EXHIBIT 99.1
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ARRANGEMENT AGREEMENT
DATED AUGUST 21, 2005
BETWEEN
CNPC INTERNATIONAL LTD.
AND
PETROKAZAKHSTAN INC.
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ARRANGEMENT AGREEMENT
THIS AGREEMENT dated the 21st day of August, 2005.
B E T W E E N:
CNPC INTERNATIONAL LTD.,
a corporation existing under the laws of the Cayman Islands,
(hereinafter called "PARENT"),
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PETROKAZAKHSTAN INC.,
a corporation existing under the laws of Alberta,
(hereinafter called "COMPANY").
WHEREAS Company and Parent wish to propose an arrangement involving
Company, Acquiror and the shareholders of Company;
AND WHEREAS the parties hereto intend to carry out the transactions
contemplated herein by way of an arrangement under the provisions of the
BUSINESS CORPORATIONS ACT (Alberta);
AND WHEREAS the parties hereto have entered into this Arrangement
Agreement (this "Agreement") to provide for the matters referred to in the
foregoing recitals and for other matters relating to such arrangement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
covenants and agreements herein contained and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
each party), the parties hereto hereby covenant and agree as follows:
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ARTICLE 1
INTERPRETATION
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1.1 DEFINITIONS
In this Agreement, unless the context otherwise requires:
"ABCA" means the BUSINESS CORPORATIONS ACT (Alberta), R.S.A. 2000, c. B-9,
as amended;
"ACQUIROR" means 818 Acquisition Inc., a corporation existing under the
laws of Alberta, or another wholly-owned direct or indirect subsidiary of
Parent existing under the laws of Alberta;
"ACQUISITION PROPOSAL" means any (i) merger, amalgamation, consolidation,
recapitalization, arrangement, business combination or take-over bid, (ii)
sale of material assets (or any lease, long-term supply agreement or other
arrangement having the same economic effect as a sale) which exceeds 20% of
the book value of the assets of Company or (iii) sale of 20% or more of the
issued and outstanding shares or equity of Company or rights or interests
therein or thereto, or similar transactions, or series of transactions,
involving Company or any Material Entities of Company, or a proposal or
offer or public announcement of an intention to do any of (i), (ii) or
(iii), excluding the Arrangement and the transactions permitted pursuant to
this Agreement;
"ARRANGEMENT" means the arrangement involving Company and its Shareholders
under the provisions of section 193 of the ABCA, on the terms and
conditions set forth in the Plan of Arrangement;
"ARRANGEMENT RESOLUTION" means the special resolution approving the Plan of
Arrangement to be considered at the Company Meeting;
"ARTICLES OF ARRANGEMENT" means the articles of arrangement of Company in
respect of the Arrangement required by the ABCA to be filed with the
Registrar after the Final Order is made;
"BUSINESS DAY" means any day, other than a Saturday, a Sunday and a
statutory holiday in Toronto, Ontario, London, England or Beijing, China;
"CANADIAN GAAP" means generally accepted accounting principles in Canada;
"COMPANY COMMON SHARES" means the Class A common shares of Company;
"COMPANY DISCLOSURE LETTER" has the meaning ascribed thereto in Section
1.10;
"COMPANY MEETING" means the special meeting of Shareholders to be called
and held for the purpose of considering the Arrangement and any
adjournments or postponements thereof;
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"COMPANY PLANS" has the meaning ascribed thereto in Section 15 of Schedule
B; and "COMPANY PLAN" means any one of them;
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement dated April
8, 2005 between Company and Parent, as amended;
"CONSIDERATION" means, in respect of each Company Common Share, $55.00 in
cash;
"COURT" means the Court of Queen's Bench of Alberta;
"DISSENT RIGHTS" means the rights of dissent of the holders of Company
Common Shares in respect of the Arrangement described in section 3.1 of the
Plan of Arrangement;
"EFFECTIVE DATE" means the date the Arrangement is effective under the
ABCA;
"EFFECTIVE TIME" means 12:01 a.m. (Calgary time) on the Effective Date;
"ENCUMBRANCE" includes, without limitation, any mortgage, pledge,
assignment, charge, lien, claim, security interest, adverse interest in
property, option, right of first refusal or offer, adverse claim, other
third party interest or encumbrance of any kind, whether contingent or
absolute, and any agreement, option, right or privilege (whether by law,
contract or otherwise) capable of becoming any of the foregoing;
"ENVIRONMENTAL APPROVALS" means all permits, certificates, licences,
authorizations, consents, instructions, registrations, directions or
approvals issued or required by Governmental Entities pursuant to
Environmental Laws;
"ENVIRONMENTAL LAWS" means all applicable Laws, including applicable common
laws, relating to the protection of the environment and employee and public
health and safety;
"FINAL ORDER" means the order of the Court approving the Arrangement, as
such order may be amended at any time prior to the Effective Date or, if
appealed, then unless such appeal is withdrawn or denied, as affirmed;
"GOVERNMENTAL ENTITY" means any applicable (a) multinational, federal,
provincial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal, arbitral
body, commission, board, bureau or agency, domestic or foreign, (b) any
subdivision, agent, commission, board, or authority of any of the foregoing
or (c) any quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of the
foregoing, including the Securities Authorities;
"HAZARDOUS SUBSTANCE" means any pollutant, contaminant, waste of any
nature, hazardous substance, hazardous material, toxic substance, dangerous
substance or dangerous good as defined, judicially interpreted or
identified in any Environmental Law, and including, without limitation, any
petroleum product or byproduct, solvent, flammable or explosive material,
radioactive material, asbestos, lead paint, polychlorinated biphenyls (or
PCBs), dioxins, dibenzofurons, heavy metals, radon gas, mould spores and
mycotoxins;
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"INCENTIVE STOCK OPTION PLAN" means the stock option plan of Company made
effective as of May 29, 2000, as amended on May 8, 2002;
"INTERIM ORDER" means the interim order of the Court, as the same may be
amended, pursuant to subsection 193(4) of the ABCA containing declarations
and directions in respect of Company under the ABCA with respect to the
Arrangement and the Company Meeting;
"JOINT VENTURE ENTITIES" means, in respect of Company, each of the joint
ventures listed in the Company Disclosure Letter;
"LAWS" means all laws, by-laws, rules, regulations, orders, rulings,
ordinances, protocols, codes, guidelines, policies, notices, directions and
judgments or other requirements of any Governmental Entity, including
applicable securities laws and the rules and regulations of any stock
exchange or quotation system on which the securities of the Company are
listed;
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" on Company means any
change, effect, event, occurrence or state of facts that, individually or
in the aggregate, is, or would reasonably be expected to be, material and
adverse to the business, operations or financial condition, assets,
liabilities (contingent or otherwise) of Company and its Material Entities
taken as a whole, other than any change, effect, event, occurrence,
circumstance or state of facts (i) relating to general political, economic
or financial conditions, including in Canada, the United States or
Kazakhstan, (ii) relating to the state of securities markets in general,
including any reduction in Canadian, United States, European or other
market indices, (iii) reasonably attributable to the announcement of this
Agreement or the transactions contemplated hereby, including the reaction
or position of any Kazakhstani Governmental Entity or any change in the
trading price of Company Common Shares, (iv) relating to the oil and gas
industry in general and not specifically relating to Company or its
Material Entities or (v) relating to changes in Laws (including tax Laws)
or the interpretation, application or non-application of Laws by
Governmental Entities;
"MATERIAL ENTITIES" means each of the Subsidiaries of Company and Joint
Venture Entities listed in the Company Disclosure Letter;
"OPTIONS" means the stock options outstanding under the Incentive Stock
Option Plan;
"PARTIES" means Company, Parent and Acquiror; and "PARTY" means any one of
them;
"PLAN OF ARRANGEMENT" means the plan of arrangement in the form and content
of Schedule A annexed hereto and any amendment or variation thereto made in
accordance with Article 5 of the Plan of Arrangement, Section 7.1 hereof or
upon the direction of the Court in the Final Order;
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"PROXY CIRCULAR" means the management information circular prepared by
Company for the Company Meeting;
"PUBLICLY DISCLOSED BY COMPANY" means disclosed by Company or a Material
Entity in a public filing made with a Securities Authority prior to the
date hereof;
"REGISTRAR" means the Registrar appointed pursuant to section 263 of the
ABCA;
"SECURITIES AUTHORITIES" means the Alberta Securities Commission and the
other securities regulatory authorities in Canada and the United States
Securities and Exchange Commission;
"SHAREHOLDERS" means the holders of Company Common Shares;
"SUBSIDIARY" means, with respect to a specified body corporate, any body
corporate of which the specified body corporate is entitled to elect a
majority of the board of directors thereof and shall include any body
corporate, partnership, joint venture or other entity over which it
exercises direction or control or which is in a like relation to such a
body corporate, excluding any body corporate in respect of which such
direction or control is not exercised by the specified body corporate as a
result of existing contracts, agreements and commitments;
"SUPERIOR PROPOSAL" means any BONA FIDE written Acquisition Proposal made
unsolicited after the date hereof by a third party (other than Parent and
its affiliates), directly or indirectly, to acquire all or substantially
all of the assets of the Company or more than 50% of the Common Shares, and
that in the good faith determination of the Board of Directors of Company
(based upon advice from its financial advisors and outside legal counsel)
(a) is reasonably capable of being completed without undue delay, taking
into account all legal, financial, regulatory and other aspects of such
proposal and the party making such proposal; (b) would, if consummated in
accordance with its terms, result in a transaction more favourable to
Shareholders from a financial point of view than the transactions
contemplated by this Agreement; and (c) in respect of which the financing
is then committed or confirmation is provided from the sources of financing
to be used to complete the transaction contemplated by such proposal that
such financing is available without delays or conditions (other than the
conditions attached to such proposal);
"THIRD PARTY CONSENTS" in respect of or in contemplation of the
transactions contemplated by the Agreement or the Arrangement
(collectively, an "EVENT") means all consents, approvals and waivers that
are required under, or are necessary to ensure that, the Event, or the
consummation thereof, does not result in a violation or breach of, or give
rise to any termination or rights of first refusal or other buy-sell rights
under, any contract, agreement, licence, franchise or permit to which
Company, or any Material Entities is bound or is subject to or is the
beneficiary.
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1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this Agreement into Articles and Sections and the
insertion of headings are for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
1.3 ARTICLE REFERENCES, ETC.
Unless the contrary intention appears, references in this Agreement to
an Article, Section or Schedule by number or letter or both refer to the
Article, Section or Schedule, respectively, bearing that designation in this
Agreement.
1.4 NUMBER AND GENDER
In this Agreement, unless the contrary intention appears, words
importing the singular include the plural and vice versa; words importing gender
shall include all genders; and words importing persons shall include a natural
person, firm, trust, partnership, association, corporation, joint venture or
government (including any governmental agency, political subdivision or
instrumentality thereof).
1.5 DATE FOR ANY ACTION
If the date on which any action is required to be taken hereunder by
any Party is not a business day, such action shall be required to be taken on
the next succeeding day which is a business day.
1.6 CURRENCY
Unless otherwise stated, all references in this Agreement to sums of
money are expressed in United States dollars.
1.7 SCHEDULES
Schedules A, B and C annexed to this Agreement are incorporated by
reference into this Agreement and form part hereof.
1.8 ACCOUNTING MATTERS
Unless otherwise stated, all accounting terms used in this Agreement in
respect of Company shall have the meanings attributable thereto under Canadian
GAAP and all determinations of an accounting nature in respect of Company
required to be made shall be made in a manner consistent with Canadian GAAP and,
when used in connection with Company or its Subsidiaries, on a basis consistent
with the annual audited consolidated financial statements of Company for the
fiscal year ended December 31, 2004.
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1.9 MATERIAL
The terms "material" and "materially" shall, when used in this
Agreement, be construed, measured or assessed on the basis of whether the matter
would materially affect a Party and its Subsidiaries (and, in the case of
Company, the Joint Venture Entities) taken as a whole or would significantly
impede the completion of the Arrangement or the other transactions contemplated
hereby.
1.10 DISCLOSURE IN WRITING
The phrase "except as previously disclosed in writing" and similar
expressions used in this Agreement shall be construed for all purposes of this
Agreement as referring to a disclosure letter prepared by Company and delivered
to Parent contemporaneously with the execution and delivery of this Agreement
(the "COMPANY DISCLOSURE LETTER"). Disclosure by Company in any particular
schedule or exhibit of the Company Disclosure Letter will be deemed to be
disclosure of the information for all purposes of this Agreement.
1.11 MATERIAL ENTITIES
Notwithstanding any other provisions hereof, the representations and
warranties given hereunder with respect to the Material Entities that are Joint
Venture Entities are given by Company only to the best of the actual knowledge
of its executive officers, based on inquiry of the management of Company or its
Material Entities (excluding such Joint Venture Entities) but without inquiry of
the management or employees of the Joint Venture Entities, except for the
representations and warranties given respecting Company's direct or indirect
ownership and other rights and obligations in respect of such Joint Venture
Entities. Covenants given by Company which refer to any of the Material Entities
shall not extend to the Joint Venture Entities; provided however, that if an
issue relating to any of the Joint Venture Entities arises, which issue would be
the subject matter of any of the covenants contained in this Agreement but for
the fact that the covenants do not extend to the Joint Venture Entities, subject
to any pre-existing agreement, Company shall use reasonable commercial efforts
to comply with such covenant and shall vote its voting interests in the relevant
Joint Venture Entity in respect of such issue consistent with complying with the
relevant covenant as though such covenant did extend to the relevant Joint
Venture Entity. Company shall also exercise any other proper influence in the
relevant Joint Venture Entity in a manner consistent with complying with the
relevant covenant as though such covenant did extend to the relevant Joint
Venture Entity, subject to any applicable Laws, applicable fiduciary duties or
contractual obligations (other than under this Agreement). For the purpose of
this Section, "executive officer" means any of: ▇▇▇▇▇▇▇ Isautier, ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇.
1.12 ACQUIROR
Parent hereby covenants that it shall cause Acquiror to execute and
assume the benefits and obligations of this Agreement pertaining to it by no
later than September 9, 2005. Prior to such execution, references in this
Agreement to "Acquiror" or "Parent and Acquiror" shall be interpreted so as to
mean Parent alone.
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ARTICLE 2
THE ARRANGEMENT
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2.1 INTERIM ORDER
As soon as reasonably practicable, Company shall apply to the Court in
a manner acceptable to Parent, acting reasonably, pursuant to subsection 193(2)
of the ABCA and, in cooperation with Parent and Acquiror, prepare, file and
diligently pursue an application for the Interim Order providing, among other
things:
(a) for the class of persons to whom notice is to be provided in respect of
the Arrangement and the Company Meeting and for the manner in which
such notice is to be provided;
(b) that the requisite approval for the Arrangement Resolution shall be
two-thirds of the votes cast on the Arrangement Resolution by
Shareholders present in person or represented by proxy at the Company
Meeting;
(c) that, in all other respects, the terms, restrictions and conditions of
Company's articles of incorporation and by-laws, including quorum
requirements and all other matters, shall apply in respect of the
Company Meeting;
(d) for the grant of the Dissent Rights; and
(e) for the notice requirements with respect to the presentation of the
application to the Court for the Final Order.
2.2 FINAL ORDER
If the Interim Order and the approval of Shareholders are obtained,
Company shall as soon as reasonably practicable thereafter take all steps
necessary or desirable to submit the Arrangement to the Court and diligently
pursue an application for the Final Order pursuant to subsection 193(9) of the
ABCA.
2.3 PAYMENT TO COMPANY
If in connection with the satisfaction of the payment of the cash
consideration to the Shareholders as required by the Final Order:
(a) the Company receives funds from the Acquiror or the Parent;
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(b) the Company receives funds from a bank or another financial institution
sent on behalf of the Acquiror or the Parent; or
(c) the Company draws funds on a Letter of Credit issued by Citibank, N.A.
for the account of the Acquiror or the Parent in favour of the Company
as beneficiary,
Company acknowledges that it receives such funds not as beneficiary but as
trustee for the Shareholders, and the Company undertakes that it will
immediately upon receipt pay such funds to the Depository to the extent that
such payment shall satisfy the obligation of the Acquiror pursuant to Article
4.1 of Schedule A and to the extent that such funds are used solely for the
purpose of paying the consideration payable by the Acquiror for shares in the
Company and for no other purpose.
2.4 ARTICLES OF ARRANGEMENT AND EFFECTIVE DATE
Company will carry out the terms of the Interim Order and the Final
Order as soon as is reasonably practicable after the issuance of the Interim
Order and Final Order, respectively, and as soon as practicable following the
receipt of the Final Order and subject to the satisfaction or waiver of the
conditions set forth in Article 6, Company shall file articles of arrangement
with the Registrar pursuant to subsection 193(10) of the ABCA to give effect to
the Arrangement and implement the Plan of Arrangement. The Arrangement shall
become effective on the Effective Date and the steps to be carried out pursuant
to the Arrangement shall become effective on the Effective Date in the order set
out in the Plan of Arrangement.
2.5 COMPANY APPROVAL
(a) Company represents as of the date hereof that the members of the Board
of Directors that participated in the meeting held to consider the
Arrangement and the other transactions contemplated by the Agreement:
(i) have unanimously determined that the Arrangement is fair to the
Shareholders and is in the best interests of Company; and
(ii) have unanimously resolved to recommend that the Shareholders
vote in favour of the Arrangement.
(b) Company represents as of the date hereof that it has received an
opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ International, dated the date of this
Agreement, to the effect that, as of such date, the Consideration is
fair, from a financial point of view, to the Shareholders.
(c) Company represents as of the date hereof that each member of its Board
of Directors that participated in the meeting held to consider the
Arrangement has advised that he intends to vote all Company Common
Shares held by such director in favour of the Arrangement Resolution
and will, accordingly, so represent in the Proxy Circular.
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2.6 OPTIONS
Company shall take all necessary actions to cause the vesting of all
outstanding Options prior to the Effective Time to permit holders of Options to
exercise all Options prior to the Effective Time and shall be entitled to make
arrangements in order to facilitate the conditional exercise of Options,
conditional upon the Arrangement becoming effective, and any Company Common
Shares issued pursuant to any such conditional exercise shall be accepted as
validly subject to the Arrangement.
2.7 GUARANTEE OF PARENT
Parent hereby unconditionally and irrevocably guarantees the due and
punctual performance by Acquiror of each and every obligation of Acquiror
arising under this Agreement and the Arrangement, including, without limitation,
the payment of the Consideration pursuant to the Arrangement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
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3.1 REPRESENTATIONS
Company hereby makes to Parent and Acquiror the representations and
warranties as set forth in Schedule B to this Agreement as of the date of this
Agreement and acknowledges that each of Parent and Acquiror is relying upon
those representations and warranties in connection with entering into this
Agreement.
3.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Company contained in this
Agreement shall survive the execution and delivery of this Agreement and shall
expire and be terminated and extinguished at the Effective Time.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUIROR
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4.1 REPRESENTATIONS
Each of Parent and Acquiror hereby makes to Company the representations
and warranties as set forth in Schedule C to this Agreement as of the date of
this Agreement, and acknowledges that Company is relying upon those
representations and warranties in connection with entering into this Agreement.
4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Parent and Acquiror contained in
this Agreement shall survive the execution and delivery of this Agreement and
shall expire and be terminated and extinguished at the Effective Time.
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ARTICLE 5
COVENANTS
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5.1 PRESS RELEASES; FILINGS
(a) The Parties agree to consult with each other in issuing any press
releases or otherwise making public statements with respect to this Agreement or
the Arrangement. Each Party shall provide the other Parties with a reasonable
period of time to review and comment on all such press releases prior to release
thereof. The Parties agree to issue jointly a press release with respect to this
Agreement as soon as practicable, in a form acceptable to each Party, and each
Party agrees to file a copy of this Agreement with applicable Securities
Authorities, to the extent such filing is required by Law. Each of the Parties
agrees not to make any public statement that is inconsistent with such press
release.
(b) Each of Parent and Acquiror will make all filings and applications and
submissions of information under all Laws which are applicable in connection
with the Arrangement and the other transactions contemplated by this Agreement.
The Company will (i) cooperate and assist Parent and Acquiror in the making of
all such filings and submissions and the obtaining of any related consents,
approvals or waivers, including, if requested by the Parent or Acquiror,
pursuant to the Kazakhstan Subsoil Use Law and with the Kazakhstan Committee for
Protection of Competition of the Ministry of Industry and Trade, and (ii) assist
Parent and Acquiror in any discussions which Parent and Acquiror may wish to
have with any other parties to the Joint Venture Entities upon the reasonable
request of Parent, provide all reasonable assistance and furnish all reasonably
available information to Parent and Acquiror to defend, rebut or otherwise
challenge any claims (A) that this Agreement or the Arrangement trigger any
rights for any third party to purchase the Company's interest in any Joint
Venture Entities, or violate any agreement relating to any Joint Venture
Entities; or (B) in any manner challenging or seeking to prevent, delay or
interfere with this Agreement or the Arrangement; in each case promptly upon the
reasonable request of Parent. For greater certainty, nothing in this Section 5.1
shall be interpreted in such a manner so as to give rise to a condition or
termination right in favour of Parent or Acquiror as a result of a failure to
obtain any such consent, approval or waiver.
5.2 COVENANTS OF COMPANY
Company covenants and agrees that, without the prior written consent of
Parent (such consent not to be unreasonably withheld or delayed) or except as
contemplated in this Agreement or the Arrangement or the Company Disclosure
Letter, from the date hereof until the earlier of the Effective Date or the day
upon which this Agreement is terminated:
(a) in a timely and expeditious manner it will:
(i) prepare the Proxy Circular and provide Parent and Acquiror with
reasonable opportunity to review and comment on drafts thereof
(recognizing Company shall determine whether or not to take
account of such comments, acting reasonably, and recognizing
that each of Company, Parent and Acquiror has an interest in
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ensuring the Proxy Circular complies with all Laws) and file the
Proxy Circular in all jurisdictions where the same is required
to be filed and mail the same as ordered by the Interim Order
and in accordance with all applicable Laws (provided that in any
event the Company will have prepared all materials necessary for
filing the application for the Interim Order with the Court and
the Registrar within 30 days after the date of this Agreement),
in all jurisdictions where the same is required, complying in
all material respects with all applicable Laws on the date of
mailing thereof and ensure that such Proxy Circular does not
contain any misrepresentation (as defined under applicable
securities Laws);
(ii) as soon as reasonably practicable after the execution of this
Agreement but in any case before November 15, 2005 convene and
conduct the Company Meeting in accordance with the Interim
Order, Company's by-laws and applicable Laws; and
(iii) provide notice to Parent and Acquiror of the Company Meeting and
allow Parent's and Acquiror's representatives to attend the
Company Meeting;
(b) subject to Section 6.4 and Section 5.5(c), except as required for
quorum purposes, not postpone or cancel (or propose for adjournment,
postponement or cancellation of) the Company Meeting without the
Acquiror's prior written consent except as required by Laws;
(c) in a timely and expeditious manner, it will prepare (in consultation
and in cooperation with Parent and Acquiror) and file any mutually
agreed (or otherwise required by applicable Laws) amendments or
supplements to the Proxy Circular with respect to the Company Meeting
and mail the same as required by the Interim Order and in accordance
with all applicable Laws, in all jurisdictions where the same is
required, complying in all material respects with all applicable legal
requirements on the date of mailing thereof;
(d) except for proxies (unless otherwise requested by Parent) and other
non-substantive communications, it will furnish promptly to Parent and
Acquiror, or provide Parent and Acquiror with reasonable access to
review, a copy of each notice, report, schedule or other document or
communication delivered, filed or received by Company in connection
with the Arrangement, the Interim Order, the Company Meeting or the
Final Order or any filings under applicable Laws;
(e) at the request of Acquiror, it will use commercially reasonable efforts
to solicit from the Shareholders proxies in favour of the Arrangement
Resolution, including, if so requested by Acquiror, using the services
of dealers and proxy solicitation services, and to take all other
action that is necessary or desirable to secure the approval of the
Arrangement Resolution, unless and until the Board of Directors of
Company has changed its recommendation in accordance with the terms of
this Agreement pursuant to Section 5.5;
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(f) it will permit Parent and Acquiror and their counsel to review and
comment upon drafts of all material to be filed by Company with the
Court in connection with the Plan of Arrangement and provide counsel to
Parent and Acquiror on a timely basis with copies of any notice of
appearance and evidence served on Company or its counsel in respect of
the application for the Final Order or any appeal therefrom and of any
notice (written or oral) received by Company indicating any intention
to oppose the granting of the Final Order or to appeal the Final Order;
(g) give Parent prompt notice of any written notice of dissent, withdrawal
of such notice, and any other instruments received by the Company
pursuant to any such dissent rights;
(h) except as previously disclosed in writing to Parent and Acquiror or in
contemplation of or to give effect to the transactions contemplated by
this Agreement or the Arrangement, it shall, and shall cause each of
its Material Entities to, conduct its and their respective businesses
only in, and not take any action except in, the ordinary course of
business consistent with past practice;
(i) except in contemplation of or to give effect to the transactions
contemplated by this Agreement or the Arrangement, and except as
previously disclosed in writing to Parent and Acquiror, it shall not,
directly or indirectly, whether by or through any Material Entity, do
or permit to occur any of the following:
(i) issue, sell, pledge, lease, dispose of, encumber or agree to
issue, sell, pledge, lease, dispose of or encumber (or permit
any of the Material Entities to issue, sell, pledge, lease,
dispose of, encumber or agree to issue, sell, pledge, lease,
dispose of or encumber) any shares of, or any options, warrants,
calls, conversion privileges or rights of any kind to acquire
any shares of it or any of its Material Entities, other than the
issue of Company Common Shares pursuant to the exercise,
conversion or payment in respect of Options (whether vested or
unvested), in each case currently outstanding and, except as
contemplated by Section 2.6, in accordance with their current
terms;
(ii) other than pursuant to obligations or rights under existing
contracts, agreements and commitments (to the extent such rights
have been exercised or initiated by other persons in accordance
with their terms), sell, lease (other than space leases) or
otherwise dispose of (or permit any of its Material Entities to
dispose of) any material assets or enter into any agreement or
commitment in respect of any of the foregoing;
(iii) amend or propose to amend its articles or by-laws or the
articles, charter, by-laws or other similar organizational
documents of any of its Material Entities or any of the terms of
the Options, except as contemplated by Section 2.5;
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(iv) split, combine, reclassify or amend the material terms of any of
its outstanding securities or any securities of its Material
Entities, or declare, set aside or pay any dividend or other
distribution payable in cash, stock, property or otherwise with
respect to the Company Common Shares, except for regular
quarterly cash dividends on the Company Common Shares in the
normal course in accordance with its existing practice;
(v) redeem, purchase or offer to purchase (or permit any of its
Material Entities to redeem, purchase or offer to purchase) any
Company Common Shares (including by way of issuer bid) or other
equity securities of it or any of its Material Entities, unless
otherwise required by the terms of such securities and other
than pursuant to existing share purchase plans (other than by
way of issuer bid), Options and obligations or rights under
existing contracts, agreements and commitments (to the extent
such rights have been exercised or initiated by other persons);
(vi) repay, redeem, repurchase or retire, or otherwise make any
payment in respect of any indebtedness for borrowed money or any
of its debt securities, or any rights, warrants, calls or
options to acquire any of its debt securities, other than in the
ordinary course of business consistent with past practice or as
required by their terms as in effect on the date of this
Agreement, or authorize, or make any commitment to make any new
capital expenditure or expenditures in excess of $20 million,
except as currently set forth in the approved budgets of the
Company;
(vii) reorganize, amalgamate or merge it or any of its Material
Entities with any other person, corporation, partnership or
other business organization whatsoever;
(viii) other than pursuant to obligations or rights under existing
contracts, agreements and commitments (to the extent such rights
have been exercised or initiated by other persons), acquire or
agree to acquire any person, corporation, partnership, joint
venture or other business organization (or material interest
therein) or division or acquire or agree to acquire any assets
which, in each case are, individually or in the aggregate,
material, including by merger, amalgamation, plan of
arrangement, acquisition of shares or otherwise;
(ix) incur or commit to provide guarantees for borrowed money, incur
or assume any additional indebtedness for borrowed money or
issue any additional debt securities except for the purpose of
the renewal of or the replacement of existing credit facilities,
mortgages or financings with floating rate debt that is
prepayable in no more than 30-day intervals;
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(x) except as required by Canadian GAAP or applicable Law make,
change or revoke any material election relating to taxes, change
any annual accounting period, adopt or change any existing
accounting practices, take any action, or omit to take any
action, in either case inconsistent with past practice, relating
to the filing of any tax return or the payment of any tax,
settle any material tax claim or assessment in an amount that
exceeds, individually or in the aggregate, $20 million or
surrender any right to claim a tax refund;
(xi) acquire (including by merger, amalgamation, plan of arrangement,
consolidation or acquisition of stock or assets or any other
business combination) any corporation, partnership, other
business organization or any division thereof or any assets
except purchases of inventory in the ordinary course of business
consistent with past practice;
(xii) pay, settle, discharge or satisfy any material claim, liability
or obligation (whether absolute, accrued, asserted or
unasserted, contingent or otherwise), other than in the ordinary
course of business and consistent with past practice; and
(xiii) except as otherwise provided in Section 5.8, amend, modify or
terminate any insurance policy of the Company or any Material
Entities in effect on the date hereof, except for the scheduled
renewal of the Company's current directors' and officers'
liability insurance policy for a period of not more than one
year, on the terms (including price) currently in effect under
such policy, or the most similar terms then available, as
permitted by the terms of such policy and except for scheduled
renewals of any other insurance policy of the Company or the
Material Entities in effect on the date hereof in the ordinary
course of business consistent with past practice;
(j) it shall not, and shall cause each of its Material Entities to not,
other than as previously disclosed in writing to Parent and Acquiror or
with respect to employees in the ordinary course of business or as
required pursuant to existing Company Plans or agreements, enter into
or modify any employment, severance, collective bargaining or similar
agreements, policies or arrangements with, or grant any bonuses, salary
increases, stock options, pension or supplemental pension benefits,
profit sharing, retirement allowances, deferred compensation, incentive
compensation, severance or termination pay to, or make any loan to, any
employees, officers or directors of it; provided that the foregoing
shall not prevent Company from taking such action that is reasonably
necessary to permit the conditional exercise of Options as provided in
Section 2.6;
(k) it shall use its reasonable commercial efforts (and cause each of its
Material Entities to use reasonable commercial efforts) to cause its
current insurance (or re-insurance) policies not to be cancelled or
terminated or any of the coverage thereunder to lapse, unless
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simultaneously with such termination, cancellation or lapse,
replacement policies underwritten by insurance and re-insurance
companies of nationally recognized standing providing coverage equal to
or greater than the coverage under the cancelled, terminated or lapsed
policies for substantially similar premiums are in full force and
effect;
(l) it shall:
(i) use its reasonable commercial efforts, and cause each of its
Material Entities to use its reasonable commercial efforts, to
preserve intact its business organizations and goodwill, to
maintain satisfactory relationships with customers, suppliers,
agents, tenants, co-owners, employees and others having business
relationships with it or its Material Entities;
(ii) not take any action, or permit any of its Material Entities to
take any action, that would interfere with or be inconsistent
with the completion of the transactions contemplated hereunder
or would render, or that reasonably may be expected to render,
any representation or warranty made by it in this Agreement
untrue in any material respect at any time prior to the
Effective Time if then made; and
(iii) promptly notify Parent and Acquiror of (A) any material adverse
change, or any change which would reasonably be expected to
become a material adverse change, in respect of Company, and (B)
of any material Governmental Entity or third party litigation,
complaints, investigations or hearings (or communications
indicating that the same may be contemplated);
(m) it shall not and shall cause its Material Entities not to settle or
compromise any claim brought by any present, former or purported holder
of any of its securities in connection with the transactions
contemplated by this Agreement or the Arrangement prior to the
Effective Time;
(n) except as previously disclosed in writing to Parent and Acquiror or as
required by applicable Laws, it and its Material Entities shall not (i)
authorize any waiver, release or relinquishment of any material
contractual right or (ii) enter into or modify in any material respect
or terminate any contract, agreement, commitment or arrangement which
new contract or series of related new contracts or modification to or
termination of an existing contract or series of related existing
contracts would be material to the Company or would have a material
adverse effect on Company;
(o) as soon as reasonably practicable, it shall use all commercially
reasonable efforts to satisfy (or cause the satisfaction of) the
conditions precedent to its and Parent's and Acquiror's obligations
hereunder set forth in Article 6 to the extent the same is within its
control and to take, or cause to be taken, all other action and to do,
or cause to be done, all other things necessary, proper or advisable
under all applicable Laws to complete the Arrangement and the
transactions contemplated by this Agreement, including using its
commercially reasonable efforts to:
-17-
(i) effect all necessary registrations, filings and submissions of
information requested by Governmental Entities required to be
effected by it in connection with the Arrangement and the
transactions contemplated by this Agreement;
(ii) oppose, lift or rescind any injunction or restraining order or
other order, proceeding or action challenging or affecting this
Agreement or the transactions contemplated hereby by seeking to
restrain, enjoin or prohibit the consummation of the Arrangement
in accordance with the terms hereof; and
(iii) cooperate with Parent and Acquiror in connection with the
performance by them of their obligations hereunder, including
providing such information about Company and its Material
Entities as may be reasonably required by any potential lender
to the Parent or Acquiror in connection with the funding of the
Consideration under the Arrangement;
(p) it shall not take any action, refrain from taking any action (subject
to its commercially reasonable efforts), or permit any action to be
taken or not taken, inconsistent with this Agreement or which would
reasonably be expected to materially impede the completion of the
Arrangement or the other transactions contemplated hereby, provided
that where Company is required to take any such action or refrain from
taking such action (subject to its commercially reasonable efforts) as
a result of this Agreement, Company shall immediately notify Parent and
Acquiror in writing of such circumstances; it shall use its
commercially reasonable efforts to conduct its affairs and shall cause
its Material Entities to conduct their affairs so that all of its
representations and warranties contained herein shall be true and
correct in all material respects on and as of the Effective Date as if
made on and as of such date; and
(q) it shall promptly advise Acquiror and Parent in writing:
(i) if it becomes aware that the Proxy Circular or any application
for an order hereunder contains any untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements contained
therein not misleading in light of the circumstances in which
they are made or that otherwise requires an amendment or
supplement to the Proxy Circular or such application;
(ii) of any event, condition or circumstance that would be reasonably
expected to cause any representation or warranty of Company
contained in this Agreement to be untrue or inaccurate on the
Effective Date (or, in the case of any representation or
warranty made as of a specified date, as of such specified
date);
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(iii) of any material adverse effect on Company or any event,
occurrence or development which would be reasonably expected to
have a material adverse effect on Company; and
(iv) of any material breach by Company of any covenant, obligation or
agreement contained in this Agreement.
5.3 GENERAL COVENANTS OF PARENT AND ACQUIROR
Each of Parent and Acquiror covenants and agrees that, except
as contemplated by this Agreement, the Arrangement and transactions (including
financing transactions) necessary to implement the Arrangement, until the
earlier of the Effective Date and the day upon which this Agreement is
terminated:
(a) in a timely and expeditious manner it shall take all such steps and do
all such acts and things as are specified in the Interim Order, the
Plan of Arrangement and the Final Order to be taken or done by Parent
and Acquiror, as applicable;
(b) Parent shall take all necessary action to ensure that Acquiror performs
its obligations hereunder, including, without limitation, ensuring that
Acquiror has sufficient funds to carry out its obligations under this
Agreement and the Arrangement and to pay related fees and expenses;
(c) as soon as reasonably practicable, it shall use all commercially
reasonable efforts to satisfy (or cause the satisfaction of) the
conditions precedent to its and Company's obligations hereunder set
forth in Article 6 to the extent the same is within its control and to
take, or cause to be taken, all other action and to do, or cause to be
done, all other things necessary, proper or advisable under all
applicable Laws to complete the Arrangement and the transactions
contemplated by this Agreement, including using its commercially
reasonable efforts to:
(i) effect all necessary registrations, filings and submissions of
information requested by Governmental Entities or required to be
effected by it in connection with the Arrangement and the
transactions contemplated by this Agreement;
(ii) oppose, lift or rescind any injunction or restraining order or
other order, proceeding or action challenging or affecting this
Agreement or the transactions contemplated hereby by seeking to
restrain, enjoin or prohibit the consummation of the Arrangement
in accordance with the terms hereof;
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(iii) fulfill all conditions and satisfy all provisions of this
Agreement required to be fulfilled or satisfied by the Acquiror
and Parent and the Arrangement required to be fulfilled or
satisfied by each of them; and
(iv) cooperate with Company in connection with the performance by it
of its obligations hereunder;
(d) it shall not take any action, refrain from taking any action (subject
to its commercially reasonable efforts), or permit any action to be
taken or not taken, inconsistent with this Agreement or which would
reasonably be expected to materially impede the completion of the
Arrangement or the other transactions contemplated hereby, provided
that where Parent or Acquiror is required to take any such action or
refrain from taking such action (subject to its commercially reasonable
efforts) as a result of this Agreement, it shall immediately notify
Company in writing of such circumstances;
(e) except for proxies and other non-substantive communications, it shall
furnish promptly to Company a copy of each notice, report, schedule or
other document or communication delivered, filed or received by Parent
or Acquiror in connection with the Arrangement or the Interim Order,
any filings under applicable Laws and any dealings with Governmental
Entities in connection with, or in any way affecting, the transactions
contemplated herein;
(f) in a timely and expeditious manner, it shall provide to Company all
information as may be reasonably requested by Company or as required by
the Interim Order or applicable Laws with respect to Parent and
Acquiror and their respective Subsidiaries and their respective
businesses and properties for inclusion in the Proxy Circular with
respect to the Company Meeting or in any amendments or supplements to
such Proxy Circular complying in all material respects with all
applicable Laws on the date of mailing thereof and shall ensure such
information does not contain any misrepresentation (as defined under
applicable securities Laws); and
(g) it shall promptly advise Company in writing:
(i) of any event, condition or circumstance that might be reasonably
expected to cause any representation or warranty of Acquiror and
Parent contained in this Agreement to be untrue or inaccurate on
the Effective Date (or, in the case of any representation or
warranty made as of a specified date, as of such specified
date); and
(ii) of any material breach by Acquiror or Parent of any covenant,
obligation or agreement contained in this Agreement.
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5.4 COVENANTS REGARDING NON-SOLICITATION
(a) Company shall not, directly or indirectly, through any officer,
director, employee, representative or agent of Company or any of its
Subsidiaries, or otherwise:
(i) solicit, initiate, knowingly encourage or otherwise facilitate
(including by way of furnishing information or entering into any
form of agreement, arrangement or understanding) any inquiries
or proposals regarding an Acquisition Proposal or potential
Acquisition Proposal;
(ii) participate in any negotiations or discussions regarding, or
provide any confidential information with respect to or
otherwise cooperate in any way with, any Acquisition Proposal or
potential Acquisition Proposal;
(iii) withhold, withdraw or modify in a manner adverse to Parent and
Acquiror the approval of the Board of Directors of Company of
the transactions contemplated hereby;
(iv) approve or recommend any Acquisition Proposal or potential
Acquisition Proposal; or
(v) cause Company to enter into any agreement related to any
Acquisition Proposal or potential Acquisition Proposal;
provided however that, notwithstanding the preceding part of this
Section 5.4(a) and any other provision of this Agreement, nothing shall
prevent the Board of Directors of Company, prior to the approval of the
Arrangement Resolution by the Shareholders at the Company Meeting, from
considering, participating in discussions or negotiations in respect of
or responding to an unsolicited BONA FIDE written Acquisition Proposal
from any person (but, subject to Section 5.5, not approve, recommend,
accept or enter into any agreement, arrangement or understanding with
respect to such Acquisition Proposal), provided that (A) the Board of
Directors of Company determines in good faith, after consultation with
financial and outside legal advisors, that the Acquisition Proposal is
a Superior Proposal; (B) the Board of Directors of Company after
consultation with outside legal advisors, determines in good faith it
is necessary for the Board of Directors of Company to take such action
in order to avoid breaching its fiduciary duties; and (C) prior to
entering into discussions or negotiations with any person regarding the
Superior Proposal, Company notifies the Acquiror and Parent of its
determination that such Acquisition Proposal constitutes a Superior
Proposal;
(b) Company shall cease and cause to be terminated any discussion,
negotiations, solicitation, encouragement, or activity by Company or
its representatives or agents with any parties other than the other
Parties hereto, with respect to any potential Acquisition Proposal, and
in connection therewith, Company will request (and exercise all rights
it has to require) the return or destruction of information regarding
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Company and its Material Entities previously provided to any such
person or any other person. Company agrees not to release any third
party from any confidentiality or standstill agreement to which such
third party is a party, or modify or waive the terms thereof;
(c) Promptly, and in any event within 24 hours, after the receipt by
directors or senior officers of Company or by its representatives or
agents of any BONA FIDE written Acquisition Proposal, or any material
amendments to such Acquisition Proposal, or any request for non-public
information relating to Company or any Material Entity, Company shall
notify Acquiror and Parent at first orally and then in writing. Such
written notice shall include a description of the terms and conditions
of any inquiry or Acquisition Proposal or any amendment thereto, the
identity of the person making such inquiry or Acquisition Proposal and
provide such other details of the Acquisition Proposal or inquiry as
Acquiror or Parent may reasonably request, including a copy of any
written Acquisition Proposal. Company shall, upon request of Acquiror
or Parent, promptly inform Acquiror or Parent of the status, including
any change to the material terms, of any such Acquisition Proposal;
(d) If, prior to the approval of the Arrangement Resolution by the
shareholders at the Company Meeting, Company receives a request for
material non-public information from a person who proposes an
Acquisition Proposal in respect of Company (the existence and content
of which have been disclosed to Parent or Acquiror), and the Board of
Directors of Company determines that such proposal is a Superior
Proposal pursuant to Section 5.4(a) then, and only in such case, the
Board of Directors of Company may, subject to the execution of a
confidentiality agreement, provide such person with access to
information regarding Company; provided, however, that (i) Company
sends a copy of any such confidentiality agreement to Parent and
Acquiror immediately upon its execution; (ii) if the confidentiality
agreement in question contains standstill or confidentiality provisions
that are less restrictive than the comparable provisions, or omits
restrictive provisions, contained in the Confidentiality Agreement,
then the Confidentiality Agreement shall be deemed to be amended to
contain only such less restrictive provisions or to omit such
restrictive provisions, as the case may be; and (iii) Parent and
Acquiror are provided with a list of, and access to, the information,
if any, provided to such person that was not previously provided to
Parent and Acquiror;
(e) Company shall reaffirm its recommendation of the transaction to be
effected by the Plan of Arrangement by press release promptly after:
(A) any Acquisition Proposal which is publicly announced and determined
not to be a Superior Proposal; or (B) Company, Parent and Acquiror
enter into an amended Agreement; and
(f) Company shall ensure that its officers, directors and employees and its
Subsidiaries and any financial advisors or other advisors or
representatives retained by it are aware of the provisions of this
Section 5.4, and it shall be responsible for any breach of this Section
5.4 by its financial advisors or other advisors or representatives.
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5.5 NOTICE BY COMPANY OF SUPERIOR PROPOSAL DETERMINATION
(a) Company covenants that:
(i) Company shall not enter into any agreement in respect of an
Acquisition Proposal (other than a confidentiality agreement
contemplated by Section 5.4(d)) (a "Proposed Agreement") on the
basis that it would constitute a Superior Proposal; and
(ii) Company's Board of Directors will not withdraw, modify or change
its recommendation concerning the Arrangement after the public
announcement of an Acquisition Proposal that is a Superior
Proposal in respect of which no Proposed Agreement has been or
is proposed to be entered into (an "Announced Acquisition
Proposal") or recommend any Announced Acquisition Proposal,
unless (A) it has provided Parent and Acquiror with written notice that the
Company's Board of Directors has determined that it has received a Superior
Proposal and, in the case of clause (a)(i) above, it has provided Acquiror with
a copy of any Proposed Agreement executed by the party making such Superior
Proposal not less than five business days prior to its proposed execution by
Company, and in the case of clause (a)(ii) above, it has provided Parent and
Acquiror with not less than five business days written notice that the Company's
Board of Directors intends to withdraw, modify or change its recommendation
regarding the Arrangement following the public announcement of an Announced
Acquisition Proposal or to recommend any Announced Acquisition Proposal (either
such five day period, the "NOTICE PERIOD"); (B) it has complied with Section 5.4
with respect thereto; (C) the approval of the Arrangement by the Shareholders
has not yet occurred; (D) it has complied with the provisions of Section 5.5(b);
and (E) before entering to any Proposed Agreement, this Agreement shall have
been terminated pursuant to Section 8.1(e). Any Proposed Agreement or such
written notice, as applicable, shall, if relevant, be accompanied by a written
document from the Company's Board of Directors regarding the value in financial
terms that Company's Board of Directors has, in consultation with financial
advisors, determined in good faith should be ascribed to any non-cash
consideration offered under the Proposed Agreement or Announced Acquisition
Proposal, as applicable.
(b) During the Notice Period (as defined above), Company acknowledges that
Acquiror shall have the opportunity, but not the obligation, to offer to amend
the terms of this Agreement and the Arrangement. The Board of Directors of
Company will review any offer by Acquiror to amend the terms of this Agreement
in good faith in order to determine, in its discretion in the exercise of its
fiduciary duties, whether Acquiror's offer upon acceptance by Company would
result in such Superior Proposal ceasing to be a Superior Proposal. If the Board
of Directors of Company so determines, it will enter into an amended agreement
with Acquiror reflecting Acquiror's amended proposal. If (i) Acquiror does not
offer to amend the terms of this Agreement and the Arrangement or (ii) the Board
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of Directors of Company determines, in good faith and after consultation with
its financial and legal advisors that such Superior Proposal continues to be a
Superior Proposal and therefore rejects Acquiror's amended proposal and (iii)
Company has complied with the other requirements of Section 5.4(a), Company
shall be entitled to enter into the Proposed Agreement and withdraw, modify or
change its recommendation concerning the Arrangement and recommend the Superior
Proposal.
(c) If Company provides Acquiror with notice under Section 5.5(a) on a date
that is less than five business days before the date of the Company Meeting,
subject to applicable Laws, Company shall postpone or adjourn the Company
Meeting to a date that is at least five business days but not more than 10
business days after the scheduled date of the Company Meeting.
(d) Company also acknowledges and agrees that each successive modification
of any Acquisition Proposal shall constitute a new Acquisition Proposal for
purposes of the requirement under Section 5.5(a) to initiate an additional five
business day notice period.
5.6 ACCESS TO INFORMATION
(a) Subject to Section 5.6(b) and applicable Laws, upon reasonable notice,
Company shall (and shall cause each of its Material Entities to) afford
Parent's and Acquiror's officers, employees, counsel, accountants and
other authorized representatives and advisors ("REPRESENTATIVES")
reasonable access, during normal business hours from the date hereof
and until the earlier of the Effective Time or the termination of this
Agreement, to its and its Material Entities' financial or accounting
records, properties, books, contracts and records as well as to its
management personnel, and, during such period, Company shall (and shall
cause each of its Material Entities to) furnish promptly to Parent and
Acquiror all information concerning Company's and its Material
Entities' business, properties and personnel as Parent and Acquiror may
reasonably request. Nothing in the foregoing shall require Company to
disclose information subject to a written confidentiality agreement
with third parties, or customer-specific or competitively sensitive
information relating to areas or projects where Parent, Acquiror or any
of their respective affiliates is a competitor. Company agrees to
consult and cooperate in a reasonable manner with Parent and Acquiror
with respect to (i) any of the foregoing matters, and (ii) any matters
relating to material litigation to which the Company is a party.
(b) Each of Parent and Acquiror acknowledges that information provided by
Company to it under Sections 5.4(c) and 5.6 is subject to the
Confidentiality Agreement which shall remain in full force and effect
notwithstanding any other provision of this Agreement or any
termination of this Agreement.
5.7 EMPLOYMENT AGREEMENTS AND RELATED MATTERS
(a) Each of Parent and Acquiror covenants and agrees, and after the
Effective Time will cause Company and any successor to Company to
agree, to honour and comply with the terms of those existing
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employment, severance and indemnification agreements or arrangements of
Company which have been Publicly Disclosed by Company or which Company
has disclosed in the Company Disclosure Letter, provided that nothing
shall prevent the termination of any agreement that is terminable in
accordance with its terms.
(b) Each of Parent and Acquiror also covenants and agrees, and after the
Effective Time it will cause Company and any successor to Company to
agree, that it will deal with any employees of Company who are not
party to an employment agreement with Company and whose employment may
be terminated after the Effective Date and on or prior to December 31,
2006 in a fair and equitable manner consistent with the existing
termination practices of Company as disclosed to Parent and Acquiror in
the Company Disclosure Letter.
5.8 DIRECTORS' AND OFFICERS' INSURANCE
(a) Parent and Acquiror shall ensure that the by-laws of Company and any
corporation continuing following any amalgamation, merger, plan of
arrangement, consolidation or winding-up of Company with or into one or
more other persons (a "CONTINUING CORPORATION") shall contain the
provisions with respect to indemnification set forth in Company's
by-laws, which provisions shall not, except to the extent required by
law, be amended, repealed or otherwise modified for a period of six
years from the Effective Date in any manner that would adversely affect
the rights thereunder of individuals who, immediately prior to the
Effective Time, were directors, officers, employees or agents of
Company, unless required by Law, and Parent and Acquiror shall ensure
that the obligations of Company under any indemnification agreements
between Company and its directors and certain officers continue in
place and are assumed by, if applicable, any Continuing Corporation.
(b) Each of Parent and Acquiror agrees that Company shall, prior to the
Effective Time, purchase and maintain for the period from the Effective
Time until six years after the Effective Time on a "trailing" (or
"run-off") basis, a directors' and officers' insurance policy for all
present and former directors and officers of Company, covering claims
made prior to or within six years after the Effective Time, on terms
and conditions which are no less advantageous to the directors and
officers of Company and providing no less than $20 million of coverage
for all such present and former directors and officers of Company
provided, however, that in purchasing and maintaining such policy, the
Company shall not pay more than $4 million unless Parent consents
otherwise.
5.9 MERGER OF COVENANTS
The covenants set out in this Agreement (except for Sections
5.6(b), 5.7, 5.8, 5.9 and 9.1 which shall survive the completion of the
Arrangement and except for Sections 5.6(b), 5.9, 8.2 and 8.3 which shall survive
the termination of this Agreement) shall not survive the completion of the
Arrangement, and shall expire and be terminated without recourse between the
Parties upon such completion.
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ARTICLE 6
CONDITIONS
----------
6.1 MUTUAL CONDITIONS
The obligations of Company, Parent and Acquiror to complete the
Arrangement and the other transactions contemplated herein are subject to the
fulfilment of the following conditions at or before the Effective Time or such
other time as is specified below:
(a) the Interim Order shall have been granted in form and substance
satisfactory to the Parties, acting reasonably, and shall not have been
set aside or modified in a manner unacceptable to such Parties, acting
reasonably, on appeal or otherwise;
(b) the Arrangement Resolution shall have been approved by the Shareholders
at the Company Meeting, in accordance with the Interim Order;
(c) the Final Order shall have been granted in form and substance
satisfactory to the Parties, acting reasonably, and shall not have been
set aside or modified in a manner unacceptable to such Parties, acting
reasonably, on appeal or otherwise;
(d) the Effective Date shall occur on or before November 30, 2005, subject
to any extension available to a Party pursuant to Section 6.4; and
(e) this Agreement shall not have been terminated pursuant to Article 8.
The foregoing conditions are for the mutual benefit of Company on the
one hand and Parent and Acquiror on the other hand and may be waived, in whole
or in part, by a Party at any time. If any of the said conditions precedent
shall not be complied with or waived as aforesaid on or before November 30,
2005, then subject to Section 6.4, a Party may rescind and terminate this
Agreement by written notice to the other Parties in circumstances where the
failure to satisfy any such condition is not the result, directly or indirectly,
of such rescinding Party's breach of this Agreement.
6.2 COMPANY CONDITIONS
The obligation of Company to complete the Arrangement and the other
transactions contemplated herein is subject to the fulfilment of the following
additional conditions at or before the Effective Time or such other time as
specified below:
(a) the representations and warranties made by Parent and Acquiror in this
Agreement shall be true and correct in all material respects as of the
Effective Date as if made on and as of such date (except to the extent
such representations and warranties expressly speak as of an earlier
date, in which event such representations and warranties shall be true
and correct as of such earlier date), and each of Parent and Acquiror
shall have provided to Company a certificate of two qualified officers
certifying such accuracy on the Effective Date;
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(b) each of Parent and Acquiror shall have complied in all material
respects with its covenants herein, and each of Parent and Acquiror
shall have provided to Company a certificate of two qualified officers
certifying that it has so complied with its covenants herein; and
(c) Acquiror shall have provided evidence reasonably satisfactory to
Company that it has received the funds necessary to complete the
transactions contemplated hereby.
The foregoing conditions precedent are for the benefit of
Company and may be waived, in whole or in part, by Company in writing at any
time. If any of the said conditions shall not be complied with or waived by
Company on or before November 30, 2005, then subject to Section 6.4, Company may
rescind and terminate this Agreement by written notice to Parent and Acquiror in
circumstances where the failure to satisfy any such condition is not the result,
directly or indirectly, of Company's breach of this Agreement.
6.3 PARENT AND ACQUIROR CONDITIONS
The obligation of Parent and Acquiror to complete the
Arrangement and the other transactions contemplated herein is subject to the
fulfilment of the following additional conditions at or before the Effective
Time or such other time as specified below:
(a) the representations and warranties made by Company in Sections 1, 2, 3,
4(a), 4(b) and 10 of Schedule B of this Agreement which are qualified
by the expression "material adverse change" or "material adverse
effect" shall be true and correct as of the Effective Date as if made
on and as of such date (except to the extent such representations and
warranties expressly speak as of an earlier date, in which event such
representations and warranties shall be true and correct as of such
earlier date), and Company shall have provided to Parent and Acquiror a
certificate of two qualified officers certifying such accuracy on the
Effective Date;
(b) the representations and warranties made by Company in the other
sections of Schedule B of this Agreement which are qualified by the
expression "material adverse change" or "material adverse effect" shall
be true and correct as of the date of this Agreement, and all other
representations and warranties made by Company in this Agreement which
are not so qualified shall be true and correct in all material respects
as of the date of this Agreement and on the Effective Date Company
shall have provided to Parent and Acquiror a certificate of two
qualified officers certifying that from and after the date of this
Agreement, Company has taken no action and has not conducted its
business in a manner that would render any such representation or
warranty untrue in any material respect as if made on the Effective
Date;
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(c) from the date hereof up to and including the Effective Time, there
shall not have occurred or have been disclosed to the public a material
adverse change to Company that has not been Publicly Disclosed by
Company or disclosed to Parent or Acquiror in writing prior to the date
hereof, and Company shall have provided to Parent and Acquiror a
certificate of two qualified officers to such effect on the Effective
Date;
(d) Dissent Rights shall not have been exercised in respect of more than
10% of the Company Common Shares (on a fully-diluted basis);
(e) Company shall have complied in all material respects with its covenants
herein, and Company shall have provided to Parent and Acquiror a
certificate of two qualified officers certifying that Company has so
complied with its covenants herein;
(f) the Board of Directors of Company shall have adopted all necessary
resolutions, and all other necessary corporate action shall have been
taken by Company, to permit the consummation of the Plan of
Arrangement;
(g) the Board of Directors of the Company shall not have approved or
recommended any Acquisition Proposal;
(h) no person other than Acquiror and Parent shall have entered into a
definitive agreement or an agreement in principle with the Company with
respect to an Acquisition Proposal;
(i) any consents, waivers, permits, orders and approvals of any
Governmental Entity other than a Governmental Entity located in either
of Kazakhstan or the People's Republic of China, and the expiry of any
waiting periods, in connection with, or required to permit, the
consummation of the Arrangement, the failure of which to obtain would
render completion of the Arrangement unlawful, shall have been obtained
or satisfied on terms that would not reasonably be expected to have a
material adverse effect on Acquiror or the Company; and
(j) no legal action or proceeding that has a reasonable prospect of
ultimate success and that is not frivolous or vexatious shall have been
commenced after the date hereof by any person (other than Lukoil
Overseas Kumkol B.V. in respect of any legal action or proceeding in
Kazakhstan or before the Arbitration Institute of the Stockholm Chamber
of Commerce, or Arbitration Institute of the International Chamber of
Commerce, Paris relating exclusively to AO Turgai Petroleum) or
Governmental Entity (other than a Governmental Entity located in
Kazakhstan) to cease trade, enjoin, prohibit or impose material
limitations or conditions on the completion of the Arrangement or the
right of Acquiror to own or exercise full rights of ownership of all of
the outstanding Company Common Shares and all of the outstanding shares
or other ownership interests of Material Entities owned by Company.
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For greater certainty, the Parties acknowledge that the obligations of
Company, Parent and Acquiror to complete the transactions contemplated hereby
shall not be subject to the receipt of any approval from any Governmental Entity
of the Republic of Kazakhstan, and each of Parent and Acquiror acknowledge and
agree that any regulatory risk relating to Kazakhstan shall be borne by Parent
and Acquiror. The foregoing conditions precedent are for the benefit of Parent
and Acquiror and may be waived, in whole or in part, by Parent and Acquiror in
writing at any time. If any of the said conditions shall not be complied with or
waived by Parent and Acquiror on or before November 30, 2005, then subject to
Section 6.4, Parent and Acquiror may rescind and terminate this Agreement by
written notice to Company in circumstances where the failure to satisfy any such
condition is not the result, directly or indirectly, of Parent's or Acquiror's
breach of this Agreement.
6.4 NOTICE AND CURE PROVISIONS
Each Party will give prompt notice to the other Parties of the occurrence, or
failure to occur, at any time from the date hereof until the Effective Date, of
any event or state of facts which occurrence or failure would, or would be
likely to:
(i) cause any of the representations or warranties of any other
Party contained herein to be untrue or inaccurate in any
material respect on the date hereof or on the Effective Date, as
applicable;
(ii) result in the failure to comply with or satisfy any covenant or
agreement to be complied with or satisfied by any other Party
prior to the Effective Date; or
(iii) result in the failure to satisfy any of the conditions precedent
in its favour contained in Sections 6.1, 6.2 or 6.3, as the case
may be.
Subject as herein provided, a Party may elect not to complete the
transactions contemplated hereby pursuant to the conditions precedent contained
in Sections 6.1, 6.2 and 6.3 or exercise any termination right arising
therefrom; provided, however, that (A) forthwith and in any event prior to the
filing of the Final Order and Articles of Arrangement for acceptance by the
Registrar, the Party intending to rely thereon has delivered a written notice to
the other Parties specifying in reasonable detail all breaches of covenants,
representations and warranties or other matters which the Party delivering such
notice is asserting as the basis for the non-fulfilment of the applicable
condition precedent or termination right, as the case may be and (B) if any such
notice is delivered, and a Party is proceeding diligently to cure such matter,
if such matter is susceptible to being cured, the other Parties may not
terminate this Agreement until the later of November 30, 2005 and the expiration
of a period of 30 days from such notice. If such notice has been delivered prior
to the date of the Company Meeting, Company shall have the right, but not the
obligation, to postpone such meeting until the expiry of such period.
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6.5 MERGER OF CONDITIONS
The conditions set out in Sections 6.1, 6.2 and 6.3 shall be
conclusively deemed to have been satisfied, waived or released upon the filing
of Articles of Arrangement as contemplated by this Agreement, and the issuance
of a certificate of arrangement and certificate of amendment in respect thereof
under the ABCA. Company acknowledges and agrees that it shall have no right to
file Articles of Arrangement unless such conditions have been satisfied,
fulfilled or waived.
ARTICLE 7
AMENDMENT
---------
7.1 AMENDMENT
This Agreement may, at any time and from time to time before or after
the holding of the Company Meeting, be amended by mutual written agreement of
the Parties without further notice to or authorization on the part of the
Shareholders, and any such amendment may, without limitation:
(a) change the time for performance of any of the obligations or acts of
the Parties;
(b) waive any inaccuracies or modify any representation contained herein or
in any document delivered pursuant hereto;
(c) waive compliance with or modify any of the covenants herein contained
and waive or modify performance of any of the obligations of the
Parties; and
(d) waive compliance with or modify any conditions precedent herein
contained;
provided, however, that any such change, waiver or modification does not
invalidate any required Shareholder approval of the Arrangement.
7.2 MUTUAL UNDERSTANDING REGARDING AMENDMENTS
In addition to the transactions contemplated hereby or at the request
of a Party, the Parties will continue from and after the date hereof and through
and including the Effective Date, to use their respective commercially
reasonable efforts to maximize present and future planning opportunities for
Parent and Acquiror and for Company and its Subsidiaries as and to the extent
that the same shall not prejudice any Party or its securityholders. Without
limiting the generality of the foregoing, the Company shall assist and
co-operate with Parent and Acquiror in determining whether the Canadian tax
"bump" rules would apply upon an amalgamation of Company and Acquiror to include
the amount determined under paragraph 88(1)(d) of the Tax Act when calculating
the tax cost of capital property held by the amalgamated company (including
shares of Company's Subsidiaries held by Company immediately prior to the
amalgamation) pursuant to paragraph 88(1)(c) of the Tax Act, and the form of
transaction structure necessary to achieve the application of the Canadian tax
"bump" rules as described above. Such planning opportunities shall be
implemented only upon the prior written agreement of the Parties. The Parties
will ensure that such planning activities do not impede the progress of the
Arrangement in any material way. If Company effects any transaction contemplated
hereby or upon Parent's or Acquiror's request before the Effective Date for such
purposes, Parent and Acquiror will be responsible for any structuring and
unwinding costs if the Arrangement is not effected.
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The Parties mutually agree that if a Party proposes any other amendment
or amendments to this Agreement or to the Plan of Arrangement, Company on the
one hand and Parent and Acquiror on the other hand will act reasonably in
considering such amendment and if the other Party or Parties and their
shareholders are not prejudiced by reason of any such amendment, the other Party
or Parties will co-operate in a reasonable fashion with the Party proposing the
amendment so that such amendment can be effected subject to applicable Laws and
the rights of the securityholders.
Company covenants and agrees to cooperate with Parent and Acquiror in
invoking at Parent's and Acquiror's request a right of first refusal or right of
first offer mechanism in favour of the co-owners, joint venturers or partners of
one or more Company properties contained in any co-ownership, joint venture,
partnership or similar agreements to which Company or any Subsidiary of Company
is a party in order to give the other co-owners, joint venturers or partners the
right to purchase Company's or its Subsidiary's interests in the affected
properties if such rights are triggered as a result of the Arrangement or if
Parent and Acquiror choose to offer such rights to such co-owners, joint
venturers or partners.
ARTICLE 8
TERMINATION
-----------
8.1 TERMINATION
This Agreement may be terminated at any time prior to the Effective
Date:
(a) by mutual written consent of the Parties;
(b) as provided in Sections 6.1, 6.2 and 6.3, subject to Section 6.4;
(c) by Parent and Acquiror if, prior to the Effective Time, the Board of
Directors of Company shall have (i) withdrawn, withheld, qualified or
modified in a manner adverse to Parent its recommendation of the
Arrangement and this Agreement (it being understood that the taking of
a neutral position or no position with respect to an Acquisition
Proposal beyond a period of five business days after public
announcement of an Acquisition Proposal shall be considered an adverse
modification), (ii) approved or recommended any Acquisition Proposal or
(iii) after a period of five business days after public announcement of
an Acquisition Proposal the Board of Directors of the Company shall
have failed to reaffirm its recommendation of the Arrangement and this
Agreement as promptly as practicable but in any event within five
business days after receipt of any written request to do so from
Parent;
(d) by Parent and Acquiror or by Company if the Company Meeting shall have
been held and completed and the approval of the Arrangement by
Shareholders required by Section 6.1(b) shall not have occurred;
-31-
(e) subject to prior payment by Company to Acquiror of the amount payable
under Section 8.2, by Company in the circumstances specified in Section
5.5; or
(f) by Parent and Acquiror if the Company Meeting has not occurred on or
before November 15, 2005.
8.2 BREAK FEE
If:
(a) this Agreement is terminated by Company pursuant to Section 8.1(e); or
(b) this Agreement is terminated by Parent and Acquiror pursuant to Section
8.1(c); or
(c) this Agreement is terminated by Parent, Acquiror or Company pursuant to
Section 8.1(d) or 8.1(f) and (A) and after the date of this Agreement
and prior to such termination (in the case of Section 8.1(f)) or prior
to the date of the Special Meeting (in the case of Section 8.1(d)), an
Acquisition Proposal was made or publicly disclosed and not publicly
withdrawn prior to such date; and (B) concurrently with such
termination or within 12 months following such termination, the Company
enters into or submits to the Shareholders for approval, an agreement
with respect to an Acquisition Proposal, or an Acquisition Proposal is
consummated;
then Company shall pay to Parent, in the case of (a) prior to termination of
this Agreement or (b) within five business days following the termination of
this Agreement, and in the case of (c) within five business days of the
consummation of the Acquisition Proposal, $125 million in immediately available
funds to an account designated by Acquiror/Parent. Company shall not be
obligated to make more than one payment pursuant to this Section 8.2.
8.3 EFFECT OF TERMINATION
In the event of termination in accordance with Section 8.1, written
notice shall be provided forthwith by the terminating Party to the other
Parties, specifying the provision pursuant to which the termination is being
made and except as provided in Section 5.9, each Party shall be deemed to have
released, remised and forever discharged the other Parties in respect of any and
all claims arising in respect of this Agreement; provided that no Party will be
relieved from liability for any breach of any covenant, representation or
warranty contained in this Agreement prior to such termination; and further
provided that Company will be relieved from liability for any breach of any
covenant, representation or warranty in this Agreement upon payment of the Break
Fee. Notwithstanding anything in this Section 8.3 to the contrary, payment by
Company and acceptance by Parent of the amounts required to be paid pursuant to
Section 8.2 shall not be in lieu of any damages or any other payment or remedy
available in the event of any wilful or intentional breach by Company of any of
its obligations under this Agreement.
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ARTICLE 9
GENERAL
-------
9.1 EXPENSES
The Parties agree that all out-of-pocket third party transaction
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including legal fees, financial advisor fees and all
disbursements by advisors, shall be paid by the Party incurring such expenses,
whether or not the Arrangement is consummated.
Company on the one hand and Parent and Acquiror on the other hand
represent and warrant to each other that, except for ▇▇▇▇▇▇▇ ▇▇▇▇▇
International, in the case of Company, and Citigroup Global Markets Inc. in the
case of Parent and Acquiror, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission, or to the reimbursement
of any of its expenses, in connection with the Arrangement and the transactions
contemplated hereby.
9.2 REMEDIES
The Parties acknowledge and agree that an award of money damages would
be inadequate for any breach of this Agreement by any Party or its
representatives and advisors and that such breach would cause the non-breaching
Party irreparable harm. Accordingly, the Parties agree that, in the event of any
such breach or threatened breach of this Agreement by one of the Parties,
Company (if either Parent or Acquiror is the breaching Party) or Acquiror and
Parent (if Company is the breaching Party) will be entitled, without the
requirement of posting a bond or other security, to seek equitable relief,
including injunctive relief and specific performance. Subject to any other
provision hereof including, without limitation, Article 8, such remedies will
not be the exclusive remedies for any breach of this Agreement but will be in
addition to all other remedies available at law or in equity to each of the
Parties.
9.3 NOTICES
Any notice, consent, waiver, direction or other communication required
or permitted to be given under this Agreement by a Party shall be in writing and
may be given by delivering same or sending same by facsimile transmission or by
delivery addressed to the Party to which the notice is to be given at its
address for service herein. Any notice, consent, waiver, direction or other
communication aforesaid shall, if delivered, be deemed to have been given and
received on the date on which it was delivered to the address provided herein
(if a business day, and if not, the next succeeding business day) and if sent by
facsimile transmission be deemed to have been given and received at the time of
receipt (if a business day, and if not, the next succeeding business day) unless
actually received after 4:00 p.m. (local time) at the point of delivery in which
case it shall be deemed to have been given and received on the next succeeding
business day.
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The address for service of each of the Parties hereto shall be as
follows:
(a) if to Company:
PetroKazakhstan Inc.
Hogarth House
▇▇-▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President,
General Counsel and Corporate Secretary
Fax: ▇▇▇.▇▇.▇▇▇▇.▇▇▇.▇▇▇
with a copy to:
Davies ▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
44th Floor
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: ▇▇▇.▇▇▇.▇▇▇▇
(b) if to Parent or Acquiror:
CNPC International Ltd.
▇▇. ▇-▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇
100034
Attention: ▇▇. ▇▇▇▇▇ Yu
Fax: 8610-5855-1001
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ World Tower 2
▇▇. ▇ ▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇-▇▇▇▇▇
Fax: ▇▇-▇▇-▇▇▇▇-▇▇▇▇
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and to:
Osler, ▇▇▇▇▇▇ & Harcourt LLP
1 First Canadian Place, Suite 6100
Toronto, Ontario Canada M5X 1B8
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
9.4 TIME OF THE ESSENCE
Time shall be of the essence in this Agreement.
9.5 ENTIRE AGREEMENT
This Agreement and the Confidentiality Agreement constitute the entire
agreement between the Parties hereto and cancel and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, between the Parties with respect to the subject matter hereof. There
are no conditions, covenants, agreements, representations, warranties or other
provisions, whether oral or written, express or implied, collateral, statutory
or otherwise, relating to the subject matter hereof other than those contained
in this Agreement or in the Confidentiality Agreement.
9.6 FURTHER ASSURANCES
Each Party shall, from time to time, and at all times hereafter, at the
request of the other Party, but without further consideration, do all such other
acts and execute and deliver all such further documents and instruments as shall
be reasonably required in order to fully perform and carry out the terms and
intent hereof including, without limitation, the Plan of Arrangement.
9.7 GOVERNING LAW
This Agreement shall be governed by, and be construed in accordance
with, the laws of the Province of Ontario and the laws of Canada applicable
therein, except for the Arrangement which shall be governed by the ABCA. Except
for the implementation of the Arrangement and the Interim Order and Final Order,
each Party hereby irrevocably attorns to the jurisdiction of the Courts of the
Province of Ontario in respect of all matters arising under or in relation to
this Agreement.
-35-
9.8 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any Law, or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any Party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the Parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible in a mutually acceptable manner in order that the Arrangement is
consummated as originally contemplated to the greatest extent possible.
9.9 EXECUTION IN COUNTERPARTS
This Agreement may be executed in identical counterparts, each of which
is and is hereby conclusively deemed to be an original and the counterparts
collectively are to be conclusively deemed to be one instrument.
9.10 WAIVER
No investigations made by or on behalf of any of the Parties, at any
time, shall have the effect of waiving, diminishing the scope of or otherwise
affecting any representation or warranty made by Company, Parent or Acquiror in
or pursuant to this Agreement. No waiver of any condition or other provision, in
whole or in part, shall constitute a waiver of any other condition or provision
(whether or not similar) nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided. No waiver by any Party shall be effective
unless in writing and any waiver shall affect only the matter, and the
occurrence thereof, specifically identified and shall not extend to any other
matter or occurrence.
9.11 ENUREMENT AND ASSIGNMENT
This Agreement shall enure to the benefit of and be binding upon the
Parties hereto and their respective successors and permitted assigns. This
Agreement may not be assigned by any Party without the prior written consent of
the other Parties, which consent may be unreasonably withheld, PROVIDED,
HOWEVER, that the Acquiror may assign any of or all its rights, interests and
obligations under this Agreement to Parent or any direct or indirect
wholly-owned subsidiary of Parent without the prior written consent of the
Company, but no such assignment shall relieve the Acquiror of any of its
obligations under this Agreement.
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IN WITNESS WHEREOF the Parties hereto have executed this Agreement.
CNPC INTERNATIONAL LTD.
Per: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and Director
/s/ ▇▇▇▇▇ ▇▇
---------------------------
Name: ▇▇▇▇▇ ▇▇
Title: Vice President
PETROKAZAKHSTAN INC.
Per: /s/ ▇▇▇▇▇▇▇ ▇. Isautier
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. Isautier
Title: President and CEO
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President
and General Counsel
SCHEDULE A
PLAN OF ARRANGEMENT UNDER SECTION 193
OF THE BUSINESS CORPORATIONS ACT (ALBERTA)
ARTICLE 1
INTERPRETATION
--------------
1.1 DEFINITIONS
In this Plan of Arrangement, unless something in the subject matter or
context is inconsistent therewith:
"ABCA" means the BUSINESS CORPORATIONS ACT (Alberta), R.S.A. 2000, c. B-9,
as amended;
"ACQUIROR" means |_|, a corporation existing under the laws of Alberta;
"ARRANGEMENT" means the proposed arrangement under the provisions of
section 193 of the ABCA on the terms and conditions set forth in this Plan
of Arrangement and any amendment thereto made in accordance with Article 7
of the Arrangement Agreement and Article 5 hereof or the direction of the
Court in the Final Order;
"ARRANGEMENT AGREEMENT" means the agreement made between Parent, Acquiror
and Company dated August 21, 2005 providing for, among other things, the
Arrangement, to which this Plan of Arrangement is attached as Schedule A,
and all amendments thereto;
"ARRANGEMENT RESOLUTION" means the special resolution passed by the
Shareholders at the Meeting (voting together as a single class) approving
the Arrangement;
"BUSINESS DAY" means a day other than a Saturday, Sunday or day on which
Canadian chartered banks are authorized or required by law to be closed in
Toronto, Ontario, London, England or Beijing, China;
"COMPANY" means Petrokazakhstan Inc., a corporation existing under the
ABCA;
"COMPANY COMMON SHARES" means the Class A common shares of Company;
"COMPANY DISSENTING SHAREHOLDER" means a Shareholder who exercises such
holder's Dissent Rights;
"COMPANY OPTION" means an option to acquire Company Common Shares granted
prior to the Effective Date pursuant to the Company Incentive Stock Option
Plan;
-2-
"COMPANY INCENTIVE STOCK OPTION PLAN" means the stock option plan of
Company made effective as of May 29, 2000, as amended on May 8, 2002;
"COURT" means the Court of Queen's Bench of Alberta;
"DEPOSITARY" means Computershare Trust Company of Canada;
"DISSENT RIGHTS" means the right of a Shareholder to dissent in respect of
the Arrangement Resolution pursuant to the procedures set forth in section
191 of the ABCA, Section 3.1, the Interim Order and the Final Order;
"EFFECTIVE DATE" means the date the Arrangement is effective under the
ABCA;
"EFFECTIVE TIME" means 12:01 a.m. (Calgary time) on the Effective Date;
"FINAL ORDER" means the order of the Court approving the Arrangement, as
such order may be amended at any time prior to the Effective Date or, if
appealed, then unless such appeal is withdrawn or denied, as affirmed;
"INFORMATION CIRCULAR" means the Management Information Circular of Company
dated September |X|, 2005;
"INTERIM ORDER" means the interim order of the Court, as the same may be
amended, pursuant to subsection 193(4) of the ABCA containing declarations
and directions in respect of Company under the ABCA with respect to the
Arrangement and the Meeting;
"MEETING" means the special meeting of Shareholders to be held for the
purpose of considering the Arrangement Resolution, and any adjournment(s)
or postponement(s) thereof;
"OPTIONHOLDER" means a holder of Company Options;
"PARENT" means CNPC International Ltd., a corporation existing under the
laws of the Cayman Islands;
"PLAN OF ARRANGEMENT" means this plan of arrangement as the same may be
amended from time to time in accordance with the terms of Article 5 hereof
or the direction of the Court in the Final Order;
"SECURITIES" means, collectively, the Company Common Shares and the Company
Options;
"SECURITYHOLDERS" means, collectively, the Shareholders and the
Optionholders;
"SHAREHOLDER" means a holder of Company Common Shares;
"TAX ACT" means the INCOME TAX ACT (Canada);
-3-
"U.S. DOLLAR EQUIVALENT" means, in respect of an amount expressed in
Canadian dollars at any date, the product obtained by multiplying (i) the
Canadian dollar amount and (ii) the noon spot exchange rate for Canadian
dollars expressed in U.S. dollars as reported by the Bank of Canada on the
Business Day immediately prior to such date, rounded to the nearest whole
cent.
1.2 CONSTRUCTION
In this Plan of Arrangement, unless otherwise expressly stated or the
context otherwise requires:
(a) references to "herein", "hereby", "hereunder", "hereof" and similar
expressions are references to this Plan of Arrangement and not to any
particular Article, Section, Subsection or Clause;
(b) references to an "Article", "Section", "Subsection", "Clause" or
"Appendix" are references to an Article, Section, Subsection, Clause or
Appendix of or to this Plan of Arrangement;
(c) words importing the singular shall include the plural and vice versa,
words importing gender shall include the masculine, feminine and neuter
genders, and references to a "person" or "persons" shall include
individuals, corporations, partnerships, associations, bodies politic
and other entities, all as may be applicable in the context;
(d) the use of headings is for convenience of reference only and shall not
affect the construction or interpretation hereof;
(e) the word "includes" or "including", when following any general term or
statement, is not to be construed as limiting the general term or
statement to the specific items or matters set forth or to similar
items or matters, but rather as referring to all other items or matters
that could reasonably fall within the broadest possible scope of the
general term or statement; and
(f) a reference to a statute or code includes every regulation made
pursuant thereto, all amendments to the statute or code or to any such
regulation in force from time to time, and any statute, code or
regulation which supplements or supersedes such statute, code or
regulation.
1.3 CURRENCY
All references to currency herein are to United States dollars unless
otherwise specified.
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ARTICLE 2
THE ARRANGEMENT
---------------
2.1 ARRANGEMENT AGREEMENT
This Plan of Arrangement is made pursuant to the provisions of the
Arrangement Agreement and constitutes an arrangement as referred to in section
193 of the ABCA.
2.2 THE ARRANGEMENT
Commencing at the Effective Time, subject to the Dissent Rights
referred to in Section 3.1, the following shall occur and be deemed to occur in
the following order without any further act or formality and, except as
otherwise noted in this Section 2.2, with each transaction or event being deemed
to occur immediately after the occurrence of the transaction or event
immediately preceding it:
(a) Each Company Option held by an Optionholder that has not been duly
exercised prior to the Effective Time will be transferred by the Optionholder to
Company and be cancelled in exchange for a cash payment from Company equal to
the amount by which $55.00 exceeds the U.S. Dollar Equivalent (immediately prior
to the Effective Time) of the exercise price thereof.
(b) All Company Common Shares issued and outstanding at the Effective Time
(other than those held by Company Dissenting Shareholders) will be transferred
to and acquired by Acquiror in exchange for $55.00 for each Company Common
Share.
(c) the name of each Shareholder will be removed from the register of
Shareholders and Acquiror will be added to the register of Shareholders.
ARTICLE 3
RIGHTS OF DISSENT
-----------------
3.1 RIGHTS OF DISSENT
Registered holders of Company Common Shares may exercise Dissent Rights
pursuant to and in the manner set forth in section 191 of the ABCA and in this
Section 3.1 in connection with the Arrangement Resolution as the same may be
modified by the Interim Order or the Final Order; provided that, notwithstanding
subsection 191(5) of the ABCA, the written objection to the Arrangement
Resolution referred to in subsection 191(5) of the ABCA must be received by
Company before 5:00 p.m. (Toronto time) on the Business Day immediately
preceding the Meeting. Registered holders of Company Common Shares who duly
exercise such Dissent Rights and who:
(a) are ultimately entitled to be paid the fair value of their
Company Common Shares shall be deemed to have transferred such
shares to Acquiror on the Effective Date contemporaneously with
the step of this Plan of Arrangement set out in Section 2.2(b)
being effective; or
-5-
(b) are ultimately not entitled to be paid the fair value for their
Company Common Shares shall be deemed to have transferred such
shares to Acquiror at the same time as the other transfers of
Company Common Shares to Acquiror are effective pursuant to
Section 2.2 and shall receive from Acquiror for each Company
Common Share $55.00,
but in no case shall Company, Parent, Acquiror or any other person be required
to recognize such holders as holders of Company Common Shares after the
Effective Time, and the names of such holders shall be deleted from the register
of Shareholders on the Effective Date. In addition to any other restrictions in
section 191 of the ABCA, none of the following shall be entitled to exercise
Dissent Rights: (i) Optionholders; and (ii) Shareholders who vote in favour of
the Arrangement Resolution.
ARTICLE 4
CERTIFICATES
------------
4.1 EXCHANGE OF CERTIFICATES FOR CASH
On the Effective Date, Company shall deposit cash in immediately
available funds (at Toronto) with the Depositary in an amount sufficient to pay
all amounts payable to the Optionholders pursuant to Section 2.2(a). From and
after the transfer of the Company Options to Company pursuant to Section 2.2(a)
hereof, the Depositary shall be considered to hold such funds for the sole
benefit of the holders of such securities transferred to Company. Upon surrender
to the Depositary for cancellation of a certificate or other instrument or
acknowledgment which immediately prior to the Effective Time represented
outstanding Company Options that were transferred to Company, together with such
additional documents and instruments as the Depositary may reasonably require,
the holder of such surrendered certificate or other instrument shall be entitled
to receive in exchange therefor, and the Depositary shall deliver to such
holder, the cash which such holder has the right to receive pursuant to Section
2.2(a) hereof, net of any applicable withholding taxes.
On the Effective Date, Acquiror shall deposit cash in immediately
available funds (at Toronto) with the Depositary for the benefit of
Shareholders, in an amount sufficient to pay all cash consideration payable by
it to Shareholders under this Plan of Arrangement. From and after the deposit of
such cash, the Depositary shall be considered to hold such funds for the sole
benefit of the Shareholders. Upon surrender to the Depositary for cancellation
of a certificate which immediately prior to the Effective Time represented
outstanding Company Common Shares that were exchanged for cash under this Plan
of Arrangement, together with such other documents or instruments as would have
been required to effect the transfer of such Company Common Shares under the
articles and by-laws of Company, together with such additional documents and
instruments as the Depositary may reasonably require, the holder of such
surrendered certificate or other instrument shall be entitled to receive in
exchange therefor, and the Depositary shall deliver to such holder the cash
which such holder has the right to receive pursuant to Section 2.2(b) hereof,
net of any applicable withholding taxes.
-6-
The cash deposited with the Depositary shall be held in an interest
bearing account, and any interest earned upon such funds shall be for the
account of Acquiror or Company, as the case may be.
Until surrendered as contemplated by this Section 4.1, each certificate
or other instrument which immediately prior to the Effective Time represented
Company Common Shares or Company Options shall be deemed at all times after the
Effective Time to represent only the right to receive upon such surrender a cash
payment in lieu of such certificates as contemplated in this Section 4.1.
4.2 LOST CERTIFICATES
In the event that any certificate which, immediately prior to the
Effective Time, represented one or more outstanding Company Common Shares
transferred pursuant to Section 2.2 shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
certificate to have been lost, stolen or destroyed, the Depositary will issue in
exchange for such lost, stolen or destroyed certificate, cash deliverable in
accordance with such holder's letter of transmittal enclosed with the
Information Circular. When authorizing such payment and delivery in exchange for
such lost, stolen or destroyed certificate, the person to whom such cash is to
be delivered shall, as a condition precedent to the delivery of such cash, give
a bond satisfactory to Acquiror and the Depositary in such sum as Acquiror may
direct, or otherwise indemnify Acquiror in a manner satisfactory to Acquiror,
against any claim that may be made against Acquiror in respect of the
certificate alleged to have been lost, stolen or destroyed.
4.3 EXTINCTION OF RIGHTS
If any Shareholder fails for any reason to deliver to the Depositary
for cancellation the certificates formerly representing Company Common Shares
(or an affidavit of loss and bond or other indemnity pursuant to Section 4.2),
together with such other documents or instruments required to effect the
transfer of Company Common Shares, on or before the sixth anniversary of the
Effective Date, such Shareholder shall be deemed to have donated and forfeited
to Acquiror any cash, net of any applicable withholding or other taxes, held by
the Depositary in trust for such Shareholder to which such Shareholder is
entitled. At and after the Effective Time, any certificate formerly representing
Company Common Shares shall represent only the right to receive the
consideration provided in Section 2.2(b) or Section 3.1 in accordance with the
Plan of Arrangement; provided that such certificates shall, on the sixth
anniversary of the Effective Date, cease to represent a claim of any nature
whatsoever and shall be deemed to have been surrendered to Acquiror and shall be
cancelled.
-7-
4.4 WITHHOLDING RIGHTS
Company, Acquiror and the Depositary shall be entitled to deduct and
withhold from any consideration otherwise payable to any holder of Company
Common Shares or Company Options such amounts as Company, Acquiror or the
Depositary is required or permitted to deduct and withhold with respect to such
payment under the Tax Act, the United States INTERNAL REVENUE CODE OF 1986 or
any provision of applicable federal, provincial, state, local or foreign tax
law. To the extent that amounts are so withheld, such withheld amounts shall be
treated for all purposes hereof as having been paid to the holder of the Company
Common Shares or Company Options in respect of which such deduction and
withholding was made, provided that such withheld amounts are actually remitted
to the appropriate taxing authority.
ARTICLE 5
AMENDMENTS
----------
5.1 AMENDMENTS TO PLAN OF ARRANGEMENT
(a) Parent, Acquiror and Company reserve the right to amend, modify and/or
supplement this Plan of Arrangement at any time and from time to time prior to
the Effective Date, provided that each such amendment, modification and/or
supplement must be (i) set out in writing, (ii) approved by the others, (iii)
filed with the Court and, if made following the Meeting, approved by the Court,
and (iv) communicated to Securityholders if and as required by the Court.
(b) Any amendment, modification or supplement to this Plan of Arrangement
may be proposed by Parent, Acquiror or Company at any time prior to or at the
Meeting (provided that the others shall have consented thereto) with or without
any other prior notice or communication, and if so proposed and accepted by the
persons voting at the Meeting (other than as may be required under the Interim
Order), shall become part of this Plan of Arrangement for all purposes.
(c) Any amendment, modification or supplement to this Plan of Arrangement
that is approved by the Court following the Meeting shall be effective only if
it is consented to by each of Parent, Acquiror and Company.
(d) Any amendment, modification or supplement to the Plan of Arrangement
may be made following the Effective Date unilaterally by Company, provided that
it concerns a matter which, in the reasonable opinion of Company, is of an
administrative nature required to better give effect to the implementation of
this Plan of Arrangement and is not adverse to the financial or economic
interests of Parent, Acquiror or any holder of Company Common Shares or Company
Options.
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to the Parent and Acquiror
that, except as set forth in the Company Disclosure Letter, this Agreement, the
Plan of Arrangement or as Publicly Disclosed by Company:
1. ORGANIZATION. Each of Company and its Material Entities has been duly
incorporated or formed under all applicable Laws, is validly subsisting and
has full corporate or legal power and authority to own its properties and
conduct its businesses as currently owned and conducted. All of the
outstanding shares of capital stock and other ownership interests of its
Material Entities are validly issued, fully paid and non-assessable and all
such shares and other ownership interests owned directly or indirectly by
Company are owned free and clear of all material Encumbrances and there are
no outstanding options, rights, entitlements, understandings or commitments
(contingent or otherwise) regarding the right to acquire any such shares of
capital stock or other ownership interests in any of its Material Entities
except, in each case, pursuant to the restrictions on transfer contained in
constating or foundation documents, rights of first refusal and similar
rights restricting transfer contained in shareholders, partnership,
co-owner, co-tenancy or joint venture agreements, or pursuant to existing
financing arrangements involving Subsidiaries, in each case as identified
in Section 1 of the Company Disclosure Letter or as Publicly Disclosed by
Company. Company has disclosed in writing to Parent and Acquiror the names
and jurisdictions of incorporation of each of its Subsidiaries and Joint
Venture Entities. Each of Company and each Material Entity is duly
qualified or licensed to do business and is in good standing in each
jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except where the failure to be so qualified, licensed
or in good standing has not had or would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on
Company.
2. CAPITALIZATION. The authorized capital of Company consists of an unlimited
number of Company Common Shares and an unlimited number of Class B
redeemable preferred shares, issuable in series. As at August 18, 2005,
there were 74,020,265 Company Common Shares and no Class B redeemable
preferred shares outstanding. As at August 18, 2005, there were 1,975,287
Options outstanding, providing for the issuance of 1,975,287 Company Common
Shares upon the exercise thereof. Except as described in the immediately
preceding sentence or as set forth in Sections 1 and 3 of the Company
Disclosure Letter, there are no options, warrants, purchase rights,
subscription rights, conversion privileges, exchange rights or preemptive
rights or other rights, agreements, arrangements or other commitments of a
similar nature to which Company or a Material Entity is bound relating to
the issued or unissued share capital of Company or such Material Entity or
obligating Company or any Material Entity to issue any shares of, or other
equity interest in, Company or any Material Entity or securities or
obligations of any kind convertible into or exchangeable for any shares of
Company, any Material Entity or any other person, nor is there outstanding
any stock appreciation rights, phantom equity or similar rights,
agreements, arrangements or commitments based upon the book value, income
or any other attribute of Company or any Material Entity. There have been
no Company Common Shares issued since December 31, 2004, other than
pursuant to the exercise or payment of Options. All outstanding Company
Common Shares have been duly authorized and are validly issued and
outstanding as fully paid and non-assessable shares, free of pre-emptive
rights. There are no outstanding bonds, debentures or other evidences of
indebtedness of Company or any Material Entity having the right to vote (or
that are convertible for, exercisable into or exchangeable for securities
having the right to vote) on any matter on which the holders of the Company
Common Shares may vote. There are no outstanding contractual obligations of
Company or any Material Entity to repurchase, redeem or otherwise acquire
any outstanding Company Common Shares or any shares of any Material Entity
with respect to the voting or disposition of any outstanding Company Common
Shares or share of any Material Entity.
3. AUTHORITY. Company has the requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution
and delivery of this Agreement by Company and the consummation by Company
of the transactions contemplated by this Agreement have been duly
authorized by the Board of Directors of Company and, subject to shareholder
approval, no other corporate proceedings on the part of Company are
necessary to authorize this Agreement or the transactions contemplated
hereby other than in connection with the approval by the Board of Directors
of Company of the Proxy Circular and other matters relating to the
implementation of the Arrangement, and the approval by Shareholders
required by the Interim Order and approval by the Court. This Agreement has
been duly executed and delivered by Company and constitutes a legal, valid
and binding obligation of Company, enforceable against Company in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and other applicable Laws
relating to or affecting creditors' rights generally, and to general
principles of equity. Except as set forth in Sections 1 and 3 of the
Company Disclosure Letter, the execution and delivery by Company of this
Agreement and performance by it of its obligations hereunder and the
completion of the Arrangement and the transactions contemplated thereby,
will not:
(a) result in a violation or breach of, or constitute a default (or an
event which, with notice or lapse of time or both, would become a
default) under, or give rise to any termination rights, or the
amendment, acceleration or cancellation of or give rise to or change
any rights or obligations of any person under any provision of:
(i) its or any Material Entities' certificate of incorporation,
articles, by-laws or other charter documents, including any
unanimous shareholder agreement or any other agreement or
understanding with any party holding an ownership interest in
any Material Entity;
(ii) any Canadian, European, Bermudian or United States Law; or
(iii) any contract, agreement, lease, licence, franchise or permit
to which Company or any Material Entity is a party or is
bound or is subject;
(b) give rise to any right of termination or acceleration of
indebtedness, or cause any third party indebtedness owing by it to
come due before its stated maturity or cause any available credit to
cease to be available which is material to the Company or its
Material Entities taken as a whole;
(c) result in the imposition of, give rise to or trigger any Encumbrance
upon any of its assets or the assets of any Material Entities, or
restrict, hinder, impair or limit the ability of Company or any
Material Entities to carry on the business of Company or any
Material Entity as and where it is now being carried on; or
(d) give rise to any rights of termination, acceleration, disposition
(including for greater certainty any put or call rights) or any
other material rights on the part of any Person other than Company
under any agreements governing or relating to any of the Joint
Venture Entities;
which in the case of (a)(ii), (a)(iii), (b) or (c) would, individually
or in the aggregate, have a material adverse effect on Company.
4. CONSENTS AND APPROVALS.
(a) No consent, approval, order or authorization of, or declaration or
filing with, any Governmental Entity outside of the Republic of
Kazakhstan is required to be obtained by Company and its Material
Entities in connection with the execution and delivery of this
Agreement or the consummation by Company of the transactions
contemplated hereby other than (i) any approvals required by the
Interim Order, (ii) the Final Order, (iii) filings with the
Registrar under the ABCA and filings with Securities Authorities and
stock exchanges and (iv) any other consents, approvals, orders,
authorizations, declarations or filings which, if not obtained,
would not, individually or in the aggregate, materially impede the
completion of the Arrangement or the transactions contemplated
hereby.
(b) No Third Party Consents are required, except where the failure to
obtain such consent, approval, or authorization would, individually
or in the aggregate, have a material adverse effect on Company.
(c) For certainty, no representation or warranty is made with respect to
any consent, approval, order, authorization, declaration or filing
required from or with any Governmental Entity in the Republic of
Kazakhstan.
(d) Based on the audited financial statements for the most recently
completed fiscal year, neither the book value of the assets of
Company located in Canada nor the gross revenues generated from such
assets in or from Canada exceed CDN$50 million.
(e) Company is not a "Canadian business", within the meaning of the
INVESTMENT CANADA ACT.
5. NO DEFAULTS. Neither Company nor any of its Material Entities is in default
under, and there exists no event, condition or occurrence which, after
notice or lapse of time or both, would constitute such a default under any
material contract, agreement or licence to which it is a party or by which
it is bound which would, if terminated or upon exercise of a right made
available to a third party solely by a reason of such a default due to such
default, individually or in the aggregate, have a material adverse effect
on Company. Neither the Company nor any of its Material Entities is in
violation of any applicable Laws which could have a material adverse effect
on the Company or any of its Material Entities.
6. ABSENCE OF CHANGES. Except as publicly announced or as set forth in Section
6 of the Company Disclosure Schedule, since December 31, 2004:
(a) Company and its Subsidiaries have conducted their businesses only in
the ordinary and regular course of business consistent with past
practice;
(b) other than in the ordinary and regular course of business consistent
with past practice, Company and its Material Entities have not
incurred any liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise) which would,
individually or in the aggregate, have a material adverse effect on
Company;
(c) neither Company nor any of its Material Entities has incurred or
suffered individually or in the aggregate a material adverse change;
(d) there has not occurred any damage, destruction or loss that is not
fully covered by insurance (subject to normal deductibles) that
would, individually or in the aggregate, have a material adverse
effect on Company;
(e) there has not occurred or arisen individual capital expenditure or
commitment, or a series of related capital expenditure or
commitments by Company or its Material Entities exceeding $20
million;
(f) there has not occurred any change in accounting methods or practices
(including any change in revenue recognition, capitalization,
depreciation or amortization policies or rates) by Company except as
may be required to comply with Canadian GAAP;
(g) there has not occurred any material revaluation by Company of any of
its assets;
(h) there has not occurred any loan by Company or its Material Entities
to any person or entity, incurrence by Company or its Material
Entities of any indebtedness, issuance or sale of any debt
securities of Company or its Material Entities or guaranteeing of
any debt securities of others, except for advances to employees for
travel and business expenses in the ordinary course of business,
consistent with past practices and except for the incurrence of
indebtedness (including the guarantee of subsidiary indebtedness)
not in excess of $10 million;
(i) there has not occurred any increase in or modification of the
compensation payable or to become payable by Company or its
Subsidiaries to any of their respective directors, officers or
employees, or any grant to any such director, officer or employee of
any increase in entitlements under, or general institution of,
retention, severance or termination programs or pay, in each case,
other than annual increases consistent with past practice or as a
result of promotions in the ordinary course of business;
(j) the adoption by Company or its Subsidiaries of, any increase in or
modification of any bonus, pension, retention, insurance or benefit
arrangement (including the granting of stock options, restricted
stock awards or stock appreciation rights) made to, for or with any
of their respective directors, officers or employees, in each case,
other than annual increases consistent with past practice, as
required under Law or collective agreements, or as a result of
promotions in the ordinary course of business; and
(k) Company has not entered into any interest rate, currency or
commodity swaps, ▇▇▇▇▇▇ or other similar financial instruments other
than in the ordinary course of business and consistent with past
practice.
7. EMPLOYMENT AGREEMENTS
(a) Company is not a party to any written or oral policy, agreement,
obligation or understanding providing for severance or termination
payments to, or any employment agreement with, any director or
officer of Company.
(b) Except as set forth in Sections 7, 5.2 and 5.7 of the Company
Disclosure Letter, there are no contracts of employment entered into
by Company or any Subsidiary with any employee of Company or any
Subsidiary which would entitle such employee to receive enhanced
benefits or payments upon the Company entering into this Agreement
or any of the other documents contemplated by this Agreement to
which the Company is a party or upon the consummation of the
transactions contemplated hereby.
(c) Neither Company nor any Material Entities: (i) is party to any
collective bargaining agreement with a term that expires within the
12-month period following the date of this Agreement; or (ii) has
any current, pending or threatened strikes (including official or
unofficial strikes or other labour relations difficulties), work
stoppage, slowdown or lockouts, union representation or organizing
activities or unlawful labour practices or actions that, in the case
of (i) and (ii), would, individually or in the aggregate, have a
material adverse effect on Company.
(d) Neither Company nor any Material Entity is subject to any claim for
wrongful dismissal, constructive dismissal or any other tort claim,
actual or threatened, or any litigation, actual or threatened,
relating to employment or termination of employment of employees or
independent contractors other than those claims or such litigation
as would not, individually or in the aggregate, have a material
adverse effect on Company.
8. FINANCIAL STATEMENTS. The audited consolidated statements of income and
retained earnings and cash flows of Company for the fiscal years ended
December 31, 2004 and 2003, the audited consolidated balance sheets of the
Company as at December 31, 2004 and 2003 and the unaudited interim
consolidated statements of income and retained earnings and cash flows of
Company for the three-month period ended June 30, 2005 and unaudited
consolidated balance sheet of the Company as at June 30, 2005, were
prepared in accordance with Canadian GAAP consistently applied and fairly
present in all material respects the consolidated financial condition of
Company at the respective dates indicated and the results of operations and
cash flows of Company (on a consolidated basis) for the periods covered.
9. BOOKS AND RECORDS. The financial books, records and accounts of the Company
and its Subsidiaries, in all material respects, (i) have been maintained in
accordance with good business practices on a basis consistent with prior
years, (ii) are stated in reasonable detail and accurately and fairly
reflect the material transactions and dispositions of the assets of the
Company and its Subsidiaries and (iii) accurately and fairly reflect the
basis for the Company's financial statements. The Company has devised and
maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; and (ii) transactions are
recorded as necessary (A) to permit preparation of financial statements in
conformity with Canadian GAAP, or any other criteria applicable to such
statements and (B) to maintain accountability for assets. The Company's and
its Subsidiaries' corporate records and minute books have been maintained
substantially in compliance with applicable Laws and are complete and
accurate in all material respects.
10. LITIGATION, ETC. Except as Publicly Disclosed by Company: (i) there is no
claim, action, proceeding or investigation pending or, to the knowledge of
Company, threatened against or relating to Company or any Material Entity
or affecting any of their properties or assets before any court or
governmental or regulatory authority or body or other Governmental Entity
which would, if adversely determined, individually or in the aggregate,
have a material adverse effect on Company or prevent or delay the
consummation of the Arrangement; and (ii) neither Company nor any Material
Entity nor their respective properties or assets is subject to any
outstanding judgment, order, writ, injunction or decree which has or would,
individually or in the aggregate, have a material adverse effect on Company
or prevent or delay consummation of the Arrangement or other transactions
contemplated by this Agreement.
11. CONTINGENT LIABILITIES. Except as set forth in Section 11 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) except (i) liabilities or obligations set forth in
the audited consolidated balance sheet of the Company as of December 31,
2004, or (ii) liabilities or obligations incurred since December 31, 2004
in the ordinary course of business consistent with past practice, none of
which have had or would, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Company.
12. ENVIRONMENTAL. All operations of Company and its Material Entities have
been, and are now, in compliance in all material respects with all
Environmental Laws, except where the failure to be in compliance would not,
individually or in the aggregate, have a material adverse effect on
Company. The Company and its Material Entities are in possession of, and in
compliance with, all permits, authorizations, certificates, registrations,
approvals and consents necessary under Environmental Laws to own, lease and
operate their properties and to conduct their respective businesses as they
are now being conducted or as proposed to be conducted, except where the
failure to do so would not, individually or in the aggregate, have a
material adverse effect on the Company. Neither Company nor any Material
Entity is subject to:
(a) any proceeding, application, order or directive which relates to
environmental health or safety matters, and which may require any
material work, repairs, construction or expenditures; or
(b) any demand or notice with respect to the breach of any Environmental
Laws applicable to Company or any Material Entity, including,
without limitation, any regulations respecting the use, storage,
treatment, transportation, or disposition of Hazardous Substances,
which would, individually or in the aggregate, have a material adverse
effect on Company.
13. INSURANCE. All policies of insurance in force as of the date hereof naming
Company as an insured shall remain in full force and effect and shall not
be cancelled or otherwise terminated as a result of the Arrangement or
transactions contemplated hereby, other than such cancellations as would
not, individually or in the aggregate, have a material adverse effect on
Company.
14. TAX MATTERS. Company and each of its Material Entities have timely filed,
or caused to be filed, all tax returns required to be filed by them (all of
which returns were correct and complete in all material respects) and have
paid, collected, withheld or remitted, or caused to be paid, collected,
withheld or remitted, all taxes that are due and payable, collectible and
remittable in each case, except for any such tax returns or taxes the
non-filing or non-payment of which have not had a material adverse effect
on Company or which are being contested in good faith, and Company has
provided adequate accruals in accordance with Canadian GAAP in its most
recently published consolidated financial statements for any taxes for the
period covered by such financial statements that have not been paid,
whether or not shown as being due on any tax returns.
15. PENSION AND EMPLOYEE BENEFITS
(a) Other than the pension and other employee compensation and benefit
obligations of Company and its Material Entities, disclosed in
public filings or in the Company Disclosure Letter (collectively
referred to as the "COMPANY PLANS"), the Company has no pension or
retirement income plans or other employee compensation or benefit
plans, agreements, policies, programs, arrangements or practices,
whether written or oral, which are maintained by or binding upon
Company or any of its Material Entities. Company has complied, in
all material respects, with all the terms of, and all applicable
Laws in respect of, all Company Plans, and all Company Plans are
fully funded and in good standing with such regulatory authorities
as may be applicable.
(b) There are no actions, suits, claims (other than routine claims for
payment of benefits in the ordinary course), trials, demands,
investigations, arbitrations or other proceedings which are pending
or threatened in respect of any of the Company Plans or their assets
which would, individually or in the aggregate, have a material
adverse effect on Company.
16. PROPERTIES. Company and its Material Entities have good and sufficient
title to the real property interests necessary to permit the operation of
its businesses as presently owned and conducted, except for such failures
of title that would not, individually or in the aggregate, have a material
adverse effect on Company. All such properties and assets, other than
properties and assets in which the Company or any Material Entity has
leasehold interest, are free and clear of all Encumbrances, other than
those Encumbrances that, in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect.
17. REPORTS. Company has filed with the Securities Authorities and stock
exchanges on which the Company Common Shares are listed true and complete
copies of all forms, reports, schedules, statements, material change
reports and other documents required to be filed by it since December 31,
2003 (such forms, reports, schedules, statements and other documents,
including any financial statements or other documents, including any
schedules included therein, are referred to as the "COMPANY DOCUMENTS").
The Company Documents, at the time filed, (a) did not contain any
misrepresentation (as defined in the SECURITIES ACT (Ontario)) and (b)
complied in all material respects with the requirements of applicable
securities Laws. Company has not filed any confidential material change or
similar report with any Securities Authorities or such stock exchanges
which at the date hereof remains confidential.
18. LICENCES, ETC. Company and each of its Material Entities owns, possesses,
or has obtained and is in compliance in all material respects with, all
licences, permits (including Environmental Approvals), certificates,
orders, grants, approvals and other authorizations ("PERMITS") of or from
any Governmental Entity necessary to conduct its businesses as now
conducted or as proposed to be conducted, other than those the failure to
own, possess, obtain or be in compliance with would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on
Company. No suspension or cancellation of any of the Permits is pending, or
to the knowledge of the Company, threatened except where the suspension or
cancellation of any of the Permits have not had and would not be reasonably
expected to have, individually or in the aggregate, a material adverse
effect on the Company.
19. MATERIAL CONTRACTS. Except as set forth in Section 1 of the Company
Disclosure Letter, there is no contract to which the Company or any of its
Subsidiaries is a party or by which any of them or their respective
properties or assets are bound that (i) if terminated, would reasonably be
expected to have a material adverse effect on the Company; (ii) is a
contract or group of related contracts which involves payments to or by the
Company or any of its Subsidiaries of more than US$10 million per annum
(other than contracts with suppliers and customers entered into in the
ordinary course of business); (iii) is a contract that contains any
non-competition obligations or otherwise restricts in any material way the
business of the Company or any of its Subsidiaries; (iv) is a partnership
or joint venture agreement in which the Company or any of its Subsidiaries
participates as a general partner or joint venturer; (v) is a contract
pursuant to which the Company or any of its Subsidiaries provides an
indemnification to any other person (other than the Company or a
wholly-owned Subsidiary), other than contracts with suppliers,
distributors, sales representatives and customers entered into in the
ordinary course of business or in an amount not in excess of US$10 million
(the contracts described in items (i) to (v) collectively, the "MATERIAL
CONTRACTS"). Except as set forth in the Company Disclosure Letter, all
Material Contracts are legal, valid, binding and in full force and effect
and are enforceable by the Company and its Subsidiaries in accordance with
their respective terms (subject to bankruptcy, insolvency and other
applicable Laws affecting creditors' rights generally, and to general
principles of equity), the Company and its Subsidiaries have performed in
all material respects all respective obligations required to be performed
by them to date under the Material Contracts and are not, and are not to
the Company's knowledge alleged to be (with or without the lapse of time or
the giving of notice, or both), in breach or default in any material
respect thereunder.
20. UNITED STATES SECURITIES LAWS. Company is a foreign private issuer (as the
term is defined in Rule 3b-4 of the United States SECURITIES EXCHANGE ACT
OF 1934, as amended).
SCHEDULE C
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUIROR
1. ORGANIZATION. Each of Parent and Acquiror has been duly incorporated or
formed under all applicable Laws, is validly subsisting and has full
corporate or legal power and authority to own its properties and conduct
its businesses as currently owned and conducted. Acquiror is a wholly-owned
subsidiary of Parent incorporated for the purpose of acquiring the Company
Common Shares pursuant to the Arrangement Agreement and the Arrangement and
has carried on no other business.
2. AUTHORITY. Each of Parent and Acquiror has the requisite corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by Parent and
Acquiror, the performance by Parent and Acquiror of their obligations under
this Agreement and the consummation by Parent and Acquiror of the
transactions contemplated by this Agreement have been duly authorized by
the Boards of Directors of Parent and Acquiror, and no other corporate
proceedings on the part of Parent and Acquiror are necessary to authorize
this Agreement or the transactions contemplated hereby. This Agreement has
been duly executed and delivered by each of Parent and Acquiror and
constitutes a legal, valid and binding obligation of each of Parent and
Acquiror, enforceable against Parent and Acquiror in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and other applicable Laws relating to or affecting
creditors' rights generally, and to general principles of equity. The
execution and delivery by each of Parent and Acquiror of this Agreement and
performance by it of its obligations hereunder and the completion of the
Arrangement and the transactions contemplated thereby, will not in respect
of each of Parent and Acquiror:
(a) result in a violation or breach of or give rise to any termination
rights under any provision of:
(i) its certificate of incorporation, articles, by-laws or other
charter documents, including any unanimous shareholder
agreement or similar document;
(ii) any Law, regulation, order, judgment or decree; or
(iii) any contract, agreement, licence, franchise or permit to
which Parent or Acquiror is bound or is subject;
(b) give rise to any right of termination or acceleration of its
indebtedness, or cause any third party indebtedness owing by it to
come due before its stated maturity or cause any of its available
credit to cease to be available; or
(c) result in the imposition of any Encumbrance upon any of its assets
or the assets of any Subsidiary, or restrict, hinder, impair or
limit the ability of Parent or Acquiror or any Subsidiary to carry
on the business of Parent, Acquiror or any Subsidiary as and where
it is now being carried on or as and where it may be carried on
which would, individually or in the aggregate, materially impede the completion
of the Arrangement or the other transactions contemplated hereby.
3. CONSENTS AND APPROVALS.
(a) No consent, approval, order or authorization of, or declaration or
filing with, any Governmental Entity is required to be obtained by
Parent or Acquiror or their Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation by
Parent and Acquiror of the transactions contemplated hereby other
than (i) any approvals required by the Interim Order, (ii) the Final
Order, (iii) filings which may be required under the ABCA, in the
case of Acquiror and filings with and approvals required by the
Securities Authorities and stock exchanges, (iv) any other consents,
approvals, orders, authorizations, declarations or filings which, if
not obtained, would not, individually or in the aggregate,
materially impede the completion of the Arrangement or the other
transactions contemplated hereby.
(b) No consent, approval, or authorization is required under any
material contract, agreement, licence, franchise or permit to which
Parent or Acquiror is bound or is subject in connection with the
execution and delivery of this Agreement or the consummation by
Parent and Acquiror of the transactions contemplated hereby, where
failure to obtain such consent, approval or authorization would,
individually or in the aggregate, have a material adverse effect on
the Parent or Acquiror, taken as a whole.
4. LITIGATION, ETC. There is no claim, action, proceeding or investigation
pending or, to the knowledge of Parent or Acquiror, threatened against or
relating to Parent or Acquiror or any Subsidiary or affecting any of their
properties or assets before any court or governmental or regulatory
authority or body and no material fact exists that, if adversely
determined, would materially impede the completion of the Arrangement or
the other transactions contemplated hereby. Neither Parent nor Acquiror nor
any Subsidiary is subject to any outstanding order, writ, injunction or
decree that would materially impede the completion of the Arrangement or
the other transactions contemplated hereby.
5. SUFFICIENT FUNDS. Parent has sufficient funds or has made adequate
arrangements to have financing in place in order to provide sufficient
funds to pay the aggregate Consideration in accordance with the terms of
the Arrangement, and such financing is not subject to any condition
precedent other than those conditions set forth in Article 6 hereof.
6. SHARE OWNERSHIP. Neither Parent nor Acquiror, nor their respective
affiliates, is the beneficial owner of any Company Common Shares.