EXHIBIT 10(e)
GHK COMPANY COLOMBIA SHARE PURCHASE AGREEMENT
THIS AGREEMENT dated for reference the 26th day of July, 1996
BETWEEN:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, Businessman, of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
#▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, in the United States of America
(hereinafter called the "Vendor")
AND:
SEVEN SEAS PETROLEUM COLOMBIA INC., a company incorporated under the
laws of the Cayman Islands and having a business address at ▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, in the United
States of America
(hereinafter called "SSPC")
AND:
SEVEN SEAS PETROLEUM INC., a company incorporated under the laws of
the Province of British Columbia with registered offices at 800 -
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
(hereinafter called "SSPI")
WITNESSES THAT WHEREAS:
A. The Vendor is the registered and beneficial owner of all of the issued and
outstanding shares of the Company;
B. The Vendor has agreed to sell and SSPI has agreed to purchase the Vendor's
Shares on the terms and conditions detailed herein.
THEREFORE in consideration of the premises and the mutual covenants and
agreements herein set forth, the parties hereto covenant and agree each with the
other as follows:
1. INTERPRETATION
1.1 In this Agreement, including the schedules hereto, except as otherwise
expressly provided:
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(a) "Agreement" means this agreement, including the preamble and the
Schedules hereto, as it may from time to time be supplemented or
amended;
(b) "Association Contracts" means the association contracts between the
Company and Empressa Colombiana de Petroles S.A. respecting the
Properties;
(c) "Cimarrona Agreement" means the agreement of even date between
certain members of Cimarrona Limited Liability Company on the one
hand, and SSPI and SSPC on the other hand respecting the acquisition
by SSPI of a 62.963% membership interest in Cimarrona LLC;
(d) "Closing" means the completion of the transactions contemplated in
this Agreement in accordance with its terms;
(e) "Closing Certificate" means a closing certificate executed by or on
behalf of, inter alia, the parties to this Agreement;
(f) "Closing Date" means the date of the closing of the transactions
contemplated herein;
(g) "Company" means GHK Company Colombia;
(h) "Escrow Agreement" means that agreement providing for the escrowing
of certain of the SSPI Preferred Shares in the form attached as
Schedule "I" hereto;
(i) "▇▇▇▇▇▇▇▇▇ Agreement" means the agreement of even date between the
members of ▇▇▇▇▇▇▇▇▇ Limited Liability Company on the one hand, and
SSPI, SSPC and Seven Seas Petroleum Holdings Inc. on the other hand
respecting the acquisition by SSPI of the members' interests in
▇▇▇▇▇▇▇▇▇ LLC;
(j) "Final Prospectus" means a final prospectus of SSPI which qualifies
INTER ALIA the exchange of the SSPI Preferred Shares for the SSPI
Shares;
(k) "Financial Statements" means the financial statements of the Company
attached as Schedule "A" hereto;
(l) "JOA" means that joint operating agreement dated August 1, 1994
respecting the operatorship of the Properties;
(m) "Liens" means all liens, mortgages, debentures, charges,
hypothecations, pledges or other security interests or encumbrances
of whatever kind;
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(n) "Management Contract" means that management contract to be entered
into between the Company, GHK Company, LLC, SSPI and SSPC in the
form attached as Schedule "C" hereto;
(o) "Material Adverse Effect" means an adverse effect that is, or would
be, singly or in the aggregate material;
(p) "1933 Act" means the SECURITIES ACT OF 1933 (United States) as
amended;
(q) "Preliminary Prospectus" means a preliminary prospectus of SSPI
which qualifies the exchange of the SSPI Preferred Shares for the
SSPI Shares;
(r) "Properties" means the Dindal and Rio Seco areas located in the
Upper ▇▇▇▇▇▇▇▇▇ Basin of Colombia as described in the Association
Contracts;
(s) "Public Record" means, in respect of SSPI, the financial statements,
offering memoranda, material change reports, information circulars,
press releases and all other documents and information filed or
required to be filed with the Ontario Securities Commission or the
Alberta Securities Commission on or during the 12 months preceding
the date of this Agreement;
(t) "Registration Rights Agreement" means that registration rights
agreement between, INTER ALIA, SSPI and the Vendor, in the form
attached as Schedule "J" hereto;
(u) "SSPI Financial Statements" means the audited, consolidated
financial statements of SSPI as at and for the year ended December
31, 1995 and the unaudited, consolidated financial statements of
SSPI for the six month period ended June 30, 1996;
(v) "SSPI Preferred Shares" means a total of 5,002,972 Class "A"
preferred shares Series I of SSPI having the rights and restrictions
as detailed in the Articles of SSPI attached as Schedule "B" hereto;
(w) "SSPI Shares" means the common shares of SSPI to be issued upon
conversion of the SSPI Preferred Shares;
(x) "Statement Date" means the date to which the Financial Statements of
the Company were prepared;
(y) "U.S. Person" has the meaning set out in Regulation S under the 1933
Act;
(z) "Vendor's Shares" means the shares of the Vendor in the Company;
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(aa) "Voting Support Agreement" means the shareholders voting support
agreement in the form attached as Schedule "D" hereto;
(ab) all references in this Agreement to a designated "Section" or other
subdivision or to a Schedule are to the designated Section or other
subdivision of, or Schedule to, this Agreement;
(ac) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Section or other subdivision or Schedule;
(ad) the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define, or limit the
scope, extent or intent of this Agreement or any provision hereof;
(ae) the singular of any term includes the plural, and vice versa; the
use of any term is equally applicable to any gender and, where
applicable, a body corporate; the word "or" is not exclusive and the
word "including" is not limiting (whether or not non-limiting
language, such as "without limitation" or "but not limited to" or
words of similar import, is used with reference thereto);
(af) in respect of the Company, any accounting term not otherwise defined
has the meaning assigned to it in accordance with United States tax
basis accounting practices;
(ag) in respect of SSPI and SSPC, any accounting term not otherwise
defined has the meaning assigned to it in accordance with Canadian
generally accepted accounting principles;
(ah) where any representation or warranty is made "to the knowledge of"
any party, such party will not be liable for a misrepresentation or
breach of warranty by reason of the fact, state of facts, or
circumstance in respect of which the representation or warranty is
given being untrue if such party proves it did not have actual
knowledge thereof;
(ai) in respect of SSPI and SSPC, where any representation or warranty is
made to the knowledge of one, it is deemed to be to the knowledge of
both; and
(aj) where any representation or warranty of the Vendor references
disclosure to either SSPI or SSPC, disclosure to one is deemed to be
disclosure to both.
1.2 The following are the Schedules to this Agreement:
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SCHEDULE DESCRIPTION
-------- -----------
A Financial Statements
B Memorandum and Articles of SSPI
C Management Contract
D Voting Support Agreement
E Directors and Officers of the Company
F Outstanding Indebtedness
G Surviving Contracts
H Cost Allocation
I Escrow Agreement
J Registration Rights Agreement
2. PURCHASE AND SALE
2.1 Subject to the terms and conditions of this Agreement, the Vendor hereby
sells and assigns to SSPI, and SSPI hereby purchases from the Vendor the
Vendor's Shares free and clear of any Liens.
2.2 SSPI hereby directs the Vendor to transfer the Vendor's Shares to and into
the name of SSPC, and SSPC hereby acknowledges its entitlement to and receipt of
the Vendor's Shares.
2.3 The Purchase Price payable by SSPI for the Vendor's Shares shall be the SSPI
Preferred Shares which are hereby issued and tendered to the Vendor, and the
Vendor hereby acknowledges receipt of same.
3. VENDOR'S WARRANTIES AND REPRESENTATIONS
3.1 The Vendor warrants and represents to SSPI, with the intent that SSPI will
rely thereon in entering into this Agreement and in concluding the purchase and
sale contemplated herein, that on the date hereof:
(a) the Vendor is the registered holder and beneficial owner of the
Vendor's Shares free and clear of all Liens, and the Vendor has no
interest, legal or beneficial, direct or indirect, in any shares of,
or the assets or business of, the Company other than the Vendor's
Shares, the Management Contract and any interest arising from the
Vendor's beneficial ownership interest in ▇▇▇▇▇▇▇▇▇ LLC;
(b) the Vendor's Shares represent all of the issued and outstanding
shares of the Company;
(c) with the exception of this Agreement, no party has any agreement,
right or option, consensual or arising by law, present or future,
contingent or absolute, or capable of becoming an agreement, right
or option:
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(i) to require the Company to issue or allot any further or other
shares in its capital or any other security convertible or
exchangeable into shares in its capital or to convert or
exchange any securities into or for shares in the capital of
the Company;
(ii) to require the Company to purchase, redeem or otherwise
acquire any of the issued and outstanding shares in its
capital; or
(iii) to purchase or otherwise acquire any shares in the capital of
the Company;
(d) the Vendor has good and sufficient right and authority to enter into
this Agreement on the terms and conditions herein set forth and to
transfer the legal and beneficial title and ownership of the
Vendor's Shares to SSPC;
(e) the Company is duly incorporated, validly existing and in good
standing under the laws of the State of Oklahoma;
(f) the directors and officers of the Company are as described in
Schedule "E";
(g) all alterations to the constating documents of the Company since its
incorporation have been duly approved by the shareholders of the
Company and registered with the appropriate authorities where
required;
(h) to the Vendor's knowledge, the Company is duly registered to carry
on business in all jurisdictions in which the Company carries on
business except where the failure to so register would not have a
Material Adverse Effect on the Company;
(i) to the Vendor's knowledge, the Company has the power, authority and
capacity to carry on its business as presently conducted by it;
(j) the Company holds the 10.944% participating interest under the
Association Contracts, free and clear of all Liens;
(k) the Company carries on no other business other than the holding of
the 10.944% participating interest under the Association Contracts
and acting as operator of the Properties;
(l) to the Vendor's knowledge, the Association Contract is in good
standing and remains in full force and effect;
(m) to the Vendor's knowledge, the Company holds all licences and
permits required for the conduct in the ordinary course of its
business as presently conducted by it and all such licences and
permits are in good standing and
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the conduct and uses of the same by the Company are in compliance
with all laws, and other restrictions, rules, regulations and
ordinances applicable to the Company and its respective business,
save and except for breaches which do not have a Material Adverse
Effect on the Company or its business as presently conducted and
with the exception that no such representation and warranty is given
with respect to any permit, license, contract consent or authority
granted under or in connection with the Association Contracts;
(n) the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the
terms hereof will not:
(i) conflict with or result in a breach of or violate any of the
terms, conditions, or provisions of the constating documents
of the Company;
(ii) to the Vendor's knowledge, conflict with or result in a breach
of or violate any of the terms, conditions or provisions of
any law, judgment, order, injunction, decree, regulation or
ruling of any court or governmental authority, domestic or
foreign, to which the Company or the Vendor is subject or
constitute or result in a default under any agreement,
contract or commitment to which the Company or the Vendor is a
party with the exception that no such representation and
warranty is made with respect to or in connection with the
Association Contracts;
(iii) to the Vendor's knowledge, give to any person any remedy,
cause of action, right of termination, cancellation or
acceleration in or with respect to any understanding,
agreement, contract, or commitment, written, oral or implied,
to which the Company is a party with the exception that no
such representation and warranty is made with respect to the
Association Contracts;
(iv) to the Vendor's knowledge, give to any government or
governmental authority including any governmental department,
commission, bureau, board, or administrative agency any right
of termination, cancellation, or suspension of, or constitute
a breach of or result in a default under any permit, license,
control, or authority issued to the Company and which is
necessary or desirable in connection with the conduct and
operation of the businesses currently conducted by the Company
with the exception that no such representation and warranty is
given with respect to any permit, license, contract or
authority granted under or in connection with the Association
Contracts;
(v) to the Vendor's knowledge, constitute a default by the Company
or an event which, with the giving of notice or lapse of time
or both, might constitute an event of default or
non-observance under any agreement, contract, indenture or
other instrument relating to any indebtedness of any of the
Company which would give any
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party the right to accelerate the maturity for the payment of
any amount payable under that agreement, contract, indenture,
or other instrument;
so as to have a Material Adverse Effect on the Company;
(o) the Financial Statements were prepared on a cash basis in accordance
with U.S. tax regulations applied on a basis consistent with prior
years and are true and correct in every material respect;
(p) to the Vendor's knowledge, there is no indebtedness of the Company,
including to the Vendor, which is not disclosed or reflected in the
Company's Financial Statements other than as detailed in Schedule
"F";
(q) to the Vendor's knowledge, the Company has been assessed for income
tax for all years to and including the most recent fiscal year end
of the Company to which the Financial Statements are made up, and
the Company has withheld and remitted to all applicable tax
collecting authorities all amounts required to be remitted to all
tax collecting authorities respecting payments to employees or to
non-residents, or otherwise and has paid all instalments of
corporate taxes due and payable as of the date hereof;
(r) to the Vendor's knowledge, all tax returns and reports of the
Company required by law to be filed prior to the date hereof
including all income tax returns and all other corporate tax returns
required to be filed with any governmental taxing authority or board
have been filed and are true, complete and correct, and all taxes
and other government charges including all income, excise, sales,
business and property taxes and other rates, charges, assessment,
levies, duties, taxes, contributions, fees and licenses required to
be paid have been paid, and if not required to be paid as at the
date hereof, have been accrued in the Financial Statements;
(s) to the Vendor's knowledge, adequate provision has been made for
taxes payable by the Company which are not yet due and payable and
there are no agreements, waivers or other arrangements providing for
an extension of time with respect to the assessment or reassessment
of any tax return by any taxing authority or for the filing of any
tax return by or payment of any tax, governmental charge or
deficiency by the Company, and to the Vendor's knowledge, there are
no contingent tax liabilities or any grounds which would prompt a
re-assessment;
(t) to the Vendor's knowledge, no authorization, approval, order,
license, permit or consent of any governmental authority, regulatory
body or court, and no registration, declaration or filing by the
Vendor or the Company with any such governmental authority,
regulatory body or court
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remains outstanding in order for the Vendor to complete the within
purchase and sale, to duly perform and observe the terms and
provisions of this Agreement, and to render this Agreement legal,
valid, binding and enforceable in accordance with its terms with the
exception that no representation and warranty is given as to any
authorizations, approvals, orders, licenses, permits or consents
granted under or in connection with the Association Contracts;
(u) the Vendor does not have any specific information relating to the
Company which is not generally known and which to the knowledge of
the Vendor has not been disclosed to, SSPC or SSPI and which if
known could reasonably be expected to have a Material Adverse Effect
on the Company;
(v) (i) to the Vendor's knowledge, the business of the Company as
currently carried on by it, and in particular the conduct of
the Company as operator of the Properties, complies with all
applicable laws, judgments, decrees, orders, injunctions,
rules, statutes and regulations of all courts, arbitrators or
governmental authorities, including all environmental, health
and safety statutes and regulations except where the failure
to comply would not have a Material Adverse Effect on the
Company;
(ii) to the Vendor's knowledge, the Company' business, assets or
properties are not subject to any judicial or administrative
proceeding alleging the violation of any applicable
environmental, health or safety law, judgment, decree, order,
injunction, rule, statute or regulation except where such
proceeding would not have a Material Adverse Effect on the
Company;
(w) since the date of the Company's most recent Financial Statements, to
the Vendor's knowledge, there has not been any occurrence or event
which has had, or might reasonably be expected to have, a Material
Adverse Effect on the business of the Company as currently carried
on or the results of its operations;
(x) to the Vendor's knowledge, other than as disclosed in Schedule "G"
hereto, the Company does not have any material contract, agreement,
undertaking or arrangement, whether oral, written or implied, which
cannot be terminated on not more than one month's notice and the
Company does not have any outstanding material agreements, contracts
or commitments (whether written or oral) whatsoever relating to or
affecting the conduct of its business as currently carried on or any
of its assets or for the purchase, sale or lease of its assets with
the exception of this Agreement;
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(y) there are no actions, suits, judgments, investigations or
proceedings outstanding or pending or to the knowledge of the Vendor
threatened against or affecting the Company at law or in equity or
before or by any court or federal, state, municipal or other
governmental authority, department, commission, board, tribunal,
bureau or agency and the Company is not a party to or threatened
with any litigation which in either case would have a Material
Adverse Effect on the Company;
(z) [intentionally left blank]
(aa) the Company has not guaranteed, or agreed to guarantee, any
indebtedness or other obligation of any party, except in the
ordinary course of its business as operator of the Properties and
except as described in the Financial Statements, under the
Association Contracts, the JOA and under a trust agreement with SSPC
pertaining to SSPC's interest in the Association Contracts;
(ab) the Company has no employees;
(ac) since the date of the most recent Financial Statements:
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(i) no dividends of any kind or other distribution on any shares
of the Company has been declared or paid by the Company;
(ii) except as required under the Association Contracts, no single
capital expenditure or commitment therefor has been made by
the Company other than as previously disclosed in writing to
SSPC; and
(iii) the Company has not increased the pay of or paid or agreed to
pay any pension, bonus, share of profits or other similar
benefit to or for the benefit of any agent, director or
officer of the Company, except increases in the normal course
of business;
(ad) the Vendor:
(i) is a U.S. Person;
(ii) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of
the transactions detailed in this Agreement and is able to
bear the economic risk of loss arising from the transactions
contained herein;
(iii) is acquiring the SSPI Preferred Shares and will acquire the
SSPI Shares for investment only and not with a view to resale
or distribution and, in particular, has no intention to
distribute either directly or indirectly any of the SSPI
Preferred Shares or the SSPI Shares in the United States or to
U.S. Persons other than pursuant to registration thereof
pursuant to the 1933 Act and any applicable State securities
laws, or unless an exemption from such registration
requirements is available or registration is not required
pursuant to Regulation S under the 1933 Act or registration is
otherwise not required under the 1933 Act, and the Vendor
hereby acknowledges that SSPI has no obligation or present
intention of filing a registration statement under the 1933
Act in respect of the SSPI Preferred Shares or the SSPI
Shares;
(iv) understands that the SSPI Preferred Shares and the SSPI Shares
have not been and will not be registered under the 1933 Act
and that the issuance contemplated hereby is being made in
reliance on an exemption from such registration requirement;
(v) is a natural person whose individual net worth, or joint net
worth with his spouse, on the date of purchase exceeds US
$1,000,000;
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(ae) the Vendor is aware that if he decides to offer, sell or otherwise
transfer any of the SSPI Preferred Shares or SSPI Shares, he will
not offer, sell or otherwise transfer any of such securities
directly or indirectly, unless:
(ix) the sale is to SSPI;
(x) the sale is made outside the United States in a transaction
meeting the requirements of Rule 904 of Regulation S under the
1933 Act and in compliance with applicable local laws and
regulations;
(xi) the sale is made pursuant to the exemption from the
registration requirements under the 1933 Act provided by Rule
144 thereunder if available and in accordance with any
applicable state securities or "Blue Sky" laws; or
(xii) the SSPI Preferred Shares or SSPI Shares are sold in a
transaction that does not require registration under the 1933
Act or any applicable U.S. state laws and regulations
governing the offer and sale of securities, and it has prior
to such sale furnished to SSPI an opinion of counsel
reasonably satisfactory to SSPI;
(af) the SSPI Preferred Shares were not acquired as a result of, and the
Vendor will not engage in, any "directed selling efforts" (as
defined in Regulation S under the ▇▇▇▇ ▇▇▇) in the United States in
respect of the SSPI Preferred Shares which would include any
activities undertaken for the purpose of, or that could reasonably
be expected to have the effect of, conditioning the market in the
United States for the resale of the SSPI Preferred Shares or SSPI
Shares; provided, however, that the Vendor may sell or otherwise
dispose of any of the SSPI Preferred Shares or SSPI Shares pursuant
to registration of the SSPI Preferred Shares or SSPI Shares pursuant
to the 1933 Act and any applicable state securities laws or under an
exemption from such registration requirements and as otherwise
provided herein; and
(ag) the Vendor is aware that upon the issuance thereof, and until such
time as the same is no longer required under the applicable
requirements of the 1933 Act or applicable U.S. State laws and
regulations, the certificates representing any of the SSPI Preferred
Shares or SSPI Shares will bear a legend in substantially the
following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY ACQUIRING
SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (a) TO THE COMPANY, (b) OUTSIDE THE UNITED
STATES IN
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ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAW, (c)
PURSUANT TO THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF
AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS, OR (d) IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE STATE LAWS
AND REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES,
AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE
COMPANY AN OPINION OF COUNSEL, OF RECOGNIZED STANDING, OR
OTHER EVIDENCE OF EXEMPTION, REASONABLY SATISFACTORY TO THE
COMPANY. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN
CANADA; A NEW CERTIFICATE, BEARING NO LEGEND, DELIVERY OF
WHICH WILL CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM THE
REGISTRAR AND TRANSFER AGENT OF THE COMPANY UPON DELIVERY OF
THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM
SATISFACTORY TO THE COMPANY AND ITS REGISTRAR AND TRANSFER
AGENT, TO THE EFFECT THAT THE SALE OF THE SECURITIES
REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904
OF REGULATION S UNDER THE 1933 ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS."
and that any certificate representing SSPI Shares issuable in
exchange for the SSPI Preferred Shares or in substitution thereof
will bear the same legend; provided that if the SSPI Shares are
being sold in the manner described in subsection 3.1 (ae)(ii) above,
the legend may be removed by providing a declaration to the
registrar and transfer agent of SSPI in the form agreed upon by SSPI
(or as SSPI may reasonably prescribe from time to time);
"The Undersigned (A) acknowledges that the sale of the
securities to which this declaration relates is being made in
reliance on Rule 904 of Regulation S under the United States
SECURITIES ACT OF 1933, as amended (the "1933 Act') and (B)
certifies that: (1) the seller is not an affiliate of the
Company as defined in the 1933 Act (other than solely by
virtue of his position as an officer or director of the
Company); (2) the offer of such securities was not made to a
person in the United States and either (a) at the time the buy
order was originated or (b) at the time the sale was made, the
buyer was outside the United States";
(ah) the Vendor is a resident of the State of Texas;
(ai) the Vendor is not acquiring the SSPI Preferred Shares as a result of
any form of general solicitation or general advertising including
advertisements, articles, notices or other communications published
in any newspaper, magazine or similar media or broadcast over radio,
or television, or any seminar or meeting whose attendees have been
invited by general solicitation or general advertising.
(aj) the Company has provided to SSPC all material drilling, completion
and testing information in its possession for the El Segundo No. 1
well and
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any and all material engineering or other evaluations which the
Company has done based on such information; and
4. SSPC'S AND SSPI'S WARRANTIES AND REPRESENTATIONS
4.1 SSPC and SSPI jointly and severally warrant and represent to the Vendor,
with the intent that the Vendor will rely thereon in entering into this
Agreement and in concluding the purchase and sale contemplated herein, that on
the date hereof:
(a) SSPC has been duly and validly incorporated and is a validly
existing corporation in good standing under the laws of the Cayman
Islands, with all necessary power, authority and capacity to own its
property and assets and carry on its business as presently carried
on by it and to complete the transactions provided for herein;
(b) SSPI has been duly and validly incorporated and is a validly
existing corporation in good standing under the laws of the Province
of British Columbia, with all necessary power, authority and
capacity to own its property and assets and carry on its business as
presently carried on by it and to complete the transactions provided
for herein;
(c) SSPI is a reporting issuer in good standing under the securities
laws of Ontario and Alberta and, since March 31, 1996, no material
change relating to SSPI has occurred with respect to which the
requisite material change report has not been filed under the
applicable securities laws in Ontario and Alberta and no such
disclosure has been made on a confidential basis;
(d) SSPI is not a reporting issuer under the securities laws of any
other province, state, country or other jurisdiction;
(e) SSPI has full corporate power and authority to issue the SSPI
Preferred Shares and the SSPI Shares upon the conversion of the SSPI
Preferred Shares; the SSPI Preferred Shares have been duly and
validly created, authorized, allotted and issued, the SSPI Shares
issuable upon conversion of the SSPI Preferred Shares have been duly
and validly authorized, allotted and reserved for issuance upon such
conversion and will, upon conversion in accordance with the terms of
the Articles of SSPI, be duly and validly issued as fully paid and
non-assessable shares;
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(f) the authorized capital of SSPI consists of 100,000,000 common shares
without par value and 10,000,000 Class "A" preferred shares without
par value of which 12,995,463 common shares (and no Class "A"
preferred shares with the exception of the SSPI Preferred Shares)
are issued and outstanding as at the date hereof; a further
1,085,000 common shares are reserved for issuance pursuant to the
exercise of incentive stock options; and a further 3,000,000 common
shares are reserved for issuance pursuant to the exercise of special
warrants previously issued by way of a private placement; as a
result of which the total issued and outstanding share capital of
SSPI on a fully diluted basis is 17,080,463;
(g) the creation, terms (including the terms of conversion),
authorization, allotment and issuance to the Vendor of the SSPI
Preferred Shares comply with all applicable securities and other
statutes, rules, regulations and policies;
(h) the authorized capital of SSPC consists of 50,000 common shares with
a par value of $1.00 (US) each, of which one share is issued and
outstanding as at the date hereof, and SSPI is the registered and
beneficial owner thereof;
(i) all alterations to the constating documents of each of SSPI and SSPC
since their incorporation have been duly approved by the
shareholders of SSPI and SSPC respectively and registered with the
appropriate authorities;
(j) each of SSPI and SSPC is duly registered to carry on business in all
jurisdictions in which it carries on business except where the
failure to register would not have a Material Adverse Effect on SSPI
or SSPC as the case may be;
(k) each of SSPI and SSPC has full corporate power and authority to
enter into this Agreement and to perform its obligations set out
herein, and the Agreement has been duly authorized, executed and
delivered by each of SSPI and SSPC and constitutes a legal, valid
and binding obligation of each of SSPI and SSPC enforceable in
accordance with its terms;
(l) neither SSPC nor SSPI is in default or breach of, and the execution
and delivery of this Agreement by SSPC and SSPI and the performance
of the transactions contemplated thereby will not result in a breach
of, and do not create a state of facts which, after notice or lapse
of time or both, will result in a breach of, and do not and will not
conflict with, any of the terms, conditions or provisions of the
constating documents, resolutions or bylaws of SSPC or SSPI;
- 16 -
(m) SSPC and SSPI hold all licenses and permits required for the conduct
in the ordinary course of their respective businesses as presently
conducted by them and all such licenses and permits are in good
standing and the conduct and uses of the same by them are in
compliance with all laws and other restrictions, rules, regulations
and ordinances applicable to them and their respective businesses,
save and except for breaches which do not have a Material Adverse
Effect on SSPC or SSPI, as the case may be, or their respective
businesses as currently conducted;
(n) SSPI has the right, power and authority to direct the transfer of
the Vendor's Shares to SSPC and SSPC has the right, power and
authority to receive same, and neither such direction nor reception
of the Vendor's Shares gives rise to any liability under taxation or
other laws;
(o) the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the
terms hereof do not and will not:
(i) conflict with or result in a breach of or violate any of the
terms, conditions or provisions of any law, judgment, order,
injunction, decree, regulation or ruling of any court or
governmental authority, domestic or foreign, to which SSPI or
SSPC are subject;
(ii) give to any person any right, remedy, cause of action, right
of termination, cancellation or acceleration in or with
respect to any understanding, agreement, contract, or
commitment, written, oral or implied to which SSPI or SSPC or
any predecessor or shareholder thereof is or was a party with
the exception that no such representation and warranty is made
with respect to the Association Contracts;
(iii) give to any government or governmental authority including any
governmental department, commission, bureau, board, or
administrative agency any right of termination, cancellation,
or suspension of, or constitute a breach of or result in a
default under any permit, license, control, or authority
issued to SSPI or SSPC and which is necessary or desirable in
connection with the conduct and operation of the businesses
currently conducted by SSPI and SSPC with the exception that
no such representation and warranty is given with respect to
any permit, license, contract or authority granted under or in
connection with the Association Contracts;
(iv) constitute a default by SSPI or SSPC or an event which, with
the giving of notice or lapse of time or both, might
constitute an event of default or nonobservance under any
agreement, contract, indenture or other instrument relating to
any indebtedness of SSPI
- 17 -
or SSPC which would give any person the right to accelerate
the maturity for the payment of any amount payable under that
agreement, contract, indenture, or other instrument;
such that there would be a Material Adverse Effect on them;
(p) SSPI and its subsidiaries are the beneficial owners of or have the
right to acquire the interests in the properties, business and
assets referred to in the Public Record, which interests in the
properties, business and assets represent all interests of SSPI and
its subsidiaries in any properties, business or assets and any and
all agreements pursuant to which SSPI or its subsidiaries hold or
will hold any such interest in property, business or assets are in
good standing in all material respects according to their terms, and
the properties are in good standing in all material respects under
the applicable statues and regulations of the jurisdictions in which
they are situated;
(q) the Public Record is in all material respects accurate and omits no
facts, the omission of which makes the Public Record, or any
particulars therein, misleading or incorrect, as at the date they
were made;
(r) SSPI is not party to and has not granted and no person has any
agreement, warrant, option, right or privilege, consensual or
arising by law, present or future, contingent or absolute, capable
of becoming an agreement, warrant, option, right or privilege for
the creation, purchase, acquisition, subscription, issuance or
allotment of any shares of SSPI or securities convertible into or
exchangeable for shares of SSPI or to convert or exchange any
securities into or for shares of SSPI, or to require SSPI to
purchase, redeem or otherwise acquire any of the issued and
outstanding shares in its capital except as disclosed in the Public
Record or as contemplated hereunder;
(s) no judgments, investigations, actions, suits, inquiries or
proceedings are outstanding or pending or, to the knowledge of SSPI,
are contemplated or threatened to which SSPI or its subsidiaries is
a party or to which the property of SSPI or its subsidiaries is
subject at law or in equity that would have a Material Adverse
Effect on the business, operations, condition (financial or
otherwise) of SSPI and its subsidiaries, on a consolidated basis;
(t) the SSPI Financial Statements were prepared in accordance with
Canadian general accepted accounting principles applied on a basis
consistent with prior years (in respect of any predecessors of SSPI)
and are true and correct in every material respect and present
fairly and accurately the financial condition and position of SSPI
and it subsidiaries as at the dates set out therein and the results
of its operations and the changes in its
- 18 -
financial position for the periods then ended, in accordance with
Canadian generally accepted accounting principles;
(u) except as disclosed in the Public Record, there has not been any
material change in the assets, liabilities or obligations (absolute,
accrued, contingent or otherwise) of SSPI and its subsidiaries, on a
consolidated basis, as set forth in the SSPI Financial Statements
and there has not been any material adverse change in the business,
operations or condition (financial or otherwise) or results of the
operations of SSPI and its subsidiaries, on a consolidated basis,
since June 30, 1996 and since that date there have been no material
facts, transactions, events or occurrences which could have a
Material Adverse Effect on the business of SSPI and its
subsidiaries, on a consolidated basis;
(v) none of SSPI's or any of its subsidiaries' businesses, assets or
properties are subject to any judicial or administrative proceeding
alleging the violation of any applicable law, judgment, decree,
order, injunction, rule, statute or regulation except where such
violation would not have a Material Adverse Effect on SSPI or its
subsidiaries;
(w) except as disclosed in Schedule "G", neither SSPI nor any of its
subsidiaries has any material contract, agreement, undertaking or
arrangement, whether oral, written or implied, which cannot be
terminated on not more than one month's notice and neither SSPI nor
any of its subsidiaries has any outstanding material agreements,
contracts or commitments (whether written or oral) whatsoever
relating to or affecting the conduct of their businesses as
currently carried on or any of their assets or for the purchase,
sale or lease of any of their assets with the exception of this
Agreement;
(x) each of SSPI and its subsidiaries has been assessed for income tax
for all years to and including the fiscal year of each of SSPI and
its subsidiaries ended on December 31, 1995, and each of SSPI and
its subsidiaries has withheld and remitted to all applicable tax
collecting authorities all amounts required to be remitted to all
tax collecting authorities respecting payments to employees or to
nonresidents, or otherwise and has paid all instalments or corporate
taxes due and payable as of the date hereof;
(y) all tax returns and reports of each of SSPI and its subsidiaries
required by law to be filed prior to the date hereof including all
income tax returns and all other corporate tax returns required to
be filed with any governmental taxing authority or board have been
filed and are true, complete and correct, and all taxes and other
government charges including all income, excise, sales, business and
property taxes and other rates, charges, assessment, levies, duties
taxes, contributions, fees,
- 19 -
licenses, interest and penalties required to be paid have been paid,
and if not required to be paid as at the date hereof, have been
accrued in the SSPI Financial Statements;
(z) adequate provision has been made for taxes payable by each of SSPI
and its subsidiaries which are not yet due and payable and there are
no agreements, waivers or other arrangements providing for an
extension of time with respect to the assessment or reassessment of
any taxing authority or board or the filing of any tax return by or
payment of any tax, governmental charge or deficiency by any of SSPI
or its subsidiaries, and there are no contingent tax liabilities or
any grounds which would prompt a reassessment, including aggressive
treatment of income and expenses in filing earlier tax returns;
(aa) no authorization, approval, order, license, permit or consent of any
governmental authority, regulatory body or court, and no
registration, declaration or filing by either of SSPI or SSPC with
any such governmental authority, regulatory body or court is
required in order for SSPI and SSPC to complete the within purchase
and sale, to duly perform and observe the terms and provisions of
this Agreement, to allot and issue the SSPI Preferred Shares, and to
render this Agreement legal, valid, binding and enforceable in
accordance with its terms with the exception that no representation
and warranty is given as to any authorizations, approvals, orders,
licenses, permits or consents required under the Association
Contracts;
(ab) neither SSPI nor SSPC has guaranteed or agreed to guarantee any
indebtedness or other obligation of any party except as described in
the SSPI Financial Statements;
(ac) no order ceasing or suspending trading in securities of SSPI or
prohibiting the sale of securities by SSPI has been issued and no
proceedings for this purpose have been instituted, are pending,
contemplated or threatened;
(ad) SSPI has not, directly or indirectly, declared or paid any dividend
or declared or made any other distribution on any of its shares or
securities of any class, or, directly or indirectly, redeemed,
purchased or otherwise acquired any of its shares or securities or
agreed to do any of the foregoing;
(ae) since June 30, 1996, there has not been any occurrence or event
which has had, or might reasonably be expected to have, a Material
Adverse Effect on the business of SSPI or SSPC as currently carried
on or the results of their operations;
- 20 -
(af) neither SSPI nor SSPC has increased the pay of or paid or agreed to
pay any pension, bonus, share of profits or other similar benefit of
any individual named on the "Summary Compensation Table" in the
Management Information Circular of SSPI as at May 8, 1996;
(ag) since June 30, 1996, no single capital expenditure or commitment
therefor has been made by SSPI or SSPC other than as previously
disclosed in writing to the Vendor;
(ah) there is not, in the constating documents or bylaws of SSPI or in
any agreement, mortgage, note, debenture, indenture or other
instrument or document to which SSPI is a party, any restriction
upon or impediment to the declaration or payment of dividends by the
directors of SSPI or the payment of dividends by SSPI to the holders
of its common shares;
(ai) neither SSPI nor SSPC:
(i) is in breach of any of the terms, covenants, conditions or
provisions of, is in default under, or has done or omitted to
do anything which, with the giving of notice or lapse of time
or both, would constitute a breach of or a default under any
contract to which it is a party provided that no
representation or warranty is given with respect to any beach
or default under the Association Contracts which may arise as
a result of the entering into of this Agreement and the
completion of the transactions contemplated hereby;
(ii) is in violation of nor are any present uses by either SSPI or
SSPC of any of its assets in violation of or contravention of
any applicable law, statute, order, rule or regulation;
(iii) is in breach or default under any judgment, injunction or
other order or aware of any judicial, administration,
governmental, or other authority or arbitrator by which either
SSPI or SSPC is bound or to which either SSPI or SSPC or any
of their assets are subject except where such breach or
violation would not have a Material Adverse Effect;
(aj) The Montreal Trust Company of Canada at its office in Calgary,
Alberta has been duly appointed as the transfer agent and registrar
for all of the outstanding common shares of SSPI;
(ak) each of the material contracts referred to in the Public Record to
which SSPI or its subsidiaries is a party has been duly authorized,
executed and delivered by the parties thereto and is a legal, valid
and binding obligation
- 21 -
of the parties thereto enforceable in accordance with their
respective terms; and
(al) SSPI is not a nonresident of Canada for the purposes of the INCOME
TAX ACT (Canada).
5. COVENANTS OF THE VENDOR
5.1 The Vendor shall:
(a) duly and punctually perform all the obligations to be performed by
him under this Agreement; and
(b) execute all such documents and do all such things as shall be
reasonably necessary to give full effect to this Agreement.
6. COVENANTS OF SSPI
6.1 SSPI shall:
(a) use its best efforts to file the Preliminary Prospectus within two
weeks of the Closing Date and to obtain a receipt for the Final
Prospectus by September 30, 1996;
(b) use its best efforts to obtain a listing of SSPI's common shares on
a stock exchange recognized under the INCOME TAX ACT (Canada) by
September 30, 1996;
(c) ensure that at the respective times of filing and at all times
subsequent to the filing thereof during the distribution of the SSPI
Shares, the Preliminary Prospectus, and the Final Prospectus will
fully comply with the requirements of applicable securities
legislation;
(d) duly and punctually perform all the obligations to be performed by
it under this Agreement, and cause SSPC to duly and punctually
perform all the obligations to be performed by it under this
Agreement;
(e) execute, and will cause SSPC to execute, all such documents and
shall do, and will cause SSPC to do, all such things as shall be
reasonably necessary to give full effect to this Agreement;
(f) continue under the laws of the Yukon Territory within 30 days of the
date hereof;
- 22 -
(g) until such time as ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ became directors of
SSPI, give them reasonable prior notice of all meetings of the board
of directors of SSPI and afford them observer status at such
meetings;
(h) purchase within 45 days of the date hereof and maintain in good
standing for a period of two years thereafter, an insurance policy
or policies insuring the directors and officers of the Company
against reasonable risks of liability and costs in an amount no less
than U.S. $3 million;
(i) reserve and keep available a sufficient number of common shares of
SSPI for the purpose of enabling it to satisfy its obligations to
issue common shares upon the conversion of the SSPI Preferred
Shares;
(j) cause the SSPI Shares and the certificates representing the same
from time to time acquired pursuant to the conversion of the SSPI
Preferred Shares to be duly issued and delivered in accordance with
the Articles of SSPI;
(k) cause all SSPI Shares which shall be issued upon conversion of the
SSPI Preferred Shares shall be fully paid and non-assessable at the
time of conversion;
(l) use its best efforts to maintain its corporate existence;
(m) use its best efforts to ensure that all common shares of SSPI
outstanding or issuable from time to time continue to be traded on
the Canadian Dealing Network, the Alberta Stock Exchange or such
other exchange or electronic trading facility satisfactory to the
directors of SSPI;
(n) duly and punctually take all such steps as shall be necessary to
cause the removal of any order which may be issued ceasing or
suspending trading in the securities of SSPI or prohibiting the sale
of such securities or otherwise take all such steps as shall be
necessary to allow the issuance of SSPI Shares upon exercise of the
SSPI Preferred Shares, notwithstanding the existence of such order;
(o) make all requisite filings under applicable securities legislation
including those necessary to remain a reporting issuer not in
default in the provinces of Ontario and Alberta until the date of
conversion of the SSPI Preferred Shares in accordance with their
terms and it will use its reasonable best efforts to:
(i) maintain that status for a period of one year from the date
hereof;
and
(ii) become a reporting issuer in British Columbia, if it is not
already one, and maintain that status for a period of 12
months thereafter;
- 23 -
(p) if SSPI pays a dividend or makes any other distribution in cash or
property or securities of SSPI (including rights, options or
warrants to acquire common shares of SSPI or securities convertible
into or exchangeable for common shares of SSPI and including
evidences of its indebtedness) to holders of the common shares of
SSPI prior to the date of conversion of the SSPI Preferred Shares in
accordance with their terms, SSPI agrees that it will pay the same
amount of such dividend or make the same distribution to the holders
of the SSPI Preferred Shares, as if they were holders of the SSPI
Shares. SSPI will mail a notice to each holder of SSPI Preferred
Shares specifying the particulars of such payment or distribution
within two (2) Business Days of such payment or distribution; and
(q) deliver a notice to each holder of the SSPI Preferred Shares of the
issuance of the receipts for the Final Prospectus, together with a
commercial copy of the Final Prospectus, within two days of the
issuance of such receipt.
7. NON-MERGER
7.1 The representations, warranties, covenants and agreements of the Vendor
contained herein and those contained in the documents and instruments delivered
pursuant hereto will survive the Closing Date for a period of one year from the
date hereof, and notwithstanding the completion of the transactions herein
contemplated, the waiver of any condition contained herein (unless such waiver
expressly releases the Vendor of such representation, warranty, covenant or
agreement), or any investigation by SSPC, the same will remain in full force and
effect during that period.
7.2 The representations, warranties, covenants and agreements of SSPC and SSPI
contained herein and those contained in the documents and instruments delivered
pursuant hereto will survive the Closing Date for a period of one year, and
notwithstanding the completion of the transactions herein contemplated, the
waiver of any condition contained herein (unless such waiver expressly releases
SSPC and SSPI of such representation, warranty, covenant or agreement), or any
investigation by the Vendor, the same will remain in full force and effect
during that period.
8. CONDITIONS PRECEDENT
8.1 The obligations of SSPC and SSPI to consummate the transactions herein
contemplated are subject to the fulfilment of each of the following conditions
at the times stipulated:
(a) the representations and warranties of the Vendor contained herein
are true and correct in all respects;
- 24 -
(b) all covenants, agreements and obligations hereunder on the part of
the Vendor to be performed or complied with at or prior to the
Closing, including the Vendor's obligation to deliver the documents
and instruments herein provided for, shall have been performed and
complied with at and as of the Closing;
(c) all contracts, other than as detailed in Schedule "G", shall have
been terminated without further obligation to the Company;
(d) the Vendor shall have entered into the Escrow Agreement and shall
have executed all such other documents as may be required by the
Ontario Securities Commission and the Alberta Stock Exchange
providing for restrictions on the resale of the SSPI Preferred
Shares and the SSPI Shares;
(e) the Vendor shall have entered into the Voting Support Agreement; and
(f) the Cimarrona Agreement and the ▇▇▇▇▇▇▇▇▇ Agreement shall have been
executed by all parties thereto, and all conditions precedent to the
consummation of the transactions contemplated therein, except for
the execution and delivery at the closing Certificate referenced
therein, shall have been satisfied or waived.
8.2 The conditions set forth in Section 8.1 are for the exclusive benefit of
SSPI and may be waived by SSPI in writing in whole or in part at any time.
8.3 The obligations of the Vendor to consummate the transactions herein
contemplated are subject to the fulfilment of each of the following conditions:
(a) the representations and warranties of SSPC and SSPI contained herein
are true and correct in all material respects; and
(b) all covenants, agreements and obligations hereunder on the part of
SSPC and SSPI to be performed or complied with at or prior to the
Closing, including SSPC's and SSPI's obligations to deliver the
documents and instruments herein provided for, shall have been
performed and complied with as at the Closing;
(c) the terms of any escrow restrictions imposed by the Ontario
Securities Commission with respect to the resale of the SSPI
Preferred Shares and the SSPI Shares shall be acceptable to the
Vendor;
(d) SSPI shall have executed the Management Contract, the Registration
Rights Agreement, the ▇▇▇▇▇▇▇▇▇ Agreement and the Cimarrona
Agreement and all conditions precedent to the transactions
contemplated by the ▇▇▇▇▇▇▇▇▇ Agreement and the Cimarrona Agreement,
except for the execution and delivery of the Closing Certificate
referenced therein, shall have been satisfied or waived.
- 25 -
8.4 The conditions set forth in Section 8.3 are for the exclusive benefit of the
Vendor and may be waived by the Vendor in whole or in part at any time.
8.5 The obligations of the Vendor, SSPI and SSPC to complete and give effect to
the transactions herein contemplated are further subject to the due execution of
the Closing Certificate by or on behalf of all parties whose execution is
provided for therein.
9. TRANSACTIONS OF THE VENDOR AT THE CLOSING
9.1 At the Closing, the Vendor will execute and deliver or cause to be executed
and delivered all documents, instruments, resolutions and share certificates as
are necessary to effectively transfer the Vendor's Shares to SSPC, free and
clear of all Liens, including:
(a) certified copies of resolutions of the directors of the Company
authorizing the transfer of the Vendor's Shares and certified copies
of resolutions of the directors of the Company authorizing the
registration of the Vendor's Shares in the name of SSPC and
authorizing the issue of new share certificates representing the
Vendor's Shares in the name of SSPC;
(b) share certificates representing the Vendor's Shares duly endorsed
for transfer to SSPC;
(c) duly issued share certificates in the name of SSPC;
(d) resignations in writing of all the directors and officers and
signing officers of the Company;
(e) all corporate records and books of account of the Company including,
without limiting the generality of the foregoing, minute books,
share register books, share certificate books and annual reports;
(f) a Closing Warranty and Certificate from the Vendor confirming that
the conditions to be satisfied by the Vendor, unless waived, set out
in Section 8.1 have been satisfied at the Closing;
(g) the Voting Support Agreement duly executed by the Vendor;
(h) the Escrow Agreement duly executed by the Vendor together with duly
executed copies of such other documents as may be required under
Section 8.1 (d) of this Agreement;
(i) consents to act as directors of SSPI duly executed by ▇▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇;
(j) a legal opinion from counsel to the Company addressed to SSPI in
form satisfactory to SSPI; and
- 26 -
(k) all such other documents and instruments as SSPI may reasonably
require including but not limited to all geologic information, and
data from drilling and exploration, computer data including
information as to the Properties, administrative information, plans
and drawings and all exploration data including computer input,
computer models and computer outputs and all accounting information,
vouchers, receipts, accounting entries and diaries of the Company.
10. TRANSACTIONS OF SSPI AT THE CLOSING
10.1 At the Closing, SSPC and SSPI will deliver or cause to be executed and
delivered all documents, instruments, resolutions and share certificates as are
necessary to effectively transfer the SSPI Preferred Shares to the Vendor, free
and clear of all Liens, including:
(a) certified copies of resolutions of the directors of SSPC and SSPI
authorizing the entering into of this Agreement and the carrying out
of the transactions contemplated herein and certified copies of
resolutions of the directors of SSPI authorizing the issuance of
SSPI Preferred Shares and the SSPI Shares;
(b) duly issued share certificates representing the SSPI Preferred
Shares in the name of the Vendor as provided in Section 2.3 hereof;
(c) a Closing Warranty and Certificate from SSPC and SSPI confirming
that the conditions to be satisfied by SSPC and SSPI, unless waived,
set out in Section 8.3 have been satisfied at the Closing;
(d) a legal opinion from counsel to SSPC and SSPI addressed to the
Vendor and in form satisfactory to the Vendor;
(e) a directors' resolution of SSPI appointing ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇ as directors of SSPI effective upon the continuation of SSPI
under the laws of the Yukon Territory and the satisfaction of
Section 6.1(h);
(f) the Management Contract duly executed by SSPI;
(g) the Registration Rights Agreement duly executed by SSPI; and
(h) all such other documents and instruments as the Vendor may
reasonably require with respect to SSPC and SSPI, including but not
limited to:
(i) a draft form of the Preliminary Prospectus;
(ii) a letter from counsel to SSPI advising of the status of SSPI's
application to list its common shares on the Alberta Stock
Exchange; and
- 27 -
(iii) a letter from SSPI and Yorkton Securities Inc. discussing the
plans of Yorkton Securities Inc. to carry out a private
placement for SSPI.
11. INDEMNITY
11.1 Subject to Section 11.2, the Vendor will indemnify and hold harmless SSPI
from and against:
(a) any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfilment of any
covenant on the part of the Vendor under this Agreement or from any
misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished to SSPI or SSPC hereunder;
(b) any and all actions, suits, proceedings, demands, assessments,
judgments, costs and legal and other expenses incidental to any of
the foregoing; and
(c) any and all liability to which SSPI or SSPC is subject as a result
of the failure of the Vendor to pay such tax obligations of the
Vendor as are determined to exist arising from the transactions
contemplated herein;
and if any action or claim shall be asserted against SSPI or SSPC in respect of
which indemnity may be sought hereunder, SSPI or SSPC, as the case may be, shall
promptly notify the Vendor in writing and the Vendor shall assume the defence
thereof at his expense through legal counsel acceptable to SSPI. No party shall
effect a settlement of such action or claim without the written consent of the
other party, such consent not to be unreasonably withheld or delayed.
11.2 The maximum extent of the liability of the Vendor under Section 11.1 herein
(with the exception of liability arising directly or indirectly by reason of a
misrepresentation or breach of warranty as it relates to the representations and
warranties contained in Section 3.1(a), 3.1(d) and 3.1(ad) to 3.1(ai)) shall be
limited in the aggregate to the market value, as at the date of a claim for
indemnity, of the SSPI Preferred Shares or SSPI Shares of the Vendor, as the
case may be acquired pursuant to this Agreement and then held subject to the
Escrow Agreement as at such date, and the Vendor shall have no further personal
liability to SSPI or SSPC in this regard.
11.3 Subject to the maximum limit on liability in Section 11.2 the Vendor can
satisfy any liability referred to in Section 11.2 herein by either paying the
amount thereof to SSPI or surrendering or causing to be surrendered to SSPI such
of the Vendor's SSPI Preferred Shares or SSPI Shares or the rights thereto then
held subject to the Escrow Agreement as at the date of receipt of a claim for
indemnity as have a market value equal to the amount of the liability.
11.4 In circumstances where the Vendor is liable under Section 11.1 in respect
of a misrepresentation or breach of warranty as it relates to a representation
or warranty contained
- 28 -
in Sections 3.1(a), 3.1(d) and 3.1(ad) to 3.1(ai), SSPC and SSPI agree that it
shall first exhaust recourse against the SSPI Preferred Shares or SSPI Shares of
such Vendor, as the case may be, then held subject to the Escrow Agreement, to
satisfy such liability in which case the provisions of Section 11.3 apply
mutatis mutandis, and SSPI may only further seek recourse against the Vendor
generally in circumstances where the market value of such SSPI Preferred Shares
or SSPI Shares, as the case may be, is not sufficient to satisfy such liability
under Sections 3.1(a), 3.1(d) and 3.1(ad) to 3.1(aj).
11.5 For the purposes of Sections 11.2 and 11.3, herein the "market value" of
the SSPI Preferred Shares or SSPI Shares or the rights thereto shall be deemed
to be equal to the weighted average of the closing prices at which SSPI's common
shares have traded on the Alberta Stock Exchange or, if such shares are not then
listed on the Alberta Stock Exchange, on such stock exchange or electronic
trading facility on which the shares then trade as may be selected by the board
of directors of SSPI, during the 20 most recent trading days ending on the
trading day immediately prior to the date of a claim for indemnity.
11.6 SSPC and SSPI will indemnify and hold harmless the Vendor from and against:
(a) any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfilment of any
covenant on the part of SSPC or SSPI under this Agreement or from
any misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished to the Vendor hereunder; and
(b) any and all actions, suits, proceedings, demands, assessments,
judgments, costs and legal and other expenses incidental to any of
the foregoing;
and if any action or claim shall be asserted against the Vendor in respect of
which indemnity may be sought hereunder, the Vendor shall notify SSPI in writing
and SSPI shall assume the defence thereof at its expense through legal counsel
acceptable to the Vendor. No party shall effect a settlement of such action or
claim without the written consent of the other party, such consent not to be
unreasonably withheld or delayed.
11.7 SSPI shall bear the costs relating to the test procedures in respect of the
El Segundo No. 1 well as detailed in Schedule "H". To the extent such costs
exceed the amounts set forth in Schedule "H", the Vendor, together with the
vendors under the Cimarrona Agreement and the ▇▇▇▇▇▇▇▇▇ Agreement, shall
reimburse SSPI for the excess pursuant to Section 11.8 hereof.
11.8 If the costs relating to the test procedures in respsct of El Segundo No 1
well exceed the amounts set forth in Schedule "H", GHK Company Colombia shall
submit invoices to the Manager (as defined in the Management Contract), SSPI and
the Vendor in respect of such excess amounts within 90 days of the date hereof.
Once satisfied that such invoices accurately reflect actual costs incurred in
respect of the test procedures, the Vendor shall within 30 days after such
90-day period pay to the Manager, and direct the Manager to pay to SSPI, a
portion of such costs equivalent to his pro rata share of the aggregate number
of warrants and preference shares in SSPI issued to the Vendor under this
Agreement and the vendors under the Cimarrona Agreement and the ▇▇▇▇▇▇▇▇▇
Agreement.
11.9 The Vendor shall be entitled to a portion, equivalent to his pro rata share
of the aggregate number of warrants and preference shares in SSPI issued to the
Vendor under this Agreement and the vendors under the Cimarrona Agreement and
the ▇▇▇▇▇▇▇▇▇ Agreement, of any revenues generated by the production or sale of
oil produced from El Segundo No. 1 well prior to the Closing. The Vendor shall
be entitled to require from GHK Company Colombia an accounting of any such
revenues within 90 days of the date hereof and SSPI shall within 30 days after
such 90-day period pay to the Vendor the portion of such proceeds set forth in
this Section 11.9.
12. CONTRACTUAL RIGHT OF ACTION FOR RESCISSION
12.1 In the event that the Vendor, in circumstances where he acquires the SSPI
Shares upon the conversion of the SSPI Preferred Shares as provided for in the
Final Prospectus, is or becomes entitled under applicable securities legislation
to the remedy of rescission by reason of the Final Prospectus or any amendment
thereto containing a misrepresentation, the Vendor shall be entitled to
rescission not only of the conversion of the SSPI Preferred Shares but also of
the transaction hereunder pursuant to which the SSPI Preferred Shares were
initially acquired. The foregoing is in addition to any other right or remedy
available to the Vendor under applicable securities legislation or otherwise at
law.
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13. ISSUANCE OF SSPI SHARES
13.1 The Vendor hereby irrevocably directs SSPI to deliver such of the SSPI
Shares as are issuable upon the exercise of the SSPI Preferred Shares held by
Montreal Trust Company of Canada under the terms of the Escrow Agreement to
Montreal Trust Company of Canada to be held under the terms of the Escrow
Agreement.
14. COUNTERPARTS
14.1 This Agreement may be executed in any number of facsimile counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same document.
15. TIME OF THE ESSENCE
15.1 Time is of the essence of this Agreement.
16. ENTIRE AGREEMENT
16.1 This Agreement, together with the agreements and documents provided for
herein, contains the entire agreement between the parties hereto in respect of
the purchase and sale of the Vendor's Shares and there are no warranties,
representations, terms, conditions or collateral agreements, express or implied,
other than expressly set forth or provided for in this Agreement.
17. FURTHER ASSURANCES
17.1 The parties will execute and deliver such further documents and instruments
and do all such acts and things as may be reasonably necessary or requisite to
carry out the full intent and meaning of this Agreement and to effect the
transactions contemplated by this Agreement, and the parties will cooperate in
respect of any requirement to file an application with Investment Canada.
18. SUCCESSORS AND ASSIGNS
18.1 This Agreement will enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
19. NOTICE
19.1 Any notice required or permitted to be given under this Agreement will be
validly given if in writing and delivered or sent by pre-paid registered mail,
to the following addresses:
- 30 -
(a) If to the Vendor:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇.▇.▇.
(b) If to SSPI or SSPC:
SEVEN SEAS PETROLEUM INC.
Suite 960 - ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇.▇.▇.
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or to such other address as any Party may specify by notice in writing to the
other.
19.2 Any notice delivered on a business day will be deemed conclusively to have
been effectively given on the date notice was delivered.
19.3 Any notice sent by prepaid registered mail will be deemed conclusively to
have been effectively given on the third business day after posting; but if at
the time of posting or between the time of posting and the third business day
thereafter there is a strike, lockout or other labour disturbance affecting
postal service, then the notice will not be effectively given until actually
delivered.
20. VENDOR'S NOMINEE
20.1 The Vendor may, without SSPC's or SSPI's consent, elect to nominate a
company or other legal entity, including a company which may be hereafter
incorporated, to be the recipient of all or any part of the SSPI Preferred
Shares which are to be issued by SSPI and to which the Vendor shall be entitled
pursuant to Section 2.3 herein. Such nomination will not take effect until
communication thereof to SSPI, or to SSPI's solicitors. Once such communication
has been made, the nominee elected by the Vendor will be deemed to be the Vendor
hereunder for purposes of receiving the applicable SSPI Preferred Shares and for
all purposes after the Closing Date, but the Vendor will in no way be released
from its representations, warranties and obligations hereunder despite the
election or appointment of a nominee.
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21. PROPER LAW
21.1 This Agreement will be governed by and construed in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein and the parties will attorn to the Courts thereof.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed and
delivered this 26th day of July, 1996.
SIGNED, SEALED AND DELIVERED by )
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III in the presence of: )
)
-------------------------------------- )
Signature )
) -------------------------------
-------------------------------------- ) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Print Name )
)
-------------------------------------- )
Address )
)
-------------------------------------- )
)
-------------------------------------- )
Occupation )
SEVEN SEAS PETROLEUM COLOMBIA INC.
Per: _________________________________
Authorized Signatory
SEVEN SEAS PETROLEUM INC.
Per: _________________________________
Authorized Signatory
This is page 32 of an Agreement dated the 26th day of July, 1996 between ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, III, SEVEN SEAS PETROLEUM COLOMBIA INC. AND SEVEN SEAS PETROLEUM INC.