EXHIBIT 3
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SECOND SUPPLEMENTAL TRUST INDENTURE
This Second Supplemental Trust Indenture is entered into as of the 2nd day of
August, 2005 between:
HARVEST ENERGY TRUST, an open ended unincorporated trust
governed under the laws of the Province of Alberta and having
its head office in the City of Calgary, in the Province of
Alberta (hereinafter called the "TRUST")
- and -
HARVEST OPERATIONS CORP., a corporation existing under the
laws of the Province of Alberta and having its head office in
the City of Calgary, in the Province of Alberta (hereinafter
called "HOC" or the "CORPORATION")
- and -
VALIANT TRUST COMPANY, a trust company incorporated under the
laws of the Province of Alberta having an office in the City
of Calgary, in the Province of Alberta in its capacity as
debenture trustee under a trust indenture dated January 29,
2004 (as amended) with the Trust and the Corporation
(hereinafter called the "DEBENTURE TRUSTEE")
WITNESSETH THAT:
WHEREAS the Trust, the Corporation and the Debenture Trustee entered into an
indenture dated January 29, 2004 to provide for the creation and issuance of
Debentures, as supplemented by a first supplemental indenture entered into as of
August 10, 2004 (the "FIRST SUPPLEMENTAL INDENTURE") to provide for the issuance
of Second Debentures (the indenture as so supplemented collectively called the
"INDENTURE");
AND WHEREAS Article 16 of the Indenture provides that the Debenture Trustee may
enter into indentures supplemental to the Indenture;
AND WHEREAS the Trust has determined to create and issue Series 3, 6.5%
convertible extendible unsecured subordinated debentures (the "THIRD
DEBENTURES") and to enter into this second supplemental indenture (this
"SUPPLEMENTAL INDENTURE") with the Debenture Trustee to provide for such
creation and issuance of Third Debentures;
AND WHEREAS all necessary acts and proceedings have been done and taken and all
necessary resolutions have been passed to authorize the execution and delivery
of this Supplemental Indenture, to make the same effective and binding upon the
Trust, and to make the Third Debentures, when authenticated by the Debenture
Trustee and issued as provided in the Indenture and this Supplemental Indenture,
valid, binding and legal obligations of the Trust with the benefit and subject
to the terms of the Indenture and this Supplemental Indenture;
AND WHEREAS the foregoing recitals are made as representations and statements of
fact by the Trust and not by the Debenture Trustee.
NOW THEREFORE it is hereby covenanted, agreed and declared as follows:
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ARTICLE 1
DEFINITIONS AND AMENDMENTS TO INDENTURE
1.1 DEFINITIONS
All capitalized terms not defined herein, or in the recitals
or description of parties herein, shall have the meanings given to them in the
Indenture and, in addition, in this Supplemental Indenture (including the
recitals hereto) and in the Third Debentures, unless there is something in the
subject matter or context inconsistent therewith, the expressions following
shall have the following meanings:
(a) "ACQUISITION" means the acquisition of the Nexen Partnership pursuant
to the Purchase Agreement;
(b) "CLOSING" means the closing of the Acquisition in accordance with the
terms of the Purchase Agreement;
(c) "HARVEST BREEZE TRUST NO. 1" means Harvest Breeze Trust No. 1, a trust
formed pursuant to the laws of Alberta;
(d) "HARVEST BREEZE TRUST NO. 2" means Harvest Breeze Trust No. 2, a trust
formed pursuant to the laws of Alberta;
(e) "NEXEN PARTNERSHIP" means Nexen Canada No. 1, a general partnership
formed under the laws of Alberta;
(f) "PURCHASE AGREEMENT" means the partnership purchase agreement dated
July 15, 2004 between Harvest Breeze Trust ▇▇. ▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇ and the Vendor, as from time to time amended;
(g) "TERMINATION DATE" means the date upon which the Termination Time
occurs;
(h) "TERMINATION TIME" means the earlier to occur of (i) 5:00 pm (Calgary
time) on September 30, 2005 if the Closing has not taken place by that
time, (ii) the time at which the Purchase Agreement is terminated, and
(iii) the time at which Trust advises the Underwriters or announces to
the public that it does not intend to proceed with the Acquisition;
(i) "UNDERWRITERS" means, collectively, National Bank Financial Inc., TD
Securities Inc., CIBC World Markets Inc., Scotia Capital Inc.,
Canaccord Capital Corporation, GMP Securities Ltd., FirstEnergy Capital
Corp., Tristone Capital Inc., ▇▇▇▇▇▇▇ Securities Inc. and ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ltd. and; and
(j) "VENDOR" means Nexen Inc., Canadian Nexen Yemen Ltd. and Nexen
Marketing.
1.2 AMENDMENTS TO INDENTURE
This Supplemental Indenture is supplemental to the Indenture
and the Indenture and this Supplemental Indenture shall hereafter be read
together and shall have effect, so far as practicable, with respect to the Third
Debentures as if all the provisions of the Indenture and this Supplemental
Indenture were contained in one instrument. The Indenture is and shall remain in
full force and effect with regards to all matters governing the Initial
Debentures and Second Debentures, and with regards to all matters governing the
Third Debentures, except as the Indenture is amended, superceded, modified or
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supplemented by this Supplemental Indenture. Any references in the text of this
Supplemental Indenture to section numbers, article numbers, "hereto", "herein",
"hereby", "hereunder", "hereof" and similar expressions refer to the Indenture
unless otherwise qualified.
ARTICLE 2
THE THIRD DEBENTURES
2.1 FORM AND TERMS OF THIRD DEBENTURES
(a) The Third Debentures authorized for issue immediately are limited to an
aggregate principal amount of $75,000,000 and shall be designated as
"Series 3, 6.5% Convertible Extendible Unsecured Subordinated
Debentures".
(b) The Third Debentures shall be dated as of August 2, 2005 and shall bear
interest from such date at the rate of 6.5% per annum, payable in
arrears in equal (with the exception of the first interest payment
which will include interest from August 2, 2005 as set forth below)
semi-annual payments of $32.50 per $1,000 of principal amount of the
Third Debentures on June 30 and December 31 in each year, the first
such payment to fall due, subject as hereinafter provided, on December
31, 2005 and the last such payment (representing interest payable from
the last Interest Payment Date to, but excluding, the Maturity Date of
the Third Debentures) to fall due on December 31, 2010, payable after
as well as before maturity and after as well as before default, with
interest on amounts in default at the same rate, compounded
semi-annually. The Third Debentures will mature on December 31, 2010,
provided that if the Closing does not take place at or before the
Termination Time, the Third Debentures will mature on September 30,
2005. If the Acquisition does take place at or before the Termination
Time, the maturity date of the Third Debentures will be automatically
extended to December 31, 2010 without any further act or formality on
the part of the Trust or the Debenture Trustee (such maturity date of
either September 30, 2005 or December 31, 2010 herein referred to for
the purposes of this Supplemental Indenture as the "MATURITY DATE").
The Trust will announce by press release the Closing or the Termination
Time, as the case may be, and confirmation of the Maturity Date and
will provide a copy thereof to the Debenture Trustee in accordance with
Section 14.3 of the Indenture. If the Maturity Date is not September
30, 2005, the first interest payment will include interest accrued from
and including August 2, 2005 to, but excluding, December 31, 2005,
which will be equal to $26.89 per $1,000 principal amount of the Third
Debentures. If the Maturity Date is September 30, 2005 interest accrued
from August 2, 2005 to, but excluding, the Maturity Date of September
30, 2005 shall be payable, together with all other amounts due on
Maturity, in accordance with Section 2.13 of the Indenture.
(c) The Third Debentures will be redeemable in accordance with the terms of
Article 4 of the Indenture, provided that the Third Debentures will not
be redeemable on or before December 31, 2008, except in the event of
the satisfaction of certain conditions after a Change of Control has
occurred as outlined herein. Subsequent to December 31, 2008 and on or
prior to December 31, 2009, the Third Debentures may be redeemed at the
option of the Trust in whole or in part from time to time on notice as
provided for in Section 4.3 of the Indenture at a Redemption Price of
$1,050 per $1,000 principal amount of Third Debentures and, in addition
thereto, at the time of redemption, the Trust shall pay to the holder
accrued and unpaid interest. After December 31, 2009 and prior to
maturity, the Third Debentures may be redeemed at the option of the
Trust in whole or in part from time to time on notice as provided for
in Section 4.3 of the Indenture at a Redemption Price of $1,025 per
$1,000 principal amount of Debentures and, in addition thereto, at the
time of redemption, the Trust shall pay to the holder accrued and
unpaid interest. The Redemption Notice for the Third Debentures shall
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be in the form of SCHEDULE "B" hereof. In connection with the
redemption of the Third Debentures, the Trust may, at its option and
subject to the provisions of Section 4.6 and subject to regulatory
approval, elect to satisfy its obligation to pay all or a portion of
the aggregate Redemption Price of the Third Debentures to be redeemed
by issuing and delivering to the holders of such Third Debentures, such
number of Freely Tradeable Trust Units as is obtained by dividing the
Redemption Price by 95% of the Current Market Price in effect on the
Redemption Date. Interest accrued and unpaid on the Third Debentures on
the Redemption Date will be paid to holders of Third Debentures, in
cash, in the manner contemplated in Section 4.5 of the Indenture. If
the Trust elects to exercise such option, it shall so specify and
provide details in the Redemption Notice.
(d) The Third Debentures will be subordinated to the Senior Indebtedness of
the Trust in accordance with the provisions of Article 5 of the
Indenture.
(e) Upon and subject to the provisions and conditions of Article 6 of the
Indenture, and provided that the Closing takes place at or before the
Termination Time, the holder of each Third Debenture shall have the
right at such holder's option, at any time when the register of the
Debenture Trustee is open, prior to the close of business on the
earlier of December 31, 2010 and the last Business Day immediately
preceding the date specified by the Trust for redemption of the Third
Debentures by notice to the holders of Third Debentures in accordance
with Sections 2.4(c) and 4.3 of the Indenture (the earlier of which
will be the "TIME OF EXPIRY" for the purposes of Article 6 of the
Indenture in respect of the Third Debentures), to convert any part,
which is $1,000 or an integral multiple thereof, of the principal
amount of such Third Debenture into Trust Units at the Conversion Price
in effect on the Date of Conversion.
The Conversion Price in effect on the date hereof for each Trust Unit
to be issued upon the conversion of Third Debentures shall be equal to
$31.00 such that approximately 32.2581 Trust Units shall be issued for
each $1,000 principal amount of Third Debentures so converted. No
adjustment in the number of Trust Units to be issued upon conversion
will be made for distributions on Trust Units issuable upon conversion
or for interest accrued on the Third Debentures which are surrendered
for conversion; however, holders converting their Third Debentures will
receive all interest which has accrued to but excluding the Date of
Conversion which has not been paid. The Conversion Price applicable to
and the Trust Units, securities or other property receivable on the
conversion of the Third Debentures is subject to adjustment pursuant to
the provisions of Section 6.5 of the Indenture.
Notwithstanding any other provisions of the Indenture or this
Supplemental Indenture, if a Third Debenture is surrendered for
conversion on an Interest Payment Date or during the five preceding
Business Days, the person or persons entitled to receive Trust Units in
respect of the Third Debenture so surrendered for conversion shall not
become the holder or holders of record of such Trust Units until the
Business Day following such Interest Payment Date.
(f) On maturity of the Third Debentures, and provided that the Closing
takes place at or before the Termination Time, the Trust may, at its
option and subject to the provisions of Section 4.10 of the Indenture,
Section 2.1 of this Supplemental Indenture and subject to regulatory
approval, elect to satisfy its obligation to pay all or a portion of
the aggregate principal amount of the Third Debentures due on maturity
by issuing and delivering to such holders of Third Debentures, Freely
Tradeable Trust Units pursuant to the provisions of Section 4.10 of the
Indenture. If the Trust elects to exercise such option, it shall
deliver a maturity notice (the "MATURITY Notice") to the holders of the
Third Debentures in the form of SCHEDULE "C" of this Supplemental
Indenture and provide the necessary details.
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(g) The Third Debentures shall be issued as Fully Registered Debentures in
denominations of $1,000 and integral multiples of $1,000. Each Third
Debenture and the certificate of the Debenture Trustee endorsed thereon
shall be issued in substantially the form set out in SCHEDULE "A" of
this Supplemental Indenture, with such insertions, omissions,
substitutions or other variations as shall be required or permitted by
this Indenture, and may have imprinted or otherwise reproduced thereon
such legend or legends or endorsements, not inconsistent with the
provisions of the Indenture or this Supplemental Indenture, as may be
required to comply with any law or with any rules or regulations
pursuant thereto or with any rules or regulations of any securities
exchange or securities regulatory authority or to conform with general
usage, all as may be determined by the directors of HOC (on behalf of
the Trust) executing such Third Debenture in accordance with Section
2.7 of the Indenture, as conclusively evidenced by their execution of a
Third Debenture. Each Third Debenture shall additionally bear such
distinguishing letters and numbers as the Debenture Trustee shall
approve. Notwithstanding the foregoing, a Third Debenture may be in
such other form or forms as may, from time to time, be approved by a
resolution of the directors of HOC, on behalf of the Trust or as
specified in an Officer's Certificate. The Third Debentures may be
engraved, lithographed, printed, mimeographed or typewritten or partly
in one form and partly in another.
The Third Debentures shall be issued as Global Debentures and the
Depositary for the Third Debentures shall be The Canadian Depositary
for Securities Limited, the Global Debentures shall be registered in
the name of The Canadian Depositary for Securities Limited (or any
nominee of the Depositary). No beneficial holder will receive
definitive certificates representing their interest in Debentures
except as provided in Section 3.2 of the Indenture. A Global Debenture
may be exchanged for Third Debentures in registered form that are not
Global Debentures, or transferred to and registered in the name of a
person other than the Depository for such Global Debentures or a
nominee thereof as provided in Section 3.2 of the Indenture.
(h) Upon and subject to the provisions and conditions of Article 10 of the
Indenture, and provided that the Closing takes place at or before the
Termination Time, the Trust may elect, from time to time, to satisfy
its Interest Obligation on the Third Debentures on any Interest Payment
Date by delivering Trust Units to the Debenture Trustee.
(i) Within 30 days following the occurrence of a Change of Control, and
subject to the provisions and conditions of this Section 2.1(i), the
Trust shall be obligated to offer in writing to each holder of Third
Debentures (the "OFFER") to purchase the Third Debentures. The terms
and conditions of such obligation are set forth below:
(i) Within 30 days following the occurrence of a Change of
Control, the Trust shall deliver to the Debenture Trustee, and
the Debenture Trustee shall promptly deliver to the holders of
the Third Debentures, a notice stating that there has been a
Change of Control and specifying the circumstances surrounding
such event (a "CHANGE OF CONTROL NOTICE") together with the
Offer to purchase all then outstanding Third Debentures made
in accordance with the requirements of Applicable Securities
Legislation at a price equal to 101% of the principal amount
thereof (the "OFFER PRICE") plus accrued and unpaid interest,
if any, on such Third Debentures up to, but excluding, the
date of acquisition by the Trust or a related party of such
Third Debentures (collectively, the "TOTAL OFFER PRICE") which
Offer shall, unless otherwise provided under Applicable
Securities Legislation, be open for acceptance thereof for a
period of not less than 35 days and not more than 60 days and
shall provide for payment to all Debenture holders who accept
the Offer not later than the 60th day after the making of the
Offer.
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(ii) If 90% or more in aggregate principal amount of Third
Debentures outstanding on the date the Trust provides the
Change of Control Notice and the Offer to holders of the Third
Debentures have been tendered for purchase pursuant to the
Offer on the expiration thereof, the Trust shall provide
written notice to the Debenture Trustee, along with the
aggregate Offer Price for the Third Debentures remaining
outstanding at the expiration of the Offer, within 10 days
following the expiration of the Offer, that it is redeeming
and shall redeem all the Third Debentures remaining
outstanding on the expiration of the Offer at the aggregate
Offer Price for such Third Debentures remaining outstanding
(the "90% REDEMPTION Right").
(iii) Upon receipt of notice that the Trust is acquiring the
remaining Third Debentures pursuant to the 90% Redemption
Right, the Debenture Trustee shall promptly provide written
notice, in the form provided by HOC, to each Debentureholder
that did not previously accept the Offer that:
(A) the Trust has exercised the 90% Redemption Right and
is purchasing all outstanding Third Debentures
effective on the expiry of the Offer at the aggregate
Offer Price for such remaining Third Debentures, and
shall include a calculation of the amount payable to
such holder as payment of the Total Offer Price;
(B) each such holder must transfer its Third Debentures
to the Debenture Trustee on the same terms as those
holders that accepted the Offer and must send its
Third Debentures, duly endorsed for transfer, to the
Debenture Trustee within 10 days after the sending of
such notice; and
(C) the rights of such holder under the terms of the
Third Debentures, the Indenture and this Supplemental
Indenture cease effective as of the date of expiry of
the Offer provided the Trust has, on or before the
time of notifying the Debenture Trustee of the
redemption pursuant to the 90% Redemption Right, paid
the aggregate Offer Price for such Third Debentures
to, or to the order of, the Debenture Trustee and
thereafter such Third Debentures shall not be
considered to be outstanding and the holder shall not
have any right except to receive such holder's Offer
Price upon surrender and delivery of such holder's
Third Debentures in accordance with the Indenture.
(iv) The Trust shall, on or before 11:00 a.m., (Calgary time), on
the Business Day immediately prior to the expiry of the Offer,
deposit with the Debenture Trustee or any paying agent to the
order of the Debenture Trustee, such sums of money as may be
sufficient to pay the Total Offer Price for each Third
Debenture to be purchased or redeemed by the Trust on the
expiry of the Offer, provided that if the aggregate Total
Offer Price payable for the Third Debentures to be redeemed or
purchased is less than the amount required, by any applicable
banking regulations or procedures, to be paid by wire
transfer, the Trust may elect to satisfy this requirement by
providing the Debenture Trustee with a certified cheque for
such amounts required under this Section 2.1(i)(iv) post-dated
to the date of expiry of the Offer. The Trust shall also
deposit with the Debenture Trustee a sum of money sufficient
to pay any charges or expenses, which may be incurred by the
Debenture Trustee in connection with such purchase and/or
redemption, as the case may be. Every such deposit shall be
irrevocable. From the sums so deposited, the Debenture Trustee
shall pay or cause to be paid to the holders of such Third
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Debentures, the Total Offer Price for each such Third
Debenture to which they are entitled on the Trust's purchase
or redemption.
(v) Third Debentures for which holders have accepted the Offer and
Third Debentures which the Trust is redeeming in accordance
with this Section 2.1(i) shall become due and payable at the
Offer Price for each such Third Debenture on the date of
expiry of the Offer, in the same manner and with the same
effect as if it were the date of maturity specified in such
Third Debentures, anything therein or herein to the contrary
notwithstanding, and from and after such date of expiry of the
Offer, if the money necessary to purchase or redeem the Third
Debentures shall have been deposited as provided in this
Section 2.1(i) and affidavits or other proofs satisfactory to
the Debenture Trustee as to the publication and/or mailing of
such notices shall have been lodged with it, interest on the
Third Debentures shall cease. If any question shall arise as
to whether any notice has been given as above provided and
such deposit made, such question shall be decided by the
Debenture Trustee whose decision shall be final and binding
upon all parties in interest.
(vi) In case the holder of any Third Debenture to be purchased or
redeemed in accordance with this Section 2.1(i) shall fail on
or before the date of expiry of the Offer so to surrender such
holder's Third Debenture or shall not within such time accept
payment of the monies payable, or give such receipt therefor,
if any, as the Debenture Trustee may require, such monies may
be set aside in trust, either in the deposit department of the
Debenture Trustee or in a chartered bank, and such setting
aside shall for all purposes be deemed a payment to the
Debentureholder of the sum so set aside and the
Debentureholder shall have no other right except to receive
payment of the monies so paid and deposited, upon surrender
and delivery up of such holder's Third Debenture. In the event
that any money required to be deposited hereunder with the
Debenture Trustee or any depository or paying agent on account
of principal, premium, if any, or interest, if any, on Third
Debentures issued hereunder shall remain so deposited for a
period of six years from the date of expiry of the Offer, then
such monies, together with any accumulated interest thereon,
shall at the end of such period be paid over or delivered over
by the Debenture Trustee or such depository or paying agent to
the Trust and the Debenture Trustee shall not be responsible
to Debentureholders for any amounts owing to them.
Notwithstanding the foregoing, the Debenture Trustee will pay
any remaining funds deposited hereunder prior to the expiry of
six years after the date of expiry of the Offer to the Trust
upon receipt from the Trust, or one of its Subsidiaries, of an
unconditional letter of credit from a Canadian chartered bank
in an amount equal to or in excess of the amount of the
remaining funds (the "LETTER OF CREDIT"). If the remaining
funds are paid to the Trust prior to the expiry of six years
after the date of expiry of the Offer, and any amounts are
thereafter, but prior to six years after the date of expiry of
the Offer, claimed from the Debenture Trustee by a
Debentureholder in respect of the remaining funds which are in
excess of amounts available to the Debenture Trustee under the
Letter of Credit, or by reason that the Letter of Credit has
expired or otherwise can not be drawn upon, the Debenture
Trustee shall immediately notify the Trust of such claim, but
shall have no liability to effect any such payment until the
Trust shall have deposited with the Debenture Trustee any
amounts to be paid pursuant to such claim.
(vii) Subject to the provisions above related to Third Debentures
purchased in part, all Third Debentures redeemed and paid
under this Section 2.1(i) shall forthwith be delivered to the
Debenture Trustee and cancelled and no Third Debentures shall
be issued in substitution therefor.
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(j) The Debenture Trustee shall be provided with the documents and
instruments referred to in Sections 2.5(b), (c) and (d) of the
Indenture with respect to the Third Debentures prior to the issuance of
the Third Debentures.
ARTICLE 3
ADDITIONAL MATTERS
3.1 CONFIRMATION OF INDENTURE
The Indenture, as amended and supplemented by this
Supplemental Indenture, is in all respects confirmed.
3.2 ACCEPTANCE OF TRUSTS
The Debenture Trustee hereby accepts the trusts in this
Supplemental Indenture declared and provided for and agrees to perform the same
upon the terms and conditions and subject to the provisions set forth in the
Indenture.
3.3 GOVERNING LAW
This Supplemental Indenture shall be construed in accordance
with the laws of the Province of Alberta and the laws of Canada applicable
therein and shall be treated, in all respects, as an Alberta contract.
3.4 FURTHER ASSURANCES
The parties shall, with reasonable diligence, do all such
things and provide all such reasonable assurances as may be required to
consummate the transactions contemplated by this Supplemental Indenture, and
each party shall provide such further documents or instruments required by the
other party as may be reasonably necessary or desirable to effect the purpose of
the Indenture and this Supplemental Indenture and carry out its provisions.
3.5 COUNTERPARTS
This Supplemental Indenture may be executed by the parties in
separate counterparts each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF the parties hereto have executed these presents under their
respective corporate seals and the hands of their proper officers in that
behalf.
HARVEST ENERGY TRUST, by its attorney,
Harvest Operations Corp.
By:
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By:
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HARVEST OPERATIONS CORP.
By:
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By:
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VALIANT TRUST COMPANY
By:
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By:
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SCHEDULE "A"
THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF THE INDENTURE HEREIN
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF.
THIS DEBENTURE MAY NOT BE TRANSFERRED TO OR EXCHANGED FOR DEBENTURES REGISTERED
IN THE NAME OF ANY PERSON OTHER THAN THE DEPOSITORY OR A NOMINEE THEREOF AND NO
SUCH TRANSFER MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE. EVERY DEBENTURE AUTHENTICATED AND DELIVERED UPON REGISTRATION OF,
TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF, THIS DEBENTURE SHALL BE A GLOBAL
DEBENTURE SUBJECT TO THE FOREGOING, EXCEPT IN SUCH LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS DEBENTURE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
CANADIAN DEPOSITORY FOR SECURITIES LIMITED ("CDS") TO HARVEST ENERGY TRUST OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY DEBENTURE
ISSUED IN RESPECT THEREOF IS REGISTERED IN THE NAME OF CDS & CO., OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS, (AND ANY
PAYMENT IS MADE TO CDS & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF CDS) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE AS THE REGISTERED
HOLDER HEREOF, CDS & CO. HAS AN INTEREST HEREIN.
CUSIP
[NO. 41752X AD 3 / 41752X AE 1] [$75,000,000]
HARVEST ENERGY TRUST
(A TRUST GOVERNED BY THE LAWS OF ALBERTA)
SERIES 3, 6.5% CONVERTIBLE EXTENDIBLE UNSECURED
SUBORDINATED DEBENTURE DUE DECEMBER 31, 2010
HARVEST ENERGY TRUST (the "TRUST") for value received hereby
acknowledges itself indebted and, subject to the provisions of the trust
indenture (the "INITIAL INDENTURE") dated as of January 29, 2004 amended and
supplemented by the First Supplemental Indenture dated as of August 10, 2004
(the "FIRST SUPPLEMENTAL INDENTURE") and by the Second Supplemental Indenture
dated as of August 2, 2005 (the "SECOND SUPPLEMENTAL INDENTURE" and together
with the Initial Indenture and First Supplemental Indenture, the "INDENTURE")
among the Trust, Harvest Operations Corp. and Valiant Trust Company (the
"DEBENTURE TRUSTEE"), promises to pay to the registered holder hereof on
December 31, 2010 if the Closing of the Acquisition takes place at or before the
Termination Time, and otherwise on September 30, 2005 (the applicable date of
maturity referred to as the "MATURITY DATE"), or on such earlier date as the
principal amount hereof may become due in accordance with the provisions of the
Indenture the principal sum of [SEVENTY FIVE MILLION DOLLARS ($75,000,000)] in
lawful money of Canada on presentation and surrender of this Third Debenture at
the main branch of the Debenture Trustee in Calgary, Alberta or its agent in
Toronto, Ontario in accordance with the terms of the Indenture and, subject as
hereinafter provided, to pay interest on the principal amount hereof from the
date hereof, or from the last Interest Payment Date to which interest shall have
been paid or made available for payment hereon, whichever is later, at the rate
of 6.5% per annum, in like money, in arrears in equal (with the exception of the
first interest payment which will include interest from August 2, 2005 to but
excluding December 31, 2005 as set forth below) semi-annual instalments (less
any tax required by law to be deducted) of $32.50 per $1,000 of principal amount
A-2
of the Third Debentures on June 30 and December 31 in each year commencing on
December 31, 2005 and the last payment (representing interest payable from the
last Interest Payment Date to, but excluding, December 31, 2010) to fall due on
December 31, 2010 and, should the Trust at any time make default in the payment
of any principal or interest, to pay interest on the amount in default at the
same rate, in like money and on the same dates. If the Maturity Date is
September 30, 2005 interest accrued from and including August 2, 2005 to, but
excluding September 30, 2005, will be paid, together with all other amounts due
on maturity, in accordance with Section 2.13 of the Indenture.
Interest hereon shall be payable by cheque mailed by prepaid ordinary
mail or by electronic transfer of funds to the registered holder hereof and,
subject to the provisions of the Indenture, the mailing of such cheque shall, to
the extent of the sum represented thereby (plus the amount of any tax withheld),
satisfy and discharge all liability for interest on this Third Debenture.
This Debenture is one of the Series 3, 6.5% Convertible Extendible
Unsecured Subordinated Debentures (referred to herein as the "THIRD DEBENTURES")
of the Trust issued or issuable in one or more series under the provisions of
the Indenture. The Third Debentures authorized for issue immediately are limited
to an aggregate principal amount of $75,000,000 in lawful money of Canada.
Reference is hereby expressly made to the Indenture for a description of the
terms and conditions upon which the Third Debentures are or are to be issued and
held and the rights and remedies of the holders of the Third Debentures and of
the Trust and of the Debenture Trustee, all to the same effect as if the
provisions of the Indenture were herein set forth to all of which provisions the
holder of this Third Debenture by acceptance hereof assents. This Third
Debenture is issued subject to the terms of the Indenture, is a summary of, is
not intended to be and does not constitute a comprehensive description of, the
terms of the Indenture and in the event of any conflict or inconsistency between
the provisions hereof and the Indenture, the provisions of the Indenture shall
govern.
The Third Debentures are issuable only in denominations of $1,000 and
integral multiples thereof. Upon compliance with the provisions of the
Indenture, Debentures of any denomination may be exchanged for an equal
aggregate principal amount of Debentures in any other authorized denomination or
denominations.
If the Closing takes place at or before the Termination Time, the
whole, or if this Third Debenture is a denomination in excess of $1,000, any
part which is $1,000 or an integral multiple thereof, of the principal of this
Third Debenture is convertible, at the option of the holder hereof, upon
surrender of this Third Debenture at the principal office of the Debenture
Trustee in Calgary, Alberta or its agent in ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, at any time prior
to the close of business on the Maturity Date or, if this Third Debenture is
called for redemption on or prior to such date, then up to but not after the
close of business on the last Business Day immediately preceding the date
specified for redemption of this Third Debenture, into Trust Units (without
adjustment for interest accrued hereon or for dividends or distributions on
Trust Units issuable upon conversion) at a conversion price of $31.00 (the
"CONVERSION PRICE") per Trust Unit, being a rate of approximately 32.2581 Trust
Units for each $1,000 principal amount of Third Debentures, all subject to the
terms and conditions and in the manner set forth in the Indenture. No Debentures
may be converted during the five Business Days preceding and including June 30
and December 31 in each year, commencing December 31, 2005, as the registers of
the Debenture Trustee will be closed during such periods. The Indenture makes
provision for the adjustment of the Conversion Price in the events therein
specified. No fractional Trust Units will be issued on any conversion but in
lieu thereof, the Trust will satisfy such fractional interest by a cash payment
equal to the market price of such fractional interest determined in accordance
with the Indenture. Holders converting their Third Debentures will receive
accrued and unpaid interest thereon. If a Third Debenture is surrendered for
conversion on an Interest Payment Date or during the five preceding Business
Days, the person or persons entitled to receive Trust Units in respect of the
Third Debenture so surrendered for conversion shall not become the holder or
holders of record of such Trust Units until the Business Day following such
Interest Payment Date.
A-3
This Third Debenture may also be redeemed at the option of the Trust on
the terms and conditions set out in the Indenture at the redemption price
therein and herein set out provided that this Third Debenture is not redeemable
on or before December 31, 2008, except in the event of the satisfaction of
certain conditions after a Change of Control has occurred. After December 31,
2008 and on or prior to December 31, 2009, the Third Debentures are redeemable
at the option of the Trust at a price equal to $1,050 per $1,000 principal
amount of Debentures and, in addition thereto, at the time of redemption, the
Trust shall pay to the holder accrued and unpaid interest and otherwise on the
terms and conditions described in the Indenture. After December 31, 2009 and
prior to maturity, the Third Debentures are redeemable at the option of the
Trust at a price equal to $1,025 per $1,000 principal amount of Debentures and,
in addition thereto, at the time of redemption, the Trust shall pay to the
holder accrued and unpaid interest and otherwise on the terms and conditions
described in the Indenture. The Trust may, on notice as provided in the
Indenture, at its option and subject to any applicable regulatory approval,
elect to satisfy its obligation to pay all or any portion of the applicable
Redemption Price by the issue of that number of Trust Units obtained by dividing
the applicable Redemption Price by 95% of the weighted average trading price of
the Trust Units on the Toronto Stock Exchange for the 20 consecutive trading
days ending on the fifth trading day preceding the Redemption Date.
Upon the occurrence of a Change of Control of the Trust, the Trust is
required to make an offer to purchase all of the Third Debentures at a price
equal to 101% of the principal amount of such Third Debentures plus accrued and
unpaid interest (if any) up to, but excluding, the date the Third Debentures are
so repurchased (the "OFFER"). If 90% or more of the principal amount of all
Debentures outstanding on the date the Trust provides notice of a Change of
Control to the Debenture Trustee have been tendered for purchase pursuant to the
Offer, the Trust shall to redeem all the remaining outstanding Third Debentures
on the same date and at the same price.
If a takeover bid for Third Debentures, within the meaning of the
Applicable Securities Legislation, is made and 90% or more of the principal
amount of all the Third Debentures (other than Third Debentures held at the date
of the takeover bid by or on behalf of the Offeror, associates or affiliates of
the Offeror or anyone acting jointly or in concert with the Offeror) are taken
up and paid for by the Offeror, the Offeror will be entitled to acquire the
Third Debentures of those holders who did not accept the offer on the same terms
as the Offeror acquired the first 90% of the principal amount of the Third
Debentures.
The Trust may, on notice as provided in the Indenture and provided the
Closing takes place at or before the Termination Time, at its option and subject
to any applicable regulatory approval, elect to satisfy the obligation to repay
all or any portion of the principal amount of this Third Debenture due on the
Maturity Date by the issue of that number of Freely Tradeable Trust Units
obtained by dividing the principal amount of this Third Debenture to be paid for
in Trust Units pursuant to the exercise by the Trust of the Unit Repayment Right
by 95% of the weighted average trading price of the Trust Units on the Toronto
Stock Exchange for the 20 consecutive trading days ending on the fifth trading
day preceding the Maturity Date.
The indebtedness evidenced by this Third Debenture, and by all other
Third Debentures now or hereafter certified and delivered under the Indenture,
is a direct unsecured obligation of the Trust, and is subordinated in right of
payment, to the extent and in the manner provided in the Indenture, to the prior
payment of all Senior Indebtedness (including any indebtedness to trade
creditors), whether outstanding at the date of the Indenture or thereafter
created, incurred, assumed or guaranteed.
The principal hereof may become or be declared due and payable before
the stated maturity in the events, in the manner, with the effect and at the
times provided in the Indenture.
A-4
The Indenture contains provisions making binding upon all holders of
Debentures outstanding thereunder (or in certain circumstances specific series
of Debentures) resolutions passed at meetings of such holders held in accordance
with such provisions and instruments signed by the holders of a specified
majority of Debentures outstanding (or specific series), which resolutions or
instruments may have the effect of amending the terms of this Third Debenture or
the Indenture.
The Indenture contains provisions disclaiming any personal liability on
the part of holders of Trust Units, officers and directors of Harvest Operations
Corp. or the trustee, manager and other agents of the Trust in respect of any
obligation or claim arising out of the Indenture or this Debenture.
This Third Debenture may only be transferred, upon compliance with the
conditions prescribed in the Indenture, in one of the registers to be kept at
the principal office of the Debenture Trustee in Calgary, Alberta or its agent
in Toronto, Ontario and in such other place or places and/or by such other
registrars (if any) as the Trust with the approval of the Debenture Trustee may
designate. No transfer of this Third Debenture shall be valid unless made on the
register by the registered holder hereof or his executors or administrators or
other legal representatives, or his or their attorney duly appointed by an
instrument in form and substance satisfactory to the Debenture Trustee or other
registrar, and upon compliance with such reasonable requirements as the
Debenture Trustee and/or other registrar may prescribe and upon surrender of
this Third Debenture for cancellation. Thereupon a new Third Debenture or Third
Debentures in the same aggregate principal amount shall be issued to the
transferee in exchange hereof.
This Third Debenture shall not become obligatory for any purpose until
it shall have been certified by the Debenture Trustee under the Indenture.
Capitalized words or expressions used in this Third Debenture shall,
unless otherwise defined herein, have the meaning ascribed thereto in the
Indenture.
IN WITNESS WHEREOF HARVEST ENERGY TRUST has caused this Third Debenture
to be signed by its authorized representatives as of the 2nd day of August,
2005.
HARVEST OPERATIONS TRUST, by its
attorney Harvest Operations Corp.
By:
-------------------------------
(FORM OF DEBENTURE TRUSTEE'S CERTIFICATE)
This Third Debenture is one of the Series 3, 6.5% Convertible
Extendible Unsecured Subordinated Debentures referred to in the Indenture within
mentioned.
VALIANT TRUST COMPANY
By:
----------------------------
(Authorized Officer)
(FORM OF REGISTRATION PANEL)
(No writing hereon except by Debenture Trustee or other registrar)
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DATE OF IN WHOSE NAME SIGNATURE OF DEBENTURE TRUSTEE OR
REGISTRATION REGISTERED REGISTRAR
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________________, whose address and social insurance
number, if applicable, are set forth below, this Third Debenture (or
$______________ principal amount hereof*) of HARVEST ENERGY TRUST standing in
the name(s) of the undersigned in the register maintained by the Trust with
respect to such Third Debenture and does hereby irrevocably authorize and direct
the Debenture Trustee to transfer such Third Debenture in such register, with
full power of substitution in the premises.
Dated: _____________________
Address of Transferee: _______________________________________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇ and Postal Code)
Social Insurance Number of Transferee, if applicable: ________________________
*If less than the full principal amount of the within Third Debenture is to be
transferred, indicate in the space provided the principal amount (which must be
$1,000 or an integral multiple thereof, unless you hold an Third Debenture in a
non-integral multiple of 1,000 by reason of your having exercised your right to
exchange upon the making of an Offer, in which case such Third Debenture is
transferable only in its entirety) to be transferred.
1. The signature(s) to this assignment must correspond with the name(s) as
written upon the face of this Third Debenture in every particular
without alteration or any change whatsoever. The signature(s) must be
guaranteed by a Canadian chartered bank or trust company or by a member
of an acceptable Medallion Guarantee Program. Notarized or witnessed
signatures are not acceptable as guaranteed signatures. The Guarantor
must affix a stamp bearing the actual words: "SIGNATURE GUARANTEED".
2. The registered holder of this Third Debenture is responsible for the
payment of any documentary, stamp or other transfer taxes that may be
payable in respect of the transfer of this Debenture.
Signature of Guarantor:
_________________________________ __________________________________
Authorized Officer Signature of transferring
registered holder
_________________________________
Name of Institution
EXHIBIT "1"
TO CDS GLOBAL DEBENTURE
HARVEST ENERGY TRUST
SERIES 3, 6.5% CONVERTIBLE EXTENDIBLE UNSECURED
SUBORDINATED DEBENTURES
Initial Principal Amount: $75,000,000 CUSIP: o
Authorization: _________________________________
ADJUSTMENTS
==========================================================================================================================
DATE AMOUNT OF INCREASE AMOUNT OF DECREASE NEW PRINCIPAL AMOUNT AUTHORIZATION
==========================================================================================================================
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SCHEDULE "B"
FORM OF REDEMPTION NOTICE
HARVEST ENERGY TRUST
SERIES 3, 6.5% CONVERTIBLE EXTENDIBLE UNSECURED
SUBORDINATED DEBENTURES
REDEMPTION NOTICE
To: Holders of Series 3, 6.5% Convertible Unsecured Subordinated Debentures
(the "THIRD DEBENTURES") of Harvest Energy Trust (the "TRUST")
Note: All capitalized terms used herein have the meaning ascribed thereto in
the Indenture and the Supplemental Indenture mentioned below, unless
otherwise indicated.
Notice is hereby given pursuant to Section 4.3 of the trust indenture
(the "INDENTURE") dated as of January 29, 2004 among the Trust, Harvest
Operations Corp. and Valiant Trust Company (the "DEBENTURE TRUSTEE") and Section
2.1(c) of the second supplemental indenture (the "SUPPLEMENTAL INDENTURE") dated
as of August 2, 2005 among the Trust, Harvest Operations Corp. and the Debenture
Trustee, that the aggregate principal amount of $o of the Third Debentures
outstanding will be redeemed as of o (the "REDEMPTION DATE"), upon payment of a
redemption amount of $o for each $1,000 principal amount of Third Debentures,
being equal to the aggregate of (i) $o (the "REDEMPTION PRICE"), and (ii) all
accrued and unpaid interest hereon to but excluding the Redemption Date
(collectively, the "TOTAL REDEMPTION PRICE").
The Total Redemption Price will be payable upon presentation and
surrender of the Third Debentures called for redemption at the following
corporate trust office:
VALIANT TRUST COMPANY
▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
The interest upon the principal amount of Third Debentures called for
redemption shall cease to be payable from and after the Redemption Date, unless
payment of the Total Redemption Price shall not be made on presentation for
surrender of such Debentures at the above-mentioned corporate trust office on or
after the Redemption Date or prior to the setting aside of the Total Redemption
Price pursuant to the Indenture.
[PURSUANT TO SECTION 4.6 OF THE INDENTURE AND SECTION 2.1(C) OF THE
SUPPLEMENTAL INDENTURE, THE TRUST HEREBY IRREVOCABLY ELECTS TO SATISFY ITS
OBLIGATION TO PAY $O OF THE REDEMPTION PRICE PAYABLE TO HOLDERS OF THIRD
DEBENTURES IN ACCORDANCE WITH THIS NOTICE BY ISSUING AND DELIVERING TO THE
HOLDERS THAT NUMBER OF FREELY TRADABLE TRUST UNITS OBTAINED BY DIVIDING THE
REDEMPTION PRICE BY 95% OF THE CURRENT MARKET PRICE OF THE TRUST UNITS.
NO FRACTIONAL TRUST UNITS SHALL BE DELIVERED UPON THE EXERCISE BY THE
TRUST OF THE ABOVE-MENTIONED REDEMPTION RIGHT BUT, IN LIEU THEREOF, THE TRUST
SHALL PAY THE CASH EQUIVALENT THEREOF DETERMINED ON THE BASIS OF THE CURRENT
MARKET PRICE OF TRUST UNITS ON THE REDEMPTION DATE (LESS ANY TAX REQUIRED TO BE
DEDUCTED, IF ANY).
B-2
IN THIS CONNECTION, UPON PRESENTATION AND SURRENDER OF THE THIRD
DEBENTURES FOR PAYMENT ON THE REDEMPTION DATE, THE TRUST SHALL, ON THE
REDEMPTION DATE, MAKE THE DELIVERY TO THE DEBENTURE TRUSTEE, AT THE
ABOVE-MENTIONED CORPORATE TRUST OFFICE, FOR DELIVERY TO AND ON ACCOUNT OF THE
HOLDERS, OF CERTIFICATES REPRESENTING THE FREELY TRADABLE TRUST UNITS TO WHICH
HOLDERS ARE ENTITLED TOGETHER WITH THE CASH EQUIVALENT IN LIEU OF FRACTIONAL
TRUST UNITS, CASH FOR ALL ACCRUED AND UNPAID INTEREST UP TO, BUT EXCLUDING, THE
REDEMPTION DATE, AND, IF ONLY A PORTION OF THE DEBENTURES ARE TO BE REDEEMED BY
ISSUING FREELY TRADABLE TRUST UNITS, CASH REPRESENTING THE BALANCE OF THE
REDEMPTION PRICE.]
DATED: _______________________________
HARVEST ENERGY TRUST, by its attorney
Harvest Operations Corp.
______________________________________
(Authorized Director or Officer of Harvest Operations Corp.)
SCHEDULE "C"
FORM OF MATURITY NOTICE
HARVEST ENERGY TRUST
SERIES 3, 6.5% CONVERTIBLE EXTENDIBLE UNSECURED
SUBORDINATED DEBENTURES
MATURITY NOTICE
To: Holders of Series 3, 6.5% Convertible Extendible Unsecured Subordinated
Debentures (the "THIRD DEBENTURES") of Harvest Energy Trust (the
"TRUST")
Note: All capitalized terms used herein have the meaning ascribed thereto in
the Indenture mentioned below, unless otherwise indicated.
Notice is hereby given pursuant to Section 4.10(b) of the trust
indenture (the "INDENTURE") dated as of January 29, 2004 among the Trust,
Harvest Operations Corp. and Valiant Trust Company (the DEBENTURE TRUSTEE") and
Section 2.1(f) of the second supplemental trust indenture dated as of August 2,
2005 among the Trust, Harvest Operations Corp. and the Debenture Trustee, that
the Third Debentures are due and payable as of [DECEMBER 31, 2010] (the
"MATURITY DATE") and the Trust elects to satisfy its obligation to repay to
holders of Third Debentures the principal amount of all of the Third Debentures
outstanding on the Maturity Date by issuing and delivering to the holders that
number of Freely Tradable Trust Units equal to the number obtained by dividing
such principal amount of the Debentures by 95% of the Current Market Price of
Trust Units on the Maturity Date.
No fractional Trust Units shall be delivered on exercise by the Trust
of the above mentioned repayment right but, in lieu thereof, the Trust shall pay
the cash equivalent thereof determined on the basis of the Current Market Price
of Trust Units on the Maturity Date (less any tax required to be deducted, if
any).
In this connection, upon presentation and surrender of the Third
Debentures for payment on the Maturity Date, the Trust shall, on the Maturity
Date, make delivery to the Debenture Trustee, at its principal corporate trust
office in Calgary, Alberta, for delivery to and on account of the holders, of
certificates representing the Freely Tradable Trust Units to which holders are
entitled together with the cash equivalent in lieu of fractional Trust Units,
cash for all accrued and unpaid interest up to, but excluding, the Maturity Date
and if only a portion of the Third Debentures are to be repaid by issuing Freely
Tradable Trust Units, cash representing the balance of the principal amount and
premium (if any) due on the Maturity Date.
DATED: _____________________________
HARVEST ENERGY TRUST, by its attorney
Harvest Operations Corp.
_______________________________________
(Authorized Director or Officer
Officer of Harvest Operations Corp.)