpose of directly or indirectly securing the
repayment of borrowed money), and any other interest in property or
assets, howsoever created or arising, that secures payment or
performance of an obligation, including a trust and statutory deemed
trust;
"Subsidiary" means:
(a) any corporation of which at least a majority of the
outstanding shares having by the terms thereof ordinary voting
power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, shares of
any other class or classes of such corporation might have
voting power by reason of the happening of any contingency,
unless the contingency has occurred and then only for as long
as it continues) is, at the time, directly or indirectly
beneficially owned by the Guarantor or one or more of its
Subsidiaries or by the Guarantor and one or more of its
Subsidiaries; and
(b) any partnership of which at least a majority of the
outstanding income interests or capital interests are at the
time directly or indirectly beneficially owned by the
Guarantor or one or more of its Subsidiaries or by the
Guarantor and one or more of its Subsidiaries;
"Taxes" shall have the meaning given to it in the Credit Agreement;
"United States Dollars" and "U.S. $" means the lawful money of the
United States of America; and
"Year 2000 Compliance" means a product is compliant if the product,
when used in accordance with its associated documentation, is capable
of processing, providing, and/or receiving data without material error
relating to date data which represents or references different
centuries or more than one century, provided all other products used
with the product properly exchange similarly accurate date data with
the product. "Year 2000 Compliant" shall have a corresponding meaning.
1.2 Headings and Guarantee References
(a) The division of this Guarantee into Articles, Sections,
Schedules, the inclusion of a table of contents and the
insertion of headings is for convenience of reference only and
shall not affect the construction or interpretation of this
Guarantee.
(b) The terms "this Guarantee", "hereof", "hereunder" and similar
expressions refer to this Guarantee and not to any particular
Article, Section, Schedule or other portion hereof, and
include any amendments or supplements hereto. Unless otherwise
stated, references herein to Articles, Sections and Schedules
are to Articles, Sections and Schedules of this Guarantee.
References to "the date hereof" or similar references shall
mean the date of this Guarantee.
1.3 Number; Person
Words importing the singular number only shall include the plural and
vice versa, words importing the masculine gender shall include the feminine and
neuter genders and vice versa.
1.4 Time; Including
(a) Unless otherwise stated, references to time shall mean local time in
Calgary, Alberta, Canada.
(b) The word "including" shall not be construed to limit or restrict the
generality of the matter that precedes it.
1.5 Legislation
All references herein to a statute include, unless otherwise stated,
regulations passed or in force pursuant thereto and any amendments to such
statute or regulations from time to time, and any legislation or regulations
substantially replacing the same or substantially replacing any specific
provision to which such reference is made.
1.6 Administrative Agent for Guarantee Beneficiaries
(a) Any action that may be taken, communication or demand given or remedy
exercised by the Guarantee Beneficiaries hereunder may be taken, given
or exercised by the Administrative Agent on their behalf, and any
payment required to be made by the Guarantor to the Guarantee
Beneficiaries hereunder shall be made to the Administrative Agent on
behalf of the Guarantee Beneficiaries.
(b) All documents, statements, certificates and other materials required
to be delivered by the Guarantor to the Administrative Agent hereunder
shall be delivered in a sufficient number of copies to allow the
Administrative Agent to deliver one such copy to each Guarantee
Beneficiary.
(c) A reference in this Guarantee to the "Guarantee Beneficiaries" shall
be a reference to the Guarantee Beneficiaries or any one or more of
them, as the case may be.
(d) The Guarantor shall be entitled to rely upon any certificate, notice
or other document (including any facsimile) or other advice, statement
or instruction provided to it by the Administrative Agent pursuant to
this Guarantee. Except with respect to Sections 3.5, 3.14, 7.2 and any
Lender's demand or enforcement of remedies hereunder (collectively,
the "Guarantee Beneficiary Actions") the Guarantor shall be entitled
to deal with the Administrative Agent with respect to all matters
under this Guarantee, without any obligation whatsoever to satisfy
itself as to the authority of the Administrative Agent to act on
behalf of the Guarantee Beneficiaries and without any liability
whatsoever to the Guarantee Beneficiaries for relying upon any
certificate, notice or other document or other advice, statement or
instruction provided to it by the Administrative Agent,
notwithstanding any lack of authority of the Administrative Agent to
provide the same.
Notwithstanding the foregoing the applicable Guarantee Beneficiary may
authorize the Guarantor to deal with the Administrative Agent with
respect to any Guarantee Beneficiary Action undertaken by that
Guarantee Beneficiary.
1.7 Accounting Principles
Wherever in this Guarantee reference is made to "GAAP", such reference
shall be deemed to be to the generally accepted accounting principles in the
United States of America from time to time approved by the American Institute of
Chartered Accountants, or any successor institute, applicable as at the date on
which the relevant determination or calculation is made or required to be made.
Where the character or amount of any asset or liability or item of revenue or
expense is required to be determined, or any consolidation or other accounting
computation is required to be made for the purpose of this Guarantee, such
determination or calculation shall, unless the context otherwise requires, be
made in accordance with GAAP applied on a consistent basis.
ARTICLE 2
NO COLLATERAL AGREEMENTS
------------------------
2.1 Acknowledgement
The Guarantor confirms that its obligations under this Guarantee are
not subject to any promise or condition affecting or limiting its liability, and
no statement, representation, collateral agreement or promise by the Guarantee
Beneficiaries or any of them or by any officer, employee or agent of any of them
forms any part of this Guarantee or has induced the making thereof, or shall be
deemed in any way to affect the Guarantor's liability hereunder. It is intended
that all conditions and limitations relating to this Guarantee are expressly set
out herein, failing which the Guarantor expressly waives reliance on any
conditions or limitations not set forth herein as a defence to or limitation of
its obligations hereunder.
2.2 Subsidiary Assets Not Charged
This Guarantee is an unsecured guarantee and does not create or grant
any charge on or security over any of the property and assets of the Guarantor
or any of its Subsidiaries, including its Subsidiaries, Brooklyn Union, Brooklyn
Union of Long Island and KeySpan Generation LLC (the "Utility Subsidiaries"). No
lien, levy, execution, seizure, attachment, garnishment or other encumbrance
whatsoever may be placed on or enforced against any of the property and assets
of the Utility Subsidiaries, and no obligation of the Borrower or the Guarantor
may be enforced against any of the Utility Subsidiaries, as a consequence of
this Guarantee or in connection with the enforcement hereof, notwithstanding any
Applicable Law, common law or equitable principle to the contrary, including any
bankruptcy law, principle of consolidation or otherwise whatsoever; provided
that nothing herein shall in any way restrict the Guarantee Beneficiaries from
enforcing any claim or judgment pursuant to this Guarantee against any assets of
the Guarantor, including against the shares or other securities of the Utility
Subsidiaries held by the Guarantor.
ARTICLE 3
GUARANTEE
---------
3.1 Guarantee
The Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to the Guarantee Beneficiaries the due and punctual payment and
discharge of all of the Guaranteed Obligations. The Guarantor covenants that the
Guaranteed Obligations will be duly and punctually paid and discharged in
accordance with the terms of the Credit Agreement, whether the same become due
on maturity, by mandatory prepayment, by demand, by acceleration or otherwise.
3.2 Continuing Guarantee
This Guarantee shall be a continuing guarantee, shall cover and secure
any ultimate balance of the Guaranteed Obligations owing to the Guarantee
Beneficiaries, and shall be operative and binding notwithstanding that at any
time or times the Guaranteed Obligations may be zero, or that any payments from
time to time may be made to the Guarantee Beneficiaries, or any settlements of
account effected, or any other thing whatsoever done, suffered or permitted, or
any other action short of actual payment of all the Guaranteed Obligations and
any other amounts payable hereunder.
3.3 Other Guarantors
(a) This Guarantee shall be operative and binding regardless of whether or
not any proposed guarantor or any other persons have executed or shall
execute a guarantee in respect of the Guaranteed Obligations or is or
are or shall become in any other way responsible to the Guarantee
Beneficiaries for or in respect of the Guaranteed Obligations or any
part thereof, and regardless of whether or not any other persons now
or hereafter liable to the Guarantee Beneficiaries for the Guaranteed
Obligations or any part thereof (whether under this Guarantee or
otherwise) shall cease to be so liable.
(b) The Guarantor's obligations hereunder shall be joint and several with
any other guarantor guaranteeing all or any part of the Guaranteed
Obligations.
3.4 Borrower
This Guarantee shall extend to the Borrower's obligations to the
Guarantee Beneficiaries under the Credit Agreement notwithstanding any change or
changes in the name, business, shareholders, directorate, powers, objects,
capital structure, organization or management of the Borrower, and
notwithstanding any reorganization of the Borrower or the amalgamation or other
merger or combination of the Borrower with another or others (including with the
Guarantor, in which case the obligations of the Guarantor under and in respect
of the Credit Agreement shall be direct), or the sale or disposal of any of the
Borrower's properties, business or undertaking in whole or in part to another or
others, or the amendment, surrender, forfeiture or termination of the Borrower's
certificate of incorporation, memorandum of association, articles of association
or by-laws or the receivership, dissolution, insolvency, winding-up,
arrangement, reorganization, bankruptcy or liquidation of or in respect of the
Borrower, and no such event shall lessen, release or discharge the obligations
of the Guarantor under this Guarantee.
3.5 Acknowledgement of Continued Liability
The Guarantor shall, from time to time, forthwith on the reasonable
request of any Guarantee Beneficiary:
(a) deliver to such Guarantee Beneficiary suitable acknowledgements of the
Guarantor's continued liability hereunder in such form as Lenders'
Counsel may advise; and
(b) prevent any action brought against the Guarantor hereunder from being
barred by any statute of limitations now or hereafter in force in the
province of Alberta, Canada, the state of New York, United States of
America and elsewhere, and in the event of the failure of the
Guarantor to do so, the Guarantor hereby irrevocably appoints each
Guarantee Beneficiary the attorney in fact and agent of the Guarantor
to make, execute and deliver such written acknowledgements or other
instruments as may from time to time become necessary or advisable to
fully maintain and keep in force the liability of the Guarantor
hereunder.
3.6 Payment on Demand; Interest
(a) At any time when an Event of Default is continuing, the Guarantee
Beneficiaries shall be entitled to immediate payment of the Guaranteed
Obligations by the Guarantor on written demand for payment made by the
Administrative Agent on the Guarantor.
(b) If and whenever the Administrative Agent makes demand for payment upon
the Guarantor as provided in this Section, the Guarantor shall be
liable to the Guarantee Beneficiaries for the amount demanded directly
as principal, and not just as surety, and will not plead or assert to
the contrary in any proceeding taken by or on behalf of the Guarantee
Beneficiaries in enforcing this Guarantee.
(c) The Guarantor shall pay interest on the amount of the Guaranteed
Obligations for which demand shall have been made hereunder (but
without duplication of interest payable under the Credit Agreement),
computed from and including the date of the applicable demand until
payment in full, both before and after default, maturity and judgment,
at the rate or rates provided in the Credit Agreement in respect of
the obligation so demanded, calculated and compounded in the manner
set out in the Credit Agreement.
(d) All amounts payable by the Guarantor under this Guarantee shall be
paid without set-off or counterclaim and without any deduction
whatsoever.
(e) The Guarantor acknowledges that the Guaranteed Obligations may be
payable either in United States Dollars or Canadian Dollars or partly
in one currency and partly in the other, and, without limiting the
effect of Section 8.3, the Guarantor agrees to make all required
payments hereunder in the currency or currencies in which such
Guaranteed Obligations are owing by the Borrower.
3.7 Statement of Obligations
Any account settled between the Administrative Agent and the Borrower
as to the amount of the Guaranteed Obligations shall be conclusive evidence
thereof. All right to question in any way the Guarantee Beneficiaries' present
or future method of dealing with the Borrower, or with any persons now or
hereafter liable to the Guarantee Beneficiaries for the Guaranteed Obligations
or any part thereof, or with any security held by the Guarantee Beneficiaries,
or with any property covered thereby, is hereby waived. The Guarantor waives any
right it may otherwise have to be kept appraised, advised or informed by the
Guarantee Beneficiaries (or any of them) of the activities, or of the position
(financial or otherwise), of the Borrower. The Guarantor hereby renounces all
benefits of discussion and division.
3.8 Not Bound to Exhaust Recourse
The Guarantee Beneficiaries shall not be bound to exhaust their
recourse against the Borrower or to pursue any rights or remedies they may have
against the Borrower or any other persons, or to pursue any rights or remedies
under any security, or to value any security, or to make any demand on or
present any note or security to the Borrower or any other person, before
demanding or being entitled to payment from the Guarantor hereunder.
3.9 Corporate Authority
The Guarantee Beneficiaries shall not be concerned to see or enquire
into the status, powers, capacity, authority or ability of the Borrower or any
of its directors, officers or agents acting or purporting to act on its behalf,
and all moneys, advances, renewals and credits in fact borrowed or obtained in
the professed exercise of such powers shall be deemed to form part of the
Guaranteed Obligations even if irregularly, fraudulently, defectively or
informally effected, or in excess of the powers or authority of the Borrower or
any of its directors, officers or agents, and notwithstanding any incapacity or
disability of any thereof, and further notwithstanding any actual or
constructive notice of the Administrative Agent or any of the Guarantee
Beneficiaries of the authority or lack of authority of the Borrower or its
directors, officers, employees or agents.
3.10 Reinstatement
This Guarantee shall continue to be effective or be reinstated, as the
case may be, if at any time payment of the Guaranteed Obligations or any part
thereof is rescinded or must otherwise be restored or returned by the Guarantee
Beneficiaries or any of them upon the insolvency, bankruptcy or reorganization
of the Borrower or the Guarantor or for any other reason whatsoever, all as
though such payment had not been made.
3.11 Subrogation and Indemnity
The Guarantor shall not exercise any rights which it may have acquired
by way of subrogation, indemnity or contribution under this Guarantee (by virtue
of any payment being made by it hereunder, or any liability of it to make
payment hereunder, or otherwise) or exercise any right of contribution against
any other guarantor, unless and until all Guaranteed Obligations have been
finally paid and performed in full. If any amount shall be paid (including
through any exercise of set-off rights) to the Guarantor arising out of or based
upon such right of subrogation, indemnity or contribution at a time when the
Guaranteed Obligations have not been finally paid and performed in full, such
amount shall be deemed to have been paid to the Guarantor for the benefit of,
and held by the Guarantor in trust for, the Guarantee Beneficiaries, and shall
forthwith be paid to the Guarantee Beneficiaries, to be credited and applied to
the Guaranteed Obligations, whether matured or unmatured.
3.12 Postponement of Claims
All indebtedness, obligations and liabilities, present and future,
direct or indirect, of the Borrower to the Guarantor (the "Intercorporate
Debt"), together with each and every security therefor, shall be and is hereby
subordinated and postponed to the prior payment in full of all of the Guaranteed
Obligations, and all monies received by the Guarantor on account of the
principal amount of any Intercorporate Debt, and all monies received by the
Guarantor on account of interest or other amounts paid or payable in respect of
any Intercorporate Debt at any time following the occurrence and during the
continuance of an Event of Default, shall be received and held by the Guarantor
in trust for the Guarantee Beneficiaries, and forthwith upon demand by the
Administrative Agent shall be paid over to the Guarantee Beneficiaries and
applied to the Guaranteed Obligations until the Guaranteed Obligations are
finally paid and satisfied in full, all without prejudice to, and without in any
way limiting or lessening, the liability of the Guarantor to the Guarantee
Beneficiaries under this Guarantee.
3.13 Filing of Claims in Insolvency
Notwithstanding Section 3.12, on request by the Administrative Agent,
the Guarantor will file, enforce and collect all claims against the Borrower in
any receivership, bankruptcy or other proceedings in which the filing of claims
is contemplated by law in respect of any indebtedness of the Borrower to the
Guarantor, and will hold in trust and assign to the Administrative Agent, on
behalf of the Guarantee Beneficiaries, all of the Guarantor's rights thereunder.
If the Guarantor fails to file, enforce or collect any such claim:
(a) the Administrative Agent, as attorney in fact and agent of the
Guarantor, is hereby authorized to do so in the name of the Guarantor
or, in its discretion, to assign the claim to the Administrative Agent
on behalf of the Guarantee Beneficiaries and to cause a proof of claim
to be filed in the Guarantee Beneficiaries' name or the name of the
Administrative Agent; and
(b) in all such cases, the person or persons authorized to pay such claim
shall be fully authorized and entitled to pay to the Guarantee
Beneficiaries or the Administrative Agent the full amount payable on
the claim in the proceeding before making any payment to the
Guarantor, and to the extent necessary to give effect hereto, the
Guarantor hereby assigns to the Administrative Agent on behalf of the
Guarantee Beneficiaries all of its rights to any payments or
distributions to which the Guarantor otherwise would be entitled in
such proceeding.
3.14 Appropriation
The Guarantee Beneficiaries shall be at liberty (without in any way
prejudicing or affecting their rights hereunder) to appropriate any payment made
or monies received to any portion of the Guaranteed Obligations, whether then
due or to become due, and from time to time to revoke or alter any such
appropriation, all as the Guarantee Beneficiaries see fit; provided that any
such payment or monies shall first be applied against Guaranteed Obligations
which are due before being appropriated to Guaranteed Obligations which are not
due.
3.15 Interest Act
The Guarantor hereby acknowledges that certain of the rates of interest
applicable to the Guaranteed Obligations or any other amounts payable by the
Guarantor hereunder may be computed on the basis of a year of 360 days or 365
days, as the case may be, and paid for the actual number of days elapsed. For
purposes of the Interest Act (Canada), whenever any interest is calculated using
a rate based on a year of 360 days or 365 days, as the case may be, such rate,
determined pursuant to such calculation, when expressed as an annual rate, is
equivalent to the amount obtained when the product of:
(a) the applicable rate based on a year of 360 days or 365 days, as the
case may be; and
(b) the actual number of days in the calendar year in which the period for
such interest is payable (or compounded) ends;
is divided by 360 or 365, as the case may be.
ARTICLE 4
OBLIGATIONS NOT RELEASED
4.1 Obligations Absolute
The obligations of the Guarantor hereunder shall be absolute and
unconditional, and shall not be released, discharged or in any way lessened,
abated or reduced by:
(a) the Guarantee Beneficiaries agreeing to any renewal, extension,
change, variation, alteration, waiver or modification in or in respect
of the Guaranteed Obligations, the Credit Agreement or any security,
or anything done, suffered or permitted by the Guarantee Beneficiaries
in relation to the Guaranteed Obligations, the Credit Agreement, or
any security, including any amendment or change in the manner, time,
place or calculation of payment of the Guaranteed Obligations
(including increases or decreases in interest rates);
(b) extensions of time or any indulgence being given to the Borrower or
any other person by the Guarantee Beneficiaries,
(c) any contest by the Borrower or any other person as to the validity or
enforceability of any terms of the Credit Agreement or any security
provided in respect of the Credit Agreement or of the amount of the
Guaranteed Obligations;
(d) any defence, counter-claim or right of set-off available to the
Borrower or the Guarantor, whether in connection with this Guarantee
or the Credit Agreement or any unrelated transaction;
(e) the merging of the Credit Agreement, any security or the Guaranteed
Obligations or other obligations of the Borrower in, or any alteration
thereof by virtue of, any subsequent agreement or amending agreement;
(f) the Guarantee Beneficiaries agreeing to any compromise, proposal,
arrangement or plan of reorganization affecting the Borrower or any
other guarantor;
(g) the Guarantee Beneficiaries agreeing to the release at any time or
from time to time of any other guarantor or other person liable
directly or as surety or otherwise for the Guaranteed Obligations or
any part thereof, or the addition of any guarantor, endorser or surety
from time to time;
(h) the Guarantee Beneficiaries failing or omitting to take, or refraining
from taking, any action to enforce the Credit Agreement, or any
security or any rights or remedies thereunder, or proving the claim or
part of the claim of the Guarantee Beneficiaries in any liquidation,
bankruptcy, winding-up, compromise, receivership, arrangement or other
proceeding relating to the Borrower or any other person;
(i) the lack of validity or enforceability (in whole or in part) for any
reason of, or any informality, defect or irregularity in or omission
from, the Guaranteed Obligations, the Credit Agreement or any
security, or any impossibility, impracticability, frustration,
illegality, force majeure, act of government or change in Applicable
Laws, or the loans, advances or other obligations constituting the
Guaranteed Obligations having been made in excess of the power of the
Guarantee Beneficiaries or any of them or in contravention of any of
their governing statutes or constating documents;
(j) any invalidity, irregularity or unenforceability of any term,
condition, covenant or obligation in or arising under, or pursuant to,
this Guarantee or the Credit Agreement or any other guarantee held by
the Administrative Agent or the Lenders for the Guaranteed
Obligations;
(k) any common law or statute bar on enforcement of the whole or any part
of the Guaranteed Obligations, the Credit Agreement or any security,
or any stay of proceedings in respect of the Borrower or any other
direct or indirect guarantor of the Guaranteed Obligations;
(l) any defence that the Guarantor might have based on a failure to have
been or to have remained informed of the condition (financial or
otherwise) of the Borrower or any other guarantor, or of any
circumstances affecting the ability of the Borrower to perform under
the Credit Agreement;
(m) any incapacity, disability or lack or limitation of status or power of
the Borrower, the Guarantor or any other guarantor of the Guaranteed
Obligations;
(n) any notice by the Guarantor purporting in any way to limit its
liability hereunder in respect of any Guaranteed Obligations, whether
arising prior or subsequent to such notice;
(o) the bankruptcy, insolvency, liquidation, dissolution or winding up of
the Borrower, the Guarantor or any other guarantor of the Guaranteed
Obligations;
(p) any Applicable Law now or hereafter in effect in any jurisdiction
affecting any of the Guaranteed Obligations or the rights of the
Administrative Agent or the Lenders with respect thereto; or
(q) any other event or circumstance which might otherwise constitute a
legal or equitable defence available to, or discharge of, the
Guarantor, the Borrower or any other person of or in respect of the
Guaranteed Obligations;
in each case regardless of how substantial or material such event or
circumstance mentioned above may be, or however prejudicial it may be to the
Guarantor, and without any requirement for notice to the Guarantor of any of the
foregoing.
4.2 Security provided by the Borrower
(a) Without limiting the generality of Section 4.1, the Guarantee
Beneficiaries shall, subject to the provisions of the Credit
Agreement, be at liberty (without in any way prejudicing or affecting
their rights hereunder) from time to time to receive any security for
the Guaranteed Obligations or any part thereof as they may deem
proper, and may give-up, vary, exchange, release, discharge, waive,
postpone, subordinate, abandon or otherwise deal with, or fail to deal
with, security or any part thereof or property covered thereby or
allow the Borrower or others to deal with the property covered
thereby, all as the Guarantee Beneficiaries may consider expedient or
appropriate; provided that nothing in this Guarantee shall obligate
the Borrower or the Guarantor to provide any such security.
(b) The Guarantee Beneficiaries may, without releasing in whole or in part
the Guarantor, abstain from perfecting or registering, or from
continuing any such perfection or registration, or from taking
advantage of, any security or the provisions of any Applicable Laws
relating thereto.
(c) The Guarantee Beneficiaries may realize or refrain from realizing upon
any security when, and in such manner as, the Guarantee Beneficiaries
deem expedient, and the Guarantor waives any right it may have to
receive notice of any actions or proceedings taken in respect thereof.
(d) Neither:
(i) any loss of or in respect of any security or the property covered
thereby, whether occasioned by the negligence or wilful
misconduct of the Guarantee Beneficiaries or otherwise (including
improvident or improper handling, collection or realization
thereof or thereunder); nor
(ii) the failure by the Guarantee Beneficiaries, in whole or in part,
to put or keep themselves in a position to deliver the security
or any of it to the Guarantor on payment of the Guaranteed
Obligations;
shall in any way limit, lessen or release or otherwise abate the
liability of the Guarantor hereunder.
(e) The Guarantor shall not have any recourse against the Administrative
Agent or the Lenders for any invalidity, non-perfection or
unenforceability of any security held by the Administrative Agent or
the Lenders in respect of the Guaranteed Obligations or any
irregularity or defect in the manner or procedure by which the
Administrative Agent or the Lenders realize on such security, whether
occasioned by the fault of the Administrative Agent or the Lenders or
otherwise.
4.3 Dealing with the Borrower
It is the intent of the Guarantor and the Guarantee Beneficiaries that
the Guarantee Beneficiaries may discontinue, reduce, increase or otherwise vary
the Guaranteed Obligations and otherwise deal, in the broadest sense of that
word, with the Borrower and others, including any other guarantor, as the
Guarantee Beneficiaries may see fit, all without prejudice to or in any way
limiting or lessening the Guarantor's liability hereunder and without necessity
for obtaining the consent of, or giving notice to, the Guarantor.
4.4 Extensions
Without limiting the generality of the foregoing Sections in this
Article, the Guarantor hereby specifically authorizes and consents to any
requests now or hereafter made by the Borrower from time to time for any
extension of the revolving period or any maturity date under the Credit
Agreement, and to the granting by the Guarantee Beneficiaries of any such
extension from time to time, regardless of whether or not the Guarantor signs or
otherwise consents to any particular request. For certainty, but without
limitation, all amounts advanced and otherwise owing during any such extended
period, and all interest thereon and fees, expenses and indemnities related
thereto, shall form part of the Guaranteed Obligations.
4.5 Increased Commitments
Notwithstanding anything to the contrary contained herein if and
whenever the Guarantee Beneficiaries and the Borrower amend or restate the
Credit Agreement by agreement in writing to increase the aggregate principal
amount of the Commitments, the Guarantor shall not be liable hereunder to pay
any such aggregate principal amount of the Commitments in excess of Cdn.
$200,000,000 (or the Equivalent Amount thereof) unless the Guarantor has agreed
in writing with the Guarantee Beneficiaries to be liable for such excess
aggregate principal amount; provided that the foregoing provisions of this
Section shall not relieve the Guarantor of any other obligations under this
Guarantee all of which other obligations shall continue in full force and effect
and shall be binding on the Guarantor.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Representations and Warranties By the Guarantor
The Guarantor represents and warrants to the Guarantee Beneficiaries as
follows, and acknowledges that the Guarantee Beneficiaries are relying on such
representations and warranties in entering into the Credit Agreement and making
the Credit Facility available to the Borrower:
(a) Incorporation and Registration: it is:
(i) duly organized and validly existing under the laws of the State
of New York and is a valid and subsisting corporation in good
standing under the laws of the State of New York;
(ii) duly licensed, registered or qualified to carry on business in
the State of New York, and in all other jurisdictions where the
character of its property owned or leased or the nature of the
activities conducted by it makes such licensing, registration or
qualification necessary and where a failure to so register would
have a Material Adverse Effect in respect of the Guarantor;
(iii)a public corporation with its common shares listed and posted
for trading on the New York Stock Exchange;
(b) Corporate Power and Capacity: it has the full corporate power,
capacity and authority to own or lease its properties, to carry on its
businesses as presently conducted, to guarantee obligations and to
perform all of its obligations hereunder. Without limiting the
generality of the foregoing, there are no restrictions, limitations,
conditions or constraints of any nature whatsoever (whether by
Applicable Law, contract or otherwise) in respect of or adversely
affecting the power, capacity and authority of the Guarantor to
execute, deliver and perform all of its obligations under this
Guarantee;
(c) Principal Business; Licenses and Permits: it has obtained and
continues to hold all licences, permits, franchises, consents and
other authorizations materially necessary to its ownership of its
material property and to the conduct of its material business;
(d) Authorizations: it is duly authorized to guarantee the Guaranteed
Obligations and to execute, deliver and perform its obligations under
and in respect of this Guarantee, and all corporate steps and
proceedings necessary for the due execution and delivery of this
Guarantee by it and the performance of its obligations hereunder have
been taken;
(e) Validity and Enforceability: this Guarantee has been duly executed and
delivered by it and constitutes a legal, valid and binding obligation
of it, enforceable by the Guarantee Beneficiaries in accordance with
its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other similar
Applicable Laws affecting creditor's rights generally from time to
time in effect, and to equitable principles, which may limit the
availability of certain remedies, including the remedy of specific
performance;
(f) Non-Violation of Instruments: the execution, delivery and performance
by it of this Guarantee does not and will not: (i) contravene its
charter or by-laws; (ii) contravene any Applicable Laws (including any
financial assistance prohibitions of Applicable Laws); (iii)
contravene any instrument, indenture, contract or other agreement or
commitment to which it or its assets are bound, or require any consent
thereunder, except to the extent that if any such contravention
occurred or if such consent was not received that in either case there
would not be a Material Adverse Effect on the Guarantor; or (iv)
contravene any resolution of its directors or officers or any
committee of either;
(g) Approvals and Consents: no consent, authorization, approval or other
action by, and no notice to or filing or registration with, any
Governmental Authority is required to be obtained or made by or on
behalf of the Guarantor for the due execution, delivery and
performance by it of this Guarantee or to ensure the validity or
enforceability thereof against it, other than those that have been
made or obtained;
(h) No Actions: there are no actions, suits, claims or proceedings
(including counterclaims or third party proceedings) existing or, to
its knowledge, threatened against it or its property or its
Subsidiaries or their properties before any Governmental Authority
having jurisdiction in the circumstances in respect of which there is
a reasonable possibility of a determination adverse to the Guarantor
or any of its Subsidiaries which would be reasonably likely to have a
Material Adverse Effect in respect of the Guarantor, except as set
forth on Schedule 1 hereto;
(i) Title to Shares: it has indirect ownership of 100% of the issued and
outstanding shares of every class of the capital stock of the
Borrower, free and clear of any Security Interests or adverse claims
whatsoever;
(j) Pari Passu: all of its payment obligations under this Guarantee rank
at least pari passu in priority of payment with its other Debt and in
priority to all of its indebtedness for borrowed money to any of its
Affiliates;
(k) Financial Information: its audited consolidated financial statements,
(including its consolidated balance sheet, its consolidated statement
of income and its consolidated statement of cash flows) for the period
ending December 31, 1998 are true and correct in all material respects
as at the date thereof, have (in respect of financial data) been
prepared in accordance with GAAP, and fairly present its financial
position and condition as at the date thereof;
(l) Financial Condition: since December 31, 1998 nothing has occurred
(whether external or internal to it) which has had, or would be
reasonably likely to have, a Material Adverse Effect in respect of the
Guarantor; and
(m) Ratings of Debt: its Debt is rated A3 by Moody's and A- by S&P as of
the date hereof.
5.2 General
(a) The Guarantor acknowledges that the Guarantee Beneficiaries have
entered into the Credit Agreement and agreed to extend credit to the
Borrower in full reliance upon the foregoing representations and
warranties. Such representations and warranties shall survive until
the Credit Agreement and this Guarantee have been terminated by the
Guarantee Beneficiaries. Any investigations made at any time by or on
behalf of any of or all of the Guarantee Beneficiaries shall not
diminish in any respect whatsoever any Guarantee Beneficiary's right
to rely on such representations and warranties.
(b) All statements certified as true in any certificates or other
documents and all information contained in any financial statements
delivered by or on behalf of the Guarantor under or pursuant to this
Guarantee shall constitute representations and warranties made by the
Guarantor to the Guarantee Beneficiaries under this Guarantee.
ARTICLE 6
COVENANTS
---------
6.1 Covenants of the Guarantor
The Guarantor covenants and agrees with the Guarantee Beneficiaries
that it shall:
(a) Maintain Corporate Existence: except as permitted by paragraph (d),
maintain and preserve its corporate existence and organization in good
standing in each jurisdiction in which it carries on a material
business or owns material property, and make all corporate and other
filings necessary therefore, and obtain and maintain all licences,
permits, franchises, consents and other authorizations materially
necessary to the ownership of its material property and to the conduct
of its material business in each such jurisdiction;
(b) Conduct Business: carry on and continuously conduct its businesses,
activities and operations in an efficient, diligent and businesslike
manner and in accordance with good industry practices unless failure
to do so would not have a Material Adverse Effect on the Guarantor;
(c) Comply with Laws: comply in all material respects with Applicable
Laws, including Applicable Environmental Laws, where failure to do so
would be likely to have a Material Adverse Effect in respect of the
Guarantor;
(d) Reorganizations: not become a party to any transaction whereby all or
any substantial part of its property would become the property of any
other person, whether by way of reconstruction, reorganization,
arrangement, recapitalization, consolidation, dissolution, winding-up,
liquidation, amalgamation, merger, combination, transfer, sale, lease
or otherwise, unless:
(i) the successor or acquiror resulting from such transaction
("Successor Corporation") is (or upon consummation of the
transaction will be) a corporation or other legal entity
incorporated, continued or amalgamated and validly subsisting
under the laws of the United States of America (or one of its
States), the laws of Canada (or one of its Provinces) or the laws
of a member state of the European Union;
(ii) the Successor Corporation has executed, prior to or
contemporaneously with the consummation of such transaction, such
instruments, if any, as are, in the opinion of Lenders' Counsel
(acting reasonably), necessary or advisable to evidence the
obligation of the Successor Corporation to observe and perform
all the Guarantor's obligations under this Guarantee;
(iii)no default has occurred and is continuing under this Guarantee
immediately prior to such transaction or will occur or would be
continuing under this Guarantee immediately after such
transaction;
(iv) such transaction does not result in a Material Adverse Effect in
respect of the Guarantor, or adversely affect the validity or
enforceability of this Guarantee in any manner; and
(v) the Debt of the Successor Corporation has been assigned a rating
of at least Baa3 by Moody's (or an equivalent rating by a
substitute rating entity which are both acceptable to the
Guarantee Beneficiaries) and BBB- by S&P (or an equivalent rating
by a substitute rating entity which are both acceptable to the
Guarantee Beneficiaries);
(e) Annual Financial Statements: furnish to the Administrative Agent,
within 120 days after the end of each of its Fiscal Years, audited
annual financial statements of it (including, without limitation, its
consolidated balance sheet, its consolidated statement of income and
its consolidated statement of cash flows), prepared in accordance with
GAAP and setting forth in each case comparative figures from its
preceding fiscal year, together with a report of auditors of
recognized national standing thereon;
(f) Quarterly Financial Statements: furnish to the Administrative Agent,
within 60 days after the end of each of its first, second and third
Fiscal Quarters and within 120 days after the end of its fourth Fiscal
Quarter, of each of its Fiscal Years, unaudited financial statements
of it for each such quarter (including, without limitation, its
consolidated balance sheet, its consolidated statement of income and
its consolidated statement of cash flows) prepared in accordance with
GAAP, setting forth in each case comparative figures for the
corresponding period in the preceding fiscal year;
(g) Other Financial Reports: promptly furnish to the Administrative Agent
any financial or operating statements or reports relating to its
business or affairs as the Administrative Agent may reasonably request
from time to time in writing;
(h) Maintain Property: maintain, protect and preserve its property and
assets in accordance with good business practice except to the extent
that failure to do so would not have a Material Adverse Effect on the
Guarantor;
(i) Notices: promptly given written notice to the Administrative Agent of:
(i) Defaults: any breach of a representation, warranty or any
covenant, or other default, under this Guarantee, promptly (but
in any event with 7 Banking Days) after it becomes aware of the
same;
(ii) Financial Reporting: any material amendment to its method of
financial reporting, together with full particulars thereof, the
reasons therefor and effect thereof;
(iii)Actions Against: the commencement of, or any new development in,
any action, suit or proceeding against it before any Governmental
Authority which individually or together with any such other
actions, suits or proceedings against it could reasonably be
expected to have a Material Adverse Effect;
(iv) Amendments to Charter or By-laws: any material amendment of its
charter or by-laws, such notice to include a copy of the
amendment;
(v) Credit Agreement Defaults: any material default by it under any
agreement or agreements creating, evidencing or guaranteeing
indebtedness for borrowed money in an aggregate amount in excess
of U.S.$50,000,000 (or the Equivalent Amount in other
currencies), or any default or event which could entitle the
lender or holder thereof to accelerate the payment of such
indebtedness in excess of such aggregate amount; and
(vi) Rating Changes: any change in the rating of its Debt by Moody's
or S&P, or the failure of either Moody's or S&P to rate its Debt;
(j) Maintain Ownership of Borrower: maintain direct or indirect ownership
of all of the issued and outstanding shares of all classes of the
capital stock of the Borrower;
(k) Restriction on Disposition of Assets: not, in any Fiscal Year, sell or
dispose of (other than in connection with a transaction permitted by,
and undertaken in accordance with the provisions of, Section 6.1(d))
any substantial part of its property or assets; provided that the
foregoing shall not prohibit any such sale or disposition which,
together with all other such sales or dispositions in any Fiscal Year,
could not reasonably be expected to have a Material Adverse Effect;
and provided further that in any event, the Guarantor shall at all
times, both before and after any such sale or disposition, continue to
have a Consolidated Tangible Net Worth equal of at least
U.S.$1,600,000,000;
(l) Subordination: ensure that payment of all long term debt for borrowed
money (including any current portion of that long term debt) owed by
the Guarantor to any Affiliate of the Guarantor is postponed and
subordinated in right of payment to all amounts payable by the
Guarantor to the Guarantee Beneficiaries under this Guarantee;
(m) Guaranteed Obligations Pari Passu: ensure that the Guaranteed
Obligations rank at least pari passu in priority of payment with all
other long term debt for borrowed money of the Guarantor;
(n) Maintenance of Ratings: cause its Debt to continue to be assigned a
rating by each of Moody's and S&P;
(o) Remain Publicly Traded: cause its common stock or other equity
securities to continue to be listed and posted for trading on the New
York Stock Exchange;
(p) Pay all Amounts: punctually pay all amounts payable by it pursuant to
this Guarantee; and
(q) Year 2000 Compliance: take all reasonable commercial efforts as part
of its Year 2000 Compliance program, to ensure that its material
mission-critical computer systems and programs are Year 2000 Compliant
as soon as practicable and, in any event before December 31, 1999.
ARTICLE 7
EXPENSES AND INDEMNITY
----------------------
7.1 Expenses
The Guarantor shall pay to the Guarantee Beneficiaries all reasonable
out-of-pocket costs and expenses, including all reasonable legal fees (on a
solicitor and his own client basis) and other expenses incurred by the Guarantee
Beneficiaries from time to time in the enforcement, realization and collection
of or in respect of this Guarantee. All such amounts shall be payable by the
Guarantor on demand, shall bear interest at a rate per annum equal to the
Canadian Prime Rate plus 2% per annum, calculated from the date incurred by the
Guarantee Beneficiaries to the date paid by the Guarantor, compounded monthly on
the last day of each month, both before and after default, maturity and
judgment.
7.2 Indemnity
The Guarantor shall indemnify the Guarantee Beneficiaries and hold them
harmless against all losses, costs, expenses, liabilities, claims or damages
(collectively, the "Claims") incurred by the Guarantee Beneficiaries as a result
of:
(a) any representation or warranty made herein by the Guarantor being
incorrect at the time it was made;
(b) a default by the Guarantor in the payment of any Guaranteed
Obligations;
(c) the failure by the Guarantor to comply with any of its covenants or
other obligations hereunder; or
(d) non-compliance by the Guarantor with Applicable Environmental Laws;
provided that this indemnity shall not apply in respect of any Claims which are
caused by the gross negligence or wilful misconduct of the Guarantee Beneficiary
claiming to be indemnified.
Without limiting the generality of the foregoing, the foregoing
indemnities shall extend to:
(i) reasonable legal fees (on a solicitor and his own client basis),
including the costs of defending and/or counterclaiming or
claiming over against third parties in respect of any action or
matter; and
(ii) any amounts payable arising out of a settlement of any action
brought against the Guarantee Beneficiaries with or without the
consent of the Guarantor.
The foregoing indemnities shall also extend to the officers, directors,
employees, agents, shareholders and assignees of the Guarantee Beneficiaries,
and the Guarantee Beneficiaries will hold the benefit of the foregoing
indemnities in trust for such indemnified parties to the extent necessary to
give effect hereto. A certificate of a Guarantee Beneficiary (accompanied by
reasonably detailed particulars) as to the amount of any such loss or expense
shall be prima facie proof of the amount thereof. The amount required to be paid
by the Guarantor hereunder shall be payable by the Guarantor on demand, and
shall bear interest at Canadian Prime Rate plus 2% per annum, calculated from
the date any indemnified amount is paid by any one or more Guarantee
Beneficiaries to the date paid by the Guarantor, both before and after default,
maturity and judgment. The undertakings and indemnities set out in this Section
shall survive the payment and satisfaction of the Guaranteed Obligations and the
termination of the Credit Agreement and this Guarantee.
ARTICLE 8
GENERAL
-------
8.1 Notice
Any notice, communication or demand to be made or given hereunder shall
be in writing and may be made or given by personal delivery or by telecopy or
other electronic means of communication addressed as follows:
To the Guarantor:
KeySpan Corporation
1 Metro Tech Centre
Brooklyn, New York
11201
Attention: Treasurer
Telecopier No.: (718) 403-6421
To the Administrative Agent and Guarantee Beneficiaries:
Royal Bank of Canada
Global Syndications - Canada
12th Floor, South Tower
Royal Bank Plaza, 200 Bay Street
Toronto, Ontario
M5J 2J2
Attention: Manager, Agency
Telecopier No.: (416) 974-2407
or such other address or telecopy number as any party may from time to time
notify the other in accordance with this Section. Any notice, communication or
demand made or given by personal delivery during usual business hours at the
place of receipt on a Banking Day shall conclusively be deemed to have been
given on the day of actual delivery thereof. Any notice, communication or demand
made or given by personal delivery or by telecopier or other electronic means of
communication after normal business hours at the place of receipt or otherwise
than on a Banking Day shall be conclusively deemed to have been made or given at
9:00 a.m. on the Banking Day following actual delivery or transmittal, as the
case may be.
8.2 Governing Law and Jurisdiction
(a) This Guarantee and any other documents delivered hereunder shall be
governed by and interpreted in accordance with the laws of Alberta and
the laws of Canada applicable therein, and shall in all respects be
treated as Alberta contracts.
(b) The Guarantor hereby (i) irrevocably submits to the jurisdiction of
the courts of the Province of Alberta over any suit, action or
proceeding arising out of or relating to this Guarantee; (ii)
irrevocably agrees that all claims in respect of any suit; action or
proceeding may be heard and determined in such courts; (iii)
irrevocably waives, to the fullest extent permitted by law, any
objection which it may have or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in such courts
and any claim that any such suit, action or proceeding brought in such
courts has been brought in an inconvenient forum; and (iv) irrevocably
appoints Macleod Dixon (the "Process Agent"), with an office at the
date hereof at 3700, 400 - 3rd Avenue S.W., Calgary, Alberta, T2P 4H2,
as its authorized agent to accept and acknowledge service of any and
all process which may be served in any suit, action or proceeding, and
upon which such process may be served. Service of all process which
may be served in any suit, action or proceeding on the Guarantor may
be made by delivering a copy of such process to the Process Agent at
the Process Agent's above address, and the Guarantor hereby
irrevocably authorizes and directs the Process Agent to receive such
service on its behalf. Notwithstanding the foregoing the Guarantor may
from time to time request by notice in writing to the Administrative
Agent that the person designated as Process Agent and/or the address
of the Process Agent be changed and if the Administrative Agent agrees
to that change "Process Agent" as used herein shall mean that the new
person designated as Process Agent or if applicable, the new address
of the Process Agent as agreed by the Administrative Agent. The
Guarantor agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in any other manner
provided by law. Nothing in this section shall affect the right of the
Administrative Agent and the Lenders to serve process in any manner
permitted by law, or limit the rights of the Administrative Agent and
the Lenders to bring proceedings against the Guarantor in the courts
of any other jurisdiction.
8.3 Judgment Currency
(a) If, for the purpose of obtaining or enforcing judgment against the
Guarantor in any court in any jurisdiction, it becomes necessary to
convert into any other currency (such other currency being hereinafter
in this Section 8.3 referred to as the "Judgment Currency") an amount
due in Canadian Dollars or United States Dollars under this Guarantee
(including a conversion of United States Dollars to Canadian Dollars),
the conversion shall be made at the rate of exchange prevailing on the
Banking Day immediately preceding:
(i) the date of actual payment of the amount due, in the case of any
proceeding in the courts of any jurisdiction that will give
effect to such conversion being made on such date; or
(ii) the date on which the judgment is given, in the case of any
proceeding in the courts of any other jurisdiction;
(the date as of which such conversion is made pursuant to this Section
8.3 being hereinafter in this Section 8.3 referred to as the "Judgment
Conversion Date").
(b) If, in the case of any proceeding in the court of any jurisdiction
referred to in Section 8.3, there is a change in the rate of exchange
prevailing between the Judgment Conversion Date and the date of actual
payment of the amount due, the Guarantor shall pay such additional
amount (if any) as may be necessary to ensure that the amount paid in
the Judgment Currency, when converted at the rate of exchange
prevailing on the date of payment, will produce the amount of Canadian
Dollars or United States Dollars, as the case may be, which could have
been purchased with the amount of Judgment Currency stipulated in the
judgment or judicial order at the rate of exchange prevailing on the
Judgment Conversion Date.
(c) Any amount due from the Guarantor under the provisions of Section 8.3
shall be due as a separate debt and shall not be affected by or merged
into any judgment being obtained for any other amounts due under or in
respect of this Guarantee.
(d) The term "rate of exchange" in this Section 8.3 means the rate of
exchange at which the Administrative Agent is able, on the relevant
date, to purchase the currency converted for the Judgment Currency.
8.4 Payments Free and Clear of Taxes
(a) All payments to the Guarantee Beneficiaries by the Guarantor under
this Guarantee shall be made free and clear of, and without deduction
or withholding for, any and all Taxes imposed by any Governmental
Authority, unless such Taxes are required by Applicable Law to be
deducted or withheld. If the Guarantor shall be required by Applicable
Law to deduct or withhold any such Taxes from or in respect of any
amount payable hereunder, then (i) the amount payable under this
Guarantee shall be increased (and for greater certainty, in the case
of interest, the amount of interest shall be increased) as may be
necessary so that, after making all required deductions or
withholdings (including deductions or withholdings applicable to any
additional amounts paid under this Section 8.4), the Guarantee
Beneficiaries receive an amount equal to the amount they would have
received if no such deduction or withholding had been made, (ii) the
Guarantor shall make such deductions or withholdings, and (iii) the
Guarantor shall immediately pay the full amount deducted or withheld
to the relevant Governmental Authority in accordance with Applicable
Law.
(b) The Guarantor agrees to immediately pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges,
financial institutions duties, debits taxes or similar levies (all
such taxes, charges, duties and levies being referred to as "Other
Taxes") which arise from any payment made by the Guarantor hereunder
or from the execution, delivery or registration of, or otherwise with
respect to, this Guarantee.
(c) The Guarantor shall indemnify the Guarantee Beneficiaries for the full
amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable by
the Guarantor under this Section 8.4) paid by the Guarantee
Beneficiaries or any of them, and any liability (including penalties,
interest and expenses) arising from or with respect to such Taxes or
Other Taxes, whether or not they were correctly or legally asserted.
Payment under this indemnification shall be made within 10 days from
the date the relevant Guarantee Beneficiaries makes a written claim to
the Guarantor in respect thereof. A certificate as to the amount of
such Taxes or Other Taxes submitted to the Guarantor by the relevant
Guarantee Beneficiaries shall be conclusive evidence, absent manifest
error, of the amount due from the Guarantor to the relevant Guarantee
Beneficiaries.
(d) The Guarantor shall furnish to the relevant Guarantee Beneficiaries
the original or a certified copy of a receipt evidencing payment of
Taxes or Other Taxes made by the Guarantor within 30 days after the
date of any payment of Taxes or Other Taxes.
(e) The provisions of this Section 8.4 shall survive the termination of
the Credit Agreement and this Guarantee and the payment and
satisfaction of all Guaranteed Obligations.
8.5 Prohibited Rate
(a) Notwithstanding anything herein or elsewhere contained, if and to the
extent that under any circumstances the effective annual rate of
interest (including, to the extent applicable to such determination,
the aggregate of all charges and expenses, whether in the form of
fees, fines, penalties, commissions or similar charges or expenses)
received or to be received by the Guarantee Beneficiaries would but
for this Section be a rate that is prohibited by Applicable Laws (such
rate being hereinafter called the "Prohibited Rate"), then the
effective annual rate of interest shall be and be deemed to be
adjusted to the highest rate (hereinafter called the "Adjusted Rate")
that the Guarantor could validly have agreed to pay the Guarantee
Beneficiaries by contract on the date hereof under Applicable Laws.
(b) If the Guarantee Beneficiaries have received a payment or partial
payment which would, but for this Section, constitute payment at the
Prohibited Rate, then any amount or amounts so received by the
Guarantee Beneficiaries in excess of the Adjusted Rate shall and shall
be deemed to have comprised a credit to be applied to subsequent
payments on account of interest, fees or other amounts properly due to
the Guarantee Beneficiaries, or if no further amounts are due, shall
be repaid to the Guarantor.
(c) It is the intent of this Section that under no circumstances shall the
Guarantee Beneficiaries be entitled to receive nor shall it in fact
receive any payment of interest, fees or other amounts at a rate that
is prohibited under Applicable Laws.
8.6 Assignment
(a) The Guarantee Beneficiaries may assign, or grant participations in,
this Guarantee (in whole or in part) to any person to whom they are
entitled to assign interests, or grant participations in the Credit
Agreement provided that such an assignment or grant of participation
is made concurrently with a corresponding assignment or grant of
participation under the Credit Agreement.
(b) Subject to Section 6.1(d), the Guarantor shall not assign its rights
or obligations hereunder without the prior written consent of the
Guarantee Beneficiaries.
(c) In the event that another Lender is appointed as Administrative Agent
pursuant to and in accordance with the Credit Agreement, the
Administrative Agent shall give notice to the Guarantor and shall be
entitled to assign to such successor Administrative Agent all its
rights and obligations hereunder and the Guarantor shall take such
actions and execute and deliver to the Administrative Agent and other
such successor Administrative Agent all such documents as the
Administrative Agent and its counsel shall reasonably request for the
purpose of effecting the assignment.
8.7 Severability
Any provision of this Guarantee which is prohibited or unenforceable in
any jurisdiction shall not invalidate the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
8.8 Whole Agreement
This Guarantee constitutes the whole and entire agreement with regard
to the subject matter hereof and cancels and supersedes any prior agreements,
undertakings, declarations, commitments and representations, written or oral, in
respect thereof.
8.9 Amendments, Waivers and Consents
This Guarantee may only be amended by agreement in writing between the
Guarantor and the Administrative Agent, and provisions hereof may be waived or
matters consented to by the Guarantee Beneficiaries only if the Guarantee
Beneficiaries so agree in writing. Any waiver or consent by the Guarantee
Beneficiaries under any provision of this Guarantee may be given subject to any
conditions thought fit by the Guarantee Beneficiaries. Any waiver or consent
shall be effective only in the specific instance and for the purpose for which
it is given.
8.10 Further Assurances
(a) The Guarantor shall promptly cure any defect by it in the execution
and delivery of this Guarantee.
(b) The Guarantor, at its expense, shall promptly execute and deliver to
the Guarantee Beneficiaries, upon request by the Administrative Agent
in writing, all such other and further documents, agreements,
opinions, certificates and instruments in order to give effect to the
covenants and agreements of the Guarantor in this Guarantee, and shall
make any recording, file any notice or obtain any consent in
connection therewith, all as may be reasonably necessary or
appropriate.
8.11 Time of the Essence
Time shall be of the essence of this Guarantee.
8.12 Separate Action
In case of default hereunder, the Guarantee Beneficiaries may maintain
an action or separate successive actions upon this Guarantee against the
Guarantor whether or not the Borrower is joined therein or a separate action is
brought against the Borrower or any other guarantor or any judgment obtained
against any of them. The Guarantee Beneficiaries' rights shall not be exhausted
by the exercise of any of the Guarantee Beneficiaries' rights hereunder or
otherwise against the Guarantor or by any number of successive actions until and
unless all Guaranteed Obligations have been fully paid an performed, and each of
the Guarantor's obligations hereunder has been fully paid and performed.
8.13 Waiver and Acknowledgement
(a) The Guarantor hereby expressly waives:
(i) notice of acceptance of this Guarantee;
(ii) notice of the existence or creation of all or any of the
Guaranteed Obligations;
(iii)presentment, demand, notice of dishonour, protest, and all
other notices whatsoever; and
(iv) all diligence in collection or protection of or realization
upon the Guaranteed Obligations or any thereof, or any
obligation hereunder;
(b) The Guarantor hereby acknowledges that:
(i) the Guarantor has received and reviewed the Credit
Agreement; and
(ii) this Guarantee is intended to guarantee payment of the
Guaranteed Obligations.
8.14 No Merger
Neither the taking of any judgment nor the exercise of any right or
remedy shall operate to extinguish the liability of the Guarantor to make
payment of the Guaranteed Obligations nor shall the acceptance of any payment
constitute or create any novation, and it is further agreed that the taking of a
judgment or judgments under any of the covenants herein contained shall not
operate as a merger of such covenants.
8.15 Successors and Assigns
This Guarantee shall be binding upon the Guarantor, its successors and
assigns, and shall enure to the benefit of the Lenders, the Administrative Agent
and their respective successors and assigns.
8.16 Execution
This Guarantee may be executed by facsimile transmission. Any facsimile
transmission copy of this Guarantee shall be considered an original copy. The
Guarantor shall promptly deliver to the Administrative Agent an original
executed copy of this Guarantee immediately following facsimile transmission of
an executed copy of this Guarantee being delivered.
IN WITNESS WHEREOF the Guarantor has executed this Guarantee.
KEYSPAN CORPORATION
By:
----------------------------------------
Name:
Title:
SCHEDULE 1
LITIGATION SCHEDULE
Legal Proceedings Regarding Environmental Matters
Air. The Guarantor has submitted timely applications for permits in accordance
with the requirements of the Title V of the 1990 amendments to the Federal Clean
Air Act ("CAA"). Final permits have been issued for all of the Guarantor's
electric generating facilities with the exception of the Far Rockaway facility,
which is pending. The permits allow the Guarantor's electric generating plants
to continue to operate without any additional significant expenditures, except
as described below.
The Guarantor's generating facilities are located within a CAA severe ozone
non-attainment area, and are subject to the Phase I, II, and III NOx reduction
requirements established under the Ozone Transportation Commission ("OTC")
memorandum of understanding. Software and equipment upgrades of approximately $1
million for continuous emissions monitors ("CEM") may be required in 1999-2000
to meet EPA requirements for the NOx allowance tracking/trading program and
certain other regulatory changes affecting the operation of CEM systems. The
Guarantor currently estimates that it may be required to spend between $10
million and $35 million by the year 2003 for additional pollution control
equipment to achieve the OTC Phase III NOx reduction requirements and/or new
requirements imposed under the EPA NOx state implementation plan, depending on
the actual level of NOx emission reductions which are required when pending
regulations are implemented by the State of New York.
Water. The Guarantor possesses permits for its generating units which authorize
discharges from cooling water circulating systems and chemical treatment
systems. Several of these permits are being renewed; one or more of the new
permits are expected to require biological monitoring to determine if the
cooling water intake structures meet the best available technology requirements
of the Federal Clean Water Act ("CWA") for the protection of marine life.
On behalf of Long Island Power Authority ("LIPA"), the Guarantor provides
management and operations support for the LIPA-Connecticut Light and Power
Company electric transmission cable system located under the Long Island Sound
(the "Sound Cable"). The Connecticut Department of Environmental Protection
("DEP") and the New York State Department of Environmental Conservation ("DEC")
separately have issued Administrative Consent Orders ("ACOs") in connection with
releases of insulating fluid from the Sound Cable. The ACOs require the
submission of a series of reports and studies describing cable system condition,
operation and repair practices, alternatives for cable improvements or
replacement, and environmental impacts associated with prior leaks of fluid into
the Long Island Sound. Compliance activities associated with the ACOs are
ongoing.
Superfund Sites. Federal and New York State Superfund laws impose liability,
regardless of fault, upon generators of hazardous substances for costs
associated with remediating contaminated property. In the course of its business
operations, the Guarantor generates materials which are subject to these laws.
From time to time, the Guarantor has received notices under these laws
concerning possible claims with respect to sites at which hazardous substances
generated by the Guarantor and other potentially responsible parties ("PRPs")
allegedly were disposed.
The DEC has notified the Guarantor, pursuant to the State Superfund program,
that the Guarantor may be responsible for the disposal of hazardous substances
at the Huntington/East Northport Site, a municipal landfill property. The DEC
investigation is in its preliminary stages, and the Guarantor currently is
unable to estimate its share, if any, of the costs required to investigate and
remediate this site.
Manufactured Gas Plant ("MGP") Sites. The Guarantor or its predecessor entities,
including Brooklyn Union of Long Island and Long Island Lighting Company
("LILCO"), historically owned or operated several former MGP sites. Operations
at these plants in the late 1800's and early 1900's may have resulted in the
release of hazardous substances. These former sites have been identified to the
DEC for inclusion on appropriate waste site inventories. In certain
circumstances, former MGP sites can give rise to environmental cleanup
responsibilities for the Guarantor.
The Guarantor has several former MGP sites that will require investigation
and/or remediation. In 1995, the Guarantor executed an ACO with the DEC which
addressed the investigation and remediation of the Brooklyn Borough Works site
in Coney Island, Brooklyn. In 1998, the Guarantor executed an ACO for the
investigation and remediation of the Clifton MGP site in Staten Island. Both of
these properties are owned by the Guarantor. The City of New York has notified
the Guarantor that a property now owned by the City which was formerly owned and
operated by a Brooklyn Union of Long Island predecessor, the Citizen's Site,
should be investigated. The Guarantor has submitted an investigation study plan
and requested cost sharing for this property with the City. The Guarantor is
awaiting the City's response. Two ACO's were executed on March 31, 1999 for
Brooklyn Union of Long Island MGP sites. One ACO addressed two MGP sites
classified as "Class II Sites" on the State registry of inactive hazardous waste
sites. The other ACO addressed the four other MGP sites. Both ACO's generally
require Brooklyn Union of Long Island to investigate the condition of each site
and conduct remediation activities depending on the results of the
investigation. The investigation of the Class II listed sites will proceed
first, to be followed by the investigation of the four other sites in three
month intervals.
The final end uses for these sites and acceptable remediation goals have not
been determined in the ACOs. In addition, investigation may be required at other
former MGP sites before determinations can be made regarding the need for or
scope of potential remediation at these locations. Based upon activities
conducted to date, the Guarantor estimates the minimum cost of its MGP-related
environmental cleanup activities will be approximately $130 million; that amount
has been accrued by the Guarantor as an environmental liability. The actual
MGP-related costs may be substantially higher, depending upon remediation
experience, selected end use for each site, and actual environmental conditions
encountered.
Ravenswood. In June 1999 the Guarantor acquired the 2,168 megawatt Ravenswood
electric generating facility located in Queens, New York from Consolidated
Edison Company of New York, Inc. ("Con Ed") for approximately $597 million. The
Guarantor has assumed all of Con Ed's historical and current environmental
contingency obligations relating to facility operations other than liabilities
arising from pre-closing disposal of waste at off-site locations and any
monetary fines arising from Con Ed's pre-closing conduct. Presently, there are
four ACO's issued to Con Ed by the DEC. Generally, the Guarantor's derivative
obligations are expected to include investigation and remediation of certain
petroleum releases, inspection and any necessary corrective action for certain
aboveground storage tanks and underground piping, potential upgrades to existing
cooling water intake structures, and implementation of an air emissions opacity
reduction program. Pursuant to its derivative obligations, the Guarantor will
complete the investigation and remediation of certain petroleum and other
hazardous material releases at Ravenswood, as necessary. The Guarantor will also
address similar releases not covered by the ACO's. The Ravenswood facility is
also located on a former MGP site. In general, costs arising from remediation of
MGP wastes could be material. Based on information currently available for
environmental contingencies related to the Ravenswood acquisition, the Guarantor
has accrued $5 million as the minimum liability to be incurred.