Creating a Resilient Energy Leader
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CREATING A RESILIENT ENERGY LEADER NOTICES OF SPECIAL MEETINGS - AND - NOTICE OF APPLICATION TO THE COURT OF QUEEN’S BENCH OF ALBERTA - AND - JOINT MANAGEMENT INFORMATION CIRCULAR CONCERNING THE PLAN OF ARRANGEMENT INVOLVING CENOVUS ENERGY INC. - AND - HUSKY ENERGY INC. NOVEMBER 9, 2020 These materials are important and require your immediate attention. They require securityholders of Husky Energy Inc. (“Husky”) and Cenovus Energy Inc. (“Cenovus”) to make important decisions. If you are in doubt as to how to make these decisions or require assistance with voting your securities of Husky or Cenovus, please contact your financial, legal, tax or other professional advisors. Shareholders of Cenovus may also contact Cenovus’s strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors by: (A) telephone at (i) 1-866-851-4179 (North American Toll-Free Number); or (ii) 1-416-867-2272 (collect calls outside North America); or (B) email at [email protected]. No securities regulatory authority has expressed an opinion about, or passed upon the fairness or merits of the transaction described in this document, the securities being offered pursuant to such transaction or the adequacy of the information contained in this document and it is an offense to claim otherwise. TABLE OF CONTENTS LETTER TO HUSKY SHAREHOLDERS AND INTERESTS OF CERTAIN PERSONS OR OPTIONHOLDERS ............................ i COMPANIES IN THE ARRANGEMENT ............ 94 LETTER TO CENOVUS COMMON Husky ........................................ 94 SHAREHOLDERS ............................. v Cenovus ...................................... 97 HUSKY Q&A .................................. ix Combined Company Appointments ................. 97 CENOVUS Q&A ............................... xviii LEGAL DEVELOPMENTS ........................ 98 NOTICE OF SPECIAL MEETING OF HUSKY DISSENT RIGHTS ............................... 98 SECURITYHOLDERS .......................... xxvi CERTAIN CANADIAN FEDERAL INCOME TAX NOTICE OF SPECIAL MEETING OF CENOVUS CONSIDERATIONS .............................. 100 SHAREHOLDERS ............................. xxix Holders Resident in Canada ....................... 100 NOTICE OF APPLICATION .................... xxxi Holders Not Resident in Canada ................... 104 GLOSSARY OF TERMS ........................ 1 Dissenting Non-Resident Holders .................. 105 CONVENTIONS ............................... 14 CERTAIN UNITED STATES FEDERAL INCOME ABBREVIATIONS ............................. 15 TAX CONSIDERATIONS ......................... 106 JOINT MANAGEMENT INFORMATION Certain U.S. Federal Income Tax Considerations for CIRCULAR ................................... 16 U.S. Holders Relating to the Arrangement ........... 108 FORWARD-LOOKING STATEMENTS ........... 19 Certain U.S. Federal Income Tax Considerations for ADVISORY REGARDING OIL AND GAS U.S. Holders of the Ownership, Exercise and INFORMATION ............................... 25 Disposition of Cenovus Warrants .................. 109 INFORMATION FOR BENEFICIAL HOLDERS ... 26 Passive Foreign Investment Company Status of SUMMARY ................................... 28 Cenovus ...................................... 110 THE ARRANGEMENT ......................... 49 Additional Considerations ........................ 110 General ..................................... 49 OTHER TAX CONSIDERATIONS ................. 111 Background to the Arrangement ................. 49 PRO FORMA INFORMATION CONCERNING THE Reasons for the Arrangement .................... 54 COMBINED COMPANY .......................... 111 Attributes of the Combined Company ............. 59 Notice to Reader ................................ 111 Husky Fairness Opinions ....................... 61 General ....................................... 111 Cenovus Fairness Opinions ..................... 63 Description of Share Capital of the Combined Recommendation of the Husky Board ............. 66 Company ..................................... 112 Recommendation of the Cenovus Board ........... 66 Selected Pro Forma Financial Information ........... 115 EFFECT OF THE ARRANGEMENT .............. 67 Selected Pro Forma Operational Information ......... 116 General ..................................... 67 Pro Forma Consolidated Capitalization ............. 117 Husky Incentive Awards ....................... 68 Dividends ..................................... 118 Cenovus Incentive Awards ..................... 69 Credit Ratings ................................. 118 Board and Management ........................ 69 Principal Holders of Cenovus Common Shares ........ 119 Details of the Arrangement ..................... 69 Directors and Executive Officers after the The Arrangement Agreement .................... 70 Arrangement ................................... 119 Support Agreements ........................... 79 Corporate Governance and Audit Committee ......... 120 Standstill Agreements ......................... 79 Conflicts of Interest ............................. 120 Pre-Emptive Rights Agreement .................. 82 Statement of Proposed Executive Compensation ...... 120 Registration Rights Agreement .................. 82 Indebtedness of Directors, Officers and Other Description of the Cenovus Warrants ............. 83 Management ................................... 120 PROCEDURE FOR THE ARRANGEMENT TO Auditors, Transfer Agent and Registrar .............. 120 BECOME EFFECTIVE ......................... 85 Material Contracts .............................. 121 Procedural Steps .............................. 85 Risk Factors ................................... 121 Securityholder Approvals ...................... 86 Court Approval .............................. 86 Regulatory Approvals ......................... 87 Securities Law Matters ......................... 90 Procedure for Exchange of Husky Share Certificates or DRS Advices .............................. 92 TIMING .......................................... 121 RISK FACTORS ................................... 121 COMPARISON OF SHAREHOLDER RIGHTS ........ 128 INFORMATION CONCERNING HUSKY ENERGY INC. ............................................. 128 INFORMATION CONCERNING CENOVUS ENERGY INC. ............................................. 128 MATTERS TO BE CONSIDERED AT THE HUSKY MEETING ........................................ 128 MATTERS TO BE CONSIDERED AT THE CENOVUS MEETING ........................................ 128 GENERAL PROXY MATTERS – HUSKY ............. 130 Solicitation of Proxies ............................. 130 Appointment and Revocation of Proxies .............. 130 Proxy Voting .................................... 131 General ........................................ 131 Voting Securities of Husky and Principal Holders thereof ......................................... 131 Procedure and Votes Required ...................... 132 How to Participate at the Husky Meeting .............. 132 GENERAL PROXY MATTERS – CENOVUS .......... 133 Solicitation of Proxies ............................. 133 Appointment and Revocation of Proxies .............. 133 Proxy Voting .................................... 134 General ........................................ 134 Voting Securities of Cenovus and Principal Holders thereof ......................................... 135 QUESTIONS AND OTHER ASSISTANCE ............ 136 APPENDICES APPENDIX A – Arrangement Resolution APPENDIX B – Preferred Shareholder Resolution APPENDIX C – Share Issuance Resolution APPENDIX D – Arrangement Agreement APPENDIX E – Plan of Arrangement APPENDIX F – Interim Order APPENDIX G – Goldman Sachs Fairness Opinion APPENDIX H – CIBC Common Shareholder Fairness Opinion APPENDIX I – CIBC Preferred Shareholder Fairness Opinion APPENDIX J – RBC Fairness Opinion APPENDIX K – TD Fairness Opinion APPENDIX L – Unaudited Consolidated Pro Forma Financial Statements of the Combined Company APPENDIX M – Information Concerning Husky Energy Inc. APPENDIX N – Information Concerning Cenovus Energy Inc. APPENDIX O – Section 191 of the Business Corporation Act (Alberta) APPENDIX P – Comparison of Shareholder Rights LETTER TO HUSKY SHAREHOLDERS AND OPTIONHOLDERS November 9, 2020 Dear Husky Shareholders and Husky Optionholders: You are invited to attend a special meeting (the “Husky Meeting”) of the holders (the “Husky Common Shareholders”) of common shares (“Husky Common Shares”) of Husky Energy Inc. (“Husky”, “we”, “us”, or “our”), the holders (the “Husky Optionholders”) of options to acquire Husky Common Shares (the “Husky Options”) and the holders of preferred shares (“Husky Preferred Shares”) of Husky (the “Husky Preferred Shareholders” and together with the Husky Common Shareholders, the “Husky Shareholders”) to be held on Tuesday, December 15, 2020 at 9:00 a.m. (Calgary time) in a virtual-only format that will be conducted via live webcast accessible at https://web.lumiagm.com/459526828, password “husky2020” (case sensitive). At the Husky Meeting, the Husky Shareholders and Husky Optionholders will be asked to consider and vote on special resolutions approving the plan of arrangement (the “Arrangement”) under section 193 of the Business Corporations Act (Alberta), involving the acquisition by Cenovus Energy Inc. (“Cenovus”) of all of the issued and outstanding Husky Common Shares and Husky Preferred Shares, as more particularly described in the joint management information circular of Cenovus and Husky dated November 9, 2020 (the “Information Circular”). Please complete the enclosed form of proxy and submit it to Husky’s transfer