EXHIBIT 10.7
SALE AGREEMENT
RELATING TO THE SALE OF
OF THE INTEREST OF
▇▇▇▇▇▇▇▇ ENERGY (CANADA), INC.
IN THE COCHRANE, EMPRESS II AND EMPRESS V STRADDLE PLANTS
DATED AS OF JULY 8, 2004
-------------------------------------------
▇▇▇▇▇▇▇▇ ENERGY (CANADA), INC.
- AND -
1024234 ALBERTA LTD.
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TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions..................................................................................... 2
1.2 Schedules....................................................................................... 2
1.3 Knowledge....................................................................................... 2
ARTICLE 2
PURCHASE AND SALE
2.1 Acquisition of Business......................................................................... 3
2.2 Future Obligations and Indemnification by Purchaser............................................. 3
2.3 Effective Time of Transfer...................................................................... 4
ARTICLE 3
PURCHASE PRICE
3.1 Purchase Price.................................................................................. 4
3.2 Allocation of Purchase Price.................................................................... 4
3.3 Satisfaction of Purchase Price.................................................................. 4
3.4 Taxes........................................................................................... 6
3.5 Interest on Purchase Price...................................................................... 6
3.6 Net Cash Adjustment............................................................................. 6
ARTICLE 4
BASE PURCHASE PRICE ADJUSTMENTS
4.1 Accounting Adjustments.......................................................................... 6
4.2 Valuation of Inventories........................................................................ 7
4.3 Closing Statement............................................................................... 7
4.4 Post Closing Adjustments........................................................................ 7
4.5 Payment on Determination of Actual Adjustments.................................................. 8
4.6 Deemed Inventory Adjustments.................................................................... 9
4.7 Outstanding Audits.............................................................................. 9
ARTICLE 5
INTERIM MATTERS
5.1 Risk of Loss.................................................................................... 10
5.2 Facility Loss and Environmental Damage.......................................................... 10
5.3 General Operation and Maintenance............................................................... 11
5.4 Restricted Activities........................................................................... 11
5.5 Corporate Subsidiaries and Subsidiary Partnerships.............................................. 12
5.6 Updates to Representations and Warranties....................................................... 13
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of Vendor........................................................ 14
6.2 Representations and Warranties of Purchaser..................................................... 20
6.3 No Additional Representations and Warranties.................................................... 22
6.4 No Merger....................................................................................... 23
6.5 Non-Transferable................................................................................ 23
ARTICLE 7
TAX MATTERS
7.1 Tax Returns for Pre-Effective Date Periods...................................................... 23
- ii -
7.2 Tax Returns for Straddle Period and Post-Effective Date Periods................................. 23
7.3 Cooperation on Tax Matters...................................................................... 23
7.4 Tax Liability................................................................................... 24
7.5 Tax Indemnification and Audits.................................................................. 24
ARTICLE 8
PREFERENTIAL PURCHASE RIGHTS
8.1 Notices......................................................................................... 27
8.2 Continued Obligations Upon Exercise of Preferential Purchase Rights............................. 27
ARTICLE 9
ENVIRONMENTAL DUE DILIGENCE
9.1 Environmental Reports........................................................................... 28
9.2 Environmental Liability......................................................................... 28
ARTICLE 10
CONDITIONS
10.1 Conditions for Benefit of Purchaser............................................................. 28
10.2 Conditions for Benefit of Vendor................................................................ 29
10.3 Parties to Exercise Diligence with Respect to Conditions Precedent.............................. 30
10.4 Rights of Purchaser............................................................................. 30
10.5 Rights of Vendor................................................................................ 30
10.6 Effect of Termination........................................................................... 31
10.7 Provision of Information........................................................................ 31
ARTICLE 11
CLOSING
11.1 Closing of Transaction.......................................................................... 31
11.2 Deliveries by Vendor at Closing................................................................. 32
11.3 Deliveries by Purchaser at Closing.............................................................. 32
ARTICLE 12
INDEMNITIES
12.1 Indemnity by Vendor............................................................................. 33
12.2 Indemnity by Purchaser.......................................................................... 33
12.3 Empress II Partnership Transaction.............................................................. 34
12.4 Survival of Representations and Warranties\No Merger............................................ 35
12.5 Limitation on Vendor's Indemnities.............................................................. 35
12.6 Indemnity Procedure for Third Party Claims...................................................... 36
12.7 Consequential Damages........................................................................... 37
12.8 Failure by Vendor to Close...................................................................... 37
ARTICLE 13
BOOKS AND RECORDS
13.1 Preservation and Access to Books and Records.................................................... 38
ARTICLE 14
TECHNOLOGY
14.1 In-house Software............................................................................... 39
14.2 Third Party Technology and Process Technology................................................... 39
14.3 Hardware........................................................................................ 40
14.4 No Liability.................................................................................... 40
ARTICLE 15
INTERIM AND TRANSITIONAL SERVICES
15.1 Interim Period.................................................................................. 40
- iii -
15.2 Transitional Services........................................................................... 41
15.3 Fee Payable for Provision of Transitional Services.............................................. 41
15.4 Points of Contact............................................................................... 41
15.5 Purchaser Provided Services..................................................................... 41
15.6 Post-Closing Costs.............................................................................. 42
15.7 Payments........................................................................................ 42
15.8 Post-Closing Receipts........................................................................... 42
ARTICLE 16
EMPLOYMENT MATTERS
16.1 Written Offers of Employment.................................................................... 42
16.2 Terms of Employment............................................................................. 43
16.3 Severance....................................................................................... 44
16.4 Termination Entitlements........................................................................ 44
16.5 PERSONAL TIME OFF............................................................................... 44
ARTICLE 17
GENERAL
17.1 Removal of Name................................................................................. 45
17.2 Interest Accrues on Amounts Owing............................................................... 45
17.3 Expanded Meanings............................................................................... 45
17.4 Currency........................................................................................ 46
17.5 Accounting References........................................................................... 46
17.6 Statutory References............................................................................ 46
17.7 Applicable Law and Attornment................................................................... 47
17.8 Expenses........................................................................................ 47
17.9 Publicity Regarding Transaction................................................................. 47
17.10 Notices......................................................................................... 48
17.11 Time of the Essence............................................................................. 49
17.12 Entire Agreement................................................................................ 49
17.13 Severability.................................................................................... 49
17.14 Amendment of Agreement.......................................................................... 50
17.15 Waiver.......................................................................................... 50
17.16 Assignment and Enurement........................................................................ 50
17.17 No Third Party Beneficiaries.................................................................... 50
17.18 Further Assurances.............................................................................. 50
17.19 Counterpart Execution........................................................................... 50
SALE AGREEMENT
THIS SALE AGREEMENT is made as of the 8th day of July, 2004
BETWEEN:
▇▇▇▇▇▇▇▇ ENERGY (CANADA), INC., a corporation incorporated under the
laws of the Province of New Brunswick ("VENDOR")
OF THE FIRST PART
- and -
1024234 ALBERTA LTD., a body corporate incorporated under the laws
of Alberta ("PURCHASER")
OF THE SECOND PART
WHEREAS Vendor owns all of the outstanding share capital in the Corporate
Subsidiaries, and the Corporate Subsidiaries own all of the outstanding
Partnership Units in the Subsidiary Partnerships.
WHEREAS the Empress II Partnership owns the Empress II Assets and the Cochrane
Partnership owns the Cochrane Assets and the Empress V Assets.
WHEREAS Vendor holds legal title to certain of the Cochrane Assets, Empress V
Assets and Empress II Assets as bare trustee for the Subsidiary Partnerships.
WHEREAS Purchaser has agreed to purchase and Vendor has agreed to sell the
entire right, title and interest of Vendor in the Shares and the Support Assets
upon and subject to the terms and conditions provided in this Agreement;
AND WHEREAS Purchaser acknowledges that the Corporate Subsidiaries and the
Subsidiary Partnerships are liable to perform, and Purchaser has agreed that
following Closing, Purchaser will indemnify Vendor from and against, the Future
Obligations upon and subject to the terms and conditions provided in this
Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
the mutual covenants and agreements of the parties herein set forth, the parties
hereby covenant and agree with one another as follows:
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ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
Terms defined in Schedule "A" have the meanings in this Agreement (including the
recitals and Schedules) set forth in Schedule "A".
1.2 SCHEDULES
Exhibit 1 sets forth the Schedules to this Agreement, which are incorporated by
reference in this Agreement, and form a part hereof. A reference in any Schedule
to another Schedule refers to another Schedule of this Agreement. If there is a
conflict or inconsistency between a provision of the body of this Agreement and
that of a Schedule, the provision of the body of this Agreement shall prevail.
1.3 KNOWLEDGE
Where in this Agreement, or in any certificate or document delivered pursuant
hereto, any statement, representation or warranty is made as to, or as being
based on, the awareness, knowledge, information or belief of Vendor, such
awareness, knowledge, information or belief is limited to the actual knowledge
of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Senior Vice President, Midstream Gas & Liquids of The
▇▇▇▇▇▇▇▇ Companies, Inc. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President & General Manager
of Vendor each after making reasonable inquiries including of the following
employees of Vendor, but without any other inquiry:
(a) ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇;
(b) ▇▇▇ ▇▇▇▇▇▇▇▇;
(c) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
(d) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇;
(e) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇-▇▇▇▇▇;
(f) ▇▇▇▇ ▇▇▇▇▇▇; and
(g) ▇▇▇ ▇▇▇▇▇▇▇.
Purchaser acknowledges that none of the individuals listed in this
Section 1.3 shall have any personal liability to Purchaser in respect of any
matter set forth in this Agreement.
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ARTICLE 2
PURCHASE AND SALE
2.1 ACQUISITION OF BUSINESS
On and subject to the terms and conditions of this Agreement:
(a) Vendor and Purchaser agree that:
(i) Vendor shall sell, assign, transfer and convey to Purchaser
and Purchaser shall purchase and acquire from Vendor, all of
the right, title, interest and estate of Vendor in the Shares,
(ii) to the extent assignable, Vendor shall sell, assign, transfer
and convey to Purchaser and Purchaser shall purchase and
acquire from Vendor, all of the right, title, interest and
estate of Vendor in the Support Assets,
subject to the Permitted Encumbrances.
(b) Purchaser shall pay the Purchase Price to or to the order of Vendor
in the manner herein provided.
2.2 FUTURE OBLIGATIONS AND INDEMNIFICATION BY PURCHASER
(a) Purchaser acknowledges that the Corporate Subsidiaries and the
Subsidiary Partnerships shall be liable to pay, perform and
discharge all of the Future Obligations and that Vendor shall have
no liability in respect thereof.
(b) Purchaser shall cause the return of the Financial Assurances to
Vendor as soon as is reasonably possible and in any event within 60
days after the Closing Date. In order to facilitate such return
Purchaser shall provide to the third party beneficiaries of the
Financial Assurances, substitute obligations, guarantees, letters of
credit, bonds or other assurances as may be required by such third
party beneficiaries, including the provision of replacement
pre-payments to third parties.
(c) Upon the return of the Financial Assurances, Purchaser shall pay to
Vendor in the case of cash prepayments, an amount of interest on
such prepayment from the Effective Date until the date of return, at
a rate of interest equal to two (2%) percent per annum above the
Prime Rate, which shall accrue daily and be compounded monthly,
provided that no amount shall be payable to Vendor by Purchaser in
respect of a Financial Assurance relating to the supply and cost of
natural gas.
(d) Purchaser will indemnify and save harmless Vendor from and against
all Losses Vendor suffers, sustains, pays or incurs as a consequence
of any of the Financial Assurances being applied to payment of any
of the Future Obligations.
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2.3 EFFECTIVE TIME OF TRANSFER
The transfer and assignment of the Shares and the Support Assets shall be
effective as of the Effective Date provided that Closing occurs. Possession and
title to the Shares and the Support Assets shall not pass to Purchaser until
Closing but shall pass at Closing.
ARTICLE 3
PURCHASE PRICE
3.1 PURCHASE PRICE
The aggregate purchase consideration (the "PURCHASE PRICE") payable by Purchaser
for the Shares and the Support Assets shall be:
(a) Cdn. Seven hundred and fifteen million ($715,000,000) Dollars (the
"BASE PURCHASE PRICE");
(b) plus or minus (as applicable) the adjustment made pursuant to
Section 4.1 (the "ACCOUNTING ADJUSTMENTS");
(c) minus any adjustment made pursuant to Section 5.2(b)(iv);
(d) minus any adjustment made pursuant to Section 8.2;
(e) plus Cdn. one hundred and twenty five thousand dollars ($125,000)
per day, for each day that the Closing Date is beyond July 28, 2004,
provided that all of the conditions provided for in Sections 10.1
and 10.2 (other than those to be satisfied at or by Closing) have
been satisfied; and
(f) plus interest payable pursuant to Section 3.5.
3.2 ALLOCATION OF PURCHASE PRICE
The Base Purchase Price shall be allocated among the Shares and the Support
Assets as specified in Schedule "B", provided that if there are adjustments
described in Section 3.1(b), (c) or (d) the allocations in Schedule "B" shall be
adjusted consistent with those adjustments.
3.3 SATISFACTION OF PURCHASE PRICE
Purchaser shall satisfy the Purchase Price by:
(a) the payment to, or to the order of, Vendor upon execution of this
Agreement by wire transfer in immediately available funds to an account
specified by Vendor of an amount equal to 5% of the Base Purchase Price
(the "DEPOSIT") to be held by Vendor's solicitors ▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP in
trust, in accordance with the Escrow Agreement to be entered into by
Vendor, Purchaser and ▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP contemporaneously with this
Agreement in the form of that attached as Schedule "V", and shall be
disbursed in accordance with the following:
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(i) if Closing occurs, the Deposit and interest accrued thereon shall be
applied to satisfaction of the Base Purchase Price;
(ii) if Closing does not occur due to: (A) a breach of this Agreement by
Purchaser, or (B) the non-satisfaction of any of the conditions in
Sections 10.2(a), (b), (c) or (e), or (C) Vendor having exercised
its right to terminate its obligations under this Agreement pursuant
to Section 10.5(b), the Deposit and interest accrued thereon shall,
at the election of Vendor, be forfeited to and retained by Vendor
for its own account absolutely as a genuine pre-estimate by Vendor
and Purchaser of the minimum Losses which will be suffered or
incurred by Vendor as a consequence of Closing not occurring and
Vendor may recover additional Losses suffered or incurred by it as a
consequence of Closing not occurring up to an amount for such Losses
not exceeding 10% of the Base Purchase Price (which, for clarity,
shall include the retained Deposit); and
(iii) if Closing does not occur for any reason or circumstance other than
that described in paragraph 3.3(a)(ii), the Deposit and interest
accrued thereon shall be returned to Purchaser for the account of
Purchaser and, to the extent Closing does not occur due to a breach
of this Agreement by Vendor, Vendor shall be liable for the amounts
payable pursuant to Section 12.8; and
(b) the payment at the Time of Closing to, or to the order of, Vendor of an
amount equal to the sum of:
(i) the Base Purchase Price less the Deposit and interest accrued
thereon;
(ii) plus or minus (as applicable) the estimate of the Accounting
Adjustments made pursuant to Section 4.3;
(iii) minus any adjustment made pursuant to Section 5.2(b)(iv);
(iv) minus any adjustment made pursuant to Section 8.2;
(v) plus any adjustment made pursuant to Section 3.1(d),
by wire transfer in immediately available funds to an account or accounts
specified by Vendor on or prior to the Closing Date.
In addition to the foregoing, Purchaser shall also pay to Vendor at the Time of
Closing:
(c) all GST required to be paid or collected by Vendor from Purchaser at the
Time of Closing; and
(d) an amount equal to all fees, royalties and charges of third parties
incurred or to be incurred by Vendor to obtain the consents, additional
licenses or sublicenses (details of which shall be provided to Purchaser
10 days in advance of payment of such fees, royalties and charges) and
other documentation necessary for Vendor to transfer, assign,
6
license or sublicense the Third Party Technology, and the Process
Technology to Purchaser.
To the extent that it is not possible at the Time of Closing to determine the
amount of a fee, royalty or charge that will be incurred by Vendor pursuant to
Section 3.3(d), Purchaser shall pay to Vendor that amount as soon as is
reasonably possible after it can be determined.
3.4 TAXES
Purchaser shall be solely liable for and shall pay all Taxes (other than
Vendor's income taxes), imposed in connection with the Transaction, including
any associated interest charges or penalties except to the extent such interest
charges or penalties are caused by the actions of Vendor or its Affiliates.
Without limiting the generality of the foregoing, all GST applicable to the sale
and transfer of the Support Assets hereunder shall be paid by Purchaser to or to
the order of Vendor at the Time of Closing. Vendor shall remit, or shall cause
to be remitted, such GST collected from Purchaser at Closing to the appropriate
Governmental Body in accordance with Applicable Law.
3.5 INTEREST ON PURCHASE PRICE
Purchaser shall pay to Vendor at Closing interest on the Base Purchase Price
from the Effective Date until the Closing Date, at the rate of two (2%) percent
per annum above the Prime Rate, which shall accrue daily and be compounded
monthly.
3.6 NET CASH ADJUSTMENT
At Closing, Purchaser shall deduct from the amount payable to Vendor at Closing,
(or where a negative amount, add to the amount payable) the estimated Net Cash
Adjustment set forth in the Closing Statement provided pursuant to Section 4.3.
ARTICLE 4
BASE PURCHASE PRICE ADJUSTMENTS
4.1 ACCOUNTING ADJUSTMENTS
The Base Purchase Price shall be adjusted as follows:
(a) by adding thereto or subtracting therefrom, as the case may be, the
Aggregate Net Working Capital; and
(b) by adding thereto the amount determined pursuant to Schedule "S" to
compensate Vendor for general and administrative costs incurred by
Vendor in managing the Business during the Interim Period.
Except to the extent otherwise provided in this Agreement, such adjustments
shall be calculated on an accrual basis in accordance with GAAP.
7
4.2 VALUATION OF INVENTORIES
For the purposes of calculating the Aggregate Net Working Capital, Inventory
shall be valued at the Effective Date in the following manner:
(a) all Inventories of natural gas (whether positive or negative) shall
be valued based on the AECO Index;
(b) subject to (c) below, all Inventories other than Product Inventories
shall be valued based on the cost at which such Inventories were
acquired by Vendor, the Corporate Subsidiaries, the Cochrane
Partnership or the Empress II Partnership, as the case may be; and
(c) no value shall be given to:
(i) spare parts, pipe, chemical and other inventories located at a
Facility or used in connection with the Business;
(ii) natural gas liquids in storage or utilized as linepack and
which form part of the Empress V Assets;
(iii) all ethane in Product Inventories held in the Alberta Ethane
Gathering System; or
(iv) any Product Inventories in respect of propane, normal butane,
isobutane and condensate for which the Deemed Inventory
Adjustment has been made.
4.3 CLOSING STATEMENT
Ten (10) days prior to Closing, Vendor shall prepare and give to Purchaser a
statement setting forth (i) the Base Purchase Price (including any Related Cost
adjustment); (ii) the Deposit and interest accrued thereon; (iii) Vendor's good
faith estimate of the Accounting Adjustments along with supporting schedules
evidencing how such Accounting Adjustments were derived, which estimate shall be
based upon Vendor's most current financial information available relative to the
Effective Date; (iv) the GST to be paid to Vendor at Closing pursuant to Section
3.3(c); (v) the amount to be paid to Vendor at Closing pursuant to Section
3.3(d); (vi) the estimated Net Cash Adjustment (based on the most current
financial information available at the time) and (vii) the total amount payable
by Purchaser at Closing pursuant to Sections 3.3 and 3.5.
4.4 POST CLOSING ADJUSTMENTS
(a) As soon as the relevant information is available and in any event
within one hundred and eighty (180) days after Closing (but subject
to Section 4.4(b)), Vendor shall in good faith prepare and deliver
to Purchaser a final closing statement setting forth the actual
Accounting Adjustments and Net Cash Adjustments (the "Final Closing
Statement"). To the extent reasonably required by Vendor, Purchaser
shall assist in the preparation of the Final Closing
8
Statement and shall make available sufficient staff to ensure the
Final Closing Statement is prepared in a timely manner. Purchaser
shall make available to Vendor and its employees, agents,
representatives and consultants, full and complete access during
normal business hours to the Books and Records to enable Vendor to
prepare the Final Closing Statement. The amounts set forth in the
Final Closing Statement shall be final and binding upon Vendor and
Purchaser unless Purchaser delivers to Vendor written notice
disputing any amounts set forth in the Final Closing Statement and
the specific grounds of such dispute (the "Dispute Note") within
thirty (30) days after receipt of the Final Closing Statement. In
such event, the Parties shall co-operate in good faith to attempt to
resolve the matters in dispute and agree upon the actual Accounting
Adjustments or Net Cash Adjustments. If the Parties cannot resolve
the matters in dispute and agree upon the actual Accounting
Adjustments or Net Cash Adjustments within ten (10) Business Days
from receipt by Vendor of the Dispute Note, then the amount of the
actual Accounting Adjustments or Net Cash Adjustments shall be
determined by the chartered accounting firm of
PriceWaterhouseCoopers ("PWC") within a period of ninety (90) days
from the date such accounting firm is retained and each Party shall
co-operate with PWC and shall make available to PWC such books and
records as are within its possession or control as PWC may request
in connection therewith. The determination of PWC shall be final and
binding upon both Parties. The fees and expenses of the accounting
firm of PWC shall be shared equally between the Parties.
(b) The Parties shall make such further Accounting Adjustments after the
one hundred and eighty (180) day period referred to in Section
4.4(a) only in respect of income taxes accrued in respect of the
taxable period ending prior to the Effective Date, provided that any
such Accounting Adjustments shall be made within thirty (30) days of
a notice of assessment under the Tax Act received in respect of the
Tax Returns filed in accordance with Section 7.1 and as allocated
pursuant to Section 7.4.
4.5 PAYMENT ON DETERMINATION OF ACTUAL ADJUSTMENTS
Within five (5) Business Days after the final determination of the actual
Accounting Adjustments and Net Cash Adjustments pursuant to Section 4.4:
(a) Purchaser shall pay to, or to the order of, Vendor (i) the amount,
if any, by which the actual Accounting Adjustments exceed the
estimated amount of the Accounting Adjustments and Net Cash
Adjustments relied on for the purposes of Closing plus (ii) interest
on the amount described in Section 4.6(a)(i) from the Time of
Closing to the day of payment at the Prime Rate; or
(b) Vendor shall pay to Purchaser (i) the amount, if any, by which the
estimated amount of the Accounting Adjustments and Net Cash
Adjustments relied upon for the purposes of Closing exceeds the
actual Accounting Adjustments and Net Cash Adjustments plus (ii)
interest on the amount described in Section 4.6(b)(i) from the Time
of Closing to the day of payment at the Prime Rate,
9
as determined in accordance with this Agreement. No further Accounting
Adjustments or Net Cash Adjustments shall be made by the Parties following the
final determination of the Accounting Adjustments or Net Cash Adjustments
pursuant to Section 4.4.
4.6 DEEMED INVENTORY ADJUSTMENTS
(a) The Parties acknowledge that:
(i) the Cochrane Liquids Sale Agreement dated January 1, 1999
between Cochrane Extraction Plant Partnership (predecessor to
the Corporate Subsidiaries) and Amoco Canada Resources Company
(predecessor to BP) (the "CPLSA") provides for the sale of
propane, normal butane, isobutane and condensate produced in
the Cochrane Plant to BP; and
(ii) the CPLSA provides for an annual adjustment after the end of a
calendar year (the "THIRTEEN MONTH ADJUSTMENTS") to account
for the fact that the aggregate deemed volumes of normal
butane and propane on which the monthly invoices for the year
were based are not the same as the actual volumes that were
produced during the year.
(b) For purposes of the adjustments made pursuant hereto, the Parties
agree that the Deemed Inventory Amount shall equal the estimated
Thirteenth Month Adjustment under the CPLSA which would be owing to,
or payable by, the Vendor beginning January 1, 2004 up to and
including the last full calendar month prior to the Effective Date,
as determined by Vendor after the Effective Date and prior to
Closing, in a manner consistent with Vendor's past practices with
respect to such amount.
(c) Unless addressed to the satisfaction of Vendor, acting reasonably,
as part of the negotiations described in paragraph 1 of Schedule "D"
as it relates to the Empress V Joint Venture Agreement dated January
15, 1997 between WECI and BP, the provisions of this Section 4.6
shall apply in respect of any deemed volumes of normal butane and
propane produced thereunder and on which the monthly invoices for
the year were based (and any differences from the actual volumes
that were produced during the year), mutatis mutandis.
4.7 OUTSTANDING AUDITS
Notwithstanding Section 4.4, Vendor shall be responsible for all amounts payable
and all Losses, and shall retain all amounts receivable and all benefits in
respect of, any amounts paid or payable with respect to the Outstanding Audits.
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ARTICLE 5
INTERIM MATTERS
5.1 RISK OF LOSS
Except as provided in Section 5.2, at all times prior to Closing, the Assets and
the operation of the Business shall remain at the risk of Vendor.
5.2 FACILITY LOSS AND ENVIRONMENTAL DAMAGE
(a) Notwithstanding Section 5.1, if, during the Interim Period:
(i) any of the Facilities are expropriated or damaged, destroyed
or otherwise altered by reason of fire, flood, storm or other
casualty ("Facility Loss"); or
(ii) Vendor becomes aware of any Environmental Liability (other
than those as disclosed in Schedule "H" and other than the
Previously Disclosed Environmental Liabilities) ("New
Environmental Liability");
Vendor shall promptly notify Purchaser in writing of the nature and
extent of the Facility Loss or New Environmental Liability. Vendor
may, but shall not be obligated to, undertake any repairs or other
remedial actions to remedy the Facility Loss or New Environmental
Liability.
(b) Where:
(i) the cost of undertaking such repairs and other remedial
actions as are necessary to return a Facility which is the
subject to the Facility Loss to the substantially the same
condition and capability of operations as it was in prior to
the Facility Loss; plus
(ii) the net income lost to the Corporate Subsidiaries as a result
of the Facility Loss in the period from and after the
Effective Date; plus
(iii) the cost to remediate any New Environmental Liability to the
standard required by Applicable Law,
(the "RELATED COSTS") is:
(iv) less than $10,000,000, the Parties shall proceed with Closing
subject to and in accordance with the terms of this Agreement;
and
(v) $10,000,000 or greater, but not more than $25,000,000, the
Base Purchase Price shall be reduced by the amount by which
the Related Costs exceed $10,000,000 and the Parties shall
proceed with Closing subject to and in accordance with the
terms of this Agreement; and
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(vi) $25,000,000 or more, Purchaser may elect to not proceed with
Closing, terminate this Agreement and have returned to it the
Deposit and interest accrued thereon.
(c) If Closing occurs, Vendor shall, or, where insurance is maintained
by its Affiliate, shall have such Affiliate, assign to Purchaser all
of the rights of Vendor in and to the proceeds of insurance payable
in respect of each Facility Loss, excluding business interruption
insurance proceeds payable in respect of the period prior to the
Effective Date. In the circumstances contemplated in Section
5.2(b)(v), any proceeds of insurance shall be allocated between
Vendor and Purchaser in proportion to the extent each Party bears
the Related Costs. After Closing, Vendor shall, at Purchaser's
request, use commercially reasonably efforts to assist Purchaser in
the collection of such proceeds of insurance.
5.3 GENERAL OPERATION AND MAINTENANCE
Throughout the Interim Period, Vendor shall and shall cause the Corporate
Subsidiaries to:
(a) observe, perform and comply in all material respects with all
covenants, agreements and obligations of such party with respect to
the Business;
(b) maintain and operate that part of the Business conducted by it, to
the extent within its control or direction, in a proper and prudent
manner in accordance with its customary practice and Applicable
Laws;
(c) provide to Purchaser, subject to any confidentiality obligations,
any information, periodic reports and such further information as
Purchaser may reasonably request, in respect of the negotiations
described in Schedule "D"; and
(d) pay all insurance premiums in respect of the policies set forth in
Schedule "K" as those premiums become due and payable.
5.4 RESTRICTED ACTIVITIES
Throughout the Interim Period Vendor shall not, and shall cause the Corporate
Subsidiaries not to, without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld, delayed or conditioned:
(a) make any material change in the conduct of the Business that would
reasonably be expected to have a Material Adverse Effect;
(b) enter into, assign, terminate or amend, in any material respect, any
Material Agreement, except for activities in the ordinary course of
the Business, including the activities described in Schedule "D",
provided that Vendor shall not conclude any of the negotiations set
forth described in Schedule "D" on terms materially economically
different than those represented to Purchaser without Purchaser's
prior written consent;
12
(c) sell, lease or otherwise dispose of any of the Assets except (i)
personal property sold, leased or otherwise disposed of in the
ordinary course of the Business, (ii) any item of personal property
having a value of less than $25,000, and (iii) pursuant to the
exercise by any third party of a Preferential Purchase Right;
(d) create any Security Interest on any of the Assets except to the
extent (i) incidental to the operation of the Business and given in
the ordinary course of business, or (ii) required or evidenced by
any contract or agreement set forth in Cochrane Schedule 1, Empress
II Schedule 1, or Empress V Schedule 1, or (iii) Permitted
Encumbrances; or
(e) make any individual capital expenditure or commitment therefor in
respect of the Business in excess of $250,000 for any single item,
or in excess of $500,000 in aggregate, other than expenditures: (i)
provided for in the existing capital budget of the Corporate
Subsidiaries, the Partnership or the Empress II Partnership, as the
case may be, (ii) required by any contract or agreement set forth in
Cochrane Schedule 1, Empress II Schedule 1, or Empress V Schedule 1,
or (iii) pursuant to an authorization for expenditure set forth in
Schedule "D".
Notwithstanding the foregoing:
(f) Vendor, a Corporate Subsidiary or Subsidiary Partnership may take or
not take any action mentioned in this Section if reasonably
necessary under emergency circumstances or if it is required to take
or not take such action under Applicable Laws and provided Purchaser
is notified as soon thereafter as practicable; and
(g) Vendor may, and may cause the Corporate Subsidiaries and Subsidiary
Partnerships to, undertake the transactions contemplated in Section
6.1(ee).
5.5 CORPORATE SUBSIDIARIES AND SUBSIDIARY PARTNERSHIPS
In addition to the restrictions set forth in Section 5.4, throughout the Interim
Period, Vendor shall cause the Corporate Subsidiaries and the Subsidiary
Partnerships not to, without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld, delayed or conditioned:
(a) issue any of their equity securities or securities convertible into
equity securities or, in the case of the Subsidiary Partnerships,
Partnership Units, or repurchase, redeem or otherwise acquire any
such securities or Partnership Units or make or propose to make any
other change in their capitalization;
(b) make any change in their respective constating documents or by-laws;
(c) purchase any securities of any corporation or other Person;
(d) take any action or enter into any commitment with respect to or in
contemplation of any liquidation, dissolution or other winding up of
their respective businesses or operations;
13
(e) acquire (by merger, consolidation, acquisition of stock or assets or
otherwise), in whole or in party, any corporation, partnership, or
other business organization or division thereof;
(f) amalgamate, merge or consolidate their respective assets with any
other Person; or
(g) in respect of the Corporate Subsidiaries, declare any dividends or
make any returns of capital to its shareholders, or commit to do so
and, in respect of the Subsidiary Partnerships, make any
distributions or returns of capital to its partners or commit to do
so, provided however that each of the Corporate Subsidiaries and
Subsidiary Partnerships:
(i) may declare and pay dividends or make distributions or returns
of capital not in excess, in the aggregate, of the Cash held
by such corporation or partnership at the time of payment upon
delivery to Purchaser of written notice of the intent of such
corporation or partnership to make such payment;
(ii) shall repay, in all material respects, Intercorporate Debt
other than that which is attributable to operating costs
incurred in the ordinary course of business (which for
certainty, shall be included in the Net Working Capital); and
(iii) shall assign to Vendor or an Affiliate (other than a Corporate
Subsidiary or Subsidiary Partnership) any Excluded Asset held
by it and shall have the Vendor or such Affiliate assume the
Excluded Liabilities.
5.6 UPDATES TO REPRESENTATIONS AND WARRANTIES
(a) Each of the Parties shall, in the event of, or promptly after
obtaining knowledge of the occurrence or threatened occurrence of
any fact or circumstance that would cause any of its or the other
Party's representations and warranties set forth herein not to be
true and correct, give notice thereof to the other Party.
(b) If prior to the Time of Closing a Party (the "DISCLOSING PARTY")
gives notice to the other Party (the "NOTIFIED PARTY") of the
occurrence of any fact or circumstance that would cause any of the
Disclosing Party's representations and warranties set forth herein
not to be true and correct, then the representations and warranties
of the Disclosing Party set forth herein shall be deemed to be
amended to reflect that fact or circumstance. All references to
Sections 6.1 and 6.2 and subsections thereof in this Agreement shall
be deemed to be references to Sections 6.1 and 6.2 and subsections
thereof as so amended. The Notified Party's sole remedy in respect
of such an amendment shall be as set out in Section 10.4 or 10.5, as
the case may be.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES OF VENDOR
As of the date hereof, Vendor represents and warrants to Purchaser as follows:
(a) ORGANIZATION AND GOOD STANDING: Each of Vendor and the Corporate
Subsidiaries is a corporation duly incorporated, validly existing
and current with all corporate filings under the laws of their
respective constating jurisdictions, and each of the Subsidiary
Partnerships is a general partnership, validly existing and in good
standing under the laws of Alberta.
(b) QUALIFICATION: Each of Vendor, the Corporate Subsidiaries and the
Subsidiary Partnerships has the requisite power to carry on its
business as it is now being conducted and is duly qualified to do
business in the Province of Alberta and in the jurisdictions in
which its assets make such qualification necessary.
(c) AUTHORITY: Vendor has all requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement
and the Transaction have been duly authorized by all requisite
corporate action on the part of Vendor.
(d) ENFORCEABILITY: This Agreement constitutes a valid and binding
agreement of Vendor enforceable against it in accordance with its
terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
application with respect to creditors, (ii) general principles of
equity, and (iii) the power of a court to deny enforcement of
remedies generally based upon public policy.
(e) NO CONFLICT OR VIOLATION: Assuming all Required Consents are
obtained or otherwise complied with, neither the execution and
delivery of this Agreement nor the consummation of the Transaction
and performance of the terms and conditions contemplated hereby by
Vendor will (i) conflict with or result in a violation or breach of
any provision of the certificate of incorporation, by-laws or other
similar governing documents of Vendor, the Corporate Subsidiaries or
the Subsidiary Partnerships or, to the knowledge of Vendor, any
material agreement, indenture or other instrument to which Vendor, a
Corporate Subsidiary or a Subsidiary Partnership is bound, other
than such conflicts, breaches or violations of agreements,
indentures or other instruments as would not reasonably be expected
to have a Material Adverse Effect, or (ii) violate or conflict with
any Applicable Laws in the jurisdiction in which the Assets are
located other than as would not reasonably be expected to have a
Material Adverse Effect.
(f) CONSENTS, APPROVALS, LICENSES: No consent, approval, authorization
or filing with or notification to any Person is required for or in
connection with the execution and delivery of this Agreement by
Vendor or for or in connection with the consummation of the
Transaction or the performance of the terms and
15
conditions contemplated hereby by Vendor, except: (i) the Required
Consents; (ii) consents, approvals, authorizations, filings or
notices required to be made or obtained in accordance with
Applicable Laws; (iii) Customary Post Closing Consents; and (iv)
consents, filings or notices the failure of which to obtain or with
which to comply would not reasonably be expected to have a Material
Adverse Effect on Vendor's ability to complete the Transaction; and
(v) such other consents, filings or notices, the failure to obtain
which or to comply with which would not have a Material Adverse
Effect.
(g) ACTIONS: Except as set forth in Schedules "F", "G" and "H" there are
no actions, suits, other legal, administrative or arbitration
proceedings existing or, to the knowledge of Vendor, which are
pending or threatened against Vendor, the Corporate Subsidiaries or
the Subsidiary Partnerships or relating to the Business, the Shares
or the Assets.
(h) COMPLIANCE WITH APPLICABLE LAWS: Except as set forth in Schedules
"G" and "H", to the knowledge of Vendor, none of Vendor, the
Corporate Subsidiaries or the Subsidiary Partnerships is in
violation of any Applicable Laws; provided that Vendor makes no
representation or warranty, express or implied, with respect to
Taxes except as are set forth in Section 6.1(n) or Environmental
Laws except as are set forth in Subsection 6.1(m).
(i) SHARES AND PARTNERSHIP UNITS:
(i) WECI holds of record and owns beneficially all of the Shares;
(ii) The Shares are free and clear of any Security Interests and
are not subject to the provisions of any contract or
commitment that would require WECI to sell, transfer or
otherwise dispose of any Shares to any Person other than
Purchaser;
(iii) The entire ownership interest in the Subsidiary Partnerships
is divided into and represented by the Partnership Units, and
PARI and 898389 beneficially own all of the Partnership Units;
(iv) The Partnership Units are free and clear of any Security
Interests and are not subject to the provisions of any
contract or commitment that would require the Corporate
Subsidiaries to sell, transfer or otherwise dispose of any
Partnership Units to any Person; and
(v) at Closing, no Person has any right, option or entitlement to
acquire an equity interest in the Corporate Subsidiaries or
the Subsidiary Partnerships.
(j) CAPITALIZATION OF CORPORATE SUBSIDIARIES AND THE SUBSIDIARY
PARTNERSHIPS:
(i) PARI: The authorized share capital of PARI consists of an
unlimited number of Class A common voting shares, an unlimited
number of Class
16
B common non-voting shares, an unlimited number of Class C
common voting shares and an unlimited number of Class A
preferred non-voting shares, of which 126,675 Class A common
voting shares and 1,999,000 Class B common non-voting shares
are issued and outstanding and held beneficially and of record
by Vendor;
(ii) 898389: The authorized share capital of 898389 consists of an
unlimited number of common shares and 100 preferred shares, of
which 71,029,728 common shares are issued and outstanding and
held beneficially and of record by Vendor;
(iii) All of the issued and outstanding shares of the Corporate
Subsidiaries have been duly authorized and are validly issued,
fully paid and non-assessable;
(iv) Cochrane Partnership: 1051751 Partnership Units of the
Cochrane Partnership have been issued to each of PARI and
898389; and
(v) Empress II Partnership: 790,501 Partnership Units of the
Empress II Partnership have been issued to each of PARI and
898389.
(k) DIVIDENDS: At Closing, neither of the Corporate Subsidiaries shall
have any declared but unpaid dividends.
(l) TITLE TO ASSETS: Vendor does not warrant title to the Assets, but
does represent and warrant that the Assets are free and clear of all
Security Interests created by, through or under Vendor, the
Corporate Subsidiaries or the Subsidiary Partnerships since October
13, 2000, except the Permitted Encumbrances.
(m) ENVIRONMENTAL MATTERS: To the knowledge of Vendor, all material
written environmental reports, audits, summaries, materials, data
and other information related to Environmental Liabilities affecting
the Business in the possession of Vendor have been disclosed to
Purchaser. Except as disclosed in Schedule "H" and other than the
Previously Disclosed Environmental Liabilities, as of the date
hereof, to the knowledge of Vendor none of Vendor, the Corporate
Subsidiaries or the Subsidiary Partnerships has received:
(i) any order or directive pursuant to Environmental Laws which
requires any work, repairs, construction or capital
expenditures with respect to the Business or the Assets which
has not been complied with in all material respects; or
(ii) any demand or notice issued under Environmental Laws with
respect to the breach of any Environmental Law in relation to
the Business or the Assets which has not been complied with in
all material respects.
(n) TAX MATTERS: Except as set forth in Schedule "J", to the knowledge
of Vendor:
17
(i) all Tax Returns required to be filed by the Corporate
Subsidiaries and the Subsidiary Partnerships have been timely
filed, and such Tax Returns are correct and complete in all
material respects and all items of income, gain, loss,
deduction and credit or other items required to be included in
each such Tax Return have been or will be so included; and
(ii) all Taxes shown as due on such returns have been paid.
(o) INSURANCE: Set forth in Schedule "K" is a summary listing of all
current policies of liability and property insurance insuring the
Assets, employees and Business of Vendor, the Corporate Subsidiaries
and the Subsidiary Partnerships. All policies are in full force and
effect. Coverage under such policies shall terminate on the Closing
Date.
(p) OTHER BUSINESSES: As of the date of this Agreement, the Corporate
Subsidiaries and the Subsidiary Partnerships do not carry on any
business other than the Business, and at the Closing, the Corporate
Subsidiaries and the Subsidiary Partnerships will not carry on any
business other than the Business.
(q) NO SUBSIDIARIES: None of the Corporate Subsidiaries or the
Subsidiary Partnerships has any subsidiaries.
(r) RESIDENCY FOR TAX PURPOSES: Vendor is not a non-resident of Canada
for the purposes of the Tax Act.
(s) ETA REGISTRATION: WECI is a registrant for the purposes of the ETA,
WECI's registration number being 86119 3126 RT0001. PARI is a
registrant for the purposes of the ETA, PARI's registration number
being 10405 8102 RT0001. 898389 is a registrant for the purposes of
the ETA, 898389's registration number being 10515 0833 RT0001. The
Cochrane Partnership is a registrant for the purposes of the ETA,
the Partnership's registration number being 86757 9401 RT0001. The
Empress II Partnership has, as of the date of execution of this
Agreement, applied to be a registrant for the purposes of the ETA,
and on the Closing Date will be a registrant, and at or prior to the
Closing Date will have provided Purchaser with notice of its
registration number.
(t) BROKERAGE FEES AND COMMISSIONS: Vendor has not incurred any
obligation or entered into any agreement for any investment banking,
brokerage or finder's fee or commission in respect of the
Transaction for which Purchaser, the Corporate Subsidiaries or the
Subsidiary Partnerships shall incur any liability.
(u) EMPLOYEES: The Corporate Subsidiaries and the Subsidiary
Partnerships do not have any employees.
(v) FINANCIAL STATEMENTS: Vendor has delivered to Purchaser the audited
financial statements for the years ended December 31, 2003, 2002 and
2001 and unaudited financial statements for the 3 months ended March
31, 2004 and 2003, all as set
18
forth in Schedule "W". Such audited and unaudited financial
statements were prepared from the Books and Records of Vendor in
accordance with GAAP.
(w) NO UNDISCLOSED LIABILITIES:
(i) On the Effective Date, ▇▇▇▇, ▇▇▇▇▇▇ and the Subsidiary
Partnerships do not have any liabilities which should be shown
on a balance sheet or notes thereto prepared in accordance
with GAAP except: (A) liabilities which are included in the
calculation of the Net Working Capital; (B) liabilities that
have been incurred in the ordinary course of business which
have not become due; (C) liabilities associated with those
matters set out in Schedule "F", "G" and "H"; (D) Permitted
Encumbrances; (E) Environmental Liabilities; (F) liabilities
or indebtedness which are satisfied after the Effective Date
in accordance with Section 5.5(g)(ii); (G) obligations and
liabilities otherwise disclosed herein; and (H) future income
tax liability; and
(ii) There is no Intercorporate Debt that would not be classified
as a current liability or current asset pursuant to GAAP.
(x) CONTRACTS: Vendor has, or has caused the Corporate Subsidiaries or
the Subsidiary Partnerships to have, made available to Purchaser
true and complete copies or financial or agreement summaries of the
Material Agreements, and the Material Agreements include all of the
contracts, agreements and instruments to which any of Vendor, the
Corporate Subsidiaries or the Subsidiary Partnerships are a party as
at the date hereof which affect or relate to the Business and the
Assets or either of them (other than consulting services or
performance of work contracts entered into in the ordinary course of
business) and which: (A) provide for aggregate payments by or to
Vendor, the Corporate Subsidiaries or the Subsidiary Partnerships of
$1,000,000 or more over the term of the contract; or (B) the
termination of which would have a Material Adverse Effect.
(y) PERMITS:
(i) Vendor holds, or to its knowledge where a third party operates
a Facility, that third party holds, all material Permits
necessary or required to be held by it for the operation of
that Facility and is in compliance with those Permits;
(ii) Except as set forth in Schedules "F", "G" and "H", no
proceeding is existing, or to the knowledge of Vendor, pending
or threatened, with respect to any alleged material failure by
it or any third party operator, to have any required Permit or
not to be in material compliance with its Permits, where such
alleged failure has not been rectified;
(iii) To the knowledge of Vendor no event has occurred and is
continuing which allows, or after notice or lapse of time or
both would allow, any
19
material modification or the termination of any such Permit
held by it or any third party operator.
(z) NO VIOLATION OF CONTRACTS: Except as disclosed in Schedule "F", to
the knowledge of Vendor none of Vendor, the Corporate Subsidiaries,
the Subsidiary Partnerships or any other Person is in material
breach or violation of, or default under, any Material Agreement.
Each Material Agreement is, to the knowledge of Vendor, a valid
agreement, arrangement or commitment of Vendor, the Corporate
Subsidiary or the Subsidiary Partnerships which is a party thereto,
enforceable against Vendor, the Corporate Subsidiary or the
Subsidiary Partnerships as applicable, and the other parties
thereto, in accordance with its terms, except in each case where
enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights generally and except where
enforceability is subject to the application of equitable principles
or remedies.
(aa) PREFERENTIAL PURCHASE RIGHTS: Except as set forth in Schedule "N",
or in respect of which a waiver has been obtained, there are no
Preferential Purchase Rights, options or other rights created by,
through or under it or any Corporate Subsidiary or the Subsidiary
Partnerships since October 13, 2000 or, to the knowledge of Vendor,
prior to that date, held by any Person not a party to this Agreement
to purchase or acquire any interest in any part of the Assets or
Shares as a result of the Transaction and in respect of those
Preferential Purchase Rights set forth in Schedule "N", as of the
date hereof, the waivers indicated in Schedule "N" have been
obtained.
(bb) MINUTE BOOKS: The minute books of the Corporate Subsidiaries were
accurate and current in all material respects as of the date of this
Agreement.
(cc) INTELLECTUAL PROPERTY: The Assets include all material patents,
trade designs and other intellectual property used in the Business
(provided that Purchaser makes no representation as to the
transferability of, or implications of a change of control on, any
licensed third party intellectual property). To the knowledge of
Vendor, to the extent related to the Business, none of Vendor, the
Corporate Subsidiaries or the Subsidiary Partnerships is in
violation of any patents, trade marks or intellectual property
rights.
(dd) NO LOSS OF RIGHTS: To the knowledge of Vendor, the consummation of
the Transaction shall not result in the loss of any right or benefit
under any Material Agreement nor confer upon any third party any
right or benefit under any Material Agreement except as provided for
in the Shrinkage Make-Up and Billing/Payment Frequency Memorandum of
Agreement dated September 26, 2002.
(ee) INTERCORPORATE DEBT, EXCLUDED ASSETS AND PARI CIBC LOAN: On or
before the Closing Date Vendor shall have:
20
(i) caused PARI to pay in full all amounts outstanding in respect
of the PARI CIBC Loan;
(ii) repaid, in all material respects, Intercorporate Debt other
than that which is attributable to operating costs incurred or
revenues arising in the ordinary course of business; and
(iii) caused the Corporate Subsidiaries and the Subsidiary
Partnerships, as applicable, to have assigned to Vendor all of
the Excluded Assets and all rights, obligations and
liabilities associated therewith.
6.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Vendor as follows:
(a) ORGANIZATION: Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of Province of Alberta.
(b) QUALIFICATION: Purchaser has the requisite corporate power to carry
on its business as it is now being conducted, and is duly qualified
to do business, and is in good standing, in the jurisdictions in
which Purchaser's assets make such qualification necessary.
(c) AUTHORITY: Purchaser has all requisite corporate power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement
and the consummation of the Transaction have been duly and validly
authorized by all requisite corporate action on the part of
Purchaser.
(d) ENFORCEABILITY: This Agreement constitutes a valid and binding
agreement of Purchaser enforceable against Purchaser in accordance
with its terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
application with respect to creditors, (ii) general principles of
equity and (iii) the power of a court to deny enforcement of
remedies generally based upon public policy.
(e) NO CONFLICT OR VIOLATION: Neither the execution and delivery of this
Agreement nor the consummation of the Transaction and performance of
the terms and conditions contemplated herein by Purchaser will: (i)
conflict with or result in a violation or breach of any provision of
the certificate of incorporation, by-laws or other similar governing
documents of Purchaser or, to the knowledge of Purchaser, any
material agreement, indenture or other instrument under which
Purchaser is bound, other than such conflicts, breaches or
violations of agreements, indentures or other instruments as would
not reasonably be expected to have a material adverse effect on
Purchaser's ability to complete the Transaction, or (ii) violate or
conflict with any Applicable Laws in the jurisdictions in which the
assets of Purchaser are located other than as would not
21
reasonably be expected to have a material adverse effect on
Purchaser's ability to complete the Transaction.
(f) CONSENTS: To the knowledge of Purchaser, no consent, approval,
authorization or permit of, or filing with or notification to, any
Person is required for or in connection with the execution and
delivery of this Agreement by Purchaser or for or in connection with
the consummation of the Transaction and performance of the terms and
conditions contemplated hereby by Purchaser, except for (i) those
consents, filings or notices expressly described and set forth in
Schedule "M", (ii) Customary Post-Closing Consents, (iii) consents,
filings or notices required to be made in accordance with the
Competition Act (Canada), and (iv) consents, filings or notices the
failure of which to obtain or with which to comply would not
reasonably be expected to have a material adverse effect on
Purchaser's ability to complete the Transaction.
(g) ACTIONS: There are no actions, suits, or other legal, administrative
or arbitration proceedings pending against Purchaser, or to the
knowledge of Purchaser, threatened against Purchaser, which would
reasonably be expected to have a material adverse effect on
Purchaser's ability to complete the Transaction.
(h) FUNDS: Purchaser has, and at all times prior to Closing will have,
sufficient funds available to enable Purchaser to consummate the
Transaction and to pay the payments described in Section 3.3 and
Section 4.5 and all related fees and expenses of Purchaser.
(i) INVESTMENT CANADA ACT: Purchaser is not a non-Canadian within the
meaning of the Investment Canada Act (Canada).
(j) ACTING AS PRINCIPAL: Purchaser is purchasing all of the right,
title, interest and estate of Vendor in the Shares and Support
Assets as principal.
(k) BROKERAGE FEES AND COMMISSIONS: Neither Purchaser nor any Affiliate
of Purchaser has incurred any obligation or entered into any
agreement for any investment banking, brokerage or finder's fee or
commission in respect of the Transaction for which Vendor shall
incur any liability.
(l) GOOD STANDING: Purchaser is not in breach of any Applicable Laws
which could result in an undue delay or an inability to register any
transfers of any license, order, permit or approval relating to the
Business.
(m) TAX STATUS: Purchaser is not exempt from Canadian income Tax
pursuant to section 149 of the Tax Act.
(n) ETA REGISTRATION: Purchaser is a registrant pursuant to the ETA,
Purchaser's registration number being 861863025 RT0001.
22
6.3 NO ADDITIONAL REPRESENTATIONS AND WARRANTIES
Except as and to the extent set forth in Section 6.1, Vendor makes no
representations or warranties whatsoever, and Purchaser acknowledges that it is
purchasing the Shares and the Support Assets (and, indirectly, the Assets) on an
"as is, where is" basis except as and to the extent of the representations and
warranties set forth in Section 6.1. Vendor disclaims all liability and
responsibility for any representation, warranty, statement or information made
or communicated (orally, electronically or in writing) to Purchaser (including
any opinion, information or advice which may have been provided to Purchaser by
any officer, shareholder, director, employee, agent, consultant or
representative of Vendor, or its Affiliates, financial advisors, counsel or any
other agent, consultant, representative or Person (collectively referred to as
"VENDOR'S REPRESENTATIVES"). Without limiting the generality of the foregoing,
Vendor makes no representations or warranties, as to:
(a) title to the Assets (except to the limited extent set forth in
Subsections 6.1(l);
(b) any Environmental Matters or Environmental Liabilities, except to
the limited extent set forth in Subsection 6.1(m);
(c) any estimates of the value of the Shares, the Assets, the Business
or the revenues, future revenues or estimates applicable to the
Business;
(d) any engineering or other interpretations or evaluations respecting
the Business;
(e) the location, quality, condition or serviceability of the Assets or
the Business;
(f) the suitability or fitness of any of the Assets for any use or
purpose; or
(g) any information provided or made available to Purchaser by Vendor's
Representatives, in Vendor's data room, on plant or site visits or
otherwise.
Without restricting the generality of the foregoing, Purchaser acknowledges that
it:
(i) has been given the opportunity to make plant and site visits;
(ii) has had full access to Vendor's data room and the information
contained in the data room;
(iii) has made its own independent investigation, analysis,
evaluation, appraisal and inspection of the Business and the
financial condition, operations and prospects of Vendor, the
Subsidiary Partnerships, the Corporate Subsidiaries and the
Business;
(iv) has relied solely on its independent investigation, analysis,
evaluation, appraisal, inspection and judgment as to its
assessment of the value of the Business, the Shares and the
Assets and the valuation, price and expense assumptions
applicable thereto; and
23
(v) has, prior to entering into this Agreement, been advised by
its counsel and such other Persons it has deemed appropriate
concerning this Agreement.
6.4 NO MERGER
The representations and warranties made by Vendor in Section 6.1 shall
respectively be deemed to apply to all transfers, assignments and other
documents under which Vendor conveys its entire right, title, estate and
interest in the Shares and the Support Assets to Purchaser. There shall not be
any merger of any of such representations or warranties in such assignments,
transfers or other documents, notwithstanding any rule of law, equity or statute
to the contrary and all such rules are hereby waived.
6.5 NON-TRANSFERABLE
The representations and warranties contained in this Agreement and in any other
certificate, agreement or other document delivered pursuant hereto, are made for
the exclusive benefit of the Person to whom they are addressed, and such
Person's Affiliates, and are not transferable and shall not be the subject of
any rights of subrogation granted in favour of any other Person.
ARTICLE 7
TAX MATTERS
7.1 TAX RETURNS FOR PRE-EFFECTIVE DATE PERIODS
Vendor will cause to be prepared and timely filed all Tax Returns for each
Corporate Subsidiary and the Cochrane Partnership for all taxable periods ending
prior to the Effective Date and which are not filed before the Effective Date.
Vendor has caused the fiscal year end for the Cochrane Partnership to end on the
day immediately preceding the Effective Date.
7.2 TAX RETURNS FOR STRADDLE PERIOD AND POST-EFFECTIVE DATE PERIODS
Purchaser shall prepare or cause to be prepared and timely filed all Tax Returns
for each Corporate Subsidiary and the Subsidiary Partnerships for taxable
periods ending on or after the Effective Date. Purchaser shall permit Vendor to
review and comment on each such Tax Return prior to filing and shall make such
revisions to such Tax Returns as are reasonably requested by Vendor. Vendor
shall reimburse Purchaser for all reasonable third party costs and expenses
incurred in connection with the preparation and filing of such Tax Returns to
the extent in relation to the period ending on or at the Effective Date.
7.3 COOPERATION ON TAX MATTERS
Vendor and Purchaser shall cooperate fully, as and to the extent reasonably
requested by the other Party, in connection with the preparation and filing of
Tax Returns pursuant to this Article 7, in the conduct of any Tax matter with
respect to Taxes relating to taxable periods (or portions thereof) ending prior
to the Effective Date and in the management of income tax liability and the
implementation of any Tax savings plans.
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7.4 TAX LIABILITY
(a) Vendor shall be liable for, and shall cause to be timely paid, all
Taxes, and shall be entitled to Tax refunds, of PARI and 898389 for
tax periods ending prior to the Effective Date ("PRE-EFFECTIVE DATE
TAX PERIOD");
(b) Subject to Section 7.4(c), Purchaser shall be liable for, and shall
cause to be timely paid, all Taxes, and shall be entitled to Tax
refunds, of PARI and 898389 for taxable periods ending on or after
the Effective Date;
(c) Vendor shall be liable for all Taxes and entitled to Tax refunds of
PARI and 898389 for periods that begin before the Effective Date and
end after the Effective Date ("STRADDLE PERIOD") that are properly
allocable to the period prior to the Effective Date ("PRE-EFFECTIVE
DATE PERIOD"). Taxes or Tax refunds from a Straddle Period shall be
allocated to Vendor by taking the total amount of Tax or Tax refunds
for the Straddle Period and apportioning an amount of such Tax or
Tax refunds to Vendor based on the tax base attributable to the
Pre-Effective Date Period (examples of tax base are "sale" and/or
"expenditures" for sales tax returns and "time" for franchise tax
and ad valorem tax returns).
(d) The Straddle Period Taxes (which may include tax refunds) allocable
to Vendor as well as any unpaid Taxes or Tax refunds from
Pre-Effective Date Tax Periods shall be included as Other Current
Liabilities or Other Current Assets in the determination of Net
Working Capital.
7.5 TAX INDEMNIFICATION AND AUDITS
(a) Provided Purchaser and its Affiliates have not requested an audit by
a taxing authority or otherwise deliberately caused such an audit to
occur, from and after the Closing Vendor shall indemnify, release
and save Purchaser, its Affiliates, PARI and 898389 and their
respective officers, directors, employees and agents harmless from
and against, and shall pay, all Taxes imposed (net of the present
value of any Tax benefits, including the present value of any
increased future year deductions, calculated pursuant to Schedule
"J") as a result of an assertion, claim, notice of deficiency, or
assessment by, or any obligation owing to, any taxing authority for
any Taxes of ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ for any Pre-Effective Date Period or for
any Straddle Period Taxes which are properly allocable to Vendor
under Section 7.4.
(b) Provided Vendor and its Affiliates have not requested an audit by a
taxing authority or otherwise deliberately caused such an audit to
occur, from and after Closing, Purchaser shall indemnify, release
and save the Vendor Indemnified Parties harmless from and against,
and shall pay, all Taxes imposed as a result of an assertion, claim,
notice of deficiency or assessment by, or any obligation owing to,
any taxing authority for any Taxes of ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ for any period
beginning on or after the Effective Date ("POST-EFFECTIVE DATE
PERIOD") or for
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any Straddle Period Taxes which are properly allocable to Purchaser
under Section 7.4.
(c) If an assertion, question or claim (whether written or verbal) shall
be made by any taxing authority that could result in the
indemnification of a Party (the "TAX INDEMNIFIED PARTY") under this
Section, the Tax Indemnified Party shall promptly notify the Party
obligated under this Section (the "TAX INDEMNIFYING PARTY") to
indemnify the Tax Indemnified Party in writing of such fact, and:
(i) the Tax Indemnified Party shall take such action in connection
with responding to such assertion, question or claim as the
Tax Indemnifying Party shall reasonable request in writing
from time to time, including the selection of counsel and
experts and the execution of powers of attorney, provided that
(A) within thirty (30) days after the notice required by this
subsection has been delivered (or such earlier date that any
payment of Taxes is due by the Tax Indemnified Party but in no
event sooner than five (5) days after the Tax Indemnifying
Party's receipt of such notice), the Tax Indemnifying Party
requests that such claim be contested or specifies the manner
in which such assertion or question should be responded to,
and (B) the Tax Indemnifying Party shall have agreed to pay to
the Tax Indemnified Party all reasonable costs and expenses
that the Tax Indemnified Party incurs in connection with
contesting such claim or responding to such question or
assertion, including reasonable attorney's and accountants'
fees and disbursements. The Tax Indemnified Party shall not
make any payment of such claim for at least thirty (30) days
(or such shorter period as may be required by Applicable Laws)
after the giving of the notice required by this subsection,
shall give to the Tax Indemnifying Party any information
requested relating to such assertion, question or claim, and
shall otherwise cooperate with the Tax Indemnifying Party in
order to contest effectively any such assertion, question or
claim. The Tax Indemnifying Party shall determine the method
of any contest of such claim and shall control the conduct
thereof. The Tax Indemnifying Party shall have the right to
pay the amount of any claim at any time for the purpose of
avoiding interest charges. Upon the successful contestation of
such claim, in whole or in part, the Tax Indemnifying Party
shall be entitled to the return of such amount or portion
thereof, together with any interest that is received thereon;
(ii) subject to the provisions of paragraph (i) of this subsection,
the Tax Indemnified Party shall enter into settlement of such
contest with the applicable taxing authority or prosecute such
contest to a determination in a court, all as the Tax
Indemnifying Party may reasonably request; provided, however,
that the Tax Indemnified Party shall not be required by this
Section 7.5(c) to agree to any settlement or take any position
in any contest that would increase the Tax Indemnified Party's
tax liability for any period for which it is not indemnified
by the Tax Indemnifying Party;
26
(iii) promptly after the extent of the liability of the Tax
Indemnified Party with respect to a claim shall be established
by the final judgment or decree of a court or a final and
binding settlement with a Governmental Body having
jurisdiction thereof, the Tax Indemnifying Party shall pay to
the Tax Indemnified Party the amount of any Taxes to which the
Tax Indemnified Party may become entitled by reason of the
provisions of this Section; and
(iv) the failure of the Tax Indemnified Party to promptly notify
the Tax Indemnifying Party hereunder shall not relieve the Tax
Indemnifying Party of its obligations hereunder, except to the
extent that the Tax Indemnifying Party is prejudiced by the
failure to so notify promptly.
(d) Notwithstanding anything to the contrary in this Section, any
interest, penalties, fines, assessments or additions to Tax
resulting from or attributable to the failure of the Tax Indemnified
Party to act in a timely manner, including filing Tax Returns,
responding to tax audit or other inquiries or making payments shall
not be indemnified hereunder and shall be the sole responsibility of
the Tax Indemnified Party.
(e) In addition to the provisions of Section 7.5(c), if Vendor becomes
aware of any proposed audit adjustments of a Pre-Effective Date
Period Tax Return that could result in or increase any Tax imposed
on ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ in any Post-Effective Date Period, Vendor shall
promptly inform Purchaser. If Vendor elects not to contest the
adjustment, Purchaser shall have the option, at Purchaser's own
expense, to contest the proposed adjustment in accordance with the
provisions of Section 7.5(c).
(f) In addition to the provisions of Section 7.5(c), if any proposed
audit adjustments of a Post-Closing Period could result in an audit
adjustment for a Pre-Effective Date Period, Purchaser shall promptly
inform Vendor. If Purchaser elects not to contest the adjustment,
Vendor shall have the option, at Vendor's own expense, to contest
the proposed adjustment in accordance with the provisions of Section
7.5(c).
(g) Subject to the application of Section 12 to any representation,
warranty, covenant or agreement made herein with respect to Taxes,
the indemnification provided in this Section shall be the sole
remedy for any claim in respect of Taxes. Any claim for indemnity
under this Section must be made within ninety (90) days following
the expiration of the applicable tax statute of limitations with
respect to the relevant taxable period (including all periods of
extension).
(h) To the extent any refunds or credits with respect to Taxes paid by
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ are attributable to transactions in taxable periods
commencing before and ending on or before the Effective Date, such
refunds or credits shall be for the account of Vendor. Except as
provided in the immediately succeeding sentence, to the extent any
determination of Taxes, whether as the result of an audit or
examination, a claim for refund, the filing of an amended Tax Return
or otherwise
27
results in a refund or credit of Taxes paid (a "REFUND") (i) Vendor
shall be entitled to any part of such Refund attributable to a
Pre-Effective Date Period, (ii) Purchaser shall be entitled to any
part of such Refund attributable to a Post-Closing Tax Period, and
(iii) Purchaser and Vendor shall each be entitled to a Refund
attributable to a Straddle Period in the portions that Purchaser and
Vendor originally bore any Taxes payable with respect to such
taxable period. Whichever Party receives such Refund shall, within
ten (10) Business Days after receipt thereof, pay such Refund, or
the appropriate part thereof, and the interest received thereon to
the Party entitled thereto under this subsection. To the extent any
such Refund is properly includable in the taxable income of the
initial recipient, the amount forwarded or reimbursed to Vendor or
Purchaser, as the case may be, shall be reduced by a percentage of
the amount of such Refund equal to the highest combined marginal
federal and provincial income tax rate applicable to manufacturing
and processing profits for the tax period in which the Refund is
received. Any Refund not made within the ten (10) Business Day
period specified above shall bear interest from the date received by
the refunding Party at the Prime Rate.
(i) Purchaser agrees that it shall not take any pro-active action which
may result in an audit or investigation relating to Tax matters
arising from the conduct of the Business prior to the Effective
Date.
ARTICLE 8
PREFERENTIAL PURCHASE RIGHTS
8.1 NOTICES
As soon as commercially reasonable following the execution and delivery of this
Agreement by both Parties, Vendor shall comply with all Preferential Purchase
Rights set forth and described in Schedule "N" which have not been waived and
shall inter alia cause any required notices to be served on all appropriate
parties utilizing bona fide value allocations as required under the agreements
pursuant to which such Preferential Purchase Rights relate, which shall be
supplied by Purchaser based upon generally accepted industry evaluation
practices applied in a reasonable manner.
8.2 CONTINUED OBLIGATIONS UPON EXERCISE OF PREFERENTIAL PURCHASE RIGHTS
If one or more third parties duly exercises a Preferential Purchase Right,
Vendor shall proceed to sell that part of the Assets subject to such exercised
Preferential Purchase Right (the "ROFR ASSETS") to such third party or third
parties, and Purchaser shall purchase all of the Shares and the Support Assets
other than the ROFR Assets subject to and in accordance with this Agreement,
and:
(a) the Purchase Price shall be reduced by the aggregate value
attributed to the ROFR Assets pursuant to the values attributed
thereto by Purchaser pursuant to Section 8.1; and
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(b) this Agreement, including the definitions and all Schedules attached
hereto, and all certificates, agreements and documents to be
delivered pursuant hereto shall be construed without reference to
the ROFR Assets.
ARTICLE 9
ENVIRONMENTAL DUE DILIGENCE
9.1 ENVIRONMENTAL REPORTS
Purchaser acknowledges that prior to the execution and delivery of this
Agreement, Purchaser has reviewed and examined all environmental reports,
audits, summaries and other data and information relating to the Environment
referred to in Schedule "I" with respect to the environmental condition of the
Assets, and has taken into account the Previously Disclosed Environmental
Liabilities in determining the amount of the Purchase Price.
9.2 ENVIRONMENTAL LIABILITY
Purchaser acknowledges that it has been provided with the right and opportunity
to conduct due diligence investigations with respect to any potential
Environmental Liabilities. Notwithstanding any other provision of this
Agreement, Purchaser shall be solely responsible for all Environmental
Liabilities regardless of whether such Environmental Liabilities occurred, arose
or accrued at, prior to or subsequent to the Time of Closing. The covenants and
agreements to indemnify made by Purchaser pursuant to Section 12.2 (b)(v) shall
survive the Closing and shall not be subject to any limitation periods. Other
than claims by Purchaser pursuant to Section 12.1 in respect of the
representation and warranty contained in Subsection 6.1(m), the Purchaser
Indemnified Parties shall have no rights of recovery, indemnification or
contribution for Environmental Liabilities under this Agreement or at law or in
equity, and all other rights or remedies which Purchaser may have at or under
Applicable Law or in equity, including any right of contribution or
reimbursement under any Environmental Law, with respect to any Environmental
Liabilities are expressly waived.
ARTICLE 10
CONDITIONS
10.1 CONDITIONS FOR BENEFIT OF PURCHASER
The obligation of Purchaser to complete the Transaction shall be subject to the
satisfaction of, or compliance with, the following conditions at or before the
Time of Closing (which conditions Vendor hereby acknowledges are intended for
the exclusive benefit of Purchaser and may be unilaterally waived by Purchaser
in whole or in part):
(a) VENDOR'S REPRESENTATIONS AND WARRANTIES: The representations and
warranties of Vendor set forth in Section 6.1 shall, except where a
specific time is otherwise indicated, be true and correct in all
material respects as at the Time of Closing with the same force and
effect as though made at the Time of Closing, except to
29
the extent of any matters permitted under Section 5, and a
certificate to that effect from Vendor shall have been delivered to
Purchaser at Closing;
(b) COMPLIANCE WITH AGREEMENT: Vendor shall have complied with and
performed in all material respects all covenants and obligations
required by this Agreement to be complied with and performed by
Vendor at or prior to Closing;
(c) RECEIPT OF CLOSING DOCUMENTATION: Purchaser shall have received from
Vendor all documents required to be delivered by Vendor pursuant to
Section 11.2;
(d) STATUTORY REQUIREMENTS: The Competition Act Requirement shall have
been satisfied on term satisfactory to Purchaser, acting reasonably;
(e) REQUIRED CONSENTS: All Required Consents shall have been obtained;
and
(f) ADDITIONAL CONDITION: The condition set forth in that letter
agreement between Purchaser and Vendor dated June 29, 2004 shall
have been satisfied or waived by July 20, 2004.
10.2 CONDITIONS FOR BENEFIT OF VENDOR
The obligation of Vendor to complete the Transaction shall be subject to the
satisfaction of, or compliance with, at or before the Time of Closing, the
following conditions (which are acknowledged to be inserted for the exclusive
benefit of Vendor and which may be unilaterally waived by Vendor in whole or in
part):
(a) TRUTH AND ACCURACY OF REPRESENTATIONS AND WARRANTIES: All
representations and warranties of Purchaser in Section 6.2 shall,
except where a specific time is otherwise indicated, be true and
correct in all material respects as at the Time of Closing with the
same force and effect as though made at the Time of Closing and a
certificate to that effect from Purchaser shall have been delivered
to Vendor at Closing;
(b) COMPLIANCE WITH AGREEMENT: Purchaser shall have complied with and
performed in all material respects all covenants and agreements
required by this Agreement to be complied with and performed by
Purchaser at or prior to Closing;
(c) RECEIPT OF CLOSING DOCUMENTATION: Vendor shall have received from
Purchaser all documents required to be delivered by Purchaser
pursuant to Section 11.3;
(d) STATUTORY REQUIREMENTS: The Competition Act Requirement shall have
been satisfied on terms satisfactory to Vendor, acting reasonably;
and
(e) REQUIRED CONSENTS: All Required Consents shall have been obtained
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10.3 PARTIES TO EXERCISE DILIGENCE WITH RESPECT TO CONDITIONS PRECEDENT
Each Party shall use all commercially reasonable efforts to satisfy (or cause
the satisfaction of) the conditions to its and the other Party's obligations
under this Agreement that are reasonably capable of being performed by it and,
subject to the satisfaction or waiver of the conditions set forth in this
Section 10 that are for its benefit, each Party shall take, or cause to be taken
all other commercially reasonable actions to complete the Transaction. Purchaser
shall be solely responsible, at its sole cost, for preparing and filing the
Competition Act Notification. Purchaser shall be obligated to agree to
reasonable conditions and undertakings to the extent required to satisfy the
Competition Act Requirement.
10.4 RIGHTS OF PURCHASER
If:
(a) any of the conditions for the exclusive benefit of Purchaser set
forth in Section 10.1 shall not have been fulfilled at or prior to
the Closing; or
(b) Vendor has notified Purchaser of an amendment to Vendor's
representations and warranties pursuant to Section 5.6 that is
reasonably expected to have a Material Adverse Effect,
Purchaser shall be entitled, upon written notice given to Vendor prior to the
Time of Closing to terminate its obligations under this Agreement effective as
of the time of such notice, provided such written notice sets forth the grounds
of termination. If no such notice is given prior to the completion of Closing,
Purchaser shall be deemed to have waived fulfillment of such condition and to
have elected to proceed with Closing as contemplated by Section 11. Where
Purchaser has given written notice to Vendor to terminate its obligations under
this Agreement as a result of an amendment to Vendor's representations and
warranties pursuant to Section 5.6, and such amendment is the result of a
willful breach by Vendor of its obligations hereunder, or is attributable the
actions of Vendor's Affiliate which, had they been actions of Vendor, would have
been a willful breach hereunder, Vendor shall pay to Purchaser, the Purchaser's
Transaction Costs.
10.5 RIGHTS OF VENDOR
If:
(a) any of the conditions for the exclusive benefit of Vendor set forth
in Section 10.2 shall not have been fulfilled at or prior to the
Time of Closing; or
(b) Purchaser has notified Vendor of an amendment to Purchaser's
representations and warranties pursuant to Section 5.6 that is
reasonably expected to have a Material Adverse Effect,
Vendor shall be entitled, by written notice given to Purchaser prior to the Time
of Closing to terminate its obligations under this Agreement effective as of the
time of such notice, provided such written notice sets forth the grounds of
termination. If no such notice is given prior to the
31
completion of Closing, Vendor shall be deemed to have waived fulfillment of such
condition and to have elected to proceed with Closing as contemplated by Section
11.
10.6 EFFECT OF TERMINATION
If this Agreement is terminated by Purchaser as permitted under Section 10.4 or
terminated by Vendor as permitted under Section 10.5 hereof:
(a) except as set forth in paragraph (b), (c) and (d) below, such
termination shall be without liability of any Party to any other
Party to this Agreement and the Parties shall be released from all
of their obligations under this Agreement and neither Party shall
have any claim against the other for damages or specific performance
or otherwise in respect of the Transaction or this Agreement other
than a claim for Losses suffered or incurred by it as a consequence
of the other Party failing to comply with Section 10.3;
(b) the Deposit and interest accrued thereon shall be retained by Vendor
or returned to Purchaser in accordance with Article 3;
(c) Purchaser shall promptly return to Vendor all materials delivered to
Purchaser by Vendor, together with all copies of them that may have
been made by or for Purchaser as contemplated in the Confidentiality
Agreement; and
(d) the Confidentiality Agreement shall survive any termination of this
Agreement.
10.7 PROVISION OF INFORMATION
For a period commencing on the date hereof and ending on the first anniversary
of the Closing Date, Vendor shall, subject to any obligations to third parties
or other lawful restrictions, provide to Purchaser and to Purchaser's auditors
such information as Purchaser may request in respect of the Assets and Business
as is required pursuant to Applicable Laws, or for the requirements of any stock
exchange or securities commission, which information may be disclosed by
Purchaser in accordance with Section 17.9. Vendor consents to its auditors
communicating and cooperating with Purchaser and its auditors and providing any
consent or comfort letter in connection with Purchaser's use of financial
information provided under this Section 10.7 and will instruct its auditors to
do so.
ARTICLE 11
CLOSING
11.1 CLOSING OF TRANSACTION
The Closing shall take place at the offices of Vendor's counsel, ▇▇▇▇▇▇▇ ▇▇▇▇▇
LLP, in Calgary Alberta, at 10:00 a.m. on the Closing Date.
32
11.2 DELIVERIES BY VENDOR AT CLOSING
At Closing, Vendor shall deliver or cause to be delivered to Purchaser:
(a) the documents reasonably necessary to effectively transfer and
convey the Shares and the Support Assets to Purchaser and the
Purchaser shall, at its own cost and expense, register or have
executed by third-parties such documents necessary to effect such
transfer and conveyance;
(b) resignations of the directors and officers of the Corporate
Subsidiaries and mutual releases of all claims such officers and
directors and the Corporate Subsidiaries may have against each other
arising from such officers and directors acting as such;
(c) the certificate referred to in Section 10.1(a);
(d) share certificates representing all of the shares of each of the
Corporate Subsidiaries (endorsed for transfer);
(e) confirmation from the CIBC of the repayment of the PARI CIBC Loan;
(f) termination of, and releases by Vendor, 898389 and PARI in respect
of, the Management and Operating Services Agreements;
(g) a guarantee given by The ▇▇▇▇▇▇▇▇ Companies, Inc. of the payment and
performance by Vendor of its obligations hereunder in the form of
that attached as Schedule "U";
(h) a ▇▇▇▇ of sale or general conveyance in respect of the Support
Assets in form and substance satisfactory to Purchaser, acting
reasonably; and
(i) any other documents specifically contemplated herein.
11.3 DELIVERIES BY PURCHASER AT CLOSING
At Closing, Purchaser shall deliver or cause to be delivered to Vendor:
(a) the payments described in Sections 3.3, 3.4 and 3.5;
(b) the certificate referred to in Section 10.2(a);
(c) a guarantee given by Inter Pipeline Fund of the payment and
performance by Purchaser of its obligations hereunder in the form of
that attached as Schedule "U"; and
(d) and any other documents specifically contemplated herein.
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ARTICLE 12
INDEMNITIES
12.1 INDEMNITY BY VENDOR
From and after the Closing and subject to the limitations contained in Sections
12.3 and 12.4, Vendor shall:
(a) be solely liable and responsible for any and all Losses which
Purchaser, its Affiliates and their directors, officers, agents and
employees (the "PURCHASER INDEMNIFIED PARTIES") may suffer, sustain,
pay or incur; and
(b) indemnify, release and save Purchaser Indemnified Parties from any
and all Losses which Purchaser Indemnified Parties may suffer,
sustain, pay or incur;
resulting from, arising out of, attributable to or connected with:
(i) any breach of any representation or warranty made by Vendor
under Section 6.1;
(ii) any failure by Vendor to observe or perform any covenant or
agreement made by Vendor under this Agreement to the extent
such failure was not caused by a Purchaser Indemnified Party;
and
(iii) third party claims arising from or related to the conduct of
the Business prior to the Effective Date, other than:
(A) Environmental Liabilities;
(B) Disclosed Actions; and
(C) any current liabilities included in the Net Working
Capital.
(iv) claims arising from or related to the Outstanding Audits; and
(v) claims arising from or related to the Excluded Assets or any
Third Party Technology, Process Technology or Hardware that
Vendor is unable to transfer, assign or license.
The covenants and agreements to indemnify made by Vendor in this Section shall
survive the Closing for the applicable Survival Period.
12.2 INDEMNITY BY PURCHASER
From and after the Closing and subject to the limitations contained in Section
12.3, Purchaser shall:
34
(a) be solely liable and responsible for any and all Losses which
Vendor, its Affiliates and their directors, officers, agents and
employees (the "VENDOR INDEMNIFIED PARTIES") may suffer, sustain,
pay or incur; and
(b) indemnify, release and save the Vendor Indemnified Parties harmless
from any and all Losses which Vendor Indemnified Parties may suffer,
sustain, pay or incur;
resulting from, arising out of, attributable to or connected with:
(i) any breach of any representation or warranty made by Purchaser
under Section 6.2;
(ii) any failure by Purchaser to observe or perform any covenant or
agreement made by Purchaser under this Agreement to the extent
such failure was not caused by the Vendor Indemnified Parties;
(iii) the Future Obligations and the Financial Assurances to the
extent provided in Section 2.2(c) to the extent such failure
was not caused by a breach of a representation, warranty or
covenant of the Vendor hereunder;
(iv) any Taxes (other than income taxes of Vendor), fees, charges,
levies, duties or similar assessments or charges of any
jurisdiction which may be imposed with respect to the
Transaction, including any associated interest charges or
penalties, to the extent such Taxes, fees, charges, levies,
duties or similar assessments or charges were not caused by a
breach of a representation, warranty or covenant of the Vendor
hereunder;
(v) Environmental Liabilities, regardless of whether such
Environmental Liabilities occurred, arose or accrued at, prior
to or subsequent to the Time of Closing, unless and to the
extent Vendor is liable to Purchaser pursuant to Section 12.1
in respect of a breach of the representation and warranty set
forth in Section 6.1(m);
(vi) Disclosed Actions; and
(vii) the failure by Purchaser to cause the removal of names or
marks pursuant to, or any other violation of, Section 17.1.
The covenants and agreements to indemnify made by Purchaser in this Section
shall survive the Closing for the applicable Survival Period.
12.3 EMPRESS II PARTNERSHIP TRANSACTION
Purchaser acknowledges that on or immediately prior to the Effective Date, in
anticipation of the Transaction, Vendor caused to be undertaken the Empress II
Partnership Transaction. Whether or not Closing occurs, Purchaser shall:
35
(a) be solely liable and responsible for any and all Losses which the
Vendor Indemnified Parties may suffer, sustain, pay or incur; and
(b) indemnify, release and save Vendor Indemnified Parties from any and
all Losses which Vendor Indemnified Parties may suffer, sustain, pay
or incur;
as a result of the Empress II Partnership Transaction to the extent such Losses
would not have been suffered, sustained, paid or incurred had the Empress II
Partnership Transaction not occurred.
12.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES\NO MERGER
(a) The covenants, agreements, representations, warranties and
indemnities of the Parties contained in this Agreement, or in any
certificate, agreement or other document furnished by or on behalf
of the Parties pursuant to this Agreement, shall survive Closing
and, notwithstanding Closing or any documents delivered or
investigations made by the Parties in connection therewith, shall
continue in full force and effect for the benefit of the Party to
whom such covenant, agreement, representation, warranty and
indemnity was made; provided that no claim may be made against any
Party pursuant to or based in any way upon the breach of any
covenant, agreement, representation, warranty or for indemnification
unless written notice thereof with reasonable particulars shall have
been provided by the Party making such claim within the following
period (the "SURVIVAL PERIOD"):
(i) in the case of a claim pursuant to Section 12.1(i) or 12.2(i),
the Survival Period is twelve (12) months;
(ii) in the case of a claim by the Vendor Indemnified Parties
pursuant to 12.2 (iv), the Survival Period is the limitation
period under the relevant Tax legislation;
(iii) in the case of a claim pursuant to Article 7 the Survival
Period is as set out in Section 7.5(g); and
(iv) subject to the Limitations Act (Alberta), in the case of any
other claim the Survival Period is unlimited.
(b) After the applicable Survival Period, a Party shall have no
liability in respect of the covenants, agreements, representations,
warranties and indemnities of such Party contained in this Agreement
or in any certificate, agreement or other document furnished by or
on behalf of such Party pursuant to this Agreement unless written
notice of a claim in respect thereof has been provided within three
(3) Business Days following the expiry of such Survival Period.
12.5 LIMITATION ON VENDOR'S INDEMNITIES
Notwithstanding any other provision of this Agreement, the liability of Vendor
pursuant to this Agreement and any certificate, agreement or other document
delivered pursuant hereto,
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including any liability pursuant to a claim for indemnity or for breach of any
representation, warranty, covenant or agreement on the part of Vendor contained
herein shall be limited in accordance with the following provisions:
(a) written notice of a claim shall have been provided by the relevant
Purchaser Indemnified Party to Vendor within the Survival Period in
accordance with Section 12.4;
(b) a Purchaser Indemnified Party shall have no claim against Vendor:
(i) in respect of a particular act, omission, breach, failure or
other event, unless the Losses attributable to such act,
omission, breach, failure or other event exceed $250,000; and
(ii) unless and until the aggregate amount of all claims by the
Purchaser Indemnified Parties in respect of any other acts,
omissions, breaches, failures or other events exceeds
$10,000,000 and Vendor shall only be liable to the Purchaser
Indemnified Parties with respect to that portion of the claims
that exceed the aggregate deductible of $10,000,000;
(c) the aggregate amount of the claims of the Purchaser Indemnified
Parties against Vendor shall not exceed fifty percent (50%) of the
Base Purchase Price; and
(d) no claims may be made by the Purchaser Indemnified Parties against
Vendor to the extent that the matter is reimbursed or reimbursable
by insurance.
12.6 INDEMNITY PROCEDURE FOR THIRD PARTY CLAIMS
The following procedures shall be applicable to any claim by a Party (the
"INDEMNIFIED PARTY") for indemnification from the other Party (the "INDEMNIFYING
PARTY") in respect of a third party claim made against the Indemnified Party
pursuant to this Agreement.:
(a) Upon the third party claim being made against or commenced against
the Indemnified Party, the Indemnified Party shall promptly provide
notice thereof to the Indemnifying Party. The notice shall describe
the third party claim in reasonable detail and indicate the
estimated amount, if practicable, of the indemnifiable Losses that
has been or may be sustained by the Indemnified Party. If the
Indemnified Party does not give timely notice to the Indemnifying
Party as aforesaid, then such failure shall only lessen or limit the
Indemnified Party's rights to indemnity hereunder to the extent that
the defence of the third party claim was prejudiced by such lack of
timely notice.
(b) If the Indemnifying Party acknowledges to the Indemnified Party in
writing that the Indemnifying Party is responsible to indemnify the
Indemnified Party in respect of the third party claim pursuant
hereto, the Indemnifying Party shall have the:
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(i) the right to assume carriage of the defence of the claim using
legal counsel of its choice and at its sole cost; and\or
(ii) the right to settle the claim provided the Indemnifying Party
pays the full monetary amount of the settlement and the
settlement does not impose any restrictions or obligations on
the Indemnified Party;
(c) Each Party shall cooperate with the other in the defence of the
claim, including making available to the other Party, its directors,
officers, employees and consultants whose assistance, testimony or
presence is necessary to assist in evaluating and defending the
third party claim.
(d) The Indemnified Party shall not enter into any settlement, consent
order or other compromise with respect to the third party claim
without the prior written consent of the Indemnifying Party, (which
consent shall not be unreasonably withheld or delayed) unless the
Indemnified Party waives its rights to indemnification in respect of
the third party claim.
(e) Upon payment of the third party claim, the Indemnifying Party shall
be subrogated to all claims the Indemnified Party may have relating
thereto. The Indemnified Party shall give such further assurances
and cooperate with the Indemnifying Party to permit the Indemnifying
Party to pursue such subrogated claims as reasonably requested by
it.
(f) If the Indemnifying Party has paid an amount pursuant to the
indemnification obligations herein and the Indemnified Party shall
subsequently be reimbursed from any source in respect of the claim
from any other Person, the Indemnified Party shall promptly pay to
the Indemnifying Party such amounts received, including interest
actually received attributable thereto, net of taxes required to be
paid as a result of any such receipt and plus any taxes saved or
recovered as a result of such payment.
12.7 CONSEQUENTIAL DAMAGES
In no event shall a Party be liable in respect of the covenants, agreements,
representations, warranties and indemnities contained in this Agreement or in
any certificate, agreement or other document furnished pursuant to this
Agreement for consequential, indirect or punitive damages (including loss of
anticipated profits, business interruption or any special or incidental loss of
any kind) suffered, sustained, paid or incurred by the other Party.
12.8 FAILURE BY VENDOR TO CLOSE
If Closing does not occur due to a breach of this Agreement by Vendor, Vendor
shall be liable to Purchaser for, and shall indemnify Purchaser in respect of,
all Purchaser's Transaction Costs.
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ARTICLE 13
BOOKS AND RECORDS
13.1 PRESERVATION AND ACCESS TO BOOKS AND RECORDS
(a) Vendor shall deliver to Purchaser the originals of Books and Records
relating to the Business as soon as practicable after Closing, other
than:
(i) Books and Records that relate to any assessment, action,
investigation or other legal proceeding to which Vendor is a
party; and
(ii) Books and Records that also relate to other business or
operations of Vendor or its Affiliates.
Such delivery shall be effected by the occupation by Purchaser of
the premises held pursuant to the Office Lease and the delivery by
the Vendor to the Purchaser of any Books and Records not held in
such premises.
(b) Purchaser shall make available for Vendor, and Vendor shall be
entitled to permanently retain copies of, all Books and Records
referred to in (a)(i) and (ii) above (provided that Purchaser may
retain a copy of same to the extent related to the Business) and all
information, data, documents, books, records, agreements, reports,
plans, drawings, papers, files, lists, returns, assessments,
reassessments and other materials of any nature or kind (whether
written, machine readable or electronically stored) which are
directly related to the ownership, conduct and/or operation of the
business or operations of Vendor or its Affiliates other than the
Business.
(c) Following Closing, upon reasonable notice to Purchaser, Vendor shall
be entitled to access and copy the Books and Records for any
reasonable business purpose, including preparing for litigation,
arbitration or to respond to any claim, demand, investigation or
assessment threatened or commenced against Vendor, responding to any
post-Closing inquiries made by any Governmental Body or other third
parties, the preparation of Tax Returns and income tax information,
the determination of the actual Accounting Adjustments as provided
in Section 4, and responding to an audit or complying with the
requirements of Applicable Laws. Vendor shall pay all reasonable
third party costs and expenses incurred by Purchaser in providing
Vendor access to the Books and Records from time to time. All such
Books and Records made available to Vendor pursuant to this Section
13.1(c) shall be maintained as confidential by Vendor and shall not
be disclosed except as required in connection with any demand,
investigation or assessment threatened or commenced against Vendor.
(d) Until December 31, 2010, Purchaser shall give Vendor reasonable
written notice prior to transferring, destroying or discarding any
such Books and Records and, if Vendor so requests, Purchaser shall
allow Vendor to take possession of such Books and Records. If any
Books and Records contain information relating to the Business which
is consolidated with, or otherwise difficult to isolate or extract
39
from, information that relates to other business or operations of
Vendor or its Affiliates, the Parties shall cooperate and act in
good faith to determine which information should be provided to
Purchaser hereunder and the means for providing that information.
ARTICLE 14
TECHNOLOGY
14.1 IN-HOUSE SOFTWARE
At Closing Vendor shall, to the extent permitted under any related agreements to
which it is subject, grant to Purchaser, a perpetual, non-exclusive, paid-up
sub-license in and to the source code and documentation (if any) to the In-house
Software pursuant to which Purchaser shall have the right after Closing to
disassemble, decompile, reverse engineer or otherwise manipulate, develop,
change, expand or abandon all or any part of the In-house Software and shall
also have the right to further sub-licence all or any part of the In-house
Software to Affiliates or any third party purchaser of the Business for use in
connection with the Business. The In-house Software and the sub-license in
respect thereof shall be delivered to Purchaser on an "as-is" basis without any
representation or warranty of any nature or kind whatsoever. Notwithstanding
anything to the contrary contained in this Agreement, or in any certificate,
agreement or other document delivered pursuant hereto, Vendor specifically
disclaims any and all warranties of any nature or kind whatsoever with respect
to the In-house Software, including any implied warranties of merchantability or
fitness for any particular purpose, and Vendor shall not be liable for any
Losses (including any consequential, punitive, exemplary, third party or other
damages) suffered, sustained, paid or incurred by Purchaser or any Person
claiming by, through or under Purchaser relating to the use, misuse or reliance
upon the In-house Software, the integration of the In-house Software with any
other software or the failure of the In-house Software. Vendor shall have no
obligation whatsoever in respect of the In-house Software, including any
obligation to support, update, upgrade or maintain such software. Vendor shall
retain all rights in and to the In-house Software, including the right after
Closing to disassemble, decompile, reverse engineer or otherwise manipulate,
develop, change, exchange, expand, commercialize, sell, license or abandon the
In-house Software and shall be under no obligation to account therefor or to
provide copies thereof to Purchaser. For greater certainty, Vendor will license
or otherwise transfer or make available to Purchaser that In-House Software
described in Schedule "O" as "EPAS-Extraction Plant Accounting System" and "LMAC
- Liquids Management Accounting", it being agreed that, when licensed by Vendor
to Purchaser, Vendor may continue to use such In-House Software.
14.2 THIRD PARTY TECHNOLOGY AND PROCESS TECHNOLOGY
Prior to Closing, Vendor and Purchaser will use commercially reasonable efforts
to obtain all necessary third party consents, additional licenses and other
documentation necessary for ▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇, the Cochrane Partnership or
the Empress II Partnership to obtain the right to use the Third Party Technology
and the Process Technology from and after Closing, including by way of a
transfer, assignment or license by Vendor where legally permissible in the
judgment of Vendor. To the extent additional license fees, royalties or other
amounts are payable
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to third parties in respect of Purchaser's, PARI's, 838983's or the Cochrane
Partnership's or the Empress II Partnership's right to use any Third Party
Technology and Process Technology, such fees, royalties and amounts shall be
paid by Purchaser. If Vendor is not able to transfer, assign or license any
Third Party Technology and Process Technology to ▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇, the
Cochrane Partnership or the Empress II Partnership, Purchaser shall, at its sole
cost and expense, purchase or otherwise acquire its own license or rights to use
such Third Party Technology as may be necessary to carry on operations in
respect of the Business. For greater certainty, Vendor will license or otherwise
transfer or make available to Purchaser that Third Party Technology and Process
Technology described as items 3 though 8 in Schedule "P".
14.3 HARDWARE
Purchaser acknowledges that certain Hardware as identified on Schedule "Q" is
currently used by Vendor in the conduct of businesses other than the Business.
Notwithstanding Section 2.1, Vendor shall sell, assign, transfer and convey and
transfer possession to Purchaser and Purchaser shall purchase and acquire from
Vendor (without further consideration), the Hardware upon the earlier of (i)
such time as Vendor no longer requires the use of the Hardware in its
businesses, and (ii) the last day of the Transition Period. During such time
period, Vendor shall provide to Purchaser, as part of the Transitional Services,
the right to utilize the Hardware insofar as the Hardware is required to operate
the Third Party Technology and the In-House Software (provided that Purchaser
has obtained the right to use such Third Party Technology and the In-House
Software as described in Section 14.2).
14.4 NO LIABILITY
The inability of Vendor to transfer, assign or license any Third Party
Technology, Process Technology or Hardware to Purchaser shall not be deemed
under any circumstances to be the fault of, or create any liability under any
legal theory to Vendor (whether under breach of warranty, contract, tort or
strict liability), it being acknowledged by Purchaser that such matters are
beyond the control of Vendor. There shall be no adjustment to the Purchase Price
if Vendor is not able to transfer, assign or license any Third Party Technology,
In-House Software, Process Technology or Hardware to Purchaser.
ARTICLE 15
INTERIM AND TRANSITIONAL SERVICES
15.1 INTERIM PERIOD
To compensate Vendor for the operation and maintenance of the Corporate
Subsidiaries during the Interim Period, Purchaser shall pay to Vendor on the
Closing Date, the amount described as being payable for the Interim Period as
set forth in Schedule "S". Such amount shall be prorated for any partial month.
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15.2 TRANSITIONAL SERVICES
In order to facilitate the orderly and effective transition of the Business to
Purchaser, Vendor shall provide to Purchaser the services set forth in Schedule
"S" relating to the operation of the Business for the Transitional Period.
15.3 FEE PAYABLE FOR PROVISION OF TRANSITIONAL SERVICES
Purchaser shall pay Vendor or to the order of Vendor, a monthly fee for the
provision of the Transitional Services in accordance with the fee structure set
forth in Schedule "S". The fee payable by Purchaser shall represent recovery of
the direct costs incurred by Vendor, including related overhead. Purchaser shall
also pay to Vendor all third party costs and expenses incurred in providing the
Transitional Services. Upon notice by Purchaser, Vendor shall no longer supply
the services set forth in this Section 15.3 (or any portion thereof) and the
monthly fee (or the portion related thereto) shall no longer be payable. The
monthly fee shall be prorated for any partial month.
15.4 POINTS OF CONTACT
Prior to Closing, each of Vendor and Purchaser shall designate a transition
project manager (the "TRANSITION CO-ORDINATOR") to be the primary source of
co-ordination between the Parties for the provision of the Transitional
Services, and a point of contact for each of the Transitional Services specified
in Schedule "S". The Transitional Coordinator for each Party shall coordinate
all efforts in the provision and receipt of the Transitional Services. Purchaser
shall keep Vendor reasonably informed of its transitioning plan.
15.5 PURCHASER PROVIDED SERVICES
(a) Purchaser shall provide to Vendor such assistance as reasonably
requested by Vendor, including certain Continued Employees, to:
(i) provide the Transitional Services; and
(ii) to provide such additional assistance as Purchaser as Vendor
may reasonably require to attend to certain post-Closing
matters.
(b) Purchaser shall also provide Vendor with the services contemplated
in Note 1 of Schedule "S".
(c) Vendor shall pay to Purchaser:
(i) in respect of the services provided in (a) above, $10,000 per
month; and
(ii) in respect of the services provided in (b) above, $11,000 per
month.
(d) Upon notice by Vendor, Purchaser shall no longer supply the services
set forth in this Section 15.5 and the amounts set forth in (c)
shall no longer be payable. Such amounts shall be prorated for any
partial month to the extent that Purchaser
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renders such employees unavailable to Vendor, Vendor shall have the
right to hire third party contractors and consultants to assist in
the provision of the Transitional Services and Purchaser shall
reimburse Vendor for all such additional costs. Following Closing,
for a period not to exceed 180 days, Purchaser shall provide Vendor
with the services contemplated in Note 1 of Schedule "S", such costs
to be credited against the fee payable in respect of the
Transitional Services.
15.6 POST-CLOSING COSTS
Except as set out in this Article 15 or as expressly required herein, each Party
shall bear its own costs and expenses required to be incurred to prepare the
Final Closing Statement and satisfy any post-Closing obligations it may have.
15.7 PAYMENTS
The amounts payable by the Parties as set forth in this Article 15 may be set
off against each other. Any net amounts owing, plus GST thereon, shall be paid
within 30 days of receipt of the invoice. Where a Party fails to pay such
invoice within such 30 day period, the other Party shall have the right (without
limiting any other rights or remedies available to it) upon the delivery of
written notice to non-paying Party to cease to perform the services to which the
payment relates.
15.8 POST-CLOSING RECEIPTS
Any amounts received by Vendor or its Affiliates (other than the Corporate
Subsidiaries or the Subsidiary Partnerships) after the Closing Date and relating
to the operation of the Business after the Effective Date, including
governmental incentives (if any) and proceeds from the sale of production, shall
be received and held by Vendor or such Affiliate in trust for Purchaser and
shall be paid to Purchaser within five Business Days of receipt by Vendor or
such Affiliate.
ARTICLE 16
EMPLOYMENT MATTERS
16.1 WRITTEN OFFERS OF EMPLOYMENT
Subject to the terms and conditions set forth in the letter agreement dated June
29, 2004 between Inter Pipeline Fund and the Vendor, Purchaser shall:
(a) control and be responsible for the process of evaluating the
Prospective Employees and of selecting those Prospective Employees
to whom Purchaser chooses to make offers of employment. In
evaluating and selecting the Prospective Employees, Purchaser may
interview at reasonable times such of the Prospective Employees as
it wishes and Vendor agrees to assist with interview logistics;
(b) prior to making any offers of employment to the Prospective
Employees, consult with Vendor with respect to the Prospective
Employees to whom Purchaser will make written offers of employment
and the terms of the offers;
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(c) deliver written offers of employment to the Prospective Employees
selected in accordance with Section 16.1 and concurrently provide
copies of such offers to Vendor at least ten (10) days prior to the
Closing Date. Each offer of employment shall be conditional on
Closing occurring and shall provide the terms and conditions of
employment with Purchaser including the terms and conditions
provided in Section 16.2 hereof and the eligibility for and value of
other employment programs and practices of Purchaser and will be
open for acceptance by the Prospective Employee until 12:00 p.m.
five (5) days prior to the Closing Date; and
(d) for a period of not less than six (6) months from the Closing Date,
employ all Continued Employees in substantially similar or
equivalent positions as described in Schedule "T" in order to
provide each Continued Employee a reasonable opportunity to prove
his or her capabilities to Purchaser, provided, however, that
Purchaser shall have the right to terminate the employment of a
Continued Employee for cause.
16.2 TERMS OF EMPLOYMENT
Purchaser shall, from and after the Closing:
(a) credit the Continued Employees with all service recognized by
Vendor, including all periods of employment leave, for all purposes
including eligibility for, vesting and locking in of benefits, as
applicable, under each of Purchaser's employee benefit plans,
policies or programs to the extent so recognized under the analogous
Employee Plans and, in the event of future termination of
employment, the entitlement to severance payments;
(b) for a period of not less than two (2) years from the Closing Date,
provide to the Continued Employees (including any Continued
Employees on maternity leave, approved leaves of absence, vacation
leave or short term disability) total cash compensation
opportunities and employee benefits on a basis such that each
Continued Employee individually receives a total cash compensation
opportunity and benefits which are not less favourable in the
aggregate, as the total cash compensation opportunity and employee
benefits provided by Vendor under the Employee Plans to such
Continued Employee immediately prior to Closing (but not including
any extraordinary retention bonuses or similar payments); and
(c) for a period of not less than two (2) years from the Closing Date,
provide to the Continued Employees cash compensation on a basis
which is not less favourable in the aggregate to the total cash
compensation opportunity each Continued Employee was receiving from
Vendor (being the sum of such Continued Employee's base pay and
incentive compensation target opportunity)immediately prior to the
Closing and which each Continued Employee would have received from
Vendor after the Closing but for this Agreement.
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16.3 SEVERANCE
If a Prospective Employee is not offered employment by Purchaser pursuant to
Section 16.1 or, having received an offer of employment from Purchaser pursuant
to Sections 16.1 and 16.2 does not accept such offer, and is thereafter
terminated by Vendor, Vendor will be responsible for the severance liability (if
any) regarding such terminated Prospective Employee (the "TERMINATION PAYMENT"),
provided, however:
(a) that if any such terminated Prospective Employee is subsequently
hired by Purchaser within six (6) months of the Time of Closing (the
"RESTRICTED PERIOD"), Purchaser shall pay to Vendor an amount equal
to the Termination Payment multiplied by a fraction, the numerator
of which is the number of months remaining in the Restricted Period
at the time such terminated employee is offered employment with
Purchaser, and the denominator of which is six; and
(b) that if any such terminated Prospective Employee was not offered
employment by Purchaser pursuant to Section 16.1, and their
employment with Vendor was based in a field location outside of
Vendor's head office in Calgary as of the date Purchaser delivered
the written offers of employment pursuant to Section 16.1, and is
terminated by Vendor within one month after the Closing Date,
Purchaser shall reimburse Vendor for any Termination Payment
relating to that Prospective Employee.
16.4 TERMINATION ENTITLEMENTS
For greater certainty, effective immediately prior to the Time of Closing the
Continued Employees shall be considered to have terminated their employment with
Vendor for purposes of Vendor's Pension Plan, Vendor's Savings Plan and other
applicable employee plans and they shall be entitled to such options with
respect to their entitlements under such plans as are generally available to
terminated employees of Vendor under such plans in accordance with their
respective terms. Vendor shall also pay each Continued Employee any incentive
payments (at the target level) which have accrued in respect of those Continued
Employees during the period from January 1, 2004 until the Time of Closing.
16.5 PERSONAL TIME OFF
In order to apportion the liability for the payment of a Continued Employee's
PTO Entitlement:
(a) Vendor shall pay to Purchaser an amount equal to the Continued
Employee's base salary for the number of days of his or her PTO
Entitlement for 2004 multiplied by a percentage equal to 50% less
the percentage of PTO Entitlement that the Continued Employee took
prior to the Effective Date, provided that no payment will be made
by Vendor pursuant to this Section 16.5(a) in respect of such
Continued Employee if such Continued Employee took 50% or more of
his or her PTO Entitlement prior to the Effective Date;
(b) Purchaser shall pay to Vendor an amount equal to the Continuing
Employee's base salary for the number of days of his or her PTO
Entitlement for 2004 multiplied by a percentage equal to 50% less
the percentage of his or her PTO that the Continued Employee did not
45
take prior to the Effective Date, provided that no payment will be
made by Purchaser pursuant to this Section 16.5(b) in respect of
such Continued Employee if such Continued Employee took less than
50% of his or her PTO Entitlement prior to the Effective Date;
(c) Purchaser shall be liable for each Continuing Employee's PTO
Entitlement for 2004 which was unutilized as of the Effective Date;
and
(d) Vendor shall remain liable for any unused carry over of PTO
Entitlement of each Continuing Employee for years prior to 2004.
ARTICLE 17
GENERAL
17.1 REMOVAL OF NAME
Following the Closing, neither Purchaser nor any of the Corporate Subsidiaries
or any Affiliate of Purchaser will be entitled to use the names "▇▇▇▇▇▇▇▇" or
"WECI" or any variations and derivations thereof, including any logo, trademark
or design containing such name (the "PROHIBITED NAMES AND MARKS"). Accordingly,
promptly following the Closing, Purchaser shall cause the destruction, disposal
or replacement of stationery, business cards and similar assets, and where
applicable, shall cause the applicable corporation to change its name, so to
avoid the use of the Prohibited Names and Marks. In addition, as soon as
reasonably practicable, but in any event within the earlier of ninety (90) days
following the Closing or the date required by Applicable Laws, Purchaser shall
(i) cause to be removed the Prohibited Names and Marks from all of the Assets
and will not thereafter make any use whatsoever of such names, marks and logos
and (ii) make all requisite filings with, and provide requisite notices to, the
appropriate federal, provincial, municipal or other agencies to place title or
other evidence of operation or ownership in a name other than the Prohibited
Names and Marks.
17.2 INTEREST ACCRUES ON AMOUNTS OWING
Any amount owing to a Party by the other Party pursuant to any provision of this
Agreement after Closing and remaining unpaid after the day such amount was due,
shall bear interest which shall accrue daily and be compounded monthly, from the
day such payment was due until the day such amount was paid, at the rate of two
(2%) percent per annum above the Prime Rate.
17.3 EXPANDED MEANINGS
Unless the context otherwise necessarily requires, the following provisions
shall govern the interpretation of this Agreement:
(a) words used herein importing the singular number only shall include
the plural and vice versa;
(b) the terms "in writing" or "written" include printing, typewritten,
or any electronic means of communication by which words are capable
of being visually reproduced at a distant point of reception,
including by telecopier or telex;
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(c) "this Agreement", "the Agreement", "hereto", "herein", "hereby",
"hereunder", "hereof" and similar expressions refer to this
agreement and includes each schedule attached hereto, and not to any
particular Article, Section or other subdivision or portion hereof
and includes each and every instrument varying, amending, modifying
or supplementing this agreement;
(d) references herein to any agreement or instrument, including this
Agreement, shall be deemed to be references to the agreement or
instrument as varied, amended, modified, supplemented or replaced
from time to time;
(e) the word "including", "includes" or, "include" wherever used in this
Agreement, means "including, without limitation", "includes, without
limitation" or "include, without limitation", as the case may be;
(f) all references to "Articles", "Sections", "subsections" and
"Schedules" are references to Articles, Sections or subsections of,
or Schedules to, this Agreement; and
(g) the division of this Agreement into Articles, Sections and other
subdivisions, the provision of a table of contents and the insertion
of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
17.4 CURRENCY
All references in this Agreement to "Dollars" or "$" are references to lawful
money of Canada, unless otherwise indicated.
17.5 ACCOUNTING REFERENCES
Where the character or amount of any asset or liability or item of income or
expense is required to be determined, or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, the same
shall be done in accordance with GAAP except where the application of such
principles is inconsistent with, or limited by, the terms of this Agreement.
17.6 STATUTORY REFERENCES
Any reference to a statute shall include and shall be deemed to be a reference
to such statute and to the regulations made pursuant thereto, and all amendments
made thereto and enforced from time to time, and to any statute or regulation
that may be passed which has the effect of supplementing the statute so referred
to or the regulations made pursuant thereto, and any reference to an order,
ruling or decision shall be deemed to be a reference to such order, ruling or
decision as the same may be varied, amended, modified, supplemented or replaced
from time to time.
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17.7 APPLICABLE LAW AND ATTORNMENT
This Agreement shall be construed and enforced in accordance with the laws of
the Province of Alberta and the laws of Canada applicable therein and shall be
treated in all respects as an Alberta contract. The Parties hereto irrevocably
consent and submit to the exclusive jurisdiction of the courts of the Province
of Alberta with respect to all matters relating to this Agreement. Each Party
waives any objection that it may now or hereafter have to the determination of
venue of any proceeding in such courts relating to this Agreement that it may
now or hereafter have that such courts are an inconvenient forum.
17.8 EXPENSES
All costs and expenses (including the fees and disbursements of legal counsel)
incurred in connection with the Agreement and the Transaction shall be paid by
the Party incurring such expenses; provided, however, that Purchaser shall pay
all costs and expenses in registering any specific transfers and conveyances of
the Assets to complete the Transaction and all costs and expenses relating to
the filing of the Competition Act Notification or otherwise related to
satisfaction of the Competition Act Requirement.
17.9 PUBLICITY REGARDING TRANSACTION
No public announcement or press release concerning the Transaction shall be made
by a Party or its Affiliates without the prior written consent and joint
approval of the other Party; provided that:
(a) nothing contained herein or in the Confidentiality Agreement shall
prevent a Party from furnishing any information to any governmental
agency or regulatory authority or to the public if required by
Applicable Law or the rules of a stock exchange or securities
commission or if required to comply with Preferential Purchase
Rights or to obtain the Required Consents or in the filing of the
Competition Act Notification. Prior to a Party making an
announcement or disclosure permitted by the preceding sentence, it
will provide a copy of the proposed disclosure or announcement to
the other Party to permit the other Party to propose changes thereto
and will make such changes if they are reasonable;
(b) in connection with the public offering of securities by Purchaser to
fund a portion of the Purchase Price, Purchaser shall provide to
Vendor for its prior approval, which shall not be unreasonably
withheld, drafts of any prospectus or offering document in which
Purchaser proposes to describe the Transaction and Purchaser shall
make any changes in respect thereof which Vendor may reasonably
request, it being acknowledged that Purchaser shall not release any
information in connection therewith which would contravene any
obligation Vendor has to any third party.
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17.10 NOTICES
Any notice or other writing required or permitted to be given hereunder or for
the purposes hereof (a "NOTICE") to any Party shall be sufficiently given if
delivered or telecopied to that Party:
(a) in the case of a Notice to Purchaser at:
▇/▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
FAX NO.: (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
WITH A COPY TO:
BURNET, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
FAX NO.: (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
(b) in the case of a Notice to Vendor at:
▇▇▇▇▇▇▇▇ ENERGY (CANADA), INC.
#▇▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: PRESIDENT
with a copy to:
▇▇▇▇▇▇▇▇ ENERGY (CANADA), INC.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
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and a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Fax No.: (▇▇▇) ▇▇▇ ▇▇▇▇
ATTENTION: ▇▇. ▇▇▇▇▇▇ ▇. DESBARATS
or at such other address or telecopier as the Party to whom such writing is to
be given shall have last notified to the Party giving the same in the manner
provided in this Section. Any Notice delivered to the Party to whom it is
addressed or telecopied to the address or telecopier number hereinbefore
provided shall be deemed to have been given and received on the day it is so
delivered at such address, provided that if the Notice is delivered after 4:00
p.m. (local time) or if such day is not a Business Day then the Notice shall be
deemed to have been given and received on the next following Business Day.
17.11 TIME OF THE ESSENCE
Time shall be of the essence.
17.12 ENTIRE AGREEMENT
This Agreement, including the Schedules hereto, and the Confidentiality
Agreement together with the agreements and other documents and instruments to be
executed and delivered pursuant hereto and thereto, constitutes the entire
agreement between the Parties in relation to the subject matter hereof and
supersedes all prior agreements, representations, warranties, statements,
promises, information, arrangements and understandings, whether oral or written,
express or implied with respect to the subject matter hereof, including the
Confidential Information Memorandum. Neither of the Parties hereto shall be
bound or charged with any oral or written agreements, representations,
warranties, statements, promises, information, arrangements or understandings
not specifically set forth in this Agreement, in the agreements and other
documents and instruments to be delivered on or before the Closing Date pursuant
to this Agreement or in the Confidentiality Agreement. The Parties hereto
further acknowledge and agree that, in entering into this Agreement and in
delivering the agreements and other documents and instruments to be delivered on
or before the Closing Date pursuant hereto, they have not in any way relied, and
will not in any way rely, upon any oral or written agreements, representations,
warranties, statements, promises, information, arrangements or understandings,
express or implied, not specifically set forth in this Agreement or in such
agreements, documents and instruments to be delivered pursuant to this
Agreement.
17.13 SEVERABILITY
Any Article, Section, subsection or other subdivision or any other provision of
this Agreement which is, is deemed to be, or becomes void, illegal, invalid or
unenforceable shall be severable
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herefrom and ineffective to the extent of such voidability, illegality,
invalidity or unenforceability, and shall not invalidate, affect or impair the
remaining provisions hereof, which provisions shall be severable from any void,
illegal, invalid or unenforceable Article, Section, subsection or other
subdivision or provision.
17.14 AMENDMENT OF AGREEMENT
No supplement, modification or waiver or termination of this Agreement shall be
binding unless executed in writing by the Party to be bound thereby.
17.15 WAIVER
No waiver of any of the provisions of this Agreement shall be valid unless in
writing and no such waiver shall constitute nor be deemed to constitute a waiver
of any other provisions (whether or not similar) nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
17.16 ASSIGNMENT AND ENUREMENT
This Agreement or any rights or obligations hereunder shall not be assigned by
either Party without the prior written consent of the other Party. Subject
thereto, this Agreement shall enure to the benefit of and be binding upon the
Parties hereto and their respective successors and permitted assigns.
17.17 NO THIRD PARTY BENEFICIARIES
This Agreement is for the sole benefit of the Parties and their successors and
permitted assigns and no other Person shall be entitled to any rights or
benefits hereunder.
17.18 FURTHER ASSURANCES
The Parties hereto shall provide all such reasonable assurances as may be
requested to consummate the Transaction and each Party shall provide such
further documents or instruments requested by the other Party to effect the
purpose of this Agreement and carry out its provisions, whether before or after
Closing.
17.19 COUNTERPART EXECUTION
This Agreement may be executed in one or more counterparts. Each counterpart
shall constitute an original and all counterparts together shall constitute one
and the same agreement. Facsimile copies of executed counterparts shall be
conclusively regarded for all purposes as originally executed counterparts
pending delivery of the originals.
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IN WITNESS WHEREOF the Parties have duly executed this Agreement as of the date
first above written.
▇▇▇▇▇▇▇▇ ENERGY (CANADA), INC.
Per: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Per: Senior Vice President
1024234 ALBERTA LTD.
Per: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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President and CEO
Per: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Vice President, Finance