Exhibit 99.1

 

 

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 contactus@kingsdaleadvisors.com. 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.

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 agent and registrar, Computershare Trust Company of Canada, as soon as possible but not later than 9:00 a.m. (Calgary time) on December 11, 2020, or 48 hours (excluding Saturdays, Sundays and statutory holidays in the Province of Alberta) prior to the time of any adjournment or postponement of the Husky Meeting (the “Husky Proxy Deadline”). Registered Husky Common Shareholders and Husky Optionholders will be able to sign in to the Husky Meeting using the 15-digit control number provided with the meeting materials and password “husky2020” (case sensitive).

Beneficial Husky Common Shareholders (being Husky Common Shareholders who hold their Husky Common Shares through a broker, investment dealer, bank, trust company, custodian, nominee or other intermediary) can appoint themselves or a proxyholder to participate in the virtual Husky Meeting.

Registered Husky Common Shareholders and Husky Optionholders who appoint a proxyholder, and beneficial Husky Common Shareholders who appoint themselves or a proxyholder to participate in the virtual Husky Meeting, MUST also visit http://www.computershare.com/HuskyEnergy to register their or their proxyholder’s name and email address so that, after the Husky Proxy Deadline, Computershare can send via email a Username that will be required (with case-sensitive password “husky2020”) to log into the Husky Meeting.

If you do not follow both of these steps, you or your proxyholder will only be able to enter the meeting as a guest.

Registered Husky Shareholders should also complete and return the enclosed Letter of Transmittal which, when properly completed and returned together with the certificate(s) or DRS Advice(s) representing Husky Common Shares and/or Husky Preferred Shares, as the case may be, and all other required documents, will enable each Husky Shareholder to obtain the consideration that the Husky Shareholder is entitled to receive under the Arrangement.

The Arrangement Agreement

Husky and Cenovus agreed to combine their respective businesses and entered into an arrangement agreement dated October 24, 2020 (the “Arrangement Agreement”) which was unanimously approved by the respective boards of directors of Husky and Cenovus. Pursuant to the Arrangement Agreement and the accompanying Plan of Arrangement, Cenovus will acquire all of the issued and outstanding Husky Common Shares and, if approved by not less than 66²⁄₃% of the votes cast by Husky Preferred Shareholders, voting together as a single class, and not more than 10% of Husky Preferred Shareholders dissent in respect of the Arrangement (unless waived by Cenovus), each series of Husky Preferred Shares will be exchanged for a series of First Preferred Shares of Cenovus (“Cenovus Preferred Shares”) having substantially identical terms as such series of Husky Preferred Shares. Husky Common Shareholders will exchange a portion of their Husky Common Shares for Cenovus Common Shares and the remaining portion of their Husky Common Shares for common share purchase warrants to acquire Cenovus Common Shares (“Cenovus Warrants”), such that, in aggregate, each Husky Common Shareholder will receive, in respect of each Husky Common Share, 0.7845 of a Cenovus Common Share and 0.0651 of a Cenovus Warrant (the “Consideration”). Each whole Cenovus Warrant will entitle the holder thereof to acquire one Cenovus Common Share upon payment in full of the exercise price of $6.54 per Cenovus Common Share at any time up to 60 months following completion of the Arrangement. In exchange for their Husky Options, each Husky Optionholder will receive an option to acquire such number of Cenovus Common Shares as is equal to that number of Husky Common Shares that were issuable upon exercise of such Husky Option, multiplied by 0.7845, with an exercise price per Cenovus Common Share equal to the exercise price per share of such Husky Option divided by 0.7845 and rounded up to the nearest whole cent (the “Cenovus Replacement Options”). Completion of the Arrangement is not conditional upon the approval of the Arrangement by the Husky Preferred Shareholders.

 

- i -

Former Husky Common Shareholders are expected to own approximately 39% of the combined company immediately after completion of the Arrangement (or 41% on a partially-diluted basis assuming the exercise of all Cenovus Warrants issued pursuant to the Arrangement). Current Cenovus Common Shareholders are expected to own approximately 61% of the combined company immediately after completion of the Arrangement (or 59% on a partially-diluted basis assuming the exercise of all Cenovus Warrants issued pursuant to the Arrangement).

The Arrangement is currently anticipated to be completed in the first quarter of 2021, subject to satisfaction or waiver of all conditions precedent in the Arrangement Agreement, including receipt of all court and regulatory approvals. Upon completion of the transaction, the combined company will continue to operate as Cenovus and remain headquartered in Calgary, Alberta.

Benefits of the Arrangement

Creation of a Resilient Integrated Energy Company

Husky and Cenovus anticipate the combination will create a resilient integrated energy leader with a total enterprise value of approximately $23.6 billion (calculated as at the date of the announcement of the Arrangement) with a cost-and-market-advantaged asset portfolio, which can prioritize free funds flow generation, balance sheet strength and returns to shareholders.

The combined company will be the third largest Canadian-based oil and natural gas producer, with approximately 750,000 boe/d of low-cost oil and natural gas production. The anticipated annual sustaining capital requirements to support the combined company’s upstream production and downstream operations is approximately $2.4 billion, a reduction of more than $600 million per year compared to the two companies on a standalone basis. Furthermore, the combined company’s expanded portfolio is expected to enable more efficient, returns-focused capital allocation. With an estimated proved plus probable reserves life index of approximately 33 years, consisting mostly of low-cost reserves, the combination is expected to result in reduced re-investment risk to sustain production at current levels.

The combined company will also be the second largest Canadian-based refiner and upgrader, with total North American upgrading and refining capacity of approximately 660,000 bbls/d, which includes approximately 350,000 bbls/d of heavy oil conversion capacity. Together with Husky, the new Cenovus will have approximately 265,000 bbls/d of current takeaway capacity out of Alberta on existing major pipelines, and approximately 305,000 bbls/d of committed capacity on planned pipelines. In addition, it will have approximately 16 million barrels of crude oil storage capacity and crude-by-rail assets providing approximately 120,000 bbls/d takeaway optionality. Taken together, this results in processing capacity and egress out of Alberta for the majority of the combined company’s oil sands and heavy oil production, significantly reducing financial risks related to Western Canada Select pricing while maintaining healthy exposure to global commodity prices.

Annual Corporate and Operating Synergies and Improved Capital Allocation Opportunities

Further improving cost structure, an estimated $1.2 billion of incremental annual free funds flow, including approximately $600 million in annual corporate and operating synergies and approximately $600 million in annual sustaining capital allocation synergies, are achievable independent of commodity prices. These synergies are the product of Cenovus’s and Husky’s rigorous and disciplined evaluation process to identify the specific efficiencies that can be gained. The vast majority of the annual savings are expected to be achieved in the first year of combined operations, with the full amount of the annual run rate synergies anticipated within year two. Over the longer term, Cenovus and Husky anticipate additional cost savings and margin enhancements based on further physical integration, including connecting upstream assets with the upgrading complex at Lloydminster, Saskatchewan, storage and blending operations at Hardisty, Alberta and the large U.S. refining assets in PADD 2 and PADD 3. The integration of Cenovus’s upstream assets with Husky’s downstream and midstream portfolio is expected to also shorten the value chain and reduce condensate costs associated with heavy oil transportation over the longer term. These longer term anticipated synergies are not included in the estimated $1.2 billion annual synergies anticipated in the first two years of combined operations.

The approximately $600 million in annual corporate and operating cost synergies are expected through reductions to combined workforce and corporate overhead costs including streamlined IT systems and procurement savings through economies of scale. Immediate efficiencies are also expected by implementing best practices from each company, including applying Cenovus’s operating expertise to Husky’s oil sands assets, leveraging the increased portfolio’s scale in the Deep Basin, and pursuing commercial and contract-related efficiencies on midstream marketing and blending opportunities.

Enhanced Free Funds Flow Generation and Investment Grade Metrics

The resulting low funds flow volatility, breakeven price and corporate sustaining costs of the combined company supports an investment grade credit profile and a lower cost of capital through the commodity price cycle. Based on the assumptions contained in the Information Circular, the combined company is expected to have ample current liquidity with $8.5 billion in undrawn committed credit facilities and no bond maturities until 2022.

Furthermore, the estimated $1.2 billion of incremental annual free funds flow from identified near-term synergies is expected to accelerate balance sheet deleveraging. After achieving its balance sheet objectives, the combined company’s free funds flow profile is expected to enable sustainable growth in shareholder distributions and a returns-focused organic capital investment program with residual free funds flow. Following completion of the Arrangement, Cenovus and Husky anticipate approval by the board of directors of the combined company of a quarterly dividend of $0.0175 per share.

 

- ii -

Uncompromising Commitment to Safety and ESG Leadership

Cenovus’s and Husky’s commitments to world-class safety performance and environmental, social and governance (ESG) leadership will remain core to the combined company. This will include ambitious ESG targets, robust management systems and transparent performance reporting. The combined company will continue working to earn a position as a global energy supplier of choice by advancing clean technology and reducing emissions intensity. This includes maintaining the ambition established by each company of achieving net zero emissions by 2050. The combined company will also make it a priority to continue building upon the strong local community relationships already established by both Cenovus and Husky, with a focus on Indigenous economic reconciliation. Striking the right balance among environmental, economic and social considerations will continue to be central to the combined company’s strategy of creating long-term value and business resilience.

The targets that each of Cenovus and Husky released earlier this year for key ESG focus areas are the products of robust processes to ensure alignment with the companies’ business plans and strategies. The combined company will remain committed to pursuing ESG targets and will undertake a similarly thorough analysis within the context of the combined company’s business plan before setting meaningful targets for the combined portfolio. Once that work is complete in 2021 and approved by the combined company’s board of directors, the new targets and plans to achieve them will be disclosed. Leading safety practices, strong governance and advancing diversity and inclusion will remain central to the combined company’s ESG commitments.

For additional information with respect to these and other anticipated benefits of the Arrangement, see the sections in the Information Circular entitled “The Arrangement – Reasons for the Arrangement – Husky Board” and “The Arrangement – Attributes of the Combined Company”.

Board of Directors and Management

Following completion of the Arrangement, Alex J. Pourbaix, the current President & Chief Executive Officer of Cenovus, will serve as President & Chief Executive Officer of the combined company. Further, Jeffrey R. Hart, the current Chief Financial Officer of Husky, will serve as Executive Vice-President & Chief Financial Officer of the combined company, and Jonathan M. McKenzie, the current Executive Vice-President & Chief Financial Officer of Cenovus, will serve as Executive Vice-President & Chief Operating Officer of the combined company. Keith A. MacPhail, the current Chair of the board of directors of Cenovus (the “Cenovus Board”), will serve as Independent Board Chair of the combined company. The remainder of senior management will be selected from each of Cenovus and Husky and named prior to the completion of the Arrangement.

The board of directors of the combined company following completion of the Arrangement will consist of eight members of the current Cenovus Board, including Keith A. MacPhail (as Independent Board Chair) and Alex J. Pourbaix, with Keith M. Casey, Jane E. Kinney, Harold N. Kvisle, Richard J. Marcogliese, Claude Mongeau, and Rhonda I. Zygocki expected to continue as members of the combined company’s board of directors, and four members of the current board of directors of Husky (the “Husky Board”), with Canning K. N. Fok, Eva L. Kwok, Wayne E. Shaw and Frank J. Sixt being the members expected to join the combined company’s board of directors.

Shareholder and Optionholder Votes

The Arrangement must be approved by (i) not less than 66²⁄₃% of the votes cast by Husky Common Shareholders present in person (virtually) or represented by proxy at the Husky Meeting and (ii) not less than 66²⁄₃% of the votes cast by Husky Common Shareholders and Husky Optionholders present in person (virtually) or represented by proxy at the Husky Meeting, voting together as a single class (the “Arrangement Resolution”). In addition to the approval of the Husky Common Shareholders and Husky Optionholders, completion of the Arrangement is subject to the approval by Cenovus Common Shareholders of an ordinary resolution approving, among other things, the issuance of such number of Cenovus Common Shares and Cenovus Warrants (the “Share Issuance Resolution”) as are required to be issued pursuant to and in connection with the Arrangement.

Completion is also subject to, among other things: (i) the approval of the Court of Queen’s Bench of Alberta; (ii) the approval of the listing of the Cenovus Common Shares and Cenovus Warrants to be issued pursuant to the Share Issuance Resolution, and the Cenovus Common Shares issuable upon exercise of the Cenovus Warrants, on the Toronto Stock Exchange (the “TSX”) and the New York Stock Exchange; and (iii) the receipt of all other necessary regulatory approvals. If the Arrangement Resolution is not approved at the Husky Meeting, the Arrangement will not be completed. Similarly, if the Share Issuance Resolution is not approved at the Cenovus Meeting, the Arrangement will not be completed.

In addition, Husky will seek the approval of the Arrangement by not less than 66²⁄₃% of the votes cast by Husky Preferred Shareholders (the “Preferred Shareholder Resolution”) present in person (virtually) or represented by proxy at the Husky Meeting, voting together as a single class, to allow the Husky Preferred Shareholders to participate in the Arrangement by exchanging their Husky Preferred Shares, on a one-for-one basis, for Cenovus Preferred Shares, issuable in series, and having, on a series-by-series basis, substantially identical terms as the corresponding series of Husky Preferred Shares. Approval of the Preferred Shareholder Resolution is not required in order to complete the Arrangement. If the Husky Preferred Shareholders do not approve the Preferred Shareholder Resolution at the Husky Meeting (or if the Preferred Shareholder Resolution is approved and, unless otherwise determined by Cenovus in its sole discretion, holders of more than 10% of the Husky Preferred Shares have validly exercised, and not withdrawn, dissent and appraisal rights in connection with the Arrangement), and both the Share Issuance Resolution and the Arrangement Resolution are approved at their respective meetings, the Husky Preferred Shares will not be exchanged for Cenovus Preferred Shares pursuant to the Plan of Arrangement and will remain outstanding in a subsidiary of Cenovus following completion of the Arrangement and listed on the TSX. Subject to approval of the Preferred Shareholder Resolution, Cenovus has applied to list the Cenovus Preferred Shares to be issued in exchange for the Husky Preferred Shares on the TSX.

Support Agreements

The Arrangement has the support of Hutchison Whampoa Europe Investments S.à r.l. and L.F. Investments S.à r.l. (together, the “Supporting Husky Shareholders” and each a “Supporting Husky Shareholder”), major shareholders of Husky, which hold approximately 40.19% and

 

- iii -

29.32%, respectively, of the issued and outstanding Husky Common Shares. Each Supporting Husky Shareholder has entered into a separate hard lock-up agreement with Cenovus, pursuant to which such Supporting Husky Shareholder has irrevocably agreed to vote in favour of the Arrangement at the Husky Meeting, except in limited circumstances.

Fairness Opinions

Goldman Sachs Canada Inc. (“Goldman Sachs”) and CIBC World Markets Inc. (“CIBC Capital Markets”) acted as co-financial advisors to Husky and provided the Husky Board with their respective opinions (the “Husky Fairness Opinions”) to the effect that, as of October 24, 2020 and October 23, 2020, respectively, based upon and subject to the assumptions, qualifications and limitations set forth therein, the Consideration to be received by the Husky Common Shareholders was fair, from a financial point of view, to the Husky Common Shareholders. CIBC Capital Markets also provided the Husky Board with its opinion to the effect that, as of October 23, 2020, based upon and subject to the assumptions, qualifications and limitations set forth therein, the consideration to be received by the Husky Preferred Shareholders pursuant to the Arrangement was fair, from a financial point of view, to the Husky Preferred Shareholders. The full text of the written opinion of Goldman Sachs, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with such opinion, is contained in Appendix G to the Information Circular. The full texts of the written opinions of CIBC Capital Markets are contained in Appendices H and I to the Information Circular. Each of Goldman Sachs and CIBC Capital Markets provided its opinion(s) solely for the information and assistance of the Husky Board in connection with its consideration of the transaction. Each Husky Fairness Opinion is not a recommendation as to how any Husky Shareholder should vote with respect to the transaction, or any other matter.

Recommendation

After consulting with Husky’s senior management and with its financial, legal, tax and other advisors, and after considering, among other things, the Husky Fairness Opinions, the Husky Board has unanimously: (i) determined that the Arrangement and the entry into the Arrangement Agreement are in the best interests of Husky; (ii) determined that the Arrangement is fair to Husky Common Shareholders and Husky Preferred Shareholders; (iii) approved the Arrangement Agreement and the transactions contemplated thereby; (iv) recommended that Husky Common Shareholders and Husky Optionholders vote in favour of the Arrangement Resolution; and (v) recommended that Husky Preferred Shareholders vote in favour of the Preferred Shareholder Resolution.

The Information Circular contains a detailed description of the Arrangement, as well as detailed information regarding Husky and Cenovus and certain pro forma and other information of the combined company after giving effect to the Arrangement. It also includes certain risk factors relating to Husky, Cenovus, the Arrangement and the combined company. Please give this material your careful consideration and, if you require assistance, consult your financial, legal, tax or other professional advisors.

Due to the unprecedented public health impact of coronavirus disease 2019, also known as COVID-19, and in alignment with the recommendations of Canadian public health officials to cancel large public gatherings, the Husky Meeting will be held in a virtual-only format conducted via live webcast online at https://web.lumiagm.com/459526828 and password “husky2020” (case sensitive). The virtual-only format for the Husky Meeting will help mitigate health and safety risks to the community, shareholders, employees and other stakeholders. At this website, Husky Shareholders and Husky Optionholders and duly appointed proxyholders will be able to hear the meeting live, submit questions and vote their securities on all items of business while the Husky Meeting is being held. While Husky Shareholders, Husky Optionholders and duly appointed proxyholders will not be able to attend the Husky Meeting in person, regardless of geographic location and ownership, they will have an equal opportunity to participate at the Husky Meeting and vote on the Arrangement Resolution or the Preferred Shareholder Resolution, as applicable. Detailed instructions about how to participate in the Husky Meeting can be found in the Notice of Special Meeting of Husky Securityholders and the Information Circular.

Your vote is important to Husky and we strongly encourage you to participate in the Husky Meeting or submit the applicable enclosed form of proxy or voting information form. If you have any questions about any of the information or require assistance in completing your form of proxy or voting instruction form for your Husky securities, as applicable, please contact your financial, legal, tax or other professional advisors.

On behalf of the board of directors of Husky, I would like to express our gratitude for the support our shareholders have demonstrated with respect to our decision to take the proposed Arrangement forward. We believe that this is a transformational opportunity for both Husky and Cenovus shareholders and will create a new, Canadian-headquartered, integrated energy leader that reflects our shared commitment to creating value and unlocking growth potential for shareholders.

We look forward to your participation at the Husky Meeting.

Yours sincerely,

(signed) “Robert J. Peabody”

Robert J. Peabody

President & Chief Executive Officer

Husky Energy Inc.

 

- iv -

LETTER TO CENOVUS COMMON SHAREHOLDERS

November 9, 2020

Dear Cenovus Common Shareholders:

You are invited to attend a special meeting (the “Cenovus Meeting”) of the holders (the “Cenovus Common Shareholders”) of common shares (“Cenovus Common Shares”) in the capital of Cenovus Energy Inc. (“Cenovus”, “we”, “us”, or “our”) to be held on Tuesday, December 15, 2020 at 1:00 p.m. (Calgary time) in a virtual-only format that will be conducted via live webcast accessible at https://web.lumiagm.com/418831959 and password “cenovus2020” (case sensitive).

Cenovus and Husky Energy Inc. (“Husky”) agreed to combine their respective businesses and entered into an arrangement agreement dated October 24, 2020 (the “Arrangement Agreement”) which was unanimously approved by the respective boards of directors of Cenovus and Husky. Pursuant to the Arrangement Agreement and the accompanying Plan of Arrangement (the “Arrangement”), Cenovus will acquire all of the issued and outstanding common shares in the capital of Husky (“Husky Common Shares”) and, if approved by the holders (“Husky Preferred Shareholders”) of preferred shares in the capital of Husky (“Husky Preferred Shares”), voting together as a single class, and not more than 10% of Husky Preferred Shareholders dissent in respect of the Arrangement (unless waived by Cenovus), each series of Husky Preferred Shares will be exchanged for a series of First Preferred Shares of Cenovus (“Cenovus Preferred Shares”) having substantially identical terms as such series of Husky Preferred Shares. Holders of Husky Common Shares (“Husky Common Shareholders”) will exchange a portion of their Husky Common Shares for Cenovus Common Shares and the remaining portion of their Husky Common Shares for common share purchase warrants to acquire Cenovus Common Shares (“Cenovus Warrants”), such that, in aggregate, each Husky Common Shareholder will receive, in respect of each Husky Common Share, 0.7845 of a Cenovus Common Share and 0.0651 of a Cenovus Warrant (the “Consideration”). Each whole Cenovus Warrant will entitle the holder thereof to acquire one Cenovus Common Share upon payment in full of the exercise price of $6.54 per Cenovus Common Share at any time up to 60 months following completion of the Arrangement. In exchange for their options to acquire Husky Common Shares (“Husky Options”), each holder of a Husky Option will receive an option to acquire such number of Cenovus Common Shares as is equal to that number of Husky Common Shares that were issuable upon exercise of such Husky Option, multiplied by 0.7845, with an exercise price per Cenovus Common Share equal to the exercise price per share of such Husky Option divided by 0.7845 and rounded up to the nearest whole cent (the “Cenovus Replacement Options”). Completion of the Arrangement is not conditional upon the approval of the Arrangement by the Husky Preferred Shareholders.

At the Cenovus Meeting, you will be asked to consider and vote on an ordinary resolution (the “Share Issuance Resolution”), the full text of which is set forth in Appendix C to the accompanying joint management information circular of Cenovus and Husky dated November 9, 2020 (the “Information Circular”). The Share Issuance Resolution contemplates approving: (i) the issuance of the Cenovus Common Shares and the Cenovus Warrants issuable pursuant to the Arrangement and the Cenovus Common Shares issuable upon exercise, from time to time, of Cenovus Warrants and Cenovus Replacement Options; and (ii) certain consequential amendments to Cenovus’s current shareholder rights plan to ensure that neither the consummation of the Arrangement nor any share purchase rights issued in connection with the Arrangement triggers such rights plan, all as more particularly described in the Information Circular.

Please complete the enclosed form of proxy and submit it to Cenovus’s transfer agent and registrar, Computershare Investor Services, Inc., as soon as possible but not later than 1:00 p.m. (Calgary time) on December 11, 2020, or 48 hours (excluding Saturdays, Sundays and statutory holidays in the Province of Alberta) prior to the time of any adjournment or postponement of the Cenovus Meeting (the “Cenovus Proxy Deadline”). Registered Cenovus Common Shareholders will be able to sign in to the Cenovus Meeting using the 15-digit control number provided with the meeting materials and password “cenovus2020” (case sensitive).

Beneficial Cenovus Common Shareholders (being Cenovus Common Shareholders who hold their Cenovus Common Shares through a broker, investment dealer, bank, trust company, custodian, nominee or other intermediary) can appoint themselves or a proxyholder to participate in the virtual Cenovus Meeting.

Registered Common Shareholders who appoint a proxyholder, and beneficial Cenovus Common Shareholders who appoint themselves or a proxyholder to participate in the virtual Cenovus Meeting, must also visit https://www.computershare.com/CenovusEnergy to register their or their proxyholder’s name and email address so that, after the Cenovus Proxy Deadline, Computershare can send via email a Username that will be required (with case-sensitive password “cenovus2020”) to log into the Cenovus Meeting.

If you do not follow both of these steps, you or your proxyholder will only be able to enter the meeting as a guest.

Current Cenovus Common Shareholders are expected to own approximately 61% of the combined company immediately after completion of the Arrangement (or 59% on a partially-diluted basis assuming the exercise of all Cenovus Warrants issued pursuant to the Arrangement). Former Husky Common Shareholders are expected to own approximately 39% of the combined company immediately after completion of the Arrangement (or 41% on a partially-diluted basis assuming the exercise of all Cenovus Warrants issued pursuant to the Arrangement).

 

- v -

The Arrangement is currently anticipated to be completed in the first quarter of 2021, subject to satisfaction or waiver of all conditions precedent in the Arrangement Agreement, including receipt of all court and regulatory approvals. Upon completion of the transaction, the combined company will continue to operate as Cenovus and remain headquartered in Calgary, Alberta.

Creation of a Resilient Integrated Energy Company

Husky and Cenovus anticipate the combination will create a resilient integrated energy leader with a total enterprise value of approximately $23.6 billion (calculated as at the date of the announcement of the Arrangement) with a cost-and-market-advantaged asset portfolio, which can prioritize free funds flow generation, balance sheet strength and returns to shareholders.

The combined company will be the third largest Canadian-based oil and natural gas producer, with approximately 750,000 boe/d of low-cost oil and natural gas production. The anticipated annual sustaining capital requirements to support the combined company’s upstream production and downstream operations is approximately $2.4 billion, a reduction of more than $600 million per year compared to the two companies on a standalone basis. Furthermore, the combined company’s expanded portfolio is expected to enable more efficient, returns-focused capital allocation. With an estimated proved plus probable reserves life index of approximately 33 years, consisting mostly of low-cost reserves, the combination is expected to result in reduced re-investment risk to sustain production at current levels.

The combined company will also be the second largest Canadian-based refiner and upgrader, with total North American upgrading and refining capacity of approximately 660,000 bbls/d, which includes approximately 350,000 bbls/d of heavy oil conversion capacity. Together with Husky, the new Cenovus will have approximately 265,000 bbls/d of current takeaway capacity out of Alberta on existing major pipelines, and approximately 305,000 bbls/d of committed capacity on planned pipelines. In addition, it will have approximately 16 million barrels of crude oil storage capacity and crude-by-rail assets providing approximately 120,000 bbls/d takeaway optionality. Taken together, this results in processing capacity and egress out of Alberta for the majority of the combined company’s oil sands and heavy oil production, significantly reducing financial risks related to Western Canada Select pricing while maintaining healthy exposure to global commodity prices.

Annual Corporate and Operating Synergies and Improved Capital Allocation Opportunities

Further improving cost structure, an estimated $1.2 billion of incremental annual free funds flow, including approximately $600 million in annual corporate and operating synergies and approximately $600 million in annual sustaining capital allocation synergies, are achievable independent of commodity prices. These synergies are the product of Cenovus’s and Husky’s rigorous and disciplined evaluation process to identify the specific efficiencies that can be gained. The vast majority of the annual savings are expected to be achieved in the first year of combined operations, with the full amount of the annual run rate synergies anticipated within year two. Over the longer term, Cenovus and Husky anticipate additional cost savings and margin enhancements based on further physical integration, including connecting upstream assets with the upgrading complex at Lloydminster, Saskatchewan, storage and blending operations at Hardisty, Alberta and the large U.S. refining assets in PADD 2 and PADD 3. The integration of Cenovus’s upstream assets with Husky’s downstream and midstream portfolio is expected to also shorten the value chain and reduce condensate costs associated with heavy oil transportation over the longer term. These longer term anticipated synergies are not included in the estimated $1.2 billion annual synergies anticipated in the first two years of combined operations.

The approximately $600 million in annual corporate and operating cost synergies are expected through reductions to combined workforce and corporate overhead costs including streamlined IT systems and procurement savings through economies of scale. Immediate efficiencies are also expected by implementing best practices from each company, including applying Cenovus’s operating expertise to Husky’s oil sands assets, leveraging the increased portfolio’s scale in the Deep Basin, and pursuing commercial and contract-related efficiencies on midstream marketing and blending opportunities.

Enhanced Free Funds Flow Generation and Investment Grade Metrics

The resulting low funds flow volatility, breakeven price and corporate sustaining costs of the combined company supports an investment grade credit profile and a lower cost of capital through the commodity price cycle. Based on the assumptions contained in the Information Circular, the combined company is expected to have ample current liquidity with $8.5 billion in undrawn committed credit facilities and no bond maturities until 2022.

Furthermore, the estimated $1.2 billion of incremental annual free funds flow from identified near-term synergies is expected to accelerate balance sheet deleveraging. After achieving its balance sheet objectives, the combined company’s free funds flow profile is expected to enable sustainable growth in shareholder distributions and a returns-focused organic capital investment program with residual free funds flow. Following completion of the Arrangement, Cenovus and Husky anticipate approval by the board of directors of the combined company of a quarterly dividend of $0.0175 per share.

Uncompromising Commitment to Safety and ESG Leadership

Cenovus’s and Husky’s commitments to world-class safety performance and environmental, social and governance (ESG) leadership will remain core to the combined company. This will include ambitious ESG targets, robust management systems and transparent performance reporting. The combined company will continue working to earn a position as a global energy supplier of choice by advancing clean technology and reducing emissions intensity. This includes maintaining the ambition established by each company of achieving net zero emissions by 2050.

 

- vi -

The combined company will also make it a priority to continue building upon the strong local community relationships already established by both Cenovus and Husky, with a focus on Indigenous economic reconciliation. Striking the right balance among environmental, economic and social considerations will continue to be central to the combined company’s strategy of creating long-term value and business resilience.

The targets that each of Cenovus and Husky released earlier this year for key ESG focus areas are the products of robust processes to ensure alignment with the companies’ business plans and strategies. The combined company will remain committed to pursuing ESG targets and will undertake a similarly thorough analysis within the context of the combined company’s business plan before setting meaningful targets for the combined portfolio. Once that work is complete in 2021 and approved by the combined company’s board of directors, the new targets and plans to achieve them will be disclosed. Leading safety practices, strong governance and advancing diversity and inclusion will remain central to the combined company’s ESG commitments.

For additional information with respect to these and other anticipated benefits of the Arrangement, see the sections in the Information Circular entitled “The Arrangement – Reasons for the Arrangement – Cenovus Board” and “The Arrangement – Attributes of the Combined Company”.

Board of Directors and Management

Following completion of the Arrangement, Alex J. Pourbaix, the current President & Chief Executive Officer of Cenovus, will serve as President & Chief Executive Officer of the combined company. Further, Jeffrey R. Hart, the current Chief Financial Officer of Husky, will serve as Executive Vice-President & Chief Financial Officer of the combined company, and Jonathan M. McKenzie, the current Executive Vice-President & Chief Financial Officer of Cenovus, will serve as Executive Vice-President & Chief Operating Officer of the combined company. Keith A. MacPhail, the current Chair of the board of directors of Cenovus (the “Cenovus Board”), will serve as Independent Board Chair of the combined company. The remainder of senior management will be selected from each of Cenovus and Husky and named prior to the completion of the Arrangement.

The board of directors of the combined company following completion of the Arrangement will consist of eight members of the current Cenovus Board, including Keith A. MacPhail (as Independent Board Chair) and Alex J. Pourbaix, with Keith M. Casey, Jane E. Kinney, Harold N. Kvisle, Richard J. Marcogliese, Claude Mongeau, and Rhonda I. Zygocki expected to continue as members of the combined company’s board of directors, and four members of the current board of directors of Husky (the “Husky Board”), with Canning K. N. Fok, Eva L. Kwok, Wayne E. Shaw and Frank J. Sixt being the members expected to join the combined company’s board of directors.

Shareholder Votes

The Share Issuance Resolution must be approved by a simple majority of the votes cast by the Cenovus Common Shareholders present in person (virtually) or represented by proxy at the Cenovus Meeting. In addition to the approval of the Cenovus Common Shareholders, completion of the Arrangement is subject to, among other things: (i) the approval of the Arrangement by not less than 66²⁄₃% of the votes cast by Husky Common Shareholders present in person (virtually) or represented by proxy at a special meeting (the “Husky Meeting”) of Husky Shareholders and holders of Husky Options (the “Husky Optionholders”) and not less than 66²⁄₃% of the votes cast by Husky Common Shareholders and Husky Optionholders present in person (virtually) or represented by proxy at the Husky Meeting, voting together as a single class (the “Arrangement Resolution”); (ii) the approval of the Court of Queen’s Bench of Alberta; (iii) the approval of the listing of the Cenovus Common Shares and Cenovus Warrants to be issued pursuant to the Plan of Arrangement and the Cenovus Common Shares issuable upon exercise of the Cenovus Warrants on the Toronto Stock Exchange (the “TSX”) and the New York Stock Exchange; and (iv) the receipt of all other necessary regulatory approvals. If the Arrangement Resolution is not approved at the Husky Meeting, the Arrangement will not be completed. Similarly, if the Share Issuance Resolution is not approved at the Cenovus Meeting, the Arrangement will not be completed.

Provided that the Arrangement is approved by not less than 66²⁄₃% of the votes cast by holders of Husky Preferred Shares (“Husky Preferred Shareholders”) present in person (virtually) or represented by proxy, voting together as a single class, at the Husky Meeting, each series of Husky Preferred Shares will be exchanged, on a one-for-one basis, for Cenovus Preferred Shares, issuable in series, and having, on a series-by-series basis, substantially identical terms as the corresponding series of Husky Preferred Shares. Completion of the Arrangement is not conditional upon the approval of the Arrangement by the Husky Preferred Shareholders. If the Husky Preferred Shareholders do not approve the Arrangement or more than 10% of Husky Preferred Shareholders dissent in respect of the Arrangement (unless waived by Cenovus), the Husky Preferred Shares will not be exchanged for Cenovus Preferred Shares pursuant to the Plan of Arrangement and will remain outstanding in a subsidiary of Cenovus following completion of the Arrangement and listed on the TSX.

Support Agreements

The Arrangement has the support of Hutchison Whampoa Europe Investments S.à r.l. and L.F. Investments S.à r.l. (together, the “Supporting Husky Shareholders” and each a “Supporting Husky Shareholder”), major shareholders of Husky, which hold approximately 40.19% and 29.32%, respectively, of the issued and outstanding Husky Common Shares. Each Supporting Husky Shareholder has entered into a separate hard lock-up agreement with Cenovus, pursuant to which such Supporting Husky Shareholder has irrevocably agreed to vote in favour of the Arrangement at the Husky Meeting, except in limited circumstances.

Fairness Opinions

RBC Capital Markets and TD Securities Inc. (“TD Securities”) acted as co-financial advisors to Cenovus and each of RBC Capital Markets and TD Securities has provided the Cenovus Board with its respective opinion (together, the “Cenovus Fairness Opinions”) to the effect that, as of

 

- vii -

October 24, 2020, subject to the assumptions made and limitations and qualifications included therein, the Consideration to be paid by Cenovus pursuant to the Arrangement is fair, from a financial point of view, to Cenovus.

Recommendation

After consulting with Cenovus’s senior management and with its financial, legal, tax and other advisors, and after considering, among other things, the Cenovus Fairness Opinions, the Cenovus Board has unanimously: (i) determined that the Arrangement and entry into the Arrangement Agreement are in the best interests of Cenovus; (ii) determined that the consideration to be paid by Cenovus pursuant to the Arrangement Agreement is fair, from a financial point of view, to Cenovus; (iii) approved the Arrangement Agreement and the transactions contemplated thereby; and (iv) recommended that Cenovus Common Shareholders vote in favour of the Share Issuance Resolution.

The Information Circular contains a detailed description of the Arrangement, as well as detailed information regarding Cenovus and Husky and certain pro forma and other information of the combined company after giving effect to the Arrangement. It also includes certain risk factors relating to Cenovus, Husky, the Arrangement and the combined company. Please give this material your careful consideration and, if you require assistance, consult your financial, legal, tax or other professional advisors or Cenovus’s strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors.

Due to the unprecedented public health impact of coronavirus disease 2019, also known as COVID-19, and in alignment with the recommendations of Canadian public health officials to cancel large public gatherings, the Cenovus Meeting will be held in a virtual-only format conducted via live webcast online at https://web.lumiagm.com/418831959 (password “cenovus2020” (case sensitive)). The virtual-only format for the Cenovus Meeting will help mitigate health and safety risks to the community, shareholders, employees and other stakeholders. At this website, Cenovus Common Shareholders and duly appointed proxyholders will be able to hear the meeting live, submit questions and vote their Cenovus Common Shares on all items of business while the Cenovus Meeting is being held. While Cenovus Common Shareholders and duly appointed proxyholders will not be able to attend the Cenovus Meeting in person, regardless of geographic location and ownership, they will have an equal opportunity to participate at the Cenovus Meeting and vote on the Share Issuance Resolution. Detailed instructions about how to participate in the Cenovus Meeting can be found in the Notice of Special Meeting of Cenovus Common Shareholders and the Information Circular.

Your vote is important to Cenovus and we strongly encourage you to participate in the Cenovus Meeting or submit the enclosed form of proxy or voting information form. If you have any questions about any of the information or require assistance in completing your form of proxy or voting instruction form for your Cenovus Common Shares, as applicable, please contact your financial, legal, tax or other professional advisors or our strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, by telephone at 1-866-851-4179 (toll-free in North America) or at 1-416-867-2272 outside of North America, or by email at contactus@kingsdaleadvisors.com.

We look forward to your participation at the Cenovus Meeting.

Yours sincerely,

(signed) “Alex J. Pourbaix”

Alex J. Pourbaix

President & Chief Executive Officer

Cenovus Energy Inc.

 

- viii -

HUSKY Q&A

HUSKY SHAREHOLDERS AND OPTIONHOLDERS – QUESTIONS AND ANSWERS

ABOUT THE ARRANGEMENT AND THE HUSKY MEETING

The following is intended to address certain key questions concerning the Arrangement and the Husky Meeting. The information contained below is of a summary nature and therefore is not complete and is qualified in its entirety by the more detailed information contained elsewhere in or incorporated by reference in this Information Circular, including the Appendices hereto, all of which are important and should be reviewed carefully. Capitalized terms used but not otherwise defined in this “Questions and Answers About the Arrangement and the Husky Meeting” have the meanings set forth under “Glossary of Terms”.

 

Q:	Why did I receive this Information Circular?

 

A:	You received this Information Circular because you are a Husky Shareholder or Husky Optionholder who will be asked at the Husky Meeting to approve the Arrangement involving Husky and Cenovus.

 

Q:	What is the Arrangement?

 

A:

On October 24, 2020, Husky and Cenovus agreed to the definitive terms of a transaction to combine the two companies pursuant to the terms and conditions of the Arrangement Agreement. Pursuant to the Arrangement Agreement, Cenovus has agreed to acquire all of the issued and outstanding Husky Common Shares under a court-approved Plan of Arrangement in accordance with the provisions of the ABCA. If completed, the Arrangement will result in Cenovus acquiring all of the Husky Common Shares. Pursuant to the Arrangement, a portion of the Husky Common Shares held by each Husky Common Shareholder will be exchanged for Cenovus Warrants and the remaining portion of the Husky Common Shares will be exchanged for Cenovus Common Shares such that, in aggregate, each Husky Common Shareholder will receive 0.7845 of a Cenovus Common Share and 0.0651 of a Cenovus Warrant in respect of each Husky Common Share held. Each whole Cenovus Warrant will entitle the holder thereof to acquire one Cenovus Common Share upon payment in full of the exercise price of $6.54 per Cenovus Common Share at any time up to 60 months following completion of the Arrangement. Pursuant to the Plan of Arrangement, all outstanding Husky Options will be exchanged for Cenovus Replacement Options. If the Arrangement is completed, Husky Optionholders will receive Cenovus Replacement Options to acquire such number of Cenovus Common Shares as is equal to that number of Husky Common Shares that were issuable upon exercise of a Husky Optionholder’s Husky Options immediately prior to the Effective Time, multiplied by 0.7845, with an exercise price per Cenovus Common Share equal to the exercise price per share of a Husky Option immediately prior to the Effective Time divided by 0.7845 and rounded up to the nearest whole cent.

Former Husky Common Shareholders are expected to own approximately 39% of the combined company immediately after completion of the Arrangement (or 41% on a partially-diluted basis assuming the exercise of all Cenovus Warrants issued pursuant to the Arrangement). Current Cenovus Common Shareholders are expected to own approximately 61% of the combined company immediately after completion of the Arrangement (or 59% on a partially-diluted basis assuming the exercise of all Cenovus Warrants issued pursuant to the Arrangement).

Additionally, if the Preferred Shareholder Resolution is approved at the Husky Meeting and the Preferred Share Condition is otherwise satisfied, the Husky Preferred Shareholders will exchange their Husky Preferred Shares for Cenovus Preferred Shares having substantially identical terms to each series of Husky Preferred Shares. See “Pro Forma Information Concerning the Combined Company – Description of Share Capital of the Combined Company – Cenovus Preferred Shares”.

 

Q:	Does this consideration reflect a premium for the Husky Common Shares?

 

A:

Yes. The Consideration, being the number of Cenovus Common Shares and Cenovus Warrants being offered to Husky Common Shareholders in respect of the Husky Common Shares, implies a premium for Husky Common Shareholders as of the date of the announcement of the Arrangement Agreement. On October 25, 2020, the date of the announcement of the transaction, the Consideration to be received by Husky Common Shareholders represented a 23% premium to the closing price of the Husky Common Shares on the TSX on October 23, 2020 (with an implied price of $3.90 per Husky Common Share and including the Cenovus Warrants).

 

Q:	Does the Husky Board support the Arrangement?

 

A:

Yes. Following review of a significant amount of information and consideration of a number of factors (including the interests of affected stakeholders) and after considering the Husky Fairness Opinions and following consultation with Husky’s senior management and with Husky’s legal, financial, tax and other advisors, the Husky Board has unanimously: (i) determined that the Arrangement and the entry into the Arrangement Agreement are in the best interests of Husky; (ii) determined that the Arrangement is fair to Husky Common Shareholders and Husky Preferred Shareholders; (iii) approved the Arrangement Agreement and the transactions contemplated thereby; (iv) recommended that Husky Common Shareholders and Husky Optionholders vote in favour of the Arrangement Resolution; and (v) recommended that Husky Preferred Shareholders vote in favour of the Preferred Shareholder Resolution.

 

- ix -

THE HUSKY BOARD UNANIMOUSLY RECOMMENDS THAT (I) HUSKY COMMON SHAREHOLDERS AND HUSKY OPTIONHOLDERS VOTE FOR THE ARRANGEMENT RESOLUTION AND (II) HUSKY PREFERRED SHAREHOLDERS VOTE FOR THE PREFERRED SHAREHOLDER RESOLUTION.

See “The Arrangement – Recommendation of the Husky Board” and “The Arrangement – Reasons for the Arrangement – Husky Board”. The full text of the Arrangement Resolution is set forth in Appendix A to this Information Circular and the full text of the Preferred Shareholder Resolution is set forth in Appendix B to this Information Circular.

 

Q:	What are the benefits of the Arrangement?

 

A:

Management of Husky and Cenovus anticipate that the business combination will create a resilient integrated energy leader that is expected to unlock value for Husky Common Shareholders and Cenovus Common Shareholders, including through achieving anticipated significant synergies. The following are some, but not all, of the expected long-term benefits of the Arrangement to Husky Shareholders:

Highly Complementary Integrated and Diversified Portfolio

The assets of the combined company will result in a more diversified geographic and product portfolio supporting stability of cash flow and opportunities for enhanced free funds flow. The combined company will unlock market opportunities by uniting high-quality and low-cost oil sands and heavy oil assets with extensive midstream and downstream infrastructure providing ability to optimize margin capture across the heavy oil value chain. The transaction will result in processing capacity and egress out of Alberta for the majority of the combined company’s oil sands and heavy oil production, positioning low exposure to Alberta oil pricing while maintaining healthy exposure to global commodity prices. Cash flow stability of the combined entity will be further underpinned by the global exposure of Husky’s offshore Asia Pacific natural gas production interests, which currently generate approximately $1 billion in annual free funds flow through sales largely under long-term contracts.

The combined company will be the third largest Canadian-based oil and natural gas producer, with approximately 750,000 boe/d of low-cost oil and natural gas production. It will be the second largest Canadian-based refiner and upgrader, with total North American upgrading and refining capacity of approximately 660,000 bbls/d, which includes approximately 350,000 bbls/d of heavy oil conversion capacity. The combined company will have approximately 265,000 bbls/d of current takeaway capacity out of Alberta on existing major pipelines and approximately 305,000 bbls/d of committed capacity on planned pipelines. In addition, it will have approximately 16 million barrels of crude oil storage capacity and crude-by-rail assets providing approximately 120,000 bbls/d takeaway optionality.

Annual Corporate and Operating Synergies and Improved Capital Allocation Opportunities

An estimated $1.2 billion of incremental annual free funds flow, including approximately $600 million in annual corporate and operating synergies and approximately $600 million in annual sustaining capital allocation synergies, are achievable independent of commodity prices. The approximately $600 million in annual corporate and operating cost synergies are expected through material reductions in combined workforce and corporate overhead costs, including streamlined IT systems and procurement savings through economies of scale. Immediate efficiencies are also expected by implementing best practices from each company, including applying Cenovus’s operating expertise to Husky’s oil sands assets, leveraging the increased portfolio’s scale in the Deep Basin and pursuing commercial and contract-related efficiencies on midstream marketing and blending opportunities. The vast majority of the annual savings are expected to be achieved in the first year of combined operations, with the full amount of the annual run rate synergies anticipated within year two.

Over the longer term, Cenovus and Husky anticipate additional cost savings and margin enhancements based on further physical integration, including connecting upstream assets with the upgrading complex at Lloydminster, Saskatchewan, storage and blending operations at Hardisty, Alberta and the large U.S. refining assets in PADD 2 and PADD 3. The integration of Cenovus’s upstream assets with Husky’s downstream and midstream portfolio is expected to also shorten the value chain and reduce condensate costs associated with heavy oil transportation over the longer term. These longer term anticipated synergies are not included in the estimated $1.2 billion annual synergies anticipated in the first two years of combined operations.

Enhanced Free Funds Flow Generation and Investment Grade Metrics

The combined company is expected to be free funds flow breakeven in 2021 at WTI prices of approximately US$36.00/bbl, and expects to reduce free funds flow breakeven to less than WTI US$33.00/bbl by 2023, which is lower than either company on a standalone basis. The combined company’s priority will be to maximize free funds flow by focusing investments on sustaining capital expenditures. Based on the assumptions contained in this Information Circular, free funds flow generation will position the combined company to achieve a Net Debt to Adjusted EBITDA target of less than 2.0 times by 2022, without the need for asset dispositions. With the combined company’s low free funds flow breakeven threshold, the combined company will offer an accelerated deleveraging capability relative to either company on a standalone basis.

 

- x -

The resulting low funds flow volatility, breakeven price and corporate sustaining costs of the combined company supports an investment grade credit profile and a lower cost of capital through the commodity price cycle. Based on the assumptions contained in this Information Circular, the combined company is expected to have ample current liquidity with $8.5 billion in undrawn committed credit facilities and no bond maturities until 2022. Furthermore, the estimated $1.2 billion of incremental annual free funds flow from identified near-term synergies is expected to accelerate balance sheet deleveraging.

After achieving its balance sheet objectives, the combined company’s free funds flow profile is expected to enable sustainable growth in shareholder distributions and a returns-focused organic capital investment program with residual free funds flow. Following completion of the Arrangement, Cenovus and Husky anticipate approval by the board of directors of the combined company of a quarterly dividend of $0.0175 per share.

Increased Scale

The size of the combined company is expected to allow it to leverage increased economies of scale to better compete in an increasingly consolidated energy industry.

The combined company is expected to sustain production levels of approximately 750,000 boe/d. The anticipated annual sustaining capital requirements to support the combined company’s upstream production and downstream operations is approximately $2.4 billion, a reduction of more than $600 million per year compared to the two companies on a standalone basis. Furthermore, the combined company’s expanded portfolio is expected to enable more efficient, returns-focused capital allocation. With an estimated proved plus probable reserves life index of approximately 33 years, consisting mostly of low-cost reserves, the combination is expected to result in reduced re-investment risk to sustain production at current levels.

Uncompromising Commitment to Safety and ESG Leadership

Cenovus’s and Husky’s commitments to world-class safety performance and environmental, social and governance (ESG) leadership will remain core to the combined company. This will include ambitious ESG targets, robust management systems and transparent performance reporting. The combined company will continue working to earn a position as a global energy supplier of choice by advancing clean technology and reducing emissions intensity. This includes maintaining the ambition established by each company of achieving net zero emissions by 2050. The combined company will also make it a priority to continue building upon the strong local community relationships already established by both Cenovus and Husky, with a focus on Indigenous economic reconciliation. Striking the right balance among environmental, economic and social considerations will continue to be central to the combined company’s strategy of creating long-term value and business resilience.

The targets that each of Cenovus and Husky released earlier this year for key ESG focus areas are the products of robust processes to ensure alignment with the companies’ business plans and strategies. The combined company will remain committed to pursuing ESG targets and will undertake a similarly thorough analysis within the context of the combined company’s business plan before setting meaningful targets for the combined portfolio. Once that work is complete in 2021 and approved by the combined company’s board of directors, the new targets and plans to achieve them will be disclosed. Leading safety practices, strong governance and advancing diversity and inclusion will remain central to the combined company’s ESG commitments.

Strong Leadership Team

Management responsibilities within the combined company will be allocated among a proven management team reflecting the strengths of both organizations, with a track record of strong safety performance, operational excellence and cost and capital discipline, along with upstream, downstream and midstream expertise. Following completion of the Arrangement, Alex J. Pourbaix, the current President & Chief Executive Officer of Cenovus, will serve as President & Chief Executive Officer of the combined company. Further, Jeffrey R. Hart, the current Chief Financial Officer of Husky, will serve as Executive Vice-President & Chief Financial Officer of the combined company, and Jonathan M. McKenzie, the current Executive Vice-President & Chief Financial Officer of Cenovus, will serve as Executive Vice-President & Chief Operating Officer of the combined company. Keith A. MacPhail, the current Chair of the Cenovus Board, will serve as Independent Board Chair of the combined company. The remainder of senior management will be selected from each of Cenovus and Husky and named prior to the completion of the Arrangement.

The board of directors of the combined company following completion of the Arrangement will consist of eight members of the current Cenovus Board, including Keith A. MacPhail (as Independent Board Chair) and Alex J. Pourbaix, with Keith M. Casey, Jane E. Kinney, Harold N. Kvisle, Richard J. Marcogliese, Claude Mongeau, and Rhonda I. Zygocki expected to continue as members of the combined company’s board of directors, and four members of the current Husky Board, with Canning K. N. Fok, Eva L. Kwok, Wayne E. Shaw and Frank J. Sixt being the members expected to join the combined company’s board of directors.

See “The Arrangement – Reasons for the Arrangement”, “The Arrangement – Attributes of the Combined Company” and “Pro Forma Information Concerning the Combined Company – Directors and Executive Officers after the Arrangement”.

 

- xi -

Q:	Are there support agreements in place with any Husky Shareholders?

 

A:

Yes. The Arrangement has the support of Hutchison Whampoa Europe Investments S.à r.l. and L.F. Investments S.à r.l., the Supporting Husky Shareholders, which hold approximately 40.19% and 29.32%, respectively, of the issued and outstanding Husky Common Shares. Each of the Supporting Husky Shareholders has entered into a separate hard lock-up agreement with Cenovus, pursuant to which such Supporting Husky Shareholder has irrevocably agreed to vote in favour of the Arrangement at the Husky Meeting except in limited circumstances.

See “Effect of the Arrangement – Support Agreements”.

 

Q:	Is there a fairness opinion regarding the consideration to be received by Husky Shareholders?

 

A:

Yes. Goldman Sachs has provided the Husky Board with the Goldman Sachs Fairness Opinion, that, as of October 24, 2020, and, based upon and subject to the assumptions, qualifications and limitations set forth therein, the Consideration to be paid to the Husky Common Shareholders pursuant to the Arrangement was fair, from a financial point of view, to the Husky Common Shareholders. Further, CIBC Capital Markets has provided the Husky Board with: (a) the CIBC Common Shareholder Fairness Opinion to the effect that, as of October 23, 2020 and subject to the assumptions, qualifications and limitations set forth therein, in the opinion of CIBC Capital Markets, the Consideration to be received by the Husky Common Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the Husky Common Shareholders; and (b) the CIBC Preferred Shareholder Fairness Opinion to the effect that, as of October 23, 2020 and subject to the assumptions, limitations and qualifications set forth therein, in the opinion of CIBC Capital Markets, the consideration to be received by Husky Preferred Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the Husky Preferred Shareholders.

See “The Arrangement – Husky Fairness Opinions” and “The Arrangement – Reasons for the Arrangement – Husky Board”.

 

Q:	Why is the Husky Meeting being held?

 

A:

The Husky Meeting is being held for the purposes of obtaining the Husky securityholder approvals contemplated by the Arrangement Agreement and the Interim Order. Pursuant to the Interim Order, the Arrangement Resolution must be approved by (i) not less than 662⁄3% of the votes cast by Husky Common Shareholders present in person (virtually) or represented by proxy at the Husky Meeting and (ii) not less than 662⁄3% of the votes cast by Husky Common Shareholders and Husky Optionholders present in person (virtually) or represented by proxy at the Husky Meeting, voting together as a single class, and the Preferred Shareholder Resolution must be approved by not less than 662⁄3% of the votes cast by Husky Preferred Shareholders present in person (virtually) or represented by proxy at the Husky Meeting, voting together as a single class.

Approval of the Preferred Shareholder Resolution is not required in order to complete the Arrangement. If the Husky Preferred Shareholders do not approve the Preferred Shareholder Resolution at the Husky Meeting (or if the Preferred Shareholder Resolution is approved and the Preferred Share Condition is not otherwise satisfied), and both the Share Issuance Resolution and the Arrangement Resolution are approved at their respective meetings, the Husky Preferred Shares will not be exchanged for Cenovus Preferred Shares pursuant to the Plan of Arrangement and will remain outstanding in a subsidiary of Cenovus following completion of the Arrangement and listed on the TSX.

The full text of the Arrangement Resolution is set forth in Appendix A to this Information Circular. The full text of the Preferred Shareholder Resolution is set forth in Appendix B to this Information Circular.

 

Q:	When and where is the Husky Meeting being held?

 

A:

There is no physical location for the Husky Meeting. The Husky Meeting will 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 and password “husky2020” (case sensitive). Such format will be conducted to address public health measures arising from the COVID-19 pandemic in order to limit and mitigate risks to the health and safety of the Husky Shareholders, Husky Optionholders and Husky’s employees, directors and other stakeholders.

 

Q:	How do I access the virtual Husky Meeting?

 

A:	Registered Husky Shareholders, Husky Optionholders and duly appointed proxyholders can access and vote at the Husky Meeting as follows:

 

•

Go to https://web.lumiagm.com/459526828 in a web browser on a smartphone, tablet or computer at least 30 to 60 minutes prior to the start of the Husky Meeting. The latest versions of Chrome, Safari, Microsoft Edge or Firefox will be needed. Please ensure the browser being used is compatible by logging in early. You should allow ample time to check into the virtual Husky Meeting to check compatibility and complete the related procedures.

 

- xii -

•

Select “I have a Control Number/Username” and enter your 15-digit Control Number (your Control Number is located on your form of proxy) and the password: “husky2020” (case sensitive).

Guests, including non-registered Husky securityholders who have not duly appointed themselves as proxyholders, can log in to the Husky Meeting as set out below. Guests can listen to the Husky Meeting but are not able to vote.

 

•

Go to https://web.lumiagm.com/459526828 in a web browser on a smartphone, tablet or computer at least 30 to 60 minutes prior to the start of the Husky Meeting. The latest versions of Chrome, Safari, Microsoft Edge or Firefox will be needed. Please ensure the browser being used is compatible by logging in early. You should allow ample time to check into the virtual Husky Meeting to check compatibility and complete the related procedures.

 

•

Select “I am a guest” and then complete the online form.

See “General Proxy Matters – Husky – How to Participate at the Husky Meeting”. For information on how a non-registered (beneficial) Husky Shareholder can participate in the Husky Meeting and vote its Husky Shares, see the question below “How can a non-registered Husky Shareholder vote?”

 

Q:	Who is entitled to vote at the Husky Meeting?

 

A:

Only Husky Shareholders and Husky Optionholders of record at the close of business on November 9, 2020, being the Husky Record Date, will be entitled to receive notice of and vote on the applicable resolution at the Husky Meeting, or any adjournment or postponement thereof. Husky Common Shareholders and Husky Optionholders will be entitled to one vote on the Arrangement Resolution at the Husky Meeting for each Husky Common Share and each Husky Option held, as applicable, and Husky Preferred Shareholders will be entitled to one vote on the Preferred Shareholder Resolution at the Husky Meeting for each Husky Preferred Share held.

 

Q:	How do I vote?

If your Husky Shares are registered in your name or if you are a Husky Optionholder, there are two ways you may vote. You may vote at the Husky Meeting, or you may complete, sign and return the applicable enclosed form of proxy appointing the named persons or some other person you choose, who need not be a Husky Shareholder or Husky Optionholder, to represent you as proxyholder and vote your securities at the Husky Meeting. Registered Husky securityholders may vote on the applicable resolution at the Husky Meeting by completing a ballot online during the Husky Meeting, as further described below under “How can a registered Husky Shareholder or a Husky Optionholder vote during the Husky Meeting?”

If your Husky Shares are not registered in your name, but are held in the name of a nominee (usually a bank, trust company, securities broker or other financial institution), you should have received a Voting Instruction Form from your nominee. Please note that Husky has limited access to the names of its non-registered shareholders. If you attend the Husky Meeting, Husky may have no record of your shareholdings or of your entitlement to vote unless your nominee has appointed you as proxyholder. Therefore, if you wish to vote at the Husky Meeting, insert your own name in the space provided on the Voting Instruction Form and return the same by following the instructions provided thereon. Do not otherwise complete the Voting Instruction Form as your vote will be taken at the Husky Meeting. If you do not intend to attend the Husky Meeting, follow the instructions on the Voting Instruction Form to vote by telephone or internet or complete, sign and mail the Voting Instruction Form in the postage prepaid envelope provided. Your completed Voting Instruction Form must be submitted on or before the deadline specified on the form.

 

Q:	What if I acquire ownership of Husky Shares after the Husky Record Date?

 

A:

If a Husky Shareholder transfers Husky Shares after the Husky Record Date and the transferee of those Husky Shares, having produced properly endorsed certificates evidencing such Husky Shares or having otherwise established that the transferee owns such Husky Shares, demands, at least 10 days before the Husky Meeting, that the transferee’s name be included in the list of Husky Common Shareholders or Husky Preferred Shareholders, as applicable, entitled to vote at the Husky Meeting, such transferee shall be entitled to vote such Husky Common Shares or Husky Preferred Shares, as applicable, on the applicable resolution at the Husky Meeting.

See “General Proxy Matters – Husky”.

 

Q:	Who is soliciting my proxy?

 

A:	Management of Husky is soliciting your proxy. Solicitation of proxies is done primarily by mail and electronic means. The costs of preparing and distributing the Information Circular and meeting materials will be borne by Husky and Cenovus, as applicable.

 

Q:	When do I have to vote my Husky Shares or Husky Options by?

 

A:	Proxies must be received in each case no later than the Husky Proxy Deadline, being 9:00 a.m. (Calgary time) on December 11, 2020, or, if the Husky Meeting is adjourned or postponed, 48 hours (excluding Saturdays, Sundays and statutory holidays in the Province of

 

- xiii -

Alberta) before the beginning of any adjourned or postponed Husky Meeting. The time limit for deposit of proxies may be waived or extended by the Chair of the Husky Meeting at his or her discretion, without notice.

 

Q:	Can I appoint someone other than the individuals named in the enclosed proxy to vote my Husky securities?

 

A:

Yes, you have the right to appoint another person of your choice, who need not be a Husky Shareholder or Husky Optionholder, to attend and vote on your behalf at the Husky Meeting. If you wish to appoint a person other than those named in the enclosed proxy or Voting Instruction Form, insert the name of your chosen proxyholder in the space provided.

NOTE: It is important for you to ensure that any other person you appoint will attend the Husky Meeting and is aware that his or her appointment has been made to vote your securities.

The following applies to securityholders who wish to appoint as their proxyholders individuals other than those named in the proxy or Voting Instruction Form. This includes non-registered Husky Shareholders who wish to appoint themselves as proxyholders to attend, participate in or vote at the Husky Meeting.

Securityholders who wish to appoint as their proxyholders individuals other than those named in the proxy or Voting Instruction Form to attend and participate in the Husky Meeting and vote their securities MUST submit their proxies or Voting Instruction Forms, as applicable, appointing such individuals as proxyholders AND register such proxyholders online, as described below. Registering your proxyholder is an additional step to be completed AFTER you have submitted your proxy or Voting Instruction Form. Failure to register the proxyholder will result in the proxyholder not receiving a Username that is required to vote at the Husky Meeting.

Step 1: Submit your proxy or Voting Instruction Form: To appoint someone other than the individuals named in the proxy or Voting Instruction Form as proxyholder, insert that person’s name in the blank space provided in the proxy or Voting Instruction Form (if permitted) and follow the instructions for submitting such proxy or Voting Instruction Form. This must be completed before registering such proxyholder, which is an additional step to be completed once you have submitted your proxy or Voting Instruction Form.

If you are a non-registered Husky Shareholder and wish to vote at the Husky Meeting, you must insert your own name in the space provided on the Voting Instruction Form sent to you by your intermediary, follow all of the applicable instructions provided by your intermediary AND register yourself as your proxyholder, as described below in Step 2. By doing so, you are instructing your intermediary to appoint you as proxyholder. It is important that you comply with the signature and return instructions provided by your intermediary. Please also see further instructions below under the heading “How can a non-registered Husky Shareholder vote during the Husky Meeting?”

If you are a non-registered Husky Shareholder located in the United States and wish to vote at the Husky Meeting or, if permitted, appoint a third party as your proxyholder, in addition to the steps described below under “How can a non-registered Husky Shareholder vote during the Husky Meeting?”, you must obtain a valid legal proxy from your intermediary. Follow the instructions from your intermediary included with the legal proxy form sent to you or contact your intermediary to request a legal proxy form if you have not received one. After obtaining a valid legal proxy from your intermediary, you must then submit such legal proxy to Computershare. Requests for registration from non-registered Husky Shareholders located in the United States that wish to vote at the Husky Meeting or, if permitted, appoint third parties as their proxyholders must be sent by e-mail or by courier to: uslegalproxy@computershare.com (if by e-mail); or Computershare Trust Company of Canada, Attention: Proxy Department, 8^th Floor, 100 University Avenue, Toronto, ON M5J 2Y1, Canada (if by courier), and in both cases, must be labeled “Legal Proxy” and received no later than the Husky Proxy Deadline.

Step 2: Register your proxyholder: To register a third-party proxyholder, you must visit http://www.computershare.com/HuskyEnergy by the Husky Proxy Deadline and provide Computershare with the required proxyholder contact information so that Computershare may provide the proxyholder with a Username via email. Without a Username, proxyholders will not be able to vote at the Husky Meeting but will be able to participate as guests.

 

Q:	Should I send my form of proxy or Voting Instruction Form now?

 

A:

Yes. Once you have carefully read and considered the information in this Information Circular, you need to complete and submit the applicable enclosed form of proxy or Voting Instruction Form, as applicable. You are encouraged to vote well in advance of Husky Proxy Deadline to ensure that your Husky securities are voted at the Husky Meeting.

 

Q:	Can I revoke my vote after I have voted by proxy?

 

A:

Yes. In addition to revocation in any other manner permitted by law, a Husky Shareholder or Husky Optionholder may revoke a proxy: (a) by accessing the Husky Meeting by following the instructions under the heading “How to Participate at the Husky Meeting” in this Information Circular and voting their Husky securities during the designated time; (b) by instrument in writing executed by the

 

- xiv -

Husky Shareholder or the Husky Optionholder, as applicable, or such Husky Shareholder’s attorney authorized in writing or if the Husky Shareholder is a corporation, under its corporate seal or by an officer or attorney thereof, duly authorized, indicating the capacity under which such officer or attorney is signing and deposited with Computershare, the transfer agent of Husky, at the office designated in the Notice of Special Meeting of Husky Securityholders not later than 5:00 p.m. (Calgary time) on the Business Day preceding the day of the Husky Meeting (or any adjournment or postponement thereof); or (c) by a duly executed and deposited proxy as provided herein bearing a later date or time than the date or time of the proxy being revoked.

 

Q:	How can a registered Husky Shareholder or a Husky Optionholder vote during the Husky Meeting?

 

A:	Registered Husky Shareholders or Husky Optionholders can vote in one of the following ways:

 

During the Virtual Husky Meeting		If you are a registered Husky Shareholder or a Husky Optionholder, you can attend the Husky Meeting by going to https://web.lumiagm.com/459526828 in a web browser on a smartphone, tablet or computer, selecting “I have a Control Number/Username” and entering your 15-digit Control Number (your Control Number is located on your form of proxy) and the password: “husky2020” (case sensitive). Follow the instructions to access the Husky Meeting and vote when prompted.   See “General Proxy Matters – Husky – How to Participate at the Husky Meeting”.
Internet		Go to http://www.investorvote.com. Enter the 15-digit Control Number printed on the form of proxy and follow the instructions on screen.
Fax		1-866-249-7775 (North America toll-free)   1-416-263-9524 (Direct dial)
Mail		Enter voting instructions, sign the form of proxy and send your completed form of proxy or Voting Instruction Form to Husky’s registrar and transfer agent in the envelope provided, or to Computershare Trust Company of Canada, 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1.
Phone		Call 1-866-732-8683 and follow the instructions. You will need to enter your 15-digit Control Number printed on the form of proxy, and follow the interactive voice recording instructions to submit your vote.

 

Q:	How can a non-registered Husky Shareholder vote during the Husky Meeting?

 

A:	Non-registered (beneficial) holders of Husky Shares can vote in one of the following ways:

 

During the Virtual Husky Meeting		If you are a non-registered Husky Shareholder, you can attend and vote at the Husky Meeting by filling in your name in the blank space provided on the Voting Instruction Form and appointing yourself as proxy and sending in the completed Voting Instruction Form to the address specified on the Voting Instruction Form in advance of the Husky Meeting.   You must also visit http://www.computershare.com/HuskyEnergy to register your name and email address so that after the Husky Proxy Deadline, Computershare can send you, via email, a Username that will be required (with case-sensitive password “husky2020”) to log into the Husky Meeting.   You can then attend the Husky Meeting by going to https://web.lumiagm.com/459526828 in a web browser, on a smartphone, tablet or computer, selecting “I have a Control Number/Username”, entering the Username that you received in an email from Computershare, password “husky2020” (case sensitive), and then follow the instructions to access the Husky Meeting and vote when prompted.   Non-registered Husky Shareholders who have not duly appointed themselves as proxy will not be able to vote online at the virtual Husky Meeting. You will be able to join a live webcast of the Husky Meeting by going to https://web.lumiagm.com/459526828, clicking on “I am a guest” and filling in the form.   See “General Proxy Matters – Husky – How to Participate at the Husky Meeting”.
Internet		Go to https://www.proxyvote.com, enter the 16-digit Control Number printed on the Voting Instruction Form and follow the instructions on screen.
Mail		Enter voting instructions, sign the Voting Instruction Form and send the completed Voting Instruction Form to the address specified on the Voting Instruction Form.

 

- xv -

Phone		Call 1-800-474-7493 or 1-800-474-7501 (French) and follow the instructions. You will need to enter your 16-digit Control Number printed on the Voting Instruction Form, and follow the interactive voice recording instructions to submit your vote.

 

Q:	Will my securities intermediary vote my Husky Shares for me?

 

A:

A broker or other securities intermediary will vote your Husky Shares only if you provide instructions to such intermediary on how to vote. If you fail to provide proper instructions, the Husky Shares will not be voted on your behalf at the Husky Meeting. If you do not wish to appoint yourself as proxy, as a non-registered (beneficial) Husky Shareholder, you should instruct your intermediary/ies to vote your Husky Shares on your behalf by following the directions on the Voting Instruction Form provided by such intermediary. Unless your intermediary/ies give(s) you its proxy to vote at the Husky Meeting, you cannot vote those Husky Shares owned by you at the Husky Meeting.

 

Q:	Which form of proxy should I complete, sign and return?

 

A:

Accompanying this Information Circular is a form of proxy or Voting Instruction Form for use by Husky Common Shareholders, Husky Optionholders or Husky Preferred Shareholders, as applicable. If you hold Husky Common Shares, please complete, sign and return the form of proxy or Voting Instruction Form, as applicable, for Husky Common Shareholders. If you hold Husky Options, please complete, sign and return the form of proxy for Husky Optionholders. If you hold Husky Preferred Shares, please complete, sign and return the form of proxy or Voting Instruction Form, as applicable, for Husky Preferred Shareholders.

 

Q:	What other approvals are required for the Arrangement to be completed?

 

A:

In addition to the Husky securityholder approvals, in order for the Arrangement to be completed: (a) the Share Issuance Resolution must be approved by a simple majority of the votes cast by Cenovus Common Shareholders present in person (virtually) or represented by proxy at the Cenovus Meeting; and (b) other court and regulatory approvals must be obtained, including: (i) the approval of the TSX and the NYSE, in respect of the issuance and listing of the Cenovus Common Shares and the Cenovus Warrants to be issued to Husky Common Shareholders pursuant to the Arrangement, the Cenovus Common Shares issuable upon exercise of the Cenovus Warrants; and (ii) the Key Regulatory Approvals.

See “Procedure for the Arrangement to Become Effective”.

 

Q:	When will the Arrangement become effective?

 

A:

The Arrangement will become effective at the time the Articles of Arrangement are filed with the Registrar, which is expected to occur during the first quarter of 2021, provided that all required approvals are obtained. However, completion of the Arrangement is subject to a number of conditions and it is possible that factors outside the control of Husky and/or Cenovus could result in the Arrangement being completed at a later time, or not at all. Subject to certain limitations, each Party may terminate the Arrangement Agreement if it is not consummated by May 31, 2021; or by August 31, 2021 if the Key Regulatory Approvals have not been received by May 31, 2021.

See “Timing”.

 

Q:	What will happen to my Husky Options and Husky PSUs in connection with the Arrangement?

 

A:

Pursuant to the Plan of Arrangement, each Husky Option outstanding immediately prior to the Effective Time (whether vested or unvested) will be transferred to Cenovus. In exchange, Cenovus will grant a Cenovus Replacement Option to acquire such number of Cenovus Common Shares as is equal to that number of Husky Common Shares that were issuable upon exercise of such Husky Option immediately prior to the Effective Time, multiplied by 0.7845, with an exercise price per Cenovus Common Share equal to the exercise price per share of such Husky Option immediately prior to the Effective Time divided by 0.7845 and rounded up to the nearest whole cent (provided that, if the foregoing calculation results in a holder of Cenovus Replacement Options being entitled to acquire a fraction of a Cenovus Common Share, then the number of Cenovus Common Shares subject to such Cenovus Replacement Options will be rounded down to the next lower whole number of Cenovus Common Shares). All Husky Options will concurrently be cancelled and terminated.

All other terms and conditions of a Cenovus Replacement Option, including the term to expiry, vesting conditions and the conditions to exercise, will be the same as the Husky Option for which it was exchanged. Any document, certificate or option agreement previously evidencing the Husky Option will thereafter be deemed to evidence the Cenovus Replacement Option. Accordingly, no certificates evidencing any Cenovus Replacement Option will be issued pursuant to the Arrangement. A Husky Optionholder will cease to be a holder of Husky Options and will have no rights as a Husky Optionholder other than the right to receive the number of Cenovus Replacement Options issuable to such Husky Optionholder as provided in the Arrangement Agreement.

 

- xvi -

Completion of the Arrangement will result in the acceleration of the vesting of the Husky PSUs effective immediately prior to the Effective Time. In accordance with their terms, the Husky PSUs will be settled in cash following the Effective Time based on the weighted average trading price of the Husky Common Shares on the TSX for the five trading days immediately preceding the Effective Date.

See “Effect of the Arrangement – Husky Incentive Awards”.

 

Q:	How do I receive the Cenovus securities that I am entitled to under the Arrangement?

Registered Husky Shareholders must complete and return the enclosed Letter of Transmittal which, when properly completed and returned together with the certificate(s) or DRS Advice(s) representing Husky Common Shares and/or Husky Preferred Shares, as the case may be, and all other required documents, will enable each Husky Shareholder to obtain the consideration that the Husky Shareholder is entitled to receive under the Arrangement. See “Procedure for the Arrangement to Become Effective – Procedure for Exchange of Husky Share Certificates or DRS Advices”.

Husky Shareholders who do not hold their Husky Shares in their own name should instruct their broker or other intermediary to complete the applicable Letter of Transmittal regarding the Arrangement with respect to such holder’s Husky Shares in order to receive the consideration issuable pursuant to the Arrangement in exchange for such holder’s Husky Shares.

 

Q:	What will happen if the Arrangement Resolution is not approved or the Arrangement is not completed for any reason?

 

A:

If the Arrangement Resolution is not approved or the Arrangement is not completed for any reason, the Arrangement Agreement may be terminated by one or both of the Parties. Pursuant to the terms of the Arrangement Agreement, Husky and Cenovus have agreed that neither Party will solicit, initiate, encourage or otherwise facilitate any discussions concerning any other business combination or sale of material assets. The Husky Board or the Cenovus Board may respond to unsolicited Superior Proposals subject to certain requirements and notification to the Other Party who has the right to match any Superior Proposals within a five Business Day match period. The Arrangement Agreement provides for a termination amount of $150 million payable by Husky, in consideration for the disposition of Cenovus’s rights under the Arrangement Agreement, if the Arrangement is not completed in certain circumstances and $240 million payable by Cenovus, in consideration for the disposition of Husky’s rights under the Arrangement Agreement, if the Arrangement is not completed in certain circumstances.

See “Effect of the Arrangement – The Arrangement Agreement – Termination”.

 

Q:	What are the Canadian federal income tax consequences of the Arrangement?

 

A:

For a summary of certain of the material Canadian federal income tax consequences of the Arrangement applicable to Husky Shareholders, see “Certain Canadian Federal Income Tax Considerations”. Such summary is not intended to be legal or tax advice. Husky Shareholders should consult their own tax advisors as to the Canadian and other tax consequences of the Arrangement to them with respect to their particular circumstances.

 

Q:	What are the U.S. federal income tax consequences of the Arrangement?

 

A:

For a summary of certain of the material U.S. federal income tax consequences of the Arrangement applicable to a U.S. Holder, see “Certain United States Federal Income Tax Considerations”. Such summary is not intended to be legal or tax advice. Husky Shareholders should consult their own tax advisors as to the U.S. and other tax consequences of the Arrangement to them with respect to their particular circumstances.

 

Q:	Are Husky Shareholders entitled to Dissent Rights?

 

A:

Registered Husky Shareholders may, upon compliance with certain conditions and in certain circumstances, exercise Dissent Rights. However, failure to strictly comply with the requirements set forth in section 191 of the ABCA, as modified by the Interim Order and the Plan of Arrangement, may result in the loss of any right of dissent. It is strongly recommended that any Husky Shareholders wishing to dissent seek independent legal advice.

See “Dissent Rights”.

 

Q:	Who should I contact if I have questions?

 

A:	If you have any questions about the Arrangement or the matters described in this Information Circular, please contact your professional advisors.

 

- xvii -

CENOVUS Q&A

CENOVUS COMMON SHAREHOLDERS – QUESTIONS AND ANSWERS

ABOUT THE ARRANGEMENT AND THE CENOVUS MEETING

The following is intended to address certain key questions concerning the Arrangement and the Cenovus Meeting. The information contained below is of a summary nature and therefore is not complete and is qualified in its entirety by the more detailed information contained elsewhere in or incorporated by reference in this Information Circular, including the Appendices hereto, all of which are important and should be reviewed carefully. Capitalized terms used but not otherwise defined in this “Question and Answers About the Arrangement and the Cenovus Meeting” have the meanings set forth under “Glossary of Terms”.

 

Q:	Why did I receive this Information Circular?

 

A:	You received this Information Circular because you are a Cenovus Common Shareholder and Cenovus Common Shareholders will be asked at the Cenovus Meeting to approve the Share Issuance Resolution.

 

Q:	What is the Arrangement?

 

A:

On October 24, 2020, Husky and Cenovus agreed to the definitive terms of a transaction to combine the two companies pursuant to the terms and conditions of the Arrangement Agreement. Pursuant to the Arrangement Agreement, Cenovus has agreed to acquire all of the issued and outstanding Husky Common Shares under a court-approved Plan of Arrangement in accordance with the provisions of the ABCA. If completed, the Arrangement will result in Cenovus acquiring all of the Husky Common Shares. Pursuant to the Arrangement, a portion of the Husky Common Shares held by each Husky Common Shareholder will be exchanged for Cenovus Warrants and the remaining portion of the Husky Common Shares will be exchanged for Cenovus Common Shares such that, in aggregate, each Husky Common Shareholder will receive 0.7845 of a Cenovus Common Share and 0.0651 of a Cenovus Warrant in respect of each Husky Common Share held. Each whole Cenovus Warrant will entitle the holder thereof to acquire one Cenovus Common Share upon payment in full of the exercise price of $6.54 per Cenovus Common Share at any time up to 60 months following completion of the Arrangement. Pursuant to the Plan of Arrangement, all outstanding Husky Options will be exchanged for Cenovus Replacement Options. If the Arrangement is completed, Husky Optionholders will receive Cenovus Replacement Options to acquire such number of Cenovus Common Shares as is equal to that number of Husky Common Shares that were issuable upon exercise of a Husky Optionholder’s Husky Options immediately prior to the Effective Time, multiplied by 0.7845, with an exercise price per Cenovus Common Share equal to the exercise price per share of a Husky Option immediately prior to the Effective Time divided by 0.7845 and rounded up to the nearest whole cent.

Current Cenovus Common Shareholders are expected to own approximately 61% of the combined company immediately after completion of the Arrangement (or 59% on a partially-diluted basis assuming the exercise of all Cenovus Warrants issued pursuant to the Arrangement). Former Husky Common Shareholders are expected to own approximately 39% of the combined company immediately after completion of the Arrangement (or 41% on a partially-diluted basis assuming the exercise of all Cenovus Warrants issued pursuant to the Arrangement).

Additionally, if the Preferred Shareholder Resolution is approved at the Husky Meeting and the Preferred Share Condition is otherwise satisfied, the Husky Preferred Shareholders will exchange their Husky Preferred Shares for Cenovus Preferred Shares having substantially identical terms to each series of Husky Preferred Shares. See “Pro Forma Information Concerning the Combined Company – Description of Share Capital of the Combined Company – Cenovus Preferred Shares”.

Cenovus has agreed that it will enter into a Pre-Emptive Rights Agreement and Registration Rights Agreement upon request from a Cenovus Common Shareholder that holds more than 5% of the outstanding Cenovus Common Shares immediately upon completion of the Arrangement, provided that such Cenovus Common Shareholder was not party to a registration rights agreement or similar agreement in effect on the Agreement Date. See “Effect of the Arrangement – Pre-Emptive Rights Agreement” and “Effect of the Arrangement – Registration Rights Agreement”.

 

Q:	Does the Cenovus Board support the Arrangement?

 

A:

Yes. Following review of a significant amount of information and consideration of a number of factors (including the interests of affected stakeholders) and after considering the Cenovus Fairness Opinions and following consultation with Cenovus’s senior management and with Cenovus’s legal, financial, tax and other advisors, the Cenovus Board has unanimously: (i) determined that the Arrangement and the entry into the Arrangement Agreement are in the best interests of Cenovus; (ii) determined that the consideration to be paid by Cenovus pursuant to the Arrangement Agreement is fair, from a financial point of view, to Cenovus; (iii) approved the Arrangement Agreement and the transactions contemplated thereby; and (iv) recommended that Cenovus Common Shareholders vote in favour of the Share Issuance Resolution.

THE CENOVUS BOARD UNANIMOUSLY RECOMMENDS THAT CENOVUS COMMON SHAREHOLDERS VOTE FOR THE SHARE ISSUANCE RESOLUTION.

See “The Arrangement – Recommendation of the Cenovus Board” and “The Arrangement – Reasons for the Arrangement – Cenovus Board”. The full text of the Share Issuance Resolution is set forth in Appendix C to this Information Circular.

 

- xviii -

Q:	What are the benefits of the Arrangement?

 

A:

Management of Cenovus and Husky anticipate that the business combination will create a resilient integrated energy leader that is expected to unlock value for Cenovus Common Shareholders and Husky Common Shareholders, including through achieving anticipated significant synergies. The following are some, but not all, of the expected long-term benefits of the Arrangement to Cenovus Common Shareholders:

Highly Complementary Integrated and Diversified Portfolio

The assets of the combined company will result in a more diversified geographic and product portfolio supporting stability of cash flow and opportunities for enhanced free funds flow. The combined company will unlock market opportunities by uniting high-quality and low-cost oil sands and heavy oil assets with extensive midstream and downstream infrastructure providing ability to optimize margin capture across the heavy oil value chain. Taken together, this results in processing capacity and egress out of Alberta for the majority of the combined company’s oil sands and heavy oil production, positioning low exposure to Alberta oil pricing while maintaining healthy exposure to global commodity prices. Cash flow stability of the combined entity will be further underpinned by the global exposure of Husky’s offshore Asia Pacific natural gas production interests, which currently generate approximately $1 billion in annual free funds flow through sales largely under long-term contracts.

The combined company will be the third largest Canadian-based oil and natural gas producer, with approximately 750,000 boe/d of low-cost oil and natural gas production. It will be the second largest Canadian-based refiner and upgrader, with total North American upgrading and refining capacity of approximately 660,000 bbls/d, which includes approximately 350,000 bbls/d of heavy oil conversion capacity. The combined company will have approximately 265,000 bbls/d of current takeaway capacity out of Alberta on existing major pipelines and approximately 305,000 bbls/d of committed capacity on planned pipelines. In addition, it will have approximately 16 million barrels of crude oil storage capacity and crude-by-rail assets providing approximately 120,000 bbls/d takeaway optionality.

Annual Corporate and Operating Synergies and Improved Capital Allocation Opportunities

An estimated $1.2 billion of incremental annual free funds flow, including approximately $600 million in annual corporate and operating synergies and approximately $600 million in annual sustaining capital allocation synergies, are achievable independent of commodity prices. The approximately $600 million in annual corporate and operating cost synergies are expected through material reductions in combined workforce and corporate overhead costs, including streamlined IT systems and procurement savings through economies of scale. Immediate efficiencies are also expected by implementing best practices from each company, including applying Cenovus’s operating expertise to Husky’s oil sands assets, leveraging the increased portfolio’s scale in the Deep Basin and pursuing commercial and contract-related efficiencies on midstream marketing and blending opportunities. The vast majority of the annual savings are expected to be achieved in the first year of combined operations, with the full amount of the annual run rate synergies anticipated within year two.

Over the longer term, Cenovus and Husky anticipate additional cost savings and margin enhancements based on further physical integration, including connecting upstream assets with the upgrading complex at Lloydminster, Saskatchewan, storage and blending operations at Hardisty, Alberta and the large U.S. refining assets in PADD 2 and PADD 3. The integration of Cenovus’s upstream assets with Husky’s downstream and midstream portfolio is expected to also shorten the value chain and reduce condensate costs associated with heavy oil transportation over the longer term. These longer term anticipated synergies are not included in the estimated $1.2 billion annual synergies anticipated in the first two years of combined operations.

Enhanced Free Funds Flow Generation and Investment Grade Metrics

The combined company is expected to be free funds flow breakeven in 2021 at WTI prices of approximately US$36.00/bbl, and expects to reduce free funds flow breakeven to less than WTI US$33.00/bbl by 2023, which is lower than either company on a standalone basis. The combined company’s priority will be to maximize free funds flow by focusing investments on sustaining capital expenditures. Based on the assumptions contained in this Information Circular, free funds flow generation will position the combined company to achieve a Net Debt to Adjusted EBITDA target of less than 2.0 times by 2022, without the need for asset dispositions. With the combined company’s low free funds flow breakeven threshold, the combined company will offer an accelerated deleveraging capability relative to either company on a standalone basis.

The resulting low funds flow volatility, breakeven price and corporate sustaining costs of the combined company supports an investment grade credit profile and a lower cost of capital through the commodity price cycle. Based on the assumptions contained in this Information Circular, the combined company is expected to have ample current liquidity with $8.5 billion in undrawn committed credit facilities and no bond maturities until 2022. Furthermore, the estimated $1.2 billion of incremental annual free funds flow from identified near-term synergies is expected to accelerate balance sheet deleveraging.

 

- xix -

After achieving its balance sheet objectives, the combined company’s free funds flow profile is expected to enable sustainable growth in shareholder distributions and a returns-focused organic capital investment program with residual free funds flow. Following completion of the Arrangement, Cenovus and Husky anticipate approval by the board of directors of the combined company of a quarterly dividend of $0.0175 per share.

Increased Scale

The size of the combined company is expected to allow it to leverage increased economies of scale to better compete in an increasingly consolidated energy industry.

The combined company is expected to sustain production levels of approximately 750,000 boe/d. The anticipated annual sustaining capital requirements to support the combined company’s upstream production and downstream operations is approximately $2.4 billion, a reduction of more than $600 million per year compared to the two companies on a standalone basis. Furthermore, the combined company’s expanded portfolio is expected to enable more efficient, returns-focused capital allocation. With an estimated proved plus probable reserves life index of approximately 33 years, consisting mostly of low-cost reserves, the combination is expected to result in reduced re-investment risk to sustain production at current levels.

Uncompromising Commitment to Safety and ESG Leadership

Cenovus’s and Husky’s commitments to world-class safety performance and environmental, social and governance (ESG) leadership will remain core to the combined company. This will include ambitious ESG targets, robust management systems and transparent performance reporting. The combined company will continue working to earn a position as a global energy supplier of choice by advancing clean technology and reducing emissions intensity. This includes maintaining the ambition established by each company of achieving net zero emissions by 2050. The combined company will also make it a priority to continue building upon the strong local community relationships already established by both Cenovus and Husky, with a focus on Indigenous economic reconciliation. Striking the right balance among environmental, economic and social considerations will continue to be central to the combined company’s strategy of creating long-term value and business resilience.

The targets that each of Cenovus and Husky released earlier this year for key ESG focus areas are the products of robust processes to ensure alignment with the companies’ business plans and strategies. The combined company will remain committed to pursuing ESG targets and will undertake a similarly thorough analysis within the context of the combined company’s business plan before setting meaningful targets for the combined portfolio. Once that work is complete in 2021 and approved by the combined company’s board of directors, the new targets and plans to achieve them will be disclosed. Leading safety practices, strong governance and advancing diversity and inclusion will remain central to the combined company’s ESG commitments.

Strong Leadership Team

Management responsibilities within the combined company will be allocated among a proven management team reflecting the strengths of both organizations, with a track record of strong safety performance, operational excellence and cost and capital discipline, along with upstream, downstream and midstream expertise. Following completion of the Arrangement, Alex J. Pourbaix, the current President & Chief Executive Officer of Cenovus, will serve as President & Chief Executive Officer of the combined company. Further, Jeffrey R. Hart, the current Chief Financial Officer of Husky, will serve as Executive Vice-President & Chief Financial Officer of the combined company, and Jonathan M. McKenzie, the current Executive Vice-President & Chief Financial Officer of Cenovus, will serve as Executive Vice-President & Chief Operating Officer of the combined company. Keith A. MacPhail, the current Chair of the Cenovus Board, will serve as Independent Board Chair of the combined company. The remainder of senior management will be selected from each of Cenovus and Husky and named prior to the completion of the Arrangement.

The board of directors of the combined company following completion of the Arrangement will consist of eight members of the current Cenovus Board, including Keith A. MacPhail (as Independent Board Chair) and Alex J. Pourbaix, with Keith M. Casey, Jane E. Kinney, Harold N. Kvisle, Richard J. Marcogliese, Claude Mongeau, and Rhonda I. Zygocki expected to continue as members of the combined company’s board of directors, and four members of the current Husky Board, with Canning K. N. Fok, Eva L. Kwok, Wayne E. Shaw and Frank J. Sixt being the members expected to join the combined company’s board of directors.

See “The Arrangement – Reasons for the Arrangement”, “The Arrangement – Attributes of the Combined Company” and “Pro Forma Information Concerning the Combined Company – Directors and Officers after the Arrangement”.

 

Q:	Is there a fairness opinion regarding the consideration to be paid by Cenovus to Husky Shareholders?

 

A:	Yes. The Cenovus Board has received the Cenovus Fairness Opinions that, as of the dates thereof, the Consideration to be paid by Cenovus pursuant to the Arrangement is fair, from a financial point of view, to Cenovus.

See “The Arrangement – Cenovus Fairness Opinions” and “The Arrangement – Reasons for the Arrangement – Cenovus Board”.

 

- xx -

Q:	Why is the Cenovus Meeting being held?

 

A:

The Cenovus Common Shares to be issued to Husky Shareholders under the Arrangement will constitute greater than 25% of the issued and outstanding Cenovus Common Shares (on a non-diluted basis) immediately prior to the Arrangement. Pursuant to the applicable rules of the TSX, the issuance of the Cenovus Common Shares under the Arrangement requires the approval of a simple majority of the votes cast by the Cenovus Common Shareholders present in person (virtually) or represented by proxy at the Cenovus Meeting. Management of Cenovus is soliciting proxies of the Cenovus Common Shareholders to vote in favour for the Share Issuance Resolution.

 

Q:	What are Cenovus Common Shareholders being asked to vote on?

 

A:

Cenovus Common Shareholders will be asked to vote on the Share Issuance Resolution, the full text of which is set forth in Appendix C to this Information Circular. If approved, the Share Issuance Resolution will authorize the issuance of (i) the number of Cenovus Common Shares and Cenovus Warrants that would allow Cenovus to meet its obligations under the Arrangement Agreement to issue Cenovus Common Shares for a portion of the Husky Common Shares held by each Husky Common Shareholder and Cenovus Warrants for the remaining portion of Husky Common Shares held by each Husky Common Shareholder, such that, in the aggregate, each Husky Common Shareholder will receive consideration of 0.7845 of a Cenovus Common Share and 0.0651 of a Cenovus Warrant in respect of each Husky Common Share, and (ii) such number of Cenovus Common Shares issuable upon exercise, from time to time, of Cenovus Warrants and Cenovus Replacement Options. Based on the 1,005,121,738 Husky Common Shares and the 19,222,040 Husky Options outstanding on the Agreement Date, and assuming that no additional Husky Common Shares and no additional Husky Options are issued before the Effective Time, Cenovus would issue (A) 788,518,003 Cenovus Common Shares and 65,433,425 Cenovus Warrants to Husky Common Shareholders, in exchange for Husky Common Shares acquired by Cenovus pursuant to the Arrangement, (B) 65,433,425 Cenovus Common Shares issuable upon exercise of the Cenovus Warrants, and (C) 15,079,690 Cenovus Common Shares issuable upon exercise of 19,222,040 Cenovus Replacement Options granted by Cenovus to Husky Optionholders in accordance with the Arrangement. The number of Cenovus Common Shares, Cenovus Warrants and Cenovus Replacement Options that will be issued pursuant to the Plan of Arrangement and approved by the Share Issuance Resolution will depend on the number of Husky Common Shares and Husky Options outstanding immediately prior to the Effective Time.

Additionally, under the Share Issuance Resolution, the Cenovus Common Shareholders will be asked to approve certain consequential amendments to the Cenovus Rights Plan to ensure that neither the consummation of the Arrangement nor any share purchase rights issued in connection with the Arrangement triggers such rights plan, all as more particularly described in this Information Circular.

 

Q:	When and where is the Cenovus Meeting being held?

 

A:

There is no physical location for the Cenovus Meeting. The Cenovus Meeting will be held on Tuesday, December 15, 2020 at 1:00 p.m. (Calgary time) in a virtual-only format that will be conducted via live webcast accessible at https://web.lumiagm.com/418831959 and password “cenovus2020” (case sensitive). Such format will be conducted to address public health measures arising from the COVID-19 pandemic in order to limit and mitigate risks to the health and safety of the Cenovus Common Shareholders and Cenovus’s employees, directors and other stakeholders.

 

Q:	How do I access the virtual Cenovus Meeting?

 

A:	Registered Cenovus Common Shareholders and duly appointed proxyholders can access and vote at the Cenovus Meeting as follows:

 

•

Go to https://web.lumiagm.com/418831959 in a web browser on a smartphone, tablet or computer at least 30 to 60 minutes prior to the start of the Cenovus Meeting. The latest versions of Chrome, Safari, Microsoft Edge or Firefox will be needed. Please ensure the browser being used is compatible by logging in early. You should allow ample time to check into the virtual Cenovus Meeting to check compatibility and complete the related procedures.

 

•

Select “I have a Control Number/Username” and enter your 15-digit Control Number (your Control Number is located on your form of proxy) and the password: “cenovus2020” (case sensitive).

Guests, including non-registered Cenovus Common Shareholders who have not duly appointed themselves as proxyholders, can log in to the Cenovus Meeting as set out below. Guests can listen to the Cenovus Meeting but are not able to vote.

 

•

Go to https://web.lumiagm.com/418831959 in a web browser on a smartphone, tablet or computer at least 30 to 60 minutes prior to the start of the Cenovus Meeting. The latest versions of Chrome, Safari, Microsoft Edge or Firefox will be needed. Please ensure the browser being used is compatible by logging in early. You should allow ample time to check into the virtual Cenovus Meeting to check compatibility and complete the related procedures.

 

•

Select “I am a guest” and then complete the online form.

 

- xxi -

See “General Proxy Matter – Cenovus – How to Participate at the Cenovus Meeting”. For information on how a non-registered (beneficial) Cenovus Common Shareholder can participate in the Cenovus Meeting and vote its Cenovus Common Shares, see the question below “How can a non-registered Cenovus Common Shareholder vote?”

 

Q:	Who is entitled to vote at the Cenovus Meeting?

 

A:

Only Cenovus Common Shareholders of record at the close of business on November 9, 2020, being the Cenovus Record Date, will be entitled to receive notice of and vote at the Cenovus Meeting, or any adjournment or postponement thereof. Cenovus Common Shareholders will be entitled to one vote at the Cenovus Meeting for each Cenovus Common Share held.

 

Q:	What if I acquire ownership of Cenovus Common Shares after the Cenovus Record Date?

 

A:

A person who acquires ownership of Cenovus Common Shares after the Cenovus Record Date will not be entitled to vote such Cenovus Common Shares at the Cenovus Meeting. Only persons owning Cenovus Common Shares as of the Cenovus Record Date, or their duly appointed proxyholders, are entitled to vote at the Cenovus Meeting.

 

Q:	How do I vote?

 

A:

If your Cenovus Common Shares are registered in your name there are two ways you may vote. You may vote at the Cenovus Meeting, or you may complete, sign and return the applicable enclosed form of proxy appointing the named persons or some other person you choose, who need not be a Cenovus Common Shareholder, to represent you as proxyholder and vote your securities at the Cenovus Meeting. Registered Cenovus Common Shareholders may vote on the Share Issuance Resolution at the Cenovus Meeting by completing a ballot online during the Cenovus Meeting, as further described below under “How can a registered Cenovus Common Shareholder vote during the Cenovus Meeting?”

If your Cenovus Common Shares are not registered in your name, but are held in the name of a nominee (usually a bank, trust company, securities broker or other financial institution), you should have received a Voting Instruction Form from your nominee. Please note that Cenovus has limited access to the names of its non-registered shareholders. If you attend the Cenovus Meeting, Cenovus may have no record of your shareholdings or of your entitlement to vote unless your nominee has appointed you as proxyholder. Therefore, if you wish to vote at the Cenovus Meeting, insert your own name in the space provided on the Voting Instruction Form and return the same by following the instructions provided thereon. Do not otherwise complete the Voting Instruction Form as your vote will be taken at the Cenovus Meeting. If you do not intend to attend the Cenovus Meeting, follow the instructions on the Voting Instruction Form to vote by telephone or internet or complete, sign and mail the Voting Instruction Form in the postage prepaid envelope provided. Your completed Voting Instruction Form must be submitted on or before the deadline specified on the form.

 

Q:	Who is soliciting my proxy?

 

A:

Management of Cenovus is soliciting your proxy and has engaged Kingsdale Advisors to act as strategic shareholder advisor and proxy solicitation agent with respect to the matters to be considered at the Cenovus Meeting and the Husky Meeting. Solicitation of proxies is done primarily by mail and electronic means. The costs of preparing and distributing the Information Circular and meeting materials will be borne by Husky and Cenovus, as applicable, and the solicitation costs of Kingsdale Advisors will be borne by Cenovus.

 

Q:	When do I have to vote my Cenovus Common Shares by?

 

A:

Proxies must be received no later than the Cenovus Proxy Deadline, being 1:00 p.m. (Calgary time) on December 11, 2020, or, if the Cenovus Meeting is adjourned or postponed, 48 hours (excluding Saturdays, Sundays and statutory holidays in the Province of Alberta) before the beginning of any adjourned or postponed Cenovus Meeting. The time limit for deposit of proxies may be waived or extended by the Chair of the Cenovus Meeting at his or her discretion, without notice.

 

Q:	Can I appoint someone other than the individuals named in the enclosed proxy to vote my Cenovus Common Shares?

 

A:

Yes, you have the right to appoint another person of your choice, who need not be a Cenovus Common Shareholder, to attend and vote on your behalf at the Cenovus Meeting. If you wish to appoint a person other than those named in the enclosed proxy or Voting Instruction Form, insert the name of your chosen proxyholder in the space provided.

NOTE: It is important for you to ensure that any other person you appoint will attend the Cenovus Meeting and is aware that his or her appointment has been made to vote your securities.

The following applies to Cenovus Common Shareholders who wish to appoint as their proxyholders individuals other than those named in the proxy or Voting Instruction Form. This includes non-registered Cenovus Common Shareholders who wish to appoint themselves as proxyholders to attend, participate in or vote at the Cenovus Meeting.

 

- xxii -

Cenovus Common Shareholders who wish to appoint as their proxyholders individuals other than those named in the proxy or Voting Instruction Form to attend and participate in the Cenovus Meeting and vote their securities MUST submit their proxies or Voting Instruction Forms, as applicable, appointing such individuals as proxyholders AND register such proxyholders online, as described below. Registering your proxyholder is an additional step to be completed AFTER you have submitted your proxy or Voting Instruction Form. Failure to register the proxyholder will result in the proxyholder not receiving a Username that is required to vote at the Cenovus Meeting.

Step 1: Submit your proxy or Voting Instruction Form: To appoint someone other than the individuals named in the proxy or Voting Instruction Form as proxyholder, insert that person’s name in the blank space provided in the proxy or Voting Instruction Form (if permitted) and follow the instructions for submitting such proxy or Voting Instruction Form. This must be completed before registering such proxyholder, which is an additional step to be completed once you have submitted your proxy or Voting Instruction Form.

If you are a non-registered Cenovus Common Shareholders and wish to vote at the Cenovus Meeting, you must insert your own name in the space provided on the Voting Instruction Form sent to you by your intermediary, follow all of the applicable instructions provided by your intermediary AND register yourself as your proxyholder, as described below in Step 2. By doing so, you are instructing your intermediary to appoint you as proxyholder. It is important that you comply with the signature and return instructions provided by your intermediary. Please also see further instructions below under the heading “How can a non-registered Cenovus Common Shareholder vote during the Cenovus Meeting?”

If you are a non-registered Cenovus Common Shareholder located in the United States and wish to vote at the Cenovus Meeting or, if permitted, appoint a third party as your proxyholder, in addition to the steps described below under “How can a non-registered Cenovus Common Shareholder vote during the Cenovus Meeting?”, you must obtain a valid legal proxy from your intermediary. Follow the instructions from your intermediary included with the legal proxy form sent to you or contact your intermediary to request a legal proxy form if you have not received one. After obtaining a valid legal proxy from your intermediary, you must then submit such legal proxy to Computershare. Requests for registration from non-registered Cenovus Common Shareholders located in the United States that wish to vote at the Cenovus Meeting or, if permitted, appoint third parties as their proxyholders must be sent by e-mail or by courier to: uslegalproxy@computershare.com (if by e-mail); or Computershare Investor Services, Inc., Attention: Proxy Department, 8^th Floor, 100 University Avenue, Toronto, ON M5J 2Y1, Canada (if by courier), and in both cases, must be labeled “Legal Proxy” and received no later than the Cenovus Proxy Deadline.

Step 2: Register your proxyholder: To register a third-party proxyholder, you must visit https://www.computershare.com/CenovusEnergy by the Cenovus Proxy Deadline and provide Computershare with the required proxyholder contact information so that Computershare may provide the proxyholder with a Username via email. Without a Username, proxyholders will not be able to vote at the Cenovus Meeting but will be able to participate as guests.

 

Q:	Should I send my form of proxy or Voting Instruction Form now?

 

A:

Yes. Once you have carefully read and considered the information in this Information Circular, you need to complete and submit the enclosed form of proxy or Voting Instruction Form, as applicable. You are encouraged to vote well in advance of the Cenovus Proxy Deadline to ensure that your Cenovus Common Shares are voted at the Cenovus Meeting.

 

Q:	Can I revoke my vote after I have voted by proxy?

 

A:

Yes. In addition to revocation in any other manner permitted by law, a Cenovus Common Shareholder may revoke a proxy: (a) by accessing the Cenovus Meeting by following the instructions under the heading “How to Participate at the Cenovus Meeting” in this Information Circular and voting their Cenovus Common Shares during the designated time; (b) by instrument in writing executed by the Cenovus Common Shareholder or such Cenovus Common Shareholder’s attorney authorized in writing or if the Cenovus Common Shareholder is a corporation, under its corporate seal or by an officer or attorney thereof, duly authorized, indicating the capacity under which such officer or attorney is signing and deposited with Computershare, the transfer agent of Cenovus, at the office designated in the Notice of Special Meeting of Cenovus Common Shareholders not later than 5:00 p.m. (Calgary time) on the Business Day preceding the day of the Cenovus Meeting (or any adjournment or postponement thereof); or (c) by a duly executed and deposited proxy as provided herein bearing a later date or time than the date or time of the proxy being revoked.

 

Q:	How can a registered Cenovus Common Shareholder vote during the Cenovus Meeting?

 

A:	Registered Cenovus Common Shareholders can vote in one of the following ways:

 

During the Virtual Cenovus Meeting		If you are a registered Cenovus Common Shareholder, you can attend the Cenovus Meeting by going to https://web.lumiagm.com/418831959 in a web browser on a smartphone, tablet or computer, selecting “I have a Control Number/Username” and entering your 15-digit Control Number (your Control Number is located on your form of proxy) and the password: “cenovus2020” (case sensitive). Follow the instructions to access the Cenovus Meeting and vote when prompted.   See “General Proxy Matter – Cenovus – How to Participate at the Cenovus Meeting”.

 

- xxiii -

Internet		Go to https://www.investorvote.com. Enter the 15-digit Control Number printed on the form of proxy and follow the instructions on screen.
Fax		1-866-249-7775 (North America toll-free)   1-416-263-9524 (Direct dial)
Mail		Enter voting instructions, sign the form of proxy and send your completed form of proxy or Voting Instruction Form to Cenovus’s registrar and transfer agent in the envelope provided, or to Computershare Investor Services, Inc., 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1.
Phone		Call 1-866-732-8683 and follow the instructions. You will need to enter your 15-digit Control Number printed on the form of proxy, and follow the interactive voice recording instructions to submit your vote.
Questions		Call Cenovus’s strategic shareholder advisor and proxy solicitation agent Kingsdale Advisors, toll-free in North America at 1-866-851-4179 or at 1-416-867-2272 outside of North America, or by email at contactus@kingsdaleadvisors.com.

 

Q:	How can a non-registered Cenovus Common Shareholder vote during the Cenovus Meeting?

 

A:	Non-registered (beneficial) holders of Cenovus Common Shares can vote in one of the following ways:

 

During the Virtual Cenovus Meeting		If you are a non-registered Cenovus Common Shareholder, you can attend and vote at the Cenovus Meeting by filling in your name in the blank space provided on the Voting Instruction Form and appointing yourself as proxy and sending in your completed Voting Instruction Form to the address specified on the Voting Instruction Form in advance of the Cenovus Meeting.   You must also visit https://www.computershare.com/CenovusEnergy to register your name and email address so that after the Cenovus Proxy Deadline, Computershare can send you via email a Username that will be required (with case-sensitive password “cenovus2020”) to log into the Cenovus Meeting.   You can then attend the Cenovus Meeting by going to https://web.lumiagm.com/418831959 in a web browser on a smartphone, tablet or computer, selecting “I have a Control Number/Username”, entering the Username that you received in an email from Computershare, password “cenovus2020” (case sensitive), and then follow the instructions to access the Cenovus Meeting and vote when prompted.   Non-registered Cenovus Common Shareholders who have not duly appointed themselves as proxy will not be able to vote online at the virtual Cenovus Meeting. You will be able to join a live webcast of the Cenovus Meeting by going to https://web.lumiagm.com/418831959, clicking on “I am a guest” and filling in the form.   See “General Proxy Matter – Cenovus – How to Participate at the Cenovus Meeting”.
Internet		Go to https://www.proxyvote.com, enter the 16-digit Control Number printed on the Voting Instruction Form and follow the instructions on screen.
Mail		Enter voting instructions, sign the Voting Instruction Form and send your completed Voting Instruction Form to the address specified on the Voting Instruction Form.
Phone		Call 1-800-474-7493 or 1-800-474-7501 (French) and follow the instructions. You will need to enter your 16-digit Control Number printed on the Voting Instruction Form, and follow the interactive voice recording instructions to submit your vote.
Questions		Call Cenovus’s strategic shareholder advisor and proxy solicitation agent Kingsdale Advisors, toll-free in North America at 1-866-851-4179 or at 1-416-867-2272 outside of North America, or by email at contactus@kingsdaleadvisors.com.

 

Q:	Will my securities intermediary vote my Cenovus Common Shares for me?

 

A:

A broker or other securities intermediary will vote your Cenovus Common Shares only if you provide instructions to such intermediary on how to vote. If you fail to provide proper instructions, the Cenovus Common Shares will not be voted on your behalf at the Cenovus Meeting. If you do not wish to appoint yourself as proxy, as a non-registered (beneficial) Cenovus Common Shareholder, you should instruct your intermediary/ies to vote your Cenovus Common Shares on your behalf by following the directions on the Voting Instruction Form provided by such intermediary. Unless your intermediary/ies give(s) you its proxy to vote at the Cenovus Meeting, you cannot vote those Cenovus Common Shares owned by you at the Cenovus Meeting.

 

- xxiv -

Q:	Which form of proxy should I complete, sign and return?

 

A:	Accompanying this Information Circular is a form of proxy or Voting Instruction Form for use by Cenovus Common Shareholders. If you hold Cenovus Common Shares, please complete, sign and return the form of proxy or Voting Instruction Form, as applicable.

 

Q:	What other approvals are required for the Arrangement to be completed?

 

A:

In addition to the Cenovus Common Shareholder approval, in order for the Arrangement to be completed: (a) the Arrangement Resolution must be approved by not less than 662⁄3% of the votes cast by Husky Common Shareholders present in person (virtually) or represented by proxy at the Husky Meeting and not less than 662⁄3% of the votes cast by Husky Common Shareholders and Husky Optionholders present in person (virtually) or represented by proxy at the Husky Meeting, voting together as a single class; and (b) other court and regulatory approvals must be obtained, including: (i) the approval of the TSX and the NYSE in respect of the issuance and listing of the Cenovus Common Shares and the Cenovus Warrants to be issued to Husky Common Shareholders pursuant to the Arrangement and the Cenovus Common Shares issuable upon exercise of the Cenovus Warrants; and (ii) the Key Regulatory Approvals.

See “Procedure for the Arrangement to Become Effective”.

 

Q:	When will the Arrangement become effective?

 

A:

The Arrangement will become effective at the time the Articles of Arrangement are filed with the Registrar, which is expected to occur during the first quarter of 2021, provided that all required approvals are obtained. However, completion of the Arrangement is subject to a number of conditions and it is possible that factors outside the control of Cenovus and/or Husky could result in the Arrangement being completed at a later time, or not at all. Subject to certain limitations, each Party may terminate the Arrangement Agreement if it is not consummated by May 31, 2021; or by August 31, 2021 if the Key Regulatory Approvals have not been received by May 31, 2021.

See “Timing”.

 

Q:	What will happen to my Cenovus Options, Cenovus PSUs, and Cenovus RSUs, in connection with the Arrangement?

 

A:

Completion of the Arrangement will result in the acceleration of the vesting of the Cenovus Options, Cenovus PSUs and Cenovus RSUs held by non-executive officers of Cenovus. The payout of such Cenovus Options, Cenovus PSUs and Cenovus RSUs will be determined in accordance with the terms of the applicable Cenovus Incentive Plan, without the making of any adjustments (including as a consequence of the Arrangement) or other determinations pursuant to the terms of the Cenovus Incentive Plans or any Cenovus Incentives granted thereunder.

See “Effect of the Arrangement – Cenovus Incentive Awards”.

 

Q:	What will happen if the Share Issuance Resolution is not approved or the Arrangement is not completed for any reason?

 

A:

If the Share Issuance Resolution is not approved or the Arrangement is not completed for any reason, the Arrangement Agreement may be terminated by one or both of the Parties. Pursuant to the terms of the Arrangement Agreement, Husky and Cenovus have agreed that neither Party will solicit, initiate, encourage or otherwise facilitate any discussions concerning any other business combination or sale of material assets. The Husky Board or the Cenovus Board may respond to unsolicited Superior Proposals subject to certain requirements and notification to the Other Party who has the right to match any Superior Proposals within a five Business Day match period. The Arrangement Agreement provides for a termination amount of $150 million payable by Husky, in consideration for the disposition of Cenovus’s rights under the Arrangement Agreement, if the Arrangement is not completed in certain circumstances and $240 million payable by Cenovus, in consideration for the disposition of Husky’s rights under the Arrangement Agreement, if the Arrangement is not completed in certain circumstances.

See “Effect of the Arrangement – The Arrangement Agreement – Termination”.

 

Q:	Are Cenovus Common Shareholders entitled to Dissent Rights?

 

A:	No. Cenovus Common Shareholders are not entitled to Dissent Rights in connection with the Arrangement.

 

Q:	Who should I contact if I have questions?

 

A:

If you have any questions about the Arrangement or the matters described in this Information Circular, please contact your professional advisors. If you need additional copies of this Information Circular or you have questions or need assistance completing your form of proxy or Voting Instruction Form, please contact Cenovus’s strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors by telephone, toll free in North America at 1-866-851-4179 or at 1-416-867-2272 outside of North America, or by email at contactus@kingsdaleadvisors.com.

 

- xxv -

NOTICE OF SPECIAL MEETING OF HUSKY SECURITYHOLDERS

NOTICE IS HEREBY GIVEN that a special meeting (the “Husky Meeting”) of the holders (“Husky Common Shareholders”) of common shares (“Husky Common Shares”) of Husky Energy Inc. (“Husky”), the holders (“Husky Optionholders”) of options to acquire Husky Common Shares (“Husky Options”) and the holders (“Husky Preferred Shareholders”) of cumulative redeemable preferred shares, series 1, 2, 3, 5 and 7 (collectively, the “Husky Preferred Shares”) of Husky will be held at 9:00 a.m. (Calgary time) on Tuesday, December 15, 2020 in a virtual-only format that will be conducted via live webcast accessible online at https://web.lumiagm.com/459526828 for the following purposes:

 

1.

to consider, pursuant to an interim order (the “Interim Order”) of the Court of Queen’s Bench of Alberta dated November 9, 2020, and, if deemed advisable, to approve, with or without variation, a special resolution of the Husky Common Shareholders, voting separately and together with the Husky Optionholders as a single class (the “Arrangement Resolution”), the full text of which is set forth in Appendix A to the accompanying joint management information circular dated November 9, 2020 (the “Information Circular”), to approve a plan of arrangement (the “Arrangement”) under section 193 of the Business Corporations Act (Alberta) (the “ABCA”) involving Husky, Husky Common Shareholders, Husky Optionholders, Husky Preferred Shareholders and Cenovus Energy Inc. (“Cenovus”), whereby, among other things, Cenovus will acquire all of the issued and outstanding Husky Common Shares, will exchange all of the issued and outstanding Husky Preferred Shares for preferred shares of Cenovus, and will exchange all of the outstanding Husky Options for replacement options to acquire common shares of Cenovus, all as more particularly described in the Information Circular;

 

2.

to consider, pursuant to the Interim Order, and, if deemed advisable, to approve, with or without variation, a special resolution of the Husky Preferred Shareholders, voting together as a single class (the “Preferred Shareholder Resolution”), the full text of which is set forth in Appendix B to the Information Circular, to approve the Arrangement; and

 

3.	to transact such further and other business as may properly be brought before the Husky Meeting or any adjournment(s) or postponement(s) thereof.

Specific details of the matters to be put before the Husky Meeting are set forth in the Information Circular.

The board of directors of Husky unanimously recommends that Husky Common Shareholders and Husky Optionholders vote FOR the Arrangement Resolution and that Husky Preferred Shareholders vote FOR the Preferred Shareholder Resolution.

It is a condition to the completion of the Arrangement that the Arrangement Resolution be approved by Husky Common Shareholders, and the Husky Common Shareholders and Husky Optionholders, voting together as a single class, at the Husky Meeting. Completion of the Arrangement is not conditional upon receiving the approval of the Preferred Shareholder Resolution by Husky Preferred Shareholders. If the Husky Preferred Shareholders do not approve the Preferred Shareholder Resolution or if more than 10% of Husky Preferred Shareholders dissent in respect of the Arrangement (unless waived by Cenovus), the Husky Preferred Shares will not be exchanged for preferred shares of Cenovus and will remain outstanding in a subsidiary of Cenovus following completion of the Arrangement and listed on the TSX.

The full text of the plan of arrangement (the “Plan of Arrangement”) implementing the Arrangement is attached as Appendix E to the Information Circular. The Interim Order is attached as Appendix F to the Information Circular.

Each Husky Common Share and each Husky Option entitled to be voted in respect of the Arrangement Resolution will entitle the holder to one vote at the Husky Meeting with respect to such resolution. The Arrangement Resolution must be approved by not less than 66²⁄₃% of the votes cast by Husky Common Shareholders present in person (virtually) or represented by proxy at the Husky Meeting and not less than 66²⁄₃% of the votes cast by Husky Common Shareholders and Husky Optionholders present in person (virtually) or represented by proxy at the Husky Meeting, voting together as a single class.

Each Husky Preferred Share entitled to be voted in respect of the Preferred Shareholder Resolution will entitle the holder to one vote at the Husky Meeting with respect to such resolution. The Preferred Shareholder Resolution must be approved by not less than 66²⁄₃% of the votes cast by Husky Preferred Shareholders present in person (virtually) or represented by proxy at the Husky Meeting, voting together as a single class.

The record date (the “Husky Record Date”) for determination of Husky Common Shareholders, Husky Preferred Shareholders and Husky Optionholders entitled to receive notice of and to vote at the Husky Meeting is the close of business on November 9, 2020. Husky Common Shareholders, Husky Preferred Shareholders and Husky Optionholders whose names have been entered in the register of holders of Husky Common Shares, the register of holders of Husky Preferred Shares or the register of holders of Husky Options, as applicable, on the close of

 

- xxvi -

business on the Husky Record Date will be entitled to receive notice of and to vote at the Husky Meeting, provided that, to the extent that a Husky Common Shareholder or Husky Preferred Shareholder transfers the ownership of any Husky Common Shares or Husky Preferred Shares, as applicable, after the Husky Record Date and the transferee of those shares establishes ownership of such shares and demands, not later than 10 days before the Husky Meeting, to be included in the list of Husky Common Shareholders or Husky Preferred Shareholders, as applicable, eligible to vote at the Husky Meeting, such transferee will be entitled to vote those Husky Common Shares or Husky Preferred Shares, as applicable, at the Husky Meeting.

Due to the unprecedented public health impact of coronavirus disease 2019, also known as COVID-19, and in alignment with the recommendations of Canadian public health officials to cancel large public gatherings, the Husky Meeting will be held in a virtual-only format conducted via live webcast in order to help mitigate health and safety risks to the community, shareholders, employees and other stakeholders. Husky’s directors and management believe this format will provide Husky securityholders a safer opportunity to attend the Husky Meeting given ongoing restrictions on travel and public gatherings as well as health concerns. While Husky securityholders and duly appointed proxyholders will not be able to attend the Husky Meeting in person, regardless of geographic location and ownership, they will have an equal opportunity to participate at the Husky Meeting and vote on the applicable resolution.

Registered Husky Common Shareholders, Husky Optionholders and registered Husky Preferred Shareholders may attend the Husky Meeting in person (virtually) or may be represented by proxy. Husky Common Shareholders, Husky Optionholders and Husky Preferred Shareholders who are unable to attend the Husky Meeting or any adjournments or postponements thereof in person are requested to date, sign and return the accompanying form of proxy for use at the Husky Meeting or any adjournment or postponement thereof. To be effective, the applicable enclosed form of proxy must be dated, signed and deposited with Husky’s registrar and transfer agent, Computershare Trust Company of Canada: (i) by mail using the enclosed return envelope or one addressed to Computershare Trust Company of Canada, 8^th Floor North Tower, 100 University Avenue, Toronto, Ontario, M5J 2Y1; (ii) by facsimile 1-866-249-7775; or (iii) through the internet at www.investorvote.com, no later than: (a) 9:00 a.m. (Calgary time) on December 11, 2020 or, if the Husky Meeting is adjourned or postponed, no later than 48 hours (excluding Saturdays, Sundays and statutory holidays in Alberta) before the beginning of any adjourned or postponed Husky Meeting. The time limit for the deposit of proxies may be waived or extended by the Chair of the Husky Meeting at his or her discretion without notice. To vote through the internet you will require your 15-digit control number found on your proxy form.

If a Husky Common Shareholder or a Husky Preferred Shareholder receives more than one form of proxy because such holder owns Husky Common Shares or Husky Preferred Shares registered in different names or addresses, each form of proxy should be completed and returned.

A proxyholder has discretion under the accompanying form of proxy in respect of amendments or variations to matters identified in this Notice and with respect to other matters which may properly come before the Husky Meeting, or any adjournment or postponement thereof. As of the date hereof, management of Husky knows of no amendments, variations or other matters to come before the Husky Meeting other than the matters set forth in this Notice. Husky Common Shareholders, Husky Optionholders and Husky Preferred Shareholders who are planning to return the form of proxy are encouraged to review the Information Circular carefully before submitting the proxy form.

It is the intention of the persons named in the applicable enclosed form of proxy, if not expressly directed to the contrary in such form of proxy, to vote in favour of the Arrangement Resolution and the Preferred Shareholder Resolution.

Pursuant to the Interim Order, registered holders of Husky Common Shares and registered holders of Husky Preferred Shares have been granted the right to dissent with respect to the Arrangement Resolution and the Preferred Shareholder Resolution, respectively, and, if the Arrangement becomes effective, to be paid the fair value of their Husky Common Shares or Husky Preferred Shares, respectively, in accordance with the provisions of section 191 of the ABCA, as modified by the Interim Order and the Plan of Arrangement. The right of a Husky Common Shareholder or a Husky Preferred Shareholder to dissent is more particularly described in the Information Circular and in the Interim Order and the text of section 191 of the ABCA, which are set forth in Appendices F and O, respectively, to the accompanying Information Circular. To exercise such right to dissent, a dissenting Husky Common Shareholder or a dissenting Husky Preferred Shareholder must send to Husky, c/o Osler, Hoskin & Harcourt LLP, Suite 2500, TC Energy Tower, 450 – 1^st Street S.W., Calgary, Alberta, T2P 5H1, Attention: Tristram Mallett, a written objection to the Arrangement Resolution or Preferred Shareholder Resolution, as the case may be, which written objection must be received by 5:00 p.m. (Calgary time) on December 8, 2020 or the fifth business day immediately preceding the date of any adjournment or postponement of the Husky Meeting, as applicable. Notwithstanding the foregoing, registered Husky Preferred Shareholders who have validly exercised their right to dissent shall not be entitled to dissent nor to be paid the fair value of their Husky Preferred Shares in the event that the Husky Preferred Shares are not exchanged for preferred shares of Cenovus pursuant to the Arrangement.

Failure to strictly comply with the requirements set forth in section 191 of the ABCA, as modified by the Interim Order and the Plan of Arrangement, may result in the loss of any right of dissent. Persons who are beneficial owners of Husky Common Shares or Husky Preferred Shares registered in the name of a broker, dealer, bank, trust company or other nominee who wish to dissent should be aware that only the registered holders of such Husky Common Shares or Husky Preferred Shares are entitled to dissent. Accordingly, a beneficial owner of Husky Common Shares or Husky Preferred Shares desiring to exercise the right of dissent must make arrangements for the Husky Common Shares or Husky Preferred Shares beneficially owned by such holder to be registered in the

 

- xxvii -

holder’s name prior to the time the written objection to the Arrangement Resolution or the Preferred Shareholder Resolution, as applicable, is required to be received by Husky or, alternatively, make arrangements for the registered holder of such Husky Common Shares or Husky Preferred Shares to dissent on behalf of the beneficial holder. It is strongly recommended that any Husky Common Shareholders and Husky Preferred Shareholders wishing to dissent seek independent legal advice.

Dated at Calgary, Alberta, this 9^th day of November, 2020.

 

 

- xxviii -

NOTICE OF SPECIAL MEETING OF CENOVUS SHAREHOLDERS

NOTICE IS HEREBY GIVEN that a special meeting (the “Cenovus Meeting”) of the holders (“Cenovus Common Shareholders”) of common shares (“Cenovus Common Shares”) of Cenovus Energy Inc. (“Cenovus”) will be held at 1:00 p.m. (Calgary time) on Tuesday, December 15, 2020 in a virtual-only format that will be conducted via live webcast accessible online at https://web.lumiagm.com/418831959 for the following purposes:

 

1.	to consider and, if deemed advisable, to approve, with or without variation, an ordinary resolution, the full text of which is set forth in Appendix C to the accompanying joint management information circular dated November 9, 2020 (the “Information Circular”), to approve and authorize:

 

(a)

the issuance of (i) such number of Cenovus Common Shares and common share purchase warrants (“Cenovus Warrants”) to allow Cenovus to meet its obligations under the Arrangement Agreement (as defined below) to issue Cenovus Common Shares for a portion of the common shares (“Husky Common Shares”) in the capital of Husky Energy Inc. (“Husky”) held by each holder of Husky Common Shares (“Husky Common Shareholder”) and Cenovus Warrants for the remaining portion of Husky Common Shares held by each such Husky Common Shareholder, such that, in the aggregate, each Husky Common Shareholder will receive consideration of 0.7845 of a Cenovus Common Share and 0.0651 of a Cenovus Warrant in respect of each Husky Common Share, and (ii) such number of Cenovus Common Shares issuable upon exercise, from time to time, of (A) Cenovus Warrants, and (B) replacement options to purchase Cenovus Common Shares granted by Cenovus in consideration for the outstanding options to purchase common shares in the capital of Husky (the “Share Issuance Resolution”) pursuant to a plan of arrangement under section 193 of the Business Corporations Act (Alberta) involving Husky, the holders of common shares of Husky, the holders of preferred shares of Husky, the holders of options of Husky, and Cenovus, pursuant to the terms of an arrangement agreement dated October 24, 2020 (the “Arrangement Agreement”) between Cenovus and Husky, all as more particularly described in the Information Circular; and

 

(b)

amendments to the Amended and Restated Shareholder Rights Plan Agreement dated as of April 25, 2018 between Cenovus and Computershare Investor Services, Inc. (the “Cenovus SRP Agreement”), as described and set forth in the Information Circular and such further amendments as the board of directors of Cenovus (the “Cenovus Board”) may determine to be reasonably necessary to ensure that an acquisition by any person of Cenovus Common Shares or of rights to acquire Cenovus Common Shares pursuant to (i) the Arrangement, (ii) the Cenovus Warrants, including the exercise thereof, or (iii) any exercise of pre-emptive rights, including pursuant to any follow-on offering, under any Pre-Emptive Rights Agreement (as defined in the Information Circular) does not and will not result in the occurrence of a “Flip-In Event” or the “Separation Time” (as those terms are defined in the Cenovus SRP Agreement); and

 

2.	to transact such further and other business as may properly be brought before the Cenovus Meeting or any adjournment(s) or postponement(s) thereof.

Specific details of the matters to be put before the Cenovus Meeting are set forth in the Information Circular.

The Cenovus Board unanimously recommends that Cenovus Common Shareholders vote FOR the Share Issuance Resolution. It is a condition to the completion of the Arrangement that the Share Issuance Resolution be approved at the Cenovus Meeting. If the Share Issuance Resolution is not approved by the Cenovus Common Shareholders, the Arrangement cannot be completed.

Each Cenovus Common Share entitled to be voted in respect of the Share Issuance Resolution will entitle the holder to one vote at the Cenovus Meeting. The Share Issuance Resolution must be approved by a simple majority of the votes cast by Cenovus Common Shareholders present in person (virtually) or represented by proxy at the Cenovus Meeting.

The record date (the “Cenovus Record Date”) for determination of Cenovus Common Shareholders entitled to receive notice of and to vote at the Cenovus Meeting is the close of business on November 9, 2020. Cenovus Common Shareholders whose names have been entered in the register of holders of Cenovus Common Shares at the close of business on the Cenovus Record Date will be entitled to receive notice of and to vote at the Cenovus Meeting.

Due to the unprecedented public health impact of coronavirus disease 2019, also known as COVID-19, and in alignment with the recommendations of Canadian public health officials to cancel large public gatherings, the Cenovus Meeting will be held in a virtual-only format conducted via live webcast in order to help mitigate health and safety risks to the community, shareholders, employees and other stakeholders. Cenovus’s directors and management believe this format will provide Cenovus Common Shareholders a safer opportunity to attend the Cenovus Meeting given ongoing restrictions on travel and public gatherings as well as health concerns. While Cenovus Common Shareholders and duly appointed proxyholders will not be able to attend the Cenovus Meeting in person, regardless of geographic location and ownership, they will have an equal opportunity to participate at the Cenovus Meeting and vote on the Share Issuance Resolution. The vast majority of our shareholders vote by proxy in advance of the meeting and all shareholders are encouraged to vote by proxy ahead of the Cenovus Meeting.

 

- xxix -

Registered Cenovus Common Shareholders may attend the Cenovus Meeting in person (virtually) or may be represented by proxy. Cenovus Common Shareholders who are unable to attend the Cenovus Meeting or any adjournments or postponements thereof in person are requested to date, sign and return the accompanying form of proxy for use at the Cenovus Meeting or any adjournment or postponement thereof. To be effective, the enclosed form of proxy must be dated, signed and deposited with Cenovus’s registrar and transfer agent, Computershare Investor Services, Inc.: (i) by mail using the enclosed return envelope or one addressed to Computershare Investor Services, Inc., 8^th Floor North Tower, 100 University Avenue, Toronto, Ontario, M5J 2Y1; (ii) by facsimile 1-866-249-7775; or (iii) through the internet at www.investorvote.com, no later than 1:00 p.m. (Calgary time) on December 11, 2020 or, if the Cenovus Meeting is adjourned or postponed, no later than 48 hours (excluding Saturdays, Sundays and statutory holidays in Alberta) before the beginning of any adjourned or postponed Cenovus Meeting. The time limit for the deposit of proxies may be waived or extended by the Chair of the Cenovus Meeting at his or her discretion without notice. To vote through the internet you will require your 15-digit control number found on your proxy form.

If a Cenovus Common Shareholder receives more than one form of proxy because such holder owns Cenovus Common Shares registered in different names or addresses, each form of proxy should be completed and returned.

A proxyholder has discretion under the accompanying form of proxy in respect of amendments or variations to matters identified in this Notice and with respect to other matters which may properly come before the Cenovus Meeting, or any adjournment or postponement thereof. As of the date hereof, management of Cenovus knows of no amendments, variations or other matters to come before the Cenovus Meeting other than the matters set forth in this Notice. Cenovus Common Shareholders who are planning to return the form of proxy are encouraged to review the Information Circular carefully before submitting the proxy form.

It is the intention of the persons named in the enclosed form of proxy, if not expressly directed to the contrary in such form of proxy, to vote in favour of the Share Issuance Resolution.

Dated at Calgary, Alberta, this 9^th day of November, 2020.

 

 

- xxx -

Court File No. 2001-13754

IN THE COURT OF QUEEN’S BENCH OF ALBERTA

JUDICIAL CENTRE OF CALGARY

IN THE MATTER OF SECTION 193 OF THE BUSINESS CORPORATIONS ACT,

R.S.A. 2000, c. B-9, AS AMENDED

AND IN THE MATTER OF A PROPOSED ARRANGEMENT INVOLVING HUSKY ENERGY INC., THE HOLDERS OF COMMON SHARES OF HUSKY ENERGY INC., THE HOLDERS OF CUMULATIVE REDEEMABLE PREFERRED SHARES, SERIES 1, 2, 3, 5 AND 7 OF HUSKY ENERGY INC., THE HOLDERS OF OPTIONS TO PURCHASE COMMON SHARES OF HUSKY ENERGY INC. AND CENOVUS ENERGY INC.

NOTICE OF APPLICATION

NOTICE IS HEREBY GIVEN that an originating application (the “Application”) has been filed with the Court of Queen’s Bench of Alberta, Judicial Centre of Calgary (the “Court”) on behalf of Husky Energy Inc. (“Husky”) with respect to a proposed arrangement (the “Arrangement”) under section 193 of the Business Corporations Act, R.S.A. 2000, c. B-9, as amended (the “ABCA”), involving Husky, the holders of common shares of Husky (the “Husky Common Shareholders”), the holders of cumulative redeemable preferred shares, series 1, 2, 3, 5 and 7 of Husky (the “Husky Preferred Shareholders”), the holders of options to purchase common shares of Husky (the “Husky Optionholders”) and Cenovus Energy Inc. (“Cenovus”), which Arrangement is described in greater detail in the joint management information circular of Husky and Cenovus dated November 9, 2020 accompanying this Notice of Application. At the hearing of the Application, Husky intends to seek:

 

1.

a declaration that the terms and conditions of the Arrangement, and the procedures relating thereto, are fair to the Husky Common Shareholders, Husky Optionholders, Husky Preferred Shareholders if the Preferred Share Condition, as defined in the Arrangement, is met and other affected persons, both from a substantive and procedural perspective;

 

2.	an order approving the Arrangement pursuant to the provisions of section 193 of the ABCA and pursuant to the terms and conditions of the Arrangement Agreement;

 

3.

a declaration that the Arrangement will, upon the filing of Articles of Arrangement under the ABCA and the issuance of the proof of filing of Articles of Arrangement under the ABCA, be effective under the ABCA in accordance with its terms and will be binding on and after the Effective Date, as defined in the Arrangement; and

 

4.	such other and further orders, declarations or directions as the Court may deem just,

(collectively, the “Final Order”).

AND NOTICE IS FURTHER GIVEN that the said Application is directed to be heard before a Justice of the Court, at the Calgary Courts Centre, 601 – 5th Street, S.W., Calgary, Alberta, Canada, or via video conference if necessary, on December 16, 2020 at 3:00 p.m. (Calgary time) or as soon thereafter as counsel may be heard. Any Husky Common Shareholder, Husky Preferred Shareholder, Husky Optionholder or other interested party desiring to support or oppose the Application may appear at the time of the hearing in person (virtually) or by counsel for that purpose provided such Husky Common Shareholder, Husky Preferred Shareholder, Husky Optionholder or other interested party files with the Court and serves upon Husky on or before 5:00 p.m. (Calgary time) on December 8, 2020, a notice of intention to appear (the “Notice of Intention to Appear”) setting out such Husky Common Shareholder’s, Husky Preferred Shareholder’s, Husky Optionholder’s or interested party’s address for service and indicating whether such Husky Common Shareholder, Husky Preferred Shareholder, Husky Optionholder or interested party intends to support or oppose the Application or make submissions, together with a summary of the position such person intends to advocate before the Court, and any evidence or materials which are to be presented to the Court. Service on Husky is to be effected by delivery to its solicitors at the address set forth below.

AND NOTICE IS FURTHER GIVEN that, at the hearing and subject to the foregoing, Husky Common Shareholders, Husky Preferred Shareholders, Husky Optionholders and any other interested persons will be entitled to make representations as to, and the Court will be requested to consider, the fairness of the Arrangement. If you do not attend, either in person (virtually) or by counsel, at that time, the Court may approve or refuse to approve the Arrangement as presented, or may approve it subject to such terms and conditions as the Court may deem fit, without any further notice.

AND NOTICE IS FURTHER GIVEN that the Court, by the interim order (the “Interim Order”) of the Court dated November 9, 2020, has given directions as to the calling and holding of a special meeting of the Husky Common Shareholders, Husky Preferred Shareholders and Husky Optionholders for the purposes of such Husky Common Shareholders, Husky Preferred Shareholders and Husky Optionholders voting upon applicable special resolutions to approve the Arrangement and, in particular, has directed that registered Husky Common Shareholders and registered Husky Preferred Shareholders have the right to dissent under the provisions of section 191 of the ABCA, as modified by the terms of the Interim Order, in respect of the Arrangement.

 

- xxxi -

AND NOTICE IS FURTHER GIVEN that the Final Order approving the Arrangement will, if granted, constitute as the basis for an exemption from the registration requirements of the United States Securities Act of 1933, as amended, pursuant to Section 3(a)(10) thereof with respect to (i) the issuance of common shares and common share purchase warrants in the capital of Cenovus issuable to Husky Common Shareholders, (ii) the issuance of preferred shares in the capital of Cenovus issuable to Husky Preferred Shareholders, and (iii) the issuance of options to purchase common shares in the capital of Cenovus issuable to Husky Optionholders, all pursuant to the Arrangement.

AND NOTICE IS FURTHER GIVEN that further notice in respect of these proceedings will only be given to those persons who have filed a Notice of Intention to Appear.

AND NOTICE IS FURTHER GIVEN that a copy of the said Application and other documents in the proceedings will be furnished to any Husky Common Shareholder, Husky Preferred Shareholder, Husky Optionholder or other interested party requesting the same by the under-mentioned solicitors for Husky upon written request delivered to such solicitors as follows:

Solicitors for Husky:

Osler, Hoskin & Harcourt LLP

Suite 2500, TC Energy Tower

450 – 1^st Street S.W.

Calgary, Alberta T2P 5H1

Facsimile Number: (403) 260-7024

Attention: Tristram Mallett

DATED at the City of Calgary, in the Province of Alberta, this 9^th day of November, 2020.

 

 

- xxxii -

GLOSSARY OF TERMS

The following is a glossary of certain terms used in this Information Circular including the Summary and Appendices M and N. Terms and abbreviations used in the Appendices to this Information Circular other than Appendices M and N are defined separately and the terms and abbreviations defined below are not used therein, except where otherwise indicated.

“ABCA” means the Business Corporations Act (Alberta), RSA 2000, c B-9, as amended;

“Acquisition Proposal” means, other than the transactions contemplated by the Arrangement Agreement and except as disclosed in writing by Husky to Cenovus and other than any transaction involving only a Party and one or more of its wholly-owned subsidiaries, any proposal, expression of interest, inquiry or offer from, or public announcement of an intention by, any Person, or group of Persons “acting jointly or in concert” within the meaning of NI 62-104, whether or not in writing and whether or not delivered to a Party’s shareholders and whether or not subject to due diligence or other conditions, or whether in one transaction or a series of transactions, that relates to, or may reasonably be expected to relate to: (a) any direct or indirect sale, issuance or acquisition of shares or other securities (or securities convertible or exercisable for shares or other securities) of a Party that, when taken together with the shares and other securities of such Party held by the proposed acquiror and any Person acting jointly or in concert with such acquiror, represent 20% or more of any class of equity or voting securities of such Party or rights or interests therein and thereto; (b) any direct or indirect acquisition or purchase of 20% or more of the assets (or any joint venture, lease, long-term supply agreement or other arrangement having the same economic effect as an acquisition or purchase) of a Party and its subsidiaries taken as a whole (and, for greater certainty, assets shall include shares of subsidiaries owned by a Party); (c) an amalgamation, arrangement, share exchange, merger, business combination, joint venture, consolidation, recapitalization, liquidation, dissolution, winding-up, reorganization or other similar transaction involving a Party or its subsidiaries that collectively own assets to which 20% or more of such Party’s revenues or earnings on a consolidated basis are attributable; (d) any take-over bid, issuer bid, exchange offer or similar transaction involving a Party or its subsidiaries that, if consummated, would result in a Person or group of Persons acting jointly or in concert with such Person acquiring beneficial ownership of 20% or more of any class of equity or voting securities of such Party; or (e) any transaction that would reasonably be expected to materially reduce the benefits to the Other Party of the Arrangement or impede, interfere with, prevent or delay the transactions contemplated by the Arrangement Agreement or the Arrangement;

“Adjusted EBITDA” has the meaning given to it under the heading “Joint Management Information Circular – Supplemental Disclosure – Non-GAAP Measures”;

“affiliate” means any Person that is affiliated with another Person in accordance with the meaning of the Securities Act;

“Agreement Date” means October 24, 2020;

“allowable capital loss” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada – Taxation of Capital Gains and Losses”;

“Applicable Canadian Securities Laws” means, collectively, the securities acts or similar statutes of each of the provinces and territories of Canada and the respective rules and regulations under such laws, together with applicable published national, multilateral and local policy statements, instruments, notices and blanket orders of the provinces and territories of Canada and all rules, by-laws and regulations governing the TSX;

“Applicable Laws” means, in any context that refers to one or more Persons or its or their respective businesses, activities, properties, assets, undertakings or securities, the Laws that apply to such Person or Persons or its or their respective businesses, activities, properties, assets, undertakings or securities and emanate from a Governmental Authority having jurisdiction over the Person or Persons or its or their respective businesses, activities, properties, assets, undertakings or securities and, for greater certainty, includes Applicable Canadian Securities Laws and Applicable U.S. Securities Laws;

“Applicable Securities Laws” means, collectively, Applicable Canadian Securities Laws and Applicable U.S. Securities Laws;

“Applicable U.S. Securities Laws” means federal and state securities legislation of the United States and all rules, regulations and orders promulgated thereunder, and all rules, by-laws and regulations governing the NYSE;

“ARC” has the meaning given to it under the heading “Procedure for the Arrangement to Become Effective – Regulatory Approvals – Competition Act Approval”;

“Arrangement” means the arrangement, pursuant to section 193 of the ABCA, on the terms set out in the Plan of Arrangement, as supplemented, modified or amended in accordance with the Plan of Arrangement or made at the direction of the Court in the Final Order;

“Arrangement Agreement” means the arrangement agreement dated October 24, 2020 between Husky and Cenovus, with respect to the Arrangement, as supplemented, modified or amended, a copy of which is attached as Appendix D to this Information Circular;

“Arrangement Resolution” means the special resolution in respect of the Arrangement to be considered by the Husky Common Shareholders and the Husky Optionholders at the Husky Meeting, the full text of which is set forth in Appendix A to this Information Circular;

 

- 1 -

“Articles of Arrangement” means the articles of arrangement in respect of the Arrangement required under section 193(10) of the ABCA to be filed with the Registrar after the Final Order has been granted and all other conditions precedent to the Arrangement have been satisfied or waived, to give effect to the Arrangement;

“Asia Pacific” means offshore China and Indonesia;

“associate” has the meaning ascribed thereto in the Securities Act;

“Atlantic” means offshore the east coast of Canada;

“Beneficial Holders” means Shareholders who do not hold their Shares in their own name;

“Bennett Jones” means Bennett Jones LLP, legal counsel to Cenovus;

“Broadridge” means Broadridge Financial Solutions, Inc.;

“Business Day” means, with respect to any action to be taken, any day, other than a Saturday, Sunday or a statutory holiday in the Province of Alberta;

“Canada Transportation Act” means the Canada Transportation Act, SC 1996, c-10, as amended;

“Canadian Securities Regulators” means the securities commission or similar regulatory authority in each of the provinces and territories of Canada;

“Canadian Warrant Prospectus” has the meaning given to it under the heading “Effect of the Arrangement – Description of the Cenovus Warrants – Cenovus Warrant Indenture”;

“CBCA” means the Canada Business Corporations Act, RSC 1985, c C-44, as amended;

“CDS” means CDS Clearing and Depository Services Inc.;

“Cenovus” means Cenovus Energy Inc., a corporation existing under the CBCA;

“Cenovus AGM Circular” means the management information circular of Cenovus dated March 2, 2020 in connection with the annual meeting of Cenovus Common Shareholders held on April 29, 2020;

“Cenovus AIF” means the annual information form of Cenovus dated February 11, 2020 for the year ended December 31, 2019;

“Cenovus Annual Financial Statements” means the audited consolidated financial statements of Cenovus as at December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018, together with the notes thereto and the auditor’s report thereon;

“Cenovus Annual MD&A” means management’s discussion and analysis of the financial and operating results of Cenovus for the year ended December 31, 2019;

“Cenovus Board” means the board of directors of Cenovus;

“Cenovus Board Recommendation” has the meaning given to it under the heading “The Arrangement – Recommendation of the Cenovus Board”;

“Cenovus Common Shareholders” means the holders of Cenovus Common Shares;

“Cenovus Common Shares” means common shares in the capital of Cenovus;

“Cenovus Director DSU Plan” means the deferred share unit plan for directors of Cenovus providing for the grant of Cenovus Director DSUs to non-employee directors of Cenovus, adopted with effect from November 30, 2009, as amended and restated in its entirety effective January 1, 2018, July 25, 2018 and December 9, 2019;

“Cenovus Director DSUs” means the deferred share units granted under the Cenovus Director DSU Plan entitling the holders thereof to receive a cash payment equivalent to the value of Cenovus Common Shares underlying such Cenovus Director DSUs upon ceasing to be a director or employee of Cenovus (or its affiliates) in accordance with the provisions of the Cenovus Director DSU Plan;

 

- 2 -

“Cenovus Disposition Event” has the meaning given to it under the heading “Effect of the Arrangement – The Arrangement Agreement – Termination Amount Payable by Husky”;

“Cenovus DSU Plans” means, together, the Cenovus Director DSU Plan and the Cenovus Employee DSU Plan, and “Cenovus DSU Plan” means either one of them;

“Cenovus DSUs” means, together, Cenovus Director DSUs and Cenovus Employee DSUs;

“Cenovus Employee DSU Plan” means the deferred share unit plan for employees of Cenovus providing for the grant of Cenovus Employee DSUs to employees of Cenovus and related corporations, adopted with effect from November 30, 2009, as amended effective October 25, 2016 and December 9, 2019;

“Cenovus Employee DSUs” means the deferred share units granted under the Cenovus Employee DSU Plan entitling the holders thereof to receive a cash payment equivalent to the value of Cenovus Common Shares underlying such Cenovus Employee DSUs upon ceasing to be employed by Cenovus (or its affiliates) in accordance with the provisions of the Cenovus Employee DSU Plan;

“Cenovus Fairness Opinions” means, collectively, the RBC Fairness Opinion and the TD Fairness Opinion;

“Cenovus Incentive Plans” means, collectively, the Cenovus DSU Plans, the Cenovus Option Plan, the Cenovus PSU Plan and the Cenovus RSU Plan;

“Cenovus Incentives” means, collectively, the Cenovus DSUs, the Cenovus Options, the Cenovus PSUs and the Cenovus RSUs;

“Cenovus Interim Financial Statements” means the interim consolidated financial statements (unaudited) of Cenovus as at September 30, 2020 and for the three and nine months ended September 30, 2020, together with notes thereto;

“Cenovus Interim MD&A” means management’s discussion and analysis of the financial and operating results of Cenovus for the three and nine months ended September 30, 2020;

“Cenovus First Preferred Shares” means the First Preferred Shares in the capital of Cenovus;

“Cenovus Group” means Cenovus and its subsidiaries and their respective partnership interests, as the context requires;

“Cenovus Meeting” means the special meeting of Cenovus Common Shareholders to be called to permit the Cenovus Common Shareholders to consider the Share Issuance Resolution and related matters, and any adjournment(s) or postponement(s) thereof;

“Cenovus Option Plan” means the amended and restated employee stock option plan of Cenovus providing for the grant of Cenovus Options to employees of Cenovus or its subsidiaries made as of November 30, 2009, and amended as of February 10, 2010 and December 7, 2010 and amended and restated as of January 1, 2018;

“Cenovus Options” means the stock options of Cenovus granted under the Cenovus Option Plan entitling the holders thereof to acquire Cenovus Common Shares upon payment of an exercise price, or surrender the stock options for a cash payment, in accordance with the provisions of the Cenovus Option Plan;

“Cenovus Preferred Shares” means, collectively, Cenovus Series 1 Preferred Shares, Cenovus Series 2 Preferred Shares, Cenovus Series 3 Preferred Shares, Cenovus Series 4 Preferred Shares, Cenovus Series 5 Preferred Shares, Cenovus Series 6 Preferred Shares, Cenovus Series 7 Preferred Shares and Cenovus Series 8 Preferred Shares;

“Cenovus Proxy Deadline” means 1:00 p.m. (Calgary time) on December 11, 2020, or 48 hours (excluding Saturdays, Sundays and statutory holidays in the Province of Alberta) prior to the time of any adjournment or postponement of the Cenovus Meeting;

“Cenovus PSU Plan” means the performance share unit plan for employees of Cenovus providing for the grant of Cenovus PSUs to employees of Cenovus or its affiliates adopted with effect from February 10, 2010 and amended and restated effective January 1, 2018, as amended;

“Cenovus PSUs” means the performance share units granted under the Cenovus PSU Plan entitling the holders thereof to receive a cash payment or Cenovus Common Shares (or a combination thereof), as determined by Cenovus, upon vesting in accordance with the provisions of the Cenovus PSU Plan;

“Cenovus Record Date” means November 9, 2020;

“Cenovus Replacement Options” means the replacement options to purchase Cenovus Common Shares granted by Cenovus in consideration for the Husky Options pursuant to the Plan of Arrangement;

 

- 3 -

“Cenovus Reserves Reports” means the reports prepared by McDaniel for the year ended December 31, 2019 and by GLJ for the year ended December 31, 2019 with respect to Cenovus’s reserves pursuant to NI 51-101;

“Cenovus Rights Plan” has the meaning given to it under the heading “Matters to be Considered at the Cenovus Meeting”;

“Cenovus RSU Plan” means the restricted share unit plan for employees of Cenovus providing for the grant of Cenovus RSUs to certain employees of Cenovus or its affiliates adopted with effect from December 7, 2010 and amended and restated effective January 1, 2018 as amended;

“Cenovus RSUs” means the restricted share units granted under the Cenovus RSU Plan entitling the holders to receive a cash payment or Cenovus Common Shares (or a combination thereof), as determined by Cenovus, upon vesting of such Cenovus RSUs in accordance with the provisions of the Cenovus RSU Plan;

“Cenovus Second Preferred Shares” means the Second Preferred Shares in the capital of Cenovus;

“Cenovus Series 1 Preferred Shares” means First Preferred Shares, Series 1, in the capital of Cenovus, to be issued pursuant to the Plan of Arrangement (if the Preferred Share Condition is met) in exchange for Husky Series 1 Preferred Shares outstanding immediately prior to the Effective Time, such shares having substantially identical terms to the Husky Series 1 Preferred Shares except that the issuer thereof shall be Cenovus and they will be convertible into Cenovus Series 2 Preferred Shares instead of Husky Series 2 Preferred Shares;

“Cenovus Series 2 Preferred Shares” means First Preferred Shares, Series 2, in the capital of Cenovus, to be issued pursuant to the Plan of Arrangement (if the Preferred Share Condition is met) in exchange for Husky Series 2 Preferred Shares outstanding immediately prior to the Effective Time, such shares having substantially identical terms to the Husky Series 2 Preferred Shares except that the issuer thereof shall be Cenovus and they will be convertible into Cenovus Series 1 Preferred Shares instead of Husky Series 1 Preferred Shares;

“Cenovus Series 3 Preferred Shares” means First Preferred Shares, Series 3, in the capital of Cenovus, to be issued pursuant to the Plan of Arrangement (if the Preferred Share Condition is met) in exchange for Husky Series 3 Preferred Shares outstanding immediately prior to the Effective Time, such shares having substantially identical terms to the Husky Series 3 Preferred Shares except that the issuer thereof shall be Cenovus and they will be convertible into Cenovus Series 4 Preferred Shares instead of Husky Series 4 Preferred Shares;

“Cenovus Series 4 Preferred Shares” means First Preferred Shares, Series 4, in the capital of Cenovus, to be issued from time to time upon conversion of Cenovus Series 3 Preferred Shares in accordance with their terms, such shares having substantially identical terms to the Husky Series 4 Preferred Shares except that the issuer thereof shall be Cenovus and they will be convertible into Cenovus Series 3 Preferred Shares instead of Husky Series 3 Preferred Shares;

“Cenovus Series 5 Preferred Shares” means First Preferred Shares, Series 5, in the capital of Cenovus, to be issued pursuant to the Plan of Arrangement (if the Preferred Share Condition is met) in exchange for Husky Series 5 Preferred Shares outstanding immediately prior to the Effective Time, such shares having substantially identical terms to the Husky Series 5 Preferred Shares except that the issuer thereof shall be Cenovus and they will be convertible into Cenovus Series 6 Preferred Shares instead of Husky Series 6 Preferred Shares;

“Cenovus Series 6 Preferred Shares” means First Preferred Shares, Series 6, in the capital of Cenovus, to be issued from time to time upon conversion of Cenovus Series 5 Preferred Shares in accordance with their terms, such shares having substantially identical terms to the Husky Series 6 Preferred Shares except that the issuer thereof shall be Cenovus and they will be convertible into Cenovus Series 5 Preferred Shares instead of Husky Series 5 Preferred Shares;

“Cenovus Series 7 Preferred Shares” means First Preferred Shares, Series 7, in the capital of Cenovus, to be issued pursuant to the Plan of Arrangement (if the Preferred Share Condition is met) in exchange for Husky Series 7 Preferred Shares outstanding immediately prior to the Effective Time, such shares having substantially identical terms to the Husky Series 7 Preferred Shares except that the issuer thereof shall be Cenovus and they will be convertible into Cenovus Series 8 Preferred Shares instead of Husky Series 8 Preferred Shares;

“Cenovus Series 8 Preferred Shares” means First Preferred Shares, Series 8, in the capital of Cenovus, to be issued from time to time upon conversion of Cenovus Series 7 Preferred Shares in accordance with their terms, such shares having substantially identical terms to the Husky Series 8 Preferred Shares except that the issuer thereof shall be Cenovus and they will be convertible into Cenovus Series 7 Preferred Shares instead of Husky Series 7 Preferred Shares;

“Cenovus Shares” means collectively, the Cenovus Common Shares and the Cenovus Preferred Shares;

“Cenovus SRP Agreement” means the Amended and Restated Shareholder Rights Plan Agreement dated as of April 25, 2018 between Cenovus and Computershare Investor Services, Inc., as rights agent, and, where the context dictates, as such agreement will be amended after giving effect to the approval of the Share Issuance Resolution at the Cenovus Meeting;

“Cenovus Termination Amount” means $150 million;

 

- 4 -

“Cenovus Warrant Agent” has the meaning given to it under the heading “Effect of the Arrangement – Description of the Cenovus Warrants”;

“Cenovus Warrantholder” means a holder of Cenovus Warrants;

“Cenovus Warrant Indenture” means the warrant indenture to be entered into between the Cenovus Warrant Agent and Cenovus dated as of the Effective Date, governing the creation and issue of the Cenovus Warrants, as further described herein under the heading “Effect of the Arrangement – Description of the Cenovus Warrants – Cenovus Warrant Indenture”;

“Cenovus Warrants” means common share purchase warrants of Cenovus to be issued by Cenovus to Husky Common Shareholders pursuant to the Plan of Arrangement, with each whole common share purchase warrant entitling the holder thereof to acquire one Cenovus Common Share at an exercise price of $6.54 per Cenovus Common Share for a period of 60 months from the Effective Date;

“Cenovus Warrant Shares” has the meaning given to it under the heading “Effect of the Arrangement – Description of the Cenovus Warrants – Cenovus Warrant Indenture”;

“Cenovus Warrants Portion” means the fraction obtained when (i) the fair market value of 0.0651 of a Cenovus Warrant, is divided by (ii) the fair market value of the Consideration, in each case determined immediately prior to the Effective Time;

“Certificate” means the certificate or other proof of filing to be issued by the Registrar pursuant to section 193(11) or section 193(12) of the ABCA in respect of the Articles of Arrangement;

“CIBC Capital Markets” means CIBC World Markets Inc., financial advisor to Husky;

“CIBC Common Shareholder Fairness Opinion” means the written opinion of CIBC Capital Markets to the Husky Board dated October 23, 2020, a copy of which is attached as Appendix H to this Information Circular;

“CIBC Preferred Shareholder Fairness Opinion” means the written opinion of CIBC Capital Markets to the Husky Board dated October 23, 2020, a copy of which is attached as Appendix I to this Information Circular;

“COGE Handbook” means the Canadian Oil and Gas Evaluation Handbook, as amended from time to time maintained by the Society of Petroleum Evaluation Engineers (Calgary Chapter);

“Combination Transaction” has the meaning given to it under the heading “Effect of the Arrangement – Standstill Agreements – Transfer Restrictions”;

“Combined Company Board” has the meaning given to it under the heading “Pro Forma Information Concerning the Combined Company – Directors and Executive Officers after the Arrangement – Board of Directors”;

“Commissioner” means the Commissioner of Competition appointed under the Competition Act or any Person authorized to exercise the powers and perform the duties of the Commissioner of Competition and includes the Commissioner’s representatives where the context requires;

“Competition Act” means the Competition Act, RSC 1985, c C-34, as amended;

“Competition Act Approval” means the occurrence of one or more of the following, in respect of the transactions contemplated by the Arrangement Agreement: (a) the Commissioner shall have issued an ARC; or (b) both (i) the Commissioner shall have issued a No Action Letter to Cenovus, on terms and conditions satisfactory to Cenovus and Husky, each acting reasonably, and (ii) either the waiting period has expired or been terminated by the Commissioner under sections 123(1) or 123(2), respectively, of the Competition Act, or the obligation to provide a pre-merger notification in accordance with Part IX of the Competition Act has been waived by the Commissioner under section 113(c) thereof;

“Computershare” means Computershare Trust Company of Canada or Computershare Investor Services, Inc., as the context requires, in their respective capacities as registrar and transfer agent of Husky and Cenovus, respectively;

“Confidentiality Agreement” means the confidentiality agreement between Cenovus and Husky dated August 24, 2020;

“Consideration” means the number of Cenovus Common Shares and Cenovus Warrants to be issued to each Husky Common Shareholder (other than Dissenting Shareholders) pursuant to the Plan of Arrangement, certain Husky Common Shares being exchanged exclusively for Cenovus Common Shares and the remaining Husky Common Shares being exchanged exclusively for Cenovus Warrants, such that, in aggregate, each Husky Common Shareholder (other than Dissenting Shareholders) will receive 0.7845 of a Cenovus Common Share and 0.0651 of a Cenovus Warrant in respect of each Husky Common Share held;

 

- 5 -

“Continuing Designees” has the meaning given to it under the heading “Effect of the Arrangement – Standstill Agreements – Termination”;

“Control Shares” has the meaning given to it under the heading “Joint Information Circular – Information for United States Securityholders”;

“Convention” means the Canada-United States Income Tax Convention (1980), as amended;

“Converted Preferred Shares” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada – Holding and Disposing of Cenovus Shares and Cenovus Warrants – Conversion of Cenovus Preferred Shares”;

“Convertible Preferred Shares” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada – Holding and Disposing of Cenovus Shares and Cenovus Warrants – Conversion of Cenovus Preferred Shares”;

“COP Registration Rights Agreement” has the meaning given to it under the heading “Effect of the Arrangement – Registration Rights Agreement”;

“Court” means the Court of Queen’s Bench of Alberta;

“CRA” means the Canada Revenue Agency, or any successor agency thereto;

“CTA Approval” means that the Minister has been notified of the transactions contemplated by the Arrangement Agreement pursuant to section 53.1 of the Canada Transportation Act and either: (i) the Minister has given written notice to Cenovus that he is of the opinion that the transactions contemplated by the Arrangement Agreement do not raise issues with respect to the public interest as it relates to national transportation; or (ii) if the Minister of Transport is of the opinion that the transactions contemplated by the Arrangement Agreement raise issues with respect to the public interest as it relates to national transportation, the Governor-in-Council has approved the transactions contemplated by the Arrangement Agreement;

“DBRS” means DBRS Limited;

“Demand Registration” has the meaning given to it under the heading “Effect of the Arrangement – Registration Rights Agreement”;

“Demand Registration Right” has the meaning given to it under the heading “Effect of the Arrangement – Registration Rights Agreement”;

“Depositary” means Computershare, or such other Person that may be appointed by the Parties in connection with the Arrangement for the purpose of receiving deposits of certificates formerly representing Husky Common Shares and Husky Preferred Shares;

“Dissent Rights” means, collectively, the rights of registered Husky Common Shareholders and, if the Preferred Share Condition is satisfied prior to the Effective Time, registered Husky Preferred Shareholders to dissent in respect of the Arrangement Resolution and the Preferred Shareholder Resolution, respectively, and to be paid the fair value of the Husky Common Shares or Husky Preferred Shares in respect of which the holder dissents, all in accordance with the provisions of section 191 of the ABCA, as modified by the Interim Order and the Plan of Arrangement;

“Dissenting Shareholders” means any registered Husky Common Shareholder or, if the Preferred Share Condition is satisfied prior to the Effective Time, any registered Husky Preferred Shareholder, as applicable, who has duly and validly exercised its Dissent Rights with respect to the Arrangement Resolution or the Preferred Shareholder Resolution, as applicable, pursuant to the Plan of Arrangement and the Interim Order, and has not withdrawn or been deemed to have been withdrawn such exercise of Dissent Rights;

“Distribution” has the meaning given to it under the heading “Effect of the Arrangement – Registration Rights Agreement”;

“DOJ” means the U.S. Department of Justice, Antitrust Division;

“DPSP” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations –Holders Resident in Canada – Eligibility for Investment”;

“DRS Advice” means a Direct Registration System (DRS) advice;

“EDGAR” means the Electronic Data Gathering, Analysis and Retrieval System;

“Effective Date” means the date the Arrangement becomes effective in accordance with the ABCA;

“Effective Time” means the time on the Effective Date when the Arrangement becomes effective in accordance with the ABCA;

“Employment Agreements” has the meaning given to it under the heading “Interests of Certain Persons of Companies in the Arrangement – Husky – Severance”;

 

- 6 -

“Encana” means Encana Corporation, now Ovintiv Inc.;

“Encumbrance” means, any mortgage, pledge, assignment, charge, lien, security interest, adverse interest in property, other third party interest or encumbrance of any kind whether contingent or absolute, and any agreement, option, right or privilege (whether by Law, contract or otherwise) capable of becoming any of the foregoing;

“Excess Shares” has the meaning given to it under the heading “Effect of the Arrangement – Standstill Agreements – Voting Restrictions”;

“Final Order” means the order of the Court approving the Arrangement pursuant to section 193(9)(a) of the ABCA, as such order may be affirmed, amended or modified by any court of competent jurisdiction;

“Fitch” means Fitch Ratings Inc.;

“Foreign Investment Clearance” means: (i) Cenovus or the Supporting Husky Shareholders shall not have received notice from a Governmental Authority under either section 25.2(1) or section 25.3(2) of the Investment Canada Act in respect of the transactions contemplated by the Arrangement Agreement, or if Cenovus or the Supporting Husky Shareholders, as applicable, has received such a notice, Cenovus or the Supporting Husky Shareholders, as applicable, shall have subsequently received one of the following notices, as applicable: (a) under section 25.2(4)(a) of the Investment Canada Act indicating that no order for the review of the transactions contemplated by the Arrangement Agreement will be made under section 25.3(1) of the Investment Canada Act; (b) under section 25.3(6)(b) of the Investment Canada Act indicating that no further action will be taken in respect of the transactions contemplated by the Arrangement Agreement; or (c) under section 25.4(1) of the Investment Canada Act indicating that the Governor in Council authorizes the completion of the transactions contemplated by the Arrangement Agreement; and (ii) if a filing is required or prudent (as determined by a Party) in respect of the transactions contemplated by the Arrangement Agreement pursuant to any other Applicable Laws governing foreign investments in any jurisdiction (“foreign investment laws”), the Parties, their affiliates and any other Person required to make a filing in connection with the transactions contemplated by the Arrangement Agreement under foreign investment laws, as applicable, shall have made such filing in accordance with such foreign investment laws and any waiting period or review period shall have expired or been terminated and any consents, waivers, filings or approvals required to complete the transactions contemplated by the Arrangement Agreement under such foreign investment laws shall have been obtained on terms and conditions satisfactory to Cenovus and Husky, each acting reasonably;

“foreign investment laws” has the meaning ascribed thereto in the definition of “Foreign Investment Clearance”;

“forward-looking statements” has the meaning given to it under the heading “Forward-Looking Statements”;

“FTC” means the U.S. Federal Trade Commission;

“GLJ” means GLJ Petroleum Consultants Ltd.;

“Goldman Sachs” means Goldman Sachs Canada Inc., financial advisor to Husky;

“Goldman Sachs Fairness Opinion” means the written opinion of Goldman Sachs to the Husky Board dated October 24, 2020, a copy of which is attached as Appendix G to this Information Circular;

“Governmental Authority” means any: (a) domestic or foreign federal, territorial, provincial, state, regional, municipal or local governmental, regulatory or administrative authority, department, court, agency, commission, board or tribunal, arbitral body, bureau, ministry, agency or instrumentality or official, including any political subdivision thereof; (b) quasi-governmental or private body exercising regulatory, expropriation or taxing authority under or for the account of any of the foregoing; or (c) any stock exchange;

“Holder” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations”;

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (United States), as amended;

“HSR Approval” means, in respect of the transactions contemplated by the Arrangement Agreement, that all applicable waiting periods under the HSR Act have expired or been terminated including any extension thereof;

“Husky” means Husky Energy Inc., a corporation existing under the ABCA;

“Husky AGM Circular” means the management information circular of Husky dated March 24, 2020 in connection with the annual meeting of Husky Common Shareholders held on April 29, 2020;

“Husky AIF” means the annual information form of Husky dated February 27, 2020 for the year ended December 31, 2019;

“Husky Annual Financial Statements” means the audited consolidated financial statements of Husky as at December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018, together with the notes thereto and the auditor’s report thereon;

 

- 7 -

“Husky Annual MD&A” means management’s discussion and analysis of the financial and operating results of Husky for the year ended December 31, 2019;

“Husky Board” means the board of directors of Husky;

“Husky Board Recommendation” has the meaning given to it under the heading “The Arrangement – Recommendation of the Husky Board”;

“Husky Common Shareholder Letter of Transmittal” means the shareholder letter of transmittal forwarded to Husky Common Shareholders pursuant to which Husky Common Shareholders are required to deliver certificates or DRS Advices representing Husky Common Shares to the Depositary;

“Husky Common Shareholders” means the holders of Husky Common Shares;

“Husky Common Shares” means common shares in the capital of Husky;

“Husky DCF Analysis” has the meaning given to it under the heading “The Arrangement – Cenovus Fairness Opinions – RBC Fairness Opinion”;

“Husky Disposition Event” has the meaning given to it under the heading “Effect of the Arrangement – The Arrangement Agreement – Termination Amount Payable by Cenovus”;

“Husky DSU Plan” means the share accumulation plan of Husky providing for the grant of Husky DSUs to directors of Husky effective April 20, 2015;

“Husky DSUs” means the deferred share units granted under the Husky DSU Plan and outstanding immediately prior to the Effective Time entitling the holders thereof to receive, at the option of the holder, a cash payment equivalent to the fair market value of Husky Common Shares underlying such Husky DSUs or Husky Common Shares purchased on the open market upon ceasing to be a member of the Husky Board in accordance with the provisions of the Husky DSU Plan;

“Husky Fairness Opinions” means collectively, the Goldman Sachs Fairness Opinion, the CIBC Common Shareholder Fairness Opinion and the CIBC Preferred Shareholder Fairness Opinion;

“Husky Group” means Husky and its subsidiaries and their respective partnership interests, as the context requires;

“Husky Incentive Awards” means, collectively, Husky PSUs, Husky DSUs and Husky Options;

“Husky Interim Financial Statements” means the interim unaudited financial statements of Husky at September 30, 2020 and for the three and nine months ended September 30, 2020, together with the notes thereto;

“Husky Interim MD&A” means management’s discussion and analysis of the financial and operating results of Husky for the three and nine months ended September 30, 2020 and 2019;

“Husky Meeting” means the special meeting of Husky Common Shareholders, Husky Preferred Shareholders and Husky Optionholders to be called and held in accordance with the Arrangement Agreement and the Interim Order to permit the Husky Common Shareholders and the Husky Optionholders to consider the Arrangement Resolution and to permit the Husky Preferred Shareholders to consider the Preferred Shareholder Resolution, respectively, and related matters, and any adjournment(s) or postponement(s) thereof;

“Husky Optionholders” means the holders of Husky Options;

“Husky Option Plan” means the incentive stock option plan of Husky providing for the grant of Husky Options to officers or employees of Husky and its subsidiaries dated effective November 16, 2018;

“Husky Options” means the stock options of Husky granted under the Husky Option Plan and outstanding immediately prior to the Effective Time entitling the holders thereof to acquire Husky Common Shares upon payment of an exercise price or surrender the stock options for a cash payment in accordance with the provisions of the Husky Option Plan;

“Husky Preferred Shareholder Letter of Transmittal” means the letter of transmittal forwarded to Husky Preferred Shareholders pursuant to which Husky Preferred Shareholders are required to deliver certificates representing Husky Preferred Shares to the Depositary;

“Husky Preferred Shareholders” means, collectively, the holders of Husky Series 1 Preferred Shares, Husky Series 2 Preferred Shares, Husky Series 3 Preferred Shares, Husky Series 5 Preferred Shares and Husky Series 7 Preferred Shares;

 

- 8 -

“Husky Preferred Shares” means, collectively, Husky Series 1 Preferred Shares, Husky Series 2 Preferred Shares, Husky Series 3 Preferred Shares, Husky Series 4 Preferred Shares, Husky Series 5 Preferred Shares, Husky Series 6 Preferred Shares, Husky Series 7 Preferred Shares and Husky Series 8 Preferred Shares;

“Husky Proxy Deadline” means 9:00 a.m. (Calgary time) on December 11, 2020, or 48 hours (excluding Saturdays, Sundays and statutory holidays in the Province of Alberta) prior to the time of any adjournment or postponement of the Husky Meeting;

“Husky PSU Plan” means the performance share unit plan of Husky providing for the grant of Husky PSUs to employees or officers of Husky and its affiliates established on February 22, 2010 and amended and restated on February 28, 2017;

“Husky PSUs” means the performance awards granted under the Husky PSU Plan and outstanding immediately prior to the Effective Time entitling the holders thereof to receive a cash payment upon vesting of such Husky PSUs in accordance with the provisions of the Husky PSU Plan;

“Husky Record Date” means November 9, 2020;

“Husky Reserves Disclosure” means disclosure relating to the engineering evaluation of crude oil, NGLs and natural gas interests of Husky: (i) prepared internally in accordance with the regulations and guidelines of the Financial Accounting Standards Board in the United States and the SEC contained in Husky’s Form 40-F for the year ended December 31, 2019, filed; and (ii) prepared in accordance with NI 51-101 contained in the Husky AIF, including the Sproule Audit Opinion;

“Husky Series 1 Preferred Shares” means Cumulative Redeemable Preferred Shares, Series 1, in the capital of Husky;

“Husky Series 2 Preferred Shares” means Cumulative Redeemable Preferred Shares, Series 2, in the capital of Husky;

“Husky Series 3 Preferred Shares” means Cumulative Redeemable Preferred Shares, Series 3, in the capital of Husky;

“Husky Series 4 Preferred Shares” means Cumulative Redeemable Preferred Shares, Series 4, in the capital of Husky;

“Husky Series 5 Preferred Shares” means Cumulative Redeemable Preferred Shares, Series 5, in the capital of Husky;

“Husky Series 6 Preferred Shares” means Cumulative Redeemable Preferred Shares, Series 6, in the capital of Husky;

“Husky Series 7 Preferred Shares” means Cumulative Redeemable Preferred Shares, Series 7, in the capital of Husky;

“Husky Series 8 Preferred Shares” means Cumulative Redeemable Preferred Shares, Series 8, in the capital of Husky;

“Husky Shareholders” means collectively, the Husky Common Shareholders and the Husky Preferred Shareholders;

“Husky Shares” means collectively, the Husky Common Shares and the Husky Preferred Shares;

“Husky Termination Amount” means $240 million;

“HWEI” has the meaning given to it under the heading “Pro Forma Information Concerning the Combined Company – Principal Holders of Cenovus Common Shares”;

“ICA Minister” has the meaning given to it under the heading “Procedure for the Arrangement to Become Effective – Regulatory Approvals – Foreign Investment Clearance – Investment Canada Act”;

“IFRS” means accounting principles generally accepted in Canada applicable to public companies at the relevant time and which incorporates International Financial Reporting Standards as adopted by the Canadian Accounting Standards Boards;

“Initial Confidentiality Agreement” has the meaning given to it under the heading “Background to the Arrangement”;

“Information Circular” means this joint management information circular dated November 9, 2020, together with all Appendices hereto, distributed to the Husky Common Shareholders, the Husky Preferred Shareholders, and the Cenovus Common Shareholders in connection with the Husky Meeting and the Cenovus Meeting, as the case may be;

“Integrated Corridor” means an integrated Canada-U.S. upstream and downstream corridor;

 

- 9 -

“Interim Order” means the interim order of the Court concerning the Arrangement dated November 9, 2020 under section 193(4) of the ABCA, containing declarations and directions with respect to the Arrangement and the holding of the Husky Meeting, as such order may be affirmed, amended or modified by any court of competent jurisdiction, a copy of which order is attached as Appendix F to this Information Circular;

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, including any successor provisions and transition rules, whether or not codified;

“In the Money Amount” has the meaning given to it under the heading “Effect of the Arrangement – Husky Incentive Awards – Husky Options”;

“Investment Canada Act” means the Investment Canada Act, RSC 1985, c 28 (1st Supp), as amended;

“IRS” means the Internal Revenue Service;

“Key Regulatory Approvals” means the Competition Act Approval, the HSR Approval, the CTA Approval and the Foreign Investment Clearance;

“Kingsdale Advisors” means Kingsdale Advisors, Cenovus’s strategic shareholder advisor and proxy solicitation agent;

“Laws” means all laws (including, for greater certainty, common law), all statutes, regulations, bylaws, statutory rules, orders, ordinances, protocols, codes, guidelines, notices and directions enacted by a Governmental Authority (including all Applicable Canadian Securities Laws and all Applicable U.S. Securities Laws) and the terms and conditions of any grant of approval, permission, judgment, decision, ruling, award, authority or license of any Governmental Authority or self-regulatory authority;

“Letters of Transmittal” means collectively, the Husky Common Shareholder Letter of Transmittal and the Husky Preferred Shareholder Letter of Transmittal and “Letter of Transmittal” means either one of them;

“LFI” has the meaning given to it under the heading “Pro Forma Information Concerning the Combined Company – Principal Holders of Cenovus Common Shares”;

“Listed Preferred Shares” has the meaning given to it under the heading “Procedure for the Arrangement to Become Effective – Regulatory Approvals – Stock Exchange Listings”;

“Matching Period” has the meaning given to it under the heading “Effect of the Arrangement – The Arrangement Agreement – Covenants of the Parties Regarding Non-Solicitation; Right to Accept a Superior Proposal”;

“Material Adverse Change” or “Material Adverse Effect” means, with respect to either Party, any fact or state of facts, circumstance, change, effect, occurrence or event that individually is or in the aggregate are, or would individually or in the aggregate reasonably be expected to be, material and adverse to the business, operations, results of operations, assets, properties, capitalization, liabilities, obligations (whether absolute, accrued, conditional or otherwise) or condition (financial or otherwise) of the Party and its subsidiaries, taken as a whole, except to the extent of any fact or state of facts, circumstance, change, effect, occurrence or event resulting from or arising in connection with: (a) any change, development or condition generally affecting the industries, businesses or segments thereof, in which such Party and its respective subsidiaries operate; (b) any change, development or condition in or relating to global, national or regional political conditions (including strikes, lockouts, riots, blockades or facility takeover for emergency purposes) or in general economic, business, banking, regulatory, currency exchange, interest rate, rates of inflation or market conditions or in national or global financial or capital markets; (c) any change, development or condition resulting from any act of terrorism or any outbreak of hostilities or declared or undeclared war, or any escalation or worsening of such acts of terrorism, hostilities or war; (d) any adoption, proposal, implementation or change in Law or in any interpretation, application or non-application of any Laws by any Governmental Authority (including, for greater certainty, any change to the Tax Act or other applicable taxing legislation or to tax rates); (e) any change in applicable generally accepted accounting principles, including IFRS, or changes in regulatory accounting requirements applicable to the oil and gas and oil sands exploration, development and production businesses, the petrochemicals industry and the business of refining, marketing and distributing petroleum products; (f) any climatic, earthquake or other natural event or condition (including weather conditions and any natural disaster); (g) any epidemic, pandemic, disease outbreak (including COVID-19), other health crisis or public health event; (h) any decline in the market price for crude oil, natural gas or related hydrocarbons on a current or forward basis; (i) any actions taken (or omitted to be taken) at the written request of the Other Party; (j) any action taken by the Party or any of its subsidiaries that is required pursuant to the Arrangement Agreement (excluding any obligation to act in the ordinary course of business, but, for greater certainty, including any steps taken pursuant to Sections 3.3 and 3.6 of the Arrangement Agreement); (k) any matter which has been filed by the Party since January 1, 2020 and prior to the Agreement Date with any securities commission or similar regulatory authority in compliance, or intended compliance, with Applicable Canadian Securities Laws or Applicable U.S. Securities Laws, which is available for public viewing on the Party’s profile on SEDAR at www.sedar.com and on the Party’s profile on EDGAR at www.sec.gov/edgar/shtml; (l) the execution, announcement, pendency or performance of the Arrangement Agreement or consummation of the Arrangement; (m) the failure of the Party to meet any internal, published, public or analyst projections, forecasts, guidance or estimates, including without limitation of revenues, earnings or cash flows (it being understood that the causes underlying such failure may be taken into account in determining whether a Material Adverse Effect has

 

- 10 -

occurred); or (n) any change in the market price or trading volume of any securities of the Party (it being understood that the causes underlying such change in market price or trading volume may be taken into account in determining whether a Material Adverse Effect has occurred); provided, however, that (i) with respect to clauses (a) through and including (g), such matter does not have a materially disproportionate effect on the business, operations, results of operations, assets, properties, capitalization, liabilities, obligations (whether absolute, accrued, conditional or otherwise) or condition (financial or otherwise) of such Party and its subsidiaries, taken as a whole, relative to other comparable companies and entities operating in the oil and gas industry (in which case the incremental disproportionate effect may be taken into account in determining whether there has been, or is reasonably expected to be, a Material Adverse Effect), and (ii) unless expressly provided in any particular section of the Arrangement Agreement, references in certain sections of the Arrangement Agreement to dollar amounts are not intended to be, and shall not be deemed to be, illustrative or interpretive for purposes of determining whether a “Material Adverse Effect” has occurred;

“material change” has the meaning ascribed thereto in the Securities Act;

“McCarthy Tétrault” means McCarthy Tétrault LLP, tax counsel to Husky;

“McDaniel” means McDaniel & Associates Consultants Ltd.;

“Meetings” means, collectively, the Husky Meeting and the Cenovus Meeting, and “Meeting” means either of them;

“MI 61-101” means Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions;

“Minister” means the Minister of Transport under the Canada Transportation Act;

“misrepresentation” has the meaning ascribed thereto in the Securities Act;

“Moody’s” means Moody’s Investors Service;

“NI 51-101” means National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities;

“NI 62-104” means National Instrument 62-104 – Take-Over Bids and Issuer Bids;

“No Action Letter” means a written confirmation from the Commissioner that he does not, at that time, intend to make an application under section 92 of the Competition Act;

“Non-Resident Dissenter” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Not Resident in Canada – Dissenting Non-Resident Holders”;

“Non-Resident Holder” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Not Resident in Canada”;

“NYSE” means the New York Stock Exchange;

“Order” means all judicial, arbitral, administrative, ministerial, departmental or regulatory judgments, injunctions, orders, decisions, rulings, determinations, awards, or decrees of any Governmental Authority (in each case, whether temporary, preliminary or permanent);

“Osler, Hoskin & Harcourt” means Osler, Hoskin & Harcourt LLP, legal counsel to Husky;

“Other Party” means: (i) with respect to Cenovus, Husky; and (ii) with respect to Husky, Cenovus;

“Outside Date” means May 31, 2021; provided that if the Key Regulatory Approvals have not been received by May 31, 2021, the Outside Date shall be August 31, 2021, or such later date as may be agreed to in writing by the Parties;

“Parties” means Cenovus and Husky, and “Party” means either of them;

“Person” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executor, administrator, legal personal representative, estate group, body corporate, corporation, unincorporated association or organization, Governmental Authority, syndicate or other entity, whether or not having legal status;

“PFIC” has the meaning given to it under the heading “Certain United States Federal Income Tax Considerations – Certain U.S. Federal Income Tax Considerations for U.S. Holders Relating to the Arrangement – Tax Considerations Relating to the Arrangement if Husky is Classified as a PFIC”;

“Piggy-Back Registration Right” has the meaning given to it under the heading “Effect of the Arrangement – Registration Rights Agreement”;

 

- 11 -

“Plan” or “Plan of Arrangement” means the plan of arrangement in the form attached as Appendix D to this Information Circular, as the same may be amended or supplemented from time to time in accordance with the terms of the Arrangement Agreement, the Plan of Arrangement or at the direction of the Court in the Final Order;

“Pre-Emptive Right” has the meaning given to it under the heading “Effect of the Arrangement – Pre-Emptive Rights Agreement”;

“Pre-Emptive Rights Agreements” means the pre-emptive rights agreements that may be entered into on or following the Effective Date between certain Cenovus Common Shareholders and Cenovus, as described under the heading “Effect of the Arrangement – Pre-Emptive Rights Agreement”;

“Pre-Emptive Rights Holder” has the meaning given to it under the heading “Effect of the Arrangement – Pre-Emptive Rights Agreement”;

“Preferred Share Condition” means: (i) the Husky Preferred Shareholders have approved the Preferred Shareholder Resolution by 66²⁄₃% of the votes cast on the Preferred Shareholder Resolution by Husky Preferred Shareholders present in person (virtually) or represented by proxy at the Husky Meeting, voting together as a single class; and (ii) unless otherwise determined by Cenovus in its sole discretion, holders of not more than 10% of the Husky Preferred Shares have validly exercised, and not withdrawn, Dissent Rights;

“Preferred Shareholder Resolution” means the special resolution in respect of the Arrangement to be considered by the Husky Preferred Shareholders at the Husky Meeting, the full text of which is set forth in Appendix B to this Information Circular;

“Pro Forma Financial Statements” has the meaning given to it under the heading “Pro Forma Information Concerning the Combined Company – Selected Pro Forma Financial Information”;

“Proposed Amendments” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations”;

“Qualified Individual” has the meaning given to it under the heading “Effect of the Arrangement – Standstill Agreements – Termination”;

“RBC Capital Markets” means RBC Dominion Securities Inc., a member company of RBC Capital Markets, financial advisor to Cenovus;

“RBC Fairness Opinion” means the opinion of RBC Capital Markets to the Cenovus Board dated October 24, 2020, a copy of which is attached as Appendix J to this Information Circular;

“RDSP” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations –Holders Resident in Canada – Eligibility for Investment”;

“Receiving Party” has the meaning given to it under the heading “Effect of the Arrangement – The Arrangement Agreement – Covenants of the Parties Regarding Non-Solicitation; Right to Accept a Superior Proposal”;

“Registered Plans” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada – Eligibility for Investment”;

“Registrable Securities” has the meaning given to it under the heading “Effect of the Arrangement – Registration Rights Agreement”;

“Registrar” means the Registrar of Corporations for the Province of Alberta appointed under section 263 of the ABCA;

“Registration Rights Agreements” means the registration rights agreements that may be entered into on or following the Effective Date between certain Cenovus Common Shareholders and Cenovus, as described under the heading “Effect of the Arrangement – Registration Rights Agreement”;

“Registration Rights Holder” has the meaning given to it under the heading “Effect of the Arrangement – Registration Rights Agreement”;

“Registration Statement” has the meaning given to it under the heading “Effect of the Arrangement – Registration Rights Agreement”;

“Representatives” means, with respect to each Party, its respective subsidiaries and its and their officers, directors, employees, financial advisors, related parties, legal counsel, accountants, advisors and all other representatives and agents;

“Resident Dissenter” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada – Dissenting Resident Holders of Husky Shares”;

“Resident Holder” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada”;

 

- 12 -

“Resident Holder’s Dissent Shares” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada – Dissenting Resident Holders of Husky Shares”;

“RESP” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations –Holders Resident in Canada – Eligibility for Investment”;

“Responding Party” has the meaning given to it under the heading “Effect of the Arrangement – The Arrangement Agreement – Covenants of the Parties Regarding Non-Solicitation; Right to Accept a Superior Proposal”;

“Restricted Shares” has the meaning given to it under the heading “Joint Information Circular – Information for United States Securityholders”;

“RRIF” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations –Holders Resident in Canada – Eligibility for Investment”;

“RRSP” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations –Holders Resident in Canada – Eligibility for Investment”;

“S&P” means S&P Global Ratings;

“SEC” means the United States Securities and Exchange Commission;

“Securities Act” means the Securities Act, RSA 2000, c S-4, as amended;

“SEDAR” means the System for Electronic Document Analysis and Retrieval;

“Share Consideration Common Shares” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada – Exchange of Husky Shares under the Arrangement – Husky Common Shares Exchanged for Cenovus Common Shares and Cenovus Warrants”;

“Shareholders” means Husky Common Shareholders, Husky Preferred Shareholders and/or Cenovus Common Shareholders, as the context requires;

“Share Issuance Resolution” means the ordinary resolution to be considered by the Cenovus Common Shareholders at the Cenovus Meeting, the full text of which is set forth in Appendix C to this Information Circular;

“Shares” means the Husky Common Shares, the Husky Preferred Shares and/or the Cenovus Common Shares, as the context requires;

“Sproule” means Sproule Associates Limited;

“Sproule Audit Opinion” means the audit opinion of Sproule as of December 31, 2019, included in the Husky AIF relating to the audit of Husky’s crude oil, natural gas and NGLs reserves estimates prepared in accordance with generally accepted oil and gas engineering and evaluation practices in the Canada and as set out in the COGE Handbook;

“Standstill Agreements” means the standstill agreements entered into between the Supporting Husky Shareholders and Cenovus on the Agreement Date, and effective as of the Effective Date, which set out certain matters pertaining to the Cenovus Common Shares held by the Supporting Husky Shareholders following completion of the Arrangement;

“subsidiary” has the meaning ascribed thereto in the Securities Act;

“Superior Proposal” means an unsolicited bona fide written Acquisition Proposal: (a) that complies with all Applicable Canadian Securities Laws and Applicable U.S. Securities Laws; (b) that is not subject to a financing condition, due diligence condition and/or access condition; (c) to acquire not less than all of the applicable Party’s outstanding common shares or not less than substantially all of the assets, properties, permits, rights or other privileges (whether contractual or otherwise) of the applicable Party and its subsidiaries and partnership interests; (d) that the applicable Party’s board of directors and any relevant committee thereof has determined in good faith (after receipt of advice from its professional financial advisors and external legal counsel) is reasonably capable of being consummated without undue delay, taking into account all legal, financial, regulatory and other aspects of such Acquisition Proposal and the Person making such Acquisition Proposal; and (e) that the applicable Party’s board of directors and/or any relevant committee thereof determines in good faith, after consultation with its professional financial advisors, would be, if consummated in accordance with its terms, more favourable to the holders of its common shares than the Arrangement;

“Supplementary Information Request” has the meaning given to it under the heading “Procedure for the Arrangement to Become Effective – Regulatory Approvals – Competition Act Approval”;

 

- 13 -

“Support Agreements” means the support agreements entered into between the Supporting Husky Shareholders and Cenovus on the Agreement Date;

“Supporting Husky Shareholders” means Hutchison Whampoa Europe Investments S.à r.l. and L.F. Investments S.à r.l., and “Supporting Husky Shareholder” means either of them;

“Tax Act” means the Income Tax Act (Canada), RSC 1985, c 1 (5th Supp), including the regulations thereto, as amended from time to time;

“taxable capital gain” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada – Taxation of Capital Gains and Losses”;

“TD Fairness Opinion” means the opinion of TD Securities to the Cenovus Board dated October 24, 2020, a copy of which is attached as Appendix K to this Information Circular;

“TD Securities” means TD Securities Inc., financial advisor to Cenovus;

“TFSA” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations –Holders Resident in Canada – Eligibility for Investment”;

“Transfer” has the meaning given to it under the heading “Effect of the Arrangement – Standstill Agreements – Transfer Restrictions”;

“Tribunal” has the meaning given to it under the heading “Procedure for the Arrangement to Become Effective – Regulatory Approvals – Competition Act Approval”;

“TSX” means the Toronto Stock Exchange;

“United States” or “U.S.” means the United States of America, its territories and possessions, any State of the United States, and the District of Columbia;

“U.S. Exchange Act” means the United States Securities Exchange Act of 1934, as amended;

“U.S. Holder” has the meaning given to it under the heading “Certain United States Federal Income Tax Considerations”;

“U.S. Securities Act” means the United States Securities Act of 1933, as amended;

“Voting Instruction Form” means the voting instruction form provided by Broadridge to Beneficial Holders; and

“Warrant Consideration Common Shares” has the meaning given to it under the heading “Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada – Exchange of Husky Shares under the Arrangement – Husky Common Shares Exchanged for Cenovus Common Shares and Cenovus Warrants”.

Words importing the singular include the plural and vice versa and words importing any gender include all genders.

CONVENTIONS

Certain terms used herein are defined in the “Glossary of Terms”. Unless otherwise indicated, references herein to “$” or “dollars” are to Canadian dollars and references herein to “US$” or “U.S. dollars” are to United States dollars. All financial information in Appendices L, M and N to this Information Circular has been presented in Canadian dollars in accordance with IFRS.

 

- 14 -

ABBREVIATIONS

The following are abbreviations and definitions used in this Information Circular (including Appendices M and N, respectively):

 

bbl		barrel
bbls		barrels
bbls/d		barrels per day
Bcf		billion cubic feet
boe		barrels of oil equivalent
boe/d		barrels of oil equivalent per day
mcf		thousand cubic feet
mcfe		thousand cubic feet equivalent
MMbbls		million barrels
MMboe		million barrels of oil equivalent
mmcf/d		million cubic feet per day
NGL		natural gas liquids
PADD		Petroleum Administration for Defense District
WCS		Western Canadian Select
WTI		West Texas Intermediate

 

- 15 -

JOINT MANAGEMENT INFORMATION CIRCULAR

Introduction

This Information Circular is furnished in connection with the solicitation of proxies by the management of Husky and Cenovus for use at the Husky Meeting and the Cenovus Meeting, and at any adjournment(s) or postponement(s) thereof. No person has been authorized to give any information or make any representation in connection with the Arrangement and the issuance of Cenovus Shares or Cenovus Warrants in connection with the Arrangement, or any other matters to be considered at the Husky Meeting and Cenovus Meeting other than those contained in this Information Circular, and if given or made, any such information or representation must not be relied upon as having been authorized.

The information concerning Husky contained and incorporated by reference in this Information Circular, including but not limited to the information in Appendix M to this Information Circular, has been provided by Husky. Although Cenovus has no knowledge that would indicate that any of such information is untrue or incomplete, Cenovus does not assume any responsibility for the accuracy or completeness of such information or the failure by Husky to disclose events which may have occurred or may affect the completeness or accuracy of such information but which are unknown to Cenovus.

The information concerning Cenovus contained and incorporated by reference in this Information Circular, including but not limited to the information in Appendix N to this Information Circular, has been provided by Cenovus. Although Husky has no knowledge that would indicate that any of such information is untrue or incomplete, Husky does not assume any responsibility for the accuracy or completeness of such information or the failure by Cenovus to disclose events which may have occurred or may affect the completeness or accuracy of such information but which are unknown to Husky.

This Information Circular does not constitute an offer to sell or a solicitation of an offer to purchase any securities or the solicitation of a proxy by any person in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation of an offer or a proxy solicitation. Neither the delivery of this Information Circular nor any distribution of the securities referred to in this Information Circular will, under any circumstances, create an implication that there has been no change in the information set forth herein since the date as of which such information is given in this Information Circular.

Information contained in or otherwise accessed through Husky’s website or Cenovus’s website, or any website, other than those documents incorporated by reference herein and filed on SEDAR, does not constitute part of this Information Circular.

All summaries of, and references to, the Arrangement Agreement, the Arrangement, the Plan of Arrangement and the Cenovus SRP Agreement in this Information Circular are qualified in their entirety by reference to the complete text of the Arrangement Agreement and the Plan of Arrangement, copies of which are attached as Appendices D and E, respectively, to this Information Circular and the Cenovus SRP Agreement, a copy of which has been made available on SEDAR at www.sedar.com. You are urged to carefully read the full text of the Arrangement Agreement, the Plan of Arrangement and the Cenovus SRP Agreement.

All capitalized terms used in this Information Circular (including Appendices M and N hereto) but not otherwise defined herein have the meanings set forth herein under “Glossary of Terms”. The terms and abbreviations used in the Appendices to this Information Circular, other than in Appendices M and N, are defined separately therein. Information contained in this Information Circular is given as of November 9, 2020, unless otherwise specifically stated. Details of the Arrangement are set forth under the headings “The Arrangement” and “Effect of the Arrangement”. For details of the matters to be considered by the Husky Shareholders and the Husky Optionholders at the Husky Meeting and the Cenovus Common Shareholders at the Cenovus Meeting, see “Matters to be Considered at the Husky Meeting” and “Matters to be Considered at the Cenovus Meeting”, respectively.

Supplemental Disclosure – Non-GAAP Measures

This Information Circular and certain documents incorporated by reference herein make reference to certain non-GAAP financial measures to assist in assessing Husky’s and Cenovus’s respective financial performance, such as Adjusted EBITDA, Net Debt, Net Debt to Adjusted EBITDA, free funds flow, netback and sustaining capital. These financial measures do not have a standardized meaning as prescribed by IFRS and are therefore considered non-GAAP measures. These measures may not be comparable to similar measures presented by other issuers. These measures have been described and presented in order to provide shareholders, potential investors and analysts with additional measures for analyzing the transaction and the combined company’s ability to generate funds to finance its operations and information regarding its liquidity. Such information should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. For additional information regarding these non-GAAP measures, see the advisories in the Husky Annual MD&A, the Husky Interim MD&A, the Cenovus Annual MD&A and the Cenovus Interim MD&A, as applicable, each of which is incorporated by reference herein.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is a non-GAAP measure defined as net earnings before finance costs, interest income, income tax expense, depreciation, depletion and amortization, exploration & evaluation write-down, goodwill impairments, asset impairments and reversals, unrealized gains (losses) on risk management, foreign exchange gains (losses), revaluation gain, re-measurement of contingent payment, gains (losses) on divestiture of assets, and other income (loss), net, calculated on a trailing 12-month basis.

 

- 16 -

Net Debt is a non-GAAP measure defined as short-term borrowings, and the current and long-term portions of long-term debt, net of cash and cash equivalents and short-term investments.

Net Debt to Adjusted EBITDA is a non-GAAP measure defined as Net Debt divided by Adjusted EBITDA.

Adjusted funds flow is a non-GAAP measure commonly used in the oil and gas industry to assist in measuring a company’s ability to finance its capital programs and meet its financial obligations. Adjusted funds flow is defined as cash from (used in) operating activities excluding net change in other assets and liabilities and net change in non-cash working capital. Non-cash working capital is composed of accounts receivable, inventories (excluding non-cash inventory write-downs and reversals), income tax receivable, accounts payable and income tax payable. Net change in other assets and liabilities is composed of site restoration costs and pension funding.

Free funds flow is a non-GAAP measure defined as adjusted funds flow less capital investment.

Netback is a non-GAAP measure commonly used in the oil and gas industry to assist in measuring operating performance on a per-unit basis. Cenovus’s and Husky’s netback calculation is aligned with the definition found in the COGE Handbook. Netbacks reflect the margin on a per-barrel of oil equivalent basis. Netback is defined as gross sales less royalties, transportation and blending, operating expenses and production and mineral taxes divided by sales volumes. Netbacks do not reflect non-cash write-downs or reversals of product inventory until it is realized when the product is sold. The sales price, transportation and blending costs, and sales volumes exclude the impact of purchased condensate. Condensate is blended with the heavy oil to transport it to market.

Sustaining capital is the additional development capital that is required by the business to maintain production and operations at existing levels. Development capital includes the cost to drill, complete, equip and tie in wells to existing infrastructure. Sustaining capital does not have any standardized meaning and therefore should not be used to make comparisons to similar measures presented by other issuers.

Information for United States Securityholders

The Cenovus Shares and Cenovus Warrants issuable to Husky Shareholders in exchange for their Husky Shares and the Cenovus Replacement Options issuable to Husky Optionholders pursuant to the Arrangement have not been and will not be registered under the U.S. Securities Act or any state securities laws, and will be issued in reliance upon the exemption from the registration requirements of the U.S. Securities Act provided by Section 3(a)(10) thereof and exemptions under applicable state securities laws. Section 3(a)(10) of the U.S. Securities Act exempts the issuance of any security issued in exchange for one or more bona fide outstanding securities from the registration requirements of the U.S. Securities Act where the terms and conditions of such issuance and exchange have been approved by a court of competent jurisdiction, after a hearing upon the fairness of the terms and conditions of such issuance and exchange at which all persons to whom the securities will be issued have the right to appear and receive timely notice thereof. The solicitation of proxies for the Husky Meeting and the Cenovus Meeting by means of this Information Circular is not subject to the requirements of Section 14(a) of the U.S. Exchange Act. Accordingly, the solicitations and transactions contemplated in this Information Circular are being made in the United States for securities of a Canadian issuer in accordance with Canadian corporate and securities laws, and this Information Circular has been prepared solely in accordance with disclosure requirements applicable in Canada. Securityholders in the United States should be aware that such requirements are different from those of the United States applicable to registration statements under the U.S. Securities Act and proxy statements under the U.S. Exchange Act.

The Cenovus Shares and Cenovus Warrants issuable to Husky Shareholders and the Cenovus Replacement Options issuable to Husky Optionholders pursuant to the Arrangement will be, following completion of the Arrangement, freely tradable under the U.S. Securities Act, except for (i) any Cenovus Shares, Cenovus Warrants and Cenovus Replacement Options received in the Arrangement by persons who will be “affiliates” (within the meaning of Rule 144 under the U.S. Securities Act) of Cenovus on the date of sale or were affiliates of Cenovus within 90 days before the date of sale (“Restricted Shares”), and (ii) any Cenovus Shares, Cenovus Warrants and Cenovus Replacement Options that after the date of sale are held by persons who are then (or were within the preceding 90 days) affiliates of Cenovus (“Control Shares”). Persons who may be deemed to be “affiliates” of an issuer include individuals or entities that control, are controlled by, or are under common control with, the issuer, whether through the ownership of voting securities, by contract, or otherwise, and generally include executive officers and directors of the issuer as well as principal shareholders of the issuer. Any resale of such Cenovus Shares, Cenovus Warrants or Cenovus Replacement Options by such an affiliate (or former affiliate) will be subject to the registration requirements of the U.S. Securities Act, absent an exemption or exclusion therefrom. Subject to certain limitations, persons holding Restricted Shares or Control Shares may generally resell those shares outside the United States without registration under the U.S. Securities Act pursuant to Regulation S under the U.S. Securities Act. If available, such persons may also resell such shares pursuant to Rule 144 under the U.S. Securities Act. In addition, Section 3(a)(10) of the U.S. Securities Act does not exempt the issuance of securities upon the exercise of securities previously issued pursuant to Section 3(a)(10) of the U.S. Securities Act. As a result, any Cenovus Common Shares issuable upon exercise of Cenovus Warrants or Cenovus Replacement Options may not be issued in reliance upon Section 3(a)(10) of the U.S. Securities Act and the exercise of Cenovus Warrants and Cenovus Replacement Options may be subject to the registration requirements of the U.S. Securities Act, absent an exemption or exclusion therefrom. Prior to the Effective Time, Cenovus will file a Canadian Warrant Prospectus qualifying the issuance of Cenovus Warrant Shares and a registration statement on Form F-10 with the SEC registering the Cenovus Warrant Shares under the U.S. Securities Act and will use its best efforts to cause there to be a Canadian Warrant Prospectus and an effective registration statement under the U.S. Securities Act for as long as any Cenovus Warrants are outstanding. On or as promptly as practicable following the Effective Date, Cenovus will cause there to be a registration statement on Form S-8 to be filed with the SEC which will register the issuance of the Cenovus Common Shares issuable upon exercise of Cenovus Replacement Options. See “Procedure for the Arrangement to Become Effective – Securities Law Matters – United States”.

 

- 17 -

Information concerning the assets and operations of Husky and Cenovus contained or incorporated by reference herein has been prepared in accordance with Canadian standards and is not comparable in all respects to similar information for United States companies. In particular, data on oil and gas reserves included or incorporated by reference in this Information Circular has been prepared in accordance with Canadian disclosure standards, which are not comparable in all respects to United States disclosure standards. The financial statements of Husky and Cenovus incorporated by reference in this Information Circular have been prepared in accordance with IFRS, which differs from United States generally accepted accounting principles in certain material respects and thus are not directly comparable to financial statements of United States companies.

The Cenovus Common Shares are listed on the NYSE and registered pursuant to Section 12 of the U.S. Exchange Act. Therefore, Cenovus is required to file reports with the SEC, including annual reports on Form 40-F. Cenovus has filed with the SEC an annual report on Form 40-F for the fiscal year ended December 31, 2019. Cenovus’s Form 40-F for the fiscal year ended December 31, 2019 does not include a reconciliation of Cenovus’s financial statements to United States generally accepted accounting principles. Cenovus’s filings with the SEC may be viewed for free at the SEC’s website at www.sec.gov.

Husky Shareholders subject to United States federal income taxation should be aware that the description of tax consequences to them of the Arrangement under certain United States federal income tax laws provided in this Information Circular is a summary only. They are advised to consult their tax advisors to determine the particular tax consequences to them of participating in the Arrangement and the ownership and disposition of Cenovus Shares and the ownership, exercise and disposition of Cenovus Warrants and Cenovus Replacement Options acquired pursuant to the Arrangement.

The enforcement by Husky Shareholders, Husky Optionholders, Cenovus Common Shareholders, holders of Cenovus Preferred Shares, holders of Cenovus Warrants and holders of Cenovus Replacement Options of civil liabilities under United States federal securities laws may be affected adversely by the fact that Cenovus and Husky are organized under the laws of Canada and Alberta, Canada, respectively, that some or all of their officers and directors are residents of countries other than the United States, that some of the experts named in this Information Circular are residents of countries other than the United States, and that a substantial portion of the assets of Cenovus, Husky and such persons are located outside the United States. As a result, it may be difficult or impossible for Husky Shareholders, Husky Optionholders, Cenovus Common Shareholders, holders of Cenovus Preferred Shares, holders of Cenovus Warrants and holders of Cenovus Replacement Options in the United States to effect service of process within the United States upon Cenovus and Husky, as applicable, and their respective directors or officers, or to realize against them upon judgments of courts of the United States predicated upon civil liabilities under the federal securities laws of the United States or the securities laws of any state within the United States. In addition, Husky Shareholders, Husky Optionholders, Cenovus Common Shareholders, holders of Cenovus Preferred Shares, holders of Cenovus Warrants and holders of Cenovus Replacement Options in the United States should not assume that the courts of Canada: (a) would enforce judgments of United States courts obtained in actions against such persons predicated upon civil liabilities under the federal securities laws of the United States or the securities laws of any state within the United States; or (b) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under the federal securities laws of the United States or the securities laws of any state within the United States.

No broker, dealer, salesperson or other person has been authorized to give any information or make any representation other than those contained in this Information Circular and, if given or made, such information or representation must not be relied upon as having been authorized by Cenovus or Husky.

THE CENOVUS COMMON SHARES, CENOVUS PREFERRED SHARES, CENOVUS WARRANTS AND CENOVUS REPLACEMENT OPTIONS ISSUABLE TO HUSKY SHAREHOLDERS AND HUSKY OPTIONHOLDERS PURSUANT TO THE PLAN OF ARRANGEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR THE SECURITIES REGULATORY AUTHORITY OF ANY STATE, NOR HAS THE SEC OR THE SECURITIES REGULATORY AUTHORITY OF ANY STATE PASSED ON THE ADEQUACY OR ACCURACY OF THIS INFORMATION CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.

Currency

Except as otherwise indicated, all dollar amounts in this Information Circular are expressed in Canadian dollars. The following table sets forth: (i) the rates of exchange for Canadian dollars, expressed in United States dollars, in effect at the end of each of the periods indicated; and (ii) the high, low and average exchange rates during each such period, based on the daily average exchange rate, published on the Bank of Canada’s website as being in effect on each trading day.

 

		Nine Months Ended September 30								Year Ended December 31
		2020				2019				2019				2018				2017
Rate at end of Period		US$	0.7497			US$	0.7551			US$	0.7699			US$	0.7330			US$	0.7971
Average rate during Period		US$	0.7391			US$	0.7524			US$	0.7537			US$	0.7721			US$	0.7708
High		US$	0.7710			US$	0.7670			US$	0.7699			US$	0.8138			US$	0.8245
Low		US$	0.6898			US$	0.7353			US$	0.7353			US$	0.7330			US$	0.7276

On November 9, 2020, the Bank of Canada exchange rate for $1.00 Canadian dollar was $0.7710 United States dollars.

 

- 18 -

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Information Circular (including in Appendices M and N, respectively, to this Information Circular) and in the documents incorporated by reference herein constitute forward-looking information and forward-looking statements (collectively referred to as “forward-looking statements”) within the meaning of Applicable Canadian Securities Laws and Applicable U.S. Securities Laws, including the U.S. Private Securities Litigation Reform Act of 1995, about Cenovus’s and Husky’s current expectations, estimates and projections about the future, based on certain assumptions made in light of experiences and perceptions of historical trends. Although Cenovus and Husky believe that expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. These statements relate to future events or future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions or the negative thereof.

This Information Circular (including Appendices M and N, respectively, to this Information Circular) contains forward-looking statements pertaining to the following:

 

•

the expectations regarding whether the Arrangement will be completed, the principal steps of the Arrangement, including whether the conditions to completion of the Arrangement will be satisfied, and the anticipated timing for the Effective Date;

 

•

the perceived benefits of the Arrangement and expected attributes of the combined company resulting from the Arrangement, including anticipated corporate, operational and other synergies and the timing thereof, anticipated savings and the sustainability and timing thereof, and the plans and strategies to achieve such benefits and synergies;

 

•

the ability to successfully integrate the businesses of Cenovus and Husky;

 

•

attributes of the combined company resulting from the Arrangement, including: its corporate structure; its enterprise value; its relative size; its diversified portfolio; the strength of its balance sheet; its anticipated production, refining, upgrading, storage and transportation capabilities and levels; its anticipated margins and reductions to free funds flow break-even at WTI, excluding one-time transaction related costs; expected free funds flow; anticipated free funds flow generation and stability; its reinvestment risk; its improved position to pursue value maximization; planned capital allocation and capital investment program and the efficiency thereof; required sustaining capital; expected exposure to WCS oil prices, Alberta and global commodity prices and anticipated sensitivity to commodity price fluctuations; deleveraging capability; anticipated reserves and reserves life index; takeaway and marketing optionality; anticipated priorities; anticipated market access; financial position; liquidity; resiliency; debt levels; its expected ability to leverage its increased scale; and its expected ability to implement necessary operating expertise and the integration of its assets to optimize margin capture;

 

•

the attributes of the combined company’s reserves and assets, including the declines, longevity, free funds flow generation and associated costs of such reserves and assets;

 

•

the anticipated effect of the transaction on the competitiveness of the combined company and its profitability, liquidity and cost structure;

 

•

the expected credit profile and credit ratings of the combined company;

 

•

the anticipated immediate efficiencies of the combined company to be achieved by implementing best practices of the combined company, including applying Cenovus’s operating expertise to Husky’s oil sands assets, leveraging the increased portfolio’s scale in the Deep Basin, and pursuing commercial and contract-related efficiencies on midstream marketing and blending opportunities;

 

•

the expectations of the combined company’s dividends, including anticipated and future payments thereof, rate payable including any increases thereto and ability to pay, subject to board approval of the combined company;

 

•

the expected returns to shareholders of the combined company, including through share buy backs and sustainable dividend increases;

 

•

the anticipated physical integration of the combined company’s assets, including the connection of upstream assets with upgrading, storage, refining and blending operations to shorten the value chain and reduce costs;

 

•

the anticipated safety and reliability of the operations of the combined company;

 

•

the expected benefits of the midstream gathering, upgrading, refining and transportation network and assets, including high netback international offshore natural gas assets, and associated agreements to be acquired and assumed by Cenovus and the integration, quality and efficiencies thereof;

 

•

the combined company’s cost of capital, capital allocation and anticipated capital investment and expenditures;

 

- 19 -

•

expected pro forma financial and operational projections for 2021 and future years and plans and strategies to realize such projections;

 

•

the expected development and growth of the combined company’s business and plans and strategies to realize such expectations;

 

•

the combined company’s Net Debt to Adjusted EBITDA ratio;

 

•

the combined company’s committed credit facilities and draws thereon, excluding letters of credit;

 

•

the planned commitments to ESG leadership and initiatives of the combined company, including to clean technology, emission intensity reductions, Indigenous engagement and economic reconciliation, environmental stewardship, safety performance, diversity and inclusion, achieving net zero emissions by 2050, strategies to achieve such initiatives and disclosure of future ESG initiatives;

 

•

the expectations of future production and the timing, stability and growth thereof;

 

•

the structure and effect of the Arrangement on Husky and Cenovus;

 

•

the expected issuance, terms of, and, if applicable, registration and listing of Cenovus Common Shares, Cenovus Warrants, Cenovus Replacement Options and Cenovus Preferred Shares, if applicable, to Husky Shareholders and Husky Optionholders;

 

•

the expectations regarding future equity, market capitalization and enterprise value;

 

•

the timing, administration and conduct of the Meetings and the timing of the Final Order;

 

•

Cenovus’s and Husky’s anticipated abilities to obtain the required approvals, including securityholder, stock exchange, Court, regulatory and third-party approvals, for the Arrangement, including the Key Regulatory Approvals, and the timing of such approvals;

 

•

the satisfaction of conditions for listing of the Cenovus Common Shares and Cenovus Warrants issuable pursuant to the Arrangement and the Cenovus Common Shares issuable upon exercise of the Cenovus Warrants and the Cenovus Replacement Options, on the TSX and the NYSE, and the timing thereof, and the satisfaction of conditions for listing of the Cenovus Preferred Shares issuable pursuant to the Arrangement on the TSX;

 

•

the anticipated filing, receipt and timing of the Canadian Warrant Prospectus with the Canadian Securities Regulators to qualify the Cenovus Warrant Shares for distribution in accordance with Applicable Canadian Securities Laws and the anticipated filing, effectiveness, and timing of the required registration statements with the SEC to register the Cenovus Warrant Shares and the Cenovus Common Shares issuable upon exercise of the Cenovus Replacement Options for distribution under Applicable U.S. Securities Laws;

 

•

the ability to enforce of civil liabilities under U.S. securities laws against Cenovus, Husky or its officers or directors and the ability to effect service of process or realize judgments against Cenovus or Husky;

 

•

the expectations regarding receipt of required approvals of the Arrangement Resolution and the Share Issuance Resolution and, if applicable, the Preferred Shareholder Resolution and the results of obtaining such approvals;

 

•

the anticipated application for and filing of the Final Order and Articles of Arrangement with the Registrar under the ABCA, the content and timing of such application, the considerations of the Court in granting the Final Order and the effect of the Final Order;

 

•

the expectation that there will be no significant events occurring outside of the normal course of business of Cenovus, Husky and the combined company, as applicable;

 

•

the expected expenses associated with the Arrangement;

 

•

the expectations regarding the exercise of Cenovus Warrants and Cenovus Replacement Options issued under the Arrangement;

 

•

the effect of the Arrangement on Cenovus’s share capital, including the total issued and outstanding Cenovus Common Shares and anticipated percentages of Cenovus Common Shares that former Husky Common Shareholders and current Cenovus Common Shareholders will hold in the combined company, both on a non-diluted and partially-diluted basis;

 

•

Cenovus Common Shareholders who are expected to beneficially hold or control Cenovus Common Shares carrying at least 10% of the voting rights and entitlements of such Cenovus Common Shareholders following the Arrangement;

 

•

the composition and compensation of the Cenovus Board and Cenovus management upon the Arrangement becoming effective, the reconstitution of board committees and expected meetings, policies and mandates thereof;

 

•

the delisting of the Husky Shares from the TSX and the anticipated timing thereof;

 

- 20 -

•

the expected amendment of the Cenovus SRP Agreement;

 

•

the anticipated treatment and entitlements of Cenovus Common Shareholders and Husky Shareholders under securities and tax Laws;

 

•

the expected timing, cost, participants and terms of Husky’s and Cenovus’s retention programs, severance and other entitlements payable by the combined company pursuant to the Employment Agreements and such other obligations to directors and executive officers of Husky pursuant to the Arrangement Agreement;

 

•

the effect of the Arrangement on the vesting, settlement and payout of Cenovus Options, Cenovus PSUs, Cenovus RSUs, Husky PSUs and Husky DSUs;

 

•

the treatment of the Arrangement under government regulatory regimes;

 

•

the expectation that the combined company will deliver industry leading returns;

 

•

the sufficiency of budgeted capital expenditures in carrying out planned activities;

 

•

pro forma information, including pro forma financial and operational information pertaining to Cenovus after giving effect to the Arrangement; and

 

•

business plans, business prospects and performance, growth potential, financial strength, market profile, revenues, working capital, costs, capital expenditures, investment valuations, income, margins, access to capital, shareholder return and overall strategies and assessments of future plans and operations of the combined company.

Additionally, statements relating to “reserves” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future.

The reports of PricewaterhouseCoopers LLP and KPMG LLP included or incorporated by reference in this Information Circular refer exclusively to the historical financial statements described therein and do not extend to the prospective financial information included in this Information Circular and should not be read to do so.

Developing forward-looking statements involves reliance on a number of assumptions and consideration of certain risks and uncertainties, some of which are specific to Cenovus, Husky and the combined company and others that apply to the industry generally. These forward-looking statements are based on certain expectations and assumptions, including expectations and assumptions respecting:

 

•

the perceived benefits of the Arrangement and expected attributes of the combined company resulting from the Arrangement are based upon a number of factors, including the terms and conditions of the Arrangement Agreement and current industry, economic and market conditions (see “The Arrangement – Reasons for the Arrangement”, “The Arrangement – Attributes of the Combined Company”, “The Arrangement – Recommendation of the Husky Board” and “The Arrangement – Recommendation of the Cenovus Board”);

 

•

the completion of certain steps in, and timing of, the Arrangement and the Effective Date of the Arrangement are based upon the terms of the Arrangement Agreement and advice received from counsel to Husky and Cenovus relating to timing expectations (see “Effect of the Arrangement”);

 

•

the listing of the Cenovus Common Shares and the Cenovus Warrants issuable pursuant to the Arrangement and the Cenovus Common Shares issuable upon exercise of the Cenovus Warrants and the Cenovus Replacement Options on the TSX and the NYSE, respectively, the listing of the Cenovus Preferred Shares issuable pursuant to the Arrangement on the TSX and the delisting of the Husky Shares from the TSX are based on receiving approval from, and fulfilling all of the requirements of, the TSX and the NYSE, as applicable;

 

•

the treatment of Husky Shareholders under tax Laws is subject to the statements under “Certain Canadian Federal Income Tax Considerations” and “Certain United States Federal Income Tax Considerations”;

 

•

the effects of the Arrangement on Husky and Cenovus are based on Husky management’s current expectations regarding the intentions of Cenovus and Cenovus management’s current expectations regarding the intentions of Husky;

 

•

the satisfaction of the conditions to closing of the Arrangement in a timely manner and completion of the Arrangement on the expected terms;

 

•

the expected adherence to the terms of the Arrangement Agreement and agreements related to the Arrangement Agreement, including the Support Agreements, Standstill Agreements, Pre-Emptive Rights Agreements and Registration Rights Agreements, and the expected timing and termination of such agreements;

 

- 21 -

•

the ability of Cenovus and Husky to obtain the Key Regulatory Approvals and the timing thereof;

 

•

the ability of management of the combined company to successfully integrate the businesses of Husky and Cenovus;

 

•

access to sufficient capital to pursue any development plans associated with full ownership of Husky;

 

•

the combined company’s ability to issue securities;

 

•

the impact the transaction may have on the current credit ratings of Cenovus and Husky, and the credit ratings of the combined company following closing;

 

•

variation in forecast commodity prices, light-heavy crude oil price differentials and other assumptions used to develop the forward-looking statements or identified in the 2020 guidance of Cenovus and Husky;

 

•

the potential further ramp down for forecast production volumes based on business and market conditions;

 

•

the projected capital investment levels, the flexibility of capital spending plans and associated sources of funding;

 

•

the achievement of further cost reductions and sustainability thereof;

 

•

applicable royalty regimes, including expected royalty rates;

 

•

future improvements in availability of product transportation capacity;

 

•

the ability of underlying pricing fundamentals to support the continuation of crude-by-rail programs;

 

•

changes in transportation costs following suspension of crude-by-rail programs;

 

•

increases to the combined company’s share price and market capitalization over the long term;

 

•

the opportunity for the combined company to pay dividends, and the approval and declaration of such dividends by the board of directors of the combined company;

 

•

opportunities to repurchase shares for cancellation at prices acceptable to the combined company;

 

•

cash flows, cash balances on hand and access to credit and demand facilities being sufficient to fund capital investments;

 

•

foreign exchange rates, including with respect to the combined company’s US$ debt and refining capital and operating expenses;

 

•

realization of expected capacity to store within oil sands reservoirs barrels not yet produced, including that the combined company will be able to time production and sales of its inventory at later dates when demand has increased, pipeline and/or storage capacity has improved and crude oil differentials have narrowed;

 

•

the WTI-WCS differential in Alberta remaining largely tied to the extent to which voluntary economically driven supply cuts are made, the potential start-up of Enbridge Inc.’s Line 3 Replacement Program, the completion of the Trans Mountain Expansion and Keystone XL projects, and the level of crude-by-rail activity and capacity;

 

•

the ability of the combined company’s refining capacity, dynamic storage, existing pipeline commitments and financial hedge transactions to partially mitigate a portion of the combined company’s WCS crude oil volumes against wider differentials;

 

•

estimates of quantities of oil, bitumen, natural gas and NGLs from properties and other sources not currently classified as proved;

 

•

accounting estimates and judgments;

 

•

the future use and development of technology and associated expected future results; the combined company’s ability to obtain necessary regulatory and partner approvals;

 

•

the successful and timely implementation of capital projects or stages thereof; the ability to generate sufficient cash flow to meet current and future obligations;

 

•

the combined company’s ability to reach net zero emissions by 2050;

 

- 22 -

•

the estimated abandonment and reclamation costs, including associated levies and regulations applicable thereto;

 

•

the combined company’s ability to obtain and retain qualified staff and equipment in a timely and cost-efficient manner;

 

•

the combined company’s ability to carry out transactions on the desired terms and within the expected timelines;

 

•

forecast inflation and other assumptions inherent in the current guidance of Cenovus and Husky;

 

•

the expected impacts of the contingent payment to an affiliate of ConocoPhillips Company by Cenovus in connection with the purchase of certain oil sands and natural gas assets as announced in a press release of Cenovus dated March 29, 2017 available on SEDAR;

 

•

alignment of realized WCS prices and WCS prices used to calculate the contingent payment to an affiliate of ConocoPhillips Company by Cenovus;

 

•

the combined company’s ability to access and implement all technology necessary to efficiently and effectively operate its assets; and

 

•

other risks, uncertainties and assumptions described from time to time in the filings made by Cenovus and Husky with securities regulatory authorities.

The forward-looking statements in this Information Circular also include financial outlooks and other forward-looking metrics (including production, financial and oil and gas related metrics) relating to Cenovus, Husky, the combined company and the transaction, including: the expectations of Cenovus and Husky regarding the impact of the transaction on free funds flow, adjusted funds flow, free funds flow breakeven at WTI, Net Debt to Adjusted EBITDA, Adjusted EBITDA, deleveraging capability, the projected capital expenditures of the combined company, sustaining capital, undrawn committed credit facilities, general and administrative costs, expenses per boe and operating costs.

The forecast for the combined company reaching a Net Debt to Adjusted EBITDA ratio of less than 2.0 times in 2022 included in this Information Circular is based on August 20, 2020 forward strip commodity pricing, set out in the table below:

 

Year		WTI		WTI-WCS differential		Chicago 3-2-1 Crack		$/US$ exchange rate
2021		US$45.00		US$14.75/bbl		US$10.15/bbl		$0.75/US$
2022		US$46.00		US$15.00/bbl		US$11.50/bbl		$0.75/US$
2023		US$47.00		US$13.50/bbl		US$13.50/bbl		$0.75/US$

By their very nature, forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements.

Husky and Cenovus believe the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this Information Circular and in the documents incorporated by reference herein should not be unduly relied upon. These statements speak only as of the date of this Information Circular.

The risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements include:

 

•

Cenovus and Husky may fail to realize, or may fail to realize in the expected timeframes, the anticipated benefits and synergies resulting from the Arrangement;

 

•

the failure to integrate Cenovus’s and Husky’s respective businesses or the failure to access or implement some or all of the technology necessary to efficiently and effectively operate the assets and achieve expected future results;

 

•

the conditions to completion of the Arrangement, including receiving all Key Regulatory Approvals, Court approval, securityholder approvals, TSX and NYSE approval, as applicable, for the listing of the Cenovus Common Shares, Cenovus Warrants and the Cenovus Preferred Shares issuable pursuant to the Arrangement and the Cenovus Common Shares issuable upon exercise of the Cenovus Warrants, may not be satisfied or waived and may result in the Arrangement not being completed in a timely manner or at all;

 

•

the timing of the Meetings and the Final Order and the anticipated Effective Date may be changed or delayed or may not occur at all;

 

•

interloper risk, including actions taken by government entities or others seeking to prevent or alter the terms of the transaction or competing offers for Cenovus or Husky which arise as a result of or in connection with the proposed Arrangement;

 

•

the accuracy of the pro forma financial and operational information of the combined company after the transaction;

 

- 23 -

•

the impacts of a changing risk profile and possible subjection to a credit rating review, which may result in a downgrade or negative outlook being assigned to the combined company;

 

•

the potential exposure to political, economic or social instability in certain jurisdictions in which the combined company will operate;

 

•

Cenovus and Husky will incur significant costs relating to the Arrangement, regardless of whether the Arrangement is completed or not completed;

 

•

the Arrangement Agreement could be terminated by either Party under certain circumstances, including as a result of the occurrence of a change, event, circumstance or development that would reasonably be likely to have (individually or in the aggregate) a Material Adverse Effect on the Other Party;

 

•

if the Arrangement is not completed, either Party may be required to pay a termination amount to the Other Party in certain circumstances;

 

•

if the Arrangement is not completed, Husky Shareholders will not realize the anticipated benefits of the Arrangement and Husky’s future business and operations could be adversely affected;

 

•

if the Arrangement is not completed, Cenovus Common Shareholders will not realize the anticipated benefits of the Arrangement and Cenovus’s future business and operations could be adversely affected;

 

•

dilution and share price volatility, including a material decrease in the trading price of Cenovus Common Shares may occur which could result in a failure of the Arrangement on the basis of a Material Adverse Effect or could be sustained following the Effective Date;

 

•

litigation relating to the Arrangement may be commenced which may prevent, delay or give rise to significant costs or liabilities on the part of Cenovus or Husky;

 

•

changes in income or other tax Laws or actions taken by taxing authorities could have adverse implications on Cenovus, Husky or their respective securityholders;

 

•

the Parties may discover previously undisclosed liabilities following the Effective Date;

 

•

the focus of management’s time and attention on the Arrangement may detract from other aspects of the respective businesses of Cenovus and Husky;

 

•

the loss of key employees and the risk that the combined company may not be able to retain key employees of Cenovus or Husky following completion of the Arrangement in a timely manner or at all;

 

•

the combined company being unable to access the necessary sources of debt and equity capital on acceptable terms or at all;

 

•

the combined company’s ability to finance growth and sustaining capital expenditures;

 

•

the ability of the combined company to utilize and apply, or carry forward, tax losses and other tax attributes in the future;

 

•

the combined company’s operations near communities may cause such communities to regard its operations as being detrimental to them;

 

•

the combined company’s failure to reach net zero emissions in the expected timeframe;

 

•

a lack of adequate and cost effective product transportation including sufficient pipeline, crude-by-rail, marine or alternate transportation, including to address any gaps caused by constraints in the pipeline system or storage capacity;

 

•

changes in the regulatory framework in any of the locations in which Cenovus or Husky operate, including changes to the regulatory approval process and land-use designations, royalty, tax, environmental, greenhouse gas, carbon, climate change and other laws or regulations, or changes to the interpretation of such laws and regulations, as adopted or proposed, the negative impact thereof and the costs associated with compliance;

 

•

discrepancies between actual and estimated production for the combined company;

 

•

increased costs, delays, suspensions and technical challenges associated with the construction of capital projects;

 

- 24 -

•

risk of loss and increased cost due to acts of war, terrorism, sabotage, civil disturbances, fires, explosions, blow-outs, equipment failures, transportation incidents, extreme weather events, technological changes and resource shortages, related to climate change or similar events;

 

•

the global economic climate;

 

•

competition, and the effects of competition and pricing pressures;

 

•

industry overcapacity;

 

•

the speculative nature of the oil and gas industry, including risks and uncertainties involving the geology and geophysics of oil and gas exploration and production;

 

•

operational risks in exploring for, developing and producing crude oil, natural gas and NGLs;

 

•

a resurgence in cases of COVID-19, which has occurred in certain locations and the possibility of which in other locations remains high and creates ongoing uncertainty that could result in restrictions to contain the virus being re-imposed or imposed on a more strict basis, including restrictions on movement and businesses;

 

•

the extent to which COVID-19 impacts the global economy and harms commodity prices;

 

•

the extent to which COVID-19 and fluctuations in commodity prices associated with COVID-19 impacts Husky, Cenovus or the combined company, their results of operations and financial condition, all of which will depend on future developments that are highly uncertain and difficult to predict, including, but not limited to the duration and spread of the pandemic, its severity, the actions taken to contain COVID-19 or treat its impact and how quickly economic activity normalizes; and

 

•

the success of Husky, Cenovus or the combined company’s COVID-19 workplace policies.

With regard to the forward-looking statements in Husky’s and Cenovus’s documents incorporated by reference herein, please refer to the forward-looking statements advisories in such documents in respect of the forward-looking statements contained therein, the assumptions upon which they are based and the risk factors in respect of such forward-looking statements.

Readers are cautioned that the foregoing lists of factors are not exhaustive. Events or circumstances could cause the actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking statements. The forward-looking statements contained in this Information Circular and in the documents incorporated by reference herein are expressly qualified by this cautionary statement. Except as required by Law, neither Husky nor Cenovus undertakes any obligation to publicly update or revise any forward-looking statements.

Readers should also carefully consider the matters discussed under the headings “Risk Factors”, “Certain Canadian Federal Income Tax Considerations”, “Certain United States Federal Income Tax Considerations” and other risks described elsewhere in this Information Circular and in the documents incorporated by reference herein as they may cause the actual results to differ materially from the forward-looking statements, including Appendices M and N, the Husky AIF, the Cenovus AIF, the Husky Annual MD&A, the Cenovus Annual MD&A, the Husky Interim MD&A and the Cenovus Interim MD&A, each of which is incorporated by reference herein. Additional information on these and other factors that could affect the operations or financial results of Husky or Cenovus are included in documents on file with Applicable Canadian Securities Administrators and may be accessed on Husky’s and Cenovus’s respective issuer profiles through the SEDAR website (www.sedar.com). Such documents, unless expressly incorporated by reference herein, do not form part of this Information Circular.

ADVISORY REGARDING OIL AND GAS INFORMATION

The reserves information contained in this Information Circular has been prepared in accordance with NI 51-101. Listed below are cautionary statements that are specifically required by NI 51-101:

 

•

The terms “boe” and “mcfe” may be misleading, particularly if used in isolation. A boe conversion rate of six thousand cubic feet of natural gas per barrel of oil (6 mcf:1 bbl) and an mcfe conversion rate of one barrel of oil per six thousand cubic feet of natural gas (1 bbl:6 mcf) are each based on an energy equivalency conversion method primarily applicable at the burner tip and do not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from an energy equivalency of 6:1, utilizing a conversion ratio of 6:1 may be misleading as an indication of value.

 

•

The estimates of reserves of Cenovus were prepared effective December 31, 2019 by independent qualified reserves evaluators, based on the COGE Handbook and in compliance with the requirements of NI 51-101. Estimates are presented using an average of three independent qualified reserves evaluator January 1, 2020 price forecasts.

 

- 25 -

•

The estimates of reserves of Husky were prepared effective December 31, 2019 by internal qualified reserves evaluators in accordance with the COGE Handbook, were audited and reviewed by Sproule, an independent qualified reserves auditor, and represent the company’s working interest share. Historical Husky production volumes provided are gross, which represents Husky’s working interest share before deduction of royalties.

 

•

This information circular contains certain pro forma reserves and production information for Cenovus after giving effect to the Arrangement for the year ended December 31, 2019 as set forth in “Pro Forma Information Concerning the Combined Company”. The pro forma reserves information presented in this Information Circular is based on the Cenovus Reserves Reports and the Husky Reserves Disclosure, which are presented for informational purposes only. The pro forma reserves information presented herein is based on the estimates of reserves of Cenovus and Husky, respectively, prepared effective December 31, 2019 in accordance with NI 51-101. Cenovus and Husky did not construct a consolidated reserves report of the combined assets of Cenovus and Husky, and did not engage an independent reserves evaluator to produce such a report in accordance with NI 51-101. Cenovus and Husky employ different methodologies to estimate their reserves information which differences include, but are not limited to, assumptions regarding forecast prices and costs. As a result, the actual reserves of the combined company, if calculated as of December 31, 2019 by an independent reserves evaluator in accordance with NI 51-101, may differ from the reserves information presented in this Information Circular for a number of reasons, and such differences may be material. The reserves information should be read in conjunction with the Cenovus AIF and Husky AIF, each of which is incorporated by reference in this Information Circular. See Appendix M – “Information Concerning Husky Energy Inc.” and Appendix N – “Information Concerning Cenovus Energy Inc.”.

 

•

Readers are cautioned that the term proved plus probable reserves life index may be misleading, particularly if used in isolation. Cenovus calculates “proved plus probable reserves life index”, as presented in this Information Circular, as Total Proved Plus Probable Reserves as at December 31, 2019 divided by Average Daily Production for the year ended December 31, 2019. This measure is used for consistency with other oil and gas companies and does not reflect the actual life of the reserves.

 

•

The SEC definitions of proved and probable reserves are different from the definitions contained in NI 51-101; therefore, proved and probable reserves disclosed herein may not be comparable to U.S. standards. The SEC requires U.S. oil and gas reporting companies, in their filings with the SEC, to disclose only proved reserves after the deduction of royalties and production due to others, but permits the optional disclosure of probable and possible reserves.

INFORMATION FOR BENEFICIAL HOLDERS

The information set forth in this section is of significant importance to many shareholders, as a substantial number of such shareholders do not hold Husky Shares or Cenovus Common Shares in their own name. Beneficial Holders should note that only proxies deposited by shareholders whose names appear on the records of the registrar and transfer agent for Husky or Cenovus, as applicable, as the registered holders of shares can be recognized and acted upon at the Meetings, as applicable. If shares are listed in an account statement provided to a shareholder by a broker, then, in almost all cases, those shares will not be registered in a holder’s name on the records of Husky or Cenovus. Such shares will most likely be registered in the name of the holder’s broker or an agent of the broker. In Canada, the vast majority of such shares are registered under the name of CDS & Co. (the registration name for CDS, which acts as nominee for many Canadian brokerage firms). Shares held by brokers or their nominees can only be voted (for or against resolutions) upon instructions of the Beneficial Holder. Without specific instructions, brokers/nominees are prohibited from voting shares for their clients. Beneficial Holders should therefore ensure that instructions regarding the voting of their shares are properly communicated to the appropriate Person or that the shares are duly registered in their name well in advance of the applicable Meeting.

Applicable regulatory policies require intermediaries/brokers to seek voting instructions from Beneficial Holders in advance of shareholder meetings. Every intermediary/broker has its own mailing procedures and provides its own return instructions which should be carefully followed by Beneficial Holders in order to ensure that their shares are voted at the applicable Meeting. Often, the form of proxy supplied to a Beneficial Holder by its broker is identical to that provided to a registered shareholder. However, its purpose is limited to instructing the registered shareholder on how to vote on behalf of the Beneficial Holder. The majority of brokers now delegate responsibility for obtaining instructions from clients to Broadridge. Broadridge typically mails a scannable Voting Instruction Form in lieu of the applicable form of proxy. The Beneficial Holder is requested to complete and return the Voting Instruction Form by mail or facsimile. Alternatively, the Beneficial Holder can call a toll-free telephone number or access the internet to vote the shares held by the Beneficial Holder. Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of shares to be represented at the applicable Meeting. A Beneficial Holder receiving a form of proxy or Voting Instruction Form from its broker or other intermediary (or an agent or nominee of such broker or other intermediary) cannot use that form to vote shares directly at the applicable Meeting. Voting instructions must be communicated to the broker, intermediary, agent or nominee (in accordance with the instructions provided by it or on its behalf) well in advance of the applicable Meeting in order to have the shares to which such instructions relate voted at the applicable Meeting.

If you are a Beneficial Holder and wish to vote at the applicable Meeting, you must insert your own name in the space provided on the Voting Instruction Form sent to you by your intermediary, follow all of the applicable instructions provided by your intermediary AND register yourself as your proxyholder, as described below in Step 2. By doing so, you are instructing your intermediary to appoint you as proxyholder. It is important that you comply with the signature and return instructions provided by your intermediary. Please also see further instructions on accessing and voting at the applicable virtual Meetings under the heading “General Proxy Matters – Husky – How to Participate at the Husky Meeting” and “General Proxy Matters – Cenovus – How to Participate at the Cenovus Meeting”.

 

- 26 -

Registering your proxyholder is an additional step to be completed AFTER you have submitted the Voting Instruction Form. Failure to register the proxyholder will result in the proxyholder not receiving a Username that is required to vote at the applicable Meeting.

Step 1: Submit the Voting Instruction Form: To appoint someone other than the individuals named in the Voting Instruction Form as proxyholder, insert that person’s name in the blank space provided in the Voting Instruction Form (if permitted) and follow the instructions for submitting such Voting Instruction Form. This must be completed before registering such proxyholder, which is an additional step to be completed once you have submitted the Voting Instruction Form.

If you are a Beneficial Holder located in the United States and wish to vote at the applicable Meeting or, if permitted, appoint a third party as your proxyholder, you must additionally obtain a valid legal proxy from your intermediary. Follow the instructions from your intermediary included with the legal proxy form sent to you or contact your intermediary to request a legal proxy form if you have not received one. After obtaining a valid legal proxy from your intermediary, you must then submit such legal proxy to Computershare. Requests for registration from non-registered Husky Shareholders or non-registered Cenovus Common Shareholders located in the United States that wish to vote at the applicable Meeting or, if permitted, appoint third parties as their proxyholders must be sent by e-mail or by courier to:

 

•

in the case of a beneficial Husky Shareholder: uslegalproxy@computershare.com (if by e-mail); or Computershare Trust Company of Canada, Attention: Proxy Department, 8th Floor, 100 University Avenue, Toronto, ON M5J 2Y1, Canada (if by courier), and in both cases, must be labeled “Legal Proxy” and received no later than the Husky Proxy Deadline; or

 

•

in the case of a beneficial Cenovus Common Shareholder: uslegalproxy@computershare.com (if by e-mail); or Computershare Investor Services, Inc., Attention: Proxy Department, 8th Floor, 100 University Avenue, Toronto, ON M5J 2Y1, Canada (if by courier), and in both cases, must be labeled “Legal Proxy” and received no later than the Cenovus Proxy Deadline.

Step 2: Register your proxyholder: To register a third-party proxyholder, you must:

 

•

in the case of a beneficial Husky Shareholder: visit http://www.computershare.com/HuskyEnergy by the Husky Proxy Deadline and provide Computershare with the required proxyholder contact information so that Computershare may provide the proxyholder with a Username via email; or

 

•

in the case of a beneficial Cenovus Common Shareholder: visit https://www.computershare.com/CenovusEnergy by the Cenovus Proxy Deadline and provide Computershare with the required proxyholder contact information so that Computershare may provide the proxyholder with a Username via email.

WITHOUT A USERNAME, PROXYHOLDERS WILL NOT BE ABLE TO VOTE AT THE APPLICABLE MEETING BUT WILL BE ABLE TO PARTICIPATE AS GUESTS.

Husky Shareholders who do not hold their Husky Shares in their own name should also instruct their broker or other intermediary to complete the Husky Common Shareholder Letter of Transmittal or Husky Preferred Shareholder Letter of Transmittal, as applicable, regarding the Arrangement with respect to such holder’s Husky Shares in order to receive the consideration issuable pursuant to the Arrangement in exchange for such holder’s Husky Shares.

 

- 27 -

 

- 28 -

 

- 29 -

 

- 30 -

 

- 31 -

 

- 32 -

 

- 33 -

 

- 34 -

 

- 35 -

 

- 36 -

 

- 37 -

 

- 38 -

 

- 39 -

 

- 40 -

 

- 41 -

 

- 42 -

 

- 43 -

 

- 44 -

 

- 45 -