Exhibit 10.24
================================================================================
PCC ENERGY INC.
PCC ENERGY CORP.
PCC LIMITED PARTNERSHIP
================================================================================
SHARE PURCHASE AGREEMENT
DECEMBER 24, 2002
BLAKE, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
3500 Bankers Hall ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇.▇.▇.
TABLE OF CONTENTS
PAGE
ARTICLE 1
INTERPRETATION
1.1 Definitions..........................................................1
1.2 Schedules...........................................................16
1.3 References and Headings.............................................17
1.4 Singular/Plural; Derivatives........................................17
1.5 Statutory References................................................17
1.6 Conflicts...........................................................17
1.7 Accounting References...............................................18
1.8 Business Day........................................................18
1.9 Vendor's Knowledge..................................................18
1.10 Purchaser's Knowledge...............................................18
1.11 Joint and Several...................................................18
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase of Purchased Shares........................................19
2.2 Purchase Price......................................................19
2.3 Adjustments to the Purchase Price...................................19
2.4 Deposit.............................................................22
2.5 Adjustment Holdback Amount..........................................22
2.6 Interest Accrues On Amounts Owing...................................23
2.7 Withholding Tax.....................................................24
2.8 Manner of Payment...................................................26
ARTICLE 3
CLOSING
3.1 Place and Closing Time..............................................26
3.2 Deliveries at Closing...............................................27
ARTICLE 4
INTERIM PERIOD
4.1 Access..............................................................30
4.2 Maintenance of Business and PNG Assets..............................31
4.3 Certain Restrictions................................................31
4.4 Interim Operations-Maintenance of Assets............................33
4.5 Proposals for Dealings or Operations re PNG Assets..................34
4.6 Existing Authorizations for Expenditure.............................34
4.7 Insurance...........................................................35
4.8 Purchaser's or Affiliate Distribution of Securities.................35
-i-
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARTIES
5.1 Vendor's Representations And Warranties.............................35
5.2 Purchaser's Representations And Warranties..........................50
5.3 Survival Of Representations And Warranties..........................51
5.4 No Additional Representations Or Warranties By Vendor...............52
5.5 No Merger...........................................................53
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to the Obligations of the Purchaser to Close.............53
6.2 Conditions to Obligations of Vendor to Close........................55
6.3 Parties To Exercise Diligence With Respect To Conditions, etc.......55
6.4 Waiver Of Conditions................................................56
6.5 Failure To Satisfy Conditions.......................................56
ARTICLE 7
TERMINATION
7.1 Grounds for Termination.............................................56
7.2 Effect of Termination...............................................57
7.3 Entitlement to Deposit on Termination...............................57
ARTICLE 8
INFORMATION, MATERIALS AND CONTINUING REPORTS
8.1 Access to Information...............................................58
8.2 Maintenance of Information..........................................58
8.3 Tax Returns.........................................................59
8.4 Financial Information...............................................59
8.5 Information Systems.................................................60
ARTICLE 9
LIABILITY AND INDEMNIFICATION
9.1 Defined Terms.......................................................60
9.2 Responsibility of Vendor............................................61
9.3 Responsibility Of Purchaser.........................................61
9.4 Limit on Responsibility.............................................62
9.5 Responsibility Extends To Legal Costs and Settlements...............63
9.6 Limitations.........................................................63
9.7 Specific Performance................................................64
9.8 Letter of Credit....................................................64
9.9 Limitation on Rights or Remedies....................................65
-ii-
TABLE OF CONTENTS
(CONTINUED)
PAGE
9.10 Procedure - Indemnities.............................................65
9.11 No Merger Of Legal Responsibilities.................................66
ARTICLE 10
CONFIDENTIALITY
10.1 Restrictions on Disclosure of Purchaser.............................66
10.2 Restrictions on Disclosure of Vendor................................66
ARTICLE 11
GUARANTEE
11.1 Guarantee...........................................................67
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Waiver Must Be In Writing...........................................67
12.2 No Amendment Except In Writing......................................67
12.3 Assignments Before Closing..........................................67
12.4 Service Of Notice...................................................67
12.5 Addresses For Notices...............................................68
12.6 Consultants and Advisors Bound......................................70
12.7 Parties To Discuss Press Releases...................................70
12.8 Costs and Expenses..................................................70
12.9 Further Assurances..................................................70
12.10 Governing Law; Attornment; Etc......................................70
12.11 Invalidity of Provisions............................................71
12.12 Time................................................................71
12.13 Supersedes Earlier Agreements.......................................71
12.14 Enurement...........................................................72
12.15 Counterpart Execution...............................................72
-iii-
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT made this 24/th/ day of December, 2002.
BETWEEN:
PETROCORP INCORPORATED, a Texas corporation
("PCI")
- and -
PETROCORP ACQUISITION COMPANY, a Delaware
corporation ("PAC" and, together with PCI,
is hereafter called the "Vendor")
- and -
1022694 ALBERTA LTD., an Alberta corporation
(the "Purchaser")
- and -
AS TO ARTICLE 11 ONLY, ENERMARK INC., an
Alberta corporation (the "Guarantor")
WHEREAS:
A. The Purchased Shares are currently owned by the Vendor;
B. The Vendor desires to sell and the Purchaser desires to purchase and all
of the Purchased Shares, upon and subject to the terms and conditions
set forth in this Agreement; and
C. The Guarantor owns all of the capital stock of the Purchaser which has
been formed for the purpose of effecting the purchase and sale
contemplated by this Agreement.
NOW THEREFORE the Parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, including the recitals, this Section and the
Schedules, unless otherwise stated or the context otherwise requires:
- 2 -
"Abandonment and Reclamation Obligations" means, with respect to the PNG
Assets, all remediation and reclamation obligations of the Purchased
Entities, including:
(a) the abandonment and reclamation of any ▇▇▇▇▇; and
(b) the closure, decommissioning and dismantling of Tangibles, and
the restoration of the surface in respect thereto;
all in accordance with good oil and gas field practices, and in
compliance with Applicable Law.
"Accounting Firm" means Ernst & Young, LLP.
"Additional Indemnitees" has the meaning attributed to it in Section
9.1.
"Adjusted Working Capital" means the amount of the Current Assets of the
Purchased Entities, as recorded on the Effective Date Working Capital
Statement, less the aggregate of (i) the amount of the Current
Liabilities of the Purchased Entities, as recorded on the Effective Date
Working Capital Statement, plus (ii) the amount of the long term debt of
the Purchased Entities as at the Effective Date, as recorded on the
Effective Date Working Capital Statement; provided, however, that the
Non-Recourse Notes shall not be deemed long term debt; and provided,
further, that (A) all revenues, expenses and costs of whatever nature of
the Purchased Entities on a consolidated basis, without duplication,
prior to the Effective Date will be accrued in accordance with GAAP as
of the Effective Date; (B) Adjusted Working Capital will be decreased to
the extent Taxes applicable to the Purchased Entities for periods ending
on or before the Effective Date are not paid by the Purchased Entities
prior to the Closing Date; (C) Adjusted Working Capital will be
decreased by the amount, if any, of any cash payment, liability incurred
or benefit conferred by any of the Purchased Entities to any Affiliate
pursuant to transactions which would be subject to a transfer price
adjustment pursuant to Section 247(2)(c) of the Tax Act during the
period from the Effective Date through to Closing; and (D) Adjusted
Working Capital will be decreased by the amount of all costs (excluding
the outstanding principal amount and accrued interest) to prepay the
Credit Facility as at the Closing Time, including fees, breakage costs,
penalties and lender out-of-pocket costs.
"Adjustment Holdback Amount" means $[omitted].
"AFE's" has the meaning provided in Section 4.6.
"Affiliate" means, in respect of a Person, any other Person or group of
Persons acting in concert, directly or indirectly, that controls, is
controlled by or under common control with the first mentioned Person,
and for the purposes of this definition "control" means the possession,
directly or indirectly, by such Person or group of Persons acting in
concert of the power to direct or cause the direction of the management
and policies of the first mentioned Person, whether through the
ownership of voting securities or otherwise.
- 3 -
"Agreement" means this document, together with the Schedules attached
hereto and made a part hereof, all as amended, supplemented or modified
from time to time in accordance with the provisions hereof.
"Applicable Law" means, in relation to any Person, transaction or event,
all applicable provisions of laws, statutes, rules, regulations,
official directives and orders of all federal, provincial, municipal and
local governmental bodies (whether administrative, legislative,
executive or otherwise) and final, non-appealable judgements, orders and
decrees of all courts, arbitrators, commissions or bodies exercising
similar functions in actions or proceedings in which the Person in
question is a party, by which it is bound or having application to the
transaction or event in question.
"Arbitrator" shall have the meaning set forth in Section 2.3(g).
"Assumption of Liabilities Agreement" means a general conveyance and
assumption of liabilities agreement to be made, in a form satisfactory
to the Purchaser and the Vendor consistent with the terms of this
Agreement, during the Interim Period between the Vendor and PEC.
"Bank" means the Toronto-Dominion Bank, as Agent for the Credit
Facility.
"Burdens" means, collectively, the Royalty Interests, the Security
Interests and all other encumbrances.
"Business Day" means a day on which banks are generally open for the
transaction of commercial business in Calgary, Alberta but does not in
any event include a Saturday or a Sunday or a statutory holiday under
Applicable Law.
"Canadian Management Agreement" means a management agreement to be made
between the Manager and 1022700 Alberta Ltd., pursuant to which the
Manager will provide management, technical and administrative support
services for 1022700 Alberta Ltd., all in a form and substance
satisfactory to PCI and the Purchaser.
"CCRA" has the meaning attributed to it in Section 2.7(b)(ii).
"Closing" means the completion of the purchase and sale of the Purchased
Shares as contemplated by this Agreement.
"Closing Date" means 10:00 a.m. on the 15th day of January, 2003 or such
other date as is mutually agreed among the Parties.
"Closing Time" means the time that the documents or actions effecting
the transactions comprising the Closing are delivered or taken and
released from the terms of any escrow governing the Closing.
"Competition Act" means the Competition Act (Canada).
- 4 -
"Confidentiality Agreement" means the confidentiality agreement dated
July 24, 2002 made between Enerplus Global Energy Management Company and
PCI.
"Credit Facility" means the Credit Agreement dated July 21, 2000 among
PCI, PEC, Toronto Dominion (Texas), Inc., The Toronto Dominion Bank, TD
Securities, Inc. and various lenders signature thereto.
"Current Assets" means the aggregate of the book value of the current
assets of the Purchased Entities on a consolidated basis, without
duplication, as at the Effective Date determined in accordance with
GAAP.
"Current Liabilities" means the aggregate of the book value of the
current liabilities of the Purchased Entities on a consolidated basis,
without duplication, as at the Effective Date determined in accordance
with GAAP.
"Deposit" means an amount equal to $8,500,000.
"Disclosure Schedule" means the Schedule attached as Schedule 1.2(e).
"Dollar" or "$" means, unless otherwise provided herein, a dollar in the
lawful money of Canada.
"Effective Date" means 12:01 a.m. on the 1st day of October, 2002.
"Effective Date Working Capital Statement" means an unaudited statement
setting forth:
(i) the Adjusted Working Capital of the Purchased Entities
as at the Effective Date, prepared, except as otherwise
specified herein, in accordance with GAAP; and
(ii) the Resource Pool Adjustment Amount of the Purchased
Entities as at the Effective Date.
"Encumbrance Discharge" means, with respect to a Security Interest
affecting all or any portion of the PNG Assets or Purchased Shares, one
or more registrable discharges executed by the holder of such Security
Interest which results in a discharge of such Security Interest;
provided that, to the extent of any Security Interest affecting all or a
portion of the PNG Assets or Purchased Shares or any other assets of the
Purchased Entities, a letter of no interest executed by the holder of
the Security Interest wherein the holder acknowledges it has no interest
in the PNG Assets, the Purchased Shares or such other assets shall be
deemed to be an Encumbrance Discharge.
"Environmental Law" means any Applicable Law respecting the protection
of, or the control, remediation or reclamation of contamination or
pollution of soil, air or water (including ground water).
- 5 -
"Escrow Agent" means Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP.
"Escrow Agreement" means the escrow agreement, substantially in the form
attached hereto as Schedule 1.2(b), dated the date hereof and made
between the Vendor, the Purchaser and the Escrow Agent, pursuant to
which the Escrow Agent will hold the Deposit and, if applicable,
pursuant to Section 2.7, the Withheld Amount.
"Financial Impact" means any transaction, matter or thing which affects
or would affect revenue, expenses, liabilities or income of a Purchased
Entity.
"Financial Information" has the meaning provided in Section 8.4.
"Financial Statements" means, collectively (i) the consolidated audited
balance sheet of PCI as at December 31, 2001 and related consolidated
income statement and consolidated statement of cash flow for the fiscal
year then ended and (ii) the unaudited balance sheets of each Purchased
Corporation as at December 31, 2001 and as at September 30, 2002 and
related income statements for the twelve and nine months then ended,
respectively, all prepared in accordance with GAAP (except, with respect
to the unaudited statements, such statements omit footnotes and year-end
adjustments), a copy of which is attached as Schedule 1.2(b).
"Futures Transaction" means any derivatives or futures transaction
(including an agreement with respect thereto), including any transaction
commonly referred to as a hedge transaction, rate swap transaction,
basis swap, forward rate transaction, commodity swap, commodity option,
equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction,
floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of these
transactions) or any combination of these transactions.
"GAAP" or "generally accepted accounting principles" means accounting
principles generally accepted at the date of the Financial Statements in
the United States of America which are applicable on the relevant date.
"Guarantor" has the meaning first provided above.
"Holdback Agreement" means the Holdback Agreement dated as of the
Closing Date, pursuant to which the Escrow Agent will hold the
Adjustment Holdback Amount, substantially in the form of Schedule
1.2(d).
"include" and "including" mean "include, without limitation" and
"including, without limitation", respectively.
"Indemnified Losses" has the meaning attributed to it in Section 9.1.
"Interim Period" means the period from and after the Signing Date to and
including the Closing Date.
- 6 -
"Land Schedule" means Schedule 1.2(a), as amended by the Parties at
anytime prior to Closing.
"Lands" means, collectively, the lands set forth and described in the
Land Schedule including the Petroleum Substances within, upon or under
such lands (subject to the restrictions and exclusions set forth in the
Leases as to the Petroleum Substances and geological formations), but
does not include Surface Rights.
"LC Amount" means $[omitted].
"LC Claim Period" means the period ending on the day which is 2 years
after the Closing Date.
"Leases" means, collectively, the leases, licences, permits and other
documents of title set forth and described in the Land Schedule, by
virtue of which the holder thereof is entitled to drill for, win, take,
own or remove the Petroleum Substances within, upon or under the Lands
or by virtue of which the holder thereof is deemed to be entitled to a
share of Petroleum Substances removed from the Lands or any lands with
which the Lands are pooled or unitized and includes, if applicable, all
renewals and extensions of such documents and all documents issued in
substitution therefor.
"Letter of Credit" means an unconditional irrevocable letter of credit
drawn on a chartered bank listed in the Schedule I to the Bank Act
(Canada), in a form mutually acceptable to the Vendor and the Purchaser.
"Letter of Intent" means the letter of intent dated November 5, 2002
made between Enerplus Resources Fund and PCI.
"Management Agreement" means the First Amended and Restated Management
Agreement dated March 2, 2001 made between the Manager and PCI, pursuant
to which the Manager has agreed to provide management, technical and
administrative support services for PCI and its Affiliates, which
includes the Purchased Entities.
"Manager" means ▇▇▇▇▇▇-▇▇▇▇▇▇▇ Oil Company.
"Material Contract" means any written agreement to which a Purchased
Entity is a party or by which a Purchased Entity or any of the PNG
Assets is bound or affected except for (i) the Title and Operating
Documents, (ii) the agreements required to be disclosed on the
Disclosure Schedule pursuant to Sections 5.1(ww) and 5.1(yy), and (iii)
any agreement which involves or may reasonably be expected to involve
the payment to or by a Purchased Entity from and after the Effective
Date of less than $100,000 over the term of the agreement and is not
otherwise material to a Purchased Entity.
"Miscellaneous Interests" means all of the right, title, interest and
estate of the Purchased Entities in and to all property, rights and
assets, whether contingent or absolute, legal or beneficial, present or
future, vested or not, and not being Petroleum and
- 7 -
Natural Gas Rights or Tangibles, which pertain to such Petroleum and
Natural Gas Rights or Tangibles, including the following property,
rights and assets:
(i) contracts, agreements and documents (including Title and
Operating Documents) relating to any of such Petroleum
and Natural Gas Rights, Tangibles or items listed in
items (ii) to (vi) of this definition or any rights in
relation thereto;
(ii) Surface Rights which are used or useful in connection
with any of such Petroleum and Natural Gas Rights or
Tangibles;
(iii) permits, licences, authorizations and deposits relating
to any of such Petroleum and Natural Gas Rights or
Tangibles, or the use thereof;
(iv) all well bores located on the Lands or lands pooled or
unitized therewith which may be used to produce
Petroleum Substances from the Lands or lands pooled or
unitized therewith or otherwise serve such lands;
(v) all subsisting disposal and injection leases relating to
any of such Petroleum and Natural Gas Rights;
(vi) books, maps, records, documents, seismic, geological,
production, engineering, geophysical, data processing,
well, plant and other reports, files, data,
interpretations, information, tapes, disks, computer
programs, papers or other records and any archive
samples including core and liquid samples and cuttings,
other than Proprietary Information, which relate to or
are necessary or useful in connection with any of such
Petroleum and Natural Gas Rights or Tangibles or any of
the property or assets referred to in (i) to (iv) of
this definition;
(vii) all extensions, renewals, replacements or amendments of
the foregoing items described in items (i) to (vi) of
this definition; and
(viii) all Petroleum Substances in the course of production
from the Lands but not at the Effective Date beyond the
point of delivery to a buyer thereof.
"Non-PNG Related Environmental Damage" means any one or more of:
(i) ground water, surface water or aquifer contamination;
(ii) soil contamination, including contamination in any way
relating to the presence or disposal of waste materials
of any nature whatsoever;
(iii) corrosion or deterioration of tangibles;
(iv) substance or energy emissions which are either toxic or
hazardous;
- 8 -
(v) death or injury to plant, animals or human beings due in
whole or in part to any of the foregoing items (i)
through (iv);
but does not include PNG Related Environmental Damage.
"Non-PNG Related Environmental Liabilities" means all costs, claims,
actions, suits, fines, penalties or other liabilities of any nature
whatsoever (whether accrued, contingent, absolute, now existing or
arising at any time in the future and whether or not determined or
determinable), which are attributable to Non-PNG Related Environmental
Damage that occurred or arose prior to the Closing Date for which PEC or
any of its predecessors or subsidiaries of predecessors are now or
hereafter liable or otherwise responsible for.
"Non-Recourse Notes" means those notes issued August 9, 1994 by PEI upon
conversion of preferred shares of PEI pursuant to a Purchase Agreement
dated July 22, 1994 between PEI, AT2 Corp., MS2 Corp., MH2 Corp., KK2
Corp., DA2 Corp., G2 Corp., H2 Corp., NX2 Corp., ▇▇▇▇▇▇ ▇▇▇▇▇▇ Medical
Institute and UBS Asset Management (New York) Inc., a copy of which are
attached at Schedule 1.2(h).
"Notice of Claim" has the meaning attributed to it in Section 9.1.
"Objection Date" shall have the meaning attributed to it in Section
2.3(e).
"Outside Date" means 10:00 a.m. on January 31, 2003, or such later date
as the Vendor and the Purchaser may agree in writing or may be expressly
provided for herein.
"PAC" has the meaning first provided above.
"PAC Compliance Certificate" has the meaning attributed to it in Section
2.7(a)(i).
"PAC Share Consideration" has the meaning provided in Section 2.2.
"PAC Shares" means 14,329,948.83 Shares in the capital of PEC held by
PAC.
"PAC Tax Amount" has the meaning attributed to it in Section 2.7(b)(ii).
"PAC Withheld Amount" has the meaning attributed to it in Section
2.7(b).
"Parties" means PCI, PAC, the Purchaser and the Guarantor and "Party"
means one of them.
"PCC Limited Partnership" means PCC Limited Partnership, a limited
partnership organized under the laws of Alberta.
"PCI" has the meaning first provided above.
"PCI Compliance Certificate" has the meaning attributed to it in Section
2.7(a)(ii).
- 9 -
"PCI Share Consideration" has the meaning provided in Section 2.2.
"PCI Shares" means:
(i) 18,962,366 Shares in the capital of PEC held by PCI; and
(ii) 868.08 Shares in the capital of PEI held by PCI.
"PCI Tax Amount" has the meaning attributed to it in Section 2.7(c)(ii).
"PCI Withheld Amount" has the meaning attributed to it in Section
2.7(c).
"PEC" means PCC Energy Corp., a corporation organized under the laws of
Alberta.
"PEC Contribution Agreement" means a contribution and assumption
agreement dated December 20, 2002 between PEC and PEI and PEC, carrying
on business under the name PCC Limited Partnership.
"PEC Price" means:
(i) $74,525,400; or
(ii) if Closing occurs after December 31, 2002, $75,022,236;
being the aggregate amount payable by the Purchaser to the Vendor as
consideration for the issued and outstanding shares of PEC pursuant to
Section 2.2, as modified by the adjustments provided for herein.
"PEI" means PCC Energy Inc., a corporation organized under the laws of
Alberta.
"PEI" Contribution Agreement" means a contribution and assumption
agreement dated December 20, 2002 between PEI and PEC and PEI, carrying
on business under the name PCC Limited Partnership.
"PEI Price" means:
(i) $91,974,600; or
(ii) if Closing occurs after December 31, 2002, $92,587,764;
being the aggregate amount payable by the Purchase to the Vendor in
consideration for the issued and outstanding shares of PEI pursuant to
Section 2.2, as modified by the adjustments provided for herein.
"Permitted Defects" means Abandonment and Reclamation Obligations which
(i) under Applicable Law, as of the Closing Date, are not yet required
to be undertaken, and (ii) apply to any of the ▇▇▇▇▇.
- 10 -
"Permitted Encumbrances" means:
(i) easements, rights of way, servitudes or other similar
Surface Rights, including, without limitation, rights of
way and servitudes for highways, railways, sewers,
drains, gas and oil pipelines, gas and water mains,
electric light, power, telephone or cable television
conduits, poles, wires or cables;
(ii) the right reserved to or vested in any government,
municipality or other public authority by the term of
any Title and Operating Document or by Applicable Law to
terminate any Title and Operating Document or to require
annual or other periodic payments as a condition of the
continuance thereof;
(iii) rights of general application reserved to or vested in
any governmental authority to levy Taxes or other levies
on Petroleum Substances or the income or revenue
therefrom and governmental requirements pertaining to
production rates from ▇▇▇▇▇ on the Lands or operations
being conducted on the Lands or otherwise affecting the
value of any property;
(iv) any rights reserved to or vested in any municipality or
governmental, statutory or public authority to control
or regulate any of the PNG Assets in any manner;
(v) Title Defects arising out of a request by the Purchaser
for a Purchased Entity to not consent under Section 4.5;
(vi) the terms and conditions of the Title and Operating
Documents, provided such do not create Burdens not
disclosed in the Land Schedule or which would not be a
Permitted Encumbrance pursuant to any other item of this
definition;
(vii) undetermined or inchoate liens incurred or created in
the ordinary course of business as security in favour of
any Person for the Purchased Entities' proportionate
share of the costs and expenses applicable to the
development or operation of any of the PNG Assets which
are not due or delinquent or are being contested in good
faith;
(viii) the reservations, limitations, provisos and conditions
in any grants or transfers from the Crown of any of the
Lands or interests therein, and statutory exceptions to
title;
(ix) provisions for penalties and forfeitures under
agreements as a consequence of non-participation in
operations;
- 11 -
(x) liens granted in the ordinary course of business to a
public utility, municipality or governmental authority
with respect to operations pertaining to any of the PNG
Assets;
(xi) agreements and plans relating to pooling or unitization;
(xii) builder's, mechanic's, materialmen's and similar liens
in respect of services rendered or goods supplied for
which payment is not at the time due or, if due, are (A)
being contested in good faith and (B) set forth on the
Disclosure Schedule; and
(xiii) the Burdens, reduction or conversion or alteration of
interests and adverse claims, in each case, set forth in
the Land Schedule and all ad valorem, property,
production, severance and similar taxes and assessments
based on or measured by the ownership of Petroleum and
Natural Gas Rights or the production of Petroleum
Substances in respect of such Petroleum and Natural Gas
Rights, set forth on the Land Schedule.
"Person" includes an individual, a partnership (limited or general), a
corporation, a trust, a joint venture, an unincorporated organization, a
union, a government or any department or agency thereof and the heirs,
executors, administrators or other legal representatives of an
individual.
"Petroleum and Natural Gas Rights" means all of the right, title, estate
and interest, whether absolute or contingent, legal or beneficial,
present or future, vested or not, and whether or not an "interest in
land", held by the Purchased Entities in or to any of the following, by
whatever name the same are known:
(i) rights to explore for, drill for, extract, win, produce,
take, save or market Petroleum Substances;
(ii) rights to a share of the production of Petroleum
Substances;
(iii) rights to a share of the proceeds of, or to receive
payment calculated by reference to, the quantity or
value of the production of Petroleum Substances;
(iv) the interests set forth in the Land Schedule hereto in
and to and in respect of the Leases and the Lands
subject to the Permitted Encumbrances;
(v) rights to acquire any of the rights described in
subparagraphs (i) to (iv) of this definition; and
(vi) interests in any rights described in subparagraphs (i)
to (v) of this definition;
- 12 -
including all interests and rights known as working interests, royalty
interests, overriding royalty interests, gross overriding royalty
interests, production payments, profits interests, net profits
interests, revenue interests, net revenue interests, economic interests
and other interests, fractional or undivided interests in any of the
foregoing, and all fee simple, leasehold or other interests in any
Lands.
"Petroleum Substances" means petroleum, crude bitumen, natural gas,
natural gas liquids, related hydrocarbons and any and all other
substances, whether liquid, solid or gaseous (other than coal), whether
hydrocarbon or not, produced or producible in association with any of
the foregoing, including hydrogen sulphide and sulphur.
"Place of Closing" means the offices of the Purchaser's Counsel located
at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, 855 - 2nd Street S.W., Calgary, Alberta, or
such other place as may be agreed upon in writing by the Vendor and the
Purchaser.
"PNG Assets" means the Petroleum and Natural Gas Rights, the Tangibles
and the Miscellaneous Interests.
"PNG Related Environmental Damage" means, as it relates to Canadian
petroleum and natural gas exploration, development and production
operations, any one or more of:
(i) ground water, surface water or aquifer contamination;
(ii) soil contamination;
(iii) corrosion or deterioration of Tangibles;
(iv) substance or energy emissions which are either toxic or
hazardous;
(v) death or injury to plan, animals or human beings due in
whole or in part to any of the foregoing items (i)
through (iv);
but only to the extent the foregoing is or has been in breach of or
exceeds limitations imposed by Environmental Law and shall not include
(1) Abandonment or Reclamation Obligations and (2) Non-PNG Related
Environmental Damage.
"Prime Rate" means the annual rate of interest designated by the main
branch in Calgary of the Toronto Dominion Bank as its reference rate for
Canadian dollar commercial loans made in Canada and which is announced
by such bank as its prime rate.
"Proposal" has the meaning attributed to it in Section 4.5.
"Proprietary Information" means any evaluations of the Purchased
Entities or its respective business, assets or properties, prepared by
PCI, PAC, the Purchased Entities or any of their Affiliates, or any of
their respective consultants, agents or advisors.
- 13 -
"Purchase Agreement Default" means any material breach of a
representation or warranty made by a Party, or the failure of a Party to
perform or observe in any material respect any of the covenants or
agreements to be performed by such Party under this Agreement or any
agreement or other certificate or instrument delivered in connection
herewith, and includes the obligations set forth in Section 6.3.
"Purchased Corporations" means PEI and PEC, and "Purchased Corporation"
means one of them.
"Purchased Entities" means each Purchased Corporation and the PCC
Limited Partnership and "Purchased Entity" means one of them.
"Purchase Price" means, collectively, the PEC Price and the PEI Price.
"Purchased Shares" means, collectively, the PCI Shares and the PAC
Shares.
"Purchaser" has the meaning first provided above.
"Purchaser's Counsel" means Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP.
"Remittance Date" has the meaning attributed to it in Section 2.7(b)(i).
"Resource Pool Adjustment Amount" shall have the meaning attributed to
it in Section 2.3(b).
"Resource Pools" means, collectively, in respect of any Person, the:
(i) cumulative Canadian exploration expense;
(ii) cumulative Canadian development expense;
(iii) cumulative Canadian oil and gas property expense;
(iv) undepreciated capital cost; and
(v) non-capital loss carry forward;
as such terms are defined in the Tax Act, of such Person.
"Royalty Interests" means all carried profits, net profits, net revenue,
royalty interests (including ad valorem, property, production, severance
and similar taxes and assessments based on or measured by the ownership
of Petroleum and Natural Gas Rights or the production of Petroleum
Substances in respect of such Petroleum and Natural Gas Rights) and
similar Petroleum and Natural Gas Rights reserved or payable (by way of
a share in production of Petroleum Substances or by way of money) to any
Person or entity.
- 14 -
"Security Interest" means any mortgage, charge, pledge, lien, hypothec,
assignment by way of or in effect as security, or security interest
whatsoever, but does not include a right of set-off or a set-off.
"Share Rights" means any instruments or contractual rights capable of
being converted into, exchanged for or exercised for Shares of any class
of a Person or giving the holder the right on the occurrence of any
events, including on the payment of money, whether such events have
occurred or not, to require delivery by a Person of Shares of any class
of a Person and includes options, warrants, conversion or exchange
privileges and similar rights.
"Shareholder Debt" means any indebtedness owed by a Purchased Entity to
PCI or PAC, or any Affiliate of PCI or PAC.
"Shares" means any shares of any class of a corporation or body
corporate.
"Signing Date" means the date of this Agreement.
"Subsidiary" when used in relation to any Person, means any Affiliate
controlled, directly or indirectly, by that Person.
"Surface Rights" means rights (whether fee simple or pursuant to orders,
licences, leases, easements, rights-of-way or otherwise) to enter upon,
use and occupy the surface of any Lands, any lands with which the same
have been pooled or unitized, any lands upon which the Tangibles are
located or any lands used to gain access thereto.
"Survival Period" has the meaning attributed to it in Section 9.1.
"Take or Pay Delivery Obligations" means the obligation of the Purchased
Entities arising under or pursuant to any contract whereby Petroleum
Substances attributable to the Petroleum and Natural Gas Rights or any
of them may be sold for or in respect of payments or credits previously
received by the Purchased Entities, their predecessors or others in
respect of Petroleum Substances, the delivery of which had not been
taken by the buyer thereof at the time of the payment or crediting,
whether or not:
(i) a Purchased Entity is party to such contract;
(ii) the buyer of such Petroleum Substances recognizes a
Purchased Entity as a seller or has recourse to a
Purchased Entity; or
(iii) the payment, credit or assumption was made to or by a
Purchased Entity or was remitted by a Purchased Entity
to any other Person.
"Take or Pay Payments" means, as at a particular time, the amounts
received or receivable by and for the account of a Purchased Entity
prior to such time as a result of which the Purchased Entity has Take or
Pay Delivery Obligations which, as at such time, have not been satisfied
and have not expired.
- 15 -
"Tangibles" means all right, title, estate and interest, whether
absolute or contingent, legal or beneficial, present or future, vested
or not, held by the Purchased Entities in and to any tangible property,
apparatus, plant, equipment, machinery and facilities, fixed or
non-fixed, real or personal, used or capable of use in exploiting any
Petroleum Substances (whether the Petroleum and Natural Gas Rights to
which such Petroleum Substances are attributable are owned by the
Purchased Entities or by others or both), including:
(i) systems, plants and facilities used or useful in
producing, gathering, compressing, dehydrating,
scrubbing, processing, treating, separating, extracting,
collecting, refrigerating, refining, measuring, storing,
transporting or shipping Petroleum Substances;
(ii) tangible property and assets used or intended for use in
exploring for, producing, storing, injecting or removing
Petroleum Substances;
(iii) all extensions, additions and accretions to any item
described in subparagraphs (i) and (ii) of this
definition; and
(iv) the ▇▇▇▇▇;
and including all producing, shut-in, injection, disposal and other
▇▇▇▇▇, casing, tubing, wellheads, buildings, plants, erections,
production equipment, improvements, flowlines, pipelines, pipeline
connections, extraction facilities, meters, generators, motors,
compressors, separators, gas treating and processing equipment,
dehydrators, scrubbers, pumps, refineries, pump jacks, tanks, boilers,
communications equipment, enhanced recovery systems and other machinery,
apparatus and equipment.
"Tax" means all income, capital, gross receipts, sales, excise,
petroleum and gas revenue, value added, goods and services, use,
franchise, profits or property taxes, fees, assessments or charges
imposed in accordance with Applicable Law and includes penalties,
interest and fines with respect thereto.
"Tax Act" mean the Income Tax Act (Canada).
"Tax Returns" means all returns, declarations and reports and
information returns and statements required to be filed (taking into
account any extension of time to file or send granted to or obtained by
any such filing entity) by a Purchased Entity on or prior to the Closing
Date by or with respect to it in respect of any Tax for any period
including or ending on or before the Closing Date.
"Title and Operating Documents" means, in respect of any Petroleum and
Natural Gas Rights, Tangibles, Surface Rights or Petroleum Substances of
the Purchased Entities:
(i) all of the agreements, contracts, instruments and other
documents (including the Leases and all other leases,
reservations, permits, licences
- 16 -
of all sorts, exploration agreements, operating
agreements, unit agreements, pooling agreements,
assignments, trust declarations or other agreements to
recognize the Purchased Entities' interests,
participation agreements, farmin or farmout agreements,
royalty agreements, purchase agreements and transfers,
(A) gas, oil, condensate and other production sale
contracts, (B) gathering, common stream, extraction,
transportation, refining and processing agreements, (C)
agreements for the construction, ownership and/or
operation of Tangibles) by virtue of which such
Petroleum and Natural Gas Rights or Tangibles were
acquired or constructed or are held by a Purchased
Entity or pursuant to which the construction, ownership,
operation, exploration, exploitation, extraction,
development, production, transportation, refining or
marketing of such Petroleum and Natural Gas Rights,
Tangibles or Petroleum Substances are subject or which
grant rights which are or may be used by the Person in
connection therewith; and
(ii) the rights of the Purchased Entities (except for
Petroleum and Natural Gas Rights) granted under or
created by such agreements, contracts, instruments and
other documents.
"Title Defect" means a defect, deficiency or discrepancy in the title of
a Purchased Entity in and to any of the PNG Assets which would not be
acceptable to a prudent purchaser of the Purchased Shares, acting
reasonably, and which materially adversely affects the title of a
Purchased Entity in and to any of the Petroleum and Natural Gas Rights.
"Vendor" has the meaning first provided above.
"Vendor's Counsel" means ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Lawyers.
"▇▇▇▇▇" means all producing, suspended, shut-in, abandoned, water source
disposal or injection ▇▇▇▇▇ located on the Lands or any lands pooled or
unitized therewith, including the ▇▇▇▇▇ listed in the Land Schedule.
"Withheld Amount" means, collectively, the PCI Withheld Amount, if any,
and the PAC Withheld Amount, if any.
1.2 SCHEDULES
The following Schedules are attached hereto and made part of this
Agreement:
(a) Schedule 1.2(a) Land Schedule
(b) Schedule 1.2(b) Financial Statements
(c) Schedule 1.2(c) Escrow Agreement
(d) Schedule 1.2(d) Holdback Agreement
(e) Schedule 1.2(e) Disclosure Schedule
- 17 -
(f) Schedule 1.2(f) Form of Officer's Certificate of the Vendor
(g) Schedule 1.2(g) Form of Officer's Certificate of the Purchaser
(h) Schedule 1.2(h) Non-Recourse Notes
(i) Schedule 3.2(a)(xviii)(A) Form of Release
(j) Schedule 3.2(a)(xviii)(B) Form of Release
(k) Schedule 3.2(a)(xix) Form of Management Agreement Release
(l) Schedule 4.6 Authorizations for Expenditure
(m) Schedule 4.8 Securities Disclosure
1.3 REFERENCES AND HEADINGS
The references "hereunder", "herein" and "hereof" refer to the
provisions of this Agreement, and references to Articles and Sections
herein refer to articles, sections, or subsections of this Agreement.
Any reference to time shall refer to Mountain Standard Time or Mountain
Daylight Saving Time during the respective intervals in which each is in
force in the Province of Alberta. The headings of the Articles,
Sections, Schedules and any other headings, captions or indices herein
are inserted for convenience of reference only and shall not be used in
any way in construing or interpreting any provision hereof.
1.4 SINGULAR/PLURAL; DERIVATIVES
Whenever the singular or masculine or neuter is used in this Agreement
or in the Schedules, it shall be interpreted as meaning the plural or
feminine or body politic or corporate, and vice versa, as the context
requires. Where a term is defined herein, a capitalized derivative of
such term shall have a corresponding meaning unless the context
otherwise requires.
1.5 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.
1.6 CONFLICTS
If there is any 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.
1.7 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
- 18 -
accordance with GAAP except where the application of such principles is
inconsistent with, or limited by, the terms of this Agreement in which
case the terms of this Agreement shall apply.
1.8 BUSINESS DAY
Whenever any payment to be made or action to be taken under this
Agreement is required to be made or taken on a day other than a Business
Day, such payment shall be made or action taken or the next Business Day
following.
1.9 VENDOR'S KNOWLEDGE
Where in this Agreement, or in any certificate or document delivered in
connection herewith or to effect any of the transactions contemplated
hereby, any statement, representation or warranty is made as to, or as
being based on, the awareness, knowledge, information or belief of the
Vendor, such awareness, knowledge, information or belief, as applicable,
is limited to the actual knowledge, after due inquiry, of: (a) any
director or officer of PCI, PAC, the Purchased Corporations and the PCC
Limited Partnership, and (b) the officers and directors of the Manager
who are responsible for the supervision of the subject matter of such
statement, representation and warranty.
1.10 PURCHASER'S KNOWLEDGE
Where in this Agreement, or in any certificate or document delivered in
connection herewith or to effect any of the transactions contemplated
hereby, any statement, representation or warranty is made as to, or as
being based on, the awareness, knowledge, information or belief of the
Purchaser, such awareness, knowledge, information or belief, as
applicable, is limited to the actual knowledge, after due inquiry, of
officers of the Purchaser who are responsible for the supervision of
such statement, representation and warranty.
1.11 JOINT AND SEVERAL
The obligations and liabilities of PCI and PAC pursuant to this
Agreement and any agreement or document delivered under or pursuant to
this Agreement are joint and several.
ARTICLE 2
PURCHASE AND SALE
2.1 PURCHASE OF PURCHASED SHARES
The Purchaser agrees to purchase the Purchased Shares from the Vendor
and the Vendor agrees to sell the Purchased Shares to the Purchaser at
the Closing, all in accordance with and subject to the terms and
conditions in this Agreement.
- 19 -
2.2 PURCHASE PRICE
In consideration of the sale by the Vendor to the Purchaser of the
Purchased Shares, the Purchaser agrees, at the Closing, to pay to PCI
(on behalf of the Vendor) the Purchase Price, less the Deposit, plus
accrued interest thereon, paid by the Purchaser pursuant to Section 2.4,
which shall be adjusted:
(a) at Closing, on an interim basis in the manner set forth in
Sections 2.3(a), 2.3(b) and 2.3(d)(i); and
(b) after Closing, in the manner set forth in Section 2.3(c) and the
other remaining provisions of Section 2.3.
The Purchase Price shall additionally include simple interest on the
amount of Purchase Price (less the Deposit) plus or minus the
adjustments pursuant to Section 2.3, at a rate equal to the Prime Rate
minus 2%, which interest shall accrue from and including the Effective
Date until the Closing Date. The Purchase Price shall be allocated for
all purposes as follows: (i) to the PCI Shares, an amount equal to
91.2514% of such amount (the "PCI Share Consideration"); and (ii) to the
PAC Shares, an amount equal to 8.7486% of such amount (the "PAC Share
Consideration").
2.3 ADJUSTMENTS TO THE PURCHASE PRICE
(a) Calculation of Adjustment at Closing: The Purchase Price shall
be increased or decreased on a dollar for dollar basis by the
amount by which the Adjusted Working Capital as of the Effective
Date is greater or less than "nil". If the Adjusted Working
Capital:
(i) exceeds "nil", the Purchase Price shall be increased by
the amount of such excess; or
(ii) is less than "nil", the Purchase Price shall be
decreased by the amount of such shortfall.
(b) Calculation of Tax Pool Adjustment at Closing: The Purchase
Price shall, without duplicating any adjustments calculated
pursuant to Section 2.3(a), be decreased by an amount equal to
$0.10 for every $1.00 by which the aggregate Resource Pools of
the Purchased Entities is exceeded by $42,645,000 as at the
Effective Date (the "Resource Pool Adjustment Amount"). If the
Resource Pool Adjustment Amount is negative, the Purchase Price
shall be decreased by such amount.
(c) Calculation of Adjustment after Closing: The adjustments to the
Purchase Price as provided in Sections 2.3(a) and 2.3(b) shall
be calculated and paid on the Closing Date based on the
Effective Date Working Capital Statement. Such adjustments to
the Purchase Price shall be recalculated and paid based on the
final
- 20 -
Effective Date Working Capital Statement as contemplated in Section
2.3(i). Any amounts payable by the Purchaser or the Vendor, as
applicable, based on the final Effective Date Working Capital Statement
shall be adjusted to give credit for adjustments paid on the Closing
Date pursuant to Sections 2.3(a) and 2.3(b).
(d) Effective Date Working Capital Statement:
(i) The Effective Date Working Capital Statement shall be
used by the Vendor and the Purchaser for the purposes of
initially determining the Adjusted Working Capital,
subject to the adjustments after the Closing Date in
accordance with the remaining provisions of this Section
2.3. No later than 5 days prior to the Closing Date, the
Vendor shall prepare and deliver to the Purchaser an
interim Effective Date Working Capital Statement. The
Vendor shall consult with the Purchaser during the
preparation of such statement.
(ii) Within 120 days after the Closing Date, the Vendor shall
prepare and deliver to the Purchaser a final Effective
Date Working Capital Statement. The Purchaser shall
provide, or cause to be provided, to the Vendor and its
agents full access to the relevant records of the
Purchased Entities to aid in the preparation of such
Statement. The Vendor shall provide to the Purchaser the
right to review the Effective Date Working Capital
Statement and full access to the working papers of the
Vendor to aid in such review.
(iii) Any receipts in respect of the items listed on the
Disclosure Schedule received after settlement pursuant
to the Effective Date Working Capital Statement and
which relate to matters which accrued to or for the
benefit of a Purchased Entity prior to the Effective
Date shall be received by the Purchaser and the
Purchased Entities, as applicable, in trust for the use
and benefit of the Vendor and shall be promptly paid
over to the Vendor.
(e) Purchaser's Objections: If the Purchaser, acting reasonably,
believes that any change is required to be made to the final
Effective Date Working Capital Statement as prepared by the
Vendor, it shall, on or before that date (the "Objection Date")
which is 10 Business Days after the delivery of the Effective
Date Working Capital Statement by the Vendor pursuant to Section
2.3(d)(ii), give written notice of any such proposed change,
including the reason for such change, to the Vendor. In the
event that the Purchaser does not notify the Vendor of any
proposed change on or before the Objection Date, then the
Purchaser shall be deemed to have accepted the final Effective
Date Working Capital Statement.
(f) Settlement by Accounting Firm: If the Purchaser gives written
notice of any such proposed change on or before the Objection
Date, and if the proposed change is disputed by the Vendor and
the Purchaser and the Vendor fail to resolve such matter within
10 Business Days after the Objection Date, then the Accounting
- 21 -
Firm shall be engaged forthwith by the Purchaser and the Vendor
to resolve the dispute that cannot be agreed upon and the
Accounting Firm shall be required to render its decision without
qualifications, other than the usual qualifications relating to
engagements of this nature, within 14 days after the dispute is
referred to it. If the Purchaser and the Vendor fail to so
forthwith jointly engage the Accounting Firm, then either Party,
on behalf of itself and the other Parties, is hereby authorized
to so forthwith engage the Accounting Firm. The decision of the
Accounting Firm shall be final and binding. The fees and
expenses of the Accounting Firm shall be shared, one half to the
Vendor and one half to the Purchaser.
(g) Settlement by Arbitrator: In the event that the Accounting Firm
cannot or will not make a decision in the manner provided above,
the Purchaser and the Vendor shall refer such matter to Ernst &
Young, LLP (the "Arbitrator") to arbitrate the dispute as a
single arbitrator in accordance with the Arbitration Act
(Alberta) within 60 days after the Objection Date. If the
Purchaser and the Vendor fail to refer such matter to the
Arbitrator within such 60 day period, then any one Party, on
behalf of itself and the other Parties, is hereby authorized to
so engage the Arbitrator, or failing which, a judge of the Court
of Queen's Bench (Calgary) shall direct the Purchaser and the
Vendor to arbitrate this dispute in accordance herewith. The
decision of the Arbitrator with respect to any matter in dispute
(including as to all procedural matters) shall be final and
binding on the Vendor and the Purchaser and shall not be subject
to appeal by either Party. The fees and expenses of the
Arbitrator shall be shared, one half to the Vendor and one half
to the Purchaser.
(h) Amendments to Effective Date Working Capital Statement: Upon
agreement with respect to all matters in dispute, or upon a
decision of the Accounting Firm or the Arbitrator with respect
to all matters in dispute, such amendments shall be made to the
Effective Date Working Capital Statement as may be necessary to
reflect such agreement or such decision, as the case may be. In
such event, references in this Agreement to the Effective Date
Working Capital Statement shall refer to the Effective Date
Working Capital Statement, as so amended.
(i) Final Effective Date Working Capital Statement: Payment of any
adjustment in the Purchase Price as a result of the final
Effective Date Working Capital Statement shall be made by the
Vendor to the Purchaser or by the Purchaser to the Vendor, as
the case may be, together with interest at the rate specified in
Section 2.5 calculated from the Closing Date to the date of
payment, within 10 Business Days after the delivery of the
Effective Date Working Capital Statement, pursuant to Section
2.3(c) or 2.3(h), as applicable; provided that, in the event
there is an objection to the Effective Date Working Capital
Statement by the Purchaser pursuant to Section 2.3(e) which is
resolved pursuant to Section 2.3(f) and/or Section 2.3(g), then,
payment of the disputed portion or any part thereof, if any, of
any adjustment in the Purchase Price shall be made by the Vendor
to the
- 22 -
Purchaser or by the Purchaser to the Vendor, as the case may be,
together with interest at the rate specified in Section 2.6
calculated from the Closing Date to the date of payment or
repayment, within 5 Business Days after the disputed portion has
been agreed upon by the Purchaser and the Vendor or determined
by the Accounting Firm or Arbitrator as provided herein.
2.4 DEPOSIT
Concurrent with the execution and delivery of this Agreement (i) the
Purchaser shall pay the Deposit to the Escrow Agent, and (ii) the
Purchaser, the Vendor and the Escrow Agent shall enter into the Escrow
Agreement whereupon the Escrow Agent shall receive and hold the Deposit
pursuant to the terms of the Escrow Agreement. The Escrow Agent shall
invest the Deposit in an interest bearing trust account until Closing.
In the event Closing does not occur, the Deposit and interest earned
thereon shall be paid to the Party ultimately entitled to the Deposit
pursuant to Section 7.3. If Closing occurs, the Deposit and interest
earned thereon shall be paid to the Vendor as a partial payment of the
Purchase Price.
2.5 ADJUSTMENT HOLDBACK AMOUNT
(a) The Purchaser shall retain from the Purchase Price otherwise
payable on the Closing Date an amount equal to the Adjustment
Holdback Amount. The Adjustment Holdback Amount shall, on the
Closing Date, be paid by the Purchaser to the Escrow Agent
whereupon the Escrow Agent shall receive and hold the Adjustment
Holdback Amount pursuant to the terms of the Holdback Agreement.
The Escrow Agent shall invest the Adjustment Holdback Amount in
an interest bearing trust account. The Purchaser shall pay all
costs of the Escrow Agent.
(b) The Adjustment Holdback Amount shall be released as follows:
(i) If the Purchaser does not give a written notice to the
Vendor on or before the Objection Date as contemplated
in Section 2.3(e), then the Vendor and the Purchaser
shall forthwith prepare, sign and deliver a joint notice
to the Escrow Agent directing the Escrow Agent to
release the Adjustment Holdback Amount, plus accrued
interest thereon, to the Vendor on account of the
Purchase Price, whereupon the Escrow Agent shall,
subject to Section 2.7(d), so release such amount to the
Vendor;
(ii) If the Purchaser gives a written notice to the Vendor on
or before the Objection Date as contemplated in Section
2.3(e), then:
(A) the amount which is the subject of the written
notice and which is not more than the Adjustment
Holdback Amount (the "Disputed Amount") shall
continue to be held in trust by the Escrow Agent
pending the resolution of the objection pursuant
to Sections 2.3(f)
- 23 -
or 2.3(g). Within 5 Business Days after the
portion of the Disputed Amount has been agreed
upon by the Purchaser and the Vendor or
determined by the Accounting Firm or Arbitrator
(the "Agreed Amount"):
(I) the Vendor and the Purchaser shall
forthwith prepare, sign and deliver a
joint notice to the Escrow Agent
directing the Escrow Agent to release
the Agreed Amount, plus accrued interest
thereon, to the Party determined to be
entitled thereto pursuant to Sections
2.3(f) or 2.3(g), whereupon such amount
shall, subject to Section 2.7(d), be so
released; and
(II) the Vendor and the Purchaser shall, if
applicable, forthwith prepare, sign and
deliver a joint notice to the Escrow
Agent directing the Escrow Agent to
release to the Vendor the amount, if
any, plus accrued interest thereon, by
which the Disputed Amount exceeds the
Agreed Amount, whereupon such amount
shall, subject to Section 2.7(d), be
released to the Vendor by the Escrow
Agent on account of the Purchase Price;
and
(B) the Vendor and the Purchaser shall forthwith
prepare, sign and deliver a joint notice to the
Escrow Agent directing the Escrow Agent to
release the amount, if any, plus accrued
interest thereon, by which the Adjustment
Holdback Amount exceeds the Disputed Amount,
whereupon such amount shall, subject to Section
2.7(d), be released to the Vendor by the Escrow
Agent on account of the Purchase Price.
For greater certainty, the Agreed Amount shall not
exceed the Disputed Amount.
2.6 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 shall bear interest
calculated daily and compounded monthly, from the day such amount was
due to be paid until the day such amount was paid, at the Prime Rate
regardless of whether such Party has given the other Party prior notice
of the accrual of interest hereunder.
2.7 WITHHOLDING TAX
(a) The Purchaser and the Vendor acknowledge that, pursuant to
Section 116 of the Tax Act, the Purchaser must withhold and
remit to the Receiver General the prescribed percentage of the
amount, if any, by which:
- 24 -
(i) the PAC Share Consideration exceeds the certificate
limit set out in a certificate of compliance (the "PAC
Compliance Certificate") obtained by PAC for the
purposes of Section 116 of the Tax Act in respect of the
sale of the PAC Shares by PAC; and
(ii) the PCI Share Consideration exceeds the certificate
limit set out in a certificate of compliance (the "PCI
Compliance Certificate") obtained by PCI for the
purposes of Section 116 of the Tax Act in respect of the
sale of the PCI Shares by PCI.
The applications for the PAC Compliance Certificate and the PCI
Compliance Certificate, along with any related correspondence,
shall be provided to and approved by the Purchaser, acting
reasonably.
(b) If a PAC Compliance Certificate, in respect of the sale of the
PAC Shares, is not delivered to the Purchaser by PAC at or prior
to Closing, the Purchaser will pay the prescribed percentage of
the PAC Share Consideration (the "PAC Withheld Amount") to the
Escrow Agent, whereupon the Escrow Agent shall receive and hold
the PAC Withheld Amount pursuant to the terms of the Escrow
Agreement. The Escrow Agent shall invest the PAC Withheld Amount
in an interest bearing trust account, and the PAC Withheld
Amount shall be released by the Escrow Agent as follows:
(i) If a PAC Compliance Certificate in respect of the sale
of the PAC Shares is delivered to the Escrow Agent
before 12:00 p.m. on the date which is 3 Business Days
prior to the end of the month following the month which
includes the Closing Date (the "Remittance Date") and
the certificate limit of such PAC Compliance Certificate
is not less than the PAC Share Consideration, then the
PAC Withheld Amount shall be released to PCI (on behalf
of PAC) on account of the PAC Share Consideration;
(ii) If the Canada Customs and Revenue Agency (the "CCRA")
indicates that payment of an amount (the "PAC Tax
Amount") which is not more than the PAC Withheld Amount
would allow the CCRA to issue a PAC Compliance
Certificate meeting the criteria described in Section
2.7(b)(i), the Escrow Agent shall pay the PAC Tax Amount
to the CCRA from the PAC Withheld Amount held in trust
by it and, upon delivery of the relevant PAC Compliance
Certificate to the Escrow Agent, the amount by which the
PAC Withheld Amount exceeds the PAC Tax Amount shall be
released to PCI (on behalf of PAC) on account of the PAC
Share Consideration;
(iii) If a PAC Compliance Certificate in respect of the sale
of the PAC Shares is delivered to the Escrow Agent
before 12:00 p.m. on the Remittance Date and the
certificate limit of such PAC Compliance Certificate is
less than the PAC Share Consideration then that portion
of the PAC Withheld
- 25 -
Amount which is equal to 25% of the certificate limit
shall be released to PCI (on behalf of PAC) on account
of the PAC Share Consideration; and
(iv) Any funds held in trust on account of the PAC Withheld
Amount by the Escrow Agent which are not paid or payable
pursuant to Sections 2.7(b)(i), 2.7(b)(ii) and
2.7(b)(iii) by 12:00 p.m. on the Remittance Date shall
be remitted by the Escrow Agent to the CCRA pursuant to
Section 116 of the Tax Act.
All interest earned on the PAC Withheld Amount shall be paid to
PCI (on behalf of PAC), net of all applicable withholdings,
which shall be remitted by the Escrow Agent to the CCRA in
accordance with Applicable Law.
(c) If a PCI Compliance Certificate, in respect of the sale of the
PCI Shares, is not delivered to the Purchaser by PCI at or prior
to Closing, the Purchaser will pay the prescribed percentage of
the PCI Share Consideration (the "PCI Withheld Amount") to the
Escrow Agent, whereupon the Escrow Agent shall receive and hold
the PCI Withheld Amount pursuant to the terms of the Escrow
Agreement. The Escrow Agent shall invest the PCI Withheld Amount
in an interest bearing trust account, and the PCI Withheld
Amount shall be released by the Escrow Agent as follows:
(i) If a PCI Compliance Certificate in respect of the sale
of the PCI Shares is delivered to the Escrow Agent
before 12:00 p.m. on the Remittance Date and the
certificate limit of such PCI Compliance Certificate is
not less than the PCI Share Consideration, then the PCI
Withheld Amount shall be released to PCI on account of
the PCI Share Consideration;
(ii) If the CCRA indicates that payment of an amount (the
"PCI Tax Amount") which is not more than the PCI
Withheld Amount would allow the CCRA to issue a PCI
Compliance Certificate meeting the criteria described in
Section 2.7(c)(i), the Escrow Agent shall pay the PCI
Tax Amount to the CCRA from the PCI Withheld Amount held
in trust by it and, upon delivery of the relevant PCI
Compliance Certificate to the Escrow Agent, the amount
by which the PCI Withheld Amount exceeds the PCI Tax
Amount shall be released to PCI on account of the PCI
Share Consideration;
(iii) If a PCI Compliance Certificate in respect of the sale
of the PCI Shares is delivered to the Escrow Agent
before 12:00 p.m. on the Remittance Date and the
certificate limit of such PCI Compliance Certificate is
less than the PCI Share Consideration then that portion
of the PCI Withheld Amount which is equal to 25% of the
certificate limit shall be released to PCI on account of
the PCI Share Consideration; and
- 26 -
(iv) Any funds held in trust on account of the PCI Withheld
Amount by the Escrow Agent which are not paid or payable
pursuant to Sections 2.7(c)(i), 2.7(c)(ii) and
2.7(c)(iii) by 12:00 p.m. on the Remittance Date shall
be remitted by the Escrow Agent to the CCRA pursuant to
Section 116 of the Tax Act.
All interest earned on the PCI Withheld Amount shall be paid to
PCI, net of all applicable withholdings, which shall be remitted
by the Escrow Agent to the CCRA in accordance with Applicable
Law.
(d) To the extent any Purchase Price is, pursuant to the provisions
hereof, payable by the Purchaser to the Vendor after Closing,
then Purchaser and the Vendor acknowledge and agree that Section
2.7(a), 2.7(b) and 2.7(c) (as applicable) shall apply mutatis
mutandis in respect of such payment, except that the "Remittance
Date", shall for the purposes of this Section 2.7(d), mean 12:00
p.m. on the date which is 3 Business Days prior to the end of
the month following the month which includes the date in which
such additional Purchase Price becomes payable.
2.8 MANNER OF PAYMENT
All payments to be made by the Vendor to the Purchaser pursuant hereto
shall be made by certified cheque, bank draft or wire transfer in
immediately available funds. All payments to be made by the Purchaser to
the Vendor pursuant hereto shall be made by wire transfer in immediately
available funds to the following account of PCI:
[Omitted - Confidential Information]
ARTICLE 3
CLOSING
3.1 PLACE AND CLOSING TIME
Unless otherwise agreed in writing by the Parties, Closing shall take
place at the Closing Time at the Place of Closing on the Closing Date.
3.2 DELIVERIES AT CLOSING
(a) Vendor Deliveries:
At Closing, the Vendor shall deliver or shall cause to be
delivered the following to the Purchaser:
(i) certificate(s) representing the Purchased Shares,
accompanied by stock transfer powers duly executed in
blank or duly executed instruments of
- 27 -
transfer, and any other documents necessary to transfer
to the Purchaser title to the Purchased Shares;
(ii) original share books, share ledgers and minute books and
corporate seals of the Purchased Corporations;
(iii) original minute books of the PCC Limited Partnership;
(iv) all books, records, files, reports, data and documents
pertaining to the Purchased Entities and in the
possession or control of the Purchased Entities, the
Vendor or the Manager, including any related to (A) the
PNG Assets described in items (i), (iii), (v) and (vi)
of the definition of Miscellaneous Interests, and (B)
the Title and Operating Documents, but excluding all
Proprietary Information;
(v) a certified copy of a resolution of the board of
directors of PCI which resolution authorizes the
execution and delivery of this Agreement and the
completion of the sale of the PCI Shares and the other
transactions contemplated by this Agreement;
(vi) a certified copy of a resolution of the board of
directors of PAC which resolution authorizes the
execution and delivery of this Agreement and the
completion of the sale of the PAC Shares and the other
transactions contemplated by this Agreement;
(vii) a certified copy of a resolution of the board of
directors of PEC authorizing the transfer of all of the
issued and outstanding Shares of PEC to the Purchaser as
contemplated by this Agreement;
(viii) a certified copy of a resolution of the board of
directors of PEI authorizing the transfer of all of the
issued and outstanding Shares of PEI from the Vendor to
the Purchaser as contemplated by this Agreement;
(ix) a certified copy of a resolution of the shareholders of
PEI authorizing the sale of all of the PNG Assets of PEI
to the PCC Limited Partnership pursuant to the PEI
Contribution Agreement;
(x) a certified copy of a resolution of the shareholders of
PEC authorizing the sale of all of the PNG Assets of PEC
to the PCC Limited Partnership pursuant to the PEC
Contribution Agreement;
(xi) all third Person consents required in respect of the
sale of the PNG Assets of PEI to the PCC Limited
Partnership;
(xii) all third Person consents required in respect of the
sale of all of the issued and outstanding shares of PEI
held by PCI to the Purchaser;
- 28 -
(xiii) original executed copies of the PEI Contribution
Agreement and the PEC Contribution Agreement for the
conveyance of all of the respective PNG Assets of PEI
and PEC to the PCC Limited Partnership;
(xiv) original executed copies of the Assumption of
Liabilities Agreement;
(xv) signed copies of all agreements and resolutions entered
into by the Purchased Corporations or their directors in
connection with the declaration of dividends payable in
stock and cash and the conversion of the debt of PEC
held by PCI and/or PAC to equity, as disclosed in the
Disclosure Schedule;
(xvi) certificates of status from appropriate authorities,
dated as of or about the Closing Date, as to the legal
existence of the Vendor and the Purchased Entities and
qualification to do business in the jurisdiction in
which each of such entities is organized;
(xvii) resignations of all directors and officers of each
Purchased Corporation;
(xviii) a release:
(A) in the form attached as Schedule
3.2(a)(xviii)(A), from each Purchased
Corporation of its directors and officers of and
from any indebtedness or liability owed by the
directors and officers of each Purchased
Corporation to such Purchased Corporation; and
(B) in the form attached as Schedule
3.2(a)(xviii)(B), from each director or officer
of each Purchased Corporation, of and from any
indebtedness, liability or claim owed by such
Purchased Corporation to such director or
officer;
(xix) a release in respect of the Management Agreement, in the
form attached as Schedule 3.2(a)(xix), executed by
▇▇▇▇▇▇-▇▇▇▇▇▇▇ and PCI;
(xx) an original copy of the Canadian Management Agreement,
executed by the Manager;
(xxi) a release, signed by the Bank, of all liability of PEI
and PEC under the Credit Facility (including in respect
of the payment of the principal amount thereof and
interest accrued thereon) and of all liens on the assets
of PEI and PEC arising pursuant to the Credit Facility,
all satisfactory to the Purchaser;
(xxii) a Letter of Credit in the amount of the LC Amount;
(xxiii) the certificates and other documents required by Section
6.1;
- 29 -
(xxiv) any PAC Compliance Certificates and PCI Compliance
Certificates obtained by the Vendor in accordance with
Section 2.7;
(xxv) an irrevocable direction to the Escrow Agent to release
the Deposit and all interest earned thereon as partial
payment of the Purchase Price payable pursuant to
Section 2.2;
(xxvi) a receipt for the Purchase Price;
(xxvii) an opinion of Vendor's Counsel, in form and substance
satisfactory to the Vendor and the Purchaser;
(xxviii)the Holdback Agreement; and
(xxix) such other documents required to be delivered by the
Vendor at the Closing pursuant to this Agreement.
(b) Purchaser Deliveries:
At Closing, the Purchaser shall deliver, or cause to be
delivered, the following to:
(i) the Vendor, an irrevocable direction to the Escrow Agent
to release the Deposit and all interest earned thereon
as a partial payment of the Purchase Price payable
pursuant to Section 2.2(a);
(ii) PCI, on behalf of the Vendor, the Purchase Price payable
pursuant to Section 2.2, less the Deposit, the
Adjustment Holdback Amount and, if applicable pursuant
to Section 2.7, the PAC Withheld Amount and/or the PCI
Withheld Amount;
(iii) a certificate of status from the appropriate authority,
dated as of or about the Closing Date, as to the legal
existence of the Purchaser and qualification to do
business in the jurisdiction in which such entity is
organized;
(iv) an opinion of Purchaser's Counsel, in form and substance
satisfactory to the Vendor and the Purchaser;
(v) the Escrow Agent, the Adjustment Holdback Amount;
(vi) the Escrow Agent, the PAC Withheld Amount and/or the PCI
Withheld Amount, if required pursuant to Section 2.7;
(vii) the Vendor, an original copy of the Management Agreement
signed by 1022700 Alberta Ltd.;
(viii) the Vendor, the certificates and other documents
required by Section 6.2;
- 30 -
(ix) the Vendor and the Escrow Agent, the Holdback Agreement;
and
(x) the Vendor, such other documents required to be
delivered by the Purchaser at Closing pursuant to this
Agreement.
ARTICLE 4
INTERIM PERIOD
4.1 ACCESS
(a) The Vendor shall and shall cause the Purchased Entities,
directly or indirectly (through the activities of the Manager
pursuant to the Management Agreement), to furnish to the
Purchaser and its authorized representatives reasonable access
during the Interim Period, during normal business hours, to the
Purchased Entities' properties, books and records (including the
PNG Assets) and will cause the Purchased Entities, directly or
indirectly (through the activities of the Manager pursuant to
the Management Agreement), to furnish to the Purchaser such
additional financial and operating data and other information as
it may reasonably request.
(b) The access afforded to the Purchaser and its representatives
pursuant to Section 4.1(a) shall include:
(i) access to the Purchased Entities' records, files,
reports, title opinions or title reports, if any, data
and documents directly or indirectly relating to the PNG
Assets at the offices of ▇▇▇▇▇▇ Energy, Ltd. in Calgary,
Alberta and the offices of ▇▇▇▇▇▇-▇▇▇▇▇▇▇ Oil Company in
Tulsa, Oklahoma, during normal business hours, for the
purpose of the Purchaser's review of the PNG Assets and
the title of the Purchased Entities thereto, including:
(A) all operating, technical, financial and
environmental data and information and the Title
and Operating Documents; and
(B) the PNG Assets described in items (i), (ii),
(iii), (vi), (vii) and (viii) of the definition
of Miscellaneous Interests;
(ii) a reasonable opportunity to conduct a physical
inspection of the PNG Assets (including the ▇▇▇▇▇,
Tangibles and surface areas included therein or
associated therewith) at the Purchaser's sole cost, risk
and expense, insofar as the Vendor can cause the
Purchased Entities or, pursuant to the Title and
Operating Documents, any third party to reasonably
provide such access to the PNG Assets; and
(iii) access to the Purchased Entities' minute books, books of
account, Tax records and technology;
- 31 -
provided that access to all such information and data described
in this Section 4.1(b) shall be subject to the restrictions
described in Section 4.1(a).
4.2 MAINTENANCE OF BUSINESS AND PNG ASSETS
Except as contemplated herein or as otherwise consented to by the
Purchaser in writing during the Interim Period (which consent shall not
be unreasonably withheld) and, subject to Section 4.6, the Vendor shall
(having regard to the terms and provisions of the Title and Operating
Documents and to the nature of the Purchased Entities' interest in the
PNG Assets) cause the Purchased Entities, directly or indirectly
(through the activities of the Manager pursuant to the Management
Agreement) to:
(a) conduct their activities and operations in the ordinary and
usual course of their business; and
(b) operate, maintain and effect repairs to the PNG Assets in a
proper and prudent manner in accordance with generally accepted
oil and gas industry practices, and in compliance with the Title
and Operating Documents and Applicable Law.
4.3 CERTAIN RESTRICTIONS
Except as contemplated herein and subject to Section 4.6, without first
obtaining the written consent of the Purchaser (which consent will not
be unreasonably withheld), during the Interim Period, the Vendor shall
ensure that the Purchased Entities, directly or indirectly (through the
activities of the manager pursuant to the Management Agreement), will
not:
(a) make or commit any single capital or extraordinary expenditure
in excess of $100,000 (except in the event of a catastrophe or
other event endangering life or property);
(b) issue, sell, lease, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, lease, pledge, disposition, grant
or encumbrance of any assets or properties whether now or
hereafter acquired, except for Permitted Encumbrances, except
for sales of Petroleum Substances in the ordinary course of
business, except for matters which would have a Financial Impact
on a Purchased Entity of less than $100,000 and except for the
contribution and conveyance of the PNG Assets of PEI and PEC as
contemplated in the PEI Contribution Agreement and PEC
Contribution Agreement, respectively;
(c) amalgamate with, merge into or with or otherwise consolidate
with any other Person or acquire all of the business or assets
of any Person;
(d) make loans to any Person or incur any indebtedness for borrowed
money or issue, deliver or sell or propose the issuance,
delivery or sale of any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of
any
- 32 -
kind or issue or issue or authorize issuance of any debt
securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for the obligation of any
Person;
(e) hire an employee, increase the compensation paid to, or amend or
implement any termination or severance arrangements with any
director, officer, agent, independent contractor or employee;
(f) other than the declaration of the dividends payable in stock and
cash and the conversion of debt of PEC held by PCI and/or PAC to
equity, each as disclosed in the Disclosure Schedule, declare,
set aside or pay any dividends, or make any distributions
(whether in cash, stock or property) in respect of its stock or
partnership interests (as the case may be) whether now or
hereafter outstanding, or split, combine or reclassify any of
its capital stock or partnership interests (as the case may be)
or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
capital stock or for its partnership interests (as the case may
be), or repurchase, redeem or otherwise acquire any shares of
its stock or partnership interest (as the case may be);
(g) amend its articles, by-laws or other constating documents;
(h) make any payment to or incur any obligation of any kind or
nature to PCI, PAC or any Affiliate of PCI or PAC or any
director or officer of the foregoing except in the ordinary
course of business consistent with past practices;
(i) take any action that will result in a change in the composition
of the board of directors of the Purchased Corporations, subject
to an exception in the case of the death or resignation or
disqualification of a director;
(j) change accounting policies or practices (including any change in
depreciation or amortization practices), except as required
under GAAP;
(k) propose or initiate the exercise of any right (including bidding
rights at Crown sales, rights under area of mutual interest
provisions and rights of first refusal) or option relative to,
or arising as a result of the ownership of, any of the PNG
Assets, or propose or initiate any operations on the Lands which
have not commenced or have not been committed to by a Purchased
Entity or by the Manager on their behalf as of the commencement
of the Interim Period, if such exercise or option would result
in a financial obligation of a Purchased Entity, after the
commencement of the Interim Period, in excess of $100,000;
(l) resign as operator or issue any notice of its intention to
resign as operator, of any of the Lands, Tangibles or the
Petroleum and Natural Gas Rights;
(m) purchase any securities (within the meaning of the Securities
Act (Alberta)) of any Person; or
- 33 -
(n) enter into or amend a contract, agreement, commitment or
arrangement with respect to any matter set forth in this Section
4.3, subject to any of the thresholds or limitations specified
therein.
4.4 INTERIM OPERATIONS-MAINTENANCE OF ASSETS
During the Interim Period, the Vendor will cause the Purchased Entities,
directly or indirectly (through the activities of the Manager pursuant
to the Management Agreement), to:
(a) unless consented to in writing by the Purchaser, refrain from
amending or agreeing to amend in any material respect or
terminating any of the Material Contracts or the agreements
required to be disclosed on the Disclosure Schedule pursuant to
Sections 5.1(ww) and 5.1(yy) prior to the expiration thereof or,
except in the ordinary course of business, any of the Title and
Operating Documents;
(b) unless consented to in writing by the Purchaser, refrain from
entering into any new material agreement respecting the PNG
Assets which would have a Financial Impact on a Purchased Entity
of more than $100,000;
(c) unless consented to in writing by the Purchaser, refrain from
surrendering or abandoning or allowing to expire any of the PNG
Assets except in the ordinary course of business;
(d) pay or cause to be paid all costs and expenses relating to the
PNG Assets which become due during the Interim Period;
(e) perform and comply with all covenants and conditions contained
in the Material Contracts, the agreements required to be
disclosed on the Disclosure Schedule pursuant to Sections
5.1(ww) and 5.1(yy) and in any other agreements and documents
(including the Title and Operating Documents) to which the PNG
Assets are subject; and
(f) continue in force all existing policies of insurance or renewals
thereof presently maintained by each Purchased Entity, take out
any additional insurance as may be reasonably requested by the
Purchaser, at the sole expense of the Purchaser, and give all
notices and present all claims under all policies of insurance
in a due and timely fashion.
4.5 PROPOSALS FOR DEALINGS OR OPERATIONS RE PNG ASSETS
Subject to Section 4.6, if a Purchased Entity, directly or indirectly
(through the activities of the Manager pursuant to the Management
Agreement), receives notice of proposed operations, or the exercise of
any right or option, respecting the PNG Assets from a third party during
the Interim Period in circumstances in which such operation or the
exercise of such right or option would require the consent of the
Purchaser pursuant to Sections
- 34 -
4.3 or 4.4, the following paragraphs shall apply to such operation or
the exercise of such right or option (the "Proposal"):
(a) The Vendor shall cause the applicable Purchased Entity to,
directly or indirectly (through the activities of the Manager
pursuant to the Management Agreement), give prompt notice of the
Proposal to the Purchaser, including with such notice the
particulars of such Proposal in reasonable detail, and whether
the applicable Purchased Entity recommends the exercise of its
rights with respect to the Proposal.
(b) The Purchaser shall, not later than (i) 4 Business Days prior to
the time the applicable Purchased Entity is required to make its
election with respect to the Proposal or (ii) one half of the
time remaining for an election with respect to the Proposal,
whichever is greater (the "Election Time"), advise the Vendor
and the applicable Purchased Entity, by written notice, whether
it wishes the applicable Purchased Entity to exercise its rights
with respect to the Proposal, provided that failure of the
Purchaser to provide such notice within such period shall be
deemed to be an election by the Purchaser to have the applicable
Purchased Entity proceed with its recommendation with respect to
the Proposal as specified in the notice delivered pursuant to
Section 4.5(a).
(c) The Vendor shall cause the applicable Purchased Entity to,
directly or indirectly (through the activities of the Manager
pursuant to the Management Agreement), make the election
requested by the Purchaser with respect to the Proposal within
the period during which the applicable Purchased Entity may
respond to the Proposal.
(d) A request by the Purchaser not to consent to any Proposal
required to preserve the existence of any of the PNG Assets
shall not entitle the Purchaser to any reduction of the Purchase
Price in the event that the Purchased Entity's interest therein
is terminated or reduced as a result of thereof, and such
termination or reduction shall be deemed to be a Permitted
Encumbrance and shall not constitute a failure of the Vendor's
representations and warranties pertaining to such PNG Assets.
4.6 EXISTING AUTHORIZATIONS FOR EXPENDITURE
Notwithstanding the preceding provisions of this Article 4, a Purchased
Entity shall be entitled to conduct those activities and operations
arising out of or incidental to the authorizations for expenditures
("AFE's") existing and effective as of the Signing Date, which AFE's
have been listed on Schedule 4.6.
4.7 INSURANCE
The Purchaser acknowledges that the Vendor maintains in favour of the
Purchased Entities, or causes the Purchased Entities to, directly or
indirectly (through the activities of the Manager pursuant to the
Management Agreement), maintain, adequate policies of
- 35 -
insurance and surety bonds. The Vendor will or will cause the Purchased
Entities to, directly or indirectly (through the activities of the
Manager pursuant to the Management Agreement), maintain such existing
policies of insurance and surety bonds until 11:59 p.m. on the Closing
Date. Thereafter the Purchaser will or will cause the Purchased Entities
to procure and maintain any and all policies of insurance as the
Purchaser or the Purchased Entities, at its or their respective cost and
expense, deem advisable. All risk of loss with respect to the Purchased
Entities or the PNG Assets or other properties of the Purchased Entities
shall pass to the Purchaser upon completion of Closing. After the
Closing Date the Vendor shall have no further responsibility or duty to
administer, in any fashion, claims under any insurance policies.
4.8 PURCHASER'S OR AFFILIATE DISTRIBUTION OF SECURITIES
The Vendor hereby consents to the disclosure by Enerplus Resources Fund,
the Purchaser or an Affiliate of such entities in a prospectus, offering
memorandum or other offering or disclosure document of such Persons of
the information concerning:
(a) PCI, PAC and the Purchased Entities and such other information
as is set forth in Schedule 4.8;
(b) the PNG Assets;
(c) the terms of and transactions contemplated by this Agreement;
and
(d) the Financial Statements.
The consent granted by this Section shall not constitute a
representation or warranty as to the accuracy or completeness of the
foregoing information.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARTIES
5.1 VENDOR'S REPRESENTATIONS AND WARRANTIES
The Vendor represents and warrants to the Purchaser that:
CONCERNING THE VENDOR AND THE PURCHASED ENTITIES
(a) Standing - Vendor, PEC and PEI: PCI, PAC and each Purchased
Corporation:
(i) is a corporation duly organized, validly existing and up
to date with all of its corporate filings under the laws
of its constating jurisdiction;
(ii) has all necessary corporate power and authority to own
or lease its properties and assets (which, at Signing
Date, in the case of Purchased Corporations, includes
the PNG Assets) and to carry on its business as now
being conducted; and
- 36 -
(iii) is duly qualified to own or lease its properties and
assets (which, at Signing Date, in the case of Purchased
Corporations, includes the PNG Assets) and to carry on
its business and is up to date with all of its corporate
filings required to be made in each jurisdiction in
which the nature of the business conducted by it or the
character of the properties and assets owned or leased
by it makes such qualification necessary.
(b) Standing - PCC Limited Partnership: The PCC Limited Partnership:
(i) is a limited partnership duly organized, validly
existing and up to date with all of its filings under
the laws of its constating jurisdiction;
(ii) has all necessary power and authority to own or lease
its properties and assets (which, at the Closing Date,
includes the PNG Assets) and to carry on its business as
now being conducted; and
(iii) is duly qualified to own or lease its properties and
assets (which, at the Closing Date includes the PNG
Assets) and to carry on its business and is up to date
with all of its filings required to be made in each
jurisdiction in which the nature of the business
conducted by it or the character of the properties and
assets owned or leased by it makes such qualification
necessary.
(c) Requisite Authority: Each of PCI and PAC has the requisite
corporate capacity, power and authority to execute this
Agreement and each of PCI, PAC and the Purchased Entities has
the requisite corporate or other capacity, power and authority
to execute the other agreements and documents required to be
delivered by it pursuant hereto and to perform the obligations
to which it thereby becomes subject.
(d) Authorization And Enforceability: Each of PCI and PAC has taken
all necessary corporate actions to authorize the execution,
delivery and performance of this Agreement, and the other
agreements and documents required to be delivered by it pursuant
hereto, including the sale of the PCI Shares by PCI and the sale
of the PAC Shares by PAC in accordance with the provisions of
this Agreement. Each Purchased Corporation has taken all
necessary corporate action to authorize the execution, delivery
and performance of those agreements and documents required to be
delivered by it pursuant hereto and to authorize the transfer
and assignment of the Purchased Shares to the Purchaser in
accordance with the provisions of this Agreement. The PCC
Limited Partnership has taken all necessary actions to authorize
the execution, delivery and performance of those agreements and
documents required to be delivered by it pursuant hereto. This
Agreement has been duly executed and delivered by each of PCI
and PAC and this Agreement constitutes, and all other documents
executed and delivered on behalf of PCI, PAC and a Purchased
Entity pursuant hereto shall, when executed and delivered,
constitute, valid and binding obligations of PCI, PAC and such
Purchased Entity
- 37 -
enforceable in accordance with their respective terms and
conditions, subject to the qualification that such
enforceability may be subject to (i) bankruptcy, insolvency,
fraudulent preference, reorganization or other laws affecting
creditors' rights generally, and (ii) general principles of
equity (regardless of whether such enforceability is considered
in a proceeding at equity or law).
(e) No Conflict: The execution and delivery of this Agreement and
the completion of the sale of the Purchased Shares to the
Purchaser in accordance with the terms of this Agreement are not
and will not be in material violation or breach of, or be in
material conflict with or require any material consent,
authorization or approval under:
(i) any term or provision of the constating documents of
PCI, PAC or a Purchased Entity other than any thereof
which have been obtained prior to the Signing Date or
will be obtained prior to the Closing Date;
(ii) other than the Title and Operating Documents, any permit
or other governmental authorization to which one or more
of PCI, PAC and a Purchased Entity are a party or by
which one or more of PCI, PAC and a Purchased Entity are
bound; or
(iii) any Applicable Law (except for approvals required under
the Competition Act) or any judicial order, award,
judgement or decree applicable to one or more of PCI,
PAC, a Purchased Entity, the Petroleum and Natural Gas
Rights, the Tangibles and the Purchased Shares.
(f) Private Companies: Each Purchased Corporation is not a
"reporting issuer" under relevant securities legislation or a
"distributing corporation" under relevant corporate legislation.
(g) Residency For Tax Purposes: Each of PCI and PAC is a
non-resident of Canada within the meaning of the Tax Act.
(h) GST Registrant: The PCC Limited Partnership is a registrant for
the purposes of the Excise Tax Act (Canada) and will be a
registrant at the time it acquires the PNG Assets. The GST
registration number of the PCC Limited Partnership is [omitted -
confidential information].
(i) Authorized and Issued Capital of the Purchased Corporations:
(i) The authorized share capital of PEC consists of an
unlimited number of common voting Shares, an unlimited
number of common non-voting Shares and an unlimited
number of first preferred Shares, of which 33,292,314.83
common voting Shares (forming part of the Purchased
Shares) have been validly issued and are outstanding as
fully paid and non-assessable Shares of PEC;
- 38 -
(ii) All shares of PEC which may be issued upon the
conversion of debt to equity by PCI prior to or at the
Closing shall be PCI Shares, shall form part of the
Purchased Shares and shall be, when issued, validly
issued and fully paid and non-assessable Shares of PEC;
and
(iii) The authorized share capital of PEI consists of an
unlimited number of common voting shares, of which
868.08 common voting Shares (together, forming part of
the Purchased Shares) have been validly issued and are
outstanding as fully paid and non-assessable shares of
PEI.
(j) Title to Purchased Shares:
(i) PCI is the registered and beneficial owner of all of the
PCI Shares and has good and marketable title to the PCI
Shares free and clear of all Security Interests except
those of the Purchaser arising pursuant to this
Agreement, and free and clear of any voting trusts,
demands or claims by any Person whatsoever; and
(ii) PAC is the registered and beneficial owner of all of the
PAC Shares and has good and marketable title to the PAC
Shares free and clear of all Security Interests except
those of the Purchaser arising pursuant to this
Agreement, and free and clear of any voting trusts,
demands or claims by any Person whatsoever.
(k) Subsidiaries: None of the Purchased Corporations have any
Subsidiaries and no other (and no agreement to acquire any)
equity or ownership interest in any Person, except that the PCC
Limited Partnership is a subsidiary of the Purchased
Corporations.
(l) No Share Rights: Other than the Shares referred to in Section
5.1(j), no Person shall have any Share Right or other agreement,
option or privilege (whether pre-emptive, contractual or
otherwise) capable of becoming a Share Right and the execution,
delivery and performance of this Agreement shall not give any
Person other than the Purchaser any Share Right.
(m) Minute Books: Except as it relates to transactions or matters
arising from or contemplated in this Agreement, the minute book
and share ledger of each Purchased Entity will be true and
correct in all material respects and such minute books shall
contain copies of all meetings of the directors and shareholders
or partners (as applicable) of each Purchased Entity and all
resolutions by consent (if any) of the directors and
shareholders or partners (as applicable) of each Purchased
Entity.
(n) Partners of the PCC Limited Partnership: At all times since the
formation of the PCC Limited Partnership, the only partners
(limited or general) of the PCC Limited Partnership have been
PEC and PEI.
- 39 -
(o) Partnership Interests Held:
(i) PEC is the registered and beneficial owner of a 1%
general partnership interest and 10,000 limited
partnership units in the PCC Limited Partnership and,
pursuant to the PEC Contribution Agreement, is entitled
to and will receive an additional 73,900,740 limited
partnership units on January 1, 2003, each free and
clear of all Security Interests, burdens, profit
interests, options, conversion privileges, restrictions,
encumbrances or other adverse claims of any kind or
character whatsoever.
(ii) PEI is the registered and beneficial owner of 10,000
limited partnership units in the PCC Limited Partnership
and, pursuant to the PEC Contribution Agreement, is
entitled to and will receive an additional 89,078,800
limited partnership limits on January 1, 2003, each free
and clear of all Security Interests, burdens, profit
interests, options, conversion privileges, restrictions,
encumbrances or other adverse claims of any kind or
character whatsoever.
(p) No Partnership Interest Rights: Other than as specified in
Section 5.1(o), no Person shall have any partnership interest or
other agreement, option or privilege (whether pre-emptive,
contractual or otherwise) capable of becoming a partnership
interest in the PCC Limited Partnership and the execution,
delivery and performance of this Agreement shall not give any
Person other than the Purchaser of any right to a partnership
interest in the PCC Limited Partnership.
(q) Financial Statements: The Financial Statements fairly present
the financial position of PCI and each Purchased Entity (as
applicable) as at the respective dates thereof, as well as the
results of operations and changes in financial position of PCI
and each Purchased Entity (as applicable) for the periods
covered thereby, as applicable, in accordance with GAAP
consistently applied and the accounting policies set out in the
notes to such Financial Statements; provided, however, that
those Financial Statements which are unaudited omit footnotes
and year-end adjustments.
(r) No Undisclosed Liabilities: Except as set forth in the
Disclosure Schedule, and except for:
(i) liabilities which are disclosed or adequately provided
for in the Financial Statements;
(ii) liabilities incurred in the ordinary course of business
of the Purchased Entities subsequent to September 30,
2002; and
(iii) liabilities as a result of transactions contemplated by
this Agreement;
- 40 -
each Purchased Entity has no liabilities which would be required
by GAAP to be disclosed in the financial statements of such
Purchased Entity and which in the aggregate are material to the
business, financial condition and results of operations of such
Purchased Entity, taken as a whole.
(s) Intellectual Property: Neither the Vendor nor any Purchased
Entity has received, directly or indirectly (through the
activities of the Manager pursuant to the Management Agreement),
notice that the technology owned or used by such Purchased
Entity infringes upon any patents, trade marks, trade secrets or
copyrights owned by other Persons.
(t) Bank Accounts: The Disclosure Schedule contains a complete and
correct list of all bank accounts and safety deposit boxes
maintained by the Purchased Entities.
(u) Loans and Credit Facilities: Except as set forth on the
Disclosure Schedule, the Purchased Entities have not entered
into, or otherwise arranged for, any loans, operating lines of
credit or other credit facilities or has outstanding any bonds,
debentures, mortgages, notes or similar indebtedness for
borrowed money or indebtedness in connection with capital or
operating leases having a financial impact in excess of $100,000
or non-recourse project financing not disclosed in or provided
for in the Financial Statements and the Purchased Entities are
not obligated to create or issue any bonds, debentures,
mortgages, notes or similar indebtedness for borrowed money or
indebtedness in connection with capital or operating leases
having a financial impact in excess of $100,000 or non-recourse
project financing not disclosed in or provided for in the
Financial Statements. The Disclosure Schedule contains an
accurate and complete summary of all loans, operating lines of
credit or other credit facilities, bonds, debentures, mortgages,
notes or similar indebtedness of the Purchased Entities for
borrowed money or indebtedness in connection with capital or
operating leases having a financial impact in excess of $100,000
or non-recourse project financing not disclosed in or provided
for in the Financial Statements. The only Security Interests
granted or created by the Purchased Entities in connection with
the foregoing indebtedness are those described in the Disclosure
Schedule.
(v) No Dividends or Fees: Other than as set forth on the Disclosure
Schedule, since the Effective Date, the Purchased Entities have
not:
(i) declared, authorized, paid or made any dividend or other
distribution to any shareholder or partner thereof which
would have effect after the Effective Date; or
(ii) paid or agreed to pay any corporate management fee other
than as disclosed in the Financial Statements, or in the
ordinary course of business and in accordance with past
practice.
- 41 -
(w) No Default: Neither the Vendor nor any Purchased Entity is in
default under, and, to the knowledge of the Vendor, no condition
exists that, with notice or lapse of time or both, would
constitute a default under:
(i) any loan agreement, evidence of indebtedness, or
instrument granting a Security Interest to which such
Purchased Entity is a party or by which such Purchased
Entity or its assets (including the PNG Assets) are
bound; or
(ii) any judgment, order or injunction of any court,
arbitrator or governmental agency,
which default or potential default would reasonably be expected
to affect materially and adversely the business, financial
condition or results of operations of a Purchased Entity, taken
as a whole.
(x) Applicable Law: Neither the Vendor nor any Purchased Entity has,
directly or indirectly (through the activities of the Manager
pursuant to the Management Agreement), received nor delivered
any written notices of non-compliance or alleged non-compliance
of any provisions of Applicable Law, non-compliance with which
would reasonably be expected to affect materially and adversely
the business, financial condition or results of operations of a
Purchased Entity, taken as a whole, and, to the Vendor's
knowledge, no Purchased Entity is in default under nor does any
condition exist that, with notice or lapse of time or both,
would constitute a default or a violation of Applicable Law
which such default or violation would reasonably be expected to
affect materially and adversely the business, financial
condition or results of operations of a Purchased Entity, taken
as a whole.
(y) Litigation: Except as set forth in the Disclosure Schedule, at
the date hereof:
(i) there are no actions, suits or other legal proceedings
subsisting or, to the knowledge of the Vendor,
threatened, in respect of a material aspect of the
business of any Purchased Entity, against a Purchased
Entity;
(ii) no Purchased Entity has been charged with a material
violation of, nor, to the knowledge of the Vendor,
threatened with a charge of a material violation of, any
Applicable Law relating to any material aspect of their
respective businesses or assets; and
(iii) the Purchased Entities have not commenced any litigation
which will not, as at the Closing Date, be discontinued,
on a without costs basis.
(z) Taxes: The fiscal year end of the Purchased Corporations, for
income tax purposes, is December 31 and the fiscal year end of
the PCC Limited Partnership has not as of the Signing Date been
set. The Purchased Corporations are taxable
- 42 -
Canadian corporations and the PCC Limited Partnership is, and
has been at all times, a Canadian partnership, for the purposes
of the Tax Act. Except as set forth in the Disclosure Schedule:
(i) the Purchased Entities have filed, or will prior to the
Closing file, all Tax Returns required to be filed under
Applicable Law prior to Closing;
(ii) the Purchased Entities have, to the knowledge of the
Vendor, made complete and accurate disclosure in such
returns and in all materials accompanying such Tax
Returns;
(iii) the Purchased Entities have paid or accrued all Taxes
due and payable under the Tax Returns referred to in
Section 5.1(z)(i);
(iv) the Purchased Entities have paid all Tax assessments and
reassessments and any penalties, interest, fines,
governmental charges and other amounts which the
relevant authority is entitled to collect from the
Purchased Entities;
(v) there are no actions, audits, assessments,
reassessments, suits, proceedings, investigations or
claims now subsisting against a Purchased Entity in
respect of Taxes paid or payable affecting the business
carried on by such Purchased Entity;
(vi) there are no matters which are the subject of any
agreement with any governmental authority relating to
claims for additional Taxes which affect the business of
a Purchased Entity nor, to the knowledge of the Vendor,
are any such matters under discussion with such
authorities;
(vii) there are no agreements, waivers or other arrangements
providing for an extension of time with respect to the
assessments or reassessment of any Tax or the filing of
any Tax Returns by, or the payment of any Tax by, or
levy of any governmental charge against a Purchased
Entity; and
(viii) the Purchased Entities have withheld from each payment
made by it the amount of all Taxes and other deductions
required to be withheld therefrom and have paid all such
amounts due and payable before the date hereof to the
proper taxing or other authority within the time
prescribed under Applicable Law.
(aa) Futures Transactions: Except as set forth on the Disclosure
Schedule, there are no Futures Transactions to which a Purchased
Entity is a party or by which a Purchased Entity is bound,
either as principal or surety.
(bb) Absence of Certain Changes: Except as set forth in the
Disclosure Schedule, since the Effective Date there has not
been:
- 43 -
(i) any material change by a Purchased Entity in accounting
methods or principles which would be required to be
disclosed under GAAP;
(ii) any outstanding dividend payable, any declaration or
payment of any dividend on, or any other distribution
with respect to, the Shares of the Purchased
Corporations or the partnership interest of the PCC
Limited Partnership or any repurchase, redemption or
other acquisition of any such Shares or partnership
interests;
(iii) a grant of any power of attorney;
(iv) other than as contemplated herein, a reduction in the
Purchased Corporations' stated capital; and
(v) authorized or paid, any bonus or similar payment not in
the ordinary course of business to any officer or
director of the Purchased Corporations.
(cc) Certain Contracts, Agreements, Plans and Commitments: Other than
in respect of the Title and Operating Documents and the
agreements required to be disclosed in the Disclosure Schedule
pursuant to Sections 5.1(ww) and 5.1(yy), the Disclosure
Schedule contains a complete and correct list of all of all
Material Contracts to which a Purchased Entity is a party or by
which it is bound, or in the case of item (ii), to which any of
them adhere or in which any of them participates (complete and
correct copies of descriptions of each of which, as in effect on
the date hereof, have been made available to the Purchaser),
including:
(i) any material management or employment contract providing
for personal services with respect to any period after
the Closing Date with any officer, consultant, director,
employee or any other Person;
(ii) any written agreements that contain any liability of a
Purchased Entity after the Closing Date for severance
pay, liabilities or obligations in respect of
termination or severance of employment;
(iii) any contract or agreement under which a Purchased Entity
has outstanding indebtedness for borrowed money or the
deferred purchase price of property in an amount which
is in the aggregate in excess of $100,000 or has the
right or obligation to incur any such indebtedness;
(iv) any guarantee or surety entered into by a Purchased
Entity that continues after Closing;
(v) any confidentiality or non-competition agreement which
restricts the right of a Purchased Entity to engage in
any type of business after the consummation of the
transactions contemplated by this Agreement; and
- 44 -
(vi) any lease or sublease entered into by a Purchased Entity
for office space.
(dd) Material Agreements: To the knowledge of the Vendor:
(i) none of the Material Contracts has, except as described
therein, been assigned or is the subject of any security
agreement entered into by PCI, PAC or a Purchased Entity
except for any assignment which could not reasonably be
expected to have a material adverse effect;
(ii) each of the Material Contracts constitute a legal and
binding obligation of the applicable Purchased Entity
and the third parties thereto enforceable in accordance
with their respective terms, subject to limitations with
respect to enforcement imposed by Applicable Law in
connection with bankruptcy, or similar proceedings and
to the extent that equitable remedies such as specific
performance and injunction are in the discretion of the
courts from which they are sought; and
(iii) the Purchased Entities have not terminated or cancelled
any term or condition of any Material Contract, no such
term or condition has been modified, amended or waived
where the effect of such modification, amendment or
waiver extends beyond the Effective Date and no proposal
or discussion with third parties for any such
termination, modification, amendment or waiver is
ongoing, except in each of the foregoing cases in a
manner which could not reasonably be expected to have a
material adverse effect on a Purchased Entity.
(ee) Employees: The Purchased Entities have not had since April 30,
2000 and will, as at the Closing Date not have, any employees or
consultants and have no outstanding claims, obligations or
liabilities, statutory or otherwise, relating to any previous
employees or consultants.
(ff) Resource Pools: The cumulative amount of the Resource Pools of
PEC as at September 30, 2002 will not be less than $19,600,000.
The cumulative amount of the Resource Pools of PEI as at
September 30, 2002 will not be less than $23,045,000. The
Purchased Entities have not since September 30, 2002, and will
not prior to Closing, use or renounce any of their Resource
Pools.
(gg) Intercompany Debt: The adjusted cost base of any advances or
inter-company debt owned by PEI to PEC or by PEI to PEC is not
less than the outstanding principal amount thereof which is, and
which will be at Closing, $42,832,923.
(hh) No Other Business Activities: To Vendor's knowledge, the
Purchased Entities do not, other than as set forth on the
Disclosure Schedule, have not previously (either directly or
through its predecessors or subsidiaries of predecessors),
carried out any business activities other than activities which
are incidental to or related to the Canadian upstream oil and
gas business.
- 45 -
(ii) Non-Oil and Gas Liabilities:
(i) Each of PCI and PAC has taken all necessary corporate
actions to authorize the execution, delivery and
performance of the Assumption of Liabilities Agreement
and that agreement has been duly executed and delivered
by each of PCI and PAC, is in full force and effect and
constitutes the valid and binding obligations of PCI and
PAC enforceable against it in accordance with its terms.
(ii) None of the Vendor or any Purchased Entity or any of
their subsidiaries has received, directly or indirectly,
notice or demand for or in respect of any Non-PNG
Related Environmental Liabilities, and to the Vendor's
knowledge, there are no current obligations in respect
of any Non-PNG Related Environmental Liabilities that
are outstanding.
(jj) Managed Interests: PEI has calculated and paid all amounts
required to be calculated and paid by it and performed all other
obligations required to be performed of it in accordance with
the terms of (i) a Royalty Agreement dated December 12, 1991
between PEI and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Ltd., (ii) an Overriding
Royalties Conveyance dated December 12, 1991 between PEI and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Ltd., (iii) a Gas Sales Agreement dated December
12, 1991 between PEI and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Ltd., (iv) a Purchase
Agreement dated July 22, 1994, and (v) the Non-Recourse Notes,
each as amended; and there exists no "event of default" or
"event of non-performance" (as the case may be), which has not
been cured, as contemplated under a Fixed Charge Debenture dated
December 12, 1991 and a Fixed Charge Debenture dated August 9,
1994, each granted by PCI to 507317 Alberta Ltd.
(kk) No Ongoing Obligations: As at the Closing Date, none of PCI or
PAC nor any Affiliate of PCI or PAC, the Manager nor any
Affiliate of the Manager nor any shareholder, director or
officer of the Purchased Corporations: (i) will be a party to
any transaction with a Purchased Entity; or (ii) will have any
contractual or other claim, express or implied, of any kind
whatsoever against a Purchased Entity except for transactions
accrued at or prior to Closing arising in the ordinary course of
business consistent with past practice.
(ll) Securities Disclosure: The information contained in Schedule 4.8
has been prepared in accordance with the requirements of the
United States Securities Exchange Act of 1934.
(mm) No Fees etc.: None of PCI, PAC or the Purchased Entities have
incurred any obligation or liability, contingent or otherwise,
for brokers' or finders' fees or commissions with respect to the
transactions herein for which the Purchaser or a Purchased
Entity shall have any obligation or liability.
CONCERNING THE PNG ASSETS
- 46 -
(nn) Title to PNG Assets: None of the Manager (or any Affiliate
thereof) nor the Purchased Entities nor any other Affiliate of
PCI and PAC has done any act or thing whereby any of the PNG
Assets may be cancelled or determined except for actions or
inactions which a prudent operator would take or fail to take
and, except for Permitted Encumbrances, the PNG Assets are now,
and will be at Closing, free and clear of all Burdens created
by, through or under the Manager (or any Affiliate thereof) the
Purchased Entities, PCI, PAC or any other Affiliate of PCI or
PAC.
(oo) Conveyance of PNG Assets: All of the right, title, estate and
interest in the assets (including the PNG Assets) held by PEI
and PEC on the Signing Date will be sold, assigned, transferred
and conveyed to the PCC Limited Partnership, absolutely on
January 1, 2003, together with all of the benefits and
advantages to be derived therefrom.
(pp) Quiet Enjoyment: Subject to the rents, covenants, conditions and
stipulations in the Title and Operating Documents and on the
lessee's or holder's part thereunder to be paid, performed and
observed, the PCC Limited Partnership may, as at Closing, hold
and enjoy its interest in the PNG Assets for the residue of
their respective terms and all renewals or extensions thereof,
where applicable, for its own use and benefit without any lawful
interruption of or by the Vendor or its Affiliates or any Person
claiming by, through or under the Manager (or any Affiliate
thereof) or by, through or under the Purchased Entities, PCI,
PAC or any other Affiliate of PCI or PAC.
(qq) AMIs and Areas of Exclusion: Except as set forth in the
Disclosure Schedule, to the knowledge of the Vendor, there are
no material area of mutual interest or area of exclusion
provisions applicable to and binding upon a Purchased Entity.
(rr) No Reduction: As at Closing, the interests of the PCC Limited
Partnership in the PNG Assets are not subject either to
reduction by virtue of the conversion or other alteration of the
interest of any third Person claiming by, through or under the
Manager (or any Affiliate thereof) or by, through or under the
Purchased Entities, PCI, PAC or any other Affiliate of PCI or
PAC, except for the Permitted Encumbrances or as set out in the
Land Schedule.
(ss) Joint Venture Audits: Except as set forth in the Disclosure
Statement, as of the Signing Date, there are no joint venture
audits which have been commenced against any Purchased Entity
having a Financial Impact in excess of $100,000 in respect of
those PNG Assets currently operated by a Purchased Entity (or
the Manager on its behalf) or to Vendor's knowledge, in respect
of those PNG Assets not operated by a Purchased Entity (or the
Manager on its behalf), pursuant to the Title and Operating
Documents, which joint venture audits have not been concluded as
at the Signing Date.
- 47 -
(tt) No Withholding: To the knowledge of the Vendor, all Title and
Operating Documents affecting a Purchased Entity's title to the
PNG Assets which are in the possession of the Manager (or any
Affiliate thereof) or a Purchased Entity, PCI or PAC or any
other Affiliate of PCI or PAC have been or will be made
available for investigation by the Purchaser pursuant to Section
4.1.
(uu) Insurance: No Purchased Entity has had coverage with respect to
the PNG Assets denied or limited by any insurance carrier to
which it has applied for insurance or with which it has carried
insurance, during the last two years.
(vv) Take or Pay Delivery Obligations and Payments: There are no Take
or Pay Delivery Obligations or Take or Pay Payments.
(ww) Production Sales Contracts: Except as listed on the Disclosure
Schedule, to the knowledge of the Vendor, there are no
production sales agreements or arrangements under which a
Purchased Entity, or any third party acting on behalf of a
Purchased Entity, is obligated to sell or deliver Petroleum
Substances allocable to the Petroleum and Natural Gas Rights,
other than contracts which are terminable on not more than 30
days notice without penalty or payment and which have a
Financial Impact of less than $100,000.
(xx) No Balancing Agreements: There are no agreements or arrangements
(commonly known as gas balancing, over-production or
underlift-overlift agreements or arrangements) having a
Financial Impact of more than $100,000 which are among two or
more Persons owning interests in a portion of the Lands or lands
pooled or unitized therewith, nor has there been any
circumstance or case whereby one of such Persons has taken, or
may hereafter take, a share of the production of Petroleum
Substances from such lands greater than it would otherwise be
entitled to by virtue of its interest in such Lands and which
excess taking entitles the other Persons to a credit in respect
of subsequent production from such lands by which a Purchased
Entity is bound and which pertain to the PNG Assets.
(yy) Transportation Agreements: Except as listed in the Disclosure
Schedule, to the knowledge of the Vendor, no Purchased Entity is
party to any agreement respecting the firm transportation of
Petroleum Substances having a term which expires more than 91
days after the Closing and having a Financial Impact of more
than $100,000.
(zz) Processing Agreements: To the knowledge of the Vendor, except as
set out in the Disclosure Schedule, no Purchased Entity is party
to any agreement respecting the processing of Petroleum
Substances other than contracts which are terminable on not more
than 91 days notice without penalty or payment.
(aaa) CO&O Agreements: To the knowledge of the Vendor, except as set
out in the Disclosure Schedule, no Purchased Entity is party to
any agreement respecting the
- 48 -
construction, ownership and operation of any Tangible having a
Financial Impact more than $100,000.
(bbb) No Default Notices: Neither the Vendor nor any Purchased Entity
has, directly or indirectly (through the activities of the
Manager pursuant to the Management Agreement), received nor
delivered any written notices of default under the Title and
Operating Documents or any notice alleging material default
under any other agreement pertaining to the PNG Assets.
(ccc) Offset and Accrued Drilling Obligations: Other than as disclosed
in the Disclosure Schedule, neither the Vendor nor any Purchased
Entity has, directly or indirectly (through the activities of
the Manager pursuant to the Management Agreement), received
written notice that any of the Leases are subject to any accrued
or drilling or off-set obligations which have not been satisfied
or waived.
(ddd) Royalties to Affiliated Persons: No officer, director or
consultant of the Purchased Corporations, PCI or PAC, nor any
associate or Affiliate of any such Person or any party not at
arm's length to the Purchased Corporations owns, has or is
entitled to any royalty, net profits interest, carried interest
or other encumbrance of any nature whatsoever which are based on
production from a Purchased Entity's properties or assets
(including the PNG Assets) or any revenue or rights attributed
thereto.
(eee) Payment of Royalties and Taxes: Neither the Vendor nor any
Purchased Entity has, directly or indirectly (through the
activities of the Manager pursuant to the Management Agreement),
received any written notice which remains in effect of
non-payment of royalties and ad valorem, property, production,
severance and similar taxes and assessments based on, or
measured by, ownership of the PNG Assets, the production of
Petroleum Substances from the Lands or the receipt of proceeds
therefrom that are payable by a Purchased Entity.
(fff) Environmental Matters: Except as set forth in the Disclosure
Schedule, the Purchased Entities:
(i) nor the Vendor have received, directly or indirectly
(through the activities of the Manager pursuant to the
Management Agreement), any orders or directives which
relate to environmental matters and which require any
work, repairs, construction or capital expenditures with
respect to the PNG Assets, where such orders or
directives have not been complied with in all material
respects;
(ii) nor the Vendor have received, directly or indirectly
(through the activities of the Manager pursuant to the
Management Agreement), any demand or notice issued with
respect to the breach of any Environmental Law
applicable to the PNG Assets, including, without
limitation, respecting the use, storage, treatment,
transportation or disposition of environmental
- 49 -
contaminants, which demand or notice remains outstanding
on the Closing Date; and
(iii) have obtained all permits, licenses and other
authorizations which are required under Environmental
Law to own or operate the PNG Assets and the failure of
which to obtain would have a material adverse effect
upon the current use or operation of such PNG Assets.
(ggg) ▇▇▇▇▇: To the knowledge of the Vendor, the Land Schedule
contains a list of all ▇▇▇▇▇.
(hhh) Abandonment of ▇▇▇▇▇:
(i) Neither the Vendor nor any Purchased Entity has
received, directly or indirectly (through the activities
of the Manager pursuant to the Management Agreement),
any notice under Applicable Law which remains
outstanding or from any operator of any of the ▇▇▇▇▇ to
the effect that any of the ▇▇▇▇▇ are required to be
abandoned.
(ii) To the extent, the Purchased Entities operated the ▇▇▇▇▇
at the time of abandonment, or to the extent the
Purchased Entities did not operate same at the time of
abandonment, to the Vendor's knowledge, all of the
▇▇▇▇▇, if any, which have been abandoned were abandoned
in accordance with all Applicable Laws regarding the
abandonment of ▇▇▇▇▇.
(iii) Operation of PNG Assets: The PNG Assets have been operated in
all material respects in accordance with generally accepted oil
and gas industry practices in a good and workmanlike fashion and
in compliance with Applicable Law and the terms and conditions
of all agreements relating thereto and the Purchased
Corporations currently maintain insurance for the joint account
in respect of loss or damage to such PNG Assets and the income
therefrom, which insurance has coverage limits that are
reasonable and prudent in the circumstances.
(jjj) Tangibles:
(i) To the knowledge of the Vendor, no material tangible
depreciable property and assets which are used, were
used or are intended to be used in producing,
processing, gathering, treating, measuring, making
marketable or injecting the Petroleum Substances or any
of them or in connection with water injection or removal
operations that pertain to the Petroleum and Natural Gas
Rights has been removed from its location since the
Signing Date nor has a Purchased Entity alienated or
encumbered any such tangible depreciable property and
assets since such date.
- 50 -
(ii) The Tangibles operated by the Purchased Entities (or the
Manager on its behalf), if any, are in good and operable
condition, reasonable wear and tear excepted.
(kkk) Production Allowables: None of the ▇▇▇▇▇ operated by the
Purchased Entities (or the Manager on its behalf) have been
produced in excess of applicable production allowables imposed
by Applicable Law since the Purchased Entities first acquired
their interests in the relevant PNG Assets.
(lll) AFE's: To the knowledge of the Vendor, other than as disclosed
in Schedule 4.6, there are no third party AFE's approved by a
Purchased Entity whereby such Purchased Entity's share of the
AFE which becomes payable after the date hereof would exceed
$25,000 individually and there are no outstanding cash calls, a
Purchased Entity's share of which exceeds $25,000, except as
listed on in Schedule 4.6.
5.2 PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Vendor that:
(a) Standing: The Purchaser is a corporation, duly organized,
validly existing under the laws of its jurisdiction of
incorporation, and duly registered and authorized to carry on
business in the Province of Alberta.
(b) Requisite Authority: The Purchaser has the requisite corporate
capacity, power and authority to execute this Agreement and the
other agreements and documents required to be delivered hereby
and to perform the obligations to which it thereby becomes
subject.
(c) Execution and Enforceability: The Purchaser has taken all
necessary corporate actions to authorize the execution, delivery
and performance of this Agreement, including the purchase of the
Purchased Shares in accordance with the provisions of this
Agreement. This Agreement has been duly executed and delivered
by the Purchaser, and this Agreement constitutes, and all other
documents executed and delivered on behalf of the Purchaser
hereunder shall, when executed and delivered constitute, valid
and binding obligations of the Purchaser enforceable in
accordance with their respective terms and conditions, subject
to the qualification that such enforceability may be subject to
(i) bankruptcy, insolvency, fraudulent preference,
reorganization or other laws affecting creditors' rights
generally, and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding at
equity or law).
(d) No Conflict: The execution and delivery of this Agreement by the
Purchaser and the completion of the purchase of the Purchased
Shares by the Purchaser in accordance with the terms of this
Agreement are not and will not be in violation
- 51 -
or breach of, or be in conflict with or require any consent,
authorization or approval under:
(i) any term or provision of the constating documents of the
Purchaser;
(ii) any permit or authority to which the Purchaser is a
party or by which the Purchaser is bound; or
(iii) Applicable Law (except for approvals required under the
Competition Act) or any judicial order, award, judgement
or decree applicable to the Purchaser.
(e) Litigation: There are no actions, suits or proceedings pending
or, to the knowledge of the Purchaser, threatened against the
Purchaser seeking relief which would prevent or materially
hinder the consummation of the transactions contemplated by this
Agreement.
(f) Investment Canada Act: The Purchaser is not a "non-Canadian"
within the meaning of the Investment Canada Act (Canada).
(g) Acting as Principal: The Purchaser is purchasing the Purchased
Shares as principal.
(h) Funds Available: The Purchaser has sufficient cash, available
lines of credit or other sources of immediately available funds
to enable the Purchaser to make payment of the Purchase Price
and any other amounts to be paid by it hereunder (including any
adjustment to the Purchase Price).
(i) No Fees etc.: The Purchaser has not incurred any obligation or
liability, contingent or otherwise, for brokers' or finders'
fees or commissions with respect to the transactions herein for
which the Vendor shall have any obligation or liability.
5.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Each Party acknowledges that the other may rely on the representations
and warranties made by such Party pursuant to Sections 5.1 or 5.2, as
the case may be. The representations and warranties in Sections 5.1 and
5.2 shall be true on the Signing Date and on the Closing Date, and such
representations and warranties shall continue in full force and effect
and shall survive the Closing Date for the Survival Period applicable
thereto for the benefit of the Party for which such representations and
warranties were made.
5.4 NO ADDITIONAL REPRESENTATIONS OR WARRANTIES BY VENDOR
Except as and to the extent set forth in Section 5.1, the Vendor makes
no representation or warranties whatsoever, and disclaims all liability
and responsibility for any
- 52 -
representation, warranty, statement or information made or communicated
(orally or in writing) to the Purchaser (including any opinion,
information or advice which may have been provided to the Purchaser by
any officer, shareholder, director, employee, agent, consultant or
representative of a Purchased Entity, the Vendor, Affiliates of the
Vendor, the Vendor's Counsel or any other agent, consultant,
representative or Person, collectively referred to as the "Vendor's
Representatives"). Without limiting the generality of the foregoing,
except as and to the extent, if any, set forth in Section 5.1, the
Vendor makes no representations or warranties as to:
(a) title to any of the Purchased Entity's interests in any
properties or assets, including the PNG Assets;
(b) the quantity, quality or recoverability of Petroleum Substances
respecting the Lands;
(c) any estimates of the value of the PNG Assets or the revenues
applicable to future production from the Lands;
(d) any engineering, geological, environmental or other
interpretations or economic evaluations respecting the PNG
Assets;
(e) the rates of production of Petroleum Substances from the Lands;
(f) the quality, condition or serviceability of the PNG Assets;
(g) the suitability of any of the PNG Assets use for any purpose; or
(h) any information provided or made available to the Purchaser by
the Vendor, a Purchased Entity or the Vendor's Representatives,
including the Title and Operating Documents, the Financial
Statements, any engineering report or update, books, accounts,
records, minute books, Tax Returns and filings and other
information and documents of the Purchased Entities and the
Vendor.
Without restricting the generality of the foregoing, subject to the
Vendor and the Purchased Entities complying with Section 4.1, the
Purchaser acknowledges that it has had full access to all information
with respect to the PNG Assets and the business, financial condition,
operations and prospects of the Purchased Entities and has made its own
independent investigation, analysis, evaluation and inspection of the
Purchased Entities, the PNG Assets and the business, financial
condition, operations and prospects of the Purchased Entities, the PNG
Assets and the extent and value of the reserves of Petroleum Substances
attributable thereto and that it has relied solely on such
investigation, analysis, evaluation and inspection as to its assessment
of the quantum and value of the PNG Assets and the value of the
Purchased Shares.
- 53 -
5.5 NO MERGER
The representations and warranties in Sections 5.1 and 5.2 shall be
deemed to apply to all transfers, assignments and other documents
conveying any of the Purchased Shares from the Vendor to the Purchaser.
Until the end of the Survival Period applicable thereto, 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.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER TO CLOSE
The obligation of the Purchaser to complete the purchase of the
Purchased Shares from the Vendor pursuant to this Agreement is subject
to the fulfilment, on or prior to the Closing Date, of the following
conditions precedent:
(a) Representations and Warranties: All representations and
warranties of the Vendor contained in this Agreement shall,
except where a specific time is otherwise indicated, be true at
and as of the Signing Date and the Closing Date as if made then
in each case, except for inaccuracies which are not in the
aggregate material, and a certificate in the form attached as
Schedule 1.2(f) to that effect from a senior officer of PCI and
PAC shall have been delivered to the Purchaser.
(b) Covenants and Agreements: The Vendor 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 the Vendor at or prior to the Closing Date and a
certificate in the form attached as Schedule 1.2(f) to that
effect from a senior officer of PCI and PAC shall have been
delivered to the Purchaser.
(c) No Adverse Physical Changes: The Purchaser shall be satisfied,
acting reasonably, that, from the Signing Date to the Closing
Date, there has been no: (i) physical change in any of the PNG
Assets (other than production of Petroleum Substances in the
ordinary course) which has or would have a material adverse
effect on the value, use or operation of the PNG Assets in the
aggregate; and (ii) material adverse effect on or a material
adverse change to any of the Purchased Entities (including their
business, financial condition, operations or future prospects)
but excluding all those effects and changes that may affect the
Canadian upstream oil and gas industry in general, and a
certificate in the form attached as Schedule 1.2(f) to that
effect from a senior officer of PCI and PAC shall have been
delivered to the Purchaser.
(d) PNG Assets: The Purchaser shall be satisfied that (i) the PNG
Assets shall have been sold, transferred, assigned, conveyed and
contributed to the PCC Limited
- 54 -
Partnership by PEI and PEC, and (ii) immediately prior thereto,
the Vendor and PEC shall have entered into the Assumption of
Liabilities Agreement.
(e) No Action or Proceeding: No suit, action or other proceeding
shall, at Closing, be pending against any of the Parties or a
Purchased Entity before any court or governmental entity seeking
to restrain, prohibit, obtain damages or other relief in
connection with the consummation of the transactions herein
which would materially and adversely affect the Purchaser or a
Purchased Entity.
(f) Release of Security: The Purchaser shall have received delivery
of an Encumbrance Discharge in respect of all Security Interests
to the extent such security encumbers the PNG Assets, the
Purchased Shares or the partnership interests of the Purchased
Corporations in the PCC Limited Partnership (except to the
extent that such Security Interests are Permitted Encumbrances).
(g) Due Diligence: The Purchaser shall have conducted and completed
a due diligence investigation relating to all aspects (including
with respect to environmental, legal and operational due
diligence matters) of all mining and non-Canadian oil or gas
exploration, development, operations and activities (including
all mining claims, prospects and interests) held or carried on,
directly or indirectly, by a Purchased Entity or by any of its
predecessors or any subsidiary of a predecessor and the
Purchaser, shall be satisfied, acting reasonably, that the
results of any and all such investigations, if determined
adversely, could not reasonably be expected to result in a
Financial Impact, whether absolute or contingent, on PEC in
excess of $[omitted].
(h) Consents: The Purchaser shall have received delivery of all
third Person consents, waivers and approvals to the transaction
contemplated herein and to the restructuring to be effected
post-Closing by the Purchaser and its Affiliates required in
respect of PEI and its PNG Assets, in a manner and on terms and
conditions satisfactory to the Purchaser.
(i) Letter of Credit: The Purchaser shall be satisfied, acting
reasonably, with the form of and content of the Letter of Credit
to be provided pursuant to Section 9.8.
(j) Closing Deliveries: The Purchaser shall have received delivery
of all documents required to be delivered by the Vendor pursuant
to Section 3.2(a).
(k) Outside Date: The Closing shall have occurred not later than the
Outside Date.
6.2 CONDITIONS TO OBLIGATIONS OF VENDOR TO CLOSE
The obligation of the Vendor to complete the sale of the Purchased
Shares to the Purchaser pursuant to this Agreement is subject to the
satisfaction at or prior to the Closing Date of the following conditions
precedent:
- 55 -
(a) Representations and Warranties: All representations and
warranties of the Purchaser contained in this Agreement shall,
except where a specific time is otherwise indicated, be true at
and as of the Signing Date and the Closing Date as if made then
in each case except for inaccuracies which are not in the
aggregate material and a certificate in the form attached as
Schedule 1.2(g) to that effect from a senior officer of the
Purchaser shall have been delivered to the Vendor.
(b) Covenants and Agreements: The 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 the Purchaser at or prior to the Closing Date and a
certificate in the form attached as Schedule 1.2(g) to that
effect from a senior officer of the Purchaser shall have been
delivered to the Vendor.
(c) No Action or Proceeding: No suit, action or other proceeding
shall, at Closing, be pending against any of the Parties or a
Purchased Entity before any court or governmental entity seeking
to restrain, prohibit, obtain damages or other relief in
connection with the consummation of the transactions herein
which would materially and adversely affect the Vendor or a
Purchased Entity.
(d) Consents: The Vendor shall have received delivery of all third
Person consents, waivers and approvals to the transaction
contemplated herein required in respect of PEI and its PNG
Assets, in a manner and on terms and conditions satisfactory to
the Vendor.
(e) Closing Deliveries: The Vendor shall have received delivery of
all documents required to be delivered by the Purchaser pursuant
to Section 3.2(b).
(f) Outside Date: The Closing shall have occurred not later than the
Outside Date.
6.3 PARTIES TO EXERCISE DILIGENCE WITH RESPECT TO CONDITIONS, ETC.
Each Party shall proceed diligently, honestly and in good faith and use
all reasonable efforts with respect to all matters within its control to
satisfy the conditions referred to in Sections 6.1 and 6.2. In
particular:
(a) The Vendor and the Purchaser shall each use all of their
respective reasonable efforts, and shall cooperate with each
other, to obtain all governmental and regulatory filings,
approvals and consents as may be or become necessary for or in
connection with the consummation of the transactions
contemplated by this Agreement.
(b) The Vendor and Purchaser will, at the request of the other
Party, from time to time during the Interim Period, provide the
other Party and its representatives with copies of all
correspondence or documents (including drafts thereof) related
to the satisfaction of all the conditions to Closing together
with such written
- 56 -
advice and information with respect to the status of the
Purchaser's or the Vendor's (as the case may be) efforts to
obtain the satisfaction of the conditions to Closing as the
Vendor or the Purchaser (as the case may be) may reasonably
request.
The Vendor shall reimburse the Purchaser for 50% of the application fee
for the filing by the Purchaser of a request for an advance ruling
certificate pursuant to the Competition Act in respect of the
transactions contemplated herein.
6.4 WAIVER OF CONDITIONS
The conditions in Section 6.1 are for the sole benefit of the Purchaser
and the conditions in Section 6.2 are for the sole benefit of the
Vendor. The Party for the benefit of which such conditions have been
included may waive any of them, in whole or in part, by written notice
to the other Party.
6.5 FAILURE TO SATISFY CONDITIONS
If any of the conditions in Sections 6.1 or 6.2 has not been satisfied
at or before the Closing Date and such condition has not been waived by
the Party for the benefit of which such condition has been included,
such Party may terminate this Agreement pursuant to Section 7.1 by
written notice to the other Party prior to the Closing. The Purchaser
shall use reasonable efforts to waive the condition set out at Section
6.1(g) as soon as possible after the Signing Date.
ARTICLE 7
TERMINATION
7.1 GROUNDS FOR TERMINATION
This Agreement may be terminated prior to the Closing Date:
(a) by the mutual written agreement of the Vendor and the Purchaser;
(b) in accordance with Section 6.5 by the Party and in the
circumstances contemplated thereby; or
(c) by the Vendor or by the Purchaser if the consummation of such
transactions would violate any non-appealable final order,
decree or judgment of any court or governmental body having
competent jurisdiction;
provided that, notwithstanding anything to the contrary express or
implied herein, a Party shall not be allowed to exercise any right of
termination pursuant to this Section 7.1 if the event giving rise to
such right is due to a Purchase Agreement Default by such Party.
- 57 -
7.2 EFFECT OF TERMINATION
If this Agreement is terminated by the Vendor or by the Purchaser as
permitted under Section 7.1:
(a) except as contemplated by this Section 7.2, such termination
shall be without liability of any Party to any other Party to
this Agreement, or to any of their shareholders, directors,
officers, employees, agents, consultants or representatives, and
the Parties shall be released from all of their obligations
under this Agreement;
(b) if such termination shall result from the Purchase Agreement
Default of a Party, such Party shall not be released from such
Purchase Agreement Default and shall be fully liable for any and
all losses, costs, damages (excluding consequential damages),
expenses, charges, fines, penalties, assessments or other
liabilities sustained or incurred by the other Party or Parties
directly or indirectly as a result thereof;
(c) the Deposit and all interest earned thereon shall be paid to the
Party entitled thereto as determined in Section 7.3;
(d) the Purchaser shall promptly return to the Vendor all materials
delivered to the Purchaser by the Vendor hereunder, together
with all copies of them that may have been made by or for the
Purchaser; and
(e) Article 8, Article 9 and Section 12.6 shall survive any
termination of this Agreement.
7.3 ENTITLEMENT TO DEPOSIT ON TERMINATION
If this Agreement is terminated pursuant to Section 7.1 and the event
giving rise to the termination is not due to the Purchase Agreement
Default of the Purchaser, then the Deposit provided for in Section 2.4
shall be returned to the Purchaser, together with interest earned
thereon. However, if this Agreement is terminated pursuant to Section
7.1 prior to Closing as a result of a Purchase Agreement Default by the
Purchaser, then such Deposit, together with the interest earned thereon,
may be retained by the Vendor and applied by the Vendor on account of
its damages contemplated by Section 7.2(b) as a genuine pre-estimate of
the Vendor's liquidated damages and not as a penalty. If the Vendor's
actual damages exceed the Deposit and all interest earned thereon, the
Vendor shall not be entitled to recover the full amount of its actual
damages.
- 58 -
ARTICLE 8
INFORMATION, MATERIALS AND CONTINUING REPORTS
8.1 ACCESS TO INFORMATION
After the Closing Date, the Vendor may upon reasonable notice to the
Purchaser and subject to contractual restrictions relating to
disclosure, have access during business hours to the relevant Title and
Operating Documents, any engineering report, the Financial Statements
and the financial statements, books, accounts, records, minute books,
Tax Returns, Tax assessments, filings, maps, documents, files,
information and materials of the Purchased Entities and to obtain and
copy information in respect of matters arising out of or relating to any
period of time through the Closing if copies of such records or if the
information derived from such access would be helpful and beneficial to
the Vendor or its Affiliates:
(i) in connection with audits;
(ii) in connection with the Vendor's dealings with taxing and
other regulatory authorities;
(iii) to comply with Applicable Law; and
(iv) in connection with any action, suit or proceeding
commenced or threatened by the Purchased Entities, the
Purchaser or any third Person against the Vendor, its
Affiliates, or its or their respective directors,
officers, employees, agents, solicitors, engineers,
accountants and consultants for which the Vendor or its
Affiliates may have any liability.
8.2 MAINTENANCE OF INFORMATION
The Purchaser agrees that all of the information, materials and other
records of the Purchased Entities, including the general corporate or
partnership records, the financial and accounting records and the Tax
records, to the extent such information, material and other records
relate to or were created with respect to matters arising or relating to
the period through the Closing, shall be retained, maintained in good
order and good condition and kept in a reasonably accessible location by
the Purchaser and its Affiliates for a period of time (the "Retention
Period") beginning on the Closing Date and ending on the later of:
(a) the expiration of any applicable limitations periods for all Tax
periods beginning before the Closing, as such limitations are
provided for under Applicable Law;
(b) the end of such period as may be required by Applicable Law; or
(c) 5 years following the Closing.
- 59 -
The Purchaser further agrees that the Vendor and its Affiliates may,
during the Retention Period at their expense, make such copies of the
information and materials described above as they may reasonably
request, provided that at any time prior to the expiration of the
Retention Period, the Purchaser may destroy or give up possession of any
such information or materials if it first offers the Vendor the
opportunity (by delivery of at least 60 days prior written notice to the
Vendor, which notice shall contain a detailed listing of the information
and materials proposed to be destroyed, with an additional copy of such
notice delivered to the attention of the Vendor's Tax department), at
the Vendor's expense, without any payment to the Purchaser, to obtain
delivery of or a copy of so much of such information or materials as the
Vendor, in its sole discretion, desires.
8.3 TAX RETURNS
The Vendor shall prepare and file all Tax Returns and forms for Taxes
applicable to the Purchased Entities for periods ending on or before the
Closing Date and the Purchaser shall (i) provide the Vendor reasonable
access to all information required to do so on a timely basis, and (ii)
have an opportunity to review, comment on and approve, acting
reasonably, such Tax Returns prior to the filing of same. The Vendor
shall be entitled to use Resource Pools of a Purchased Entity to
eliminate any liabilities of such Purchased Entity for Taxes in such Tax
Returns, to the extent such pools are eligible to eliminate any such
liabilities.
8.4 FINANCIAL INFORMATION
(a) The Vendor agrees that upon the written request of the
Purchaser, if required by any securities regulator in connection
with the filing by the Purchaser or its Affiliates, or any of
them, of public disclosure or other documents after the Closing,
indicating what financial or other information in relation to a
Purchased Entity is required and the purpose of such request,
the Vendor will to the extent required by Applicable Law provide
to the Purchaser and its auditors access to any financial
information in the possession of the Vendor relating to a
Purchased Entity (including without limitation source records,
production records and invoices, and all other financial
statements and summaries previously prepared by the Vendor or a
Purchased Entity or predecessors in title to any of them and in
the possession of the Vendor) and reasonable access to its
personnel during normal hours (such access and financial
information referred to in this Section 8.4 as the (the
"Financial Information"), the intention of this Section 8.4(a)
being that the Vendor will use reasonable commercial efforts to
provide access to the Financial Information sufficient to allow
the Purchaser to prepare any such financial statements and to
allow the Purchaser's auditors to express an audit opinion
without reservation in respect of any financial statements
prepared in respect of a Purchased Entity.
(b) The Vendor shall provide a representation letter in connection
with any matter referred to in Section 8.4(a) to the auditors of
the Purchaser, which is reasonable in form and substance under
the circumstances.
- 60 -
(c) Any disclosure by the Purchaser of the Financial Information
solely for the purposes set out in Section 8.4(a) and to the
extent reasonably necessary to fulfil same shall not constitute
a breach by the Purchaser of any confidentiality obligations
pursuant to this Agreement or the Confidentiality Agreement.
8.5 INFORMATION SYSTEMS
From and after Closing, the Vendor will use its best efforts to work and
co-operate with the Purchaser in an effort to provide to the Purchaser
all information pertaining to the Purchased Entities (including the
information pertaining to the PNG Assets) in a form which will
accommodate the integration of such information into the Purchaser.
ARTICLE 9
LIABILITY AND INDEMNIFICATION
9.1 DEFINED TERMS
In this Agreement:
"Additional Indemnitees" means, with respect to any Person to which an
indemnity is granted pursuant to this Article 9, its Affiliates and the
respective directors, officers, servants, agents, advisors and employees
of that Person and its Affiliates.
"Indemnified Losses" means all losses, costs, damages, expenses,
charges, fines, penalties, assessments or other liabilities whatsoever,
but does not (except to the extent claimed by a third Person in respect
of Non-PNG Related Environmental Liabilities) include consequential,
incidental, economic or punitive losses, damages or claims.
"Notice of Claim" means a notice by the Vendor or the Purchaser, as
applicable, on behalf of itself or one or more Additional Indemnities
(if applicable) of a claim for Indemnified Losses pursuant to Section
9.2 or 9.3, as applicable, together with detailed particulars as to the
nature and amount of the claim, the basis which it is sought and the
provisions of this Agreement applicable to such claim.
"Survival Period" means:
(i) in respect of the representations and warranties set out
in Sections 5.1(z) and 5.1(ee), the period ending on the
day which is [omitted] days after the expiry of all
reassessment periods in respect of any taxation years,
or similar reporting periods, of a Purchased Entity
which ended, or end, on, or prior to, the Closing Date;
(ii) in respect of the representations, warranties, covenants
and agreements set out in Sections 5.1(j), 5.1(o),
5.1(hh), 5.1(ii), 9.2(d), 9.2(f), 9.2(g) and 9.2(h) an
indefinite period following the Closing Date; and
- 61 -
(iii) for all other representations, warranties, covenants and
agreements, a period ending [omitted] months after the
Closing Date.
9.2 RESPONSIBILITY OF VENDOR
Subject to the limitations set forth herein, the Vendor shall:
(a) be liable to the Purchaser and its Additional Indemnitees
(which, after Closing, shall include the Purchased Entities) for
all Indemnified Losses which any one or more of them could
suffer, sustain, pay or incur; and
(b) indemnify and save harmless the Purchaser and its Additional
Indemnitees (which, after Closing, shall include the Purchased
Entities) from and against all Indemnified Losses which could be
brought against or suffered by any one or more of them or which
any one or more of them could sustain, pay or incur;
as a direct result of any act, omission, circumstance or other matter
arising out of, resulting from, attributable to or connected with:
(c) any Purchase Agreement Default made by the Vendor herein or in
any document delivered at Closing;
(d) a breach by the Vendor or the failure of the Vendor to perform
or observe any of the covenants, indemnities or agreements to be
performed by the Vendor under the Assumption of Liabilities
Agreement having a Financial Impact on PEC, the Purchaser or any
of the Purchaser's Affiliates in excess of $100,000,
individually or in the aggregate;
(e) any termination of this Agreement by the Purchaser as
contemplated in Section 7.2(b);
(f) any reassessment by the Minister of National Revenue for
withholding Tax, plus penalties and interest attributable to the
Purchase Price;
(g) any reassessment by the Minister of National Revenue for Tax,
plus penalties and interest attributable to the declaration of
dividends payable in stock made by PEC and PEI during the
Interim Period or on the Closing Date; and
(h) any Tax, plus penalties and interest arising from the conversion
of debt of PEC to equity as per Section 5.1(i).
9.3 RESPONSIBILITY OF PURCHASER
Subject to the limitations set forth herein, the Purchaser shall:
(a) be liable to the Vendor and its Additional Indemnitees for all
Indemnified Losses which any one or more of them may suffer,
sustain, pay or incur; and
- 62 -
(b) indemnify and save harmless the Vendor and its Additional
Indemnitees from and against all Indemnified Losses which may be
brought against or suffered by any one or more of them or which
any one or more of them may sustain, pay or incur,
as a direct result of any act, omission, circumstance or other matter
arising out of, resulting from, attributable to or connected with
(whether before, on or after the Closing Date):
(c) any Purchase Agreement Default made by the Purchaser herein or
in any document delivered at Closing; or
(d) any termination of this Agreement by the Vendor pursuant to
Section 7.2(b); or
(e) the PNG Assets or a Purchased Entity, including all Abandonment
and Reclamation Obligations and PNG Related Environmental Damage
(but excluding all Non-PNG Related Environmental Liabilities),
except in-so-far as the Purchaser remains entitled to make a
claim against the Vendor pursuant to Section 9.2.
9.4 LIMIT ON RESPONSIBILITY
(a) Limit on Vendor's Responsibility: The Vendor's obligations and
liability under this Agreement shall be subject to the following
limitations:
(i) Other than in respect of Indemnified Losses attributable
to Sections 9.2(c), 9.2(e) and attributable to a
Purchase Agreement Default in respect of Section
5.1(ii), the Vendor shall have no liability in
connection with any Indemnified Losses until the
aggregate of such claims exceeds $[omitted] and upon the
aggregate of such Indemnified Losses exceeding
$[omitted], the Vendor shall be required to indemnify in
respect of the amount of all such Indemnified Losses.
With respect to Indemnified Losses attributable to
Sections 9.2(c), 9.2(e) and attributable to a Purchase
Agreement Default in respect of Section 5.1(ii), the
Vendor shall be liable for and required to indemnify in
respect of the amount of all such Indemnified Losses.
(ii) The total of the liabilities and indemnities of the
Vendor under this Agreement, including any claims for
Indemnified Losses arising out of, resulting from,
attributable to or connected with Purchase Agreement
Defaults, shall not exceed 100% of the Purchase Price,
as adjusted pursuant hereto.
(iii) The Vendor shall have no liability in connection with
Indemnified Losses unless the Purchaser shall, prior to
the expiry of the Survival Period, have provided the
Vendor with a Notice of Claim.
- 63 -
(b) Limit on Purchaser's Responsibility: The Purchaser's obligations
and liability under this Agreement shall be subject to the
following limitations:
(i) The Purchaser shall have no liability in connection with
any Indemnified Losses until the aggregate of such
claims exceeds $[omitted] and upon the aggregate of such
Indemnified Losses exceeding $[omitted], the Purchaser
shall be required to indemnify in respect of the amount
of all such Indemnified Losses.
(ii) The total of the liabilities and indemnities of the
Purchaser under this Agreement, including any claims for
Indemnified Losses arising out of, resulting from,
attributable to or connected with Purchase Agreement
Defaults, shall not exceed 100% of the Purchase Price,
as adjusted pursuant hereto.
(iii) The Purchaser shall have no liability in connection with
Indemnified Losses unless the Vendor shall, prior to the
expiry of the Survival Period, have provided the
Purchaser with a Notice of Claim.
(iv) Following the Survival Period, the limitations of this
Section 9.4 shall not apply to the responsibilities of
Purchaser described in Section 9.3(e) for acts,
omissions, circumstances or other matters arising after
the Closing.
9.5 RESPONSIBILITY EXTENDS TO LEGAL COSTS AND SETTLEMENTS
Notwithstanding any provision to the contrary contained in this Article
9, references to costs in the liability and indemnification obligations
prescribed by Sections 9.2 and 9.3 shall be deemed to include legal (on
a solicitor-client basis) and other professional fees and disbursements
on a full indemnity basis, and shall extend to settlements,
satisfactions or other compromises with respect to claims by third
Persons for Indemnified Losses.
9.6 LIMITATIONS
Notwithstanding anything herein to the contrary:
(a) The indemnities provided in Sections 9.2 and 9.3 and shall not
apply to the extent that claims for Indemnified Losses are
reimbursed to the Person to be indemnified by insurance.
(b) If Indemnified Losses suffered, sustained, paid or incurred by
Persons claiming indemnity at any time before or subsequent to
the making of an indemnity payment are reduced by any Tax
benefit or recovery, the amount of such reduction, together with
interest thereon from the date of payment thereof at the rate
specified in Section 2.5, shall promptly be paid by the Person
claiming indemnity to the indemnifying party.
- 64 -
(c) The Purchaser and its Additional Indemnitees shall, except as it
relates to Non-PNG Related Environmental Liabilities, have no
remedy or cause of action for a Purchase Agreement Default by
the Vendor in respect of any act, omission, circumstance or
other matter actually known to the Purchaser or its Affiliates
or their respective directors, officers, servants, agents, or
employees as at the Closing Date.
9.7 SPECIFIC PERFORMANCE
Notwithstanding any provision to the contrary contained in this
Agreement, no claim for indemnification by the Purchaser pursuant to
this Article 9 shall limit the Purchaser's right to seek and obtain
specific performance as against the Vendor for any act, omission,
circumstance or other matter arising out of, resulting from,
attributable to or connected with any Purchase Agreement Default made by
the Vendor.
9.8 LETTER OF CREDIT
(a) The Vendor shall secure its obligations under Section 9.2(c),
insofar as it relates to a Purchase Agreement Default in respect
of Section 5.1(ii), and Section 9.2(d) by providing the
Purchaser with a Letter of Credit naming the Purchaser as
beneficiary for an amount equal to the LC Amount. Such Letter of
Credit shall be delivered to the Purchaser concurrently with the
execution of this Agreement, and the Vendor shall maintain the
Letter of Credit in effect, including by way of renewals for the
entire LC Claim Period, from time to time prior to its expiry
date. The Purchaser will be entitled to present such Letter of
Credit for payment if it provides the Vendor with a Notice of
Claim for Indemnified Losses pursuant to Section 9.2(c), insofar
as it relates to a Purchase Agreement Default in respect of
Section 5.1(ii), or Section 9.2(d) but only to the extent of
such Indemnified Losses or if a renewal Letter of Credit is not
provided by the Vendor to the Purchaser at least 30 days prior
to the expiry of the then outstanding Letter of Credit;
provided, that, the Vendor shall maintain the Letter of Credit
for the full LC Amount in effect for the entire LC Claim Period
notwithstanding that the Purchaser may have presented a Letter
of Credit for payment earlier in the LC Claim Period. At any
time after the Closing Date, the Vendor may, in lieu of the
Letter of Credit, secure its obligations under Section 9.2(c),
by providing environmental insurance wherein the insurer (who
shall be satisfactory to the Purchaser, acting reasonably)
agrees to unconditionally indemnify, for the remainder of the LC
Claim Period, PEC, the Purchaser and the Purchaser's Affiliates
for any Non-PNG Related Environmental Liabilities on terms
satisfactory to the Purchaser, acting reasonably, having regard
to all information (the "non-PNG information") that the
Purchaser as of the Signing Date or at any time thereafter has
in respect of non-Canadian petroleum and natural gas
exploration, development and production operations carried out
by any one or more of PEC or any of its predecessors or
subsidiaries of predecessors; provided, however, that the Vendor
shall be solely liable for all premiums and related costs
associated with such insurance. The
- 65 -
Purchaser shall grant reasonable access to the non-PNG
information to any such insurer.
(b) Section 9.8(a) shall not impair, effect or limit in any way
whatsoever the rights and remedies of the Purchaser and its
Additional Indemnities otherwise available in this Article 9.
9.9 LIMITATION ON RIGHTS OR REMEDIES
Subject to Sections 9.7 and 9.8:
(a) this Article 9 sets forth the sole rights and remedies of each
Party and its Additional Indemnitees in connection with (i) the
transactions contemplated herein, and (ii) any act, omission,
circumstance or other matter arising out of, resulting from,
attributable to or connected with any Purchase Agreement Default
made by the other Party, and such first mentioned Party and its
Additional Indemnitees shall have no further right or remedy
(whether legal, equitable, fiduciary or in tort) whatsoever,
against the other Party, or its Affiliates or their respective
directors, officers, servants, agents, advisors or employees;
and
(b) the Purchaser acknowledges that it shall not be entitled to any
rights or remedies as against the Vendor, its Affiliates or
their respective directors, officers, servants, agents and
employees under Applicable Law, including common law or in
equity, pertaining to any Indemnified Losses, in respect of
which it is required to indemnify the Vendor pursuant to Section
9.3 and that it shall not be entitled to name the Vendor or its
Affiliates or their respective directors, officers, servants,
agents and employees under Section 9.3 as third party to any
action commenced by any third Person against the Purchaser or a
Purchased Entity.
9.10 PROCEDURE - INDEMNITIES
Any Person seeking indemnification (including by way of presentation of
Letter of Credit pursuant to Section 9.8) shall give reasonably prompt
notice thereof to the Person from whom indemnification is sought. The
Party from whom indemnification (including by way of presentation of
Letter of Credit pursuant to Section 9.8) is sought shall have the sole
right to conduct, settle or otherwise dispose of any legal action in
respect of which indemnification (including by way of presentation of
Letter of Credit pursuant to Section 9.8) is sought in any manner it
deems appropriate without the consent of the other Party if but only if
it has agreed that the matters in the action are indemnified pursuant to
Sections 9.2 or 9.3. If the Party from whom indemnification (including
by way of presentation of Letter of Credit pursuant to Section 9.8) is
sought pays the indemnified amount to the other Party seeking
indemnification, the paying Party shall not be responsible for any costs
described in Section 9.5 incurred after such payment.
- 66 -
9.11 NO MERGER OF LEGAL RESPONSIBILITIES
The liabilities and indemnities created in this Article 9 shall be
deemed to apply to, and shall not merge in, any and all assignments,
transfer and other documents conveying any of the Purchased Shares to
the Purchaser, notwithstanding the terms of such assignments, transfers,
conveyances, novations and other documents, Applicable Law or any rule
of law or equity to the contrary, and all such rules are hereby waived.
9.12 NO LIMITATION
Closing of the transactions contemplated herein or any waiver or
satisfaction of any condition precedent resulting in Closing of the
transactions contemplated herein shall not in any way whatsoever limit,
impact or derogate from the indemnities provided for herein.
ARTICLE 10
CONFIDENTIALITY
10.1 RESTRICTIONS ON DISCLOSURE OF PURCHASER
Prior to the Closing, the Purchaser shall keep confidential all
information disclosed to it by the Vendor, a Purchased Entity or their
agents relating to the Purchased Entities and the PNG Assets in
accordance with the provisions of the Confidentiality Agreement.
10.2 RESTRICTIONS ON DISCLOSURE OF VENDOR
Provided Closing occurs (except to the extent required pursuant to
Applicable Law), the Vendor shall keep confidential all information
respecting the PNG Assets for a term of 18 months from the date of
Closing. Such confidential information respecting the PNG Assets shall,
following the Closing Date, be disclosed only to those of its employees,
agents, legal counsel, accountants or other representatives on a "need
to know" basis. The foregoing restrictions on disclosure shall not apply
to information, to the extent it:
(a) is or becomes publicly available through no act or omission of
the Vendor or their employees, agents, consultants, advisors or
other representatives;
(b) is subsequently obtained lawfully from a third party who, after
reasonable inquiry, the Vendor does not know is bound to the
Purchaser or the Purchased Entities to restrict the use or
disclosure of such information;
(c) is already in the Vendor's possession, or in the possession of
any Affiliate of the Vendor, at the time of disclosure, without
any restriction on its disclosure; or
(d) is required to be disclosed pursuant to Applicable Law.
Specific items of information shall not be considered to be in the
public domain merely because more general information respecting the PNG
Assets is in the public domain.
- 67 -
ARTICLE 11
GUARANTEE
11.1 GUARANTEE
The Guarantor hereby unconditionally and irrevocably guarantees the
punctual and complete performance by the Purchaser of all of its
obligations under this Agreement and any agreement delivered under or
pursuant to this Agreement.
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 WAIVER MUST BE IN WRITING
No waiver by any Party of any breach (whether actual or anticipated) of
any of the terms, conditions, representations or warranties contained
herein shall take effect or be binding upon that Party unless the waiver
is expressed in writing under the authority of that Party. Any waiver so
given shall extend only to the particular breach so waived and shall not
limit or affect any rights with respect to any other or future breach.
12.2 NO AMENDMENT EXCEPT IN WRITING
This Agreement may be amended only by written instrument executed by the
Vendor and the Purchaser.
12.3 ASSIGNMENTS BEFORE CLOSING
Prior to Closing, neither Party may assign its interest in or under this
Agreement without the prior written consent of the other Party.
12.4 SERVICE OF NOTICE
Notwithstanding anything to the contrary contained herein, all notices
required or permitted hereunder shall be in writing. Any notice to be
given hereunder shall be deemed to be served properly if served in any
of the following modes:
(a) personally, by delivering the notice to the Party on which it is
to be served at that Party's address for service. Personally
served notices shall be deemed to be received by the addressee
when actually delivered as aforesaid, provided that such
delivery shall be during normal business hours on any Business
Day. If a notice is not delivered on a Business Day or is
delivered after the addressee's normal business hours, such
notice shall be deemed to have been received by such Party at
the commencement of the addressee's first Business Day next
following the time of the delivery;
(b) by facsimile directed to the Party on which it is to be served
at that Party's address for service. A notice so served shall be
deemed to be received by the addressee
- 68 -
when actually received by it, if received within normal business
hours on any Business Day or at the commencement of the next
ensuing Business Day following transmission if such notice is
not received during business hours; or
(c) by mailing it first class (air mail if to or from a location
outside of Canada) registered post, postage prepaid, directed to
the Party on which it is to be served at that Party's address
for service. Notices so served shall be deemed to be received by
the addressee at noon, local time, on the earlier of the actual
date of receipt or the 4th Business Day following the mailing
thereof. However, if postal service is (or is reasonably
anticipated to be) interrupted or operating with unusual delay,
notice shall not be served by such means during such
interruption or period of delay.
12.5 ADDRESSES FOR NOTICES
The address for service of notices hereunder of each of the Parties
shall be as follows:
VENDOR: c/o PetroCorp Incorporated
Business Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
U.S.A.
Mailing Address: ▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
U.S.A.
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
Fax: [omitted]
Telephone: [omitted]
Copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Lawyers
Old City Hall
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
U.S.A.
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
Fax: [omitted]
Telephone: [omitted]
- 69 -
PURCHASER: 1022694 Alberta Ltd.
The Dome Tower
▇▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇. ▇.▇. ▇▇▇▇
President and CEO
Fax: [omitted]
Telephone: [omitted]
Copy to: Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇
Fax: [omitted]
Telephone: [omitted]
GUARANTOR: EnerMark Inc.
The Dome Tower
▇▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇. ▇.▇. ▇▇▇▇
President and CEO
Fax: [omitted]
Telephone: [omitted]
Copy to: Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇
Fax: [omitted]
Telephone: [omitted]
A Party may change its address for service by notice to the other Party,
and such changed address for service thereafter shall be effective for
all purposes of this Agreement.
- 70 -
12.6 CONSULTANTS AND ADVISORS BOUND
If the Purchaser employs consultants, advisors or agents to assist in
its review of the Purchased Corporations pursuant to Article 4, the
Purchaser shall be responsible to the Vendor for ensuring that such
consultants, advisors and agents comply with the restrictions on the use
and disclosure of information set forth in this Agreement.
12.7 PARTIES TO DISCUSS PRESS RELEASES
The Parties shall co-operate with each other in relaying to third
parties information concerning this Agreement and the transactions
contemplated herein, and shall discuss drafts of all press releases and
other releases of information for dissemination to the public pertaining
hereto. However, nothing in this Section 12.7 shall prevent a Party from
furnishing any information to any governmental agency or regulatory
authority or stock exchange or to the public, insofar only as is
required by this Agreement, Applicable Law or securities laws applicable
to such Party, provided that a Party which proposes to make such a
public disclosure shall, to the extent reasonably possible, provide the
other Party with a draft of such statement a sufficient time prior to
its release to enable such other Party to review such draft and advise
that Party of any comments it may have with respect thereto.
12.8 COSTS AND EXPENSES
Except as specifically provided herein, all legal and other costs and
expenses in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party which incurred the same.
PCI shall be solely liable for all reasonable legal costs and expenses
incurred by it and the Purchaser and its Affiliates for the matters
contemplated in or otherwise related to Sections 6.1(h) and 6.2(d).
12.9 FURTHER ASSURANCES
At the Closing Date and thereafter as may be necessary, the Parties
shall execute, acknowledge and deliver such instruments and take such
other actions as may be reasonably necessary to fulfil their respective
obligations under this Agreement.
12.10 GOVERNING LAW; ATTORNMENT; ETC.
(a) This Agreement shall be governed by, and construed and enforced
in accordance with, the applicable laws, other than conflict of
laws rules, prevailing in the Province of Alberta.
(b) The Parties irrevocably:
(i) submit and attorn to the non-exclusive jurisdiction of
the Courts of the Province of Alberta for all matters
arising out of or relating to this Agreement, or any of
the transactions contemplated hereby;
- 71 -
(ii) waive all right to object to jurisdiction of such Courts
in any legal action or proceeding relative to this
Agreement or the transactions contemplated hereby or
execution of any judgment, order or decree issued in or
as a result of any such action, suit or proceeding which
they may now or hereafter have by reason of domicile or
otherwise;
(iii) waive any objection to the laying of venue in such
Courts of any of the aforesaid actions, suits or
proceedings arising out of or in connection with this
Agreement or the transactions contemplated hereby;
(iv) waive and agree not to plead or claim that any action,
suit or proceeding in such Courts has been brought in an
inconvenient forum; and
(v) waive any right they may have to, or to apply for, trial
by jury in connection with any matter, action,
proceeding, claim or counterclaim arising out of or
relating to this Agreement or any of the transactions
contemplated hereby.
(c) The Vendor shall appoint and maintain an attorney in Alberta for
service of process in respect of actions, suits or proceedings
arising out of or in connection with this Agreement or the
transactions contemplated hereby and advise the Purchaser at
Closing of the name and address of such attorney, provided that
they shall not change the attorney so appointed or terminate the
appointment unless (and no change or termination shall be
effective until) they have previously given written advice to
the Purchaser of a new attorney in Alberta for such purpose, in
which case this proviso shall again apply in respect of the new
attorney so appointed.
12.11 INVALIDITY OF PROVISIONS
If any of the provisions of this Agreement are determined to be invalid,
illegal or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
12.12 TIME
Time shall be of the essence in this Agreement.
12.13 SUPERSEDES EARLIER AGREEMENTS
This Agreement constitutes the entire agreement between the Parties
relating to the subject matter hereof; and there are no collateral or
other statements, understandings, covenants, agreements, representations
or warranties, written or oral, relating to the subject matter hereof,
except the Confidentiality Agreement. Other than the Confidentiality
Agreement, this Agreement supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written,
between the Parties
- 72 -
or their predecessors relating to the subject matter of this Agreement,
including the Letter of Intent.
12.14 ENUREMENT
This Agreement shall be binding upon and enure to the benefit of the
Parties and their respective successors and permitted assigns.
12.15 COUNTERPART EXECUTION
This Agreement may be executed in separate counterparts and all executed
counterparts together shall constitute one agreement. A signed
counterpart provided by way of telecopier will be as binding upon the
Parties as an originally signed counterpart.
IN WITNESS WHEREOF the Parties have duly executed this Agreement.
PETROCORP INCORPORATED
Per: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: President and CEO
PETROCORP ACQUISITION COMPANY
Per: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: President and CEO
1022694 ALBERTA LTD.
Per: /s/ ▇▇▇▇ ▇▇▇▇
-------------
Name: ▇▇▇▇ ▇▇▇▇
Title: President
ENERMARK INC.
Per: /s/ ▇▇▇▇ ▇▇▇▇
-------------
Name: ▇▇▇▇ ▇▇▇▇
Title: President
The following is a list of schedules which have been omitted for purposes of
this filing:
(a) Schedule 1.2(a) Land Schedule
(b) Schedule 1.2(b) Financial Statements
(c) Schedule 1.2(c) Escrow Agreement
(d) Schedule 1.2(d) Holdback Agreement
(e) Schedule 1.2(e) Disclosure Schedule
(f) Schedule 1.2(f) Form of Officer's Certificate of the Vendor
(g) Schedule 1.2(g) Form of Officer's Certificate of the Purchaser
(h) Schedule 1.2(h) Non-Recourse Notes
(i) Schedule 3.2(a)(xviii)(A) Form of Release
(j) Schedule 3.2(a)(xviii)(B) Form of Release
(k) Schedule 3.2(a)(xix) Form of Management Agreement Release
(l) Schedule 4.6 Authorizations for Expenditure
(m) Schedule 4.8 Securities Disclosure
PetroCorp Incorporated agrees to furnish supplementally a copy of any omitted
schedule to the Securities and Exchange Commission upon request.
[LETTERHEAD OF ENERPLUS]
February 20, 2003
PetroCorp Incorporated
PetroCorp Acquisition Company c/o PetroCorp Incorporated
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
U.S.A.
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, President and Chief Executive Officer
(918.491.4584)
Dear Sir:
Re: Share Purchase Agreement dated December 24, 2002 between PetroCorp
Incorporated ("PCI"), PetroCorp Acquisition Company ("PAC"), 1022694
Alberta Ltd. (the "Purchaser") and EnerMark Inc. ("EnerMark"), as
amended by a letter agreement dated January 14, 2003 and acknowledged
and agreed to on January 15, 2003 between PCI, PAC, the Purchaser and
EnerMark and by a letter agreement dated January 28, 2003 and
acknowledged and agreed as of even date therewith between PCI, PAC, the
Purchaser and EnerMark (collectively, the "Agreement")
Further to our recent discussions, this will confirm our agreement to
amend to the Agreement.
In consideration of the covenants and agreements between the Vendor, the
Purchaser and EnerMark contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Vendor, the Purchaser and EnerMark agree as follows:
1. Definitions. Capitalized words and phrases used herein, that are not
defined herein, shall have the meanings set out in the Agreement.
2. Amendments. Effective as of the date hereof, the Agreement is amended:
(a) by deleting the definitions of "Closing Date" in Section 1.1
thereof in its entirety and replacing the following therefor:
""Closing Date" means 10.00 a.m. on the 5th day of March, 2003
or such other date as is mutually agreed among the Parties."
(b) by deleting the definition of "Outside Date" in Section 1.2
thereof in its entirety and replacing the following therefor:
-2-
[LETTERHEAD OF ENERPLUS]
""Outside Date" means 10.00 a.m. on the 5th day of March, 2003,
or such later date as the Vendor and the Purchaser may agree in
writing or may be expressly provided for herein"
3. Continuing Effect. Each of the Vendor, the Purchaser and EnerMark
acknowledges and agrees that the Agreement, as amended herein, shall be
and continue in full force and effect and is hereby confirmed and the
rights and obligations of the Vendor, the Purchaser and EnerMark
thereunder shall not be affected or prejudiced in any manner except as
specifically provided for herein.
Please confirm your agreement to the foregoing by executing and
returning the duplicate copy of this letter to the undersigned. Execution may be
by counterpart and facsimile.
Yours truly,
ENERMARK INC. 1022694 ALBERTA LTD.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------- ---------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President & Director Title: General Counsel
Business Development
THE FOREGOING IS ACKNOWLEDGED AND
AGREED TO THIS _____ day of February, 2003
PETROCORP INCORPORATED
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: President & C.E.O.
PETROCORP ACQUISITION COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: President & C.E.O.
[LETTERHEAD OF ENERPLUS]
January 28, 2003
PetroCorp Incorporated
PetroCorp Acquisition Company c/o PetroCorp Incorporated
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
U.S.A.
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, President and Chief Executive Officer
(918.491.4584)
Dear Sir:
Re: Share Purchase Agreement dated December 24, 2002 between PetroCorp
Incorporated, PetroCorp Acquisition Company, 1022694 Alberta Ltd. and
EnerMark Inc., as amended by a letter agreement dated January 14, 2003
and acknowledged and agreed to on January 15, 2003 between PetroCorp
Incorporated, PetroCorp Acquisition Company, 1022694 Alberta Ltd. and
EnerMark Inc. (collectively, the "Agreement")
Further to our recent discussions, this will confirm our agreement to
amend the Agreement.
In consideration of the covenants and agreements between the Vendor, the
Purchaser and EnerMark contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Vendor, the Purchaser and EnerMark agree as follows:
1. Definitions. Capitalized words and phrases used herein, that are not
defined herein, shall have the meanings set out in the Agreement.
2. Amendments. Effective as of the date hereof, the Agreement is amended:
(a) by deleting the definition of "Closing Date" in Section 1.1
thereof in its entirety and replacing the following therefor:
""Closing Date" means 10:00 a.m. on the 21st day of February,
2003 or such other date as is mutually agreed among the
Parties."
(b) by deleting the definition of "Outside Date" in Section 1.1
thereof in its entirety and replacing the following therefor:
- 2 -
""Outside Date" means 10:00 a.m. on the 21st day of February,
2003, or such later date as the Vendor and the Purchaser may
agree in writing or may be expressly provided for herein."
3. Continuing Effect. Each of the Vendor, the Purchaser and EnerMark
acknowledges and agrees that the Agreement, as amended herein, shall be
and continue in full force and effect and is hereby confirmed and the
rights and obligations of the Vendor, the Purchaser and EnerMark
thereunder shall not be affected or prejudiced in any manner except as
specifically provided for herein.
Please confirm your agreement to the foregoing by executing and
returning the duplicate copy of this letter to the undersigned. Execution may be
by counterpart and facsimile.
Yours truly,
ENERMARK INC. 1022694 ALBERTA LTD.
By: /s/ G. F. (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------ ---------------------------
Name: G. F. (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President, Acquisitions Title: General Counsel
THE FOREGOING IS ACKNOWLEDGED AND
AGREED TO THIS 28th day of January, 2003
PETROCORP INCORPORATED
BY: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President
PETROCORP ACQUISITION COMPANY
BY: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President
[LETTERHEAD OF ENERPLUS]
January 14, 2003
PetroCorp Incorporated
PetroCorp Acquisition Company c/o PetroCorp Incorporated
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
U.S.A.
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, President and Chief Executive Officer
Dear Sir:
Re: Share Purchase Agreement dated December 24, 2002 between PetroCorp
Incorporated, PetroCorp Acquisition Company, 1022694 Alberta Ltd. and
EnerMark Inc. (the "Agreement")
Further to our recent discussions, this will confirm our agreement to
amend the Agreement.
In consideration of the covenants and agreements between the Vendor, the
Purchaser and EnerMark contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Vendor, the Purchaser and EnerMark agree as follows:
1. Definitions. Capitalized words and phrases used herein, that are not
defined herein, shall have the meanings set out in the Agreement.
2. Amendments. Effective as of the date hereof, the Agreement is amended by
deleting the definition of "Closing Date" in Section 1.1 thereof in its
entirety and replacing the following therefor:
""Closing Date" means 10:00 a.m. on the 31st day of January,
2003 or such other date as is mutually agreed among the
Parties."
3. Continuing Effect. Each of the Vendor, the Purchaser and EnerMark
acknowledges and agrees that the Agreement, as amended herein, shall be
and continue in full force and effect and is hereby confirmed and the
rights and obligations of the Vendor, the Purchaser and EnerMark
thereunder shall not be affected or prejudiced in any manner except as
specifically provided for herein.
- 2 -
Please confirm your agreement to the foregoing by executing and
returning the duplicate copy of this letter to the undersigned. Execution may be
by counterpart and facsimile.
Yours truly,
ENERMARK INC. 1022694 ALBERTA LTD.
/s/ G. F. (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------- ------------------------------
G. F. (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Vice President, Acquisitions General Counsel
THE FOREGOING IS ACKNOWLEDGED AND
AGREED TO THIS 15th day of January, 2003
PETROCORP INCORPORATED
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: President & CEO
PETROCORP ACQUISITION COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: President & CEO