REORGANIZATION AGREEMENT BETWEEN: CANWEST PETROLEUM CORPORATION - and - OILSANDS QUEST INC. June 9, 2006
BETWEEN:
CANWEST
PETROLEUM CORPORATION
-
and -
OILSANDS
QUEST INC.
June
9, 2006
TABLE
OF CONTENTS
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1
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1.1
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Definitions
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1
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1.2
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Singular,
Plural, etc.
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10
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1.3
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Deemed
Currency
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10
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1.4
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Date
for Any Action
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11
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1.5
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Decision
by Board of Directors
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11
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1.6
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Interpretation
Not Affected by Party Drafting
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11
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1.7
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Statutes
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11
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1.8
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Knowledge
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11
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ARTICLE
2 THE
REORGANIZATION
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11
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|
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2.1
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Implementation
Steps by the Corporation
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11
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2.2
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Implementation
Steps by Acquirer
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12
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2.3
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Dissenting
Shareholders
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12
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2.4
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Corporation
Approval of the Reorganization
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12
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2.5
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Proxy
Circular
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13
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2.6
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Securities
and Tax Compliance
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13
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2.7
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Preparation
of Filings
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14
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2.8
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Cooperation
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17
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ARTICLE
3 COVENANTS
OF THE CORPORATION
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19
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|
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3.1
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Ordinary
Course of Business
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19
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3.2
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Non-Solicitation
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22
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3.3
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Notice
of Material Change
|
25
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3.4
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Access
to Information
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25
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3.5
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Financial
Statements
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25
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ARTICLE
4 TRANSACTION
SUPPORT AGREEMENTS
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26
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4.1
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Transaction
Support Agreements
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26
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ARTICLE
5 COVENANTS
OF ACQUIRER
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26
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|
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5.1
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Ordinary
Course of Business
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26
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5.2
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Non-Solicitation
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29
|
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5.3
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Notice
of Material Change
|
32
|
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5.4
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Access
to Information
|
32
|
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5.5
|
Financial
Statements
|
32
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ARTICLE
6 MUTUAL
COVENANTS
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33
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6.1
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Consultation
|
33
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6.2
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Other
Filings
|
33
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ARTICLE
7 REPRESENTATIONS
AND WARRANTIES OF THE CORPORATION
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33
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|
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7.1
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Representations
|
33
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7.2
|
Investigation
|
42
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-i-
TABLE
OF CONTENTS
(continued)
|
ARTICLE
8 REPRESENTATIONS
AND WARRANTIES OF ACQUIRER
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43
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|
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8.1
|
Representations
|
43
|
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8.2
|
Investigation
|
52
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ARTICLE
9 CONDITIONS
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52
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9.1
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Conditions
Precedent to Obligations of Each Party
|
52
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9.2
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Acquirer
Conditions
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53
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9.3
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Corporation
Conditions
|
55
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ARTICLE
10 TERMINATION
|
56
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|
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10.1
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Termination
|
56
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ARTICLE
11 MISCELLANEOUS
|
57
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11.1
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Amendment
or Waiver
|
57
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11.2
|
Entire
Agreement
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57
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11.3
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Headings
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57
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11.4
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Notices
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57
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11.5
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Counterparts
and Facsimiles
|
58
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11.6
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Expenses
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58
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11.7
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Assignment
|
59
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11.8
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Severability
|
59
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11.9
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Choice
of Law
|
59
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11.10
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Attornment
|
59
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11.11
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Remedies
|
59
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11.12
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Survival
of Representations and Warranties
|
60
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11.13
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Time
of Essence
|
60
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SCHEDULE
A - REORGANIZATION
RESOLUTION
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SCHEDULE
B - REORGANIZATION
STEPS
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SCHEDULE
C - FORM
OF TRANSACTION SUPPORT AGREEMENT
|
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SCHEDULE
D - FORM OF EXCHANGEABLE SHARE PROVISIONS
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SCHEDULE
E - FORM OF VOTING AND EXCHANGE TRUST AGREEMENT
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SCHEDULE
F - FORM OF SUPPORT AGREEMENT
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-ii-
THIS
REORGANIZATION AGREEMENT
made as
of the 9th
day
of
June, 2006.
BETWEEN:
CANWEST
PETROLEUM CORPORATION,
a
corporation incorporated under the laws of Colorado ("Acquirer")
-
and
-
OILSANDS
QUEST INC.,
a
corporation incorporated under the laws of Alberta (the "Corporation")
RECITALS
WHEREAS:
A. The
Acquirer has made a proposal for a reorganization of the share capital of the
Corporation involving, among other things, changing all of the outstanding
Shares not held by the Acquirer into Exchangeable Shares on the basis of 7.95
Exchangeable Shares (subject to adjustment as provided herein) for each Share
pursuant to the terms of the Reorganization; and
B. The
Board
of Directors has determined that it would be in the best interests of the
Corporation and its Shareholders to enter into this Agreement, to recommend
acceptance of the Reorganization to the Shareholders, to cooperate with Acquirer
and to take all reasonable action to support the Reorganization;
NOW
THEREFORE IN CONSIDERATION
of the
mutual covenants set out below, Acquirer and the Corporation agree as
follows:
ARTICLE
1
DEFINITIONS
1.1 Definitions
In
this
Agreement, unless the context otherwise requires, the following terms have
the
meanings specified:
"Acquirer
Acquisition Proposal"
means a
proposal or offer by any Person, whether or not subject to conditions and
whether or not in writing, to acquire in any manner, directly or indirectly,
beneficial ownership of all or a material portion of the assets of the Acquirer
or to acquire in any manner, directly or indirectly, beneficial ownership of
or
control or direction over more than 20% of the outstanding voting shares of
the
Acquirer, whether by means of an arrangement or amalgamation, a merger,
consolidation or other business combination, a sale of shares or assets, a
take-over bid, tender offer or exchange offer, or any other transaction
involving the Acquirer, including, without limitation, any single or multi-step
transaction or series of related transactions structured to permit such Person
to acquire beneficial ownership of all or a material portion of the assets
of
the Acquirer or to acquire in any manner, directly or indirectly, more than
20%
of the outstanding voting shares of the Acquirer;
-
2 -
"Acquirer
Employee Obligations"
means
any obligations or liabilities of the Acquirer or any Subsidiary of the Acquirer
to pay, whether or not on condition, any amount to its officers, directors,
employees or consultants, (other than for salary, bonuses under their existing
bonus arrangements and directors' fees in each case in the ordinary and regular
course of business consistent with past practice) and, without limiting the
generality of the foregoing, Acquirer Employee Obligations shall include the
obligations or liabilities of the Acquirer or any of its Subsidiaries to
officers or employees (i) for severance or termination payments on the
change of control of the Acquirer pursuant to any executive involuntary
severance and termination agreements in the case of officers and pursuant to
the
Acquirer's severance policy in the case of employees and (ii) for retention
bonus payments pursuant to any retention bonus program, but shall exclude any
statutory or common law obligations or liabilities in respect of termination
or
severance;
"Acquirer
Material Contract"
means
an agreement or understanding (whether or not in writing) to which the Acquirer
or any of its Subsidiaries is a party or by which any thereof is bound
(including any agreements with past and present directors, officers, employees
or consultants and agreements containing obligations to issue securities and
agreements relating to the payment of royalties or revenue sharing on existing
assets) pursuant to which the Acquirer or any of its Subsidiaries has or may
have an obligation in excess of, or having a value in excess of, $100,000 and
which has a term in excess of 60 days without being terminable by the Acquirer
or its Subsidiary without penalty or which is otherwise material to the business
of the Acquirer and its Subsidiaries, taken as a whole;
"Acquirer
Returns"
means
all reports, estimates, declarations of estimated tax, information statements
and returns relating to, or required to be filed in connection with, any
Acquirer Taxes;
"Acquirer
Shares"
means
shares in the common stock of Acquirer;
"Acquirer
Taxes"
shall
mean all taxes, however denominated, including any interest, penalties or other
additions that may become payable in respect thereof, imposed by any federal,
territorial, provincial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and provincial income
taxes), payroll and employee withholding taxes, unemployment insurance, social
insurance taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise
taxes, gross receipts taxes, business license taxes, occupation taxes, real
and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation and other governmental charges, and other obligations
of
the same or of a similar nature to any of the foregoing, which the Acquirer
or
any of its Subsidiaries is required to pay, withhold or collect;
-
3 -
"Acquisition
Proposal"
means a
proposal or offer by any Person (other than Acquirer or an affiliate of
Acquirer), whether or not subject to conditions and whether or not in writing,
to acquire in any manner, directly or indirectly, beneficial ownership of all
or
a material portion of the assets of the Corporation or to acquire in any manner,
directly or indirectly, beneficial ownership of or control or direction over
more than 20% of the outstanding voting shares of the Corporation, whether
by
means of an arrangement or amalgamation, a merger, consolidation or other
business combination, a sale of shares or assets, a take-over bid, tender offer
or exchange offer, or any other transaction involving the Corporation,
including, without limitation, any single or multi-step transaction or series
of
related transactions structured to permit such Person to acquire beneficial
ownership of all or a material portion of the assets of the Corporation or
to
acquire in any manner, directly or indirectly, more than 20% of the outstanding
voting shares of the Corporation (other than the transactions contemplated
by
this Agreement);
"Act"
means
the Business
Corporations Act
(Alberta);
"Agreement",
and
"this
Agreement",
and
similar expressions refer to this Agreement, as the same may be amended,
restated or supplemented from time to time and, where applicable, to the
appropriate Schedules to this Agreement;
"Articles
of Amendment"
means
the articles of amendment of the Corporation to be filed in connection with
the
Reorganization which articles shall:
|
(a)
|
create
the Exchangeable Shares as a new class of shares in the capital of
the
Corporation;
|
|
(b)
|
change
each issued Share into that number of Exchangeable Shares equal to
the
Reorganization Ratio; and
|
|
(c)
|
change
each issued Series 1 Preferred Share into one
Share;
|
"Board
of Directors"
means
the board of directors of the Corporation as constituted from time to
time;
"Business
Day"
means
any day excepting a Saturday, Sunday or statutory holiday in Calgary, Alberta
or
in Vancouver, British Columbia;
"Canadian
Securities Laws"
has the
meaning set forth in Section 2.6(a) hereof;
"Closing"
means
the completion of the Reorganization (including the filing and effectiveness
of
the Articles of Amendment) and the other transactions contemplated
hereby;
"Closing
Date"
means
the date of Closing;
"date
hereof",
"date
of this Agreement"
and
other similar terms mean, unless the context otherwise requires, June 9,
2006;
-
4 -
"Disclosure
Letter"
means
the letter delivered by the Corporation to Acquirer and by the Acquirer to
the
Corporation on the date of this Agreement, in each case referencing the Section
or subsection of this Agreement in respect of which disclosure is being
made;
"Dissent
Rights"
means
the rights of dissent in respect of the Reorganization Resolution provided
under
the Act;
"Dissenters"
and
"Dissenting
Shareholders"
have
the meanings set forth in Section 2.3 hereof;
"Effective
Time"
means
the time on the Closing Date at which the Articles of Amendment are filed under
the Act;
"Employee
Obligations"
means
any obligations or liabilities of the Corporation to pay, whether or not on
condition, any amount to its officers, directors, employees or consultants,
(other than for salary, bonuses under their existing bonus arrangements and
directors' fees in each case in the ordinary and regular course of business
consistent with past practice) and, without limiting the generality of the
foregoing, Employee Obligations shall include the obligations or liabilities
of
the Corporation to officers or employees (i) for severance or termination
payments on the change of control of the Corporation pursuant to any executive
involuntary severance and termination agreements in the case of officers and
pursuant to the Corporation's severance policy in the case of employees and
(ii) for retention bonus payments pursuant to any retention bonus program,
but shall exclude any statutory or common law obligations or liabilities in
respect of termination or severance;
"Encumbrance"
includes, without limitation, any mortgage, pledge, assignment, charge, lien,
security interest or trust, royalty, carried, working, participation or net
profits interest or other third party interest and any agreement, option, right
or privilege (whether by law, contract or otherwise) capable of becoming any
of
the foregoing;
- 5
-
"Environmental
Laws"
means
the common law and all applicable statutes, regulations, ordinances, by laws,
and codes and all international treaties and agreements, in Canada and the
United States (whether federal, provincial, territorial, state or municipal)
relating to pollution or the protection and preservation of the environment,
occupational health and safety, product safety, product liability or Hazardous
Substances, including, without limitation, laws relating to Releases or
threatened Releases of Hazardous Substances into the indoor or outdoor
environment (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to
the
manufacture, processing, distribution, use, treatment, storage, Release,
transport or handling of Hazardous Substances and all laws and regulations
with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Substances, and all laws relating to endangered or
threatened species of fish, wildlife and plants and the management or use of
natural resources, including, without limitation, the Occupational
Health and Safety Act, 1993
(Saskatchewan),
Occupational
Health and Safety Regulations, 1996
(Saskatchewan),
Mines
Regulations, 2003
(Saskatchewan),
Environmental
Management and Protection Act
(Saskatchewan),
Hazardous
Substances and Waste Dangerous Goods Regulations
(Saskatchewan),
Environmental
Spill Control Regulations
(Saskatchewan),
Water
Regulations, 2002
(Saskatchewan),
Environmental
Assessment Act
(Saskatchewan),
Oil
and Gas Conservation Act
(Saskatchewan),
Oil
and Gas Conservation Regulations, 1985
(Saskatchewan),
Oil
and Gas Conservation Amendment Ac, 2001
(Saskatchewan),
Forest
Resources Management Act
(Saskatchewan),
Forest
Resources Management Regulations
(Saskatchewan),
Forest
Resources Management Amendment Act, 2003
(Saskatchewan),
Pest
Control Act
(Saskatchewan),
Pest
Control Products (Saskatchewan) Act
(Saskatchewan),
Pest
Control Products Regulations, 1995
(Saskatchewan),
Wildlife
Act, 1998
(Saskatchewan),
Wildlife
Regulations, 1981
(Saskatchewan),
Wildlife
Habitat Protection Act
(Saskatchewan),
Wildlife
Habitat Lands Designation Regulations
(Saskatchewan),
Boiler
and Pressure Vessel Act
(Saskatchewan),
Design,
Construction, Installation and Use of Boilers and Pressure
Vessels Regulations
(Saskatchewan),
Clean
Air Act
(Saskatchewan),
Clean
Air Regulations
(Saskatchewan),
Dangerous
Goods Transportation Act
(Saskatchewan),
Dangerous
Goods Transportation Regulations
(Saskatchewan),
Ecological
Reserves Act
(Saskatchewan),
Prairie
and Forest Fires Act, 1982
(Saskatchewan),
Pipelines
Act, 1998
(Saskatchewan),
Pipelines
Regulations, 2000
(Saskatchewan),
Environmental
Protection and Enhancement Act
(Alberta), Activities
Designation Regulation
(Alberta), Approvals
and Registrations Procedure Regulation
(Alberta), Code
of Practice for Compressor and Pumping Stations and Sweet Gas Processing
Plants
(Alberta), Code
of Practice for Exploration Operations
(Alberta), Code
of Practice for Land Treatment of Soil Containing Hydrocarbons
(Alberta), Code
of Practice for Pesticides
(Alberta), Code
of Practice for the Release of Hydrostatic Test Water from Hydrostatic Testing
of Petroleum Liquid and Gas Pipelines
(Alberta),
Conservation and Reclamation Regulation
(Alberta), Environmental
Assessment (Mandatory and Exempted Activities) Regulation
(Alberta), Environmental
Assessment Regulation
(Alberta), Environmental
Protection and Enhancement (Miscellaneous) Regulation
(Alberta), Ozone-depleting
Substances and Hydrocarbons Regulation
(Alberta), Pesticide
(Ministerial) Regulation
(Alberta), Pesticide
Sales, Handling, Use and Application Regulation
(Alberta), Potable
Water Regulation
(Alberta), Release
Reporting Regulation
(Alberta), Substance
Control Regulation
(Alberta), Waste
Control Regulation
(Alberta), Water
Act
(Alberta), Code
of Practice for Pipelines and Telecommunication Lines Crossing a Water
Body
(Alberta), Code
of Practice for the Temporary Diversion of Water for Hydrostatic Testing of
Pipelines (Alberta),
Code
of Practice for Watercourse Crossings
(Alberta), Water
(Ministerial) Regulation
(Alberta), Water
(Offences and Penalties) Regulation
(Alberta), Oil
and Gas Conservation Act
(Alberta), Oil
and Gas Conservation Regulations
(Alberta), Energy
Resources Conservation Act
(Alberta), Oil
Sands Conservation Act
(Alberta), Oil
Sands Conservation Regulation
(Alberta), Pipeline
Act
(Alberta), Pipeline
Regulation
(Alberta), Occupational
Health and Safety Act
(Alberta), Occupational
Health and Safety Code Order
(Alberta), Occupational
Health and Safety Regulation
(Alberta), Forest
and Prairie Protection Act
(Alberta), Forest
and Prairie Protection Regulation
(Alberta), Fire
Control Zone Regulation
(Alberta), Weed
Control Act
(Alberta), Weed
Regulation
(Alberta), Wildlife
Act
(Alberta), Wildlife
Regulation
(Alberta), Public
Lands Act
(Alberta), Exploration
Regulation
(Alberta), Public
Health Act
(Alberta), Work
Camp Regulation
(Alberta), Canadian
Environmental ▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇
(▇▇▇▇▇▇), Species
at Risk Act
(Canada), Canadian
Environmental Assessment Act
(Canada), Fisheries
Act
(Canada), Navigable
Waters Protection Act
(Canada), Migratory
Birds Act
(Canada), Transportation
of Dangerous Goods Act
(Canada)
and Transportation
of Dangerous Goods Regulation
(Canada);
- 6
-
"Environmental
Permits"
includes all orders, permits, certificates, approvals, consents, registrations,
exemptions and licences issued by any Governmental Entity under Environmental
Laws;
"Exchangeable
Share Provisions"
means
the rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares substantially in the form set forth in Schedule D attached
hereto;
"Exchangeable
Shares"
means
exchangeable shares of the Corporation as constituted at the Effective Time
and
governed by the Exchangeable Share Provisions;
"Financial
Statements"
means
the audited balance sheet and related statements of loss and deficit and
statement of cash flow of the Corporation as at and for the period from
September 24, 2004 to January 31, 2005 and the fiscal year ending January 31,
2006;
"Fully-Diluted
Acquirer Shares"
means,
at any specific time, the total number of Acquirer Shares issued and
outstanding, plus the number of Acquirer Shares issuable upon the exercise
of
all outstanding options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating the Acquirer to issue or
sell
any shares of any capital stock of the Acquirer or securities or obligations
of
any kind convertible into or exchangeable for any shares of capital stock of
the
Acquirer, plus the Acquirer Shares notionally represented by any stock
appreciation rights, phantom equity or similar rights, agreements, arrangements
or commitments based upon the book value, income or any other attribute of
the
Acquirer, but not including any Acquirer Shares issued or issuable in connection
with any issuances of Acquirer securities for cash after the date hereof and
any
stock options granted after the date hereof by Acquirer provided the exercise
price of such options is not less than the current market price of Acquirer
Shares at the time of the grant (for greater certainty, any such issuances
of
securities are subject to the restrictions set out in this Agreement);
"Fully-Diluted
Shares"
means,
at any specific time, the total number of Shares issued and outstanding, plus
the number of Shares issuable upon the exercise of all outstanding options,
warrants, conversion privileges or other rights, agreements, arrangements or
commitments obligating the Corporation to issue or sell any shares of any
capital stock of the Corporation or securities or obligations of any kind
convertible into or exchangeable for any shares of capital stock of the
Corporation, plus the Shares notionally represented by any stock appreciation
rights, phantom equity or similar rights, agreements, arrangements or
commitments based upon the book value, income or any other attribute of the
Corporation, but not including any Shares issued or issuable in connection
with
any issuances of the Corporation securities for cash after the date hereof
and
any stock options granted after the date hereof by Corporation provided the
exercise price of such options is not less than the current market price of
Shares at the time of the grant (for greater certainty, any such issuances
of
securities are subject to the restrictions set out in this
Agreement);
- 7
-
"governing
documents"
means,
with respect to any Person, the certificate or articles of incorporation,
by-laws, articles of organization, limited liability company agreement,
partnership agreement, formation agreement, joint venture agreement, unanimous
shareholder agreement or declaration or other similar governing documents of
such Person;
"Governmental
Entity"
means
any (i) multinational, federal, provincial, territorial, state, municipal,
local
or other governmental or public department, central bank, court, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) any
subdivision or authority of any of the foregoing, or (iii) any quasi
governmental or private body exercising any regulatory, expropriation or taxing
authority under or for the account of any of the above.
"Hazardous
Substance"
means
any contaminant (as defined in the Environmental
Management and Protection Act, 2002
(Saskatchewan)),
any
substance that may cause, is causing or has caused an adverse effect (as defined
in the Environmental
Protection and Enhancement Act
(Alberta)), toxic substance (as defined in the Canadian
Environmental ▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇
(▇▇▇▇▇▇)), dangerous goods (as defined in the Transportation
of Dangerous Goods Act
(Canada), or pollutant or any other substance that when Released to the natural
environment is likely to cause, at some immediate or future time, material
harm
or degradation to the natural environment or material risk to human health,
including without limitation, (a) any petrochemical or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contains
dielectric fluid containing polychlorinated biphenyls, and radon gas; (b) any
chemicals, materials or substances defined as or included in the definition
of
"hazardous substances", "hazardous wastes", "hazardous materials", "restricted
hazardous materials", "extremely hazardous substances", "toxic substances",
"contaminants" or "pollutants", "hazardous recyclable", "dangerous oilfield
waste", "non-dangerous oilfield waste" or words of similar meaning and
regulatory effect; or (c) any other chemical, material or substance, exposure
to
which is prohibited, limited, or regulated by any applicable Environmental
Law;
"Material
Adverse Change",
in
respect of the Corporation or the Acquirer, means any change (or changes which
in the aggregate would be material) (or any condition, event or development
involving a prospective material change) in the business, operations, results
of
operations, assets, capitalization, financial condition, rights, liabilities,
prospects or privileges, whether contractual or otherwise, of the Corporation
or
the Acquirer, as the case may be, or any of its Subsidiaries which is materially
adverse to the business thereof considered as a whole, other than a change:
(i) resulting from conditions affecting the oil and gas industry as a
whole; (ii) resulting from general economic, financial, currency exchange,
securities or commodity market conditions in Canada, the United States or
elsewhere; (iii) disclosed in the Disclosure Letter; or
(iv) resulting from changes in the market price of crude oil or natural
gas;
- 8
-
"Material
Adverse Effect"
means,
where used in relation to the Corporation or the Acquirer, a fact or
circumstance, such fact or circumstance (together with all other facts or
circumstances) has or is reasonably expected to: (i) have a material
adverse effect on the business, operations, results of operations, assets,
capitalization, condition (financial or otherwise), licenses, permits,
concessions, rights, liabilities (contingent or otherwise), prospects or
privileges, whether contractual or otherwise, of the Corporation or the Acquirer
and its Subsidiaries considered as a whole, as the case may be, excluding any
such effect: (A) resulting from conditions affecting the oil and gas
industry as a whole; (B) resulting from general economic, financial,
currency exchange, securities or commodity market conditions in Canada, the
United States or elsewhere; (C) disclosed in the Disclosure Letter; or
(D) resulting from changes in the market price of crude oil or natural gas;
(ii) prevent, materially delay or materially affect the consummation of the
transactions contemplated by this Agreement; or (iii) materially affect the
ability of the Corporation or the Acquirer, as the case may be, to perform
its
obligations hereunder or under the Reorganization;
"Material
Contract"
means
an agreement or understanding (whether or not in writing) to which the
Corporation is a party or by which any thereof is bound (including any
agreements with past and present directors, officers, employees or consultants
and agreements containing obligations to issue securities and agreements
relating to the payment of royalties or revenue sharing on existing assets)
pursuant to which the Corporation has or may have an obligation in excess of,
or
having a value in excess of, $100,000 and
which
has a term in excess of 60 days without being terminable by the Corporation
without penalty, or which is otherwise material to the Corporation;
"misrepresentation"
has the
meaning set forth in the Securities
Act
(Alberta);
"OS
Permits"
means
Saskatchewan Oil Shale Permits PS00205 to PS00217 inclusive;
"Permitted
Proposal"
has the
meaning set forth in Section 5.2(a) hereof;
"Person"
includes an individual, partnership, trust, firm, body corporate, government,
governmental body, agency or instrumentality, unincorporated body of persons
or
association;
"Principal
Shareholders"
means
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇;
"Proxy
Circular"
means
the management information circular of the Corporation to be sent to the
Shareholders in connection with the Shareholder Meeting (including, without
limitation, information incorporated by reference);
"Public
Record"
means
all information and materials filed by, or on behalf of, the Acquirer with
any
of the Securities Authorities;
"Real
Property"
has the
meaning set forth in Section 7.1(n);
"Registrar"
means
the Registrar appointed pursuant to Section 263 of the Act;
- 9
-
"Registration
Statement"
has the
meaning set forth in Section 2.6(b) hereof;
"Regulatory
Approvals"
means
all approvals, consents and authorizations of all Governmental Entities and
other regulators (including stock exchanges) reasonably necessary or desirable
in connection with the Reorganization and the other transactions contemplated
hereby;
"Release"
means
any release, spill, emission, discharge, leaking, pumping, dumping, escape,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater, and surface or subsurface strata) or into or out
of
any property, including the movement of Hazardous Substances through or in
the
air, soil, surface water, groundwater or property;
"Reorganization"
means
the transactions described in Schedule B attached hereto;
"Reorganization
Ratio"
means
7.95, subject to the following adjustments (which adjustments shall be made
cumulatively if both apply):
| (i) |
if
at the Effective Time the number of Fully-Diluted Acquirer Shares
exceeds
139,000,000, then the Reorganization Ratio shall be increased by
a number
equal to the difference obtained by subtracting 7.95 from the product
obtained by multiplying 7.95 by a fraction, the numerator of which
is the
number of Fully-Diluted Acquirer Shares at the Effective Time and
the
denominator of which is 139,000,000;
and
|
| (ii) |
if
at the Effective Time the number of Fully-Diluted Shares exceeds
22,922,785, then the Reorganization Ratio shall be decreased by a
number
equal to the difference obtained by subtracting 7.95 from the product
obtained by multiplying 7.95 by a fraction, the numerator of which
is the
number of Fully-Diluted Shares at the Effective Time and the denominator
of which is 22,922,785;
|
"Reorganization
Resolution"
means
the special resolution of the Shareholders to be substantially as set forth
in
Schedule A hereto;
"Returns"
means
all reports, estimates, declarations of estimated tax, information statements
and returns relating to, or required to be filed in connection with, any
Taxes;
"SEC"
means
the Securities and Exchange Commission of the United States;
"Securities
Authorities"
means
the appropriate securities commission or similar regulatory authorities in
Canada and each of the provinces and territories thereof and in the United
States and each of the states thereof;
"Securities
Laws"
means,
collectively, all applicable Canadian provincial and territorial corporate
and
securities laws, United States federal securities laws, the "blue sky" or
securities laws of the states of the United States and any other applicable
securities laws;
- 10
-
"Shareholders"
means
the holders of Shares from time to time;
"Shareholder
Meeting"
means
the special meeting of the Shareholders, including any adjournments or
postponement thereof, to be called and held in accordance with the provisions
of
the Act and the by-laws of the Corporation to consider and, if deemed advisable,
approve the Reorganization Resolution;
"Shares"
means
common shares in the share capital of the Corporation as constituted on the
date
hereof;
"Subsidiary"
has the
meaning set forth in the Act and includes each other partnership or other entity
controlled, directly or indirectly, by the referenced party but, in respect
of
the Acquirer, does not include the Corporation;
"Superior
Proposal"
has the
meaning set forth in Section 3.2(a) hereof;
"Support
Agreement"
means
an agreement substantially in the form attached hereto as Schedule
F;
"Taxes"
shall
mean all taxes, however denominated, including any interest, penalties or other
additions that may become payable in respect thereof, imposed by any federal,
territorial, provincial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and provincial income
taxes), payroll and employee withholding taxes, unemployment insurance, social
insurance taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise
taxes, gross receipts taxes, business license taxes, occupation taxes, real
and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation and other governmental charges, and other obligations
of
the same or of a similar nature to any of the foregoing, which the Corporation
is required to pay, withhold or collect;
"U.S.
Securities Act"
means
the United States Securities Act of 1933, as amended; and
"Voting
and Exchange Trust Agreement"
means
an agreement substantially in the form attached hereto as Schedule
E.
1.2 Singular,
Plural, etc.
Words
importing the singular number include the plural and vice versa and words
importing gender include the masculine, feminine and neuter
genders.
1.3 Deemed
Currency
In
the
absence of a specific designation of any currency, any undescribed dollar amount
herein shall be deemed to refer to Canadian dollars.
-
11 -
1.4 Date
for Any Action
In
the
event that any date on which any action is required to be taken hereunder by
any
of the parties hereunder is not a Business Day, such action shall be required
to
be taken on the next succeeding day which is a Business Day.
1.5 Decision
by Board of Directors
Any
reference herein to a decision or determination, unanimous or otherwise, of
the
Board of Directors means a decision or determination by a quorum of the
directors of the Corporation entitled to vote under the Act and the constating
documents of the Corporation.
1.6 Interpretation
Not Affected by Party Drafting
The
parties hereto acknowledge that their respective legal counsel have reviewed
and
participated in settling the terms of this Agreement, and the parties hereby
agree that any rule of construction to the effect that any ambiguity is to
be
resolved against the drafting party will not be applicable in the interpretation
of this Agreement.
1.7 Statutes
Any
reference to a statute herein shall include any and all rules or regulations
promulgated thereunder and any and all amendments made to such statute, rules
or
regulations prior to the date hereof and hereafter from time to
time.
1.8 Knowledge
In
this
Agreement, each of the phrases "to the best of the knowledge of", "to the best
of its knowledge" and "to its knowledge" means, unless otherwise expressly
stated, a statement of the declarant's knowledge of the facts or circumstances
in connection with such facts and circumstances; and where such statement is
made in reference to the Acquirer or the Corporation means, unless otherwise
expressly stated, a statement as to the best knowledge of each of the senior
officers of the Acquirer or the Corporation, as the case may be, about the
facts
or circumstances to which such phrase related, with such facts and circumstances
that would ordinarily be made in discharge of each such senior officer's
duties.
ARTICLE
2
THE
REORGANIZATION
2.1 Implementation
Steps by the Corporation
The
Corporation agrees that it shall use its commercially reasonable efforts
to:
|
(a)
|
as
soon as reasonably practicable, and in any event, on or before July
21, 2006, provide
due notice of the Shareholder Meeting and mail to Shareholders a
notice of
meeting, Proxy Circular and form of proxy all in accordance with
applicable laws;
|
- 12
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|
(b)
|
lawfully
convene and hold the Shareholder Meeting as soon as reasonably practicable
and, in any event, on or before August 14, 2006;
and
|
|
(c)
|
subject
to obtaining the approval of Shareholders of the Reorganization
Resolution, and the satisfaction or waiver of the other conditions
herein
contained in favour of each party, use all reasonable commercial
efforts
to enter into the agreements and take the actions constituting the
Reorganization including sending to the Registrar, for filing under
the
Act, the articles of amendment creating the Series 1 Preferred Shares
to
be issued to the Acquirer, and the Articles of Amendment and such
other
documents as may be required in connection therewith under the Act
to give
effect to the Reorganization.
|
2.2 Implementation
Steps by Acquirer
Acquirer
agrees that, on or prior to the Closing Date and subject to the satisfaction
or
waiver of the conditions herein contained in favour of Acquirer, Acquirer shall
use all reasonable commercial efforts to enter into the Voting and Exchange
Trust Agreement and the Support Agreement and to issue to the trustee under
the
Voting and Exchange Trust Agreement such share or shares as required by the
Voting and Exchange Trust Agreement, if any, in respect of the Exchangeable
Shares to be issued pursuant to the Reorganization.
2.3 Dissenting
Shareholders
Holders
of Shares shall have the right to exercise Dissent Rights in connection with
the
Reorganization pursuant to Section 191 of the Act (such holders referred to
as "Dissenters"
or as
"Dissenting
Shareholders"
when
referring exclusively to Shareholders). The Corporation shall give Acquirer
(i) prompt notice of any written notices of exercise of rights of dissent,
withdrawals of such notices, and any other instruments served pursuant to the
Act and received by the Corporation and (ii) the opportunity to participate
in all negotiations and proceedings with respect to such rights. Without the
prior written consent of Acquirer, except as required by applicable law, the
Corporation shall not make any payment with respect to any such rights or offer
to settle or settle any such rights.
2.4 Corporation
Approval of the Reorganization
|
(a)
|
The
Corporation represents that the Board of Directors, upon consultation
with
its advisors, has unanimously determined
that:
|
|
(i)
|
the
Reorganization is fair from a financial point of view to the Shareholders
and is in the best interests of the Corporation and the Shareholders;
and
|
|
(ii)
|
the
Board of Directors will unanimously recommend that Shareholders vote
in
favour of the Reorganization Resolution, which recommendation, subject
to
the fiduciary duties of the Board of Directors, may not be withdrawn,
modified or changed in any manner except in the event of the termination
of this Agreement pursuant to
Section 10.1.
|
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13 -
|
(b)
|
The
Corporation represents that the independent committee of the Board
of
Directors has received a verbal opinion from Genuity Capital Markets
that
the consideration under the Reorganization is fair from a financial
point
of view to the Shareholders
and that Genuity Capital Markets has advised that it will provide
a
written opinion to such effect on or before the mailing of the Shareholder
Meeting materials described in Section 2.1(a).
|
|
(c)
|
The
Corporation represents that its senior officers and directors have
advised
the Corporation that, at the date hereof, they intend to vote any
Shares
held by them in favour of the Reorganization Resolution and will
so
represent in the Proxy Circular.
|
2.5 Proxy
Circular
As
promptly as reasonably practicable, the Corporation shall prepare the Proxy
Circular (setting forth inter
alia
the
recommendation of the Board of Directors set forth in Section 2.4(a) and
the fairness opinion referred to in Section 2.4(b) and reflecting the
execution of the Transaction Support agreements referred to in
Section 9.2(d) and the intention of the senior officers and directors
referred to in Section 2.4(c)) together with any other documents required
by corporate laws, Securities Laws or other applicable laws in connection with
the approval of the Reorganization by the Shareholders and the Corporation
shall, on a confidential basis, provide Acquirer and its legal and financial
advisors timely opportunity to review and a reasonable period of time in the
circumstances to comment on all such documentation and all such documentation
shall be reasonably satisfactory to Acquirer before it is filed or distributed
to the Shareholders.
2.6 Securities
and Tax Compliance
|
(a)
|
Acquirer
agrees to use all commercially reasonable efforts to cause the Acquirer
to
become a reporting issuer for the purposes of the Securities
Act
(Alberta) (or equivalent status in another province of Canada) on
or
before the Closing Date. In
the event the Acquirer is not a reporting issuer for the purposes
of any
Canadian federal, provincial or territorial securities laws ("Canadian
Securities Laws")
on or before the Closing Date, Acquirer shall, or shall cause its
Subsidiaries (and the Corporation agrees to cooperate in respect
thereof)
to use commercially reasonable efforts to obtain all orders required
from
the applicable Canadian Governmental Entities to permit the first
resale
of Acquirer Shares issuable upon exchange of the Exchangeable Shares
from
time to time, without qualification with, or approval of, or the
filing of
any prospectus or similar document, or undertaking, from, any Canadian
Governmental Entity under any Canadian Securities Laws or pursuant
to the
rules and regulations of any Governmental Entity administering such
laws,
or the fulfilment of any other legal requirement in any such jurisdiction
(other than, with respect to such first resale being from the holdings
of
a "control
person"
for purposes of Canadian Securities
Laws).
|
- 14
-
|
(b)
|
Acquirer
agrees to use all commercially reasonable efforts to file a registration
statement (the "Registration
Statement")
with the SEC not more than ten Business Days following the later
of the
date that the Acquirer's Form 10-K is filed with the SEC and the
Closing
Date in order to register under the U.S. Securities Act the resale
of the
Acquirer Shares issuable from time to time after the Effective Time
upon
exchange of the Exchangeable Shares, and shall use all commercially
reasonable efforts to cause the Registration Statement to become
effective
and to maintain the effectiveness of such registration for one year
following the date on which all Exchangeable Shares have been exchanged
for Acquirer Shares (other than those Exchangeable Shares held by
Acquirer
or any of its affiliates).
|
|
(c)
|
Acquirer
agrees to use all commercially reasonable efforts to cause the Acquirer
Shares to be listed on the American Stock Exchange, the Toronto Stock
Exchange or another senior stock exchange in the United States promptly
following the Effective Time.
|
|
(d)
|
The
Acquirer shall, on a confidential basis, provide the Corporation
and its
legal and financial advisors timely opportunity to review and a reasonable
period of time in the circumstances to comment on all such documentation
as may be prepared for filing in connection with Subsections 2.6(a),
(b)
and (c) and all such documentation shall be reasonably satisfactory
to the
Corporation before it is filed.
|
|
(e)
|
The
Corporation and the Acquirer and its transfer agent shall be entitled
to
deduct and withhold from any Exchangeable Shares or other consideration
payable to any holders of Shares pursuant to the transactions contemplated
hereby, such amounts as is required to be deducted and withheld with
respect to such payment under the Income
Tax Act
(Canada), the United States Internal Revenue Code of 1986 or any
provision
of provincial, state, territorial, local or foreign tax law, in each
case,
as amended. To the extent that amounts are so withhold, such withhold
amounts shall be treated for all purposes hereof as having been paid
to
the holder of the Shares in respect of which such deduction and
withholding was made, provided that such withheld amounts are actually
remitted to the appropriate taxing authority. To the extent that
the
amount so required or permitted to be deducted or withheld exceeds
the
cash portion of the consideration otherwise payable to the holder,
the
Corporation, the Acquirer or the transfer agent are hereby authorized
to
sell or otherwise dispose of such portion of the consideration as
is
necessary to provide sufficient funds to enable compliance with such
deduction or withholding obligation and the Corporation, the Acquirer
or
the transfer agent, as the case may be, shall notify the holder thereof
and remit any unapplied balance of the net proceeds of such
sale.
|
2.7 Preparation
of Filings
|
(a)
|
Acquirer
and the Corporation shall, acting reasonably and promptly in the
circumstances, cooperate in:
|
- 15
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|
(i)
|
the
preparation of the Proxy Circular, the Registration Statement, the
stock
exchange application, the application to become a reporting issuer
and any
application for the orders and the preparation of any required
registration statements and any other documents reasonably deemed
by
Acquirer or the Corporation to be necessary to discharge their respective
obligations under corporate laws, Securities Laws or other applicable
laws
in connection with the Reorganization and the other transactions
contemplated hereby;
|
|
(ii)
|
the
taking of all such action as may be required under any applicable
Securities Laws in connection with the issuance of the Exchangeable
Shares
and Acquirer Shares in connection with the Reorganization; provided,
however, that with respect to the United States "blue sky" and Canadian
provincial qualifications neither Acquirer nor the Corporation shall
be
required to register or qualify as a foreign corporation or to take
any
action that would subject it to service of process in any jurisdiction
where such entity is not now so subject, except as to matters and
transactions arising solely from the offer and sale of the Exchangeable
Shares and Acquirer Shares;
|
|
(iii)
|
the
taking of all such actions as may be required under the Act in connection
with the transactions contemplated by this Agreement and the
Reorganization; and
|
|
(iv)
|
the
preparation of materials in connection with any financing activities
of
the Acquirer.
|
|
(b)
|
Each
of Acquirer and the Corporation agree to promptly furnish to the
other all
information concerning each of them and the Shareholders as may be
required to give effect to the actions described in Sections 2.5 and
2.6 and the foregoing provisions of this Section 2.7, and each
covenants that no information furnished by it (to its knowledge in
the
case of information concerning its shareholders) in connection with
such
actions or otherwise in connection with the consummation of the
Reorganization and the other transactions contemplated by this Agreement
will contain any misrepresentation or any untrue statement of a material
fact or omit to state a material fact required to be stated in any
such
document or necessary in order to make any information so furnished
for
use in any such document not misleading in the light of the circumstances
in which it is furnished. All such information shall be used only
for the
purposes of the transactions contemplated hereby and, except to the
extent
necessary to give effect to the actions described in Sections 2.5
and 2.6
and the foregoing provisions of this Section 2.7, shall be treated
confidentially.
|
- 16
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|
(c)
|
Each
of Acquirer and the Corporation agree to promptly notify the other
if at
any time before or after the Shareholder Meeting it becomes aware
that the
Proxy Circular or the Registration Statement or an application for
an
order or stock exchange listing or any financing disclosure document
contains any misrepresentation or 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 Registration
Statement or application or disclosure document. In any such event,
Acquirer and the Corporation agree to cooperate in the preparation
of a
supplement or amendment to the Proxy Circular, Registration Statement
application, disclosure document or such other document, as required
and
as the case may be, and, if required, shall cause the same to be
distributed to the Shareholders or filed with the relevant securities
regulatory authorities, as
applicable.
|
|
(d)
|
The
Corporation shall ensure that the Proxy Circular complies with all
applicable laws and, without limiting the generality of the foregoing,
that the Proxy Circular does not contain any misrepresentation or
any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
contained there not misleading in light of the circumstances in which
they
are made (other than with respect to any information relating to
and
provided by Acquirer). Without limiting the generality of the foregoing,
the Corporation shall ensure that the Proxy Circular complies with
National Instrument 51-102, to the extent applicable, and provides
Shareholders with information in sufficient detail to permit them
to form
a reasoned judgement concerning the matters to be placed before them
at
the Shareholder Meeting. The Corporation shall ensure that none of
the
information supplied or to be supplied by the Corporation for inclusion
or
incorporation by reference in any application or any Registration
Statement will at the relevant effective time contain any untrue
statement
of material fact or omit to state a material fact required to be
stated
therein or necessary in order to make the statements made therein
in light
of the circumstances under which they were made not misleading. The
Corporation will take all reasonable steps within its control to
ensure
that the Proxy Circular is prepared as to form in all material respects
in
compliance with the provisions of the Act and Canadian Securities
Laws.
|
|
(e)
|
Acquirer
shall ensure that any Registration Statement complies with all U.S.
Securities Laws and, without limiting the generality of the foregoing,
that such document does not contain any untrue statement of a material
fact or omit 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 (other than with respect
to
any information relating to and provided by the Corporation or any
security holder named therein). The Acquirer shall ensure that none
of the
information supplied or to be supplied by the Acquirer for inclusion
or
incorporation by reference in the Proxy Circular will at the relevant
effective time contain any untrue statement of material fact or omit
to
state a material fact required to be stated therein or necessary
in order
to make the statements made therein in light of the circumstances
under
which they were made not
misleading.
|
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2.8 Cooperation
|
(a)
|
The
Corporation agrees to use its commercially reasonable efforts to
perform
all obligations required to be performed by the Corporation under
this
Agreement, cooperate with Acquirer in connection therewith, and do
all
such other acts and things as may be necessary or desirable in order
to
consummate and make effective, as soon as reasonably practicable,
the
transactions contemplated in this Agreement and, without limiting
the
generality of the foregoing, the Corporation shall:
|
|
(i)
|
subject
to Section 3.2, solicit from the Shareholders proxies in favour of
approval of the Reorganization Resolution and use commercially reasonable
efforts to obtain the approval by such Shareholders of the Reorganization
Resolution;
|
|
(ii)
|
not
adjourn, postpone or cancel (or propose adjournment, postponement
or
cancellation of) the Shareholder Meeting without Acquirer's prior
written
consent, acting reasonably, except as required by applicable
laws;
|
|
(iii)
|
use
commercially reasonable efforts to satisfy or cause to be satisfied
as
soon as reasonably practicable all the conditions precedent that
are set
forth in Article 9;
|
|
(iv)
|
apply
for and use commercially reasonable efforts to obtain as promptly
as
practicable all Regulatory Approvals relating to the Corporation
and, in
doing so, to keep Acquirer reasonably informed as to the status of
the
proceedings related to obtaining the Regulatory Approvals, including,
but
not limited to, providing Acquirer the opportunity to be present
for or
participate in all communications with any Governmental Entity and
providing Acquirer with copies of all related applications and
notifications, in draft form, in order for Acquirer to provide its
reasonable comments;
|
|
(v)
|
use
commercially reasonable efforts to defend all lawsuits or other legal,
regulatory or other proceedings to which it is a party challenging
or
affecting this Agreement or the consummation of the transactions
contemplated hereby;
|
|
(vi)
|
use
commercially reasonable efforts to have lifted or rescinded any injunction
or restraining order or other order which may adversely affect the
ability
of the parties to consummate the transactions contemplated
hereby;
|
|
(vii)
|
effect
all necessary registrations, filings and submissions of information
required by Governmental Entities from the Corporation in connection
with
the transactions contemplated hereby;
and
|
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|
(viii)
|
use
commercially reasonable efforts to obtain all waivers, consents and
approvals from other parties to loan agreements, leases or other
contracts
required to be obtained by the Corporation to consummate the transactions
contemplated hereby which the failure to obtain would have a Material
Adverse Effect.
|
|
(b)
|
Acquirer
agrees to use its commercially reasonable efforts to, and shall use
its
commercially reasonable efforts to cause its Subsidiaries to, perform
all
obligations required to be performed by it or any of its Subsidiaries
under this Agreement, cooperate with the Corporation in connection
therewith, and do all such other acts and things as may be necessary
or
desirable in order to consummate and make effective, as soon as reasonably
practicable, the transactions contemplated by this Agreement and,
without
limiting the generality of the following, the Acquirer
shall:
|
|
(i)
|
use
commercially reasonable efforts to satisfy or cause to be satisfied
as
soon as reasonably practicable all conditions precedent that are
set forth
in Article 9 hereof;
|
|
(ii)
|
apply
for and use commercially reasonable efforts to obtain as promptly
as
practicable the order respecting reporting issuer or similar status
and
all Regulatory Approvals relating to Acquirer or any of its Subsidiaries,
and, in doing so, to keep the Corporation reasonably informed as
to the
status of the proceedings related to obtaining the order and the
Regulatory Approvals, including, but not limited to, providing the
Corporation with copies of all related applications and notifications,
in
draft form, in order for the Corporation to provide its reasonable
comments;
|
|
(iii)
|
use
commercially reasonable efforts to defend all lawsuits or other legal,
regulatory or other proceedings to which it is a party challenging
or
affecting this Agreement or the consummation of the transactions
contemplated hereby;
|
|
(iv)
|
use
commercially reasonable efforts to have lifted or rescinded any injunction
or restraining order or other order relating to Acquirer or any of
its
Subsidiaries which may adversely affect the ability of the parties
to
consummate the transactions contemplated
hereby;
|
|
(v)
|
effect
all necessary registrations, filings and submissions of information
required by Governmental Entities from Acquirer or any of its Subsidiaries
in connection with the transactions contemplated hereby;
and
|
|
(vi)
|
reserve
or have available a sufficient number of Acquirer Shares for issuance
upon
the exchange from time to time of Exchangeable Shares issued pursuant
to
the Reorganization, and use its reasonable best efforts and in good
faith
expeditiously take all such actions and do all such things as are
reasonably necessary or desirable to cause such Acquirer Shares to
be
approved for listing on any stock exchange that the Acquirer Shares
are
listed at the time.
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- 19
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|
(c)
|
The
Acquirer shall not exercise its voting rights as a Shareholder in
connection with the Reorganization
Resolution.
|
ARTICLE
3
COVENANTS
OF THE CORPORATION
3.1 Ordinary
Course of Business
The
Corporation covenants and agrees that, from the date hereof until the earlier
of
the Effective Time and the date this Agreement is terminated pursuant to its
terms, unless Acquirer otherwise agrees in writing or except as otherwise
expressly contemplated or permitted by this Agreement or the Disclosure
Letter:
|
(a)
|
the
Corporation shall conduct its business only in, and not take action
except
in, the usual, ordinary and regular course of business and consistent
with
past practice;
|
|
(b)
|
the
Corporation shall not directly or indirectly 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:
|
|
(A)
|
any
additional shares of, or any options, warrants, calls, conversion
privileges or rights of any kind to acquire any shares of, any capital
stock of the Corporation (other than pursuant to the exercise of
outstanding options or warrants),
or
|
|
(B)
|
except
in the ordinary and regular course of business, consistent with past
practice, any assets of the
Corporation;
|
|
(ii)
|
amend
or propose to amend its governing
documents;
|
|
(iii)
|
split,
combine or reclassify any outstanding Shares, or declare, set aside
or pay
any dividend or other distribution payable in cash, stock, property
or
otherwise with respect to the
Shares;
|
|
(iv)
|
redeem,
purchase or offer to purchase any Shares or other securities of the
Corporation;
|
|
(v)
|
reorganize,
amalgamate or merge the Corporation with any other
Person;
|
|
(vi)
|
acquire
or agree to acquire (by merger, amalgamation, acquisition of stock
or
assets or otherwise) any Person or acquire or agree to acquire any
assets,
except in the ordinary and regular course of business, consistent
with
past practice;
|
-
20 -
|
(vii)
|
pay,
discharge or satisfy any material claims, liabilities or obligations
or relinquish any material contractual
rights;
|
|
(viii)
|
enter
into any interest rate, currency or commodity swaps, ▇▇▇▇▇▇ or other
similar financial instruments;
|
|
(ix)
|
waive,
release, grant or transfer any rights of material value or modify
or
change in any material respect any existing material licence, lease,
contract or other document, other than in the ordinary and regular
course
of business, consistent with past
practice;
|
|
(x)
|
authorize,
recommend or propose any release or relinquishment of any material
contract right other than in the ordinary and regular course of business,
consistent with past practice;
|
|
(xi)
|
incur
or commit to incur any indebtedness for borrowed money or any other
material liability or obligation or issue any debt or assume, guarantee,
endorse or otherwise as an accommodation become responsible for,
the
obligations of any other person, or make loans or advances, except,
in
either case, in the ordinary and regular course of business consistent
with past practice;
|
|
(xii)
|
issue
any press release, make any public statement or grant any media interviews
of any kind except in connection with ongoing community consultation
and
similar activities in the ordinary course consistent with past practice
and subject to consultation, coordination and cooperation with the
Acquirer and its investor relations personnel;
|
|
(xiii)
|
create
or acquire any Subsidiary;
|
|
(xiv)
|
pay,
give or agree to pay or give any commission or other remuneration
directly
or indirectly for soliciting the exchange (as such phrase is used
and
interpreted under Section 3(a)(9) of the Securities Act of 1933,
as
amended) of Shares into Exchangeable Shares pursuant to the terms
of the
Reorganization; or
|
|
(xv)
|
authorize
or propose any of the foregoing, or enter into or modify any contract,
agreement, commitment or arrangement to do any of the
foregoing;
|
|
(c)
|
other
than as set forth in the Disclosure Letter, the Corporation shall
not:
|
|
(i)
|
take
any action with respect to the entering into, assuming or modifying
of any
employment, severance, collective bargaining or similar agreements,
policies or arrangements with respect to the grant of any bonuses,
salary
increases, stock options, pension benefits, retirement allowances,
deferred compensation, severance or termination pay or any other
form of
compensation or profit sharing or with respect to any increase of
benefits
payable; or
|
-
21 -
|
(ii)
|
without
limiting the foregoing, create, enter into, assume or modify any
Employee
Obligations;
|
|
(d)
|
the
Corporation shall use its reasonable 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 simultaneously with
such
termination, cancellation or lapse, replacement policies underwritten
by
insurance and re insurance companies of nationally recognized standing
providing commercially reasonable coverage in accordance with industry
practice for similar entities carrying on comparable business are
obtained;
|
|
(e)
|
the
Corporation shall:
|
|
(i)
|
in
the context of the transactions contemplated hereby, use its commercially
reasonable efforts to preserve intact its business organization and
goodwill, to keep available the services of its officers and employees
as
a group and to maintain satisfactory relationships with suppliers,
agents,
distributors, customers and others having business relationships
with
it;
|
|
(ii)
|
not
take any action, that 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;
|
|
(iii)
|
confer
on a regular basis with Acquirer with respect to material operational
matters and shall cooperate with the Acquirer to develop a communications
strategy regarding the progress of its exploration program and preparation
of technical reports required to comply with applicable laws and
stock
exchange rules; and
|
|
(iv)
|
cooperate
with the Acquirer and provide all reasonable support and information
necessary or desirable in connection with financing activities of
the
Acquirer and any disclosure documents and technical reports prepared
in
connection therewith;
|
|
(f)
|
the
Corporation shall not settle or compromise any claim brought by any
present, former or purported holder of any securities of the Corporation
in connection with the transactions contemplated by this Agreement
or the
Reorganization;
|
|
(g)
|
the
Corporation shall not enter into or modify any contract, agreement,
commitment or arrangement inconsistent with any of the matters set
forth
in this Section 3.1; and
|
-
22 -
|
(h)
|
the
Corporation shall use all commercially reasonable efforts to obtain
receipt of the consents of any and all lenders to the Corporation
whose
consent is required to prevent a default or any event that with the
passage of time may constitute an event of default thereunder, to
the
transactions contemplated herein.
|
3.2 Non-Solicitation
|
(a)
|
The
Corporation shall not, directly or indirectly, through any officer,
director, employee, representative or agent of the Corporation,
(i) solicit, initiate or encourage (including by way of furnishing
information or entering into any form of agreement, arrangement or
understanding) the initiation of any inquiries, discussions, negotiations,
proposals or offers from any Person or other entity or group (other
than
Acquirer) in respect of any matter or thing inconsistent with the
successful completion of the Reorganization, including, without
limitation, any Acquisition Proposal or (ii) provide any non-public
information to, participate in any discussions or negotiations relating
to
any such matter or thing with, or otherwise cooperate with or assist
or
participate in any effort to take such action by, any Person or other
entity or group; provided nothing contained in this Section 3.2 or
otherwise in this Agreement shall prevent the Board of Directors
from:
|
|
(i)
|
considering,
negotiating or providing information in connection with, or otherwise
(except as provided for in (iii) below) responding to, an unsolicited
bona
fide written Acquisition Proposal in respect of
which:
|
|
(A)
|
the
Board of Directors has determined in good faith (after receiving
the
advice of its financial advisors that is reflected in the minutes
of the
Board of Directors) to be a commercially feasible transaction that
could
be carried out within a time frame that is reasonable in the circumstances
and would, if consummated in accordance with its terms, result in
a
transaction demonstrably superior to the Reorganization from a financial
point of view to the Shareholders;
and
|
|
(B)
|
after
consultation with its financial advisors, and after receiving advice
of
counsel that is reflected in the minutes of the Board of Directors,
the
Board of Directors concludes in good faith such action is necessary
for
the Board of Directors to discharge properly its fiduciary duties
under
applicable law;
|
|
|
(any
such Acquisition Proposal that meets such requirements being referred
to
herein as a “Superior
Proposal”),
provided that the Corporation is in compliance with Sections 3.2(c)
and
(d) in respect of the Acquisition
Proposal;
|
|
(ii)
|
complying
with Securities Laws relating to the provision of directors' circulars
and
making appropriate disclosure with respect thereto to Shareholders;
and
|
-
23 -
|
(iii)
|
accepting,
recommending, approving or implementing any Superior Proposal if
the
Corporation has complied with Sections 3.2(c) and (d) in respect
of the
Superior Proposal and prior to such acceptance, recommendation, approval
or implementation:
|
|
(A)
|
after
consultation with its financial advisors, and after receiving advice
of
counsel that is reflected in the minutes of the Board of Directors,
the
Board of Directors concludes in good faith such action is necessary
for
the Board of Directors to discharge properly its fiduciary duties
under
applicable law; and
|
|
(B)
|
in
arriving at such conclusion, the Board of Directors gives consideration
to
any amendment proposed by Acquirer in writing in the three Business
Day
period referred to in Section
3.2(d).
|
|
(b)
|
The
Corporation shall, and shall direct and use reasonable efforts to
cause
its officers, directors, employees, representatives and agents to,
immediately cease and cause to be terminated any existing discussions
or
negotiations with any parties (other than Acquirer or an affiliate
of
Acquirer) with respect to any potential Acquisition Proposal. To
the
extent not already done so, the Corporation shall immediately close
any
and all data rooms which may have been opened. The Corporation agrees
not
to waive, in whole or in part, or release, in whole or in part, any
third
party from, or consent to any action pursuant to, any confidentiality
or
standstill obligation to which the Corporation and such third party
is a
party except in respect of a Superior Proposal in accordance with
Section
3.2(d). The Corporation shall immediately request the return or
destruction of all confidential non-public information provided to
any
third parties who have entered into a confidentiality agreement with
the
Corporation relating to a potential Acquisition Proposal, shall use
all
reasonable efforts to ensure that such requests are honoured and
shall
immediately advise Acquirer orally and in writing of any responses
or
action (actual or threatened) by any recipient of such request which
could
hinder, prevent, delay or otherwise adversely affect the completion
of the
Reorganization.
|
|
(c)
|
The
Corporation shall immediately notify Acquirer of any Acquisition
Proposal
(including, without limitation any amended, supplemented, replaced
or
renewed Acquisition Proposal previously made) or any request for
non-public information relating to the Corporation or for access
to the
properties, books or records of the Corporation by any Person or
other
entity or group that informs the Corporation that it is considering
making, or has made, an Acquisition Proposal. Such notice to Acquirer
shall be made, from time to time, orally and in writing, and shall
indicate such details of the proposal, inquiry or contact known to
such
person as Acquirer may reasonably request including, without limitation,
the identity of the Person or other entity or group making such proposal,
inquiry or contact and shall include a copy of any written form of
Acquisition Proposal.
|
-
24 -
|
(d)
|
If
the Board of Directors determines that an Acquisition Proposal constitutes
a Superior Proposal pursuant to Section 3.2(a), the Corporation shall
give
immediate notice of such determination to the Acquirer (together
with a
copy of any written advice of counsel that is reflected in the minutes
of
the Board of Directors, referred to in Section 3.2(a)) and shall
give
Acquirer not less than three Business Days advance notice of any
action to
be taken by the Board of Directors to withdraw, modify or change
any
recommendation regarding the Reorganization or to enter into any
agreement
to implement the Superior Proposal, and provide to Acquirer the right,
during such three Business Days, to advise the Board of Directors
that
Acquirer will, within such period, announce its intention to, and,
as soon
as practicable in the circumstances and, in any event, within three
Business Days of such announcement, amend the terms of the Reorganization
to provide that the holders of Shares shall, pursuant to the
Reorganization as amended, receive a value per Share equal to or
greater
than the value per Share provided in the Superior Proposal. If Acquirer
so
advises the Board of Directors and so amends the Reorganization,
the Board
of Directors shall not withdraw, modify or change any recommendation
with
respect to the Reorganization, as so amended, and neither the Corporation
nor the Board of Directors shall take any action to accept, recommend,
approve or implement the Superior Proposal, including, without limitation,
any release of the party making the Superior Proposal from any standstill
or confidentiality obligation, any further consideration or negotiation
of
the Superior Proposal or entry into of any agreement regarding the
Superior Proposal and the Corporation agrees to amend this Agreement
to
provide for the Reorganization as so amended.
|
|
(e)
|
If
the Board of Directors receives a request for non-public information
from
a party who has made or is considering making an unsolicited bona
fide
Acquisition Proposal and the Board of Directors determines that such
Acquisition Proposal constitutes a Superior Proposal pursuant to
Section
3.2(a), then, and only in such case, the Corporation may, subject
to the
execution of a confidentiality agreement, provide such party with
access
to information regarding the Corporation provided that the Corporation
complies with its obligations pursuant to Section 3.2(c), sends a
copy of
any such confidentiality agreement to Acquirer immediately upon its
execution and provides copies to Acquirer of any information provided
to
such party (that has not been previously provided to Acquirer)
concurrently with its provision to such
part.
|
|
(f)
|
The
Corporation shall ensure that the officers, directors and employees
of the
Corporation and any investment bankers or other advisors or
representatives retained by the Corporation are aware of the provisions
of
this Section, and the Corporation shall be responsible for any breach
of
this Section 3.2 by such investment bankers, advisors or other
representatives.
|
-
25 -
3.3 Notice
of Material Change
From
the
date hereof until the earlier of the Effective Time and the date this Agreement
is terminated pursuant to its terms, the Corporation shall promptly notify
Acquirer in writing of:
|
(a)
|
any
Material Adverse Change with respect to the
Corporation;
|
|
(b)
|
any
change in information relating to any representation or warranty
of the
Corporation set forth in this Agreement which is or may be of such
a
nature as to render any such representation or warranty misleading
or
untrue in a material respect;
|
|
(c)
|
any
material fact that arises and which would have been required to be
stated
herein or disclosed to Acquirer had such fact arisen on or prior
to the
date of this Agreement;
|
|
(d)
|
any
claim, action, proceeding or investigation pending or, to the knowledge
of
the Corporation, threatened referred to in Section 7.1(m) or any
basis for any such claim, action, proceeding or investigation; and
|
|
(e)
|
any
claim under policies of insurance referred to in
Section 7.1(r).
|
The
Corporation shall in good faith discuss with Acquirer any change in
circumstances (actual, anticipated, contemplated or, to the knowledge of the
Corporation, threatened), financial or otherwise, which is of such a nature
that
there may be a reasonable question as to whether notice is required to be given
pursuant to this Section.
3.4 Access
to Information
Upon
reasonable notice, the Corporation shall afford the Acquirer'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 and the date this Agreement is terminated
pursuant to its terms, to its facilities (including the ability to conduct
reasonable environmental tests in respect of any of the properties of the
Corporation at Acquirer's cost) properties, books, contracts and records as
well
as to its management personnel, and, during such period, the Corporation shall
furnish promptly to the Acquirer all information concerning its business,
properties and personnel as the Acquirer may reasonably request, provided that
the Acquirer shall make reasonable efforts to minimize the number of
Representatives attending at the Corporation's offices and facilities and to
work cooperatively with the Corporation to minimize disruptions in the business
of the Corporation.
3.5 Financial
Statements
The
Corporation shall deliver to Acquirer as soon as they become available true
and
complete copies of any report or statement provided to its Shareholders
subsequent to the date of this Agreement. As of their respective dates, such
reports and statements (excluding any information therein provided by Acquirer,
as to which the Corporation makes no representation) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading and will comply in
all
material respects with the requirements of applicable law and stock exchange
rules. The financial statements of the Corporation issued by the Corporation
or
to be included in such reports and statements (excluding any information therein
provided by Acquirer, as to which the Corporation makes no representation)
will
be prepared in accordance with generally accepted accounting principles
applicable in Canada (except as otherwise indicated in such financial statements
and the notes thereto or, in the case of audited statements, in the related
report of the auditor), and will present fairly the financial position, results
of operations and changes in financial position of the Corporation as of the
dates thereof and for the periods indicated therein (subject, in the case of
any
unaudited interim financial statements, to normal year-end audit
adjustments).
-
26 -
ARTICLE
4
TRANSACTION
SUPPORT AGREEMENTS
4.1 Transaction
Support Agreements
The
Corporation shall use commercially reasonable efforts to contact the Principal
Shareholders of the Corporation for the purpose of discussing the Transaction
Support Agreements.
ARTICLE
5
COVENANTS
OF ACQUIRER
5.1 Ordinary
Course of Business
The
Acquirer covenants and agrees that, from the date hereof until the earlier
of
the Effective Time and the date this Agreement is terminated pursuant to its
terms, unless the Corporation otherwise agrees in writing or except as otherwise
expressly contemplated or permitted by this Agreement or the Disclosure
Letter:
|
(a)
|
the
Acquirer shall, and shall cause each of its Subsidiaries to, conduct
its
and their respective business only in, and not take action except in, the
usual, ordinary and regular course of business;
|
|
(b)
|
the
Acquirer shall not directly or indirectly 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 its Subsidiaries
to issue,
sell, pledge, lease, dispose of, encumber or agree to issue, sell,
pledge,
lease, dispose of or encumber):
|
|
(A)
|
any
additional shares of, or any options, warrants, calls, conversion
privileges or rights of any kind to acquire any shares of, any capital
stock of the Acquirer or any of its Subsidiaries (other than pursuant
to
the exercise of outstanding options, warrants or convertible debentures),
or
|
-
27 -
|
(B)
|
except
in the ordinary and regular course of business, any assets of the
Acquirer
or any of its Subsidiaries;
|
|
(ii)
|
amend
or propose to amend its governing documents or those of any of its
Subsidiaries;
|
|
(iii)
|
split,
combine or reclassify any outstanding shares, or declare, set aside
or pay
any dividend or other distribution payable in cash, stock, property
or
otherwise with respect to the shares of the Acquirer or any of its
Subsidiaries;
|
|
(iv)
|
redeem,
purchase or offer to purchase (or permit any of its Subsidiaries
to
redeem, purchase or offer to purchase) any shares or other securities
of
the Acquirer or any of its
Subsidiaries;
|
|
(v)
|
reorganize,
amalgamate or merge the Acquirer or any of its Subsidiaries with
any other
Person;
|
|
(vi)
|
acquire
or agree to acquire (by merger, amalgamation, acquisition of stock
or
assets or otherwise) any Person or acquire or agree to acquire any
assets,
except in the ordinary and regular course of
business;
|
|
(vii)
|
pay,
discharge or satisfy any material claims, liabilities or obligations,
or
relinquish any material contractual
rights;
|
|
(viii)
|
enter
into any interest rate, currency or commodity swaps, ▇▇▇▇▇▇ or other
similar financial instruments;
|
|
(ix)
|
waive,
release, grant or transfer any rights of material value or modify
or
change in any material respect any existing material licence, lease,
contract or other document, other than in the ordinary and regular
course
of business;
|
|
(x)
|
authorize,
recommend or propose any release or relinquishment of any material
contract right other than in the ordinary and regular course of
business;
|
|
(xi)
|
incur
or commit to incur any indebtedness for borrowed money or any other
material liability or obligation or issue any debt or assume, guarantee,
endorse or otherwise as an accommodation become responsible for,
the
obligations of any other person, or make loans or advances, except,
in
either case, in the ordinary and regular course of
business;
|
|
(xii)
|
issue
any press release, make any public statement or grant any media interviews
of any kind;
|
|
(xiii)
|
pay,
give or agree to pay or give any commission or other remuneration
directly
or indirectly for soliciting the exchange (as such phrase is used
and
interpreted under Section 3(a)(9) of the Securities Act of 1933,
as
amended) of Shares into Exchangeable Shares pursuant to the terms
of the
Reorganization; or
|
-
28 -
|
(xiv)
|
authorize
or propose any of the foregoing, or enter into or modify any contract,
agreement, commitment or arrangement to do any of the
foregoing;
|
|
(c)
|
the
Acquirer shall not, and shall cause each of its Subsidiaries to
not:
|
|
(i)
|
take
any action with respect to the entering into, assuming or modifying
of any
employment, severance, collective bargaining or similar agreements,
policies or arrangements with respect to the grant of any bonuses,
salary
increases, stock options, pension benefits, retirement allowances,
deferred compensation, severance or termination pay or any other
form of
compensation or profit sharing or with respect to any increase of
benefits
payable; or
|
|
(ii)
|
without
limiting the foregoing, create, enter into, assume or modify any
Acquirer
Employee Obligations;
|
|
(d)
|
the
Acquirer shall use its reasonable 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 simultaneously with such termination,
cancellation or lapse, replacement policies underwritten by insurance
and
re insurance companies of nationally recognized standing providing
commercially reasonable coverage in accordance with industry practice
for
similar entities carrying on comparable business are
obtained;
|
|
(e)
|
the
Acquirer shall:
|
|
(i)
|
in
the context of the transactions contemplated hereby, use its commercially
reasonable efforts, and cause each of its Subsidiaries to use its
commercially reasonable efforts, to preserve intact their respective
business organizations and goodwill, to keep available the services
of its
officers and employees as a group and to maintain satisfactory
relationships with suppliers, agents, distributors, customers and
others
having business relationships with it or its Subsidiaries;
|
|
(ii)
|
not
take any action, or permit any of its Subsidiaries to take any action,
that 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)
|
confer
on a regular basis with the Corporation with respect to material
operational matters, including equity financing matters, the status
of
applications to the American Stock Exchange or other stock exchanges,
and
applications for reporting issuer status and registration
statements;
|
-
29 -
|
(f)
|
the
Acquirer shall not settle or compromise any claim brought by any
present,
former or purported holder of any securities of the Acquirer in connection
with the transactions contemplated by this Agreement or the
Reorganization;
|
|
(g)
|
the
Acquirer shall not enter into or modify any contract, agreement,
commitment or arrangement inconsistent with any of the matters set
forth
in this Section 5.1; and
|
|
(h)
|
the
Acquirer shall use all commercially reasonable efforts to obtain
receipt
of the consents of any and all lenders to the Acquirer whose consent
is
required to prevent a default or any event that with the passage
of time
may constitute an event of default thereunder, to the transactions
contemplated herein.
|
For
greater certainty, nothing in this Section 5.1 shall prohibit or restrict the
right of Acquirer to comply with its obligations, including without limitation
its continuous disclosure obligations, pursuant to Securities Laws or the
applicable rules of any stock exchange or similar trading market. For the
purposes of this Section 5.1 the phrase "the usual, ordinary and regular course
of business" shall mean what is reasonably considered to be usual, ordinary
and
regular course of business for a public company listed on a stock exchange
in
the United States or Canada.
5.2 Non-Solicitation
|
(a)
|
The
Acquirer shall not, directly or indirectly, through any officer,
director,
employee, representative or agent of the Acquirer, (i) solicit,
initiate or encourage (including by way of furnishing information
or
entering into any form of agreement, arrangement or understanding)
the
initiation of any inquiries, discussions, negotiations, proposals
or
offers from any Person or other entity or group (other than Corporation)
in respect of any matter or thing inconsistent with the successful
completion of the Reorganization, including, without limitation,
any
Acquirer Acquisition Proposal or (ii) provide any non-public
information to, participate in any discussions or negotiations relating
to
any such matter or thing with, or otherwise cooperate with or assist
or
participate in any effort to take such action by, any Person or other
entity or group; provided nothing contained in this Section 5.2 or
otherwise in this Agreement shall prevent the Acquirer
from:
|
|
(i)
|
considering,
negotiating or providing information in connection with, or otherwise
responding to, an unsolicited bona fide written Acquirer Acquisition
Proposal in respect of which, after consultation with its financial
advisors, and after receiving advice of counsel that is reflected
in the
minutes of the Acquirer Board of Directors, the Acquirer Board of
Directors concludes in good faith such action is necessary for the
Acquirer Board of Directors to discharge properly its fiduciary duties
under applicable law (any such Acquirer Acquisition Proposal that
meets
such requirements being referred to herein as a "Permitted
Proposal");
|
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30 -
|
(ii)
|
complying
with Securities Laws relating to the provision of directors' circulars
and
making appropriate disclosure with respect thereto to holders of
Acquirer
Shares; and
|
|
(iii)
|
accepting,
recommending, approving or implementing any Acquirer Acquisition
Proposal
if prior to such acceptance, recommendation, approval or implementation,
after consultation with its financial advisors, and after receiving
advice
of counsel that is reflected in the minutes of the Acquirer Board
of
Directors, the Acquirer Board of Directors concludes in good faith
such
action is necessary for the Acquirer Board of Directors to discharge
properly its fiduciary duties under applicable
law.
|
|
(b)
|
The
Acquirer shall, and shall direct and use reasonable efforts to cause
its
officers, directors, employees, representatives and agents to, immediately
cease and cause to be terminated any existing discussions or negotiations
with any parties with respect to any potential Acquirer Acquisition
Proposal. To the extent not already done so, the Acquirer shall
immediately close any and all data rooms which may have been opened.
The
Acquirer agrees not to waive, in whole or in part, or release, in
whole or
in part, any third party from, or consent to any action pursuant
to, any
confidentiality or standstill obligation to which the Acquirer and
such
third party is a party except in respect of a Permitted Proposal.
The
Acquirer shall immediately request the return or destruction of all
confidential non-public information provided to any third parties
who have
entered into a confidentiality agreement with the Acquirer relating
to a
potential Acquirer Acquisition Proposal, shall use all reasonable
efforts
to ensure that such requests are honoured and shall immediately advise
the
Corporation orally and in writing of any responses or action (actual
or
threatened) by any recipient of such request which could hinder,
prevent,
delay or otherwise adversely affect the completion of the Reorganization.
|
|
(c)
|
The
Acquirer shall immediately notify the Corporation of any Acquirer
Acquisition Proposal (including, without limitation any amended,
supplemented, replaced or renewed Acquirer Acquisition Proposal previously
made) or any request for non-public information relating to the Acquirer
or for access to the properties, books or records of the Acquirer
by any
Person or other entity or group that informs the Acquirer that it
is
considering making, or has made, an Acquirer Acquisition Proposal.
Such
notice to the Corporation shall be made, from time to time, orally
and in
writing, and shall indicate such details of the proposal, inquiry
or
contact known to such person as the Corporation may reasonably request
including, without limitation, the identity of the Person or other
entity
or group making such proposal, inquiry or contact and shall include
a copy
of any written form of Acquirer Acquisition
Proposal.
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|
(d)
|
If
an Acquirer Acquisition Proposal is recommended by the board of directors
of Acquirer, or is otherwise effected or to be effected with the
consent
or approval of the board of directors of Acquirer, then Acquirer
will use
its reasonable commercial efforts expeditiously and in good faith
to take
all such actions and do such things as are necessary or desirable
and
within its power to enable and permit holders of Shares (other than
Acquirer and its Affiliates) to participate in such transaction to
the
same extent and on an economically equivalent basis as the holders
of
Acquirer Shares, without discrimination. If an Acquirer Acquisition
Proposal is recommended by the board of directors of Acquirer, or
is
otherwise to be effected with the consent or approval of the board
of
directors of Acquirer, and the terms of such Acquirer Acquisition
Proposal
do not enable and permit holders of Shares (other than Acquirer and
its
Affiliates) to participate in such transaction to the same extent
and on
an economically equivalent basis as the holders of Acquirer Shares,
without discrimination, then the Acquirer agrees that its rights
of first
offer in the letter agreement with the Corporation dated November
12, 2004
shall forthwith terminate upon such recommendation being made by
the board
of directors of Acquirer, or such consent or approval being provided
by
the board of directors of Acquirer. The Acquirer further agrees that,
from
the date of such termination, it shall not take any actions, or permit
its
Subsidiaries to take any actions, that could reasonably be expected
to
prevent the Corporation from conducting any financing activities
to
further its business plan.
|
|
(e)
|
If
an Acquirer Acquisition Proposal is completed and does not enable
and
permit holders of Shares to participate in such transaction to the
same
extent and on an economically equivalent basis as the holders of
Acquirer
Shares, without discrimination, then the Acquirer agrees that its
rights
of first offer in the letter agreement with the Corporation dated
November
12, 2004 shall forthwith terminate upon the Person making the Acquirer
Acquisition Proposal acquiring in any manner, directly or indirectly,
beneficial ownership of all or a material portion of the assets of
the
Acquirer or acquiring in any manner, directly or indirectly, beneficial
ownership of or control or direction over more than 20% of the outstanding
voting shares of the Acquirer. The Acquirer further agrees that,
from the
date of such termination, it shall not take any actions, or permit
its
Subsidiaries to take any actions, that could reasonably be expected
to
prevent the Corporation from conducting any financing activities
to
further its business plan.
|
|
(f)
|
If
the board of directors of Acquirer receives a request for non-public
information from a party who has made or is considering making an
unsolicited bona fide Acquirer Acquisition Proposal and the board
of
directors of Acquirer determines that such Acquirer Acquisition Proposal
constitutes a Permitted Proposal, then, and only in such case, the
Acquirer may, subject to the execution of a confidentiality agreement,
provide such party with access to information regarding the Acquirer
provided that the Acquirer sends a copy of any such confidentiality
agreement to the Corporation immediately upon its execution and provides
copies to Corporation of any information provided to such party (that
has
not been previously provided to Corporation) concurrently with its
provision to such party.
|
|
(g)
|
The
Acquirer shall ensure that the officers, directors and employees
of the
Acquirer and any investment bankers or other advisors or representatives
retained by the Acquirer are aware of the provisions of this Section,
and
the Acquirer shall be responsible for any breach of this Section 5.2
by such investment bankers, advisors or other
representatives.
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-
32 -
5.3 Notice
of Material Change
From
the
date hereof until the earlier of the Effective Time and the date this Agreement
is terminated pursuant to its terms, the Acquirer shall promptly notify
Corporation in writing of:
|
(a)
|
any
Material Adverse Change with respect to the
Acquirer;
|
|
(b)
|
any
change in information relating to any representation or warranty
of the
Acquirer set forth in this Agreement which is or may be of such a
nature
as to render any such representation or warranty misleading or untrue
in a
material respect;
|
|
(c)
|
any
material fact that arises and which would have been required to be
stated
herein or disclosed to the Corporation had such fact arisen on or
prior to
the date of this Agreement;
|
|
(d)
|
any
claim, action, proceeding or investigation pending or, to the knowledge
of
the Acquirer, threatened referred to in Section 8.1(k) or any basis
for any such claim, action, proceeding or investigation;
and
|
|
(e)
|
any
claim under policies of insurance referred to in Section
8.1(s).
|
The
Acquirer shall in good faith discuss with Corporation any change in
circumstances (actual, anticipated, contemplated or, to the knowledge of the
Acquirer, threatened), financial or otherwise, which is of such a nature that
there may be a reasonable question as to whether notice is required to be given
pursuant to this Section.
5.4 Access
to Information
Upon
reasonable notice, Acquirer shall, and shall cause each of its Subsidiaries
to,
afford the Corporation'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 and the date this Agreement is terminated
pursuant to its terms, to its facilities, properties, books, contracts and
records as well as to its management personnel, and, during such period,
Acquirer shall, and shall cause such of its Subsidiaries to, furnish promptly
to
the Corporation all information concerning its business, properties and
personnel as Corporation may reasonably request, provided that Corporation
shall
make reasonable efforts to minimize the number of Representatives attending
at
the Acquirer's offices and facilities and to work cooperatively with the
Acquirer to minimize disruptions in the business of the Acquirer.
- 33
-
5.5 Financial
Statements
The
Acquirer shall deliver to the Corporation as soon as they become available
true
and complete copies of any report or statement provided to its Shareholders
subsequent to the date of this Agreement. As of their respective dates, such
reports and statements (excluding any information therein provided by Acquirer,
as to which the Acquirer makes no representation) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading and will comply in
all
material respects with the requirements of applicable law and stock exchange
rules. The financial statements of the Acquirer issued by the Acquirer or to
be
included in such reports and statements (excluding any information therein
provided by Corporation, as to which the Acquirer makes no representation)
will
be prepared in accordance with generally accepted accounting principles
applicable in the United States (except as otherwise indicated in such financial
statements and the notes thereto or, in the case of audited statements, in
the
related report of the auditor), and will present fairly the financial position,
results of operations and changes in financial position of the Acquirer as
of
the dates thereof and for the periods indicated therein (subject, in the case
of
any unaudited interim financial statements, to normal year-end audit
adjustments).
ARTICLE
6
MUTUAL
COVENANTS
6.1 Consultation
Except
as
and to the extent required by Securities Laws, other applicable law or the
rules
of any stock exchange or similar trading market, without the prior written
consent of the other party hereto, neither the Acquirer nor the Corporation
shall, directly or indirectly, make any public statement or communication and
each party shall direct its representatives not to do any of the foregoing
without such prior written consent. Acquirer and the Corporation agree to
consult with each other in issuing any press releases or otherwise making public
statements and in making any filings with any federal, provincial or state
governmental or regulatory agency or with any securities exchange with respect
thereto.
6.2 Other
Filings
Acquirer
and the Corporation shall, as promptly as practicable hereafter, prepare and
file any filings required under the Competition
Act
(Canada), any Securities Laws, the rules of the American Stock Exchange, the
United States Securities
Exchange Act of 1934,
as
amended, state securities or "blue sky" laws of the states of the United States,
as amended, or any other applicable law or rule of applicable stock exchange
relating to the transactions contemplated in this Agreement.
ARTICLE
7
REPRESENTATIONS
AND WARRANTIES OF THE CORPORATION
7.1 Representations
The
Corporation hereby represents and warrants, except as otherwise set forth in
the
Disclosure Letter, to the Acquirer (and acknowledges that the Acquirer is
relying upon such representations and warranties in connection with entering
into this Agreement):
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|
(a)
|
Organization
The
Corporation has been duly incorporated or
formed under applicable law, is validly existing and has full corporate
or
legal power and authority to own its properties and conduct its business
as presently owned and conducted. The Corporation is duly registered
to do
business and is in good standing in each jurisdiction in which the
character of its properties, owned or leased, or the nature of its
activities makes such registration necessary, except where the failure
to
be so registered or in good standing would not have a Material Adverse
Effect in respect of the Corporation. Except as disclosed in the
Disclosure Letter, the Corporation has no Subsidiaries and has never
had
any Subsidiaries since the Corporation was originally incorporated.
|
|
(b)
|
Capitalization
As
of the date hereof, the authorized capital
of the Corporation consists of an unlimited number of Shares and
an
unlimited number of preferred shares issuable in series; there are
only
18,692,147 Shares issued and outstanding; up to a maximum of 4,230,638
Shares may be issued pursuant to outstanding options and warrants
and the
details of such options and warrants are as set forth in the Disclosure
Letter. Except as described in the immediately preceding sentence
or as
set forth in the Disclosure Letter, there are no other issued or
outstanding securities of the Corporation and, without limitation,
there
are no options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating the Corporation
to
issue or sell any shares of any capital stock of the Corporation
or
securities or obligations of any kind convertible into or exchangeable
for
any shares of capital stock of the Corporation, nor are 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 the Corporation.
|
|
(c)
|
Authority
The
Corporation has the requisite corporate
power and authority to enter into this Agreement and to perform its
obligations hereunder and to complete the transactions contemplated
hereby. The execution and delivery of this Agreement by the Corporation
and the consummation by the Corporation of the transactions contemplated
by this Agreement have been duly authorized by the Board of Directors
and
no other corporate proceedings on the part of the Corporation are
necessary to authorize this Agreement or the transactions contemplated
hereby other than the approval of the Shareholders as provided in
this
Agreement. There is no agreement in force or effect to which the
Corporation is a party and, to the knowledge of the Corporation,
between
any other parties, which in any manner affects or will affect the
voting
or control of any of the securities of the Corporation. This Agreement
has
been duly executed and delivered by the Corporation and constitutes
a
valid and binding obligation of the Corporation, enforceable against
the
Corporation in accordance with its terms subject to bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium and other
laws
relating to or affecting creditors' rights generally, to general
principles of equity and the qualifications that the consummation
of the
Reorganization is subject to approval of Shareholders as provided
in this
Agreement. Except as disclosed in the Disclosure Letter, the execution
and
delivery by the Corporation of this Agreement and performance by
it of its
obligations hereunder and the completion of the Reorganization and
the
transactions contemplated thereby, will
not:
|
-
35 -
|
(i)
|
result
in a violation or breach of, require any consent to be obtained under
or
give rise to any termination rights under any provision
of:
|
|
(A)
|
its
certificate of incorporation, articles, by laws or other charter
documents, including any unanimous shareholder agreement or any other
agreement or understanding with any
party;
|
|
(B)
|
any
law, regulation, order, judgment or decree;
or
|
|
(C)
|
any
Material Contract;
|
|
(ii)
|
give
rise to any right of termination or acceleration of indebtedness,
or cause
any indebtedness to come due before its stated maturity or cause
any
available credit to cease to be available;
|
|
(iii)
|
result
in the imposition of any Encumbrance upon any of its assets, or restrict,
hinder, impair or limit the ability of the Corporation to carry on
the
business of the Corporation as and where it is now being carried
on or as
and where it may be carried on in the future;
or
|
|
(iv)
|
result
(alone or together with other adverse changes) in a Material Adverse
Change.
|
|
(d)
|
Impediments
There
are no legal restrictions to the consummation by the Corporation
of the
transactions contemplated by this Agreement or the performance
by the
Corporation of its obligations hereunder. No filing or registration
by the
Corporation with, or authorization, consent or approval of, any
domestic
or foreign public body or authority is necessary in connection
with the
consummation of the Reorganization, except for filing of the articles
of
amendment to create the Series 1 Preferred Shares, the filing of
the
Articles of Amendment and such other filings or registrations which,
if
not made, or such authorizations, consents or approvals, which,
if not
received, would not have a Material Adverse Effect in respect of
the
Corporation.
|
- 36
-
|
(e)
|
Books
and Records
All
financial transactions of the Corporation have been recorded in
the
financial books and records of the Corporation in accordance with
good
business practice, and such financial books and records accurately
reflect
the basis for the financial condition and the revenues, expenses
and
results of operations of the Corporation shown in the Financial
Statements. The Corporation has not entered into and is not a party
to any
material financial transactions which are not reflected in the
Financial
Statements. No information, records or systems pertaining to the
operation
or administration of the business of the Corporation are in the
possession
of, recorded, stored, maintained by or otherwise dependent upon
any Person
other than the Corporation, other than corporate minute books held
by
counsel.
|
|
(f)
|
Absence
of Changes
Since
January 31, 2006: (i) the Corporation has conducted its business only
in the ordinary course, (ii) no liability or obligation of any nature
(whether absolute, accrued, contingent or otherwise) material to
the
Corporation has been incurred, and (iii) there has not been any
(alone or together with other adverse changes) Material Adverse
Change.
|
|
(g)
|
Employment
Agreements and Benefit Plans
Except
as set forth in the Disclosure Letter, the Corporation 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 or, without limitation, any Employee Obligation, with,
any
Person; all benefit plans covering active, former or retired employees,
officers or directors of the Corporation is listed in the Disclosure
Letter; the Corporation has made available to Acquirer true and
complete
copies of all of the respective terms thereof and: each such plan
has been
maintained and administered in material compliance with its terms
and is,
to the extent required by applicable law or contract, fully funded
without
any deficit or unfunded actuarial liability or adequate provision
therefor
having been made; all such plans are in compliance with applicable
laws,
rules, regulations and policies (including those as to registration
or
other qualification); to the knowledge of the Corporation there
are no
pending, anticipated or threatened claims against or involving
any of the
plans; and all contributions, reserves or premium payments required
or
provided for have been made.
|
|
(h)
|
Disclosure
To
the knowledge of the Corporation there is no information regarding
any
event, circumstance or action taken or failed to be taken which
may
reasonably be expected to result in (alone or together with other
adverse
changes) a Material Adverse
Change.
|
- 37
-
|
(i)
|
Material
Contracts
The
Corporation has provided Acquirer with access to true and complete
copies
of all Material Contracts and all Material Contracts are listed
in the
Disclosure Letter. Except as disclosed in the Disclosure Letter,
such
agreements do not contain any "change of control" provisions which
would
be triggered or affected by the Reorganization. The Corporation
has
performed in all material respects the obligations required to
be
performed by it and is entitled to all benefits under the Material
Contracts. The Corporation has not violated or breached, in any
material
respect, any of the terms or conditions of the Material Contracts
and
there exists no default or event of default or event, occurrence,
condition or act which, with the giving of notice, the lapse of
time or
the happening of any other event or condition, would become a default
or
event of default by the Corporation under any of the Material Contracts.
Except as disclosed in the Disclosure Letter, the Corporation is
not a
party to or bound by any agreement containing any standstill, restrictive
covenant or similar provision that would restrict or limit its
right to
acquire or hold any asset, carry on any business or activity, solicit
business from any Person or in any geographical area, or otherwise
to
conduct its business as it may
determine.
|
|
(j)
|
Financial
Statements
The
Financial Statements were prepared in accordance with generally
accepted
accounting principles in Canada consistently applied, and fairly
present
the financial condition of the Corporation at the respective dates
indicated and the results of operations of the Corporation for
the periods
covered (subject, in the case of unaudited interim financial statements,
to normal year-end adjustments). Except (a) as disclosed or reflected
in
the Financial Statements or (b) liabilities and obligations
(i) incurred in the ordinary course of business and consistent with
past practice or (ii) pursuant to the terms of this Agreement, the
Corporation has not incurred any liabilities of any nature, whether
accrued, contingent or otherwise (or which would be required by
generally
accepted accounting principles applicable in Canada to be reflected
on a
balance sheet of the Corporation) that have constituted or would
be
reasonably likely to constitute (alone or together with other adverse
changes) a Material Adverse Change. Without limiting the generality
of the
foregoing provisions of this Section and except as set forth in the
Disclosure Letter, the Corporation has not committed to make any
capital
expenditures, nor have any capital expenditures been authorized
by the
Corporation.
|
|
(k)
|
Employee
Obligations, Etc.
The
Employee Obligations (all of which are listed in the Disclosure
Letter) do
not exceed the amounts set forth in the Disclosure Letter in respect
of
each of the persons listed therein in respect of this subsection
nor
exceed in aggregate $100,000.
|
- 38
-
|
(l)
|
Compliance
with Law
Each
of the Corporation and, to the knowledge of the Corporation, any
predecessor corporations, has complied with and is in compliance
with all
laws and regulations applicable to the operation of its business,
including without limitation all Environmental Laws, except where
such
non-compliance, considered individually or in the aggregate, would
not
constitute (alone or together with other adverse changes) a Material
Adverse Change or have a Material Adverse Effect in respect of
the
Corporation and would not materially affect the consummation of
the
transactions contemplated hereby or the ability of the Corporation
to
perform its obligations
hereunder.
|
|
(m)
|
Litigation,
etc.
Except
as set forth in the Disclosure Letter, there is no claim, action,
proceeding or investigation pending or, to the knowledge of the
Corporation threatened against or relating to the Corporation or
affecting
any of its properties or assets before any court or governmental
or
regulatory authority or body, nor is the Corporation aware of any
basis
for any such claim, action, proceeding or investigation. The Corporation
is not subject to any outstanding order, writ, injunction or decree
that
has had or is reasonably likely to have a Material Adverse Effect
in
respect of the Corporation.
|
|
(n)
|
Oil
Shale Permits and other Real Property
Subject
only
to:
|
|
(i)
|
the
relinquishment provisions of the terms of the respective OS Permits,
and
|
|
(ii)
|
royalties
payable to the Crown in the original grant thereof,
|
|
|
the
Corporation holds good, valid and marketable legal and beneficial
title to
the OS Permits and free and clear of any and all Encumbrances,
easements,
or other third party rights of any nature whatsoever. Except
such property
as is described in the Financial Statements (the "Real Property"),
the
Corporation does not own or lease and has not agreed to acquire
or lease
any real property or interest in real property other than the
Real
Property. The Corporation has the exclusive right to possess,
use and
occupy, and as applicable, has good and marketable title in
fee simple to,
all the Real Property, free and clear of all Encumbrances,
easements or
other third party rights of any kind other than as set forth
in the
Disclosure Letter. All buildings, structures, improvements
and
appurtenances situated on the Real Property are in good operating
condition and in a state of good maintenance and repair, except
as set out
in the Disclosure Letter, are adequate and suitable for the
purposes for
which they are currently being used and the Corporation has
adequate
rights of ingress and egress for the operation of its business
in the
ordinary course with such exceptions as would not have a Material
Adverse
Effect in respect of the Corporation. None of the buildings,
structures,
improvements or appurtenances located on the Real Property
(or any
equipment therein), nor the operation or maintenance thereof,
violates any
restrictive covenant or any provision of any federal, provincial
or
municipal law, ordinance, rule or regulation, or encroaches
on any
property owned by others, other than violations or encroachments
that do
not, individually or in the aggregate, have a material adverse
effect on
the current use of such property or a Material Adverse Effect
in respect
of the Corporation.
|
-
39 -
|
(o)
|
Environmental
|
|
(i)
|
The
operation of the business of the Corporation, the property and assets
owned or used by the Corporation and the use, maintenance and operation
thereof have been and are in compliance with all Environmental Laws
(except where non-compliance would not have a Material Adverse Effect
in
respect of the Corporation). The Corporation has complied with all
reporting and monitoring requirements under all Environmental Laws
(except
where non compliance would not have a Material Adverse Effect in
respect
of the Corporation). The Corporation has not received any notice
of any
non-compliance with any Environmental Laws or Environmental Permits,
and
the Corporation has not been convicted of an offence for non compliance
with any Environmental Laws or Environmental Permits or been fined
or
otherwise sentenced or settled such prosecution short of conviction,
(except where such non-compliance would not have a Material Adverse
Effect
in respect of the Corporation). There is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter existing or pending,
or
to the best knowledge of the Corporation, threatened, relating to
the
property or assets owned or used by the Corporation, relating in
any way
to the Environmental Laws or Environmental
Permits.
|
|
(ii)
|
The
Corporation has obtained all Environmental Permits necessary to conduct
its business and to own, use and operate its properties and assets
(except
where the failure to obtain any such permit would not have a Material
Adverse Effect in respect of the Corporation), all such Environmental
Permits are in effect, no appeal and no other action is pending to
revoke
any such Environmental Permits (except where revocation of any such
Environmental Permit would not have a Material Adverse Effect in
respect
of the Corporation) and the operation of the business of the Corporation,
the property and assets owned by the Corporation and the use, maintenance
and operation thereof have been and are in compliance with all
Environmental Permits (except where such non compliance would not
have a
Material Adverse Effect in respect of the Corporation). To the extent
required by applicable Environmental Laws, the Corporation has filed
all
applications necessary to renew or obtain any necessary Environmental
Permits in a timely fashion so as to allow it to continue to operate
its
business in compliance with applicable Environmental Laws, and the
Corporation does not expect such new or renewed Environmental Permits
to
include any terms or conditions that will have a Material Adverse
Effect
in respect of the Corporation.
|
- 40
-
|
(iii)
|
The
Corporation has, at all times, used, generated, treated, stored,
transported, disposed of or otherwise handled its Hazardous Substances
in
compliance with all Environmental Laws and Environmental Permits
(except
where such non-compliance would not have a Material Adverse Effect
in
respect of the Corporation).
|
|
(iv)
|
The
Corporation is not, and, to the knowledge of the Corporation, there
is no
reasonable basis upon which the Corporation could become, responsible
for
any material clean up or corrective action under any Environmental
Laws or
Environmental Permits. All audits, assessments and studies with respect
to
environmental matters relating to the Corporation have been referenced
in
the Disclosure Letter.
|
|
(v)
|
There
are no past or present (or, to the best of the Corporation's knowledge,
future) events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent compliance
or continued compliance with the Environmental Laws as in effect
on the
date hereof or which may give rise to any legal liability under any
Environmental Laws, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, notice of violation, study or
investigation, based on or related to the manufacture, generation,
processing, distribution, use, treatment, storage, disposal, transport
or
handling, or the Release or threatened Release into the indoor or
outdoor
environment by the Corporation of any Hazardous Substances (except,
in any
event, where it would not have a Material Adverse Effect in respect
of the
Corporation).
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|
(vi)
|
Prior
to the Effective Time, the Corporation shall allow the Acquirer to
conduct
at its expense such audits, assessments and studies deemed necessary
by
the Acquirer to satisfy itself of the status of the environmental
matters
and accuracy of the representations and warranties contained in this
Agreement.
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|
(p)
|
Operations
Any
and all operations of the Corporation, and to the best of the
Corporation's knowledge, any and all operations by third parties,
on or in
respect of the assets and properties of the Corporation, have been
conducted in accordance with good oil and gas industry and mining
industry
practices where the failure to so operate would have a Material
Adverse
Effect on the Corporation.
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- 41
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|
(q)
|
Patent,
Trademark and Related Matters
All
of the patents, registered trademarks and service marks, trade
names and
licenses owned or used by the Corporation are in good standing,
valid and
adequate to permit the Corporation to conduct its business as presently
conducted (except, in any event, where it would not have a Material
Adverse Effect in respect of the Corporation). To the knowledge
of the
Corporation, the Corporation is not infringing or is alleged to
be
infringing on the rights of any Person with respect to any patent,
trademark, service ▇▇▇▇, trade name, copyright (or any application
or
registration in respect thereof), licence, discovery, improvement,
process, formula, know-how, data, plan or specification where the
infringement or alleged infringement could reasonably be expected
to have
a Material Adverse Effect.
|
|
(r)
|
Insurance
Policies
of insurance in force as of the date hereof naming the Corporation
as an
insured adequately cover all risks reasonably and prudently foreseeable
in
the operation and conduct of the business of the Corporation as
would be
customary in respect of the businesses carried on by the Corporation
and
all such policies of insurance are as listed in the Disclosure
Letter. All
such policies of insurance shall remain in force and effect and
shall not
be cancelled or otherwise terminated as a result of the transactions
contemplated hereby. There are no outstanding claims under any
such
policies of insurance, except as set forth in the Disclosure
Letter.
|
|
(s)
|
Tax
Matters
|
|
(i)
|
Returns
Filed and Taxes Paid.
All Returns required to be filed prior to the date hereof by or on
behalf
of the Corporation have been duly filed on a timely basis and such
Returns
are true, complete and correct in all material respects. All taxes
shown
to be payable on the Returns or on subsequent assessments or reassessments
with respect thereto have been paid in full or objected to on a timely
basis, and no other Taxes are payable by the Corporation with respect
to
items or periods covered by such
Returns.
|
|
(ii)
|
Tax
Reserves.
The Corporation has paid or provided adequate accruals in its financial
statements for Taxes, including income taxes and related future taxes,
in
conformity with generally accepted accounting principles applicable
in
Canada.
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|
(iii)
|
Returns
Furnished.
For all periods ending on and before January 31, 2006, Acquirer has
been
provided access by the Corporation to true and complete copies of
all
federal and provincial income tax returns for the
Corporation.
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-
42 -
|
(iv)
|
Tax
Deficiencies; Audits; Statutes of Limitations.
Except as disclosed in the Disclosure Letter: (i) no deficiencies
exist or have been asserted with respect to Taxes of the Corporation;
(ii) the Corporation is not a party to any action or proceeding for
assessment or collection of Taxes, nor has such event been asserted
or
threatened against the Corporation or any of its assets which, if
successful, would constitute (alone or together with other adverse
changes) a Material Adverse Change; (iii) no waiver or extension of
any statute of limitations is in effect with respect to Taxes or
Returns
of the Corporation; and (iv) the Returns of the Corporation have
never been audited by a government or taxing authority, nor is any
such
audit in process, pending or
threatened.
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|
(t)
|
Pension
and Termination Benefits
The
Corporation has provided adequate accruals in its financial statements
(or
such amounts are fully funded) for all pension or other employee
benefit
obligations of the Corporation arising under or relating to each
of the
pension or retirement income plans or other employee benefit plans
or
agreements or policies maintained by or binding on the Corporation
as well
as for any other payment required to be made by the Corporation
in
connection with the termination of employment or retirement of
any
employee of the Corporation.
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|
(u)
|
Securities
Law Status and Shareholder Residency
The
Corporation is not, and has never been, a reporting issuer, or
similar
status, under any jurisdiction in Canada. The Corporation's shares
are not
traded on any Canadian or United States national securities exchange
or
quoted on the NASDAQ Stock Market in the United States nor are
any of its
securities registered under the United States Securities Exchange
Act of
1934, as amended, or any state securities laws. The Corporation
is not,
and has never been, required to file reports pursuant to Section
13 or
15(d) of the United States Securities Exchange Act of 1934. To
the best of
its knowledge, other than the Acquirer, the Corporation has no
shareholders who are resident in the United States, "U.S. persons"
(as
defined in Regulation S under the United States Securities Act
of 1933, as
amended) or otherwise subject to the securities laws of the United
States.
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|
(v)
|
Corrupt
Practices
There
have been no actions taken by the Corporation or any of its affiliates
which are in violation of the United States Foreign Corrupt Practices
Act
or the Corruption
of Foreign Public Officials Act
(Canada).
|
7.2 Investigation
Any
investigation by the Acquirer and its advisors shall not mitigate, diminish
or
affect the representations and warranties of the Corporation provided pursuant
to this Agreement. Where the provisions of Section 7.1 refer to disclosure
in writing, such disclosure shall be made expressly in response to the
applicable provision and shall be signed by a senior officer of the
Corporation.
- 43
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ARTICLE
8
REPRESENTATIONS
AND WARRANTIES OF ACQUIRER
8.1 Representations
Acquirer
hereby represents and warrants, except as set forth in the Disclosure Letter,
to
the Corporation (and acknowledges that the Corporation is relying upon such
representations and warranties in connection with entering into this
Agreement):
|
(a)
|
Organization
The
Acquirer and each of its Subsidiaries, has been duly incorporated
or
formed under applicable law, is validly existing and has full corporate
or
legal power and authority to own its properties and conduct its
business
as presently owned and conducted. The Acquirer and each of its
Subsidiaries is duly registered to do business and is in good standing
in
each jurisdiction in which the character of its properties, owned
or
leased, or the nature of its activities makes such registration
necessary,
except where the failure to be so registered or in good standing
would not
have a Material Adverse Effect in respect of the Acquirer. All
of the
outstanding shares of capital stock and other ownership interests
of the
Subsidiaries are validly issued, fully paid and non assessable
and all
such shares and other ownership interests owned directly or indirectly
by
the Acquirer are, except in connection with the Acquirer's existing
banking arrangements, owned free and clear of all material liens,
claims
or encumbrances, and there are no outstanding options, rights,
entitlements, understandings or commitments (contingent or otherwise)
regarding the right to acquire any shares of capital stock or other
ownership interests in any of its Subsidiaries. The Acquirer has
no
Subsidiaries other than as set forth in the Disclosure
Letter.
|
|
(b)
|
Capitalization
As
of the date hereof, the authorized share capital of Acquirer consists
of
250,000,000 shares of common stock, par value U.S. $0.001 per share,
of
which 240,000,000 are Acquirer Shares and 10,000,000 are shares
of
preferred stock. As of May 31, 2006, there are 115,943,166 Acquirer
Shares
and no preferred shares issued and outstanding and, up to a maximum
of
23,943,138 Acquirer Shares are reserved for issuance pursuant to
stock
option plans or upon exchange or conversion of outstanding Acquirer
debt
securities or warrants. Except as described in the immediately
preceding
sentences or in the Disclosure Letter, there are no other issued
or
outstanding securities of Acquirer or (other than those owned by
Acquirer)
its Subsidiaries and, without limitation, there are no options,
warrants,
conversion privileges or other rights, agreements, arrangements
or
commitments obligating Acquirer or any of its Subsidiaries to issue
or
sell any shares of any capital stock of Acquirer or any of its
Subsidiaries or securities or obligations of any kind convertible
into or
exchangeable for any shares of capital stock of Acquirer or any
of its
Subsidiaries, 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 Acquirer
or
any of its Subsidiaries.
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-
44 -
|
(c)
|
Authority
Acquirer
has the requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and to complete
the
transactions contemplated hereby. The execution and delivery of
this
Agreement by the Acquirer and the consummation by the Acquirer
of the
transactions contemplated by this Agreement and the Reorganization
have
been duly authorized by the board of directors of the Acquirer
and no
other corporate proceedings on the part of Acquirer are necessary
to
authorize this Agreement or the transactions contemplated hereby
and by
the Reorganization. There is no agreement in force or effect to
which the
Acquirer is a party and, to the knowledge of the Acquirer, which
in any
manner affects or will affect the voting or control of any of the
securities of the Acquirer. This Agreement has been duly executed
and
delivered by Acquirer and constitutes a valid and binding obligation
of
Acquirer, enforceable against Acquirer in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and other laws relating to or affecting creditors' rights
generally and to general principles of equity. The execution and
delivery
by Acquirer of this Agreement and performance by it of its obligations
hereunder and the completion of the Reorganization and the transactions
contemplated thereby, will
not:
|
|
(i)
|
result
in a violation or breach of, require any consent to be obtained under
or
give rise to any termination rights under any provision
of:
|
|
(A)
|
its
or any of its Subsidiaries' 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
Subsidiary;
|
|
(B)
|
any
law, regulation, order, judgment or decree;
or
|
|
(C)
|
any
Acquirer Material Contract, agreement, license, franchise or permit
to
which the Acquirer or any Subsidiary is bound or is subject or is
the
beneficiary;
|
|
(ii)
|
give
rise to any right of termination or acceleration of indebtedness,
or cause
any indebtedness to come due before its stated maturity or cause
any
available credit to cease to be available;
|
|
(iii)
|
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
Acquirer or any Subsidiary to carry on the business of Acquirer or
any
Subsidiary as and where it is now being carried on or as and where
it is
currently intended to be carried on in the future;
or
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-
45 -
|
(iv)
|
result
(alone or together with other adverse changes) in a Material Adverse
Change.
|
|
(d)
|
Impediments
Other
than in connection with or in compliance with the provisions of
Securities
Laws (i) there are no legal restrictions to the consummation by
Acquirer of the transactions contemplated by this Agreement or
the
performance by each of Acquirer of its obligations hereunder and
(ii) no filing or registration by Acquirer with, or authorization,
consent or approval of, any domestic or foreign public body or
authority
is necessary in connection with the consummation of the Reorganization,
except for the filings, registrations and applications expressly
contemplated by this Agreement and such other filings or registrations
which, if not made, or such authorizations, consents or approvals,
which,
if not received, would not have a Material Adverse Effect in respect
of
Acquirer.
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|
(e)
|
Public
Record
As
of their respective dates, the documents and materials comprising
the
Public Record of Acquirer (including all exhibits and schedules
thereto
and documents incorporated by reference therein) did not contain
any
untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements
therein,
in light of the circumstances under which they were made, not misleading,
and complied in all material respects with all applicable legal
and stock
exchange requirements and the Public Record is complete and up-to-date
in
all material respects.
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|
(f)
|
Books
and Records
All
financial transactions of Acquirer and its Subsidiaries have been
recorded
in the financial books and records of Acquirer and each Subsidiary,
as
applicable, in accordance with good business practice, and such
financial
books and records accurately reflect the basis for the financial
condition
and the revenues, expenses and results of operations of Acquirer
and its
Subsidiaries shown in the audited financial statements of Acquirer
for the
unaudited interim financial statements of Acquirer for the nine-month
period ended January 31, 2006 and the audited financial statements
for the
year ended April 30, 2005 (collectively, the "Acquirer
Financial Statements").
Acquirer and its Subsidiaries have not entered into and are not
parties to
any material financial transactions which are not reflected in
such
financial statements. No information, records or systems pertaining
to the
operation or administration of the business of the Acquirer are
in the
possession of, recorded, stored, maintained by or otherwise dependent
upon
any Person other than the Acquirer, other than corporate minute
books held
by counsel.
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-
46 -
|
(g)
|
Absence
of Changes
Since
January 31, 2006 and except as has been disclosed in the Disclosure
Letter: (i) Acquirer and its Subsidiaries have conducted their
respective businesses only in the ordinary course, (ii) no liability
or obligation of any nature (whether absolute, accrued, contingent
or
otherwise) material to Acquirer (on a consolidated basis) has been
incurred, and (iii) there has not been any (alone or together with
other adverse changes) Material Adverse
Change.
|
|
(h)
|
Employment
Agreements and Benefit Plans
Except
as set forth in the Disclosure Letter, the Acquirer 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
or,
without limitation, any employee obligation, with, any Person;
all benefit
plans covering active, former or retired employees, officers or
directors
of the Acquirer is listed in the Disclosure Letter; the Acquirer
has made
available to Corporation true and complete copies of all of the
respective
terms thereof and: each such plan has been maintained and administered
in
material compliance with its terms and is, to the extent required
by
applicable law or contract, fully funded without any deficit or
unfunded
actuarial liability or adequate provision therefor having been
made; all
such plans are in compliance with applicable laws, rules, regulations
and
policies (including those as to registration or other qualification);
to
the knowledge of the Acquirer there are no pending, anticipated
or
threatened claims against or involving any of the plans; and all
contributions, reserves or premium payments required or provided
for have
been made.
|
|
(i)
|
Disclosure
To
the knowledge of the Acquirer, there is no
information regarding any event, circumstance or action taken or
failed to
be taken which may reasonably be expected to result in (alone or
together
with other adverse changes) a Material Adverse
Change.
|
|
(j)
|
Material
Contracts
The
Acquirer has provided the Corporation with access to true and complete
copies of all Acquirer Material Contracts and all Acquirer Material
Contracts are listed in the Disclosure Letter. Except as disclosed
in the
Disclosure Letter, such agreements do not contain any "change of
control"
provisions which would be triggered or affected by the Reorganization.
Each of the Acquirer and its Subsidiaries has performed in all
material
respects the obligations required to be performed by it and is
entitled to
all benefits under the Acquirer Material Contracts. None of the
Acquirer
or its Subsidiaries has violated or breached, in any material respect,
any
of the terms or conditions of the Acquirer Material Contracts and
there
exists no default or event of default or event, occurrence, condition
or
act which, with the giving of notice, the lapse of time or the
happening
of any other event or condition, would become a default or event
of
default by the Acquirer or any of its Subsidiaries under any of
the
Acquirer Material Contracts. Except as disclosed in the Disclosure
Letter,
none of the Acquirer or the Subsidiaries is a party to or bound
by any
agreement containing any standstill, restrictive covenant or similar
provision that would restrict or limit its right to acquire or
hold any
asset, carry on any business or activity, solicit business from
any Person
or in any geographical area, or otherwise to conduct its business
as it
may determine.
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- 47
-
|
(k)
|
Acquirer
Financial Statements
The
Acquirer Financial Statements were prepared in accordance with
generally
accepted accounting principles in the United States consistently
applied,
and fairly present the consolidated financial condition of Acquirer
at the
respective dates indicated and the results of operations of Acquirer
(on a
consolidated basis) for the periods covered. Except (a) as disclosed
or
reflected in the Acquirer Financial Statements and (b) liabilities
and
obligations (i) incurred in the ordinary course of business or
(ii) pursuant to the terms of this Agreement, neither Acquirer nor
any of its Subsidiaries has incurred any liabilities of any nature,
whether accrued, contingent or otherwise (or which would be required
by
generally accepted accounting principles applicable in the United
States
to be reflected on a consolidated balance sheet of Acquirer) that
have
constituted or would be reasonably likely constitute (alone or
together
with other adverse changes) a Material Adverse Change. Without
limiting
the generality of the foregoing provisions of this Section and
except as
set forth in the Disclosure Letter, the Acquirer has not committed
to make
any capital expenditures, nor have any capital expenditures been
authorized by Acquirer.
|
|
(l)
|
Acquirer
Employee Obligations, etc.
The
Acquirer Employee Obligations (all of which are listed in the Disclosure
Letter) do not exceed the amounts set forth in the Disclosure Letter
in
respect of each of the persons listed therein in respect of this
subsection nor exceed in aggregate
$100,000.
|
|
(m)
|
Compliance
with Law
Each
of Acquirer and its Subsidiaries has
complied with and is in compliance with all laws and regulations
applicable to the operation of its business, except where such non
compliance, considered individually or in the aggregate, would not
constitute (alone or together with other adverse changes) a Material
Adverse Change or have a Material Adverse Effect in respect of the
Acquirer and would not materially affect the consummation of the
transactions contemplated hereby or the ability of Acquirer to perform
its
obligations hereunder.
|
- 48
-
|
(n)
|
Litigation,
etc.
Except
as set forth in the Disclosure Letter,
there is no claim, action, proceeding or investigation pending or,
to the
knowledge of the Acquirer threatened against or relating to the Acquirer
or any of its Subsidiaries or affecting any of their properties or
assets
before any court or governmental or regulatory authority or body,
nor is
the Acquirer aware of any basis for any such claim, action, proceeding
or
investigation. Neither the Acquirer nor any of its Subsidiaries is
subject
to any outstanding order, writ, injunction or decree that has had
or is
reasonably likely to have a Material Adverse Effect in respect of
the
Acquirer.
|
|
(o)
|
Information
Supplied
None
of the information supplied or to be
supplied by Acquirer for inclusion or incorporation by reference
in the
Proxy Circular will, at the time the Proxy Circular is mailed to
the
Shareholders and at the time of the Shareholder Meeting, as may be
adjourned from time to time, contain any untrue statement which,
at the
time and in light of the circumstances under which it is made, is
false or
misleading with respect to any material fact or omit to state any
material
fact required to be stated therein or necessary in order to make
the
statements therein not false or misleading or necessary to correct
any
statement in any earlier communication with respect to the solicitation
of
a proxy for the same meeting or subject matter which has become false
or
misleading.
|
|
(p)
|
Environmental
|
|
(i)
|
The
operation of the business of the Acquirer, the property and assets
owned
or used by the Acquirer and the use, maintenance and operation thereof
have been and are in compliance with all Environmental Laws (except
where
non-compliance would not have a Material Adverse Effect in respect
of the
Acquirer). The Acquirer has complied with all reporting and monitoring
requirements under all Environmental Laws (except where non compliance
would not have a Material Adverse Effect in respect of the Acquirer).
The
Acquirer has not received any notice of any non-compliance with any
Environmental Laws or Environmental Permits, and the Acquirer has
not been
convicted of an offence for non compliance with any Environmental
Laws or
Environmental Permits or been fined or otherwise sentenced or settled
such
prosecution short of conviction, (except where such non-compliance
would
not have a Material Adverse Effect in respect of the Acquirer). There
is
no civil, criminal or administrative action, suit, demand, claim,
hearing,
notice of violation, investigation, proceeding, notice or demand
letter
existing or pending, or to the best knowledge of the Acquirer, threatened,
relating to the property or assets owned or used by the Acquirer,
relating
in any way to the Environmental Laws or Environmental
Permits.
|
- 49
-
|
(ii)
|
The
Acquirer has obtained all Environmental Permits necessary to conduct
its
business and to own, use and operate its properties and assets (except
where the failure to obtain any such permit would not have a Material
Adverse Effect in respect of the Acquirer), all such Environmental
Permits
are in effect, no appeal and no other action is pending to revoke
any such
Environmental Permits (except where revocation of any such Environmental
Permit would not have a Material Adverse Effect in respect of the
Acquirer) and the operation of the business of the Acquirer, the
property
and assets owned by the Acquirer and the use, maintenance and operation
thereof have been and are in compliance with all Environmental Permits
(except where such non compliance would not have a Material Adverse
Effect
in respect of the Acquirer). To the extent required by applicable
Environmental Laws, the Acquirer has filed all applications necessary
to
renew or obtain any necessary Environmental Permits in a timely fashion
so
as to allow it to continue to operate its business in compliance
with
applicable Environmental Laws, and the Acquirer does not expect such
new
or renewed Environmental Permits to include any terms or conditions
that
will have a Material Adverse Effect in respect of the
Acquirer.
|
|
(iii)
|
The
Acquirer has, at all times, used, generated, treated, stored, transported,
disposed of or otherwise handled its Hazardous Substances in compliance
with all Environmental Laws and Environmental Permits (except where
such
non-compliance would not have a Material Adverse Effect in respect
of the
Acquirer).
|
|
(iv)
|
The
Acquirer is not, and, to the knowledge of the Acquirer, there is
no
reasonable basis upon which the Acquirer could become, responsible
for any
material clean up or corrective action under any Environmental Laws
or
Environmental Permits. All audits, assessments and studies with respect
to
environmental matters relating to the Acquirer have been referenced
in the
Disclosure Letter.
|
|
(v)
|
There
are no past or present (or, to the best of the Acquirer's knowledge,
future) events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent compliance
or continued compliance with the Environmental Laws as in effect
on the
date hereof or which may give rise to any legal liability under any
Environmental Laws, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, notice of violation, study or
investigation, based on or related to the manufacture, generation,
processing, distribution, use, treatment, storage, disposal, transport
or
handling, or the Release or threatened Release into the indoor or
outdoor
environment by the Acquirer of any Hazardous Substances (except,
in any
event, where it would not have a Material Adverse Effect in respect
of the
Acquirer).
|
- 50
-
|
(vi)
|
Prior
to the Effective Time, the Acquirer shall allow the Corporation to
conduct
at its expense such audits, assessments and studies deemed necessary
by
the Acquirer to satisfy itself of the status of the environmental
matters
and accuracy of the representations and warranties contained in this
Agreement.
|
|
(vii)
|
All
references to the Acquirer in this paragraph (p) are deemed to include
all
Subsidiaries of the Acquirer.
|
|
(q)
|
Operations
Any
and all operations of the Acquirer and its
Subsidiaries, and to the best of the Acquirer's knowledge, any and
all
operations by third parties, on or in respect of the assets and properties
of the Acquirer and its Subsidiaries, have been conducted in accordance
with good oil and gas industry and mining industry practices where
the
failure to so operate would have a Material Adverse Effect on the
Acquirer.
|
|
(r)
|
Patent,
Trademark and Related Matters
All
of the patents, registered trademarks and
service marks, trade names and licenses owned or used by the Acquirer
and
its Subsidiaries are in good standing, valid and adequate to permit
the
Acquirer and its Subsidiaries to conduct their businesses as presently
conducted (except, in any event, where it would not have a Material
Adverse Effect in respect of the Acquirer). To the knowledge of the
Acquirer, the Acquirer and its Subsidiaries are not infringing or
are
alleged to be infringing on the rights of any Person with respect
to any
patent, trademark, service ▇▇▇▇, trade name, copyright (or any application
or registration in respect thereof), licence, discovery, improvement,
process, formula, know-how, data, plan or specification where the
infringement or alleged infringement could reasonably be expected
to have
a Material Adverse Effect.
|
|
(s)
|
Insurance
Policies
of insurance in force as of the date
hereof naming the Acquirer as an insured adequately cover all risks
reasonably and prudently foreseeable in the operation and conduct
of the
business of the Acquirer and its Subsidiaries as would be customary
in
respect of the businesses carried on by the Acquirer and its Subsidiaries
and all such policies of insurance are as listed in the Disclosure
Letter.
All such policies of insurance shall remain in force and effect and
shall
not be cancelled or otherwise terminated as a result of the transactions
contemplated hereby. There are no outstanding claims under any such
policies of insurance, except as set forth in the Disclosure
Letter.
|
|
(t)
|
Tax
Matters
|
|
(i)
|
Returns
Filed and Taxes Paid.
All Acquirer Returns required to be filed prior to the date hereof
by or
on behalf of the Acquirer or any Subsidiaries have been duly filed
on a
timely basis and such Acquirer Returns are true, complete and correct
in
all material respects. All taxes shown to be payable on the Acquirer
Returns or on subsequent assessments or reassessments with respect
thereto
have been paid in full or objected to on a timely basis, and no other
Acquirer Taxes are payable by the Acquirer or any of its Subsidiaries
with
respect to items or periods covered by such Acquirer
Returns.
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(ii)
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Tax
Reserves.
The Acquirer has paid or provided adequate accruals in its financial
statements for Acquirer Taxes, including income taxes and related
future
taxes, in conformity with generally accepted accounting principles
applicable in the United States.
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(iii)
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Returns
Furnished.
For all periods from incorporation of the Acquirer until April 30,
2005,
the Corporation has been provided access by the Acquirer to true
and
complete copies of all federal and state income tax returns for the
Acquirer or any of its
Subsidiaries.
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(iv)
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Tax
Deficiencies; Audits; Statutes of Limitations.
Except as disclosed in the Disclosure Letter: (i) no deficiencies
exist or have been asserted with respect to Acquirer Taxes of the
Acquirer
or any of its Subsidiaries; (ii) neither the Acquirer nor any of its
Subsidiaries is a party to any action or proceeding for assessment
or
collection of Acquirer Taxes, nor has such event been asserted or
threatened against the Acquirer or any of its Subsidiaries or any
of their
respective assets which, if successful, would constitute (alone or
together with other adverse changes) a Material Adverse Change;
(iii) no waiver or extension of any statute of limitations is in
effect with respect to Acquirer Taxes or Acquirer Returns of the
Acquirer
or any Subsidiary; and (iv) the Acquirer Returns of the Acquirer and
any Subsidiary have never been audited by a government or taxing
authority, nor is any such audit in process, pending or
threatened.
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(u)
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Pension
and Termination Benefits
The
Acquirer has provided adequate accruals in
its financial statements (or such amounts are fully funded) for all
pension or other employee benefit obligations of the Acquirer arising
under or relating to each of the pension or retirement income plans
or
other employee benefit plans or agreements or policies maintained
by or
binding on the Acquirer or any of its Subsidiaries as well as for
any
other payment required to be made by the Acquirer in connection with
the
termination of employment or retirement of any employee of the Acquirer
or
any of its Subsidiaries.
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(v)
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U.S.
Registrant Status
The
Acquirer has filed all reports required to
be filed with the Securities and Exchange Commission pursuant to
Section
13 of the United States Securities Exchange Act of 1934, as amended,
and
the Acquirer Shares are quoted on the OTC Bulletin Board.
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(w)
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Securities
Law Exemption
It
will not be necessary in connection with the
issuance and delivery of the Acquirer Shares to holders of the
Exchangeable Shares upon retraction, redemption or exchange of the
Exchangeable Shares in the manner contemplated by the Exchangeable
Share
Provisions to register such issuance and delivery of Acquirer Shares
under
the U.S. Securities Act or any applicable state securities
laws.
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(x)
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Corrupt
Practices
There
have been no actions taken by the
Acquirer, any of its Subsidiaries or any of their affiliates which
are in
violation of the United States Foreign Corrupt Practices Act or the
Corruption
of Foreign Public Officials Act
(Canada).
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8.2 Investigation
Any
investigation by the Corporation and its advisors shall not mitigate, diminish
or affect the representations and warranties of Acquirer provided pursuant
to
this Agreement. Where the provisions of Section 8.1 refer to disclosure in
writing, such disclosure shall be made expressly in response to the applicable
provision and shall be signed by a senior officer of Acquirer.
ARTICLE
9
CONDITIONS
9.1 Conditions
Precedent to Obligations of Each Party
The
obligations of the parties hereto to consummate and effect the transactions
contemplated hereunder shall be subject to the satisfaction or waiver by both
parties on or before the Closing Date of the following conditions:
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(a)
|
the
Reorganization and the other transactions contemplated hereby shall
have
been approved and adopted by the Shareholders, in accordance with
applicable law and the Corporation's articles and
bylaws;
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(b)
|
the
Voting and Exchange Trust Agreement and Support Agreement shall have
been
executed and delivered by each of the parties
thereto;
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(c)
|
all
Regulatory Approvals shall have been obtained on reasonably satisfactory
terms and conditions and shall be in full force and effect and all
applicable statutory or regulatory waiting periods shall have expired
or
been terminated and no objection or opposition shall have been filed,
initiated or made during any applicable statutory or regulatory waiting
period which would adversely affect Acquirer's ability to consummate
the
Reorganization or the transactions contemplated hereby or which is
or
would be materially adverse to the business of the Corporation or
to the
value of the Shares to Acquirer;
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(d)
|
no
Shareholders shall have exercised their dissent rights under
Section 191 of the Act;
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(e)
|
there
shall not exist any prohibition at law against the consummation of
the
Reorganization or the transactions contemplated hereby;
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(f)
|
the
board of directors of the Acquirer shall be comprised of T. ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇
▇▇▇▇▇▇▇. The officers of the Acquirer shall be T. ▇▇▇▇▇▇ ▇▇▇▇▇▇,
Executive
Chairman; ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and Chief Executive Officer;
▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer; and ▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice-President,
Exploration;
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(g)
|
the
Acquirer shall have entered into employment agreements in replacement
of
the existing employment agreements with each of T. ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ on terms and
conditions consistent with customary industry practices and standards;
and
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(h)
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the
fairness opinion described in Section 2.4(b) shall have been delivered
to
the Board of Directors.
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9.2 Acquirer
Conditions
The
obligations of Acquirer to consummate and effect the transactions contemplated
hereunder shall be subject to the following conditions:
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(a)
|
the
Corporation shall have performed or complied with, in all material
respects, each of its obligations, covenants and agreements hereunder
to
be performed and complied with by it on or before the Effective Time
and a
certificate of the Chief Executive Officer of Corporation, dated
the
Closing Date, to that effect shall have been delivered to the Acquirer,
such certificate to be in form and substance satisfactory to the
Acquirer,
acting reasonably;
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(b)
|
each
of the representations and warranties of the Corporation in this
Agreement
(which for purposes of this clause (b) shall be read as though none
of
them contained any Material Adverse Effect or other materiality
qualification), shall be true and correct in all respects on the
date of
this Agreement and as of the Closing Date as if made on and as of
such
date (except for such representations and warranties made as of a
specified date, which shall be true and correct as of such specified
date)
except where the failure of such representations and warranties in
the
aggregate to be true and correct in all respects is not and would
not be
reasonably expected to result in a Material Adverse Effect and a
certificate of the Chief Executive Officer of Corporation, dated
the
Closing Date, to that effect shall have been delivered to the Acquirer,
such certificate to be in form and substance satisfactory to the
Acquirer,
acting reasonably;
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(c)
|
no
act, action, suit or proceeding shall have been taken before or by
any
Canadian or United States federal, provincial, territorial, state
or
foreign court or other tribunal or governmental agency or other regulatory
or administrative agency or commission or by any elected or appointed
public official or other Person in Canada, the United States or elsewhere,
whether or not having the force of law, and no law, regulation or
policy
have been proposed, enacted, promulgated or applied, whether or not
having
the force of law, which could reasonably be expected to have the
effect
of:
|
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(i)
|
making
illegal, or otherwise directly or indirectly restraining or prohibiting
the Reorganization, the acceptance for payment of, payment for, or
ownership, directly or indirectly, of some or all of the Shares by
Acquirer, or the consummation of any of the transactions contemplated
by
the Reorganization;
|
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(ii)
|
prohibiting
or materially limiting the ownership or operation by the Corporation
or by
Acquirer, directly or indirectly, of all or any material portion
of the
business or assets of the Corporation, or Acquirer, directly or
indirectly, or compelling Acquirer, directly or indirectly, to dispose
of
or hold separate all or any material portion of the business or assets
of
the Corporation or Acquirer, directly or indirectly, as a result
of the
transactions contemplated by the
Reorganization;
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(iii)
|
imposing
or confirming limitations on the ability of Acquirer, directly or
indirectly, effectively to acquire or hold or to exercise full rights
of
ownership of the Shares, including without limitation the right to
vote
any Shares acquired or owned by Acquirer, directly or indirectly,
on all
matters properly presented to the Shareholders of the Corporation,
materially adversely affecting the business, financial condition
or
results of operations of the Corporation or the value of the Shares
to
Acquirer; or
|
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(iv)
|
requiring
divestiture by Acquirer, directly or indirectly, of any Shares or
any
Subsidiary;
|
|
(d)
|
the
Principal Shareholders shall have entered into, and continue to be
bound
by and not to have breached, Transaction Support agreements in the
form
attached as Schedule C hereto. In addition to the Principal Shareholders,
all officers and directors of the Corporation shall have entered
into, and
continue to be bound by and not to have breached, Transaction Support
agreements in the form attached as Schedule C hereto, except that
such
Transaction Support Agreements shall not include the Option to Purchase
in
Section 2 thereof;
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(e)
|
▇▇▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ shall have entered into escrow agreements,
in
form and substance satisfactory to the Acquirer, acting reasonably
in
consultation with its financial advisors, providing for restrictions
on
volume and timing of resale of Acquirer Shares and Exchangeable Shares
held by them;
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55 -
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(f)
|
the
Corporation shall have delivered to the Acquirer legal opinions of
Canadian and United States counsel to the Corporation addressing
the
matters set out in the Disclosure Letter;
and
|
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(g)
|
the
Acquirer shall be satisfied, acting reasonably, that, after giving
effect
to the Reorganization and other than as set forth in the Disclosure
Letter, none of Acquirer or its then Subsidiaries will be subject
to any
limitations under the OS Permits;
|
which
conditions are for the exclusive benefit of Acquirer and may be waived by
Acquirer in whole or in part at any time and from time to time, before the
Effective Time.
9.3 Corporation
Conditions
The
obligations of the Corporation to consummate and effect the transactions
contemplated hereunder shall be subject to the following
conditions:
|
(a)
|
the
Acquirer shall have performed or complied with, in all material respects,
each of its obligations, covenants and agreements hereunder to be
performed and complied with by it on or before the Effective Time
and a
certificate of the Chief Executive Officer of Acquirer, dated the
Closing
Date, to that effect shall have been delivered to the Corporation,
such
certificate to be in form and substance satisfactory to the Corporation,
acting reasonably;
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(b)
|
each
of the representations and warranties of Acquirer in this Agreement
(which
for purposes of this clause (b) shall be read as though none of them
contained any material adverse effect or other materiality qualification,
and with respect to the Acquirer Financial Statements, shall be deemed
to
refer to the Acquirer's audited financial statements for the year
ended
April 30, 2006), shall be true and correct in all respects on the
date of
this Agreement and as of the Closing Date as if made on and as of
such
date (except for such representations and warranties made as of a
specified date, which shall be true and correct as of such specified
date)
except where the failure of such representations and warranties in
the
aggregate to be true and correct in all respects is not and would
not be
reasonably expected to result in a Material Adverse Effect and a
certificate of the Chief Executive Officer of Acquirer, dated the
Closing
Date, to that effect shall have been delivered to the Corporation,
such
certificate to be in form and substance satisfactory to the Corporation,
acting reasonably;
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(c)
|
no
act, action, suit or proceeding shall have been taken before or by
any
Canadian or United States federal, provincial, state or foreign court
or
other tribunal or governmental agency or other regulatory or
administrative agency or commission or by any elected or appointed
public
official or other Person in Canada, the United States or elsewhere,
whether or not having the force of law, and no law, regulation or
policy
have been proposed, enacted, promulgated or applied, whether or not
having
the force of law, which could reasonably be expected to have the
effect of
making illegal, or otherwise directly or indirectly restraining or
prohibiting the Reorganization, the acceptance for payment of, payment
for, or ownership, directly or indirectly, of some or all of the
Shares by
Acquirer, or the consummation of any of the transactions contemplated
by
the Reorganization;
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56 -
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(d)
|
the
Acquirer shall be a reporting issuer in a jurisdiction of Canada
for the
purposes of National Instrument 45-102;
|
|
(e)
|
the
Acquirer shall have delivered to the Corporation legal opinions of
Canadian and United States counsel to the Acquirer addressing matters
set
forth in the Disclosure Letter;
|
|
(f)
|
the
Corporation shall not have identified to the Acquirer through the
Corporation's due diligence review of the Acquirer any matters which,
in
the aggregate, do, or would be reasonably expected to, result in
a
Material Adverse Effect on the Acquirer immediately following completion
of the transactions contemplated by this Agreement; and
|
|
(g)
|
the
Corporation shall be satisfied, acting reasonably, that listing of
the
Acquirer Shares on the American Stock Exchange, the Toronto Stock
Exchange
or another senior stock exchange in the United States is pending
and is
reasonably expected to occur promptly following the Effective
Time;
|
which
conditions are for the exclusive benefit of the Corporation and may be waived
by
the Corporation in whole or in part at any time and from time to time, before
the Effective Time.
ARTICLE
10
TERMINATION
10.1 Termination
This
Agreement may be terminated at any time prior to the Effective Time
(notwithstanding any approval of the Reorganization Resolution):
|
(a)
|
by
mutual written consent of Acquirer and the
Corporation;
|
|
(b)
|
by
either Acquirer or the Corporation if the Shareholders do not approve
the
Reorganization Resolution at the Shareholder
Meeting;
|
|
(c)
|
by
either the Corporation or Acquirer, if the Closing Date does not
occur on
or before October 31, 2006 (or such other date that the Acquirer
and the
Corporation may agree in writing ) provided that the failure is not
due to
the party seeking to terminate this Agreement to perform the obligations
required to be performed by it under this
Agreement;
|
|
(d)
|
by
Acquirer, if the Corporation has breached any of its representations,
warranties, agreements or obligations herein which breach would result
in
the failure to satisfy one or more conditions set forth in
Section 9.2(a) or (b); or
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(e)
|
by
the Corporation, if Acquirer has breached any of its representations,
warranties, agreements or obligations herein which breach would result
in
the failure to satisfy one or more conditions set forth in
Section 9.3(a) or (b).
|
ARTICLE
11
MISCELLANEOUS
11.1 Amendment
or Waiver
This
Agreement, may be amended, modified or superseded, and any of the terms,
covenants, representations, warranties or conditions hereof may be waived,
but
only by written instrument executed by Acquirer and the Corporation; provided,
however, that either Acquirer or the Corporation may in its discretion waive
a
condition herein which is solely for its benefit without the consent of the
other. No waiver of any nature, in any one or more instances, shall be deemed
or
construed as a further or continued waiver of any condition or any breach of
any
other term, representation or warranty in this Agreement.
11.2 Entire
Agreement
This
Agreement and the other documents referred to herein constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, arrangement or understandings with respect
thereto.
11.3 Headings
The
division of the Agreement into Articles, Sections and other partitions and
the insertion of headings are for convenience of reference only and shall not
control or affect the meaning or construction of any provisions of this
Agreement.
11.4 Notices
All
notices or other communication which are required or permitted hereunder shall
be communicated confidentially and in writing and shall be sufficient if
delivered personally, or sent by confidential telecopier addressed as
follows:
To Acquirer:
CanWest Petroleum Corporation
1005, ▇▇▇ - ▇▇▇▇
▇▇▇▇▇▇
▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: T.
▇▇▇▇▇▇
▇▇▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
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With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ llp
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇
▇▇▇▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
To the Corporation:
Oilsands Quest Inc.
▇▇▇▇, ▇▇▇ - ▇▇▇▇
▇▇▇▇▇▇
▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇, ▇▇▇ - ▇▇▇
▇▇▇▇▇▇,
▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇
Helper
Telecopier: (▇▇▇)
▇▇▇-▇▇▇▇
11.5 Counterparts
and Facsimiles
This
Agreement may be executed in any number of counterparts and each such
counterpart shall be deemed to be an original instrument but all such
counterparts together shall constitute but one Agreement. The parties hereto
shall be entitled to rely upon delivery of an executed facsimile copy of the
Agreement, and such facsimile copy shall be legally effective to create a valid
and binding agreement between the parties hereto.
11.6 Expenses
Each
party will pay its own expenses. The Corporation represents and warrants that,
except for fees payable to CIBC World Markets Inc. pursuant to the engagement
letter dated April 28, 2006 and to Genuity Capital Markets pursuant to the
engagement letter dated June 7, 2006, copies of which has been provided to
Acquirer, 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 Reorganization. The Corporation has provided
to
Acquirer a correct and complete copy of all agreements between the Corporation
and its financial advisors as are in existence at the date hereof. The
Corporation covenants not to amend the terms of any such agreements relating
to
the payment of fees and expenses without the prior written approval of Acquirer.
The Acquirer represents and warrants that, except for fees payable to TD
Securities Inc. pursuant to the engagement letter dated March 22, 2006, a copy
of which has been provided to Corporation, 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 Reorganization.
The Acquirer has provided to the Corporation a correct and complete copy of
all
agreements between the Acquirer and its financial advisors as are in existence
at the date hereof. The Acquirer covenants not to amend the terms of any such
agreements relating to the payment of fees and expenses without the prior
written approval of the Corporation.
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11.7 Assignment
Acquirer
may assign all or any part of its rights or obligations under this Agreement
to
a direct or indirect wholly-owned Subsidiary of Acquirer or any other party
related to Acquirer, but, if such assignment takes place, Acquirer shall
continue to be liable to the Corporation for any default in performance by
the
assignee. This Agreement shall not otherwise be assignable by either party
without the prior written consent of the other party.
11.8 Severability
If
any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, void or unenforceable, the remainder
of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated and the parties shall negotiate in good faith to modify this
Agreement to preserve each party's anticipated benefits under this
Agreement.
11.9 Choice
of Law
This
Agreement shall be governed by, construed and interpreted in accordance with
the
laws of the Province of Alberta.
11.10 Attornment
The
parties hereby irrevocably and unconditionally consent to and submit to the
courts of the Province of Alberta for any actions, suits or proceedings arising
out of or relating to this Agreement or the matters contemplated hereby (and
agree not to commence any action, suit or proceeding relating thereto except
in
such courts) and further agree that service of any process, summons, notice
or
document by single registered mail to the addresses of the parties set forth
in
this Agreement shall be effective service of process for any action, suit or
proceeding brought against either party in such court. The parties hereby
irrevocably and unconditionally waive any objection to the laying of venue
of
any action, suit or proceeding arising out of this Agreement or the matters
contemplated hereby in the courts of the Province of Alberta and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such action, suit or proceeding so brought has been brought
in an inconvenient forum.
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11.11 Remedies
The
parties hereto agree that irreparable damage would occur in the event that
any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to remedy or prevent
non-compliance with or breaches of the terms of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the Province of
Alberta having jurisdiction; provided that such remedies shall be in addition
to, and not in substitution for, any other remedy to which the parties may
be
entitled at law or in equity.
11.12 Survival
of Representations and Warranties
The
representations and warranties of the Corporation and Acquirer contained in
this
Agreement shall not survive the completion of the Reorganization and shall
expire and be terminated at the earlier of the Effective Time and (except in
respect of a termination pursuant to Sections 10.1(d) or (e) in
which
respect the covenants, representations and warranties of the Corporation or
Acquirer, respectively, shall survive the termination of this Agreement) the
date on which this Agreement is terminated in accordance with its
terms.
11.13 Time
of Essence
Time
shall be of the essence in this Agreement.
IN
WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
on
their behalf by their officers thereunto duly authorized as of the date first
written above.
| CANWEST PETROLEUM CORPORATION | ||
| |
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| By: | /s/ T. ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
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| OILSANDS QUEST INC. | ||
| |
|
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| By: | /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
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