EXHIBIT 7.3
-----------
-------------------------------------------------------------------------------
COMBINATION AGREEMENT
between
FORDING INC.
- and -
TECK COMINCO LIMITED
- and -
WESTSHORE TERMINALS INCOME FUND
- and -
ONTARIO TEACHERS' PENSION PLAN BOARD
- and -
SHERRITT INTERNATIONAL CORPORATION
January 12, 2003
-------------------------------------------------------------------------------
OSLER, XXXXXX & HARCOURT LLP
TABLE OF CONTENTS
(continued)
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION...............................3
1.1 Definitions.......................................................3
1.2 Certain Rules of Interpretation..................................13
1.3 Entire Agreement.................................................14
1.4 Schedules........................................................15
1.5 Accounting Matters...............................................15
1.6 Knowledge........................................................15
ARTICLE 2
THE COMBINATION...........................................................16
2.1 The Arrangement..................................................16
2.2 Funding of the Cash Option.......................................16
2.3 Agreements of the Parties with respect to the Transaction........17
2.4 Related Agreements...............................................19
2.5 Public Announcement..............................................20
2.6 Implementation Steps for Fording.................................20
2.7 Support of Transaction...........................................20
2.8 Effective Date Matters...........................................21
2.9 Preparation of Filings, etc......................................21
ARTICLE 3
REPRESENTATIONS AND WARRANTIES............................................22
3.1 Representations and Warranties of Fording - General..............22
3.2 Representations and Warranties of Fording - Prairie Operations...27
3.3 Representations and Warranties of Teck...........................30
3.4 Representations and Warranties of Westshore......................36
3.5 Representations and Warranties of OTPP...........................37
3.6 Representations and Warranties of Sherritt.......................38
3.7 Representations and Warranties of OTPP and Sherritt
Regarding Luscar Contributed Assets...........................40
3.8 Nature and Survival..............................................45
ARTICLE 4
COVENANTS.................................................................45
4.1 Covenants of Fording.............................................45
4.2 Covenants of Other Parties.......................................47
4.3 Ordinary Course Covenants........................................48
4.4 Fording Covenants Regarding Non-Solicitation.....................48
4.5 Right of First Refusal...........................................50
4.6 Access to information............................................50
4.7 Completion of Transaction........................................51
ARTICLE 5
CONDITIONS................................................................51
-i-
TABLE OF CONTENTS
(continued)
5.1 Mutual Conditions Precedent......................................51
5.2 Additional Conditions Precedent to the Obligations
of Teck and Westshore.........................................53
5.3 Effect of Breach.................................................54
5.4 Additional Conditions Precedent to the Obligations
of Fording....................................................54
5.5 Effect of Breach.................................................55
5.6 Additional Conditions Precedent to the Obligations
of OTPP and Sherritt..........................................55
5.7 Effect of Breach.................................................56
5.8 Notice and Cure Provisions.......................................56
5.9 Satisfaction of Conditions.......................................57
ARTICLE 6
AMENDMENT AND TERMINATION.................................................57
6.1 Amendment........................................................57
6.2 Termination......................................................57
6.3 Break Fee........................................................59
6.4 Remedies.........................................................60
ARTICLE 7
GENERAL...................................................................60
7.1 Notices..........................................................60
7.2 Assignment.......................................................62
7.3 Co-Operation and Further Assurances..............................63
7.4 Effect on Westshore Trustee......................................63
7.5 Expenses.........................................................63
7.6 Execution and Delivery...........................................63
7.7 Transfer Tax Elections...........................................63
7.8 Assignment of Tax Pools..........................................63
SCHEDULE DESCRIPTION
-------- -----------
Schedule 2.1 Amended Plan
Schedule 2.3(a) Partnership Agreement Term Sheet
Schedule 2.3(c) Prairie Operations Term Sheet
Schedule 2.3(d) Teck Contribution Term Sheet
Schedule 2.3(e) Fording Contribution Term Sheet
-ii-
TABLE OF CONTENTS
(continued)
Schedule 2.3(n) Non-Competition Term Sheet
Schedule 2.4 Working Capital Term Sheet
Schedule 2.4 Governance Term Sheet
Schedule 2.4 Trust Indenture Term Sheet
Schedule 2.5 Form of Press Release
Schedule 4.1 Regulatory Approvals
-iii-
THIS AGREEMENT is made the 12th day of January, 2003
BETWEEN
FORDING INC.,
a corporation existing under the laws of Canada
("FORDING"),
- and -
TECK COMINCO LIMITED,
a corporation existing under the laws of Canada
("TECK"),
- and -
WESTSHORE TERMINALS INCOME FUND,
an open-ended mutual fund trust existing under the laws of
British Columbia
("WESTSHORE"),
- and -
ONTARIO TEACHERS' PENSION PLAN BOARD,
a corporation existing under the laws of Ontario
("OTPP"),
- and -
SHERITT INTERNATIONAL CORPORATION,
a corporation existing under the laws of New Brunswick
("SHERRITT").
RECITALS:
A. A meeting of Fording securityholders (the "Securityholders") is
scheduled to be held on January 22, 2003 to consider the adoption of a plan of
arrangement (the "Plan Of Arrangement") involving Teck and Westshore to
reorganize the way in which equity in the business of Fording is held by its
Securityholders through the conversion of Fording into the Fording Canadian
Coal Trust (the "Fund"), an open-ended mutual fund trust to be created under
the laws of Alberta.
X. Xxxxxxx, Teck, Westshore, OTPP and Sherritt wish to further enhance
the value to Securityholders of the conversion of Fording into an income trust
contemplated by the Plan of Arrangement through offering the combination of
certain metallurgical coal assets and operations of Teck and the Luscar/CONSOL
Joint Ventures (defined below) with the assets of Fording (other than the
Fording Prairie Operations and Fording's Industrial Minerals Operations) to be
held in a general partnership (the "Partnership") organized under the Fund,
together with the contemporaneous cash investments by Teck, Westshore and
-2-
Sherritt Coal Partnership II ("SCPII"), a partnership comprised of Sherritt and
OTPP, in the Fund and the Partnership to permit the Cash Option to be increased
to $1,050 million, all in the manner described herein (collectively, the
"Transaction").
C. Luscar Ltd. ("LUSCAR") is a wholly owned subsidiary of Luscar Energy
Partnership, a partnership comprised as to 50/50 of wholly-owned subsidiaries
of each of OTPP and Sherritt.
D. Luscar and CONSOL Energy Inc. ("CONSOL") are joint venture
participants as to 50/50 in the Cardinal River Coal Joint Venture and the Line
Creek Joint Venture (collectively, the "Luscar/CONSOL Joint Ventures").
E. The terms of the Plan of Arrangement previously announced by Fording
will be amended to enable Shareholders to elect to receive one unit (a "Unit")
of the Fund per Common Share (the "Unit Option") up to a maximum of
approximately the number of Common Shares outstanding at Closing less 30
million, being approximately 21,432,477 Units or $35.00 in cash per Common
Share (the "Cash Option"), to a maximum of $1,050 million, or a combination of
cash and Units, subject to proration as described herein.
F. Pursuant to the terms of the Amended Plan:
(i) Certain of Teck's and Teck's Affiliates' North American
metallurgical coal assets (consisting primarily of the
Elkview Mine), the Luscar/CONSOL Joint Ventures'
metallurgical coal assets, (consisting primarily of its Line
Creek Mine, Cheviot and the Luscar mines, and its interests
in the Neptune Terminal) and Fording's assets (other than its
Industrial Minerals Operations, the Prairie Operations and
any liabilities associated with the Mount Washington Mine
site) will be contributed, directly or indirectly, to the
Partnership in order to realize significant synergies.
(ii) Fording will sell and SCPII or an affiliated entity will
purchase the Prairie Operations for $225 million;
(iii) Fording and Westshore will build upon their historical
relationship by having a subsidiary of Westshore enter into a
long-term coal terminal agreement with Fording consistent
with their existing negotiations.
(iv) Teck will contribute $125 million to the Partnership to
acquire a partnership interest therein.
(v) Teck will make an investment in Units of the Fund of $150
million.
(vi) Westshore will make an investment in Units of the Fund of
$150 million.
(vii) SCPII will make an investment in Units of the Fund of $375
million.
(viii) The combination of the Teck Contributed Assets, the Luscar
Contributed Assets and the Fording Contributed Assets will
enable Fording to borrow or cause to be borrowed additional
-3-
funds in the aggregate of $336 million, which will be used to
fund, in part, the Cash Option and for other purposes.
G. It is anticipated that the Amended Plan will be considered at a
meeting of Securityholders to be held on or about February 19, 2003.
H. In the event that the Amended Plan is approved and implemented,
immediately after the Effective Time:
(i) initial ownership interests in the Partnership will be 65%
Fund (indirectly) and 35% Teck; and
(ii) ownership interests in the Fund will be approximately 45.5%
Shareholders (including approximately 6.7% owned by OTPP);
9.1% Teck; 9.1% Westshore; 6.8% Luscar; 6.8% CONSOL and 22.7%
SCPII.
I. The board of directors or trustees, as the case may be, of each of
Fording, Teck, Westshore, Sherritt and OTPP has determined to consummate the
Transaction and has agreed to cooperate in the manner set out herein with a
view to consummating the Transaction.
THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 DEFINITIONS.
In this Agreement, unless there is something in the subject matter or context
inconsistent therewith, the following terms shall have the following meanings
respectively:
"ACQUISITION PROPOSAL" means any proposal or offer with respect to any
merger, amalgamation, arrangement, business combination, liquidation,
dissolution, recapitalization, take-over bid, tender offer, purchase
of any assets representing greater than 20% of the fair market value
of the Transaction, or purchase of more than 20% of the equity (or
rights thereto) of Fording or similar transactions or series of
transactions involving Fording, excluding the arrangement contemplated
by the F/T/W Plan of Arrangement;
"AFFILIATE" and "ASSOCIATE" (regardless of case) each has the meaning
ascribed to it under the Securities Act;
"AGREEMENT" means this agreement, including all schedules, and all
amendments or restatements as permitted, and references to "Article"
or "Section" mean the specified Article or Section of this agreement;
-4-
"AMENDED ARRANGEMENT" means the arrangement under Section 192 of the
CBCA contemplated by the Amended Plan;
"AMENDED PLAN" means the Plan of Arrangement as amended to give effect
to the Transaction contemplated by this Agreement substantially in the
form attached as Schedule 2.1;
"ARRANGEMENT RESOLUTION" means the special resolution of the
Securityholders authorizing the Amended Plan to be considered and
voted upon by the Securityholders at the Fording Meeting;
"ARTICLES OF ARRANGEMENT" means the articles of arrangement of Fording
contemplated by the Amended Plan that, pursuant to the provisions of
Section 192(6) of the CBCA, must be filed with the Director after the
Final Order has been granted in order for the Amended Arrangement to
become effective;
"BOARD OF DIRECTORS" means the board of directors of Fording;
"BREAK FEE" has the meaning ascribed to it in Section 6.3(b);
"BUSINESS DAY" means a day, which is not a Saturday, Sunday or
statutory holiday in the Province of Alberta, the Province of British
Columbia or the Province of Ontario, on which the principal commercial
banks in downtown Calgary, Vancouver and Toronto are generally open
for the transaction of commercial banking business;
"CANADIAN SECURITIES REGULATORY AUTHORITIES" means the applicable
Canadian, provincial and territorial securities commissions and
regulatory authorities;
"CANADIAN TAX ACT" means the INCOME TAX ACT, R.S.C. 1985 c. 1 (5th
Supp.);
"CASH OPTION" has the meaning ascribed to it in the Recitals to this
Agreement;
"CBCA" means the CANADA BUSINESS CORPORATIONS ACT, R.S.C. 1985, c.
C-44;
"CCRA" means the Canada Customs and Revenue Agency;
"CERTIFICATE OF ARRANGEMENT" means the certificate or proof of filing
of the Articles of Arrangement to be issued by the Director pursuant
to Section 192(7) of the CBCA;
"CLOSING TIME" has the meaning ascribed to it in Section 2.8;
"COMMON SHARE" means a common share in the capital of Fording;
"CONFIDENTIALITY AGREEMENTS" means the Confidentiality Agreements
between Fording and each of Teck and Westshore dated November 29, 2002
and between Fording and each of OTPP and Sherritt dated January 10,
2003, and the Confidentiality Agreements between each of Teck and
Sherritt and between Westshore and Sherritt dated January 10, 2003:
-5-
"CONSOL" means CONSOL Energy Inc.;
"CONTRACTS" means a contract, lease, instrument, note, bond,
debenture, mortgage, agreement, arrangement or understanding to which
a Party, or any of its subsidiaries, is a party to or under which a
Party or any of its subsidiaries is bound, has unfulfilled obligations
or contingent liabilities or is owed unfulfilled obligations, whether
known or unknown, whether asserted or not;
"COURT" means the Court of Queen's Bench of Alberta;
"CP ARRANGEMENT AGREEMENT" means the arrangement agreement entered
into by CPL and certain of its subsidiaries dated as of July 30, 2001
setting forth the terms on which the parties would undertake a plan of
arrangement pursuant to which the operating subsidiaries of CPL would
be spun off into separate public companies;
"CPL" means Canadian Pacific Limited;
"CPR AGREEMENT" means the agreement between FCL and Canadian Pacific
Railway Company dated April 1, 2001;
"DIRECTOR" means the Director appointed under Section 260 of the CBCA;
"EFFECTIVE DATE" means the date shown on the Certificate of
Arrangement to be issued by the Director giving effect to the Amended
Arrangement, which date shall be determined in accordance with Section
2.8;
"EFFECTIVE TIME" means the first moment in time on the Effective Date;
"ELKVIEW MINE" means the coal mine owned by Teck and located in
southeastern British Columbia, covering a surface area of
approximately 23,000 hectares;
"ENVIRONMENTAL LAW" means any and all applicable Laws relating to the
protection of human health and safety or the environment, or relating
to hazardous or toxic substances or wastes, pollutants or
contaminants;
"EXCHANGE OPTIONS" means options to purchase Units, and any
accompanying unit appreciation rights, issued under the Exchange
Option Plan;
"EXCHANGE OPTION PLAN" means the Unit option plan of the Fund proposed
to be created as part of the Amended Arrangement pursuant to which
options to acquire Units and any accompanying unit appreciation rights
will be granted to existing Optionholders in exchange ultimately for
existing Options and any existing share appreciation rights in the
manner contemplated by the Amended Plan;
"FCL" means Fording Coal Limited/Les Charbons Fording, Limitee, a
corporation existing under the CBCA;
-6-
"FCL AMALCO" means the corporation resulting from the amalgamation of
Fording and FCL;
"F/T/W COMBINATION AGREEMENT" means the combination agreement dated
December 4, 2002 among Fording, Teck and Westshore;
"F/T/W PLAN OF ARRANGEMENT" means the plan of arrangement set forth as
Schedule "B" to the supplement dated December 8, 2002 to the
Information Circular;
"FX ACKNOWLEDGEMENTS" means the acknowledgements proposed to be
obtained by Fording from certain counterparties with whom Fording has
entered into certain foreign exchange forward contracts stating that
the consummation of the Transaction will not result in any early
termination or the occurrence of an event of default under such
contracts;
"FINAL ORDER" means the order of the Court approving the Amended
Arrangement;
"FORDING ANNUAL INFORMATION FORM" means the annual information form of
Fording, dated May 16, 2002, for the year ended December 31, 2001;
"FORDING BENEFIT PLANS" means all plans, arrangements, agreements,
programs, policies, practices or undertakings, whether oral or
written, formal or informal, funded or unfunded, registered or
unregistered to which Fording or its subsidiaries is a party to or
bound by or under which Fording or its subsidiaries have, or will
have, any liability or contingent liability, relating to: pension
plans, insurance plans (whether insured or self-insured) or
compensation plans with respect to any of its employees or former
employees (or any spouses, dependants, survivors or beneficiaries of
any such employees or former employees), directors or officers,
individuals working on contract with Fording or its subsidiaries or
other individuals providing services to it of a kind normally provided
by employees or eligible dependants of such Person other than the
Fording Prairie Benefit Plans;
"FORDING CONTRIBUTED ASSETS" means the assets of Fording other than
(i) its Industrial Minerals Operations, (ii) Fording's rights and
obligations in connection with its interests in a former mining
operation located at the Mount Washington mine site, and (iii) the
Prairie Operations. The Fording Contributed Assets are described in
the Fording Contribution Term Sheet attached as Schedule 23(e);
"FORDING DISCLOSURE LETTER" means the disclosure letter of Fording
delivered to the other Parties prior to the execution of this
Agreement;
"FORDING DISCLOSURE RECORD" has the meaning ascribed to it in Section
3.1(e);
-7-
"FORDING FINANCIAL STATEMENTS" means the audited financial statements
of Fording for the fiscal year ended December 31, 2001, consisting of
a consolidated balance sheet as at December 31, 2001, and the
consolidated statements of income and retained earnings and cash flows
for the fiscal year ended December 31, 2001, and all notes thereto and
the interim unaudited financial statements of Fording for the nine
month period ended September 30, 2002;
"FORDING MEETING" means the special meeting of Securityholders to be
held on or before February 19, 2003 and any adjournment(s) or
postponement(s) thereof made in accordance with the notice of meeting
that forms part of the Information Circular, to consider and to vote
on, among other things, the Resolutions;
"FORDING PRAIRIE BENEFIT PLANS" means all plans, arrangements,
agreements, programs, policies, practices or undertakings, whether
oral or written, formal or informal, funded or unfunded, registered or
unregistered to which Fording or its subsidiaries is a party to or
bound by or under which Fording or its subsidiaries has, or will have,
any liability or contingent liability, relating to: pension plans,
insurance plans (whether insured or self-insured) or compensation
plans with respect to any employees or former employees (or any
spouses, dependants, survivors or beneficiaries of any such employees
or former employees) employed in connection with the Prairie
Operations, directors or officers, individuals working on contract
with Fording or its subsidiaries or other individuals providing
services to it of a kind normally provided by employees or eligible
dependants of such Person, in each case, in connection with the
Prairie Operations;
"FORDING SUBSIDIARY" has the meaning ascribed to it in Section 3.1(a);
"FUND" has the meaning ascribed to it in the Recitals to this
Agreement;
"FURTHER SUPPLEMENT" means the amendment and supplement to the
Information Circular prepared in respect of the Amended Arrangement in
form and content acceptable to the Parties acting reasonably;
"GENESEE AGREEMENTS" means, collectively, the Genesee Coal Mine
Operating Agreement between the City of Edmonton and FCS, made as of
August 7, 1980, the Genesee Coal Mine Joint Venture Agreement between
the City of Edmonton and FCL made as of August 7, 1980, the Genesee
Coal Mine Dedication and Unitization Agreement between the City of
Edmonton, FCL and the City of Edmonton and FCL as joint venturers made
as of August 7, 1980, the Genesee Coal Mine Purchase and Sale
Agreement between the City of Edmonton and FCL as joint venturers and
the City of Edmonton made as of August 7, 1980 and the Construction
Agreement between the City of Edmonton and FCL as joint venturers and
FCL, dated August 7, 1980, as the same have been assigned;
"GOVERNANCE AGREEMENT" means the agreement regarding the governance of
the Fund on the terms attached as Schedule 2.4;
"GOVERNMENTAL AUTHORITY" means any (a) multinational, federal,
provincial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal,
arbitral body, commission, board, bureau or agency, domestic or
foreign, (b) Canadian Securities Regulatory Authority, self-regulatory
organization or stock exchange including without limitation the NYSE
and the TSX, (c) any subdivision, agent, commission, board, or
-8-
authority of any of the foregoing, or (d) any quasi-governmental or
private body exercising any regulatory, expropriation or taxing
authority under or for the account of any of the foregoing;
"HOLDERS" means, when used with reference to securities of Fording or
the Fund, the holders thereof shown from time to time on the register
maintained by or on behalf of Fording or the Fund, as the case may be,
in respect of such securities;
"INDUSTRIAL MINERALS OPERATIONS" means the NYCO Minerals, Inc.
operations at Willsboro, New York, the Minera NYCO S.A. de C.V.
operations located near Hermosillo in the northwestern state of
Sonora, Mexico and the American Tripoli, Inc. operations located near
Seneca, Missouri;
"INFORMATION CIRCULAR" means the notice of the Fording Meeting and the
management information circular dated November 20, 2002, including all
accompanying appendices thereto, sent to Securityholders in connection
with the Fording Meeting as amended or supplemented to the date
hereof;
"INTERIM ORDER" means the order of the Court confirming, among other
things, the calling and holding of the Fording Meeting and voting
thereon, as such order has been and may be amended or varied;
"LAWS" means all applicable laws (including common law), statutes,
regulations, statutory rules, orders, ordinances, and the terms and
conditions of any approvals, licences, permits, judgments or other
requirements of any applicable published notes and policies of any
Governmental Authority, and the term "APPLICABLE", with respect to
such Laws and in the context that refers to one or more Persons, means
such Laws that apply to such Person or Persons or its or their
business, undertaking, property or securities and that emanate from a
Governmental Authority having jurisdiction over the Person or Persons
or its or their business, undertaking, property or securities;
"LUSCAR" has the meaning ascribed to it in the Recitals to this
Agreement;
"LUSCAR/CONSOL JOINT VENTURES" has the meaning ascribed to it in the
Recitals to this Agreement;
"LUSCAR CONTRIBUTED ASSETS" means the assets of the Luscar/CONSOL
Joint Ventures described in the Luscar Contribution Term Sheet,
delivered to the Parties on the date hereof, which, pursuant to the
Amended Plan, will ultimately be contributed to the Partnership and
includes the Line Creek Mine, Cheviot, the Luscar Mine and a 46.4%
interest in the Neptune Terminal and associated terminal contracts;
"LUSCAR DISCLOSURE LETTER" means the disclosure letter in respect of
the Luscar Contributed Assets delivered by Sherritt and OTPP to the
other Parties prior to the execution of this Agreement;
"LUSCAR DISCLOSURE RECORD" has the meaning ascribed to it in Section
3.7(d);
-9-
"LUSCAR BENEFIT PLANS" means all plans, arrangements, agreements,
programs, policies, practices or undertakings, whether oral or
written, formal or informal, funded or unfunded, registered or
unregistered to which Luscar or the Luscar/CONSOL Joint Ventures is a
party to or bound by or under which Luscar or the Luscar/CONSOL Joint
Ventures has, or will have, any liability or contingent liability,
relating to: pension plans, insurance plans (whether insured or
self-insured) or compensation plans with respect to any of its
employees or former employees (or any spouses, dependants, survivors
or beneficiaries of any such employees or former employees), directors
or officers, individuals working on contract with Luscar or the
Luscar/CONSOL Joint Ventures or other individuals providing services
to it of a kind normally provided by employees or eligible dependants
of such Person, in each case, in connection with the Luscar
Contributed Assets;
"LUSCAR EMPLOYEES" means the persons currently employed by Luscar or
the Luscar/CONSOL Joint Ventures (including for this purpose,
dependent contractors) required to operate the Luscar Contributed
Assets, being the Persons listed in the Luscar Disclosure Letter;
"LUSCAR ENTITIES" has the meaning ascribed to it in Section 3.7(a);
"LUSCAR FINANCIAL STATEMENTS" means the audited financial statements
of Luscar Coal Income Fund and Luscar Coal Ltd. included in Appendix C
to the SCAI Offer;
"LUSCAR NEW FINANCIAL STATEMENTS" means the audited financial
statements for the Luscar/CONSOL Joint Ventures for the fiscal year
ended December 31, 2001 consisting of a balance sheet as of December
31, 2001, and the statements of earnings, owner's equity and cash
flows for the fiscal year ended December 31, 2001, and all notes
thereto and the interim unaudited financial statements for the
Luscar/CONSOL Joint Ventures for the nine month period ended September
30, 2002;
"MATERIAL ADVERSE CHANGE", when used in connection with a Party or the
Fording Contributed Assets, the Prairie Operations, the Teck
Contributed Assets or the Luscar Contributed Assets, as the case may
be, means any change, effect, event or occurrence with respect to the
condition (financial or otherwise), properties, assets, liabilities,
obligations (whether absolute, accrued, contingent, conditional or
otherwise), businesses, operations or results of operations of such
Party or assets or, if applicable, those of its subsidiaries, that is,
or could reasonably be expected to be, material and adverse to such
Party or assets and, if applicable, its subsidiaries on a consolidated
basis, other than any change, effect, event or occurrence: (i)
relating to the economy, political conditions or securities markets in
general; (ii) in the case of Fording, the Fording Contributed Assets,
the Prairie Operations, the Teck Contributed Assets or the Luscar
Contributed Assets, affecting the coal industry in general and which
does not have, or could not reasonably be expected to have, a
materially disproportionate impact on Fording, the Fording Contributed
Assets, the Prairie Operations, the Teck Contributed Assets or the
Luscar Contributed Assets, as the case may be, as compared to the
other industry participants; or (iii) that is merely itself a change
in the market trading price of publicly issued securities of the
-10-
Party; (iv) resulting exclusively from the entering into of this
Agreement; or (v) resulting from a change in the market price of
metallurgical coal or thermal coal;
"MATERIAL ADVERSE EFFECT" when used in connection with a Party, means
any effect resulting from a Material Adverse Change to a Party;
"MATERIAL FACT" has the meaning ascribed to it under the Securities
Act;
"NEW FORDING" means the corporation resulting from the amalgamation of
Fording, FCL Amalco (which results from the amalgamation of FCL and a
subsidiary of Fording) and Subco, which will occur as part of the
Amended Arrangement;
"NYSE" means the New York Stock Exchange;
"OPTIONS" means the outstanding options to purchase Common Shares
issued pursuant to Fording's Directors' Stock Option Plan and Key
Employee Stock Option Plan;
"OPTIONHOLDERS" means Holders from time to time of Options;
"OUTSIDE DATE" means, subject to Section 6.2(e), April 30, 2003 or
such later date as may be mutually agreed by the Parties;
"PARTNERSHIP" has the meaning ascribed to it in the Recitals to this
Agreement;
"PARTNERSHIP AGREEMENT" means the agreement between Fording and Teck
on the terms attached as Schedule 2.3(a);
"PARTY" or "PARTIES" means a signatory or the signatories to this
Agreement, respectively;
"PERSON" means any individual, sole proprietorship, partnership, firm,
entity, unincorporated association, unincorporated syndicate,
unincorporated organization, trust, body corporate, agency and where
the context requires, any of the foregoing when they are acting as
trustee, executor, administrator or other legal representative;
"PRAIRIE OPERATIONS" means the Fording assets described in the Prairie
Operations Term Sheet attached as Schedule 2.3(c), which, for greater
certainty, excludes thermal coal that is mined in Fording's
metallurgical coal mines;
"PRE-EFFECTIVE DATE PERIOD" means the period commencing on the
execution and delivery of this Agreement and ending at the Closing
Time, subject to the earlier termination of this Agreement in
accordance with its terms;
"PROPOSED AGREEMENT" has the meaning ascribed to it in Section 4.5(a);
"PUBLICLY DISCLOSED" means disclosure by a Party in a public filing
made by it with either the Canadian Securities Regulatory Authorities
-11-
on the SEDAR system in Canada or with the Securities and Exchange
Commission on the XXXXX system in the United States from December 31,
2001 to the date hereof;
"PWC RESOLUTION" means the resolution of the Shareholders to be
considered and voted upon by the Shareholders at the Fording Meeting,
appointing PricewaterhouseCoopers LLP as auditor of the Fund;
"RBC" means RBC Dominion Securities Inc., a member company of RBC
Capital Markets;
"RBC FAIRNESS OPINION" has the meaning ascribed to it in Section
2.7(a);
"REGISTRAR AND TRANSFER AGENT" means Computershare Trust Company of
Canada, the registrar and transfer agent of the Common Shares and the
Units;
"REGULATORY APPROVALS" means those sanctions, rulings, consents,
orders, exemptions, permits and other approvals (including the lapse,
without objection, of a prescribed time under a statute or regulation
that states that an arrangement may only be implemented if a
prescribed time lapses following the giving of notice without an
objection being made) of any Governmental Authority, as set out in
Schedule 4.1;
"RESOLUTIONS" means the special resolutions of the Shareholders and
the Optionholders, as the case may be, authorizing the Arrangement
Resolution, the Unitholder Rights Plan Resolution and the PWC
Resolution, to be considered and voted upon by the Shareholders and
the Optionholders, as the case may be, at the Fording Meeting;
"SCAI" means Sherritt Coal Acquisition Inc.;
"SCAI OFFER" means the offer made by SCAI dated October 25, 2002 as
amended December 16, 2002 and January 6, 2003, to acquire all of the
issued and outstanding Common Shares;
"SCPII" has the meaning ascribed to it in the Recitals to this
Agreement;
"SECURITIES ACT" means the SECURITIES ACT (Alberta), R.S.A. 2000, c.
S-4, and the rules and regulations promulgated thereunder;
"SECURITYHOLDERS" means, collectively, the Shareholders and the
Optionholders;
"SHAREHOLDERS" means the Holders of Common Shares;
"SHERRITT ANNUAL INFORMATION FORM" means the annual information form
of Sherritt, dated March 15, 2002, for the year ended December 31,
2001;
"SPECIAL DISTRIBUTION" has the meaning ascribed to it in Section
2.3(k);
"SUBCO" means 4123212 Canada Ltd., an indirect, wholly-owned
subsidiary of Fording with no material assets or liabilities, existing
under the laws of Canada;
-12-
"SUBSIDIARY" or "SUBSIDIARY" means, with respect to a specified body
corporate, any body corporate of which more than 50% of the
outstanding shares ordinarily entitled to elect a majority of the
board of directors thereof (whether or not shares of any other class
or classes shall or might be entitled to vote upon the happening of
any event or contingency) are at the time owned directly or indirectly
by such specified body corporate, and shall include any body
corporate, partnership, joint venture or other entity over which it
exercises direction or control or which is in a like relation to a
subsidiary;
"SUPERIOR PROPOSAL" means any bona fide written Acquisition Proposal
that, in the good faith determination of the Board of Directors after
consultation with its financial advisors and with outside counsel,
would, if consummated in accordance with its terms and taking into
account the risk of non-completion, reasonably be expected to result
in a transaction more favourable to the Securityholders from a
financial point of view than the Transaction;
"TAX RETURNS" means all returns, declarations, reports, information
returns and statements required to be filed with the CCRA or any
taxing authority relating to taxes;
"TECK ANNUAL INFORMATION FORM" means the annual information form of
Teck, dated March 1, 2002, for the year ended December 31, 2001;
"TECK CONTRIBUTED ASSETS" means the Teck assets described in the Teck
Contribution Term Sheet attached as Schedule 2.3(d), which, pursuant
to the Amended Plan, will be contributed to the Partnership;
"TECK DISCLOSURE LETTER" means the disclosure letter of Teck delivered
to the other Parties prior to the execution of this Agreement;
"TECK DISCLOSURE RECORD" has the meaning ascribed to it in Section
3.3(f);
"TECK MINE BENEFIT PLANS" means all plans, arrangements, agreements,
programs, policies, practices or undertakings, whether oral or
written, formal or informal, funded or unfunded, registered or
unregistered to which Teck or its subsidiaries is a party to or bound
by or under which Teck or its subsidiaries has, or will have, any
liability or contingent liability, relating to: pension plans,
insurance plans (whether insured or self-insured) or compensation
plans with respect to any of its employees or former employees (or any
spouses, dependants, survivors or beneficiaries of any such employees
or former employees), directors or officers, individuals working on
contract with Teck or its subsidiaries or other individuals providing
services to it of a kind normally provided by employees or eligible
dependants of such Person in each case, in connection with the Teck
Contributed Assets;
"TECK MINE EMPLOYEES" means the persons currently employed by Teck
(including for this purpose, dependent contractors) required to
operate the Elkview Mine, being the Persons listed in the Teck
Disclosure Letter;
-13-
"TECK MINE FINANCIAL STATEMENTS" means the audited financial
statements for the Elkview Mine for the fiscal year ended December 31,
2001 consisting of a balance sheet as of December 31, 2001, and the
statements of earnings, owner's equity and cash flows for the fiscal
year ended December 31, 2001, and all notes thereto and the interim
unaudited financial statements for the Elkview Mine for the nine month
period ended September 30, 2002, copies of which have been initialled
for identification and delivered by Teck to Fording;
"TERMINAL AGREEMENT" means the agreement between New Fording, on
behalf of the Partnership, and Westshore, on the terms which have been
initialed for identification and delivered to Westshore and Fording,
respectively;
"TRANSACTION" has the meaning ascribed to it in the Recitals to this
Agreement;
"TRANSACTION AGREEMENT" means each of the agreements listed in or
contemplated by Section 1.4;
"TRUSTEES" means the trustees of the Fund from time to time;
"TSX" means the Toronto Stock Exchange;
"UNIT" means a trust unit of the Fund;
"UNIT OPTION" has the meaning ascribed to it in the Recitals to this
Agreement;
"UNITHOLDER RIGHTS PLAN RESOLUTION" means the resolution of the
Shareholders authorizing the implementation of the Unitholder Rights
Plan to be considered and voted upon by the Shareholders at the
Fording Meeting;
"UNITHOLDERS" means the Holders from time to time of the Units;
"U.S. TAX CODE" means the UNITED STATES INTERNAL REVENUE CODE OF 1986;
and
"WESTSHORE DISCLOSURE LETTER" means the disclosure letter of Westshore
delivered to the other Parties prior to the execution of this
Agreement.
1.2 CERTAIN RULES OF INTERPRETATION.
In this Agreement:
(a) CONSENT. Whenever a provision of this Agreement requires an
approval or consent and such approval or consent is not
delivered within the applicable time limit, then, unless
otherwise specified, the Party whose consent or approval is
required shall be conclusively deemed to have withheld its
approval or consent.
(b) CURRENCY. Unless otherwise specified, all references to money
amounts are to lawful currency of Canada.
-14-
(c) GOVERNING LAW. This Agreement is a contract made under and
shall be governed by and construed in accordance with the
Laws of the Province of Alberta and the federal Laws of
Canada applicable in the Province of Alberta. Each Party
hereby irrevocably attorns to the non-exclusive jurisdiction
of the courts of the Province of Alberta in respect of all
matters arising under or in relation to this Agreement.
(d) HEADINGS. Headings of Articles and Sections are inserted for
convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
(e) INCLUDING. Where the word "including" or "includes" is used
in this Agreement, it means "including (or includes) without
limitation".
(f) NO STRICT CONSTRUCTION. The language used in this Agreement
is the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied
against any Party.
(g) NUMBER AND GENDER. Unless the context otherwise requires,
words importing the singular include the plural and vice
versa and words importing gender include all genders.
(h) STATUTORY REFERENCES. A reference to a statute includes all
rules and regulations made pursuant to such statute and,
unless otherwise specified, the provisions of any statute or
regulation or rule which amends, supplements or supersedes
any such statute or any such regulation or rule.
(i) SUBSIDIARIES. To the extent any representations, warranties,
covenants or agreements contained herein relate, directly or
indirectly, to a Subsidiary of any Party, each such provision
shall be construed as a covenant by such Party to cause (to
the fullest extent to which it is legally capable) such
Subsidiary to perform the required action. To the extent any
covenants or agreements contained herein relate, directly or
indirectly, to SCPII, Luscar, the Luscar/CONSOL Joint
Ventures or the Luscar Energy Partnership, each such
provision shall be construed as a joint and several covenant
by OTPP and Sherritt to cause (to the fullest extent to which
it is legally capable) such entity to perform the required
action.
(j) TIME. Time is of the essence in the performance of the
Parties' respective obligations.
(k) TIME PERIODS. Unless otherwise specified, time periods within
or following which any payment is to be made or act is to be
done shall be calculated by excluding the day on which the
period commences and including the day on which the period
ends and by extending the period to the next Business Day
following if the last day of the period is not a Business
Day.
-15-
1.3 ENTIRE AGREEMENT.
This Agreement, together with the Confidentiality Agreements and the agreements
and documents required to be delivered pursuant to this Agreement, constitute
the entire agreement between the Parties and set out all the covenants,
promises, warranties, representations, conditions, understandings and
agreements between the Parties pertaining to the subject matter of this
Agreement and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written. For greater certainty, this Agreement
supersedes and replaces the F/T/W Combination Agreement, and the term sheet
among the Parties of January 10, 2003, which are terminated without liability
between the parties. No reliance has been made upon, and there are no
covenants, promises, warranties, representations, conditions, understandings or
other agreements, oral or written, express, implied or collateral between the
Parties in connection with the subject matter of this Agreement except as
specifically set forth in this Agreement and any document required to be
delivered pursuant to this Agreement.
There shall be no liability, either in tort or in contract or otherwise,
assessed in relation to any such warranty, representation, opinion, advice or
assertion of fact, not reduced to writing as part of this Agreement. Each of
the Parties agrees that the other Parties will have no remedy in respect of any
untrue statement made to it and upon which it relied in entering into this
Agreement and that, absent fraud, its only remedy can be for breach of contract
under this Agreement.
1.4 SCHEDULES.
The Schedules to this Agreement, as listed below, are an integral part of this
Agreement:
SCHEDULE DESCRIPTION
-------- -----------
Schedule 2.1 Amended Plan
Schedule 2.3(a) Partnership Term Sheet
Schedule 2.3(c) Prairie Operations Term Sheet
Schedule 2.3(d) Teck Contribution Term Sheet
Schedule 2.3(e) Fording Contribution Term Sheet
Schedule 2.3(n) Non-Competition Term Sheet
Schedule 2.4 Governance Term Sheet
Schedule 2.4 Working Capital Term Sheet
Schedule 2.4 Trust Indenture Term Sheet
Schedule 2.5 Form of Press Release
Schedule 4.1 Regulatory Approvals
The Luscar Contribution Term Sheet has also been delivered to the Parties on
the date hereof.
-16-
1.5 ACCOUNTING MATTERS.
Unless otherwise stated, all accounting terms used in this Agreement in respect
of any Party shall have the meanings attributable thereto under generally
accepted accounting principles applicable to such Party's published financial
statements and all determinations of an accounting nature in respect of any
Party required to be made shall be made in a manner consistent with Canadian
generally accepted accounting principles applicable to such Party's published
financial statements and past practice.
1.6 KNOWLEDGE.
Any reference to the knowledge of any Party shall mean, unless otherwise
specified, to the best of the knowledge, information and belief of such Party
after reviewing all relevant records and making reasonable inquiries regarding
the relevant matter of all relevant directors, officers and employees of the
Party.
ARTICLE 2
THE COMBINATION
2.1 THE ARRANGEMENT.
(a) The Amended Plan will be substantially in the form set out in
Schedule 2.1, provided the Parties will cooperate to amend
such plan to achieve the objectives set out herein (provided
further that such amendments are not prejudicial to the
Parties).
(b) The Amended Plan will give Shareholders the option to elect
the Cash Option, the Unit Option or a combination of both,
subject to maximum available cash of $1,050 million for the
Cash Option and maximum available Units for the Unit Option
equal to the number of outstanding Common Shares at the
Effective Time less 30,000,000.
(c) The Amended Plan will contemplate the completion of the
transactions referenced in Sections 2.2 and 2.3.
(d) The Amended Plan may be amended from the form set out in
Schedule 2.1 including without limitation, the reordering of
certain steps or replacing certain amalgamations with
windings up provided such amendment does not create a
material disadvantage to any of the Parties to this
Agreement.
2.2 FUNDING OF THE CASH OPTION.
(a) The Cash Option will be funded from several sources:
(i) Teck will contribute $125 million to the Partnership
in addition to the Teck Contributed Assets and will
receive in consideration therefor an interest in the
Partnership having the rights described in Schedule
2.3(a), which together with the Partnership interest
to be acquired pursuant to Section 2.3(d), will
-17-
represent a 35% interest in the Partnership and
those funds will be paid by the Partnership to New
Fording as part of the consideration for the Fording
Contributed Assets;
(ii) Teck and Westshore will each make the following
subscriptions for Units set opposite their name:
Teck $150 million
Westshore $150 million;
(iii) OTPP and Sherritt will cause SCPII or other
Affiliates of OTPP or Sherritt to subscribe for $375
million in Units;
(iv) Subco will draw down approximately $336 million from
its new credit facilities and make a portion of such
funds available to the Fund to refinance Fording's
existing debt or pay Fording's expenses or pay for
working capital included in the Luscar Contributed
Assets and, if necessary, fund the Cash Option; and
(v) Fording will receive $225 million from the sale of
the Prairie Operations to SCPII (or an affiliated
entity) and will make such funds available for the
payment of the Cash Option to the extent not used to
fund the other obligations specified hereunder,
so that an aggregate of $1,050 million will be available to
fund the Cash Option and approximately $311 million will be
available to pay the Special Distribution, to settle the debt
obligations of Fording, and to pay the expenses of the
Parties as contemplated herein.
(b) The entire $1,050 million will be paid to Shareholders
pursuant to the Cash Option.
(c) The expense payments in Section 2.3(p) will be sourced out of
the funds referred to in paragraphs 2.2(a)(i) or (v).
2.3 AGREEMENTS OF THE PARTIES WITH RESPECT TO THE TRANSACTION.
(a) Fording and Teck each agree that prior to the Effective Time,
they will enter (and in the case of Teck, also cause
Teck-Bullmoose Coal Inc. and Quintette Coal Partnership to
enter) into the Partnership Agreement and form the
Partnership.
(b) Fording agrees that it will purchase or cause to be
purchased, and Sherritt and OTPP agree to cause the
Luscar/CONSOL Joint Ventures to sell the Luscar Contributed
Assets on the terms set out in the Luscar Contribution Term
Sheet delivered to the Parties on the date hereof. Luscar and
CONSOL will be issued shares or debt and shares of Fording or
an Affiliate in partial payment for the Luscar Contributed
-18-
Assets which will be immediately indirectly exchanged for 6.4
million freely tradeable Units (as to 50% of such Units
each).
(c) Fording agrees that it will sell or cause the sale of the
Prairie Operations on the terms set out in Schedule 2.3(c)
and Sherritt and OTPP agree that they will cause SCPII or an
affiliated entity of OTPP or Sherritt to purchase the Prairie
Operations for $225 million, subject to adjustments in
accordance with Schedule 2.3(a). The Parties will cooperate
in structuring this transaction to ensure that no current
taxes will be payable by Fording in respect of such
transactions to the extent reasonably possible.
(d) Teck agrees that, as at the Effective Time, it will
contribute or cause to be contributed the Teck Contributed
Assets to the Partnership in exchange for an interest in the
Partnership having the rights described in Schedule 2.3(a),
which together with the Partnership interest to be acquired
pursuant to Section 2.3(f), will represent a 35% interest in
the Partnership, on the terms set out in Schedule 2.3(d).
(e) Fording agrees that, as at the Effective Time, it will
contribute the Fording Contributed Assets on the terms set
out in Schedule 2.3(e), and the Luscar Contributed Assets
acquired from the Luscar/CONSOL Joint Ventures as
contemplated in Section 2.3(b) above, to the Partnership in
exchange for an interest in the Partnership having the rights
described in Schedule 2.3(a), which will represent a 65%
interest in the Partnership.
(f) Teck agrees that, as at the Effective Time, it will
contribute $125 million to the Partnership in exchange for an
interest in the Partnership having the rights described in
Schedule 2.3(a), which together with the Partnership interest
to be acquired pursuant to Section 2.3(d), will represent a
35% interest in the Partnership.
(g) Each of Teck and Westshore severally (and not jointly nor
jointly and severally) agrees that, as of the Effective Time,
in accordance with the Amended Plan, each will subscribe for
and purchase Units in the aggregate amounts specified below
at a purchase price of $35.00 per Unit:
Teck assume just $150 million
Westshore $150 million
(h) Sherritt and OTPP agree that, as of the Effective Time, they
will subscribe for and purchase or will cause SCPII or other
Affiliates of OTPP or Sherritt to subscribe for and purchase
$375 million in Units at a purchase price of $35.00 per Unit.
(i) Subco and New Fording will borrow an amount under its new
credit facilities, which together with other funds payable to
Fording hereunder, will enable it to satisfy the Cash Option,
and to pay the Special Distribution, the expenses referred to
-19-
in Section 2.3(p), its expenses, to refinance its existing
indebtedness and fulfill its other obligations hereunder.
(j) Fording agrees to cause the Fund to issue, as required under
the Amended Plan, to Shareholders, Units up to an amount
equal to the outstanding Common Shares at the Effective Date
less 30 million.
(k) Each of the Parties agrees that the Fund will make a
distribution (the "SPECIAL DISTRIBUTION") of an aggregate of
$70 million to all Unitholders as to $35 million at the end
of the quarter in which the Effective Date occurs and as to
$35 million at the end of the quarter after the quarter in
which the Effective Date occurs.
(l) OTPP agrees that it will elect to receive Units for all of
its Common Shares under the Amended Arrangement and will not
exercise any dissent or appraisal rights under the Amended
Arrangement.
(m) OTPP and Sherritt will withdraw and terminate the SCAI Offer
and publicly announce such withdrawal and termination as part
of the press release contemplated by this Agreement and
return any Common Shares that are tendered to the SCAI Offer.
They shall also cease soliciting proxies under their
dissident proxy circular in respect of the Fording Meeting.
(n) The Luscar Entities and New Fording will enter into a
non-competition agreement consistent with Schedule 2.3(n)
providing that Luscar will not compete in respect of
metallurgical coal operations in Canada for five years.
(o) The Partnership and the Fund will enter into a
non-competition agreement consistent with Schedule 23(n)
providing that the Partnership, New Fording and the Fund (but
not Teck or any of its other Affiliates) will not compete in
respect of thermal coal operations in Canada for five years.
(p) Fording on its own behalf and on behalf of New Fording (its
successor by amalgamation or liquidation) agrees that it
shall bear its own expenses in respect of the Transaction and
that upon completion of the Amended Arrangement, as at the
Closing Time, directly or indirectly it will pay the
following amount as a reimbursement of and as a contribution
to expenses and costs of the Parties:
Teck and Westshore (or their designees) $25 million
OTPP and Sherritt (or their designees) $50 million
Fording and New Fording shall be obligated to make the payments in the
amounts stated, and no Party is required to itemize or prove the
particular expenses reimbursed or costs contributed to in order to be
entitled to the payment stipulated. Fording and New Fording shall not
be obligated to pay any more than the amount stipulated regardless of
the expenses and costs actually incurred by a Party. The manner of
payment shall be structured to maximize tax efficiency for Fording
without prejudice for the other Parties.
-20-
The Parties agree that the transactions set forth in items (b) through (h) and
item (j) above will be undertaken in accordance with the Amended Arrangement.
2.4 RELATED AGREEMENTS.
At the Closing Time:
(a) Each of the Parties will enter into and deliver or cause its
respective Affiliates or associates, as appropriate, to enter
and deliver, one to the others, the Transaction Agreement to
which it or its Affiliates or associates is a Party;
(b) New Fording, on behalf of the Partnership, and Westshore will
enter into, and deliver, one to the other, the Terminal
Agreement; and
(c) If not previously formed, the Fund will be formed pursuant to
a trust indenture in accordance with the Trust Indenture Term
Sheet attached to this Agreement as Schedule 2.4.
2.5 PUBLIC ANNOUNCEMENT.
Immediately upon signing of this Agreement, the Parties shall jointly issue for
public dissemination the press release attached to this Agreement as Schedule
2.5 and shall file such press release with the TSX and in prescribed form with
the U.S. Securities and Exchange Commission and each Party (other than OTPP)
shall file, as required, on a timely basis, a material change report in
prescribed form with the Canadian Securities Regulatory Authorities.
2.6 IMPLEMENTATION STEPS FOR FORDING.
Fording shall, except to the extent that the Board of Directors has changed its
recommendation in respect of the Transaction, do the following:
(a) mail the Further Supplement to Securityholders in accordance
with the Interim Order and applicable Laws;
(b) subject to the Interim Order, hold the Fording Meeting in a
timely fashion for the purpose of considering the
Resolutions, and for any other proper purpose as may be set
out in the notice for such meeting and conduct such meeting
in accordance with the Interim Order, applicable Laws and
Fording's by-laws;
(c) use commercially reasonable efforts to solicit from the
Securityholders proxies in favour of the approval of the
Resolutions, as applicable, and take all other action that is
necessary or desirable to secure the approval of the
Resolutions by the Securityholders, as applicable;
(d) subject to obtaining the approvals as are required by the
Interim Order, apply to the Court for the Final Order and
diligently pursue its issuance; and
-21-
(e) subject to obtaining the Final Order and the satisfaction or
waiver of the other conditions herein contained in favour of
each Party, on the date contemplated in Section 2.8, send to
the Director, for endorsement and filing by the Director, the
Articles of Arrangement and such other documents as may be
required in connection therewith under the CBCA to give
effect to the Transaction and diligently pursue such
endorsement and filing.
2.7 SUPPORT OF TRANSACTION.
Fording represents and warrants to Teck, Westshore, Sherritt and OTPP that:
(a) it has received the oral opinion of RBC (the "RBC FAIRNESS
OPINION") that, as of the date hereof, the consideration to
Shareholders under the Amended Arrangement is fair from a
financial point of view to Shareholders;
(b) subject to the provisions of Section 4.4 relating to the
existence of a Superior Proposal and provided that RBC has
delivered and not withdrawn the RBC Fairness Opinion, each
director of Fording has advised that he intends to vote all
Common Shares held by him in favour of the Amended
Arrangement and will so represent in the Further Supplement;
(c) subject to the provisions of Section 4.4 relating to the
existence of a Superior Proposal and provided that RBC has
delivered and not withdrawn the RBC Fairness Opinion, the
Board of Directors (i) has advised that they will unanimously
recommend acceptance of the Amended Arrangement to
Securityholders and will so represent in the Further
Supplement; and (ii) will include a statement in the Further
Supplement that the Amended Arrangement is fair to
Securityholders and is in the best interests of Fording.
2.8 EFFECTIVE DATE MATTERS.
The Effective Date shall be not more than the 5th Business Day following the
later of the date of issuance of the Final Order (unless appealed, in which
case, the Effective Date shall be the date such appeal is dismissed or
withdrawn) and the date upon which the last Regulatory Approval is obtained, or
on such other date as the Parties agree. Closing shall take place at the
offices of Osler, Xxxxxx & Harcourt LLP in Calgary at 7:00 a.m. (Mountain
Standard Time) on the Effective Date or at such other place, date and time as
the Parties shall agree (the "Closing Time"). Each Party shall deliver, at the
closing of the Transaction, such customary certificates, resolutions and other
customary closing documents as may be required by the other Parties, acting
reasonably.
2.9 PREPARATION OF FILINGS, ETC.
(a) Each Party shall furnish to the other Parties all information
that may be required (i) under applicable Laws for inclusion
in or filing with the Further Supplement or (ii) subject to
any contractual confidentiality restrictions which the Party
has been unable to obtain a waiver with respect thereto in
order to implement the other actions described in Article 2.
-22-
Each Party covenants with and represents and warrants to the
other Parties that information to be furnished by it (to the
best of its knowledge in the case of information concerning
its securityholders and Affiliates) in connection with such
Further Supplement, actions or otherwise in connection with
the consummation of the Transaction will not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated in any such document or
which is 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. In
particular, Teck shall provide Fording with the Teck Mine
Financial Statements and, if required, the consent of its
auditor in respect thereof for inclusion in the Further
Supplement, and Sherritt and OTPP shall provide Fording with
the Luscar New Financial Statements and the consents of the
auditors in respect thereof for inclusion in the Further
Supplement if Fording receives advice from its auditor and
counsel that such financial statements and consent are
required to be included in the Further Supplement.
(b) Each Party shall promptly notify the others if, at any time
before the Closing Time, it becomes aware that the Further
Supplement, an application for an order or any other document
described herein contains any untrue statement of a material
fact or omits to state a material fact required to be stated
therein or which is necessary to make the statements
contained therein not misleading in the light of the
circumstances in which they are made, or that otherwise
requires an amendment or further supplement to the
Information Circular or such application or other document.
In any such event, each Party shall cooperate in the
preparation of any such supplement or amendment to the
Information Circular or such application or other document,
as required and as the case may be, and, if required, shall
cause the same to be distributed to Securityholders and/or
filed with the relevant Governmental Authorities.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF FORDING - GENERAL.
Fording represents and warrants to and in favour of the other Parties as
follows and acknowledges that the other Parties are relying upon same in
connection with the transactions contemplated herein:
(a) Fording is a corporation incorporated and validly existing
under the Laws of Canada and has the corporate power to own
or lease its property, to carry on its business as now being
conducted and enter into this Agreement; each material
subsidiary of Fording, being for purposes hereof, each
subsidiary whose total assets constitute more than 10% of the
consolidated assets of Fording or whose total revenues
constitute more than 10% of the consolidated revenues of
Fording, in each case as determined by reference to the
Fording Financial Statements (a "Fording Subsidiary"), is a
corporation incorporated and validly existing under the Laws
of its jurisdiction of incorporation and such subsidiary has
-23-
the corporate power to own or lease its property and to carry
on its business as now being conducted by it;
(b) Fording has all necessary corporate power and capacity to
enter into this Agreement and to carry out its obligations
hereunder, subject to Shareholder approval, the execution and
delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by
all necessary corporate action on the part of Fording;
(c) this Agreement is a legal, valid and binding obligation of
Fording, enforceable against Fording in accordance with its
terms, subject, however, to limitations with respect to
enforcement imposed by Law in connection with bankruptcy or
similar proceedings and to the extent that equitable remedies
such as specific performance and injunction are in the
discretion of the court from which they are sought;
(d) the approval, execution and delivery of this Agreement by
Fording, the performance by it of its obligations under such
agreement and the completion of the Transaction, will not:
(i) result (with or without notice or the passage of
time) in a violation or breach of, require any
consent to be obtained under or give rise to any
termination, purchase or sale rights or payment
obligation under any provision of:
(A) its certificate of incorporation, articles,
by-laws or other charter documents;
(B) any Laws (subject to obtaining the
Regulatory Approvals), except to the extent
that the violation or breach of, or failure
to obtain any consent under, any Laws would
not, individually or in the aggregate,
reasonably be expected to prevent or delay
the Transaction or have a Material Adverse
Effect on Fording; or
(C) subject to obtaining the consents required
by the CP Arrangement Agreement, the
Genesee Agreements, the CPR Agreement, the
FX Acknowledgments and the documents
disclosed as requiring consent in the
Fording Disclosure Letter, any contract,
license, permit or government grant to
which Fording or any Fording Subsidiary is
a party or by which it is bound or subject
or is the beneficiary, except as would not,
individually or in the aggregate,
reasonably be expected to prevent or delay
the Transaction or have a Material Adverse
Effect on Fording;
(ii) result in the imposition of any encumbrance, charge
or lien upon any of its assets or the assets of any
Fording Subsidiary except as would not, individually
-24-
or in the aggregate, reasonably be expected to
prevent or delay the Transaction or have a Material
Adverse Effect on Fording; or
(iii) restrict, hinder, impair or limit the ability of
Fording or any Fording Subsidiary to carry on
business in the manner in which it is currently
being carried on, except as would not, individually
or in the aggregate, reasonably be expected to
prevent or delay the Transaction or have a Material
Adverse Effect on Fording;
(e) Fording has prepared and filed all documents required to be
filed by it with the Alberta Securities Commission in
connection with its status as a "reporting issuer" under the
Securities Act and other applicable Laws, and with those
other jurisdictions where it is a reporting issuer or the
equivalent as required to be filed by it in connection with
such status (collectively the "Fording Disclosure Record"),
and such documents, as of the date they were filed, complied
in all material respects with applicable Laws and did not
fail to state a material fact required to be stated in order
to make the statements contained therein not misleading in
light of the circumstances in which they were made. No
Material Adverse Change has occurred in relation to Fording
that is not disclosed in the Fording Disclosure Record and
Fording has not filed any confidential material change
reports as part of the Fording Disclosure Record that
continue to be confidential;
(f) except as has been disclosed in the Fording Disclosure
Record, no Person has any agreement, option, right or
privilege (whether by Law, pre-emptive or contractual)
capable of becoming an agreement, including convertible
securities, options, warrants or convertible obligations of
any nature, for the purchase, subscription, allotment or
issuance of any unissued shares or other securities of
Fording or of any Fording Subsidiary except for individuals
granted Options prior to December 4, 2002 under Fording's
stock option plans and by virtue of this Agreement;
(g) the Fording Financial Statements have been prepared in
accordance with generally accepted accounting principles
applied on a basis consistent with prior periods, present
fairly in all material respects the assets, liabilities
(whether accrued, absolute, contingent or otherwise) and
financial condition of Fording, on a consolidated basis, as
at the date thereof and the revenues, earnings, and results
of operations of Fording, on a consolidated basis, for the
periods presented;
(h) since December 31, 2001, and other than as disclosed in the
Fording Disclosure Letter, the Fording Disclosure Record or
the press release dated January 6, 2003 disclosed in the
Westshore Disclosure Letter, there has not been any Material
Adverse Change in the condition (financial or otherwise),
assets, liabilities, operations, earnings or business of
Fording, on a consolidated basis;
(i) except as has been disclosed in the Fording Disclosure
Letter, there is no suit, action or proceeding pending, or to
the knowledge of Fording, threatened against Fording or any
-25-
Fording Subsidiary that would materially impede Fording's
ability to complete the Transaction or that, individually or
in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Fording, and there is no judgment,
decree, injunction, rule or order of any Governmental
Authority with jurisdiction over Fording or any Fording
Subsidiary outstanding against Fording or any Fording
Subsidiary causing, or which in so far as can reasonably be
foreseen, in the future would materially impede Fording's
ability to complete the Transaction or that would cause a
Material Adverse Effect on Fording;
(j) except as disclosed in the Fording Disclosure Letter, there
is no environmental liability, nor factors likely to give
rise to any environmental liability, affecting any of the
properties of Fording or any Fording Subsidiary that
individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Fording taken
as a whole and neither Fording nor any Fording Subsidiary has
violated or infringed any Environmental Law now in effect
except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Fording; except as disclosed in the Fording Disclosure Letter
neither Fording nor any Fording Subsidiary has violated or
infringed any then current Environmental Law as applied at
that time, other than such violations or infringements that,
individually or in the aggregate, have not had and could not
reasonably be expected to have, a Material Adverse Effect on
Fording;
(k) except as disclosed in the Fording Disclosure Letter, each of
Fording and each Fording Subsidiary has good and marketable
(and in the case of equipment valid as opposed to marketable)
title, applying customary standards in the mining industry,
to its operating properties, equipment and mineral reserves
and resources (other than property as to which Fording or a
Fording Subsidiary is a lessee, in which case it has a valid
leasehold interest), except for such defects in title that
individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on Fording;
(l) the reserves and resources of Fording as set forth in the
Fording Annual Information Form, were prepared in accordance
with accepted engineering practices and were, at such date,
in compliance in all material respects with the requirements
applicable to the presentation of such reserves and resources
in documents filed with the Alberta Securities Commission,
including without limitation, the provisions of National
Instrument 43-101;
(m) each of Fording and each Fording Subsidiary has all permits,
licences, certificates of authority, orders and approvals of,
and has made all filings, applications and registrations
with, applicable Governmental Authorities that are required
in order to permit it to carry on its business as presently
conducted, except for such permits, licences, certificates,
orders, filings, applications and registrations, the failure
to have or make, individually or in the aggregate, have not
had and could not reasonably be expected to have, a Material
Adverse Effect on Fording;
-26-
(n) each of Fording and each Fording Subsidiary has its assets
insured against loss or damage as is appropriate to its
business and assets, in such amounts and against such risks
as are customarily carried and insured against by owners of
comparable businesses and assets, and such insurance
coverages will be continued in full force and effect to and
including the Effective Date, other than those insurance
coverages in respect of which the failure to continue in full
force and effect could not reasonably be expected to have a
Material Adverse Effect on Fording;
(o) each of Fording and each Fording Subsidiary has duly filed on
a timely basis all material tax returns required to be filed
by it and has paid all taxes which are due and payable and
has paid all assessments and reassessments, and all other
taxes, governmental charges, penalties, interest and fines
due and payable on or before the date hereof, in each case,
of a material nature, and adequate provision has been made
for taxes payable for the current period for which tax
returns are not yet required to be filed; except as has been
disclosed in the Fording Disclosure Letter, there are no
material actions, suits, or claims asserted or assessed
against Fording or any Fording Subsidiary in respect of
taxes, governmental charges or assessments, nor any material
matters under discussion with the CCRA or any Governmental
Authority relating to taxes, governmental charges or
assessments asserted by such Governmental Authority;
(p) except as discussed in the Fording Disclosure Letter, the
business of Fording and the business of each Fording
Subsidiary is being and has been conducted in all material
respects in compliance with all applicable Laws, regulations
and ordinances of all Governmental Authorities having
jurisdiction, except where the failure to comply has not been
and would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Fording;
neither Fording nor any Fording Subsidiary has been notified
by any Governmental Authority of any investigation with
respect to it that is pending or threatened, nor has any
Governmental Authority notified Fording or any such
subsidiary of such Governmental Authority's intention to
commence or to conduct any investigation that would be
reasonably likely to have a Material Adverse Effect on
Fording;
(q) other than as set forth in the Fording Disclosure Letter and
other than as contemplated herein, neither Fording nor any of
its Affiliates is a party to or bound or affected by any
commitment, agreement or document containing any covenant
expressly limiting its freedom to compete in any line of
business, other than such restrictive covenants, which
individually or in the aggregate, directly or indirectly,
have not had or could not reasonably be expected to have a
Material Adverse Effect on Fording;
(r) except as disclosed in the Fording Disclosure Letter, the
Fording Contributed Assets are being and have been operated
in all material respects in compliance with all applicable
Laws, regulations and ordinances of all authorities having
jurisdiction, except where the failure to comply has not been
and would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Fording or
the Fording Contributed Assets; Fording has not been notified
-27-
by any Governmental Authority of any investigation relating
to the Fording Contributed Assets that is pending or
threatened, nor has any Governmental Authority notified
Fording of such Governmental Authority's intention to
commence or to conduct any investigation relating to the
Fording Contributed Assets;
(s) except as set out in the Fording Disclosure Letter or for
exceptions that could not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on
Fording:
(i) the Fording Benefit Plans comply in all respects
with all applicable Laws and such plans have been
administered in compliance with applicable Laws and
their terms;
(ii) none of the Fording Benefit Plans, other than plans
which provide only monetary retirement payments in
accordance with the terms of such plans, provides
benefits beyond retirement or other termination of
service to Fording employees or former Fording
employees or to the beneficiaries or dependants of
such employees;
(iii) all benefits accrued under the Fording Benefit Plans
have been properly accrued on the Fording Financial
Statements in accordance with generally accepted
accounting principles;
(iv) no event has occurred and no condition or
circumstance exists that has resulted in or could
reasonably be expected to result in any Fording
Benefit Plan being ordered, or required to be,
terminated or wound up in whole or in part, having
its registration under applicable Laws refused or
revoked, being placed under the administration of
any trustee or receiver or Governmental Authority or
being required to pay any material taxes, penalties,
payments or levies under applicable Laws;
(t) except as disclosed in the Fording Disclosure Letter or for
exceptions that could not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on
Fording, to the knowledge of Fording there are in respect of
any of Fording's employees who will be made available to the
Partnership on an agency basis:
(i) no legal proceedings involving governmental
tribunals;
(ii) no collective agreements currently under
negotiation; and
(iii) no labour disputes, grievances, strikes or lockouts,
pending or threatened;
(u) the assets set forth under the heading "PURCHASED ASSETS" in
Schedule 2.3(e) are all the assets comprising the Fording
Contributed Assets; and
-28-
(v) except as set out in the Fording Disclosure Letter, Fording
is up to date in respect of all of its reclamation bonding
requirements in all material respects.
3.2 REPRESENTATIONS AND WARRANTIES OF FORDING - PRAIRIE OPERATIONS.
Fording represents and warrants to and in favour of OTPP and Sherritt as
follows and acknowledges that OTPP and Sherritt are relying upon same in
connection with the transactions contemplated herein:
(a) except as disclosed in the Fording Disclosure Letter, there
is no environmental liability, nor factors likely to give
rise to any environmental liability, affecting the Prairie
Operations of Fording that individually or in the aggregate,
could reasonably be expected to have a Material Adverse
Effect on the Prairie Operations and neither Fording nor any
Fording Subsidiary has violated or infringed, in respect of
the Prairie Operations, any Environmental Law now in effect
except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
the Prairie Operations; except as disclosed in the Fording
Disclosure Letter neither Fording nor any Fording Subsidiary
has violated or infringed, in respect of the Prairie
Operations, any then current Environmental Law as applied at
that time, other than such violations or infringements that,
individually or in the aggregate, have not had and could not
reasonably be expected to have, a Material Adverse Effect on
the Prairie Operations;
(b) except as disclosed in the Fording Disclosure Letter, each of
Fording and each Fording Subsidiary has good and marketable
(and in the case of equipment valid as opposed to marketable)
title, applying customary standards in the mining industry,
to its operating properties and equipment and mineral
reserves and resources included in the Prairie Operations
(other than property as to which Fording or a Fording
Subsidiary is a lessee, in which case it has a valid
leasehold interest), except for such defects in title that
individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Prairie
Operations;
(c) the reserves and resources of Fording included in the Prairie
Operations as set forth in the Fording Annual Information
Form were prepared in accordance with accepted engineering
practices and were, at such date, in compliance in all
material respects with the requirements applicable to the
presentation of such reserves and resources in documents
filed with the Alberta Securities Commission, including
without limitation, the provisions of National Instrument
43-101;
(d) each of Fording and each Fording Subsidiary has all permits,
licences, certificates of authority, orders and approvals of,
and has made all filings, applications and registrations
with, applicable Governmental Authorities that are required
in order to permit it to carry on its business as presently
conducted with respect to its Prairie Operations, except for
such permits, licences, certificates, orders, filings,
-29-
applications and registrations, the failure to have or make,
individually or in the aggregate, have not had and could not
reasonably be expected to have, a Material Adverse Effect on
the Prairie Operations;
(e) each of Fording and each Fording subsidiary has its assets
included in the Prairie Operations insured against loss or
damage as is appropriate to its business and assets, in such
amounts and against such risks as are customarily carried and
insured against by owners of comparable businesses and
assets, and such insurance coverages will be continued in
full force and effect to and including the Effective Date,
other than those insurance coverages in respect of which the
failure to continue in full force and effect could not
reasonably be expected to have a Material Adverse Effect on
the Prairie Operations;
(f) except as has been disclosed in the Fording Disclosure
Letter, there is no suit, action or proceeding pending, or to
the knowledge of Fording, threatened against Fording or any
Subsidiary of Fording that would impede Fording's ability to
complete the Transaction or that, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect on the Prairie Operations, and there is no
judgment, decree, injunction, rule or order of any
Governmental Authority with jurisdiction over Fording or any
Subsidiary outstanding against Fording or any subsidiary
causing, or which in so far as can reasonably be foreseen, in
the future would materially impede Fording's ability to
complete the Transaction or that would cause, a Material
Adverse Effect on Fording or the Prairie Operations;
(g) with respect to its Prairie Operations, other than as set
forth in the Fording Disclosure Letter and other than as
contemplated herein, neither Fording nor any of its
Affiliates is a party to or bound or affected by any
commitment, agreement or document containing any covenant
expressly limiting its freedom to compete in any line of
business, other than such restrictive covenants, which
individually or in the aggregate, directly or indirectly,
have not had or could not reasonably be expected to have a
Material Adverse Effect on the Prairie Operations;
(h) except as disclosed in the Fording Disclosure Letter, the
Prairie Operations are being and have been operated in all
material respects in compliance with all applicable Laws,
regulations and ordinances of all authorities having
jurisdiction, except where the failure to comply has not been
and would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Prairie
Operations; Fording has not been notified by any Governmental
Authority of any investigation relating to the Prairie
Operations that is pending or threatened, nor has any
Governmental Authority notified Fording of such Governmental
Authority's intention to commence or to conduct any
investigation relating to the Prairie Operations;
(i) except as set out in the Fording Disclosure Letter or for
exceptions that could not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on
-30-
the Prairie Operations in so far as they apply to the Prairie
Operations:
(i) the Fording Prairie Benefit Plans comply in all
respects with all applicable Laws and such plans
have been administered in compliance with applicable
Laws and their terms;
(ii) none of the Fording Prairie Benefit Plans, other
than plans which provide only monetary retirement
payments in accordance with the terms of such plans,
provides benefits beyond retirement or other
termination of service to Fording employees or
former Fording employees or to the beneficiaries or
dependants of such employees;
(iii) all benefits accrued under the Fording Prairie
Benefit Plans have been properly accrued on the
Fording Financial Statements in accordance with
generally accepted accounting principles;
(iv) no event has occurred and no condition or
circumstance exists that has resulted in or could
reasonably be expected to result in any Fording
Prairie Benefit Plan being ordered, or required to
be, terminated or wound up in whole or in part,
having its registration under applicable Laws
refused or revoked, being placed under the
administration of any trustee or receiver or
Governmental Authority or being required to pay any
material taxes, penalties, payments or levies under
applicable Laws;
(v) all of the Fording Prairie Benefit Plans are either
(A) fully insured or (B) fully funded in accordance
with applicable Laws on a going concern solvency
basis and winding-up solvency basis;
(j) except as disclosed in the Fording Disclosure Letter or for
exceptions that could not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on
the Prairie Operations, to the knowledge of Fording there are
in respect of any of Fording's employees employed in
connection with the Prairie Operations:
(i) no legal proceedings involving governmental
tribunals;
(ii) no collective agreements currently under
negotiation; and
(iii) no labour disputes, grievances, strikes or lockouts,
pending or threatened.
(k) the assets set forth under the heading "PURCHASED ASSETS" in
Schedule 2.3(c) are all the assets comprising Fording's
Prairie Operations; and
(l) since December 31, 2001, and other than as disclosed in the
Fording Disclosure Letter or the Fording Disclosure Record,
there has not been any Material Adverse Change in the
-31-
condition (financial or otherwise), assets, liabilities,
operations, earnings on business of the Prairie Operations,
on a consolidated basis.
3.3 REPRESENTATIONS AND WARRANTIES OF TECK.
Teck represents and warrants to and in favour of the other Parties as follows
and acknowledges that the other Parties are relying upon same in connection
with the transactions contemplated herein:
(a) Teck is a corporation incorporated and validly existing under
the Laws of Canada and has the corporate power to own or
lease its property, to carry on its business as now being
conducted;
(b) Teck has all necessary corporate power, authority and
capacity to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
necessary corporate action on the part of Teck; without
limiting the generality of the foregoing, Teck has the
necessary corporate power, authority and capacity to enter
into this Agreement and to carry out its obligations
hereunder, on a basis which does not require Teck to seek the
prior approval of its shareholders;
(c) this Agreement is a legal, valid and binding obligation of
Teck, enforceable against Teck in accordance with its terms,
subject, however, to limitations with respect to enforcement
imposed by Law in connection with bankruptcy or similar
proceedings and to the extent that equitable remedies such as
specific performance and injunction are in the discretion of
the court from which they are sought;
(d) the approval, execution and delivery of this Agreement by
Teck, the performance by it of its obligations under such
agreement and the completion of the Transaction, will not:
(i) result (with or without notice or the passage of
time) in a violation or breach of, require any
consent to be obtained under or give rise to any
termination, purchase or sale rights or payment
obligation under any provision of:
(A) its certificate of incorporation, articles,
by-laws or other charter documents;
(B) any Laws (subject to obtaining the
Regulatory Approvals), except to the extent
that the violation or breach of, or failure
to obtain any consent under, any Laws would
not, individually or in the aggregate,
reasonably be expected to prevent or delay
the Transaction or have a Material Adverse
Effect on the Teck Contributed Assets; or
-32-
(C) any contract, license, permit or government
grant to which Teck is a party or by which
it is bound or subject or is the
beneficiary, except as disclosed in the
Teck Disclosure Letter or as would not,
individually or in the aggregate,
reasonably be expected to prevent or delay
the Transaction or have a Material Adverse
Effect on the Teck Contributed Assets;
(ii) result in the imposition of any encumbrance, charge
or lien upon any of its assets except as would not,
individually or in the aggregate, reasonably be
expected to prevent or delay the Transaction or have
a Material Adverse Effect on the Teck Contributed
Assets; or
(iii) restrict, hinder, impair or limit the ability of any
Teck Contributed Assets to be operated in the manner
in which they are currently being operated, except
as would not, individually or in the aggregate,
reasonably be expected to prevent or delay the
Transaction or have a Material Adverse Effect on the
Teck Contributed Assets.
(e) the Teck Mine Financial Statements have been prepared in
accordance with generally accepted accounting principles
applied on a basis consistent with prior periods, present
fairly in all material respects the assets, liabilities
(whether accrued, absolute, contingent or otherwise) and
financial condition of the Teck Contributed Assets as at the
date thereof and the revenues, earnings, and results of
operations of the Teck Contributed Assets for the periods
presented;
(f) no Material Adverse Change has occurred in relation to the
Teck Contributed Assets that is not disclosed in documents
required to be filed by Teck with the British Columbia
Securities Commission in connection with its status as a
"reporting issuer" under the British Columbia Securities Act
and other applicable Laws, and with those other jurisdictions
where it is a reporting issuer or the equivalent as required
to be filed by it in connection with such status
(collectively the "Teck Disclosure Record"), and Teck has, in
respect of all disclosure relating to the Teck Contributed
Assets complied in all material respects with applicable Laws
and has not failed to state a material fact required to be
stated in order to make the statements contained therein not
misleading in light of the circumstances in which they were
made. Teck has not filed any confidential material change
reports relating in any way to the Teck Contributed Assets as
part of the Teck Disclosure Record that continue to be
confidential;
(g) since December 31, 2001, and other than as disclosed in the
Teck Disclosure Letter or the Teck Disclosure Record, there
has not been any Material Adverse Change in the condition
(financial or otherwise), assets, liabilities, operations,
earnings or business of Teck or the Teck Contributed Assets;
(h) there is no suit, action or proceeding pending, or to the
knowledge of Teck, threatened against Teck or any subsidiary
of Teck that would impede Teck's ability to complete the
Transaction or that, individually or in the aggregate, could
-33-
reasonably be expected to have a Material Adverse Effect on
the Teck Contributed Assets, and there is no judgment,
decree, injunction, rule or order of any Governmental
Authority with jurisdiction over Teck or any subsidiary
outstanding against Teck or any subsidiary causing, or which
in so far as can reasonably be foreseen, in the future would
materially impede Teck's ability to complete the Transaction
or that would cause, a Material Adverse Effect on Teck or the
Teck Contributed Assets;
(i) except as disclosed in the Teck Disclosure Letter, there is
no environmental liability, nor factors likely to give rise
to any environmental liability, affecting the Teck
Contributed Assets that individually or in the aggregate,
could reasonably be expected to have a Material Adverse
Effect on Teck or the Teck Contributed Assets, and the
operation of the Teck Contributed Assets by Teck has not
violated or infringed any Environmental Law now in effect
except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Teck or the Teck Contributed Assets; the operation of the
Teck Contributed Assets by Teck has not violated or infringed
any then current Environmental Law as applied at that time,
other than such violations or infringements that,
individually or in the aggregate, have not had and could not
reasonably be expected to have, a Material Adverse Effect on
Teck or the Teck Contributed Assets;
(j) except as disclosed in the Teck Disclosure Letter, Teck has
good and marketable (and in the case of equipment valid as
opposed to marketable) title to the Teck Contributed Assets,
applying customary standards in the mining industry,
including its operating properties, equipment and mineral
reserves and resources (other than leasehold property as to
which Elkview is a lessee, in respect of which Elkview has a
valid leasehold interest), except for such defects in title
that individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect on Teck or the
Teck Contributed Assets; other than the Bullmoose assets,
which are owned in a joint venture, Teck is exclusively
entitled to possess and dispose of the Teck Contributed
Assets;
(k) the reserves and resources of the Teck Contributed Assets as
set forth in the Teck Annual Information Form were prepared
in accordance with accepted engineering practices and were,
at such date, in compliance in all material respects with the
requirements applicable to the presentation of such reserves
and resources in documents filed with the British Columbia
Securities Commission, including without limitation, the
provisions of National Instrument 43-101;
(l) except as disclosed in the Teck Disclosure Letter, Teck has
all permits, licences, certificates of authority, orders and
approvals of, and has made all filings, applications and
registrations with, applicable Governmental Authorities that
are required in order to permit it to carry on its business
in respect of the Teck Contributed Assets as presently
conducted, except for such permits, licences, certificates,
orders, filings, applications and registrations, the failure
to have or make, individually or in the aggregate, have not
-34-
had and could not reasonably be expected to have, a Material
Adverse Effect on Teck or the Teck Contributed Assets;
(m) each of Teck and each subsidiary of Teck has duly filed on a
timely basis all material tax returns required to be filed by
it and has paid all taxes which are due and payable and has
paid all assessments and reassessments, and all other taxes,
governmental charges, penalties, interest and fines due and
payable on or before the date hereof, in each case, of a
material nature, and adequate provision has been made for
taxes payable for the current period for which tax returns
are not yet required to be filed; there are no material
actions, suits, or claims asserted or assessed against Teck
or any subsidiary of Teck in respect of taxes, governmental
charges or assessments, nor any material matters under
discussion with the CCRA or any Governmental Authority
relating to taxes, governmental charges or assessments
asserted by such Governmental Authority except as would not,
individually or in the aggregate, reasonably be expected to
impede Teck's ability to consummate the Transaction or to
create a lien or encumbrance on the Teck Contributed Assets;
(n) the Teck Contributed Assets are being and have been operated
in all material respects in compliance with all applicable
Laws, regulations and ordinances of all authorities having
jurisdiction, except where the failure to comply has not been
and would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Teck or the
Teck Contributed Assets; Teck has not been notified by any
Governmental Authority of any investigation relating to the
Teck Contributed Assets that is pending or threatened, nor
has any Governmental Authority notified Teck of such
Governmental Authority's intention to commence or to conduct
any investigation relating to the Teck Contributed Assets;
(o) except as set out in the Teck Disclosure Letter or for
exceptions that could not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on
Teck or the Teck Contributed Assets:
(i) the Teck Mine Benefit Plans comply in all respects
with all applicable Laws and such plans have been
administered in compliance with applicable Laws and
their terms;
(ii) none of the Teck Mine Benefit Plans, other than
plans which provide only monetary retirement
payments in accordance with the terms of such plans,
provides benefits beyond retirement or other
termination of service to Teck Mine Employees or
former Teck Mine Employees or to the beneficiaries
or dependants of such employees;
(iii) all benefits accrued under the Teck Mine Benefit
Plans have been properly accrued on the Teck Mine
Financial Statements in accordance with generally
accepted accounting principles; and
-35-
(iv) no event has occurred and no condition or
circumstance exists that has resulted in or could
reasonably be expected to result in any Teck Mine
Benefit Plan being ordered, or required to be,
terminated or wound up in whole or in part, having
its registration under applicable Laws refused or
revoked, being placed under the administration of
any trustee or receiver or Governmental Authority or
being required to pay any material taxes, penalties,
payments or levies under applicable Laws;
(p) with respect to Teck Mine Employees:
(i) the Teck Disclosure Letter sets forth as of December
3, 2002 a list of all Teck Mine Employees, together
with the titles and material terms of employment,
including service date, current wages, salaries or
hourly rate of pay of, and bonus (whether monetary
or otherwise) paid or payable to each such Teck Mine
Employee and the date upon which such wage, salary,
rate or bonus became effective, and there has been
no material change in respect of such matters;
(ii) the Teck Disclosure Letter sets forth a complete
list of all collective agreements to which any of
the Teck Mine Employees are subject;
(iii) except as set forth at item (ii) above and except
for those written or oral employment contracts with
salaried Teck Mine Employees identified in the Teck
Disclosure Letter, there are no written or oral
contracts of employment entered into with any
employees that will be binding upon the Partnership
upon completion of the Transaction and that are not
terminable on the giving of reasonable notice in
accordance with applicable Laws;
(iv) except for the Teck Mine Benefits Plans, there are
no pension or benefit plans covering the Teck Mine
Employees and no employment policies or plans,
including policies or plans regarding incentive
compensation, stock options, severance pay or terms
or conditions upon which Teck Mine Employees may be
terminated, which will be binding upon the
Partnership or FCL following completion of the
Transaction;
(v) the amount of salaries, bonuses, and other
remuneration including vacation pay and unpaid
earned wages of the Teck Mine Employees as of the
Effective Date will have been paid in full, and
there is not currently and will not at the Effective
Time be any outstanding assessment, order,
certificate, lien or judgment under any employment
standards, health and safety or other employment
legislation;
(vi) the records maintained by Teck and which will be
delivered to Fording at the Closing Time relating to
the Teck Mine Employees accurately set out all
banked vacation entitlement, regular and
supplementary vacation pay, banked and deferred
overtime compensation, time-off entitlement,
-36-
accumulated time-off entitlement, severance and
retirement benefits and any other emoluments or
benefits due or accruing; and
(vii) except for exceptions that could not, individually
or in the aggregate, be reasonably expected to have
a Material Adverse Effect on the Teck Contributed
Assets, to the knowledge of Teck, there are in
respect of the Teck Mine Employees:
(A) no legal proceedings involving governmental
tribunals;
(B) no collective agreements currently under
negotiation; and
(C) no labour disputes, grievances, strikes or
lockouts, pending or threatened.
(q) Teck has available to it sufficient cash resources or
committed credit facilities in order to allow it to complete
its obligations hereunder;
(r) except as herein contemplated, Teck has not entered into any
agreement or understanding with any Person regarding the
manner in which it will exercise the rights to any Units of
the Fund which it will hold;
(s) other than as contemplated herein, neither Teck nor any of
its Affiliates is a party to or bound or affected by any
commitment, agreement or document containing any covenant
expressly limiting its freedom to compete in any line of
business other than such restrictive covenants which
individually or in the aggregate, directly or indirectly,
have not had or could not reasonably be expected to have a
Material Adverse Effect on the Teck Contributed Assets;
(t) the Teck Contributed Assets are insured against loss or
damage as is appropriate to such assets, in such amounts and
against such risks as are customarily carried and insured
against by owners of comparable businesses and assets, and
such insurance coverages will be continued in full force and
effect to and including the Effective Date, other than those
insurance coverages in respect of which the failure to
continue in full force and effect could not reasonably be
expected to have a Material Adverse Effect on the Teck
Contributed Assets;
(u) the Teck Contributed Assets (other than those owned by
Quintette Coal Partnership and Teck-Bullmoose Coal Inc.)
comprise all assets used by Teck to carry on the business
conducted by Teck at the Elkview Mine; and
(v) except as set out in the Teck Disclosure Letter, Teck is up
to date in all of its reclamation bonding in all material
respects.
-37-
3.4 REPRESENTATIONS AND WARRANTIES OF WESTSHORE.
Westshore represents and warrants to and in favour of the other Parties as
follows and acknowledges that the other Parties are relying upon same in
connection with the transactions contemplated herein:
(a) Westshore is a trust validly existing under the Laws of
British Columbia and has the power to own or lease its
property, to carry on its business as now being conducted;
(b) Westshore has all necessary power, authority and capacity to
enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated herein have
been duly authorized by all necessary action on the part of
Westshore; without limiting the generality of the foregoing,
Westshore has the necessary power, authority and capacity to
enter into this Agreement and to carry out its obligations
hereunder, on a basis which does not require Westshore to
seek the prior approval of its securityholders;
(c) this Agreement is a legal, valid and binding obligation of
Westshore, enforceable against Westshore in accordance with
its terms subject, however, to limitations with respect to
enforcement imposed by Law in connection with bankruptcy or
similar proceedings and to the extent that equitable remedies
such as specific performance and injunction are in the
discretion of the court from which they are sought;
(d) the approval, execution and delivery of this Agreement by
Westshore, the performance by it of its obligations under
such agreement and the completion of the Transaction, will
not:
(i) result (with or without notice or the passage of
time) in a violation or breach of, require any
consent to be obtained under or give rise to any
termination, purchase or sale rights or payment
obligation under any provision of:
(A) its declaration of trust or other charter
documents;
(B) any Laws (subject to obtaining the
Regulatory Approvals), except to the extent
that the violation or breach of, or failure
to obtain any consent under, any Laws would
not, individually or in the aggregate,
reasonably be expected to prevent or delay
the Transaction; or
(C) any contract, license, permit or government
grant to which Westshore is party or by
which it is bound or subject or is the
beneficiary, except as would not,
individually or in the aggregate,
reasonably be expected to prevent or delay
the Transaction;
-38-
(ii) result in the imposition of any encumbrance, charge
or lien upon any of its assets except as would not,
individually or in the aggregate, reasonably be
expected to prevent or delay the Transaction; or
(iii) restrict, hinder, impair or limit the ability of
Westshore to carry on business as and where it is
now being carried on, except as would not,
individually or in the aggregate, reasonably be
expected to prevent or delay the Transaction;
(e) except as disclosed in the Westshore Disclosure Letter, there
is no suit, action or proceeding pending, or to the knowledge
of Westshore, threatened against Westshore that would
materially impede Westshore's ability to complete the
Transaction, and there is no judgment, decree, injunction,
rule or order of any Governmental Authority with jurisdiction
over Westshore outstanding against Westshore causing, or
which in so far as can reasonably be foreseen, in the future
would materially impede Westshore's ability to complete the
Transaction;
(f) Westshore has available to it sufficient cash resources or
committed credit facilities in order to allow it to complete
its obligations hereunder; and
(g) except as contemplated herein, Westshore has not entered into
any agreement or understanding with any Person regarding the
manner in which it will exercise the rights to any Units of
the fund which it will hold.
3.5 REPRESENTATIONS AND WARRANTIES OF OTPP.
OTPP represents and warrants to and in favour of the other Parties as follows
and acknowledges that the other Parties are relying upon same in connection
with the transactions contemplated herein:
(a) OTPP is a non-share capital corporation validly existing
under the Laws of Ontario and has the power to own or lease
its property, and to carry on its business as now being
conducted;
(b) OTPP has all necessary corporate power, authority and
capacity to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
necessary corporate action on the part of OTPP; without
limiting the generality of the foregoing, OTPP has the
necessary power, authority and capacity to enter into this
Agreement and to carry out its obligations hereunder, on a
basis which does not require OTPP to seek the prior approval
of its members;
(c) this Agreement is a legal, valid and binding obligation of
OTPP, enforceable against OTPP in accordance with its terms
subject, however, to limitations with respect to enforcement
imposed by Law in connection with bankruptcy or similar
proceedings and to the extent that equitable remedies such as
-39-
specific performance and injunction are in the discretion of
the court from which they are sought;
(d) the approval, execution and delivery of this Agreement by
OTPP, the performance by it of its obligations under such
agreement and the completion of the Transaction, will not:
(i) result (with or without notice or the passage of
time) in a violation or breach of or require any
consent to be obtained under or give rise to any
termination, purchase or sale rights or payment
obligation under any provision of:
(A) its certificate of incorporation, articles,
by-laws or other charter documents;
(B) any Laws (subject to obtaining the
Regulatory Approvals), except to the extent
that the violation or breach of, or failure
to obtain any consent under, any Laws would
not, individually or in the aggregate,
reasonably be expected to prevent or delay
the Transaction; or
(C) any contract, license, permit or government
grant to which OTPP is party or by which it
is bound or subject or is the beneficiary,
except as would not, individually or in the
aggregate, reasonably be expected to
prevent or delay the Transaction;
(ii) result in the imposition of any encumbrance, charge
or lien upon any of its assets except as would not,
individually or in the aggregate, reasonably be
expected to prevent or delay the Transaction; or
(iii) restrict, hinder, impair or limit the ability of
OTPP to carry on business as and where it is now
being carried on, except as would not, individually
or in the aggregate, reasonably be expected to
prevent or delay the Transaction;
(e) there is no suit, action or proceeding pending, or to the
knowledge of OTPP, threatened against OTPP that would
materially impede OTPP's ability to complete the Transaction,
and there is no judgment, decree, injunction, rule or order
of any Governmental Authority with jurisdiction over OTPP
outstanding against OTPP causing, or which in so far as can
reasonably be foreseen, in the future would materially impede
OTPP's ability to complete the Transaction;
(f) OTPP has available to it sufficient cash resources or
committed credit facilities in order to allow it to complete
its obligations hereunder; and
-40-
(g) except as contemplated herein, OTPP has not entered into any
agreement or understanding with any Person regarding the
manner in which it will exercise the rights to any Units of
the Fund which it will hold.
3.6 REPRESENTATIONS AND WARRANTIES OF SHERRITT.
Sherritt represents and warrants to and in favour of the other Parties as
follows and acknowledges that the other Parties are relying upon same in
connection with the transactions contemplated herein:
(a) Sherritt is a corporation validly existing under the Laws of
New Brunswick and has the power to own or lease its property,
to carry on its business as now being conducted;
(b) Sherritt has all necessary corporate power, authority and
capacity to enter into this Agreement and to carry out its
obligations hereunder; the execution and delivery of this
Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
necessary corporate action on the part of Sherritt; without
limiting the generality of the foregoing, Sherritt has the
necessary power, authority and capacity to enter into this
Agreement and to carry out its obligations hereunder, on a
basis which does not require Sherritt to seek the prior
approval of its securityholders;
(c) this Agreement is a legal, valid and binding obligation of
Sherritt, enforceable against Sherritt in accordance with its
terms subject, however, to limitations with respect to
enforcement imposed by Law in connection with bankruptcy or
similar proceedings and to the extent that equitable remedies
such as specific performance and injunction are in the
discretion of the court from which they are sought;
(d) the approval, execution and delivery of this Agreement by
Sherritt, the performance by it of its obligations under such
agreement and the completion of the Transaction, will not:
(i) result (with or without notice or the passage of
time) in a violation or breach of or require any
consent to be obtained under or give rise to any
termination, purchase or sale rights or payment
obligation under any provision of:
(A) its certificate of incorporation, articles,
by-laws or other charter documents;
(B) any Laws (subject to obtaining the
Regulatory Approvals), except to the extent
that the violation or breach of, or failure
to obtain any consent under, any Laws would
not, individually or in the aggregate,
reasonably be expected to prevent or delay
the Transaction: or
-41-
(C) any contract, license, permit, government
grant to which Sherritt is party or by
which it is bound or subject or is the
beneficiary, except as would not,
individually or in the aggregate,
reasonably be expected to prevent or delay
the Transaction;
(ii) result in the imposition of any encumbrance, charge
or lien upon any of its assets except as would not,
individually or in the aggregate, reasonably be
expected to prevent or delay the Transaction; or
(iii) restrict, hinder, impair or limit the ability of
Sherritt to carry on business as and where it is now
being carried on, except as would not, individually
or in the aggregate, reasonably be expected to
prevent or delay the Transaction;
(e) there is no suit, action or proceeding pending, or to the
knowledge of Sherritt, threatened against Sherritt that would
materially impede Sherritt's ability to complete the
Transaction, and there is no judgment, decree, injunction,
rule or order of any Governmental Authority with jurisdiction
over Sherritt outstanding against Sherritt causing, or which
in so far as can reasonably be foreseen, in the future would
materially impede Sherritt's ability to complete the
Transaction;
(f) Sherritt has available to it sufficient cash resources or
committed credit facilities in order to allow it to complete
its obligations hereunder; and
(g) except as contemplated herein, Sherritt has not entered into
any agreement or understanding with any Person regarding the
manner in which it will exercise the rights to any Units of
the Fund which it will hold.
3.7 REPRESENTATIONS AND WARRANTIES OF OTPP AND SHERRITT REGARDING LUSCAR
CONTRIBUTED ASSETS.
OTPP and Sherritt, jointly and severally, represent and warrant to and in
favour of the other Parties as follows and acknowledge that the other Parties
are relying upon same in connection with the transactions contemplated herein:
(a) each entity that is controlled by Sherritt and OTPP which is
a seller of the Luscar Contributed Assets and each entity
which owns or has an interest in any part of the Luscar
Contributed Assets (the "LUSCAR ENTITIES") is duly
incorporated or created, as applicable, organized and validly
existing under the Laws of the jurisdiction in which it is
organized and each such entity has the power to own or lease
its property, to carry on its business as now being
conducted, to effect the terms of this Agreement and to
perform its obligations hereunder;
(b) the approval, execution and delivery of this Agreement by
each of OTPP and Sherritt, the performance by them of their
obligations hereunder and the completion of the Transaction,
will not:
-42-
(i) result (with or without notice or the passage of
time) in a violation or breach of, require any
consent to be obtained under or give rise to any
termination, purchase or sale rights or payment
obligation under any provision of:
(A) the constating documents of the Luscar
Entities or the Luscar/CONSOL Joint
Ventures;
(B) any Laws (subject to obtaining the
Regulatory Approvals), except to the extent
that the violation or breach of, or failure
to obtain any consent under, any Laws would
not, individually or in the aggregate,
reasonably be expected to prevent or delay
the Transaction or have a Material Adverse
Effect on the Luscar Contributed Assets; or
(C) any contract, license, permit, government
grant to which a Luscar Entity or the
Luscar/CONSOL Joint Ventures is a party or
by which it is bound or subject or is the
beneficiary, as would not, individually or
in the aggregate, reasonably be expected to
prevent or delay the Transaction or have a
Material Adverse Effect on the Luscar
Contributed Assets;
(ii) result in the imposition of any encumbrance, charge
or lien upon any of the Luscar Contributed Assets
except as would not, individually or in the
aggregate, reasonably be expected to prevent or
delay the Transaction or have a Material Adverse
Effect on the Luscar Contributed Assets; or
(iii) restrict, hinder, impair or limit the ability of any
Luscar Contributed Assets to be operated in the
manner in which they are currently being operated,
except as would not, individually or in the
aggregate, reasonably be expected to prevent or
delay the Transaction or have a Material Adverse
Effect on the Luscar Contributed Assets.
(c) the Luscar Financial Statements have been prepared in
accordance with generally accepted accounting principles
applied on a basis consistent with prior periods, present
fairly in all material respects the assets, liabilities
(whether accrued, absolute, contingent or otherwise) and
financial condition of the business disclosed therein which
includes the Luscar Contributed Assets, on a consolidated
basis, as at the date thereof and the revenues, earnings, and
results of operations of the business disclosed therein,
which includes Luscar's share of the Luscar Contributed
Assets, for the periods presented; the Luscar New Financial
Statements will be prepared in accordance with generally
accepted accounting principles applied on a basis consistent
with prior periods, will present fairly in all material
respects the assets, liabilities (whether accrued, absolute,
contingent or otherwise) and financial condition of the
Luscar Contributed Assets, on a combined basis, as at the
date thereof and the revenues, earnings and results of
operations of the Luscar Contributed Assets for the periods
presented;
-43-
(d) no Material Adverse Change has occurred in relation to the
Luscar Contributed Assets that is not disclosed in documents
filed by SCAI or required to be filed by any Luscar Entity or
Sherritt with any securities regulatory authorities in
connection with its status as a "reporting issuer" under
applicable Laws, including U.S. securities laws, and with
those other jurisdictions where any Luscar Entity or Sherritt
is a reporting issuer or the equivalent as required to be
filed by it in connection with such status (collectively the
"LUSCAR DISCLOSURE RECORD"), and OTPP, Sherritt and Luscar
have, in respect of all disclosure relating to the Luscar
Contributed Assets and OTPP and Sherritt in respect of the
SCAI Offer in so far as it refers to the Luscar Contributed
Assets complied in all material respects with applicable Laws
and has not failed to state a material fact required to be
stated in order to make the statements contained therein not
misleading in light of the circumstances in which they were
made. Sherritt and Luscar have not filed any confidential
material change reports relating in any way to the Luscar
Contributed Assets as part of the Luscar Disclosure Record
that continue to be confidential;
(e) since December 31, 2001, and other than as disclosed in the
Luscar Disclosure Letter, there has not been any Material
Adverse Change in the condition (financial or otherwise),
assets, liabilities, operations, earnings or business of the
Luscar/CONSOL Joint Ventures, the Luscar Entities or the
Luscar Contributed Assets as a whole;
(f) except as has been disclosed in the Luscar Disclosure Letter,
there is no suit, action or proceeding pending, or to the
knowledge of OTPP or Sherritt, threatened against OTPP,
Sherritt, the Luscar/CONSOL Joint Ventures and any Luscar
Entity that would impede OTPP, Sherritt and any Luscar
Entity's ability to complete the Transaction or that,
individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on the Luscar
Contributed Assets, and there is no judgment, decree,
injunction, rule or order of any Governmental Authority with
jurisdiction over any of OTPP, Sherritt, the Luscar/CONSOL
Joint Ventures and any Luscar Entity outstanding against any
of OTPP, Sherritt, the Luscar/CONSOL Joint Ventures and any
Luscar Entity causing, or which in so far as can reasonably
be foreseen, in the future would materially impede the
completion of the Transaction or that would cause, a Material
Adverse Effect on the Luscar Contributed Assets;
(g) except as disclosed in the Luscar Disclosure Letter, there is
no environmental liability, nor factors likely to give rise
to any environmental liability, affecting the Luscar
Contributed Assets that individually or in the aggregate,
could reasonably be expected to have a Material Adverse
Effect on the Luscar Contributed Assets, and the operation of
the Luscar Contributed Assets by the Luscar/CONSOL Joint
Ventures has not violated or infringed any Environmental Law
now in effect except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect on the Luscar Contributed Assets; the operation of the
Luscar Contributed Assets by the Luscar/CONSOL Joint Ventures
has not violated or infringed any then current Environmental
Law as applied at that time, other than such violations or
-44-
infringements that, individually or in the aggregate, have
not had and could not reasonably be expected to have, a
Material Adverse Effect on the Luscar Contributed Assets;
(h) except as disclosed in the Luscar Disclosure Letter, the
Luscar/CONSOL Joint Ventures and/or the Luscar Entities, as
applicable, have good and marketable (and in the case of
equipment valid as opposed to marketable) title to the Luscar
Contributed Assets, applying customary standards in the
mining industry, including its operating properties,
equipment and mineral reserves and resources (other than
leasehold property as to which such entity is a lessee, in
respect of which Luscar (or an Affiliate) has a valid
leasehold interest), except for such defects in title that
individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Luscar
Contributed Assets; OTPP and Sherritt are entitled to dispose
of their share of the Luscar Contributed Assets under the
Agreement, either in their own right or through their
Affiliates;
(i) the reserves and resources relating to the Luscar Contributed
Assets as set forth in the Sherritt Annual Information Form
were prepared in accordance with accepted engineering
practices and were, at such date, in compliance in all
material respects with the requirements applicable to the
presentation of such reserves and resources in documents
filed with the Ontario Securities Commission, including
without limitation, the provisions of National Instrument
43-101;
(j) except as disclosed in the Luscar Disclosure Letter, each of
the Luscar/CONSOL Joint Ventures and the Luscar Entities has
all permits, licences, certificates of authority, orders and
approvals of, and has made all filings, applications and
registrations with, applicable Governmental Authorities that
are required in order to permit each to carry on its business
in respect of the Luscar Contributed Assets as presently
conducted, except for such permits, licences, certificates,
orders, filings, applications and registrations, the failure
to have or make, individually or in the aggregate, have not
had and could not reasonably be expected to have, a Material
Adverse Effect on the Luscar Contributed Assets;
(k) each of the Luscar/CONSOL Joint Ventures and the Luscar
Entities has duly filed on a timely basis all material tax
returns required to be filed by each of them and has paid all
taxes which are due and payable and has paid all assessments
and reassessments, and all other taxes, governmental charges,
penalties, interest and fines due and payable on or before
the date hereof, in each case, of a material nature, and
adequate provision has been made for taxes payable for the
current period for which tax returns are not yet required to
be filed; there are no material actions, suits, or claims
asserted or assessed against any Luscar Entity or any of
their respective subsidiaries in respect of taxes,
governmental charges or assessments, nor any material matters
under discussion with the CCRA or any Governmental Authority
relating to taxes, governmental charges or assessments
asserted by such Governmental Authority except as would not,
individually or in the aggregate, reasonably be expected to
impede OTPP's and Sherritt's ability to consummate the
-45-
Transaction or to create a lien or encumbrance on any Luscar
Entity's (other than a selling entity) interest in the Luscar
Contributed Assets;
(l) unless otherwise agreed by Fording, Luscar and CONSUL the
allocation of purchase price with respect the Luscar
Contributed Assets will result in the creation of
$150,754,000 of Canadian development expenses as defined for
purposes of the INCOME TAX ACT (Canada) (the "TAX ACT") and
$71,446,000 of undepreciated capital cost as defined in the
Tax Act of assets described in class 41 of Schedule II to the
Regulations to the Tax Act;
(m) the Luscar Contributed Assets are being and have been
operated in all material respects in compliance with all
applicable Laws, regulations and ordinances of all
authorities having jurisdiction, except where the failure to
comply has not been and would not be reasonably likely,
individually or in the aggregate, to have a Material Adverse
Effect on any Luscar Entity or the Luscar Contributed Assets;
OTPP, Sherritt or any Luscar Entity have not been notified by
any Governmental Authority of any investigation relating to
the Luscar Contributed Assets that is pending or threatened,
nor has any Governmental Authority notified OTPP, Sherritt or
any Luscar Entity of such Governmental Authority's intention
to commence or to conduct any investigation relating to the
Luscar Contributed Assets;
(n) except as set out in the Luscar Disclosure Letter or for
exceptions that could not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on
the Luscar Contributed Assets:
(i) the Luscar Benefit Plans comply in all respects with
all applicable Laws and such plans have been
administered in compliance with applicable Laws and
their terms;
(ii) none of the Luscar Benefit Plans, other than plans
which provide only monetary retirement payments in
accordance with the terms of such plans, provides
benefits beyond retirement or other termination of
service to Luscar Employees or former Luscar
Employees or to the beneficiaries or dependants of
such employees;
(iii) all benefits accrued under the Luscar Benefit Plans
have been properly accrued on the Luscar Financial
Statements in accordance with generally accepted
accounting principles;
(iv) no event has occurred and no condition or
circumstance exists that has resulted in or could
reasonably be expected to result in any Luscar
Benefit Plan being ordered, or required to be,
terminated or wound up in whole or in part, having
its registration under applicable Laws refused or
revoked, being placed under the administration of
any trustee or receiver or Governmental Authority or
being required to pay any material taxes, penalties,
payments or levies under applicable Laws; and
-46-
(v) all of the Luscar Benefit Plans are either (A) fully
insured or (B) fully funded in accordance with
applicable Laws on a going concern solvency basis
and winding-up solvency basis;
(o) with respect to Luscar Employees except for exceptions that
could not, individually or in the aggregate, be expected to
have a Material Adverse Effect on the Luscar Contributed
Assets, to the knowledge of each of OTPP, Sherritt and Luscar
there are in respect of the Luscar Employees:
(i) no legal proceedings involving governmental
tribunals;
(ii) no collective agreements currently under
negotiation; and
(iii) no labour disputes, grievances, strikes or lockouts,
pending or threatened.
(p) other than as contemplated herein, no Luscar Entity is a
party to or bound or affected by any commitment, agreement or
document containing any covenant expressly limiting its
freedom to compete in any line of business other than such
restrictive covenants which individually or in the aggregate,
directly or indirectly, have not had or could not reasonably
be expected to have a Material Adverse Effect on the Luscar
Contributed Assets;
(q) the Luscar Contributed Assets comprise all assets necessary
to carry on the metallurgical coal business carried on by the
Luscar/CONSOL Joint Ventures;
(r) OTPP and Sherritt have no reason to believe that the
conditions precedent to the completion of the transactions
contemplated by the Luscar Contribution Term Sheet will not
be satisfied; and
(s) except as set out in the Luscar Disclosure Letter, the Luscar
Entities are up to date in respect of all of their
reclamation bonding requirements in all material respects.
3.8 NATURE AND SURVIVAL
(a) Subject to Sections 3.8(b), 3.8(c) and 3.8(d), all
representations, warranties and covenants contained in this
Agreement on the part of each of the Parties shall survive
the consummation of the Transaction.
(b) Representations and warranties concerning tax matters
contained in this Agreement shall survive for a period of 90
days after the relevant authorities shall no longer be
entitled to assess liability for tax against the representing
Party for any particular taxation year ended on or prior to
the Effective Date, having regard without limitation, to any
waivers given by the Party in respect of any taxation year.
(c) The representations and warranties set forth at Sections
3.1(k), 3.2(b), 3.3(j) and 3.7(h) of this Agreement shall
survive for a period of ten years following the Effective
Date.
-47-
(d) All other representations and warranties shall only survive
for a period of two years following the Effective Date;
however any claim which is based on intentional
misrepresentation or fraud may be brought at any time.
If no claim shall have been made under this Agreement against a Party for any
incorrectness in or breach of any representation or warranty made in this
Agreement prior to the expiry of the survival periods set forth above, such
Party shall have no further liability under this Agreement with respect to such
representations or warranties.
ARTICLE 4
COVENANTS
4.1 COVENANTS OF FORDING.
Except to the extent that the Board of Directors has withdrawn, modified or
qualified its recommendation to Securityholders with respect to the
Transaction, Fording will and will cause its subsidiaries to perform all
obligations required, necessary or desirable to be performed by Fording or any
of its subsidiaries under this Agreement, co-operate with the other Parties 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 Transaction and, without limiting the generality of the
foregoing, Fording shall and where necessary and appropriate shall cause its
subsidiaries to:
(a) use commercially reasonable efforts to obtain the requisite
approvals of the Securityholders to the Amended Arrangement
in accordance with the terms of this Agreement;
(b) apply for and use commercially reasonable efforts to obtain
all Regulatory Approvals relating to Fording or any of its
subsidiaries and, in doing so, to keep the other Parties
informed as to the status of the proceedings related to
obtaining the Regulatory Approvals, including, but not
limited to, providing the other Parties with copies of all
related applications and notifications (in draft form, except
that commercially confidential information of Fording may be
expurgated in the other Parties' copies) in order for such
Party to provide its reasonable comments and providing the
other Parties with copies of all material correspondence;
(c) use commercially reasonable efforts to effect all necessary
registrations, filings and submissions of information
required by Governmental Authorities from Fording or any of
its subsidiaries relating to the Amended Arrangement;
(d) use commercially reasonable efforts to obtain all necessary
waivers, consents and approvals required to be obtained by
Fording or a subsidiary in connection with the Amended
Arrangement from other parties to any loan agreements,
material leases or other material contracts or hold such
agreements, leases or contracts in trust pending receipt of
such waiver, consent or approval;
-48-
(e) carry out the terms of the Interim Order and the Final Order
applicable to it and use commercially reasonable efforts to
comply promptly with all requirements which applicable Laws
may impose on Fording or its subsidiaries with respect to the
transactions contemplated by this Agreement;
(f) not take any action, refrain from taking any action or permit
any action to be taken or not taken, inconsistent with this
Agreement and which would reasonably be expected to
significantly impede the consummation of the Amended
Arrangement;
(g) except as provided for in the Amended Plan, not make any
distribution by way of dividend, distribution of property or
assets, return of capital or otherwise to or for the benefit
of Shareholders, except in each case, in the ordinary and
usual course consistent with past practice;
(h) continue to carry on business in the ordinary course
consistent with past practice and, to use commercially
reasonable efforts to preserve intact its present business
organization, and its relationship with those having business
dealings with it, to the end that its goodwill and business
shall not be impaired in a manner that could, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect on Fording;
(i) execute and deliver for the benefit of RBC certificates of
senior officers of Fording confirming such matters as RBC may
reasonably request in order to enable it to issue and deliver
the RBC Fairness Opinion; and
(j) allow representatives of the Parties to attend the Fording
Meeting.
4.2 COVENANTS OF OTHER PARTIES.
Each of the Parties, other than Fording, hereby covenants and agrees to perform
or cause their respective Affiliates to perform all obligations required or
desirable to be performed by it or them under this Agreement, to co-operate
with Fording in connection therewith, and to 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 foregoing, each such Party shall
and where necessary and applicable shall cause its Affiliates to:
(a) apply for and use commercially reasonable efforts to obtain
all Regulatory Approvals relating to it or its Affiliates
and, in doing so, to keep Fording informed as to the status
of the proceedings related to obtaining the Regulatory
Approvals, including, but not limited to, providing Fording
with copies of all related applications and notifications, in
draft foam (except that commercially confidential information
of such Party may be expurgated in Fording's copy) in order
for Fording to provide its reasonable comments and providing
Fording with copies of all material correspondence;
-49-
(b) effect all necessary registrations, filings and submissions
of information required by Governmental Authorities from such
Party or their respective Affiliates relating to the
Transaction;
(c) vote the Common Shares held by them, and cause their
Affiliates and, to the extent possible, all of their
respective directors and officers to vote the Common Shares
held by them, in favour of the Resolutions at the Fording
Meeting;
(d) use commercially reasonable efforts to obtain all necessary
waivers, consents and approvals required to be obtained by it
or a subsidiary or associate in connection with the Amended
Arrangement from other parties to any loan agreements,
material leases or other material contracts;
(e) subject to applicable Law, not take any action to alter or
amend any rights to indemnification or exculpation existing
in favour of directors or officers of Fording or Fording
Subsidiaries or otherwise diminish directors or officers
liability insurance currently maintained by Fording in a
manner that could be prejudicial to such Persons for a period
of six years from the Effective Date;
(f) not take any action, refrain from taking any action or permit
any action to be taken or not taken, inconsistent with this
Agreement and which would reasonably be expected to
significantly impede the consummation of the Amended
Arrangement;
(g) until the third anniversary of the Effective Date, not take
any action to alter or amend any Fording compensation
arrangement other than as contemplated in the Information
Circular, without substituting therefore compensation
arrangements that are, in the opinion of the continuing
directors, no less favourable, in the aggregate, than those
arrangements currently in existence; and
(h) cause Fording to honour all contractual severance
arrangements disclosed in the Fording Disclosure Record or
Fording Disclosure Letter.
4.3 ORDINARY COURSE COVENANTS.
(a) Subject to the effects of the wind storm damage at
Westshore's coal terminal at Xxxxxxx Bank, British Columbia,
as described in Westshore's press release dated January 6,
2003, Teck covenants and agrees to continue to carry on its
metallurgical coal business in the ordinary course consistent
with past practice and to use commercially reasonable efforts
to preserve intact its present business organization and its
relationship with those having business dealings with it, to
the end that its goodwill and business shall not be impaired
in a manner that could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
the Teck Contributed Assets.
(b) Subject to the effects of the wind storm damage at
Westshore's coal terminal at Xxxxxxx Bank, British Columbia,
as described in Westshore's press release dated January 6,
-50-
2003, OTPP and Sherritt, jointly and severally, covenant and
agree to cause the Luscar/CONSOL Joint Ventures and Luscar
Entities to continue to carry on and cause the Luscar
Contributed Assets business to be carried on in the ordinary
course consistent with past practice and to use commercially
reasonable efforts to preserve intact its present business
organization and its relationship with those having business
dealings with it, to the end that its goodwill and business
shall not be impaired in a manner that could, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Luscar Contributed Assets.
4.4 FORDING COVENANTS REGARDING NON-SOLICITATION.
(a) Fording shall, and shall cause the officers, directors,
employees, representatives and agents of Fording and its
subsidiaries to cease all current discussions and
negotiations regarding any proposal that constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal,
and request and enforce the return or destruction of all
confidential information provided in connection therewith.
(b) Subject to Section 4.4(e), Fording shall not, directly or
indirectly, through any officer or director of Fording, or
any of its subsidiaries, (i) solicit, initiate, knowingly
encourage or otherwise facilitate (including by way of
furnishing information or entering into any form of
agreement, arrangement or understanding) the initiation of
any inquiries or proposals regarding an Acquisition Proposal,
(ii) participate in any discussions or negotiations
regarding, or provide any confidential information with
respect to, any Acquisition Proposal, (iii) approve or
recommend, or publicly propose to approve or recommend, any
Acquisition Proposal; or (iv) accept or enter into, or
publicly propose to accept or enter into, any letter of
intent, agreement, arrangement or understanding related to
any Acquisition Proposal.
(c) Notwithstanding Section 4.4(b) and any other provision of
this Agreement, nothing shall prevent the Board of Directors
from (i) complying with Fording's disclosure obligations
under applicable Laws with regard to an Acquisition Proposal,
(ii) taking any other action to the extent ordered or
otherwise mandated by any court of competent jurisdiction,
(iii) considering, participating in any discussions or
negotiations, or entering into a confidentiality agreement
and providing information pursuant to Section 4.4(e), or (iv)
withdrawing, modifying or qualifying (or publicly proposing
to withdraw, modify or qualify), in any manner adverse to the
other Parties, the approval or recommendation of the Amended
Arrangement by the Board of Directors if and only to the
extent that, in any such case referred to in clause (iii) or
this clause (iv), (A) the Fording Meeting shall not have
occurred, (B) Fording has complied with this Section 4.4 and
(C) the Board of Directors concludes in good faith in the
case of clauses (iii) and (iv), after consultation with its
outside legal and financial advisors, (x) that any required
financing of such Acquisition Proposal is reasonably likely
to be obtained; (y) in the case of clause (iii) that, after
taking the steps contemplated in clause (iii), it is
reasonably likely that the Board of Directors could determine
-51-
that such Acquisition Proposal is a Superior Proposal; and
(z) in the case of clause (iv) that the Acquisition Proposal
constitutes a Superior Proposal.
(d) Fording shall forthwith notify the other Parties of any
Acquisition Proposal and any inquiry of which a director or a
senior officer of Fording or Fording's financial advisor is
made aware that could lead to an Acquisition Proposal, or any
amendments to the foregoing, or any request for non-public
information relating to Fording or any Fording Subsidiary in
connection with an Acquisition Proposal or for access to the
properties, books or records of Fording or any Fording
Subsidiary by any Person. Such notice shall include a
description of the material terms and conditions of any
proposal, the identity of the Person making the first
mentioned proposal, inquiry or contact and provide such other
details of the proposal, inquiry or contact as the other
Parties may reasonably request. Fording shall keep the other
Parties informed of the status, including any change to the
material terms, of any such Acquisition Proposal or inquiry
in a timely manner, on at least a next day basis.
(e) If Fording receives a request for material non-public
information from a Person who has made an unsolicited bona
fide written Acquisition Proposal and Fording is permitted,
subject to and as contemplated under Section 4.4(c), to
negotiate the terms of such Acquisition Proposal, then, and
only in such case, the Board of Directors may, subject to the
execution by such Person of a confidentiality agreement
containing employee non-solicitation and standstill
provisions substantially similar to those contained in the
Confidentiality Agreements provide such Person with access to
information regarding Fording; provided, however, that the
Person making the Acquisition Proposal shall not be precluded
under such confidentiality agreement from making an
Acquisition Proposal for consideration for each Common Share
that is equal to or superior to that contained in such
Acquisition Proposal at the time of entry into such
confidentiality agreement in accordance with this Agreement,
and provided further that Fording sends a copy of any such
confidentiality agreement to the other Parties promptly upon
its execution and the other Parties are each provided with a
list of, and copies of, the information provided to such
Person and is also provided upon request with access to
similar information to which such Person was provided on a
timely basis.
(f) Fording shall ensure that its officers, directors and
employees and its subsidiaries and their officers, directors
and employees and any financial advisors or other advisors or
representatives retained by it or its subsidiaries are aware
of the provisions of this Section 4.4, and Fording shall be
responsible for any breach of this Section 4.4 by its and its
subsidiaries' officers, directors, employees, representatives
or agents.
4.5 RIGHT OF FIRST REFUSAL.
(a) Fording will not enter into any agreement, arrangement or
understanding regarding a Superior Proposal (a "Proposed
Agreement") without providing the other Parties with an
-52-
opportunity to amend this Agreement to provide for
consideration and financial terms which are, in the Board of
Directors' sole discretion, financially equal or superior to
those contained in the Proposed Agreement, with the result
that the Superior Proposal would cease to be a Superior
Proposal. Fording will provide the other Parties with a copy
of any Proposed Agreement, as executed by the Person making
the proposal, as soon as possible and in any event not less
than four Business Days prior to its proposed execution by
Fording. In the event the other Parties or any combination
thereof agree to amend the Agreement so that it would be
financially equal or superior to the Proposed Agreement,
Fording covenants to not enter into the Proposed Agreement
and shall agree to work with such other Parties to amend this
Agreement and no fee shall be payable under Section 6.3 in
respect of the Proposed Agreement.
(b) Subject to Section 4.1(a), nothing contained in this Section
4.5 shall limit in any way the obligation of Fording to
convene and hold the Fording Meeting.
4.6 ACCESS TO INFORMATION.
(a) Subject to Section 4.6(c) and applicable Laws, upon
reasonable notice Fording shall arrange to afford Sherritt's
officers, employees, counsel, accountants and other
authorized representatives and advisors access, during normal
business hours from the date hereof and until the earlier of
the Effective Date or the termination of this Agreement, to
its and its subsidiaries' properties, books, contracts and
records in respect to the Prairie Operations as well as to
its financial management personnel without materially
interfering with their other responsibilities, and, during
such period, Fording shall (and shall cause each of its
subsidiaries to) furnish promptly to Sherritt information
concerning the Prairie Operations as Sherritt may reasonably
request, subject to Fording confidentiality obligations.
Subject to Section 4.6(b) and applicable Laws, upon
reasonable notice, Sherritt shall arrange to afford Fording's
officers, employees, counsel, accountants and other
authorized representatives and advisors access, during normal
business hours from the date hereof and until the earlier of
the Effective Date or the termination of this Agreement, to
its and its subsidiaries' properties, books, contracts and
records in respect to the Luscar Contributed Assets as well
as to its financial management personnel without materially
interfering with their other responsibilities, and, during
such period, Sherritt shall (and shall cause each of its
subsidiaries to) furnish promptly to Fording information
concerning the Luscar Contributed Assets as Fording may
reasonably request, subject to Sherritt confidentiality
obligations. Any costs shall be at the expense of the Party
seeking access.
(b) The Parties acknowledge that, notwithstanding Section 4.6(a),
information may be competitively sensitive and that
disclosure thereof shall be limited to that which is
reasonably necessary for the purpose of (i) preparing
submissions or applications in order to obtain the Regulatory
Approvals, (ii) fulfilling legal obligations in connection
with public disclosure requirements under Law, including in
-53-
connection with the Further Supplement information circular
or a prospectus filing, and (iii) the advancement of the
Transaction; and such information shall be provided only to
those persons who need to know such information for the
foregoing purposes.
(c) Each of Sherritt and Fording acknowledges that information
provided to it under Section 4.6(a) above will be non-public
and/or proprietary in nature and will be subject to the terms
of the Confidentiality Agreements and Section 4.6(a). For
greater certainty, the provisions of the Confidentiality
Agreements shall survive the termination of this Agreement.
4.7 COMPLETION OF TRANSACTION.
The Parties shall co-operate with each other to solicit and encourage
Shareholders to vote for the Arrangement Resolution (for greater certainty,
this shall not include the payment of expenses incurred by the other Parties,
except as otherwise contemplated herein). Each Party shall take all necessary
action to complete the transactions contemplated by this Agreement, including
those contemplated by the attached Term Sheets.
ARTICLE 5
CONDITIONS
5.1 MUTUAL CONDITIONS PRECEDENT.
The respective obligations of each Party to complete the Transaction shall be
subject to the satisfaction, on or before the Closing Time, of the following
conditions precedent, each of which may only be waived by the mutual consent of
the Parties:
(a) the Arrangement Resolution shall have been approved at the
Fording Meeting in accordance with the Interim Order;
(b) the Final Order shall have been granted in form and substance
satisfactory to the Parties, each acting reasonably, and
shall not have been set aside or modified in a manner
unacceptable to the Parties, each acting reasonably, on
appeal or otherwise;
(c) Fording and/or the Partnership shall have in place credit
facilities in the aggregate of $540 million;
(d) the Articles of Arrangement and all necessary related
documents filed with the Director in accordance with the
Amended Arrangement shall be in form and substance
satisfactory to each of the Parties, acting reasonably, and
shall have been accepted for filing by the Director together
with the Final Order in accordance with subsection 192(6) of
the CBCA;
(e) there shall be no action taken under any existing applicable
Law or regulation, nor any statute, rule, regulation or
order, which is enacted, enforced, promulgated or issued by
-54-
any court, department, commission, board, regulatory body,
government or Governmental Authority or similar agency,
domestic or foreign, nor shall there be in force any order or
decree of any such entity that:
(i) makes illegal or otherwise directly or indirectly
restrains, enjoins or prohibits the Transaction or
any of the other transactions contemplated herein;
(ii) results in any judgment or assessment of material
damages directly or indirectly relating to the
transactions contemplated herein; or
(iii) imposes or confirms material limitations on the
ability of the Fund to issue Units or effectively
exercise full rights of ownership of the securities
of New Fording, including, without limitation, the
right to vote any such securities;
(f) the Regulatory Approvals and the third party approvals
required under the CP Arrangement Agreement, the Genesee
Agreements and the CPR Agreement as well as the FX
Acknowledgements shall have been obtained or satisfied on
terms and conditions satisfactory to the Parties acting
reasonably;
(g) other than the Regulatory Approvals, all consents, waivers,
permits, orders and approvals of any Governmental Authority,
and the expiry of any waiting periods, in connection with, or
required to permit, the consummation of the Amended
Arrangement, the failure of which to obtain or the non-expiry
of which would constitute a criminal offence or would have a
Material Adverse Effect on such Party shall have been
obtained or satisfied on terms that could not reasonably be
expected to have a Material Adverse Effect on such Party;
(h) there shall not have occurred any actual change or amendment
to, or any proposal by the Minister of Finance (Canada) or
Internal Revenue Service to change or amend, the Canadian Tax
Act, or U.S. Tax Code, as applicable or to any applicable
provincial tax legislation or the regulations thereunder or
any publicly stated administrative position or practice in
relation thereto which individually or in the aggregate,
directly or indirectly, has or could reasonably be expected
to have any material adverse effect on the benefits
anticipated to be enjoyed by Securityholders upon
consummation of the Transaction;
(i) the approval of the TSX to the conditional substitutional
listing of the Units to be issued pursuant to the Amended
Arrangement shall have been obtained, subject only to the
filing of required documents and such Units shall also have
been listed by the NYSE, subject to official notice of
issuance; and
(j) this Agreement shall not have been terminated pursuant to
Article 6.
-55-
5.2 ADDITIONAL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF TECK AND
WESTSHORE.
The respective obligations of Teck and Westshore to complete the Transaction
shall also be subject to the fulfilment of each of the following conditions
precedent (each of which is for Teck and Westshore's exclusive benefit and may
be waived only by Teck and Westshore acting jointly):
(a) all covenants of Fording, OTPP and Sherritt under this
Agreement to be performed on or before the Effective Time
shall have been duly performed by Fording, OTPP and Sherritt
in all material respects and Teck and Westshore shall have
received a certificate of each of Fording, OTPP and Sherritt,
respectively, addressed to Teck and Westshore respectively
and dated the Effective Date, signed on behalf of Fording,
OTPP and Sherritt, respectively, by two senior executive
officers of each such Party (on each such Party's behalf and
without personal liability), confirming the same as at the
Effective Date;
(b) the representations and warranties of each of Fording, OTPP
and Sherritt in this Agreement shall have been true and
correct on the date of this Agreement as follows: (i) the
representations and warranties of Fording, OTPP and Sherritt
that are qualified by references to materiality shall be true
and correct; (ii) the representations and warranties of
Fording, OTPP and Sherritt not so qualified (except Sections
3.1(g) and 3.7(c)) shall be true and correct (except for the
failure of such representation to be true and correct,
individually or in the aggregate, which has not had and could
not reasonably be expected to have a Material Adverse Effect
on Fording, OTPP or Sherritt, respectively, or prevent or
delay the Transaction); and (iii) the representations in
Sections 3.1(g) and 3.7(c) shall be true and correct in all
material respects, in each case as of the Closing Time as if
made on and as of such time (except to the extent such
representations and warranties speak solely as of an earlier
date, in which event such representations and warranties
shall be true and correct to such extent as of such earlier
date, or except as affected by transactions contemplated or
permitted by this Agreement), and Teck and Westshore shall
have received a certificate of each of Fording, OTPP and
Sherritt, respectively addressed to Teck and Westshore and
dated the Effective Date, signed on behalf of Fording, OTPP
and Sherritt, respectively, by two senior executive officers
of each such Party (on each such Party's behalf and without
personal liability), confirming the same as at the Effective
Date;
(c) the board of directors of Fording shall have adopted all
necessary resolutions, and all other necessary corporate
action shall have been taken by Fording and the subsidiaries
to permit the consummation of the Amended Arrangement;
(d) during the Pre-Effective Date Period, there shall not have
occurred or have been disclosed to the public if previously
undisclosed to the public and the other Parties, a Material
Adverse Change to Fording as it will be constituted including
the Luscar Contributed Assets; and
-56-
(e) the Transaction Agreements and the Terminal Agreement shall
have been executed and delivered to the other Parties, as
applicable, by Fording, the Fund, OTPP and Sherritt.
5.3 EFFECT OF BREACH.
Teck and Westshore may not rely on the failure of another Party to satisfy any
of the conditions precedent set forth in Section 5.1 or Section 5.2 if the
condition precedent would have been satisfied but for a material default by
either Teck or Westshore in complying with its respective obligations in this
Agreement.
5.4 ADDITIONAL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF FORDING.
The obligations of Fording to complete the Transaction shall also be subject to
the following conditions precedent (each of which is for the exclusive benefit
of Fording and may be waived by Fording):
(a) all covenants of Teck, Westshore, OTPP and Sherritt under
this Agreement to be performed on or before the Closing Time
shall have been duly performed by Teck, Westshore, OTPP and
Sherritt, as the case may be, in all material respects, and
Fording shall have received a certificate of each of Teck,
Westshore, OTPP and Sherritt addressed to Fording and dated
the Effective Date, signed on behalf of Teck, Westshore, OTPP
and Sherritt, respectively, by two senior executive officers
of each of Teck, OTPP and Sherritt, and one trustee in the
case of Westshore (on each such Party's behalf and without
personal liability), confirming the same as at the Effective
Date;
(b) all representations and warranties of each of Teck,
Westshore, OTPP and Sherritt in this Agreement shall have
been true and correct on the date hereof as follows: (i) the
representations and warranties of Teck, Westshore, OTPP and
Sherritt that are qualified by references to materiality
shall be true and correct; (ii) the representations and
warranties of Teck, Westshore, OTPP and Sherritt not so
qualified (except Section 3.3(e) and 3.7(c)) shall be true
and correct (except for the failure of such representation to
be true and correct, individually or in the aggregate, has
not had and could not reasonably be expected to have a
Material Adverse Effect on any of the Teck Contributed
Assets, the Luscar Contributed Assets or Westshore, as the
case may be, and that could not reasonably be expected to
prevent or delay the Transaction); (iii) the representations
in Section 3.3(e) and 3.7(c) shall be true and correct in all
material respects, in each case as of the Closing Time as if
made on and as of such time (except to the extent such
representations and warranties speak solely as of an earlier
date, in which event such representations and warranties
shall be true and correct to such extent as of such earlier
date, or except as affected by transactions contemplated or
permitted by this Agreement), and Fording shall have received
a certificate of each of Teck, Westshore, OTPP and Sherritt
addressed to Fording, and dated the Effective Date, signed on
behalf of each of Teck, Westshore, OTPP and Sherritt,
respectively, by two senior executive officers of each such
-57-
Party (or one trustee in the case of Westshore) (in each case
on each such Party's behalf and without personal liability),
confirming the same as at the Effective Date;
(c) each Party shall have deposited, prior to the prescribed time
for payment under the Amended Plan, the aggregate cash
amounts payable by that Party pursuant to Section 2.2 and 2.3
to a trust account maintained by the Registrar and Transfer
Agent of Fording to facilitate payment to Securityholders in
accordance with the Amended Plan;
(d) the Unitholder Rights Plan Resolution shall have been
approved at the Fording Meeting by not less than a simple
majority of the votes cast by the Shareholders in accordance
with any applicable Laws;
(e) arrangements satisfactory to Fording shall have been entered
into to ensure that all outstanding Options shall have been
exchanged, ultimately, for Exchange Options issued under the
Exchange Option Plan; and
(f) Fording's credit and foreign exchange facilities shall have
been reformulated to the satisfaction of the Board of
Directors, acting reasonably.
5.5 EFFECT OF BREACH.
Fording may not rely on the failure of another Party to satisfy any of the
conditions precedent in Section 5.1 or Section 5.4 if the condition precedent
would have been satisfied but for a material default by Fording in complying
with its obligations in this Agreement.
5.6 ADDITIONAL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF OTPP AND
SHERRITT.
The respective obligations of each of OTPP and Sherritt to complete the
Transaction shall also be subject to the fulfilment of each of the following
conditions precedent (each of which is for OTPP and Sherritt's exclusive
benefit and may be waived by OTPP and Sherritt, acting jointly):
(a) all covenants of Fording, Teck and Westshore under this
Agreement to be performed on or before the Effective Time
shall have been duly performed by Fording, Teck and Westshore
in all material respects and OTPP and Sherritt shall have
received a certificate of each of Fording, Teck and Westshore
addressed to them and dated the Effective Date, signed on
behalf of each of Fording and Teck by two senior executive
officers and on behalf of Westshore by one trustee of
Westshore (in each case on each such Party's behalf and
without personal liability), confirming the same as at the
Effective Date;
(b) the representations and warranties of each of Fording, Teck
and Westshore in this Agreement shall have been true and
correct on the date of this Agreement as follows: (i) the
representations and warranties of Fording, Teck and Westshore
that are qualified by references to materiality shall be true
and correct; (ii) the representations and warranties of
Fording, Teck and Westshore not so qualified (except Section
3.1(g) and 3.3(e)) shall be true and correct (except for the
-58-
failure of such representation to be true and correct,
individually or in the aggregate, which has not had and could
not reasonably be expected to have a Material Adverse Effect
on Fording, Teck or Westshore, as applicable, or prevent or
delay the Transaction); (iii) the representations in Section
3.1(g) and 3.3(e) shall be true and correct in all material
respects, in each case as of the Closing Time as if made on
and as of such time (except to the extent such
representations and warranties speak solely as of an earlier
date, in which event such representations and warranties
shall be true and correct to such extent as of such earlier
date, or except as affected by transactions contemplated or
permitted by this Agreement), and OTPP and Sherritt shall
have received a certificate of each of Fording, Teck and
Westshore, respectively, addressed to OTPP and Sherritt and
dated the Effective Date, signed on behalf of Fording and
Teck by two senior executive officers of each such Party and
on behalf of Westshore by one trustee of Westshore (in each
case on each such Party's behalf and without personal
liability), confirming the same as at the Effective Date;
(c) the board of directors of Fording shall have adopted all
necessary resolutions, and all other necessary corporate
action shall have been taken by Fording and the subsidiaries
to permit the consummation of the Amended Arrangement; and
(d) during the Pre-Effective Date Period, there shall not have
occurred or have been disclosed to the public if previously
undisclosed to the public and the other Parties, a Material
Adverse Change to Fording or the Teck Contributed Assets.
5.7 EFFECT OF BREACH.
OTPP and Sherritt may not rely on the failure of another Party to satisfy any
of these conditions precedent in Section 5.1 or Section 5.6 if the condition
precedent would have been satisfied but for a material default by either OTPP
or Sherritt in complying with their respective obligations in this Agreement.
5.8 NOTICE AND CURE PROVISIONS.
(a) The Parties will give prompt notice to each other of the
occurrence, or failure to occur, at any time during the
Pre-Effective Date Period of any event or state of facts
which occurrence or failure would, or would be likely to:
(i) cause any of the representations or warranties of
that Party contained herein to be untrue or
inaccurate on the date hereof or on the Effective
Time such that the conditions set forth in any of
Sections 5.1, 5.2, 5.4 or 5.6 would not be satisfied
as of the Effective Time; or
(ii) result in the failure in any material respect to
comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by the
other hereunder prior to the Effective Time such
that the conditions set forth in any of Sections
5.1, 5.2, 5.4 or 5.6, as applicable, would not be
satisfied as of the Effective Time.
-59-
(b) A Party may not seek to rely upon any conditions precedent
contained in Sections 5.1, 5.2, 5.4 or 5.6, nor exercise any
termination right arising therefrom, unless forthwith and in
any event prior to the filing of the Articles of Arrangement
for acceptance by the Director, a Party, as the case may be,
has delivered a written notice to the other Parties
specifying in reasonable detail all breaches of covenants,
representations and warranties or other matters which such
Party is asserting as the basis for the non-fulfilment of the
applicable condition precedent or the exercise of the
termination right, as the case may be. If any such notice is
delivered, provided that the breaching Party receiving such
notice is proceeding diligently to cure such matter, if such
matter is susceptible to being cured (for greater certainty,
except by way of disclosure in the case of representations
and warranties), the other Parties may not terminate this
Agreement as a result thereof until four Business Days from
such date on which such notice is delivered. If such notice
has been delivered prior to the date of the Fording Meeting,
such meeting shall, unless the Parties agree otherwise, be
postponed or adjourned until the expiry of such period. If
such notice has been delivered prior to the making of the
application for the Final Order or the filing of the Articles
of Arrangement with the Director, such application or filing,
as the case may be, shall be postponed until the expiry of
such period. For greater certainty, in the event that such
matter is cured within the time period referred to herein
without a Material Adverse Effect on the Party in breach,
this Agreement may not be terminated as a result of the cured
breach.
5.9 SATISFACTION OF CONDITIONS.
The conditions precedent set out in Sections 5.1, 5.2, 5.4 and 5.6 shall be
conclusively deemed to have been satisfied, waived or released when a
Certificate of Arrangement in respect of the Amended Arrangement is issued by
the Director, it being understood, that such issuance will not extinguish
liability arising from a breach of any covenant, representation or warranty.
ARTICLE 6
AMENDMENT AND TERMINATION
6.1 AMENDMENT.
Subject to applicable Laws, this Agreement may, at any time and from time to
time before or after the holding of the Fording Meeting but not later than the
Effective Date, be amended by mutual written agreement of the Parties.
6.2 TERMINATION.
(a) If any condition contained in Sections 5.1 or 5.2 is not
satisfied at or before the Closing Time, then Teck and
Westshore, acting jointly, may, subject to Section 5.3 and to
Section 5.8 by notice to the other Parties terminate this
Agreement and the obligations of the Parties hereunder
(except as otherwise herein provided, including under Section
6.3), but without detracting from the rights of Teck and
-60-
Westshore arising from any breach by another Party but for
which the condition would have been satisfied.
(b) If any condition contained in Sections 5.1 or 5.4 is not
satisfied at or before the Closing Time, then Fording may,
subject to Section 5.5 and to Section 5.8, by notice to the
other Parties terminate this Agreement and the obligations of
the Parties hereunder (except as otherwise herein provided,
including under Section 6.3), but without detracting from the
rights of Fording arising from any breach by another Party
but for which the condition would have been satisfied.
(c) If any condition contained in Section 5.1 or 5.6 is not
satisfied at or before the Closing time, then OTPP and
Sherritt, acting jointly, may, subject to Section 5.7 and
Section 5.8, by notice to the other Parties terminate the
Agreement and the obligations of the Parties hereunder
(except as otherwise herein provided, including under Section
6.3), but without detracting from the rights of OTPP and
Sherritt arising from any breach by another Party but for
which the condition would have been satisfied.
(d) This Agreement may:
(i) be terminated by the mutual agreement of the
Parties, (and for greater certainty, without further
action on the part of the Securityholders if
terminated after the holding of the Fording
Meeting);
(ii) be terminated by any Party if there shall be passed
any Law that makes consummation of the Amended
Arrangement illegal or otherwise prohibited;
(iii) be terminated by a Party other than Fording, if
(A) the Board of Directors shall have failed to
recommend or shall have withdrawn, modified
or changed its approval or recommendation
of the Arrangement Resolution, or
(B) the Board of Directors shall have approved
or recommended any Acquisition Proposal
other than the Amended Arrangement;
(iv) be terminated by Fording, provided that Fording is
not then in material breach or default of any of its
obligations hereunder, upon any determination by the
Board of Directors at the conclusion of the process
set out in Section 4.4 that an Acquisition Proposal
constitutes a Superior Proposal and that the
Parties' rights under Section 4.5 have expired
unexercised by them; or
(v) be terminated by any Party if the approval of the
Arrangement Resolution by the Securityholders, in
the manner set out in the Interim Order, shall not
have been obtained at the Fording Meeting, or if a
court as a matter of final determination that is not
-61-
subject to appeal declines to grant the Final Order
in a form consistent with this Agreement;
in each case, prior to the Effective Time.
(e) If the Effective Date has not occurred on or prior to the
Outside Date, then, unless otherwise agreed in writing by the
Parties, this Agreement shall terminate provided that in the
event that the conditions set forth in Section 5.1(f) above
shall not have been satisfied by that date, a Party may
unilaterally extend the Outside Date until May 31, 2003 upon
written notice to the other Parties, in which case the
Outside Date shall be deemed for all purposes to be May 31,
2003, provided that the right to terminate this Agreement
pursuant to this Section 6.2(e) shall not be available to the
Party seeking to terminate if any action of such Party or its
Affiliates or the failure of such Party or its Affiliates to
perform any of its obligations under this Agreement required
to be performed at or prior to the Effective Time shall have
resulted in the conditions contained in Sections 5.1, 5.2,
5.4 or 5.6 (as applicable) not having been satisfied prior to
the Outside Date.
(f) If this Agreement is terminated in accordance with the
foregoing provisions of this Section 6.2, no Party shall have
any further liability to perform its obligations under this
Agreement except as provided in Section 6.3 and as otherwise
expressly contemplated by this Agreement, and provided that
neither the termination of this Agreement nor anything
contained in this Section 6.2(f) shall relieve any Party from
any liability for any breach by it of this Agreement,
including from any inaccuracy in its representations and
warranties and any nonperformance by it of its covenants made
herein.
6.3 BREAK FEE.
(a) If:
(i) either Teck or Westshore shall terminate this
Agreement pursuant to Section 6.2(d)(iii) or Fording
shall terminate this Agreement pursuant to Section
6.2(d)(iv) in circumstances where Teck and Westshore
are not in material breach of their obligations
under this Agreement;
(ii) either Fording, Teck or Westshore shall terminate
this Agreement pursuant to Section 6.2(d)(v) and the
Board of Directors, within six months following the
date of the Fording Meeting, approves or recommends
an Acquisition Proposal that was publicly made,
publicly announced or otherwise publicly disclosed
by any Person other than Teck prior to the Fording
Meeting but subsequent to the date hereof or such an
Acquisition Proposal is actually consummated within
six months following the date of the Fording
Meeting; or
(iii) after OTPP and Sherritt withdraws the SCAI Offer
pursuant to Section 2.3(m) of this Agreement, OTPP
and/or Sherritt or any of their respective
-62-
Affiliates makes a new Acquisition Proposal after
the date of this Agreement on tee ns substantially
similar or superior to those in the SCAI Offer as it
existed on December 16, 2002 and the Board of
Directors, within six months following the date
hereof, approves or recommends such Acquisition
Proposal or such Acquisition Proposal is actually
consummated within six months following the date of
the Fording Meeting,
then in any such case Fording shall pay to Teck and Westshore
together the Break Fee in immediately available funds to an
account designated by Teck and Westshore. Such payment shall
be due (A) in the case of a termination specified in clause
(i), within one Business Day after written notice of
termination by Teck or Westshore or (B) in the ease of a
termination specified in clause (ii) or (iii) above, one
Business Day after the approval, recommendation or
consummation of an Acquisition Proposal as described in
Section 6.3(a)(ii) or (iii).
(b) Break fee means $51 million (the "BREAK FEE").
(c) Fording's obligations under this Section 63 survive
termination or expiry of this Agreement. Fording shall not be
obligated to make more than one payment pursuant to this
Section 6.3.
For greater certainty, the Break Fee is payable only in the circumstances set
out in this Section 6.3 and the Break Fee is not payable solely because
Shareholders do not approve the Arrangement Resolution.
6.4 REMEDIES.
The Parties hereto acknowledge and agree that an award of money damages would
be inadequate for any breach of this Agreement by any Party or its
representatives and any such breach would cause the non-breaching Party
irreparable harm. Accordingly, the Parties hereto agree that, in the event of
any breach or threatened breach of this Agreement by one of the Parties, the
non-breaching Party will also be entitled, without the requirement of posting a
bond or other security, to equitable relief, including injunctive relief and
specific performance. Such remedies will not be the exclusive remedies for any
breach of this Agreement but will be in addition to all other remedies
available at Law or equity to each of the Parties.
ARTICLE 7
GENERAL
7.1 NOTICES.
Any notice, consent or approval required or permitted to be given in connection
with this Agreement (in this Section referred to as a "NOTICE") shall be in
writing and shall be sufficiently given if delivered (whether in person, by
courier service or other personal method of delivery), or if transmitted by
facsimile, with or without copies by e-mail (provided it is understood that
e-mail shall not be a form of delivery):
-63-
(a) If to Fording at:
Xxxxx 0000
000 Xxxxx Xxxxxx X.X.
Xxxxxxx XX X0X XX0
Attention: Xxx Xxxxx
Telecopier No.: (000) 000-0000
Email: xxx_xxxxx@xxxxxxx.xx
with a copy to:
Xxxxx Xxxxxx & Harcourt LLP
0000, 000 - 0xx Xxxxxx XX
Xxxxxxx XX X0X 0X0
Attention: Xxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
Email: xxxxxxx@xxxxx.xxx
(b) If to Teck at:
Xxxxx 000
000 Xxxxxxx Xxxxxx
Xxxxxxxxx XX X0X 0X0
Attention: Xxxxx Rozee
Telecopier No.: (000) 000-0000
Email: xxxxx.xxxxx@xxxxxxxxxxx.xxx
with a copy to:
Lang Xxxxxxxx
BCE Place, XX Xxx 000
Xxxxx 0000, 000 Xxx Xxxxxx
Xxxxxxx XX X0X 0X0
Attention: Xxxxxxx Xxxxx
Telecopier No.: (000) 000-0000
Email: xxxxxx@xxxxxxxxxxxx.xx
(c) If to Westshore at:
Westshore Terminals Income Fund
Suite 1600
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx XX X0X 0X0
-64-
Attention: X.X. Xxxxxxxxx / X. Xxxxxxxxx
Telecopier No.: (000) 000-0000
Email: xxxxxxx_xxxxxxxxx@xx-xxxxx.xxx
xxxx_xxxxxxxxx@xx-xxxxx.xxx
(d) If to OTPP at:
0000 Xxxxx Xxxxxx
Xxxxxxx, XX X0X 0X0
Attention: Senior Vice-President, Global
Active Equities
Telecopier No.: (000) 000-0000
Email: Xxxxx_Xxxxxx@xxxx.xxx
With a copy to OTPP:
0000 Xxxxx Xxxxxx
Xxxxxxx, XX X0X 0X0
Attention: General Counsel
(e) If to Sherritt at:
0000 Xxxxx Xxxxxx
Xxxxxxx, XX X0X 0X0
Attention: Xxxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
Email: xxxxxxx@Xxxxxxxx.xxx
With a copy to Torys LLP:
Xxxxx 0000, Xxxxxxxx Xxxx Xxxxx,
XX Xxxxxx
Xxxxxxx, XX X0X 0X0
Attention: Xxxxx Xxxxxxxxx
Telecopier No.: (000) 000-0000
Email: xxxxxxxxxx@xxxxx.xxx
Any Notice delivered or transmitted to a Party as provided above shall be
deemed to have been given and received on the day it is delivered or
transmitted, provided that it is delivered or transmitted on a Business Day
prior to 5:00 p.m. local time in the place of delivery or receipt. However, if
the Notice is delivered or transmitted after 5:00 p.m. local time or if such
day is not a Business Day then the Notice shall be deemed to have been given
and received on the next Business Day.
-65-
Any Party may, from time to time, change its address by giving Notice to the
other Parties in accordance with the provisions of this Section.
7.2 ASSIGNMENT.
Except as otherwise permitted hereunder, neither this Agreement nor any rights
or obligations under this Agreement shall be assignable by any Party without
the prior written consent of each of the other Parties. Subject thereto,
provided that no assignment shall relieve a Party of its obligations, this
Agreement shall enure to the benefit of and be binding upon the Parties and
their respective successors (including any successor by reason of amalgamation
of any Party) and permitted assigns. No third party shall have any rights
hereunder unless expressly stated to the contrary.
7.3 CO-OPERATION AND FURTHER ASSURANCES.
The Parties shall with reasonable diligence do all such things and provide all
such reasonable assurances as may be required to consummate the transactions
contemplated by this Agreement, and each Party shall provide such further
documents or instruments required by any other Party as may be reasonably
necessary or desirable to effect the purpose of this Agreement and carry out
its provisions. Without limitation and subject to the terms of this Agreement,
the Parties shall co-operate with each other in furtherance of completing the
Transaction contemplated by this Agreement.
7.4 EFFECT ON WESTSHORE TRUSTEE.
The trustee of Westshore (on behalf of the trustees of Westshore) has entered
into this Agreement solely in his capacity as trustee on behalf of Westshore
and the obligations of Westshore hereunder shall not be personally binding upon
the trustee or upon any of the unitholders of Westshore or any annuitant under
a plan of which a unitholder is a trustee or carrier ("Annuitant"). Any
recourse against Westshore, the trustee or any unitholder or annuitant in any
manner in respect of any indebtedness, obligation or liability of Westshore
arising hereunder or arising in connection herewith or from the matters to
which this Agreement relates, if any, including, without limitation, claims
based on negligence or otherwise tortious behaviour, shall be limited to, and
satisfied only out of Westshore's assets, without recourse to the personal
assets of any of the foregoing Persons.
7.5 EXPENSES.
Subject to Section 2.3 and 6.3, the Parties agree that all costs and expenses
of the Parties relating to the Transaction and the transactions contemplated
hereby, including legal fees, accounting fees, financial advisory fees,
regulatory filing fees, stock exchange fees, all disbursements of advisors and
printing and mailing costs, shall be paid by the Party incurring such expenses.
-66-
7.6 EXECUTION AND DELIVERY.
This Agreement may be executed by the Parties in counterparts and may be
executed and delivered by facsimile and all such counterparts and facsimiles
shall together constitute one and the same agreement.
7.7 TRANSFER TAX ELECTIONS.
The Parties shall co-operate in good faith to file any relevant elections in
order to minimize taxes payable under Part IX of the EXCISE TAX ACT (Canada),
the Quebec Sales Tax Act and any other provincial or territorial legislation
imposing taxes on the sale or transfer of the Fording Contributed Assets, Teck
Contributed Assets, Luscar Contributed Assets and Prairie Operations.
7.8 ASSIGNMENT OF TAX POOLS.
The Luscar Entities shall elect to assign the benefit of their British Columbia
mining tax pools related to the Luscar Contributed Assets to New Fording.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the
date first written above.
FORDING INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive
Officer
TECK COMINCO LIMITED
By: /s/ Xxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Deputy Chairman and Chief
Executive Officer
WESTSHORE TERMINALS INCOME FUND,
by its trustees
FOR AND ON BEHALF OF THE TRUSTEES
By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Trustee
ONTARIO TEACHERS' PENSION PLAN BOARD
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
Title: Senior Vice-President, Global
Active Equities
SHERITT INTERNATIONAL CORPORATION
By: /s/ Xxx Xxxxxxx
----------------------------------------
Name: Xxx Xxxxxxx
Title: Chairman
SCHEDULE 2.1
PLAN OF ARRANGEMENT MADE PURSUANT TO SECTION 192
OF THE CANADA BUSINESS CORPORATIONS ACT
-i-
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 1. INTERPRETATION.....................................................1
1.1 Definitions.......................................................1
1.2 Certain Rules of Interpretation...................................7
1.3 Schedules.........................................................8
ARTICLE 2. PURPOSE AND EFFECT OF THE ARRANGEMENT..............................8
2.1 Arrangement.......................................................8
2.2 Effectiveness.....................................................8
ARTICLE 3. ARRANGEMENT........................................................8
3.2 Adjustments to Cash Option and Unit Option Elections.............13
3.3 Manner of Making Elections.......................................14
ARTICLE 4. STATED CAPITAL ADDITIONS..........................................14
4.1 Additions to Stated Capital......................................14
4.2 Stated Capital Accounts of New Fording...........................15
ARTICLE 5. NOTE AND PREFERRED SHARE DETERMINATION............................15
5.1 Subordinated Notes and Preferred Shares..........................15
ARTICLE 6. DISSENTING SHAREHOLDERS...........................................16
6.1 Rights of Dissent................................................16
6.2 Recognition of Dissenting Shareholders...........................16
ARTICLE 7. OUTSTANDING CERTIFICATES..........................................16
7.1 Outstanding Certificates.........................................16
7.2 Provision of Consideration.......................................16
7.3 Depository.......................................................17
7.4 No Entitlement to Interest.......................................17
7.5 Certificates.....................................................17
ARTICLE 8. AMENDMENTS........................................................17
8.1 Amendments.......................................................17
8.2 Proposed Amendments..............................................17
8.3 Effectiveness of Amendments......................................18
SCHEDULE "A"
FORDING CANADIAN COAL TRUST
EXCHANGE OPTION PLAN
-i-
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 1 PURPOSE OF THE PLAN................................................2
1.1 Purpose...............................................................2
ARTICLE 2 DEFINITIONS AND INTERPRETATION.....................................2
2.1 Definitions...........................................................2
2.2 Interpretation........................................................6
2.3 Effectiveness.........................................................6
ARTICLE 3 GENERAL PROVISIONS OF THE PLAN.....................................6
3.1 Administration........................................................6
3.2 Units Reserved........................................................6
3.3 Limits with respect to Insiders.......................................6
3.4 Non-Exclusivity.......................................................7
3.5 Amendment or Termination of Plan and Exchange Options.................7
3.6 Compliance with Laws and Stock Exchange Rules.........................7
3.7 Participation in the Plan.............................................8
3.8 CP Optionholders......................................................8
ARTICLE 4 EXCHANGE OF OPTIONS................................................8
4.1 Exchange of Options...................................................8
4.2 Option Agreement......................................................9
4.3 Early Expiry..........................................................9
4.4 Limited Assignment...................................................10
4.5 No Rights as Unitholder or to Remain an Eligible Person; Status of
Consultants.......................................................11
4.6 Adjustments..........................................................11
ARTICLE 5 EXERCISE OF OPTIONS...............................................12
5.1 Manner of Exercise...................................................12
5.2 Delivery of Unit Certificate.........................................12
5.3 Cashless Exercise....................................................13
5.4 Withholding..........................................................13
5.5 Indemnification......................................................13
5.6 Effect on Trustees...................................................14
SCHEDULE "A" - NOTICE OF EXERCISE FORDING CANADIAN COAL TRUST EXCHANGE
OPTION PLAN
SCHEDULE "B" - FORM OF OPTION AGREEMENT FORDING CANADIAN COAL TRUST EXCHANGE
OPTION PLAN OPTION AGREEMENT
SCHEDULE "C" - CASHLESS EXERCISE INSTRUCTION FORM FORDING CANADIAN COAL
TRUST EXCHANGE OPTION PLAN
-ii-
TABLE OF CONTENTS
(continued)
PAGE
SCHEDULE "B" - FORDING CANADIAN COAL TRUST NOTE
SCHEDULE "C"
SCHEDULE "D - 4123212 CANADA LTD. COMMON SHARES
SCHEDULE "E" - 4123212 CANADA LTD. NOMINAL NOTE
SCHEDULE "F" - 4123212 CANADA LTD. PREFERRED SHARES
SCHEDULE "G" - 4123212 CANADA LTD. PROMISSORY NOTE
SCHEDULE "H - FCL AMALCO AMALGAMATION PROVISIONS
SCHEDULE "I" - NEW FORDING AMALGAMATION PROVISIONS
APPENDIX 1 TO SCHEDULE "I"
APPENDIX J - LUSCAR/CONSOL NOTE
-iii-
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS.
In this Plan of Arrangement, the following terms have the following respective
meanings:
(a) "ARRANGEMENT" means the arrangement under Section 192 of the
CBCA described in this Plan of Arrangement involving the
Corporation, FCL, Subco, the Fund, Teck, Westshore, TBCI,
QCP, Luscar, CONSOL and SCPII;
(b) "BUSINESS DAY" means a day, which is not a Saturday, Sunday
or statutory holiday in the Provinces of Alberta, British
Columbia and Ontario, on which the principal commercial banks
in downtown Calgary, Vancouver and Toronto are generally open
for the transaction of commercial banking business;
(c) "CANADIAN TAX ACT" means the Income Tax Act, R.S.C. 1985, c.1
(5th Supp.), as amended;
(d) "CASH OPTION" means the election available to Participating
Shareholders pursuant to the Arrangement to ultimately
receive $35.00 in cash for each Common Share in respect of
which an election is made, subject to pro-ration, which
election is given effect under this Plan by such
Participating Shareholder receiving a Fund Note instead of a
Unit for the exchanges described herein;
(e) "CBCA" means the Canada Business Corporations Act, R.S.C.
1985, C.c-44, as amended, including the regulations
promulgated thereunder;
(f) "COMBINATION AGREEMENT" means the combination agreement dated
January 13, 2003 between the Corporation, Teck, Westshore,
OTPP and Sherritt International Corporation, as the same may
be amended in accordance with its terms;
(g) "COMMON SHARES" means the common shares in the capital of the
Corporation;
(h) "COMMON SHARE TRADING PRICE" means the weighted average
trading price of the Common Shares on the TSX for the five
trading days immediately preceding the Effective Date;
(i) "CONSOL" means CONSOL Energy Inc., a corporation existing
under the laws of ?;
(j) "CORPORATION" or "FORDING" means Fording Inc., a corporation
existing under the laws of Canada;
(k) "CP TRANSACTION" means the transaction completed on October
1, 2001 pursuant to which Fording became a publicly traded
corporation, a predecessor to Fording having previously been
indirectly owned by a single shareholder, Canadian Pacific
Limited;
(l) "CP OPTIONHOLDERS" means the former Canadian Pacific Limited
optionholders who held options and accompanying share
appreciation rights under the key employee stock option plan
of Canadian Pacific Limited which options and stock
appreciation rights were replaced, in part, by options and
accompanying share appreciation rights issued under Fording's
key employee stock option plan pursuant to a plan of
arrangement setting forth the steps comprising the CP
Transaction;
(m) "DEPOSITORY" means Computershare Trust Company of Canada as
the registrar and transfer agent of the Units;
(n) "DIRECTOR" means the Director appointed under Section 260 of
the CBCA;
(o) "DISSENTING SHAREHOLDER" means a registered Shareholder who
has duly exercised, and who does not, prior to the time at
which the resolution of Securityholders authorizing the
Arrangement is approved, withdraw or otherwise relinquish the
dissent rights available to it in connection with the
Arrangement;
(p) "EFFECTIVE DATE" means the date shown on the Certificate of
Arrangement to be issued by the Director giving effect to the
Arrangement;
(q) "EFFECTIVE TIME" means the first moment in time on the
Effective Date;
(r) "ELECTED CASH AMOUNT" has the meaning set out in Section
3.2(b)(i);
(s) "ELECTED UNIT AMOUNT" means the aggregate number of Common
Shares in respect of which holders of Common Shares have
elected or are deemed to have elected to receive ultimately
Units in respect of their Common Shares, prior to any
pro-ration hereunder;
(t) "ELECTION FORM" means the election form for use by
Participating Shareholders in the form provided to them;
(u) "EXCHANGE OPTION PLAN" means the Unit option plan of the Fund
created as part of the Arrangement pursuant to which Options
will ultimately be exchanged for Exchange Options in the form
attached to this Plan as Schedule "A".
(v) "EXCHANGE OPTIONS" means options to purchase Units, and any
accompanying unit appreciation rights, issued under the
Exchange Option Plan;
(w) "EXCLUDED ASSETS" means all of the outstanding shares and
debt of NYCO Minerals Inc. and 627066 Alberta Ltd., the
Initial Unit and Fording's rights and obligations in
connection with its interests in a former mining operation
located at Mount Washington;
(x) "EXISTING OPTION PLANS" means, collectively, the
Corporation's Directors' Stock Option Plan and its Key
Employee Stock Option Plan;
-2-
(y) "FCL" means Fording Coal Limited, a corporation existing
under the laws of Canada;
(z) "FCL AMALCO" means the corporation resulting from the
amalgamation of the Corporation and FCL which forms part of
this Plan of Arrangement;
(aa) "FCL AMALCO COMMON SHARES" means the common shares in the
capital of FCL Amalco;
(bb) "FUND" means the Fording Canadian Coal Trust, a trust to be
established under the laws of Alberta pursuant to a
declaration of trust;
(cc) "FUND NOTES" means the demand non-interest bearing notes of
the Fund, each with a principal amount of $35.00, issuable
pursuant to the Plan of Arrangement, substantially in the
form attached as Schedule "B";
(dd) "INITIAL UNIT" means the Unit to be issued to FCL in
consideration of the contribution of all of the issued and
outstanding common shares of Subco upon the formation and
settlement of the Fund;
(ee) "INFORMATION CIRCULAR" means the Notice of Meeting, Notice of
Petition and Information Circular of the Corporation dated
November 20, 2002 and the supplement thereto dated December
8, 2002;
(ff) "LONG-TERM HOLDER" means a Shareholder who:
(i) owned, or was deemed by the Canadian Tax Act to own,
shares of Canadian Pacific Limited ("CPL") on
January 1, 1972, had a cost in such shares on
January 1, 1972 that was less than $13.88, continued
to hold such shares until October 1, 2001, being the
date on which the CP Transaction occurred, and
continues to hold the Common Shares received in
exchange for such shares of CPL through to the
Effective Date; or
(ii) is an individual (other than a trust) resident in
Canada who owned shares of CPL on February 22, 1994,
continued to hold such shares until October 1, 2001,
being the date on which the CP Transaction occurred,
and continues to hold the Common Shares received in
exchange for such shares of CPL through to the
Effective Date;
(gg) "LUSCAR" means Luscar Coal Limited, a corporation existing
under the laws of [o];
(hh) "LUSCAR ASSETS" means the Line Creek mine, the Cheviot mine,
the Luscar mine and the collective interest of Luscar and
CONSOL in the Neptune terminal including any net working
capital related to these assets;
(ii) "LUSCAR ASSET OBLIGATIONS" means, in connection with: (a) all
of the Luscar Assets other than the Luscar mine, the ordinary
course of business liabilities and obligations of Luscar and
CONSOL related to the transferred assets; and (b) in the case
of the Luscar mine, all of the ordinary course of business
liabilities and obligations of Luscar and CONSOL in
-3-
connection with such assets other than third party debt,
pre-existing reclamation liabilities, any underfunding or
accrued pension liabilities and severance in respect of
transferred employees of the Luscar mine;
(jj) "LUSCAR/CONSOL NOTE" means the demand non-interest bearing
notes of FCL substantially in the form attached as Schedule
J;
(kk) "MAXIMUM CASH AMOUNT" means $1,050 million;
(ll) "MAXIMUM UNIT AMOUNT" means the number of Common Shares
outstanding at the Effective Time less 30,000,000
(representing the total number of Common Shares which will be
purchased for cash under the Arrangement) and less the number
of Common Shares held by Small Non-Board Lot Holders and
Dissenting Shareholders;
(mm) "MEETING" means the special meeting of Securityholders to be
held on January 22, 2003, including any adjournment(s) or
postponement(s) thereof, to consider and to vote upon, among
other things, the Arrangement Resolution, the Unitholder
Rights Plan Resolution and the PWC Resolution (as such terms
are defined in the Information Circular as modified by the
third supplement thereto expected to be dated January [o],
2003);
(nn) "NEW FORDING" means the corporation resulting from the
amalgamation of FCL Amalco and Subco which forms part of this
Plan of Arrangement;
(oo) "NEW NON-VOTING SHARES" means the New Non-Voting Shares in
the capital of FCL Amalco having the rights, privileges,
conditions and restrictions specified in Schedule "C";
(pp) "NEW OPTIONS" means options to purchase New Non-Voting Shares
issued by FCL Amalco, pursuant to the Arrangement in exchange
for Options;
(qq) "NEW VOTING SHARES" means the New Voting Preference Shares in
the capital of FCL Amalco having the rights, privileges,
conditions and restrictions specified in Schedule "C";
(rr) "NOTE INDENTURE" means the trust indenture providing for
issuance of the Subordinated Notes to be dated the Effective
Date and made between New Fording and Computershare Trust
Company of Canada as Trustee;
(ss) "OTPP" means the Ontario Teachers' Pension Plan Board, a
non-share capital corporation established under the laws of
the Province of Ontario;
(tt) "OTPP UNIT AMOUNT" means the number of Common Shares held
directly or indirectly by OTPP;
(uu) "OPTIONS" means the outstanding options to purchase Common
Shares issued pursuant to the Existing Option Plans;
-4-
(vv) "PARTICIPATING SHAREHOLDERS" means at the Effective Time,
holders of Common Shares other than Small Non-Board Lot
Holders and Dissenting Shareholders;
(ww) "PARTNERSHIP" means the Fording Canadian Coal Partnership,
the general partnership formed under the laws of Alberta the
initial partners of which will be FCL and Teck;
(xx) "PLAN OF ARRANGEMENT" or "PLAN" means this plan of
arrangement and any amendment or variation made in accordance
with the terms hereof;
(yy) "PRAIRIE OPERATIONS" means Fording's thermal coal operations
including its operations at Genessee, Whitewood and Highvale,
Alberta, its undeveloped resource properties, and the
royalties collected from third parties mining at Fording's
mineral properties at locations in Alberta and Saskatchewan
and including any net working capital related to these
assets;
(zz) "PROCEEDS DATE" means the third trading day on the TSX
following the Effective Date or such other date as the
Trustees may select;
(aaa) "QCP" means Quintette Coal Partnership, a partnership
existing under the laws of British Columbia, having as its
partners, Teck and TBCI;
(bbb) "QCP MOBILE EQUIPMENT" means all mobile equipment owned by
QCP other than mobile equipment owned by QCP and leased to
Teck as at January ?, 2003;
(ccc) "ROYALTY" means the participation right granted to [FCL] to
receive a percentage, not to exceed 5%, of the gross revenue
realized from production from lands forming part of the
Prairie Operations beyond current levels, excluding for this
purpose the planned 2005 Genesee expansion;
(ddd) "SCPII" means Sherritt Coal Partnership II a [general]
partnership existing under the laws of Ontario;
(eee) "SECURITYHOLDERS" means, collectively, Shareholders and
holders of Options;
(fff) "SHAREHOLDER RIGHTS PLAN" means the existing Fording
shareholder rights plan;
(ggg) "SHAREHOLDERS" means the holders from time to time of Common
Shares;
(hhh) "SMALL NON-BOARD LOT HOLDER" means a registered holder of
Common Shares holding 20 Common Shares or less as of the
close of business in Calgary, Alberta on November 19, 2002
who continues to hold such Common Shares as a registered
holder through to the Proceeds Date and who does not elect to
receive Units pursuant to the Arrangement;
(iii) "SUBCO" means 4123212 Canada Ltd., a corporation existing
under the laws of Canada;
-5-
(jjj) "SUBCO COMMON SHARES" means the common shares in the capital
of Subco having substantially the rights, privileges,
conditions and restrictions set forth in Schedule "D";
(kkk) "SUBCO NOMINAL NOTES" means the demand, non-interest bearing
notes of Subco, each with a principal amount of $0.01,
issuable pursuant to the Arrangement substantially in the
form attached as Schedule "E";
(lll) "SUBCO PREFERRED SHARES" means the preferred shares in the
capital of Subco having substantially the rights, privileges,
conditions and restrictions set forth in Schedule "F", and
each having a redemption amount determined in accordance with
Section 5.1;
(mmm) "SUBCO PROMISSORY NOTES" means the demand non-interest
bearing promissory notes of Subco each with a principal
amount equal to the amount obtained by dividing [$445]
million by the number of Common Shares held by Participating
Shareholders immediately prior to the Effective Time
substantially in the form attached as Schedule "G";
(nnn) "SUBORDINATED NOTES" means the unsecured, subordinated notes
of Subco to be issued by Subco pursuant to the Arrangement
having substantially the terms summarized in the Information
Circular and each having a principal amount determined in
accordance with Section 5.1;
(ooo) "TBCI" means Teck Bullmoose Coal Inc., a corporation existing
under the laws of British Columbia;
(ppp) "TECK" means Teck Cominco Limited, a corporation existing
under the laws of Canada;
(qqq) "TECK CONTRIBUTED ASSETS" means all assets (other than cash)
and liabilities associated with the Elkview Mine and all
other properties with potential coal reserves or resources
owned by Teck or its affiliates in North America and
associated surface rights other than (a) the Quintette coal
leases and licences and overlying surface tenures (the
balance of which will be conveyed after completion of the
reclamation); (b) mobile equipment and related parts owned by
QCP (the balance of the QCP Mobile Equipment and related
parts will be conveyed to the Partnership after completion of
reclamation); (c) any assets related to the Bullmoose mine
(the balance of which will be conveyed, subject to receipt of
joint venture consent, when shutdown by TBCI has been
completed and the mine reclaimed); and (d) for greater
certainty, mobile equipment used at Elkview leased from QCP
and Teck's and TBCI's interest in QCP;
(rrr) "TSX" means the Toronto Stock Exchange;
(sss) "UNIT" means a trust unit of the Fund;
(ttt) "UNIT OPTION" means the election available to Participating
Shareholders pursuant to the Arrangement to ultimately
receive a Unit for each Common Share in respect of which an
-6-
election is made or deemed to be made under this Plan,
subject to pro-ration, instead of a Fund Note for the
exchanges described herein which election is given effect
under this Plan by such Participating Shareholder receiving a
Unit; and
(uuu) "WESTSHORE" means Westshore Terminals Income Fund.
1.2 CERTAIN RULES OF INTERPRETATION.
In this Plan:
(a) CURRENCY. Unless otherwise specified, all references to money
amounts are to the lawful currency of Canada.
(b) HEADINGS. Headings of Articles and Sections are inserted for
convenience of reference only and shall not affect the
construction or interpretation of this Plan.
(c) INCLUDING. Where the word "including" or "includes" is used
in this Plan, it means "including (or includes) without
limitation".
(d) NUMBER AND GENDER. Unless the context otherwise requires,
words importing the singular include the plural and vice
versa and words importing gender include all genders.
(e) STATUTORY REFERENCES. A reference to a statute includes all
regulations made pursuant to such statute and, unless
otherwise specified, the provisions of any statute or
regulation which amends, supplements or supersedes any such
statute or any such regulation.
(f) TIME PERIODS. Unless otherwise specified, time periods within
or following which any payment is to be made or act is to be
done shall be calculated by excluding the day on which the
period commences and including the day on which the period
ends and by extending the period to the next Business Day
following if the last day of the period is not a Business
Day.
1.3 SCHEDULES.
The Schedules to this Plan, as listed below, are an integral part of this Plan:
SCHEDULE DESCRIPTION
-------- -----------
Schedule "A" Exchange Option Plan
Schedule "B" Form of Fund Note
Schedule "C" Rights, Privileges, Conditions and Restrictions
attaching to the New Voting Shares and the New
Non-Voting Shares
Schedule "D" Rights, Privileges, Conditions and Restrictions
attaching to the Subco Common Shares
Schedule "E" Form of Subco Nominal Note
-7-
Schedule "F" Rights, Privileges, Conditions and Restrictions
attaching to the Subco Preferred Shares
Schedule "G" Form of Subco Promissory Note
Schedule "H" FCL Amalco Amalgamation Provisions
Schedule "I" New Fording Amalgamation Provisions
ARTICLE 2
PURPOSE AND EFFECT OF THE ARRANGEMENT
2.1 ARRANGEMENT.
This Plan of Arrangement is made pursuant to, is subject to the provisions of,
and forms part of, the Combination Agreement.
2.2 EFFECTIVENESS.
Upon filing the Articles of Arrangement and the issuance of the Certificate of
Arrangement, this Plan of Arrangement will become effective and will be binding
without any further authorization, act or formality on the part of the Parties,
the Court, the Director or the Securityholders, from and after the Effective
Time. Other than as expressly provided in Article 3, no portion of this Plan of
Arrangement shall take effect with respect to any Party or Person until the
Effective Time.
ARTICLE 3
ARRANGEMENT
3.1 Commencing at the Effective Time, each of the events set out below
shall occur and shall be deemed to occur, except as otherwise noted,
one minute apart and in the following order without any further act or
formality:
(a) The Shareholder Rights Plan will be terminated;
(b) Each outstanding Common Share held by a Small Non-Board Lot
Holder will be cancelled by Fording in consideration for the
payment of an amount in cash equal to the Common Share
Trading Price;
(c) The stated capital account maintained by FCL for its class of
common shares will be reduced to $1.00 without any payment or
other distribution of property by FCL therefor;
(d) FCL will transfer to SCPII beneficial ownership of the
Prairie Operations, subject to the Royalty which shall be
retained by FCL, in consideration of a cash payment by SCPII
of $225 million;
(e) Luscar and CONSUL
-8-
(i) will transfer to FCL all of their interests in the
Luscar Assets; and
(ii) will pay to FCL in cash the amount, if any,
described in Schedule 2.4 to the Combination
Agreement;
in consideration of
(iii) the assumption by FCL of the Luscar Asset
Obligations,
(iv) the payment by FCL to Luscar and CONSOL of the
amount, if any, described in Schedule 2.4 of the
Combination Agreement;
(v) the Luscar/CONSOL Note;
(f) Fording and FCL will amalgamate to form FCL Amalco on the
terms set out in Schedule "H" as if such amalgamation had
been approved and undertaken pursuant to and in accordance
with Subsection 184(1) of the CBCA except to the extent
modified by the Plan;
(f.1) The Luscar/CONSOL Note held by Luscar and CONSOL will be
repaid by the issuance of 6.4 million FCL Amalco Common
Shares to Luscar and CONSOL;
(g) Teck will contribute to the Partnership $125 million of cash
and will transfer into the Partnership beneficial ownership
of the Teck Contributed Assets (but excluding the Teck
Contributed Assets to be contributed by TBCI and QCP) as a
capital contribution to the Partnership in exchange for the
assumption of obligations and an interest in the Partnership
which will be a 34.833% interest after completion of all
capital contributions to the Partnership made pursuant to
this Section 3.1;
(h) Contemporaneously with the transaction set forth in paragraph
3.1(g), QCP will contribute to the Partnership all of its fee
simple lands and related tenures including the fixtures
thereon (excluding its coal lease and licences and overlying
surface tenures) in exchange for the assumption of
obligations and an interest in the Partnership which will be
a 0.164% interest after completion of all capital
contributions to the Partnership made pursuant to this
Section 3.1, and for greater certainty, the consideration for
the interest in the Partnership will include QCP's obligation
to convey the balance of the QCP Mobile Equipment and its
coal lease and licences and overlying tenures to the
Partnership after completion of reclamation); [Note to draft:
Assets being contributed to be confirmed.]
(i) TBCI will acquire an interest in the Partnership which will
be a 0.003% interest after completion of all capital
contributions to the Partnership made pursuant to this
Section 3.1, the consideration therefor being TBCI's
obligation, subject to receipt of joint venture consent, to
transfer to the Partnership all coal properties comprising
the Bullmoose Mine owned by TBCI after completion of
reclamation at the Bullmoose Mine;
-9-
(j) FCL Amalco will transfer beneficial ownership of all of its
assets but excluding:
(i) the Excluded Assets; and
(ii) that undivided interest, expressed as a percentage,
in all of the property owned by FCL Amalco that
qualifies as "Canadian Resource Property" within the
meaning of the Canadian Tax Act and is in respect of
the Fording River Coal Mine and which has a fair
market value of $200 million;
into the Partnership as a capital contribution to the Partnership in
exchange for
(iii) a cash payment of $125 million;
(iv) the assumption of all obligations relating to the
assets contributed to the Partnership as a capital
contribution pursuant to this paragraph 3.1(j); and
(v) an interest in the Partnership equal to the product
obtained when 65% is multiplied by the quotient
obtained when
(A) the excess of the fair market value of the
assets contributed to the Partnership as a
capital contribution pursuant to this
paragraph 3.1(j) over the total of $125
million and the aggregate amount of
obligations assumed pursuant to this
paragraph 3.1(j);
is divided by
(B) the excess of the total fair market value
of the assets contributed to the
Partnership as capital contributions
pursuant to this paragraph 3.1(j) and
paragraph 3.1(bb) over the total of $125
million and the amount of obligations
assumed pursuant to this paragraph 3.1(j)
and paragraph 3.1(bb);
(k) The New Non-Voting Shares and the New Voting Shares will be
created as authorized classes of shares of FCL Amalco;
(l) Each outstanding FCL Amalco Common Share held by (a) a
Participating Shareholder or (b) Luscar or CONSOL, will be
exchanged for one New Voting Share and one New Non-Voting
Share, all such FCL Amalco Common Shares so exchanged will be
cancelled, and thereafter the FCL Amalco Common Shares will
cease to be an authorized class of shares of FCL Amalco;
(m) Contemporaneously with the transaction set forth in paragraph
3.1(1), each outstanding Option will be exchanged for a New
Option and the exercise price under the New Option will be
equal to the excess of (i) the exercise price of the
outstanding Option over (ii) the excess of (A) the fair
market value of an FCL Amalco Common Share immediately prior
to the share exchange referred to in paragraph 3.1(1) over
(B) the fair market value of a New Non-Voting Share
immediately after the share exchange referred to in paragraph
3.1(l), and thereafter the outstanding Option will be
cancelled;
-10-
(n) Each New Voting Share held by (a) a Participating Shareholder
or (b) Luscar or CONSOL, will be acquired by Subco in
exchange for the issuance of one Subco Nominal Note;
(o) Subject to section 3.2, each New Non-Voting Share and Subco
Nominal Note held by a Participating Shareholder (other than
a Long-Term Holder) who has elected the Cash Option in
respect of the relevant Common Share will be acquired by the
Fund in exchange for the issuance of one Fund Note;
(p) Subject to section 3.2, and contemporaneously with the
transaction set forth in paragraph 3.1(o), each New
Non-Voting Share and Subco Nominal Note held by a
Participating Shareholder (other than a Long-Term Holder) who
has elected the Unit Option in respect of the relevant Common
Share will be acquired by the Fund in exchange for the
issuance of one Unit;
(p.l) Contemporaneously with the transaction set forth in paragraph
3.1(o), each New Non-Voting Share and Subco Nominal Note held
by Luscar or CONSOL will be acquired by the Fund in exchange
for the issuance of one Unit;
(q) Each New Non-Voting Share held by a Long-Term Holder will be
acquired by Subco in exchange for the issuance of one Subco
Promissory Note, one Subordinated Note and one Subco
Preferred Share;
(r) Subject to section 3.2 and contemporaneous with the
transaction set forth in paragraph 3.1(q), the Subco Nominal
Notes, Subco Promissory Notes, Subordinated Notes and Subco
Preferred Shares held by each Long-Term Holder who has
elected the Cash Option in respect of the relevant Common
Share will be acquired by the Fund in exchange for the
issuance of one Fund Note for each New Non-Voting Share held
by the Long-Term Holder immediately before the exchange
referred to in paragraph 3.1(q);
(s) Subject to section 3.2, the Subco Nominal Notes, Subco
Promissory Notes, Subordinated Notes and Subco Preferred
Shares held by each Long-Term Holder who has elected the Unit
Option in respect of the relevant Common Share will be
acquired by the Fund in exchange for the issuance of one Unit
for each New Non-Voting Share held by the Long-Term Holder
immediately before the exchange referred to in paragraph
3.1(q);
(t) The Exchange Option Plan will become effective;
(u) Each New Option will be exchanged for one Exchange Option and
the exercise price under the Exchange Option will be:
(i) the exercise price under the original Option for
which the New Option was exchanged, or
(ii) such other amount determined by the Trustees of the
Fund as required to ensure that the "in-the-money"
amount of the Exchange Option, immediately after the
exchange, will be equal to the "in-the-money" amount
of the corresponding original Option immediately
before the exchange referred to in paragraph 3.1(1),
-11-
and the New Option will be cancelled;
(v) The Initial Unit will be redeemed by the Fund for an amount
equal to its fair market value;
(w) Each New Non-Voting Share held by the Fund will be acquired
by Subco in exchange for the issuance of one Subordinated
Note, one Subco Preferred Share and one Subco Promissory
Note;
(x) The Subco Nominal Notes held by the Fund will be repaid by
Subco by the payment of cash equal to their principal amount;
(y) The Subco Promissory Notes held by the Fund will be repaid by
Subco by the payment of cash equal to their principal amount;
(z) Subco will amalgamate with FCL Amalco to form New Fording on
the terms set out in Schedule "I" as if such amalgamation had
been approved and undertaken pursuant to and in accordance
with Subsection 184(1) of the CBCA except to the extent
modified by the Plan;
(aa) Each of Teck and Westshore will pay $150 million to the Fund
to purchase 4,285,714 Units from the Fund, and SCPII will pay
$375 million to the Fund to purchase 10,714,285 Units from
the Fund, in each case at a price of $35.00 per Unit;
(bb) New Fording will transfer beneficial ownership of the
property described in subparagraph 3.1(j)(ii) into the
Partnership in exchange for the assumption of all obligations
related to such property and an interest in the Partnership
equal to the excess of 65% over the interest in the
Partnership described in subparagraph 3.1(j)(v);
(cc) The Fund Notes will be repaid by the Fund by the payment of
cash equal to their principal amount (and the Fund will hold
such payment on behalf of the recipients until payment
thereof in accordance with this Plan); and
(dd) The Existing Option Plans will be terminated and all rights
and entitlements of participants under such plan will be
terminated.
3.2 ADJUSTMENTS TO CASH OPTION AND UNIT OPTION ELECTIONS.
(a) The Maximum Cash Amount will be paid, and a number of Units
equal to the Maximum Unit Amount will be issued, in their
entirety, as the consideration under the Arrangement. If more
than the Maximum Cash Amount is elected pursuant to the Cash
Option it will be necessary to pro rate the Maximum Cash
Amount among those holders who elected to receive cash and
pay the balance of the Elected Cash Amount in Units. If a
number of Units greater than the Maximum Unit Amount is
-12-
elected pursuant to the Unit Option at an issue price of
$35.00 per Unit it will be necessary to pro rate the Maximum
Unit Amount among those holders who elect to receive Units
and pay the balance of the Elected Unit Amount in cash in an
amount equal to $35.00 per Common Share, subject to
pro-ration as described below. The manner of pro-ration is
set out in this Section.
(b) Notwithstanding the election of the Cash Option by a
Participating Shareholder, the number of Common Shares in
respect of which the holder will be deemed to have elected
the Cash Option will be:
(i) subject to paragraph 3.2(c)(ii), if the product of
the aggregate number of Common Shares in respect of
which Participating Shareholders elect the Cash
Option and $35.00 (the "ELECTED CASH AMOUNT") does
not exceed the Maximum Cash Amount, the number of
Common Shares in respect of which the holder elected
the Cash Option;
(ii) if the Elected Cash Amount exceeds the Maximum Cash
Amount, that number of Common Shares determined by
multiplying the total number of Common Shares in
respect of which the holder elected the Cash Option
by the quotient obtained by dividing the Maximum
Cash Amount by the Elected Cash Amount, and such
holder shall be deemed to have elected the Unit
Option in respect of the balance of such holder's
Common Shares.
(c) Notwithstanding the election or deemed election of the Unit
Option by a Participating Shareholder (other than OTPP), the
number of Common Shares in respect of which the holder (other
than OTPP) will be deemed to have elected the Unit Option
will be:
(i) subject to paragraph 3.2(b)(ii), if the Elected Cash
Amount exceeds the Maximum Cash Amount, the number
of Common Shares in respect of which the holder
elected, or is deemed to have elected pursuant to
paragraph 3.3(a) or 3.3(b), the Unit Option; and
(ii) if the Elected Cash Amount does not exceed the
Maximum Cash Amount, that number of Common Shares
determined by multiplying the total number of Common
Shares in respect of which the holder elected or is
deemed to have elected pursuant to paragraph 3.3(b),
the Unit Option by the quotient
obtained by dividing:
(i) the excess of the Maximum Unit Amount over the OTPP
Unit Amount, by
(ii) the excess of the Elected Unit Amount over the OTPP
Unit Amount;
and such holder shall be deemed to have elected the Cash
Option in respect of the balance of such holder's Common
Shares.
-13-
3.3 MANNER OF MAKING ELECTIONS.
(a) Each Participating Shareholder (other than OTPP) shall have
the opportunity to elect either the Cash Option, the Unit
Option or a combination thereof by depositing, or by causing
its agent or other representative to deposit, with
Computershare Trust Company of Canada prior to the Effective
Date or such other date as is determined by the board of
directors of the Corporation and publicly announced in
advance thereof, a duly completed Election Form indicating
such holder's election together with the certificates
representing such holder's Common Shares. OTPP shall be
deemed to have made an election for the Unit Option in
respect of all of the Common Shares held [DIRECTLY OR
INDIRECTLY] by OTPP.
(b) Any holder who (i) does not deposit with Computershare Trust
Company of Canada a duly completed Election Form prior to the
Proceeds Date or (ii) otherwise fails to comply fully with
the requirements of paragraph 3.3(a) and the Election Form in
respect of such holder's election of the Cash Option or Unit
Option, shall be deemed to have elected the Unit Option in
respect of its Common Shares.
(c) Any deposit of an Election Form and accompanying certificates
may be made at any of the offices of Computershare Trust
Company of Canada specified in the Election Form.
ARTICLE 4
STATED CAPITAL ADDITIONS
4.1 ADDITIONS TO STATED CAPITAL.
The amounts added to the stated capital accounts maintained by FCL, FCL Amalco
or Subco, as the case may be, in respect of the issuances of shares of the
capital stock of those corporations under the Plan will be as follows:
(a) in connection with the issuance of 6.4 million FCL Amalco
Common Shares pursuant to paragraph 3.1(f.1), the amount of
$224 million shall be added to the stated capital account
maintained by FCL Amalco in respect of the FCL Amalco Common
Shares;
(b) in connection with the issuance of New Voting Shares pursuant
to paragraph 3.1(1) of the Plan, the amount of $0.01 per
share multiplied by the number of New Voting Shares so
issued, shall be added to the stated capital account
maintained by FCL Amalco in respect of the New Voting Shares
(the "NEW VOTING CAPITAL AMOUNT");
(c) in connection with the issuance of New Non-Voting Shares
pursuant to paragraph 3.1(1) of the Plan, an amount equal the
excess of the paid-up capital, under the Canadian Tax Act, of
the FCL Amalco Common Shares immediately prior to such share
exchange over the New Voting Capital Amount shall be added to
-14-
the stated capital account maintained by FCL Amalco in
respect of the New Non-Voting Shares; and
(d) in connection with the issuance of Subco Preferred Shares
pursuant to the Plan, an amount equal to the aggregate
redemption amount of the Subco Preferred Shares so issued
shall be added to the stated capital account maintained by
Subco in respect of the Subco Preferred Shares.
4.2 STATED CAPITAL ACCOUNTS OF NEW FORDING.
The stated capital accounts of New Fording shall initially be as follows:
(a) the aggregate stated capital of the class of common shares of
New Fording shall initially be equal to the aggregate paid-up
capital of the class of Subco Common Shares as determined for
purposes of the Canadian Tax Act immediately prior to the
amalgamation referred to in paragraph 3.1(z) of the Plan; and
(b) the aggregate stated capital of the preferred shares of New
Fording shall initially be equal to the aggregate paid-up
capital of the class of Subco Preferred Shares as determined
for purposes of the Canadian Tax Act immediately prior to the
amalgamation referred to in paragraph 3.1(z) of the Plan.
ARTICLE 5
NOTE AND PREFERRED SHARE DETERMINATION
5.1 SUBORDINATED NOTES AND PREFERRED SHARES.
The aggregate principal amounts of the Subordinated Notes and the aggregate
redemption amounts of the Subco Preferred Shares issued in connection with the
Arrangement will, in each ease, be such amount as is determined by the board of
directors of New Fording except that the aggregate of (i) the aggregate
principal amounts of the Subordinated Notes plus (ii) $445 million, shall not
exceed nine times the aggregate redemption amounts of the Subco Preferred
Shares, and the sum of the aggregate principal amounts of the Subordinated
Notes and the aggregate redemption amounts of the Subco Preferred Shares shall
reflect the fair market value of the consideration received by Subco for the
issuance of the Subordinated Notes and the Subco Preferred Shares.
ARTICLE 6
DISSENTING SHAREHOLDERS
6.1 RIGHTS OF DISSENT.
Pursuant to the Plan of Arrangement, Dissenting Shareholders who duly exercise
their rights of dissent and who:
(a) are ultimately entitled to be paid fair value for their
Common Shares shall have their Common Shares cancelled as of
the Effective Time and prior to commencement of the
transactions referenced to in Section 3.1 hereof in
consideration of the fair value to be paid to them and will
not be entitled to any other payment or consideration
-15-
including any payment that would be payable under the
Arrangement had such holders not exercised their rights of
dissent; or
(b) are ultimately not entitled, for any reason, to be paid fair
value for their Common Shares will be deemed to have
participated in the Arrangement on the same basis as any
non-Dissenting Shareholder who elected the Unit Option.
6.2 RECOGNITION OF DISSENTING SHAREHOLDERS.
Neither the Corporation, New Fording, any of the parties to the Combination,
Agreement (the "PARTIES") nor any other person shall be required to recognize a
Dissenting Shareholder as a holder of Common Shares or New Fording Common
Shares after the Effective Time, nor as having any interest in the Fund other
than in the circumstances where New Fording elects to deliver moneys-worth of
Units in satisfaction of its obligation to pay fair value to a Dissenting
Shareholder. After the Effective Time, the names of Dissenting Shareholders
shall be deleted from the register of holders of Common Shares maintained by
the Corporation.
ARTICLE 7
OUTSTANDING CERTIFICATES
7.1 OUTSTANDING CERTIFICATES.
From and after the Effective Time until and including the Proceeds Date, share
certificates representing Common Shares will represent the right to obtain the
consideration issued pursuant to the Plan of Arrangement, consisting of $35.00
or one Unit per Common Share or a combination thereof (other than certificates
in the name of a Dissenting Shareholder or a Small Non-Board Lot Holder) in
accordance with the elections made by the holder, subject to pro-ration
hereunder.
7.2 PROVISION OF CONSIDERATION.
As soon as practicable after the Proceeds Date:
(a) there shall be delivered to each Participating Shareholder,
certificates representing the Units and a cheque for the cash
amount to which such holder is entitled pursuant to this Plan
of Arrangement; and
(b) there shall be delivered to each Small Non-Board Lot Holder a
cheque for the cash amount to which such holder is entitled
pursuant to this Plan of Arrangement.
For greater certainty, Shareholders will not be required to send to the
Depository the certificates representing their Common Shares in order to
receive the Unit certificates and/or any cheque to which they are entitled to
receive pursuant to this Arrangement.
7.3 DEPOSITORY.
All distributions made with respect to any Units allotted and issued pursuant
to this Arrangement but for which a certificate has not been, or cannot be,
delivered, shall be paid and delivered to the Depository to be held by the
-16-
Depository in trust for the registered holder thereof. All monies received by
the Depository in respect of such Units shall be invested by it in
interest-bearing trust accounts upon such terms as the Depository may
reasonably deem appropriate. The Depository shall pay and deliver to any such
registered holder such distributions and any interest thereon to which such
holder is entitled, net of applicable withholding and other taxes, upon
delivery of the certificate representing the Units issued to such holder in
connection with the Arrangement.
7.4 NO ENTITLEMENT TO INTEREST.
The Participating Shareholders and Small Non-Board Lot Holders shall not be
entitled to any interest, dividend, premium or other payment on or with respect
to their former Common Shares other than the certificates representing the
Units and/or the cheque that they are entitled to receive pursuant to this Plan
of Arrangement.
7.5 CERTIFICATES.
After the Proceeds Date, the certificates formerly representing Common Shares
will not represent any interest in the Fund, New Fording, Fording or otherwise
and shall be deemed to be cancelled, null and void.
ARTICLE 8
AMENDMENTS
8.1 AMENDMENTS.
The Parties reserve the right to amend, modify and/or supplement this Plan of
Arrangement from time to time at any time prior to the Effective Time provided
that any such amendment, modification or supplement must be contained in a
written document that is:
(a) filed with the Court and, if made following the Meeting,
approved by the Court; and
(b) communicated to Securityholders in the manner required by the
Court (if so required).
8.2 PROPOSED AMENDMENTS.
Any amendment, modification or supplement to this Plan of Arrangement may be
proposed by the Parties at any time prior to or at the Meeting with or without
any other prior notice or communication, and if so proposed and accepted by the
Securityholders voting at the Meeting, in the manner required by the Interim
Order, shall become part of this Plan of Arrangement for all purposes. In
addition, Fording may amend, modify or supplement this Plan of Arrangement in
accordance with the terms of the Combination Agreement.
8.3 EFFECTIVENESS OF AMENDMENTS.
Any amendment, modification or supplement to this Plan of Arrangement which is
approved by the Court following the Meeting shall be effective only:
-17-
(a) if it is consented to by the Parties; and
(b) if required by the Court or applicable law, it is consented
to by the Securityholders.
[Remainder of Page Intentionally Left Blank]
-18-
SCHEDULE "A"
FORDING CANADIAN COAL TRUST
EXCHANGE OPTION PLAN
Effective December [o], 2002
ARTICLE 1
PURPOSE OF THE PLAN
1.1 PURPOSE.
The purpose of the Fording Canadian Coal Trust Exchange Option Plan (the
"PLAN") is to record and implement the exchange ultimately, as part of the
Arrangement (as herein defined), of all outstanding options and any
accompanying share appreciation rights ("Options") to purchase Common Shares
(as herein defined) issued under the Corporation's Key Employee Stock Option
Plan (the "KESOP") and the Directors' Stock Option Plan (the "DSOP") for
options to acquire Units in the Fund and accompanying unit appreciation rights
(the "Exchange Options") issued under this Plan. Exchange Options will have
attached to them terms which are substantially similar for the Options for
which they are exchanged, adjusted in accordance with the terms of the
Arrangement.
ARTICLE 2
DEFINITIONS AND INTERPRETATION
2.1 DEFINITIONS.
For the purposes of this Plan, the following terms will have the following
meanings:
(a) "ARRANGEMENT" means the arrangement under Section 192 of the
CBCA involving the Corporation, its securityholders, Fording
Coal Limited, 4123212 Canada Ltd., Teck Cominco Limited,
Westshore Terminals Income Fund, the Fund, Teck Bullmoose
Coal Inc., Quintette Coal Partnership, Luscar Coal Limited,
CONSOL Energy Inc. and Sherritt Coal Partnership II;
(b) "BOARD" means the board of directors of the Corporation;
(c) "CBCA" means the Canada Business Corporations Act, R.S.C.
1985, c. C-44, as amended, including the regulations
promulgated thereunder;
(d) "CAUSE" means:
(i) the continued failure by the Optionholder to
substantially perform his duties in connection with
his employment by, or service to, the Corporation or
any Subsidiary (other than as a result of physical
or mental illness) after the Corporation or the
Subsidiary, as the case may be, has given the
Optionholder reasonable written notice of such
failure and a reasonable opportunity to correct it;
(ii) the engaging by the Optionholder in any act which is
injurious to the Corporation (including any
Subsidiary) financially, reputationally or
otherwise;
(iii) the engaging by the Optionholder in any act
resulting, or intended to result, whether directly
or indirectly, in personal gain to the Optionholder
at the expense of the Corporation (including any
Subsidiary);
B-2
(iv) the conviction of the Optionholder by a court of
competent jurisdiction on any charge involving
fraud, theft or moral turpitude in circumstances
where such charge arises in connection with the
business of the Corporation (including any
Subsidiary); or
(v) any other conduct that constitutes cause at common
law;
(e) "COMBINATION AGREEMENT" means the agreement dated January
[o], 2003 among the Corporation, Teck Cominco Limited,
Westshore Terminals Income Fund, Ontario Teachers' Pension
Plan Board and Sherritt International Corporation setting out
the terms and conditions upon which such parties will
implement the Arrangement, and any amendment thereto;
(f) "COMMON SHARES" means common shares in the capital of the
Corporation;
(g) "CONSULTANT" means a person engaged to provide ongoing
management or consulting services to the Fund, the
Corporation or any Subsidiary;
(h) "CORPORATION" means Fording Inc., and any successor
corporation thereto;
(i) "CP OPTIONHOLDERS" means the former Canadian Pacific Limited
optionholders who held options and accompanying share
appreciation rights under the key employee stock option plan
of Canadian Pacific Limited, which options and share
appreciation rights were replaced by, in part, Options and
accompanying share appreciation rights issued under the KESOP
pursuant to a plan of arrangement under section 192 of the
CBCA completed in October 2001 that resulted in the
Corporation becoming a publicly traded Corporation;
(j) "DATE OF TERMINATION" means, unless otherwise agreed to in
writing by the Optionholder and the Corporation or, if
applicable, a Subsidiary, the actual date of termination of
employment of the Optionholder or termination of the
Optionholder's contract as a Consultant, excluding any period
during which the Optionholder is in receipt of or is eligible
to receive any statutory, contractual or common law notice or
compensation in lieu thereof or severance or damage payments
following the actual date of termination;
(k) "DSOP" has the meaning ascribed to it in Section 1.1;
(1) "EFFECTIVE TIME" has the meaning ascribed to it in the Plan
of Arrangement;
(m) "ELIGIBLE PERSON" means a holder of an Exchange Option who
is:
(i) an officer, employee, Non-Employee Director of the
Corporation or Consultant of the Corporation or any
Subsidiary, and also includes a Family Trust,
Personal Holding Corporation, Retirement Trust of
any of the foregoing individuals; or
(ii) a CP Optionholder;
B-3
(n) "EXCHANGE OPTION" has the meaning ascribed to it in Section
1.1 hereof;
(o) "EXERCISE PRICE" means the price per Unit at which Optioned
Units may be subscribed for by an Optionholder pursuant to a
particular Option Agreement;
(p) "EXPIRY DATE" means the date on which an Exchange Option
expires pursuant to the Exchange Option Agreement relating to
that Exchange Option;
(q) "FAMILY TRUST" means a trust, of which at least one of the
trustees is an Eligible Person and the beneficiaries of which
are one or more of the Eligible Person and the spouse, minor
children and minor grandchildren of the Eligible Person;
(r) "FUND" means the Fording Canadian Coal Trust;
(s) "INSIDER" means:
(i) an insider, as defined in the Securities Act
(Alberta), other than a person who falls within that
definition solely by virtue of being a director or
senior officer of a Subsidiary; and
(ii) an associate, as defined in the Securities Act
(Alberta), of any person who is an insider by virtue
of (i) above;
(t) "KESOP" has the meaning ascribed to it in Section 1.1 hereof;
(u) "NON-EMPLOYEE DIRECTOR" means a person who, as of any
applicable date, is a member of the Board and is not an
officer or employee of the Corporation or any of its
Subsidiaries;
(v) "NOTICE OF EXERCISE" means a notice, substantially in the
form of the notice set out in Schedule A to this Plan, from
an Optionholder to the Fund giving notice of the exercise or
partial exercise of an Exchange Option granted to the
Optionholder;
(w) "OPTION AGREEMENT" means an agreement, substantially in the
form of the agreement set out in Schedule B to this Plan,
between the Fund and an Eligible Person setting out the terms
of an Exchange Option granted to the Eligible Person;
(x) "OPTIONED UNITS" means the Units that may be subscribed for
by an Optionholder pursuant to a particular Option Agreement;
(y) "OPTIONHOLDER" means an Eligible Person who acquires an
Exchange Option;
(z) "ORIGINAL GRANT DATE" means the date on which an Original
Option was granted being the date that the Board resolved to
grant such option, unless the Board resolved to ratify
options to acquire Common Shares granted on an earlier date
or to delay the grant of options to acquire Common Shares to
a later date, in which case the Original Grant Date will be
such earlier or later date;
B-4
(aa) "ORIGINAL OPTION" means an Option described in Section 1.1
(including for greater certainty, any related Share
Appreciation Right) which, as an intermediate step in the
exchange described in Section 4.1, is exchanged for an option
to purchase a New Non-Voting Share (and, for greater
certainty, any related share appreciation right) of FCL
Amalco (as those terms are defined in the Plan of
Arrangement);
(bb) "PERSON" means any individual, sole proprietorship,
partnership, firm, entity, unincorporated association,
unincorporated syndicate, unincorporated organization, trust,
body corporate, agency, and where the context requires, any
of the foregoing when they are acting as trustee, executor,
administrator or other legal representative;
(cc) "PERSONAL HOLDING CORPORATION" means a corporation that is
controlled by an Eligible Person (who is a natural person)
and the shares of which are beneficially owned by the
Eligible Person and the spouse, minor children or minor
grandchildren of the Eligible Person;
(dd) "PLAN" has the meaning ascribed to it in Section 1.1;
(ee) "PLAN OF ARRANGEMENT" means the plan of arrangement appearing
as Schedule A to the Combination Agreement which describes
the steps comprising the Arrangement;
(ff) "RETIREMENT TRUST" means a trust governed by a registered
retirement savings plan or a registered retirement income
fund established by and for the benefit of an Eligible Person
(who is a natural person);
(gg) "SHARE APPRECIATION RIGHTS" are the rights granted to the CP
Optionholders in connection with the options granted under
the key employee stock option plan of Canadian Pacific
Limited, which options and rights were replaced by options
and share appreciation rights under the KESOP;
(hh) "SUBSIDIARY" means any corporation that is a subsidiary of
the Corporation as defined in the Securities Act (Alberta);
(ii) "TRUSTEES" means the trustees of the Fund from time to time;
(jj) "UNIT APPRECIATION RIGHTS" means the Unit appreciation rights
issued under the Plan forming part of the Exchange Options
issued to CP Optionholders pursuant to the Plan of
Arrangement;
(kk) "UNIT COMPENSATION ARRANGEMENT" means any unit option plan,
employee unit purchase plan or any other compensation or
incentive mechanism involving the issuance or potential
issuance of Units from treasury to one or more Eligible
Persons; and
(ll) "UNITS" means trust units of the Fund.
B-5
2.2 INTERPRETATION.
(a) Time shall be the essence of this Plan.
(b) Words denoting the singular number include the plural and
vice versa and words denoting any gender include all genders.
(c) This Plan and all matters to which reference is made herein
will be governed by and interpreted in accordance with the
laws of the Province of Alberta and the federal laws of
Canada applicable therein.
2.3 EFFECTIVENESS.
This Plan will become effective at the Effective Time in the manner specified
by the Plan of Arrangement.
ARTICLE 3
GENERAL PROVISIONS OF THE PLAN
3.1 ADMINISTRATION.
The Plan will be administered by the Trustees and the Trustees will interpret
the Plan and determine all questions arising out of the Plan and any Exchange
Option issued pursuant to the Plan, which interpretations and determinations
will be conclusive and binding on the Corporation, the Fund, Eligible Persons,
Optionholders and all other affected Persons.
3.2 UNITS RESERVED.
(a) The maximum number of Units that may be reserved for issuance
under the Plan is 776,034, which will be equal to the number
of Original Options outstanding immediately prior to the
Effective Time. The maximum number of Units will be reduced
as Exchange Options are exercised and the Units so reserved
are issued.
(b) The maximum number of Units that may be reserved for issuance
to any one Eligible Person under the Plan is 5% of the number
of Units outstanding at the time of reservation.
3.3 LIMITS WITH RESPECT TO INSIDERS.
(a) The maximum number of Units that may be reserved for issuance
to Insiders on the exercise of Exchange Options issued under
the Plan and under or pursuant to any other Unit Compensation
Arrangement of the Fund is 10% of the number of Units
outstanding.
(b) The maximum number of Units that may be issued to Insiders
under the Plan and any other Unit Compensation Arrangement of
the Fund within a one-year period is 10% of the number of
Units outstanding.
B-6
(c) The maximum number of Units that may be issued to any one
Insider (and such Insider's associates, as defined in the
Securities Act (Alberta)), under the Plan and any other Unit
Compensation Arrangement of the Fund within a one-year period
is 5% of the number of Units outstanding.
(c) For the purposes of (a), (b) and (c) above, any entitlement
to acquire Units issued pursuant to the Plan or any other
Unit Compensation Arrangement of the Fund prior to the
grantee becoming an Insider is to be excluded. For the
purposes of (b) and (c) above, the number of Units
outstanding is to be determined on the basis of the number of
Units outstanding at the time of the reservation or issuance,
as the case may be, excluding Units issued under the Plan or
under any other Unit Compensation Arrangement of the Fund
over the preceding one-year period.
3.4 NON-EXCLUSIVITY.
Nothing in this Plan will prevent the Trustees from adopting other or
additional Unit Compensation Arrangements, subject to obtaining any required
regulatory or shareholder approvals.
3.5 AMENDMENT OR TERMINATION OF PLAN AND EXCHANGE OPTIONS.
(a) The Trustees may amend, suspend or terminate the Plan at any
time, provided that no such amendment, suspension or
termination may:
(i) be made without obtaining any required regulatory or
securityholder approvals; or
(ii) prejudice the rights of any Optionholder under any
Exchange Option previously granted hereunder to the
Optionholder, without the consent or deemed consent
of the Optionholder.
(b) The Trustees may amend the terms of any outstanding Exchange
Option (including, without limitation, to cancel any Exchange
Option(s) previously issued), provided that:
(i) any required regulatory and securityholder approvals
are obtained;
(ii) the Trustees would have had the authority to
initially grant the Exchange Option under terms as
so amended; and
(iii) the consent or deemed consent of the Optionholder is
obtained if the amendment would prejudice the rights
of the Optionholder under the Exchange Option.
3.6 COMPLIANCE WITH LAWS AND STOCK EXCHANGE RULES.
The Plan, the issuance of Exchange Options and the exercise of Exchange Options
under the Plan and the Fund's obligation to issue Units on exercise of Exchange
Options will be subject to all applicable federal, provincial and foreign laws,
rules and regulations and the rules of any stock exchange on which the Xxxxx
X-0
are listed for trading. Unless otherwise agreed to by the Fund in writing, no
Exchange Option will be issued and no Optioned Units will be issued on the
exercise of Exchange Options under the Plan where such issue would require
registration of the Plan or such Optioned Units under the securities laws of
any foreign jurisdiction. Optioned Units issued to Optionholders pursuant to
the exercise of Exchange Options may be subject to limitations on sale or
resale under applicable securities laws.
3.7 PARTICIPATION IN THE PLAN.
The participation of any Eligible Person in the Plan is entirely voluntary and
not obligatory and shall not be interpreted as conferring upon such Participant
any rights or privileges other than those rights and privileges expressly
provided in the Plan. The Plan does not provide any guarantee against any loss
which may result from fluctuations in the market value of the Units. The Fund
does not assume responsibility for the income or other tax consequences for
Eligible Persons and they are advised to consult with their own tax advisors.
3.8 CP OPTIONHOLDERS.
Each Exchange Option, including any accompanying Unit Appreciation Right,
issued to a CP Optionholder pursuant to the Plan of Arrangement will be subject
to the provisions of this Plan, with the necessary changes, provided that none
of the provisions of this Plan will operate so as to adversely affect the
rights of the CP Optionholders as set forth in the key employee stock option
plan of Canadian Pacific Limited.
ARTICLE 4
EXCHANGE OF OPTIONS
4.1 EXCHANGE OF OPTIONS.
(a) Pursuant to the Plan of Arrangement, at the Effective Time,
each Original Option will ultimately be exchanged for an
Exchange Option, and thereafter the Original Options will be
cancelled.
(b) The Exercise Price of each Exchange Option issued pursuant to
the Plan of Arrangement will be determined pursuant to the
Plan of Arrangement.
(c) The Expiry Date of an Exchange Option will be ten years after
the Original Grant Date of the Original Option, subject to:
(i) any determination by the Trustees at the time of the
Original Grant Date that a particular Original
Option would have a shorter term; and
(ii) the provisions of section 4.3 relating to early
expiry.
(d) In the event of any conflict between the Plan and the
Combination Agreement, the terms of the Combination Agreement
will prevail.
(e) After the Effective Time, no further grants of Exchange
Options will be made under this Plan.
B-8
4.2 OPTION AGREEMENT.
As soon as practicable following the Effective Time, the Fund shall deliver to
the Optionholder an Option Agreement, containing the terms of the Exchange
Option and executed by the Fund. Upon return to the Fund of the Option
Agreement, executed by the Optionholder, the Optionholder will be a participant
in the Plan and have the right to purchase the Units on the terms set out in
the Option Agreement and in the Plan.
4.3 EARLY EXPIRY.
An Exchange Option will continue in effect until its Expiry Date or expire
before its Expiry Date, as the case may be, in the following events and manner:
(a) if an Optionholder resigns from his employment (other than in
the circumstances described in (c)), or an Optionholder's
contract as a Consultant terminates at its normal termination
date, then the Optionholder must exercise his Exchange Option
during the period ending on the earlier of (i) 60 days after
the date of resignation or termination and (ii) the Expiry
Date, after which period the Exchange Option will expire;
(b) if an Optionholder's employment is terminated by the
Corporation or a Subsidiary without Cause, including a
constructive dismissal, or an Optionholder's contract as a
Consultant is terminated by the Corporation or a Subsidiary
before its normal termination date without Cause, then the
Optionholder must exercise his Exchange Option during the
period ending on the earlier of (i) 60 days after the Date of
Termination and (ii) the Expiry Date, after which period the
Exchange Option will expire;
(c) if an Optionholder's employment is terminated by the
Corporation or a Subsidiary for Cause, or an Optionholder's
contract as a Consultant is terminated by the Corporation or
a Subsidiary before its normal termination date for Cause,
including where an Optionholder resigns from his employment
or terminates his contract as a Consultant after being
requested to do so by the Corporation or Subsidiary as an
alternative to being terminated for Cause, then the Exchange
Option will expire on the Date of Termination;
(d) if an Optionholder's contract as a Consultant is frustrated
before its normal termination date due to permanent
disability, then the Optionholder must exercise his Exchange
Option during the period ending on the earlier of (i) six
months after the date of frustration and (ii) the Expiry
Date, after which period the Exchange Option will expire;
(e) if an Optionholder's employment ceases due to permanent
disability, then the Exchange Option may be exercised prior
to the Expiry Date;
(f) if an Optionholder retires upon attaining the mandatory or
early retirement age established by the Corporation or a
Subsidiary from time to time (other than a Non-Employee
Director as described in (g)), then the Exchange Option may
be exercised prior to the Expiry Date;
B-9
(g) subject to paragraph (h) below, if an Optionholder who is a
Non-Employee Director ceases to be a member of the Board
(whether as a result of the resignation of the Non-Employee
Director from the Board or the Non-Employee Director not
standing for re-election or not being re-elected as a member
of the Board by the shareholders of the Corporation at a
meeting, or for any other reason other than as a result of
death), then the Non-Employee Director must exercise his
Exchange Option during the period ending on the earlier of
(i) 36 months after the date of cessation and (ii) the Expiry
Date, after which the Exchange Option will expire;
(h) if an Optionholder who is a Non-Employee Director ceases to
be a member of the Board in the circumstances described in
(g) above, but immediately thereafter becomes a Trustee of
the Fund, then the Exchange Option held by such Optionholder
must be exercised on the earlier of (i) 36 months after the
date the Optionholder ceases to be a Trustee of the Fund, and
(ii) the Expiry Date, after which the Exchange Option will
expire;
(i) if an Optionholder dies, then any exercise must be effected
by a legal representative of the Optionholder's estate or by
a person who acquires the Optionholder's rights under the
Exchange Option by bequest or inheritance and any such
exercise must be effected during the period ending on the
earlier of (i) 12 months after the death of the Optionholder
and (ii) the Expiry Date, after which period the Exchange
Option will expire;
subject to the right of the Trustees to, after the Original Grant Date, set
shorter (with the consent of the Optionholder) or longer periods for exercise
(not later than the Expiry Date) with respect to a particular Optionholder or
group of Optionholders. Notwithstanding the foregoing, the early expiry
provisions set out in this Section 4.3 shall not apply to the CP Optionholders
whose Exchange Options and Unit Appreciation Rights shall continue to be
governed by the terms of the resolution of the board of directors of Canadian
Pacific Limited dated July 30, 2001, providing for the extension of the CP
Optionholders' exercise period until the end of the original grant period,
notwithstanding any earlier termination of employment.
4.4 LIMITED ASSIGNMENT.
(a) Unit Appreciation Rights may not be assigned separately from
the related right to acquire Units.
(b) Exchange Options, including any accompanying Unit
Appreciation Rights, may not be assigned, except to:
(i) an Optionholder's Family Trust, Personal Holding
Corporation or Retirement Trust (or between such
entities or from either of such entities to the
Optionholder); or
(ii) a legal representative of the Optionholder's estate
or a person who acquires the Optionholder's rights
under the Exchange Option by bequest or inheritance
on death of the Optionholder.
B-10
(c) If a Personal Holding Corporation to which an Exchange
Option, including any accompanying Unit Appreciation Right,
has been granted or assigned is no longer controlled by the
related Eligible Person, or the shares of the Personal
Holding Corporation are no longer beneficially owned by the
Eligible Person and persons who were the spouse, minor
children or minor grandchildren of the Eligible Person at the
time of grant or assignment, then the Exchange Option,
including any accompanying Unit Appreciation Right, cannot be
exercised until it is assigned by the Personal Holding
Corporation to that Eligible Person or another assignee
permitted by section 4.4(a).
4.5 NO RIGHTS AS UNITHOLDER OR TO REMAIN AN ELIGIBLE PERSON; STATUS OF
CONSULTANTS.
(a) An Optionholder will only have rights as a unitholder of the
Fund with respect to those of the Optioned Units that the
Optionholder has acquired through exercise of an Exchange
Option in accordance with its terms.
(b) Nothing in this Plan or in any Option Agreement will confer
on any Optionholder any right to remain as an officer,
employee, Consultant, director or trustee of the Fund, the
Corporation or any Subsidiary.
(c) Nothing in this Plan or in any Option Agreement entered into
with a Consultant will constitute the Consultant as an
employee of the Fund, the Corporation or any Subsidiary.
4.6 ADJUSTMENTS.
Adjustments will be made to (i) the Exercise Price of an Exchange Option, and
(ii) the number of Optioned Units delivered to an Optionholder upon exercise of
an Exchange Option in the following events and manner, subject to any required
regulatory approvals and the right of the Trustees to make such other or
additional adjustments, or to make no adjustments at all, as the Trustees
considers to be appropriate in the circumstances:
(a) upon (i) a subdivision of the Units into a greater number of
Units, (ii) a consolidation of the Units into a lesser number
of Units, or (iii) the distribution of Units to the holders
of Units (excluding a Unit distribution made in lieu of a
cash distribution in the ordinary course and in accordance
with the Fund's distribution policy, and excluding a
distribution of Units under another Unit Compensation
Arrangement), the Exercise Price will be adjusted accordingly
and the Trustee will deliver upon exercise of an Exchange
Option, in addition to or in lieu of the number of Optioned
Units in respect of which the right to purchase is being
exercised, such greater or lesser number of Units as result
from the subdivision, consolidation or Unit distribution;
(b) upon (i) a capital reorganization, reclassification or change
of the Units, (ii) a consolidation, amalgamation, arrangement
or other form of business combination of the Fund with
another Person or (iii) a sale, lease or exchange of all or
substantially all of the property of the Fund, the Exercise
Price will be adjusted accordingly and the Fund will deliver
upon exercise of an Exchange Option, in lieu of the Optioned
Units in respect of which the right to purchase is being
B-11
exercised, the kind and amount of units or other securities
or property as results from such event;
(c) upon the distribution by the Fund to holders of the Units of
(i) units of any class (whether of the Fund or another fund)
other than Units, (ii) rights, options or warrants, (iii)
evidences of indebtedness or (iv) cash (excluding a cash
distribution paid in the ordinary course and in accordance
with the Fund's distribution policy), securities or other
property or assets, the Exercise Price will be adjusted
accordingly but no adjustment will be made to the number of
Optioned Units to be delivered upon exercise of an Exchange
Option;
(d) adjustments to the Exercise Price of an Exchange Option will
be rounded up to the nearest one cent and adjustments to the
number of Optioned Units delivered to an Optionholder upon
exercise of an Exchange Option will be rounded down to the
nearest whole Unit; and
(e) an adjustment will take effect at the time of the event
giving rise to the adjustment, and the adjustments provided
for in this section are cumulative.
In the event that any adjustment is made to the Exercise Price of an Exchange
Option or the number of Optioned Units issuable on exercise of an Exchange
Option, similar changes will be made to the exercise price of a Unit
Appreciation Right so as to preserve its value.
ARTICLE 5
EXERCISE OF OPTIONS
5.1 MANNER OF EXERCISE.
An Optionholder who wishes to exercise an Exchange Option may do so by
delivering, on or before the Expiry Date of the Exchange Option:
(a) a completed Notice of Exercise; and
(b) subject to section 5.3, a certified cheque, money order or
bank draft payable to the Fund for the aggregate Exercise
Price of the Optioned Units being acquired (and any tax
payable in accordance with Section 5.4).
If the Optionholder is deceased or mentally disabled, the Exchange Option may
be exercised by a legal representative of the Optionholder or the
Optionholder's estate or by a person who acquires the Optionholder's rights
under the Exchange Option by bequest or inheritance and who, in addition to
delivering the Notice of Exercise and (if applicable) certified cheque, money
order or bank draft described above and must also deliver evidence of their
status.
5.2 DELIVERY OF UNIT CERTIFICATE.
Not later than five business days after receipt pursuant to section 5.1 of the
Notice of Exercise and payment in full for the Optioned Units being acquired,
the Fund will direct its registrar and transfer agent to issue a certificate in
B-12
the name of the Optionholder or an intermediary on behalf of the Optionholder,
(or, if deceased, his legal representative or beneficiary) for the number of
Optioned Units purchased by the Optionholder or the intermediary (or his legal
representative or beneficiary), which will be issued as fully paid and
non-assessable Units.
5.3 CASHLESS EXERCISE.
To the extent permitted by applicable laws as determined in the sole discretion
of the Trustees, an Optionholder may elect to effect a "cashless" exercise of
its Exchange Options. In such case, the Optionholder will not be required to
deliver to the Fund the certified cheque, money order or bank draft referred to
in section 5.1. Instead, the Optionholder will complete a Cashless Exercise
Instruction Form in the form attached as Schedule C to the Plan, pursuant to
which:
(a) the Optionholder will instruct a broker selected by the
Optionholder to sell through the Toronto Stock Exchange the
Optioned Units issuable on exercise of an Exchange Option, as
soon as possible and at the then applicable bid price for the
Units of the Fund;
(b) on the settlement date for the trade, the Fund will direct
its registrar and transfer agent to issue a certificate in
the name of the broker (or as the broker may otherwise
direct) for the number of Optioned Units issued on exercise
of the Exchange Option, against payment by the broker to the
Fund of the Exercise Price for such Optioned Units; and
(c) the broker will deliver to the Optionholder the remaining
proceeds of sale, net of brokerage commission (and any tax
payable in accordance with Section 5.4).
5.4 WITHHOLDING.
If the Fund determines that the satisfaction of taxes, including withholding
tax, or other withholding liabilities is necessary or desirable in respect of
the exercise of any Exchange Option, including any accompanying Unit
Appreciation Right, the exercise of the Exchange Option is not effective unless
such taxes have been paid or withholdings made to the satisfaction of the
Trustees. The Fund may require an Optionholder to pay to the Fund, in addition
to the Exercise Price for the Optioned Units, any amount that the Fund or the
Corporation is obliged to remit to the relevant taxing authority in respect of
the exercise of the Exchange Option. Any such additional payment is due no
later than the date on which any amount with respect to the Exchange Option
exercised is required to be remitted by the Fund or the Corporation.
5.5 INDEMNIFICATION.
Every Trustee will at all times be indemnified and saved harmless by the Fund
and from its assets from and against all costs, charges and expenses whatsoever
including any income tax liability arising from any such indemnification, that
such Trustee may sustain or incur by reason of any action, suit or proceeding,
taken or threatened against the Trustee, otherwise than by the Fund, for or in
respect of any act done or omitted by the Trustee in respect of this Plan, such
costs, charges and expenses to include any amount paid to settle such action
suit or proceeding or in satisfaction of any judgement rendered therein.
B-13
5.6 EFFECT ON TRUSTEES.
The Trustees have established this Plan solely in their capacity as Trustees on
behalf of the Fund and the obligations of the Fund hereunder shall not be
personally binding upon the Trustees or any of the Unitholders of the Fund or
any annuitant under a plan of which a Unitholder is a trustee or carrier
("Annuitant"). Any recourse against the Fund, the Trustees or any Unitholder or
annuitant in any manner in respect of any indebtedness, obligation or liability
of the Fund arising hereunder or arising in connection herewith or from the
matters to which this Plan relates, if any, including, without limitation,
claims based on negligence or otherwise tortious behaviour, shall be limited
to, and satisfied only out of the Fund's assets, without recourse to the
personal assets of any of the foregoing persons.
B-14
SCHEDULE A - NOTICE OF EXERCISE
FORDING CANADIAN COAL TRUST
EXCHANGE OPTION PLAN
TO: Solium Capital Inc. FROM:
Xxxx Xxxxxxx Title:
710, 000 0(xx) Xxxxxx XX Work Address:
Xxxxxxx, X, X0X 0X0
Phone: (000) 000-0000 Phone:
Fax: (000) 000-0000 Fax:
I hereby elect to exercise [_] Exchange Options of Fording Canadian Coal Trust
(the "FUND") granted to me under the provisions of the Exchange Option Plan
(the "PLAN") dated [____]. The grant ID was and the Exercise Price of these
Exchange Options was set as $ [____]per Optioned Unit.
I have enclosed a certified cheque, bank draft or money order in the amount of
$ [____] (number of options being exercised x Exercise Price) representing the
cost to purchase [____] Units of the Fund and any tax payable in accordance
with Section 5.4 of the Plan.
I request that the certificate be registered and delivered as follows:
Name: ________________________________________________________________
Address: ______________________________________________________________
City/Province: ________________________________________________________
Postal Code: _________________________________________________________
I hereby elect to exercise Unit Appreciation Rights (UARs) of the Fund granted
to me under the provisions of the Exchange Option Plan dated [____]. The grant
ID was [____] and the price of these UARs are set at $ [____] per unit.
Current Revenue Canada/Quebec administrative practice provides that 50% of the
appreciation realized by the UAR exercise is exempt from income tax. The
remaining 50% of the appreciation will be taxed at the top marginal rate.
Signed
(Address I would like my cheque mailed to)
Dated:
(City/Province/Postal Code)
To be completed by Solium Capital Inc. and faxed to the Fund:
Solium Capital Inc. confirms that [____] is eligible to exercise the
entitlement indicated herein.
Sarum Capital Inc. Date
B-15
SCHEDULE B - FORM OF OPTION AGREEMENT
FORDING CANADIAN COAL TRUST
EXCHANGE OPTION PLAN
OPTION AGREEMENT
This Option Agreement is entered into between Fording Canadian Coal Trust (the
"Fund") and the optionholder named below (the "Optionholder") is a participant
in the Fording Canadian Coal Trust Exchange Option Plan (the "Plan"), a copy of
which is attached hereto. The Optionholder hereby confirms that:
1. on 200[_] (the "Grant Date");
2. the Optionholder;
3. was granted an option (the "Exchange Option") to purchase [_] Units (the
"Optioned Units") of the Fund to indirectly replace and exchange for the
Optionholder's Original Options (as defined in the Plan);
4. at a price (the "Exercise Price") of $ [_] per Optioned Unit; and
5. for a term expiring at 5:00 p.m., [_] time, on [_] (the "Expiry Date");
on the terms and subject to the conditions set out in the Plan.
By signing this agreement, the Optionholder acknowledges that he has read and
understands the terms of the Plan and accepts the Exchange Option in exchange
for his Original Options in accordance with the terms of the Plan.
IN WITNESS WHEREOF the Fund and the Optionholder have executed this Option
Agreement as of [_], 200[_].
FORDING CANADIAN COAL TRUST
By: [Trustee]
--------------------------------
Name of Optionholder
------------------------------------
Signature of Optionholder
------------------------------------
B-16
SCHEDULE C - CASHLESS EXERCISE INSTRUCTION FORM
FORDING CANADIAN COAL TRUST
EXCHANGE OPTION PLAN
TO: Brokerage Firm: FROM:
Broker Name: (Title:)
(Work Address)
Phone: (000) 000-0000
Fax: (000) 000-0000
A/C Number:
FAX A COPY TO:
Client Services
Solium Capital Inc.
000, 000 - 0xx Xxxxxx XX
Xxxxxxx, XX
X0X 0X0
Fax: (000) 000-0000
I hereby authorize [__] to sell [__] Units of the Fund at a price of $ [__].
Concurrent with the sale of Units, I hereby elect to exercise Grant number [__]
made to me under the provisions of the Exchange Option Plan as of [__] at an
Exercise Price of $ [__] per Optioned Unit.
Upon the sale of [__] Units of the Fund, I direct [__] to deliver payment to
the Fund. The aggregate amount that will be paid to the Fund will be $ [__]
(number of Optioned Units to be exercised [__] (LOGO) Exercise Price [__] ).
Upon receipt by the Fund of $ [__] , I hereby direct that a certificate for the
Optioned Units referred to above be issued in the name of [__] for the account
of [__] and delivered to [__] .
Upon receipt of the units, I direct [__] Units exercised under my Option
Agreement, less brokerage commission fees as follows:
[ ] Mail to my address [ ] Pick up from Broker
[ ] Deposit to my bank ___________________________________
Account: Bank ID # Transit # A/C #
Bank Address:
Signed: Home Address:
Date: ________________________
B-17
To be completed by Solium Capital Inc. and faxed to Broker:
Solium Capital Inc. hereby confirms that [__] is eligible to exercise the
Exchange Option referred to herein:
Solium Capital Inc. Date
To be completed by the Broker and faxed to Fording Canadian Coal Trust within 3
days of transaction:
This hereby confirms that the options referred to above were sold at a price of
$ [__] per Unit.
Broker's Signature Date
B-18
SCHEDULE "B"
FORDING CANADIAN COAL TRUST NOTE
$35.00 (CDN.)
l. FOR VALUE RECEIVED the undersigned unconditionally promises to pay to
the holder of this Note (the "LENDER") or to its order, in lawful
money of Canada, the amount of $35.00 (the "PRINCIPAL AMOUNT"). No
interest shall accrue or be payable on the Principal Amount.
2. The Principal Amount is repayable, at the election of the Lender, on
demand.
3. When not in default under this Note, the undersigned shall be entitled
to prepay all or any portion of the Principal Amount outstanding
without notice, bonus or penalty.
4. The undersigned waives demand, presentment for payment, notice of
non-payment and notice of protest of this Note. No failure or delay by
the Lender in exercising any right under this Note shall operate as a
waiver of such right, nor shall any single or partial exercise of any
right exclude the further exercise thereof or the exercise of any
other right.
5. The undersigned hereby waives the right to assert in any action or
proceeding with regard to this Note any setoffs or counterclaims which
the undersigned may have.
6. This Note shall be governed by and construed in accordance with the
laws of the Province of Alberta and the laws of Canada applicable
therein and shall enure to the benefit of the Lender, its successors
and assigns and shall be binding on the undersigned and its
successors.
DATED: o
The Trustees of the FORDING CANADIAN COAL TRUST on behalf of such Trust by
their duly authorized signatory
By:
Name: o
Title: o
B-19
SCHEDULE "C"
The terms and conditions of the New Voting Preference Shares and New Non-Voting
Shares of FCL Amalco shall be as follows:
1. NEW NON-VOTING SHARES.
The rights, privileges, restrictions and conditions attaching to the New
Non-Voting Shares are as follows:
(a) PAYMENT OF DIVIDENDS: The holders of the New Non-Voting
Shares will be entitled to receive dividends if, as and when
declared by the board of directors of the Corporation out of
the assets of the Corporation properly applicable to the
payment of dividends in such amounts and payable in such
manner as the board of directors may from time to time
determine. Subject to the rights of the holders of any other
class of shares of the Corporation entitled to receive
dividends in priority to or rateably with the holders of the
New Non-Voting Shares, the board of directors may in its sole
discretion declare dividends on the New Non-Voting Shares to
the exclusion of any other class of shares of the
Corporation.
(b) PARTICIPATION UPON LIQUIDATION, DISSOLUTION OR WINDING UP: In
the event of the liquidation, dissolution or winding up of
the Corporation or other distribution of assets of the
Corporation among its shareholders for the purpose of winding
up its affairs, the holders of the New Non-Voting Shares
will, subject to the rights of the holders of any other class
of shares of the Corporation entitled to receive the assets
of the Corporation upon such a distribution in priority to or
rateably with the holders of the New Non-Voting Shares, be
entitled to participate rateably in any distributions of the
assets of the Corporation.
(c) VOTING RIGHTS: Except as otherwise provided in the Canada
Business Corporations Act, the holders of the New Non-Voting
Shares shall not be entitled to receive notice of, or to
attend or to vote at, any meeting of the shareholders of the
Corporation.
2. NEW VOTING PREFERENCE SHARES.
The rights, privileges, restrictions and conditions attaching to the New Voting
Preference Shares are as follows:
(a) DEFINITIONS: With respect to the New Voting Preference
Shares, the following terms shall have the meanings ascribed
to them below:
(i) "ACT" means the Canada Business Corporations Act;
(ii) "REDEMPTION AMOUNT" in respect of each New Voting
Preference Share means the amount of $0.01; and
(iii) "REDEMPTION PRICE" in respect of each New Voting
Preference Share means the Redemption Amount
together with all dividends declared thereon and
B-20
unpaid up to the date of liquidation, dissolution or
winding up or the date of redemption, as the case
may be.
(b) PAYMENT OF DIVIDENDS: The holders of the New Voting
Preference Shares will be entitled to receive dividends if,
as and when declared by the board of directors of the
Corporation out of the assets of the Corporation properly
applicable to the payment of dividends in such amounts and
payable in such manner as the board of directors may from
time to time determine. Subject to the rights of the holders
of any other class of shares of the Corporation entitled to
receive dividends in priority to or rateably with the holders
of the New Voting Preference Shares, the board of directors
may in its sole discretion declare dividends on the New
Voting Preference Shares to the exclusion of any other class
of shares of the Corporation.
(c) VOTING RIGHTS: Each holder of New Voting Preference Shares
shall be entitled to receive notice of and to attend all
meetings of shareholders of the Corporation and to vote
thereat, except meetings at which only holders of a specified
class of shares (other than New Voting Preference Shares) or
a specified series of shares are entitled to vote. At all
meetings of which notice must be given to the holders of the
New Voting Preference Shares, each holder of New Voting
Preference Shares shall be entitled to one vote in respect of
each New Voting Preference Share held by such holder.
(d) LIQUIDATION, DISSOLUTION OR WINDING-UP: In the event of the
liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, the holders of the New
Voting Preference Shares shall be entitled to receive before
any distribution of any part of the assets of the Corporation
among the holders of the New Non-Voting Shares or any other
class of shares of the Corporation ranking junior to the New
Voting Preference Shares, an amount equal to the Redemption
Price of the New Voting Preference Shares. After payment to
the holders of the New Voting Preference Shares of the amount
so payable to such holders as herein provided, the holders
shall not be entitled to share in any further distribution of
the property or assets of the Corporation.
(e) REDEMPTION AT THE OPTION OF THE CORPORATION:
(i) Subject to the Act, the Corporation shall, at its
option, be entitled to redeem at any time or times
all or any part of the New Voting Preference Shares
registered in the name of any holder of any such New
Voting Preference Shares on the books of the
Corporation with or without the consent of such
holder by giving notice in writing to such holder
specifying:
(A) that the Corporation desires to redeem all
or any part of the New Voting Preference
Shares registered in the name of such
holder;
(B) if part only of the New Voting Preference
Shares registered in the name of such
holder is to be redeemed, the number
thereof to be so redeemed;
B-21
(C) the business day (in this paragraph
referred to as the "REDEMPTION DATE") on
which the Corporation desires to redeem
such New Voting Preference Shares. Such
notice shall specify a Redemption Date
which shall not be less than 30 days after
the date on which the notice is given by
the Corporation or such shorter period of
time as the Corporation and the holder of
any such New Voting Preference Shares may
agree; and
(D) the place of redemption.
(ii) The Corporation shall, on the Redemption Date,
redeem such New Voting Preference Shares by paying
to such holder an amount equal to the Redemption
Price on presentation and surrender of the
certificate(s) for the New Voting Preference Shares
so called for redemption at such place as may be
specified in such notice. The certificate(s) for
such New Voting Preference Shares shall thereupon be
cancelled and the New Voting Preference Shares
represented thereby shall thereupon be redeemed.
Such payment shall be made by delivery to such
holder of a cheque payable in the amount of the
aggregate Redemption Price for the New Voting
Preference Shares to be redeemed. From and after the
Redemption Date, the holder thereof shall not be
entitled to exercise any of the rights of holders of
New Voting Preference Shares in respect thereof
unless payment of the Redemption Price is not made
on the Redemption Date, or on presentation and
surrender of the certificate(s) for the New Voting
Preference Shares so called for redemption,
whichever is later in which case the rights of the
holder of the New Voting Preference Shares shall
remain unaffected until payment in full of the
Redemption Price.
(f) REDEMPTION AT THE OPTION OF THE HOLDER:
(i) Subject to the Act, a holder of any New Voting
Preference Shares shall be entitled to require the
Corporation to redeem at any time or times any New
Voting Preference Shares registered in the name of
such holder on the books of the Corporation by
tendering to the Corporation at its registered
office a share certificate representing the New
Voting Preference Shares which the holder desires to
have the Corporation redeem together with a request
in writing (in this paragraph referred to as a
"Redemption Demand") specifying:
(A) that the holder desires to have the New
Voting Preference Share represented by such
certificate redeemed by the Corporation;
(B) if part only of the New Voting Preference
Shares registered in the name of such
holder is to be redeemed, the number
thereof to be so redeemed; and
(C) the business day (in this paragraph
referred to as the "Redemption Date") on
which the holder desires to have the
Corporation redeem such New Voting
Preference Shares. The Redemption Demand
shall specify a Redemption Date which shall
not be a date earlier than the date on
B-22
which the Redemption Demand is tendered to
the Corporation or such other date as the
holder and the Corporation may agree.
(ii) The Corporation shall, on such Redemption Date
redeem all New Voting Preference Shares required to
be redeemed by paying to such holder an amount equal
to the aggregate Redemption Price therefor on
presentation and surrender of the certificate(s) for
the New Voting Preference Shares to be so redeemed
at the registered office of the Corporation. The
certificate(s) for such New Voting Preference Shares
shall thereupon be cancelled and the New Voting
Preference Shares represented thereby shall
thereupon be redeemed. Such payment shall be made by
delivery to such holder of a cheque in the amount of
the aggregate Redemption Price for the New Voting
Preference Shares to be redeemed. From and after the
Redemption Date, such New Voting Preference Shares
shall cease to be entitled to dividends and the
holder thereof shall not be entitled to exercise any
of the rights of holders of New Voting Preference
Shares in respect thereof unless payment of the said
Redemption Price is not made on the Redemption Date,
in which case the rights of the holder of the New
Voting Preference Shares shall remain unaffected
until payment in full of the Redemption Price.
B-23
SCHEDULE "D"
4123212 CANADA LTD.
COMMON SHARES
The rights, privileges, restrictions and conditions attaching to the Common
Shares are as follows:
(a) Payment of Dividends: The holders of the Common Shares will
be entitled to receive dividends if, as and when declared by
the board of directors of the Corporation out of the assets
of the Corporation properly applicable to the payment of
dividends in such amounts and payable in such manner as the
board of directors may from time to time determine. Subject
to the rights of the holders of any other class of shares of
the Corporation entitled to receive dividends in priority to
the holders of the Common Shares, the board of directors may
in its sole discretion declare dividends on the Common.
Shares to the exclusion of any other class of shares of the
Corporation including, for greater certainty, the Preferred
Shares provided that the board of directors may not declare
dividends on the Common Shares if the Corporation is, or
after the payment of the dividend would be, unable to pay the
holders of the Preferred Shares the Redemption Price for each
Preferred Share held by them.
(b) Participation Upon Liquidation, Dissolution or Winding-up: In
the event of the liquidation, dissolution or winding up of
the Corporation or other distribution of assets of the
Corporation among its shareholders for the purpose of winding
up its affairs, the holders of the Common Shares will,
subject to the rights of the holders of any other class of
shares of the Corporation entitled to receive the assets of
the Corporation upon such a distribution in priority to or
rateably with the holders of the Common Shares, be entitled
to participate rateably in any distributions of the assets of
the Corporation.
(c) Voting Rights: The holders of the Common Shares will be
entitled to receive notice of and to attend all annual and
special meetings of the shareholders of the Corporation and
to one vote in respect of each Common Share held at all such
meetings, except at separate meetings of or on separate votes
by the holders of another class or series of shares of the
Corporation.
B-24
SCHEDULE "E"
4123212 CANADA LTD.
NOMINAL NOTE
$0.01 (CDN.)
1. FOR VALUE RECEIVED the undersigned unconditionally promises to pay to
the holder of this Note (the "Lender") or to its order, in lawful
money of Canada, the amount of $0.01 (the "Principal Amount"). No
interest shall accrue or be payable on the Principal Amount.
2. The Principal Amount is repayable, at the election of the Lender, on
demand.
3. When not in default under this Note, the undersigned shall be entitled
to prepay all or any portion of the Principal Amount outstanding
without notice, bonus or penalty.
4. The undersigned waives demand, presentment for payment, notice of
non-payment and notice of protest of this Note. No failure or delay by
the Lender in exercising any right under this Note shall operate as a
waiver of such right, nor shall any single or partial exercise of any
right exclude the further exercise thereof or the exercise of any
other right.
5. The undersigned hereby waives the right to assert in any action or
proceeding with regard to this Note any setoffs or counterclaims which
the undersigned may have.
6. This Note shall be governed by and construed in accordance with the
laws of the Province of Alberta and the laws of Canada applicable
therein and shall enure to the benefit of the Lender, its successors
and assigns and shall be binding on the undersigned and its
successors.
DATED o
4123212 CANADA LTD.
By:
--------------------------------------------
Name: o
Title: o
B-25
SCHEDULE "F"
4123212 CANADA LTD.
PREFERRED SHARES
1. Definitions.
With respect to the Preferred Shares, the following terms shall have the
meanings ascribed to them below:
(a) "Act" means the Canada Business Corporations Act.
(b) "Plan of Arrangement" means the plan of arrangement
describing the arrangement under Section 192 of the Act
involving Fording Inc., Fording Coal Limited, 4123212 Canada
Ltd., the Fording Canadian Coal Trust, Teck Cominco Limited,
Westshore Terminals Income Fund, Teck Bullmoose Coal Inc.,
Quintette Coal Partnership, Luscar Coal Limited, CONSOL
Energy Inc. and Sherritt Coal Partnership II.
(c) "Redemption Amount" in respect of each Preferred Share means
the amount determined in accordance with Section 5.1 of the
Plan of Arrangement.
(d) "Redemption Price" in respect of each Preferred Share means
the Redemption Amount together with all dividends declared
thereon and unpaid up to the date of liquidation, dissolution
or winding-up or the date of redemption, as the case may be.
2. Dividends.
The holders of the Preferred Shares shall be entitled to receive and the
Corporation shall pay thereon, as and when declared by the board of directors
out of the moneys of the Corporation properly applicable to the payment of
dividends, non-preferential dividends. Subject to the rights of the holders of
any other class of shares of the Corporation entitled to receive dividends in
priority to or rateably with the holders of the Preferred Shares, the board of
directors may in its sole discretion declare dividends on the Preferred Shares
to the exclusion of any other class of shares of the Corporation.
3. No Voting Rights.
Except as otherwise provided in the Act, the holders of the Preferred Shares
shall not be entitled to receive notice of, or to attend or to vote at any
meeting of the shareholders of the Corporation.
4. Liquidation, Dissolution or Winding-up.
In the event of the liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, the holders of the Preferred Shares shall be
entitled to receive in respect of each such share held, before any distribution
of any part of the assets of the Corporation among the holders of the Common
Shares and any other class of shares of the Corporation ranking junior to the
B-26
Preferred Shares, an amount equal to the Redemption Price of the Preferred
Shares. After payment to the holders of the Preferred Shares of the amount so
payable to such holders as herein provided, the holders shall not be entitled
to share in any further distribution of the property or assets of the
Corporation.
5. Redemption At the Option of the Corporation.
(a) Subject to the Act, the Corporation shall, at its option, be
entitled to redeem at any time or times all or any part of
the Preferred Shares registered in the name of any holder of
any such Preferred Shares on the books of the Corporation
with or without the consent of such holder by giving notice
in writing to such holder specifying:
(i) that the Corporation desires to redeem all or any
part of the Preferred Shares registered in the name
of such holder;
(ii) if part only of the Preferred Shares registered in
the name of such holder is to be redeemed, the
number thereof to be so redeemed;
(iii) the business day (in this paragraph referred to as
the "Redemption Date") on which the Corporation
desires to redeem such Preferred Shares. Such notice
shall specify a Redemption Date which shall not be
less than 30 days after the date on which the notice
is given by the Corporation or such shorter period
of time as the Corporation and the holder of any
such Preferred Shares may agree; and
(iv) the place of redemption.
(b) The Corporation shall, on the Redemption Date, redeem such
Preferred Shares by paying to such holder an amount equal to
the Redemption Price on presentation and surrender of the
certificate(s) for the Preferred Shares so called for
redemption at such place as may be specified in such notice.
The certificate(s) for such Preferred Shares shall thereupon
be cancelled and the Preferred Shares represented thereby
shall thereupon be redeemed. Such payment shall be made by
delivery to such holder of a cheque payable in the amount of
the aggregate Redemption Price for the Preferred Shares to be
redeemed. From and after the Redemption Date, the holder
thereof shall not be entitled to exercise any of the rights
of holders of Preferred Shares in respect thereof unless
payment of the Redemption Price is not made on the Redemption
Date, or on presentation and surrender of the certificate(s)
for the Preferred Shares so called for redemption, whichever
is later in which case the rights of the holder of the
Preferred Shares shall remain unaffected until payment in
full of the Redemption Price.
6. Redemption At the Option of the Holder.
(a) Subject to the Act, a holder of any Preferred Shares shall be
entitled to require the Corporation to redeem at any time or
times any Preferred Shares registered in the name of such
holder on the books of the Corporation by tendering to the
b-27
Corporation at its registered office a share certificate
representing the Preferred Shares which the holder desires to
have the Corporation redeem together with a request in
writing (in this paragraph referred to as a "Redemption
Demand") specifying:
(i) that the holder desires to have the Preferred Share
represented by such certificate redeemed by the
Corporation;
(ii) if part only of the Preferred Shares registered in
the name of such holder is to be redeemed, the
number thereof to be so redeemed; and
(iii) the business day (in this paragraph referred to as
the "Redemption Date") on which the holder desires
to have the Corporation redeem such Preferred
Shares. The Redemption Demand shall specify a
Redemption Date which shall not be a date earlier
than the date on which the Redemption Demand is
tendered to the Corporation or such other date as
the holder and the Corporation may agree.
(b) The Corporation shall, on such Redemption Date redeem all
Preferred Shares required to be redeemed by paying to such
holder an amount equal to the aggregate Redemption Price
therefor on presentation and surrender of the certificate(s)
for the Preferred Shares to be so redeemed at the registered
office of the Corporation. The certificate(s) for such
Preferred Shares shall thereupon be cancelled and the
Preferred Shares represented thereby shall thereupon be
redeemed. Such payment shall he made by delivery to such
holder of a cheque in the amount of the aggregate Redemption
Price for the Preferred Shares to be redeemed. From and after
the Redemption Date, such Preferred Shares shall cease to be
entitled to dividends and the holder thereof shall not be
entitled to exercise any of the rights of holders of
Preferred Shares in respect thereof unless payment of the
said Redemption Price is not made on the Redemption Date, in
which case the tights of the holder of the Preferred Shares
shall remain unaffected until payment in full of the
Redemption Price.
B-28
SCHEDULE "G"
4123212 CANADA LTD.
PROMISSORY NOTE
1. FOR VALUE RECEIVED the undersigned unconditionally promises to pay to
the holder of this Note (the "Lender") or to its order, in lawful
money of Canada, the amount obtained by dividing $445,000,000 by the
number of Common Shares held by Participating Shareholders immediately
prior to the Effective Time (the "Principal Amount"). No interest
shall accrue or be payable on the Principal Amount.
2. The Principal Amount is repayable, at the election of the Lender, on
demand.
3. When not in default under this Note, the undersigned shall be entitled
to prepay all or any portion of the Principal Amount outstanding
without notice, bonus or penalty.
4. The undersigned waives demand, presentment for payment, notice of
non-payment and notice of protest of this Note. No failure or delay by
the Lender in exercising any right under this Note shall operate as a
waiver of such right, nor shall any single or partial exercise of any
right exclude the further exercise thereof or the exercise of any
other right.
5. The undersigned hereby waives the right to assert in any action or
proceeding with regard to this Note any setoffs or counterclaims which
the undersigned may have.
6. This Note shall be governed by and construed in accordance with the
laws of the Province of Alberta and the laws of Canada applicable
therein and shall enure to the benefit of the Lender, its successors
and assigns and shall be binding on the undersigned and its
successors.
7. All capitalized terms used herein will have the meaning ascribed to
them in the Plan of Arrangement.
DATED o
4123212 CANADA LTD.
By:
Name: o
Title: o
B-29
SCHEDULE "H"
FCL AMALCO AMALGAMATION PROVISIONS
1. Name of amalgamated corporation
FORDING INC.
2. The place in Canada where the registered office is to be situated
Xxxxx 0000, 000, Xxxxx Xxxxxx X.X.
Xxxx of Calgary, in the Province xx Xxxxxxx, X0X 0X0
3. The classes and any maximum number of shares that the corporation is
authorized to issue
The authorized capital of the amalgamated corporation is the same as
the authorized capital of Fording Inc. prior to the amalgamation
contemplated hereby and is comprised of an unlimited number of Common
Shares, an unlimited number of First Preferred Shares and an unlimited
number of Second Preferred Shares.
4. Restrictions, if any, on share transfers
None.
5. Number (or minimum and maximum number of directors)
A minimum of 5 and a maximum of 20.
6. Restrictions, if any, on business the corporation may carry on
There are no restrictions.
7. Other provisions, if any
The actual number of directors within the maximum and minimum set out
in paragraph 5 may be determined from time to time by resolution of
the directors. Any vacancy among the directors resulting from an
B-30
increase in the number of directors as so determined may be filled by
resolution of the directors.
8. The amalgamation has been effected as if approved and undertaken
pursuant to and in accordance with Subsection 184(1) of the Act except
to the extent modified by the Plan of Arrangement describing the
arrangement under Section 192 of the Act involving Fording Inc.,
Fording Coal Limited, 4123212 Canada Ltd., the Fording Canadian Coal
Fund, Teck Cominco Limited, Westshore Terminals Income Fund, Teck
Bullmoose Coal Inc., Quintette Coal Partnership, Luscar Coal Limited,
CONSOL Energy Inc. and Sherritt Coal Partnership II.
9. Name of the amalgamating corporations
Fording Inc. and Fording Coal Limited
B-31
SCHEDULE "I"
NEW FORDING AMALGAMATION PROVISIONS
1. Name of amalgamated corporation
FORDING INC.
2. The place in Canada where the registered office is to be situated
Xxxxx 0000, 000, Xxxxx Xxxxxx X.X.
Xxxx of Calgary, in the Province xx Xxxxxxx, X0X 0X0
3. The classes and any maximum number of shares that the amalgamated
corporation is authorized to issue are the same as the authorized
capital of 4123212 Canada Ltd. prior to the amalgamation contemplated
hereby and is comprised of an unlimited number of Common Shares and an
unlimited number of Preferred Shares, the rights, privileges,
conditions and restrictions of which are described in Appendix 1 to
this form.
4. Restrictions, if any, on share transfers
None.
5. Number (or minimum and maximum number of directors)
A minimum of 5 and a maximum of 20.
6. Restrictions, if any, on business the corporation may carry on
There are no restrictions.
7. Other provisions, if any
The actual number of directors within the maximum and minimum set out
in paragraph 5 may be determined from time to time by resolution of
the directors. Any vacancy among the directors resulting from an
increase in the number of directors as so determined may be filled by
resolution of the directors.
B-32
8. The amalgamation has been effected as if approved and undertaken
pursuant to and in accordance with Subsection 184(1) of the Act except
to the extent modified by the Plan of Arrangement describing the
arrangement under Section 192 of the Act involving Fording Inc.,
Fording Coal Limited, 4123212 Canada Ltd., the Fording Canadian Coal
Fund, Teck Cominco Limited, Westshore Terminals Income Fund, Teck
Bullmoose Coal Inc., Quintette Coal Partnership, Luscar Coal Limited,
CONSOL Energy Inc. and Sherritt Coal Partnership II.
9. Name of the amalgamating corporations
4123212 Canada Ltd. and Fording Inc.
B-33
APPENDIX 1 TO SCHEDULE "I"
The Corporation is authorized to issue an unlimited number of Common Shares and
an unlimited number of Preferred Shares.
COMMON SHARES
The rights, privileges, restrictions and conditions attaching to the Common
Shares are as follows:
(a) Payment of Dividends: The holders of the Common Shares will
be entitled to receive dividends if, as and when declared by
the board of directors of the Corporation out of the assets
of the Corporation properly applicable to the payment of
dividends in such amounts and payable in such manner as the
board of directors may from time to time determine. Subject
to the rights of the holders of any other class of shares of
the Corporation entitled to receive dividends in priority to
the holders of the Common Shares, the board of directors may
in its sole discretion declare dividends on the Common Shares
to the exclusion of any other class of shares of the
Corporation including, for greater certainty, the Preferred
Shares, provided that the board of directors may not declare
dividends on the Common Shares if the Corporation is, or
after the payment of the dividend would be, unable to pay the
holders of the Preferred Shares the Redemption Price for each
Preferred Share held by them.
(b) Participation Upon Liquidation, Dissolution or Winding-up: In
the event of the liquidation, dissolution or winding-up of
the Corporation or other distribution of assets of the
Corporation among its shareholders for the purpose of winding
up its affairs, the holders of the Common Shares will,
subject to the rights of the holders of any other class of
shares of the Corporation entitled to receive the assets of
the Corporation upon such a distribution in priority to or
rateably with the holders of the Common Shares, be entitled
to participate rateably in any distributions of the assets of
the Corporation.
(c) Voting Rights: The holders of the Common Shares will be
entitled to receive notice of and to attend all annual and
special meetings of the shareholders of the Corporation and
to one vote in respect of each Common Share held at all such
meetings, except at separate meetings of or on separate votes
by the holders of another class or series of shares of the
Corporation.
PREFERRED SHARES
The rights, privileges, conditions and restrictions attaching to the Preferred
Shares are as follows:
1. Definitions.
With respect to the Preferred Shares, the following terms shall have the
meanings ascribed to them below:
(a) "Act" means the Canada Business Corporations Act.
B-34
(b) "Plan of Arrangement" means the plan of arrangement
describing the arrangement under Section 192 of the Act
involving Fording Inc., Fording Coal Limited, 4123212 Canada
Ltd., the Fording Canadian Coal Trust, Teck Cominco Limited,
Westshore Terminals Income Fund, Teck Bullmoose Coal Inc.,
Quintette Coal Partnership, Luscar Coal Limited, CONSOL
Energy Inc. and Sherritt Coal Partnership II.
(c) "Redemption Amount" in respect of each Preferred Share means
the amount determined in accordance with Section 5.1 of the
Plan of Arrangement.
(d) "Redemption Price" in respect of each Preferred Share means
the Redemption Amount together with all dividends declared
thereon and unpaid up to the date of liquidation, dissolution
or winding-up or the date of redemption, as the case may be.
2. Dividends.
The holders of the Preferred Shares shall be entitled to receive and the
Corporation shall pay thereon, as and when declared by the board of directors
out of the moneys of the Corporation properly applicable to the payment of
dividends, non-preferential dividends. Subject to the rights of the holders of
any other class of shares of the Corporation entitled to receive dividends in
priority to or rateably with the holders of the Preferred Shares, the board of
directors may in its sole discretion declare dividends on the Preferred Shares
to the exclusion of any other class of shares of the Corporation.
3. No Voting Rights.
Except as otherwise provided in the Act, the holders of the Preferred Shares
shall not be entitled to receive notice of, or to attend or to vote at any
meeting of the shareholders of the Corporation.
4. Liquidation, Dissolution or Winding-up.
In the event of the liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, the holders of the Preferred Shares shall be
entitled to receive in respect of each such share held, before any distribution
of any part of the assets of the Corporation among the holders of the Common
Shares and any other class of shares of the Corporation ranking junior to the
Preferred Shares, an amount equal to the Redemption Price of the Preferred
Shares. After payment to the holders of the Preferred Shares of the amount so
payable to such holders as herein provided, the holders shall not be entitled
to share in any further distribution of the property or assets of the
Corporation.
5. Redemption At the Option of the Corporation.
(a) Subject to the Act, the Corporation shall, at its option, be
entitled to redeem at any time or times all or any part of
the Preferred Shares registered in the name of any holder of
any such Preferred Shares on the books of the Corporation
with or without the consent of such holder by giving notice
in writing to such holder specifying:
B-35
(i) that the Corporation desires to redeem all or any
part of the Preferred Shares registered in the name
of such holder;
(ii) if part only of the Preferred Shares registered in
the name of such holder is to be redeemed, the
number thereof to be so redeemed;
(iii) the business day (in this paragraph referred to as
the "Redemption Date") on which the Corporation
desires to redeem such Preferred Shares. Such notice
shall specify a Redemption Date which shall not be
less than 30 days after the date on which the notice
is given by the Corporation or such shorter period
of time as the Corporation and the holder of any
such Preferred Shares may agree; and
(iv) the place of redemption.
(b) The Corporation shall, on the Redemption Date, redeem such
Preferred Shares by paying to such holder an amount equal to
the Redemption Price on presentation and surrender of the
certificate(s) for the Preferred Shares so called for
redemption at such place as may be specified in such notice.
The certificate(s) for such Preferred Shares shall thereupon
be cancelled and the Preferred Shares represented thereby
shall thereupon be redeemed. Such payment shall be made by
delivery to such holder of a cheque payable in the amount of
the aggregate Redemption Price for the Preferred Shares to be
redeemed. From and after the Redemption Date, the holder
thereof shall not be entitled to exercise any of the rights
of holders of Preferred Shares in respect thereof unless
payment of the Redemption Price is not made on the Redemption
Date, or on presentation and surrender of the certificate(s)
for the Preferred Shares so called for redemption, whichever
is later in which case the rights of the holder of the
Preferred Shares shall remain unaffected until payment in
full of the Redemption Price.
6. Redemption At the Option of the Holder.
Subject to the Act, a holder of any Preferred Shares shall be entitled to
require the Corporation to redeem at any time or times any Preferred Shares
registered in the name of such holder on the books of the Corporation by
tendering to the Corporation at its registered office a share certificate
representing the Preferred Shares which the holder desires to have the
Corporation redeem together with a request in writing (in this paragraph
referred to as a "Redemption Demand") specifying:
(a) that the holder desires to have the Preferred Share
represented by such certificate redeemed by the Corporation;
(b) if part only of the Preferred Shares registered in the name
of such holder is to be redeemed, the number thereof to be so
redeemed; and
(c) the business day (in this paragraph referred to as the
"Redemption Date") on which the holder desires to have the
Corporation redeem such Preferred Shares. The Redemption
Demand shall specify a Redemption Date which shall not be a
B-36
date earlier than the date on which the Redemption Demand is
tendered to the Corporation or such other date as the holder
and the Corporation may agree.
The Corporation shall, on such Redemption Date redeem all Preferred Shares
required to be redeemed by paying to such holder an amount equal to the
aggregate Redemption Price therefor on presentation and surrender of the
certificate(s) for the Preferred Shares to be so redeemed at the registered
office of the Corporation. The certificate(s) for such Preferred Shares shall
thereupon be cancelled and the Preferred Shares represented thereby shall
thereupon be redeemed. Such payment shall be made by delivery to such holder of
a cheque in the amount of the aggregate Redemption Price for the Preferred
Shares to be redeemed. From and after the Redemption Date, such Preferred
Shares shall cease to be entitled to dividends and the holder thereof shall not
be entitled to exercise any of the rights of holders of Preferred Shares in
respect thereof unless payment of the said Redemption Price is not made on the
Redemption Date, in which case the rights of the holder of the Preferred Shares
shall remain unaffected until payment in full of the Redemption Price.
B-37
SCHEDULE "J"
LUSCAR/CONSOL NOTE
$224,000,000 (CDN.)
7. FOR VALUE RECEIVED the undersigned unconditionally promises to pay to
the holder of this Note (the "Lender") or to its order the amount of
$224,000,000 (the "Principal Amount") in cash or through the issuance
of 6,400,000 common shares of FCL Amalco (as such term is defined in
that certain Combination Agreement to which the undersigned is a party
dated January 13, 2003). No interest shall accrue or be payable on the
Principal Amount.
8. The Principal Amount is repayable, at the election of the Lender, on
demand.
9. When not in default under this Note, the undersigned shall be entitled
to prepay all or any portion of the Principal Amount outstanding
without notice, bonus or penalty.
10. The undersigned waives demand, presentment for payment, notice of
non-payment and notice of protest of this Note. No failure or delay by
the Lender in exercising any right under this Note shall operate as a
waiver of such right, nor shall any single or partial exercise of any
right exclude the further exercise thereof or the exercise of any
other right.
11. The undersigned hereby waives the right to assert in any action or
proceeding with, regard to this Note any setoffs or counterclaims
which the undersigned may have.
12. This Note shall be governed by and construed in accordance with the
laws of the Province of Alberta and the laws of Canada applicable
therein and shall enure to the benefit of the Lender, its successors
and assigns and shall be binding on the undersigned and its
successors.
DATED o
FORDING INC.
By:
-------------------------------
Name: o
Title: o
B-38
*****
FINAL
SCHEDULE 2.3(A)
TERM SHEET - GENERAL PARTNERSHIP AGREEMENT
PARTIES: o Fording Holdco, Teck, Quintette Coal
Partnership ("QCP") and Teck Bullmoose
Coal Inc. ("TBCI").
MANAGEMENT AND EMPLOYEES: o In order to facilitate an efficient
transition upon completion of the
Transaction, the management and employees
of Fording to be transferred to the
Partnership will be employed by the
successor by amalgamation to Fording
("Fording Holdco") as agent for the
Partnership on terms no less favourable
than their current terms of employment.
o Until permanent arrangements can be made,
Fording Holdco will make all such persons
exclusively available to the Partnership
and the Partnership shall reimburse
Fording Holdco for all costs/benefits
relating to such employees and will
indemnify Fording Holdco against claims by
such persons and third party claims in
relation to their activities on behalf of
the Partnership.
o Following completion of the Transaction,
employees, to the extent reasonable from
the perspective of Fording Holdco and the
Partnership, will be moved to a
wholly-owned operating subsidiary of the
Partnership at a tax effective time.
o Elkview employees will continue to be
employed by Elkview Operating Corporation
as agent for the Partnership.
o All management and employees of the Line
Creek mine and the Luscar mine ultimately
to be transferred to the partnership
pursuant to the Transaction will continue
to be employed by their respective
employers until permanent arrangements can
be made, and such employers will be
reimbursed on the basis set forth above
and Fording will make such persons
available to the Partnership.
o Subject to the following, Teck, in its
capacity as managing partner, shall be
responsible for and shall manage the
business and affairs of the Partnership.
All decisions relating to the business and
- 2 -
affairs of the Partnership will be made by
Teck, other than those described below
under the heading "Special Majority
Matters".
o Teck will exercise the degree of care,
skill and diligence in its management of
the Partnership that an experienced mine
operator would use in the conduct of its
own affairs, and will manage the
Partnership in accordance with prudent
mining practice. Teck will indemnify the
Partnership in respect of its gross
negligence or willful default in the
performance of its management obligations.
SPECIAL MAJORITY MATTERS: o Notwithstanding the foregoing, the
following matters will require approval of
Partners holding 95% of the Distribution
Entitlement (a "Special Resolution"):
(a) merger, arrangement, or other similar
transaction involving substantially
all of the business or assets of the
Partnership;
(b) reorganization of the structure of
the Partnership in a manner that
would materially adversely affect the
tax or financial consequences to a
Partner;
(c) any change in the distribution policy
of the Partnership;
(d) a voluntary bankruptcy/insolvency
proceeding or steps for the
appointment of a receiver in respect
of any material part of the business
or assets of the Partnership;
(e) liquidation of the Partnership's
assets or dissolution of the
Partnership;
(f) admission of new Partners, other than
wholly-owned subsidiaries or
affiliates of a Partner;
(g) change in Distribution Entitlements,
except as contemplated by the
Partnership agreement;
(h) suspending any of the operations of
the Partnership's business for a term
in excess of one year;
- 3 -
(i) annual capital requirements not
included in the approved annual
budget in excess of $10 million;
(j) a decision to continue the
Partnership if the Partnership is
terminated by operation of law;
(k) approval of the annual operating and
capital plans or budget, including
any material amendment thereto, prior
to its expiry;
(1) any sale, lease, exchange, transfer,
disposition or assignment of material
assets of the Partnership other than
as contemplated by the annual
operating and capital plans and
budget;
(m) institution or settlement of
litigation in amounts in excess of
$1,000,000;
(n) hedging transactions;
(o) any delegation by Teck of its powers
to manage the Partnership (other than
to a wholly-owned subsidiary on terms
reasonably acceptable to the
independent directors of Fording
Holdco);
(p) allocations to reserves for
reasonably anticipated working
capital, budget and capital
expenditure requirements not
contemplated by the approved annual
capital plan and budget;
(q) the entering into of any non-arm's
length transactions;
(r) any borrowings in excess of $100
million for working capital purposes;
and
(s) a decision to amend, modify, alter or
repeal any Special Resolution.
CONTRIBUTIONS: o At the Closing Time, Fording contributes,
on a tax-deferred basis, assets, as
further described and in the manner set
forth in the Fording Contribution Term
Sheet attached hereto as Schedule "A" (the
"Fording Contributed Assets").
- 4 -
o At the Closing Time, Teck contributes, on
a tax-deferred basis, assets as further
described and in the manner set forth in
the Teck Contribution Term Sheet attached
hereto as Schedule "B" (the "Teck
Contributed Assets").
o TBCI agrees to contribute the Bullmoose
mine, as described in the Teck
Contribution Term Sheet.
o QCP agrees to contribute the Quintette
Coal leases, the balance of the QCP Mobile
Equipment and the fixed assets at the
Quintette property, as described in the
Teck Contribution Term Sheet.
o Any of the foregoing assets which cannot
be conveyed at the Closing Time will be
held in trust for the Partnership and the
economic interests therein shall be
assigned to the Partnership. In such case,
the party required to convey such asset
will use it best efforts to cause the
asset to be transferred to the Partnership
as soon as possible. In addition, it is
understood that the Partners will use
their best efforts to ensure that the
Fording Contributed Assets and the Teck
Contributed Assets (collectively, the
"Contributed Assets") are contributed to
the Partnership on a tax efficient basis
for the contributor, having due regard to
the benefits anticipated to accrue to such
party pursuant to the Transaction. If any
of the Contributed Assets can not be
conveyed on such basis, the Partner shall
hold such assets in trust for the
Partnership and shall assign to the
Partnership, the economic interest
therein. Thereafter, the Partner shall use
its best efforts to ensure that such asset
is transferred to the Partnership as soon
as possible.
DISTRIBUTION ENTITLEMENTS: o Fording's Partnership Interest entitles it
to Fording Distribution Entitlements,
subject to reduction as described below.
o Teck's Partnership Interest entitles it to
Teck, Distribution Entitlements, subject
to increase as described below.
o Teck's Distribution Entitlements may be
irrevocably increased by up to an
additional 5% (bringing its total interest
to 40%) in the manner hereinafter
described.
- 5 -
o In this term sheet,
"Synergies" means all cost (including for
certainty all capital and operating costs)
savings and increased revenues
attributable to the combination of the
Teck Contributed Assets with the Fording
Contributed Assets (including, the
Luscar/Consol assets) and the operation
thereof and distribution and marketing of
the production thereof by the Partnership
on an integrated basis; provided that such
Synergies shall be calculated on the
basis, without duplication, that
eliminates the effect of changes in the
Canadian dollar, changes in metallurgical
coal prices generally and any associated
impact of such changes on transportation
costs and port loading charges (but not
eliminating changes in realized prices for
the products of the Partnership resulting
from the combination of assets therein),
changes in cash income and mineral taxes,
changes in transportation costs as a
result of contracted rate changes existing
at the date hereof or negotiated as part
of the Terminal Agreement. The annual
amount of such Synergies during each coal
year of the Period shall be set forth in a
report of a mutually acceptable expert in
metallurgical coal mining and marketing.
"Elkview Distributable Cash" will be
determined on a basis adjusted to
eliminate, without duplication, the effect
of changes in the Canadian dollar, changes
in metallurgical coal prices generally
(but not eliminating changes in realized
prices for the products of the Partnership
resulting from the combination of assets
therein), changes in cash income and
mineral taxes, reductions in Elkview coal
production or sales in comparison to its
optimal capacity on a stand-alone basis as
approved in the annual budget and changes
in transportation costs as a result of
contracted rate changes existing at the
date hereof. For certainty, Elkview
Distributable Cash in any coal year will
be determined, based on the review of the
mutually acceptable expert, so as to
adjust to eliminate the effect of items
determined to be the result of Synergies
which are counted in the calculation of
Incremental Returns for that year, and to
adjust for unusual fluctuations in
inventories.
- 6 -
"Period" means the next four coal years of
the Partnership (being April 1, 2003 to
March 31, 2007).
"Incremental Return" means, in respect of
any coal year during the Period, the
positive amount by which the aggregate of
(a) Elkview Distributable Cash for such
year and (b) the Synergies achieved during
such year, exceeds the aggregate of (x)
Elkview Distributable Cash for the year
ended December 31, 2002, (y) the sum of
$25 million and (z) the cumulative amount
of the Incremental Return for each of the
preceding coal years during the Period.
o At the end of each coal year during the
Period, Teck's Distribution Entitlement
(as defined below) will be permanently
increased by 0.1% in respect of each $1
million of Incremental Return in such coal
year. Any such increase will be made,
effective as at the end of such coal year,
by an increase in Teck's Distribution
Entitlement and in corresponding decrease
in the Distribution Entitlement of Fording
Holdco.
o Any dispute with respect to the
determination of Incremental Returns will
be resolved through a dispute resolution
mechanism to be established in the
definitive agreement.
DISTRIBUTION POLICY: o The Partnership will distribute to its
Partners in proportion to their respective
Distribution Entitlements distributable
cash on a monthly basis. Distributable
cash will be defined as all the
Partnership's available cash after
reservation for:
(a) payment of its debt obligations, if
any;
(b) operating expenses and Sustaining
Capital Expenditures; and
(c) allocations to a reserve for
reasonably anticipated working
capital and capital expenditure
requirements (provided that
reasonable use will be made of
operating lines for working capital
purposes).
- 7 -
"Sustaining Capital Expenditure" means
expenditures in respect of additions,
replacements or improvements to property,
plant and equipment required to maintain
the Partnership's current business
operations.
DISTRIBUTION ENTITLEMENTS: "Distribution Entitlement" means a
Partner's proportional entitlement,
expressed as a percentage, to share in the
profits and losses of the Partnership and
to participate in the distribution of
assets on liquidation or dissolution of
the Partnership. The initial Distribution
Entitlements will be as follows:
Teck: 34.833%
QCT: 0.164%
TBCI: 0.003%
Fording Holdco: 65%
Income and losses for tax and accounting
purposes will be allocated to the Partners
in proportion to their Distribution
Entitlements. The Partnership will in each
fiscal period, unless otherwise agreed by
the Partners claim the maximum permissible
discretionary deductions available to it
for tax purposes.
FORMATION OF PARTNERSHIP: o The name of the Partnership will be
Fording Canadian Coal Partnership and it
will be formed pursuant to the laws of
Alberta.
REPRESENTATIONS AND WARRANTIES: o The Partners will make standard
representations and warranties regarding
status and capacity.
OTHER ACTIVITIES: o Except to the extent otherwise restricted
by the Combination Agreement, Partners can
engage in other activities unrelated to
the production and sale of coal in North
America for which they are not liable to
account to the Partnership.
UNLIMITED
LIABILITY OF PARTNERS: o Except as provided below in respect of the
guarantee referred to under "Financing
Arrangements," Partners have unlimited
liability for all debts, liabilities and
obligations of the Partnership.
EVIDENCE OF OWNERSHIP: o On request of a Partner, the Managing
Partner will issue a certificate
evidencing that Partner's status as a
Partner and its Distribution Entitlement.
- 8 -
PARTNERSHIP MEETINGS: o Any Partner can call a meeting at any time
on 10 business days' notice.
o Quorum for Partnership meetings will be at
least two Partners holding not less than
95% of the outstanding Partnership Units.
o Partners may attend meetings in person or
by proxy.
AMENDMENTS TO
PARTNERSHIP AGREEMENT: o Amendments require the consent of all
Partners.
FINANCING ARRANGEMENTS: o The Partnership will provide the guarantee
contemplated by the financing arrangements
being put in place in connection with the
Transaction provided in such case, as
against Teck, QCP and TBCI the rights of
the lender under the guarantee shall be
limited in recourse to the assets of the
Partnership, it is unsecured and its
principal amount is not greater than $440
million (the "Initial Principal Amount")
and will provide a similar guarantee in
respect of the refinancing of any such
facilities provided that the amount being
refinanced is not greater than the Initial
Principal Amount and the terms and
conditions of the replacement guarantee
are no more onerous than those of the
guarantee given in connection with the
initial financing.
o So long as the guarantee is in place,
Fording Holdco will covenant in favour of
Teck (i) not to sell any of its
Partnership interest and (ii) not to carry
on any business other than through the
Partnership or in respect of its interest
therein, and other than its Industrial
Minerals business substantially as
currently conducted, unless, in the
reasonable judgment of Teck, the carrying
on of such business could not, under any
reasonably foreseeable circumstances, have
an adverse effect on the financial
condition of Fording Holdco.
PLEDGE OF
PARTNERSHIP INTEREST: o A Partner can pledge, mortgage or
hypothecate a Partnership interest subject
to the credit facilities and guarantees
being put in place in connection with the
Transaction.
- 9 -
RESTRICTIONS ON WITHDRAWALS: o No Partner will have any right to withdraw
any amount or receive any distribution
except as provided in the Partnership
Agreement and permitted by law.
TAX YEAR: o 12 months ended January 31 of each year.
REPORTING: o Teck, in its capacity as Managing Partner
will cause the Partnership to report
monthly to the Partners with respect to
the operational results and financial
performance of the Partnership. In
addition, on a quarterly basis, Teck will
report to the board of Fording Holdco with
respect to such matters and will ensure
that Fording Holdco has access to such
other information regarding the
Partnership as may be required in respect
of public company disclosure.
PARTNERS MEETINGS: o Where the consent of Partners is required
for any matter, such consent will be
obtained at a meeting of Partners or by
written resolution of Partners. Consent or
Approval by Partners holding 95% of
Distribution Entitlements will constitute
approval of any such matter. Partners
meetings will be held on reasonable
notice, such notice to be accompanied by
sufficient information to permit a
reasoned decision with respect to the
matters being considered. Each Partner
will arrange for its representation at
Partners' meetings by suitably experienced
persons with expertise in coal mining and
marketing and mine finance. Partners will
be obligated to vote on any resolution of
Partners in the best interests of the
Partnership.
SALE/ASSIGNMENT
OF PARTNERSHIP o A Partner may sell, assign, transfer or
dispose of its INTEREST: Partnership
interest to a subsidiary or affiliate (a
"Permitted Transferee") however, any
intended sale, assignment, transfer or
disposition to other than a permitted
transferee is subject to a right of first
offer to the other Partner.
o The sale by Teck of its interest will be
subject to the consent of the independent
directors of Fording Holdco, such consent
not to be unreasonably withheld.
- 10 -
WINDING UP/DISSOLUTION o The Partnership continues until wound up
OF PARTNERSHIP: or dissolved which will occur on
authorization by Special Resolution.
o After all the Partnership's liabilities
are satisfied, assets are distributed to
reduce amounts contributed in cash to
capital and to Partners in proportion to
their Distribution Entitlements, subject
to rights of set-off in the event that the
Partnership has rights against a Partner.
PARTNER SERVICES: o Partners may provide services to the
Partnership at cost, subject to
arrangements approved by the other
Partners (Teck services to be approved by
directors of Fording Holdco independent of
Teck).
FINAL
SCHEDULE 2.3(C) TO THE COMBINATION AGREEMENT
PRAIRIE OPERATIONS TERM SHEET
All capitalized terms used herein and not otherwise defined
shall have the meanings given to such terms in the Combination Agreement.
PURCHASER: o Sherritt Coal Partnership II ("SCPII"), or such
other entity as SCPII may designate
("ACQUIRECO").
VENDOR: o Fording Inc. and its relevant subsidiaries or
affiliates (collectively, the "VENDOR").
CLOSING DATE: o As defined in the Combination Agreement.
PURCHASED ASSETS: o Subject to the Royalties described under the
heading "Royalty" below (to the extent
applicable), all assets, rights and businesses
described as "Prairie Operations" in Fording
Inc.'s 2001 Annual Report and Annual Information
Form dated May 16, 2002, including:
o The Vendor's interest in the Genesee mining
operations and the related reserves and resources
(the "Genesee Mine") (including, without
limitation, assignment by the Vendor to SCPII or
its designate of the Genesee Coal Mine Joint
Venture Agreement between the Vendor and EPCOR
Utilities Inc., the Genesee Coal Mine Operating
Agreements between the Vendor and the Joint
Venturers and the Genesee Coal Mine Dedication
and Unitization Agreement between the Vendor and
EPCOR) including all current assets included in
the working capital in respect of the Genesee
Mine; the fixed assets used in connection with or
associated with the Genesee Mine including,
without limitation, those fixed assets that will
be set out in a schedule to be provided at
Closing and related reserves and resources; the
Vendor's interest in the property at the site
required to operate the mine and related
infrastructure; coal reserves and resources;
mineral resource royalties; deferred stripping;
machinery, technology, equipment, leased rail
equipment and other personal property located at
the site to operate the facilities; transferable
licences, permits and approvals; contracts for
sale of coal and procurement of services;
geological/mining data and engineering surveys;
intellectual property and information technology;
books, operating records, operating safety and
maintenance manuals, other documentation related
to the facilities and the Genesee Mine; and the
proportionate benefit of any arrangements of the
Vendor for the provision of supplies or services
for the operation of the Genesee Mine.
o The Vendor's interest in the Whitewood mining
operations and related reserves and resources, if
any, (the "Whitewood Mine") including, without
limitation, assignment by Fording to SCPII (or
its designate) of the mining contract between
Fording and TransAlta to operate the Whitewood
Mine and the support and services equipment and
any related contracts of Fording.
o The Vendor's interest in the Highvale mining
operations and related reserves and resources
(the "Highvale Mine") including, without
limitation, assignment by Fording to SCPII (or
its designate) of the mining contract between
Fording and TransAlta Corporation to operate the
Highvale Mine.
o All of the Vendor's mineral rights in Alberta,
Saskatchewan and Manitoba, including salt leases
and oil, gas and potash rights and the Xxxxxx,
Xxxxxxx and Heatburg, Alberta properties.
o All rights to royalties receivable from third
parties relating to the Purchased Assets.
EXCLUDED ASSETS: o Fording's rights and obligations in connection
with its interest in the former mining operation
located at the Mount Washington, mine site and
the Esquimault and Nanaimo railway lands.
o Thermal coal produced incidentally to operations
primarily involving the Vendor's metallurgical
coal businesses and operations.
ASSUMED LIABILITIES
AND OBLIGATIONS: o AcquireCo will on the Closing Date assume and be
responsible for (and shall indemnify and hold the
Vendor harmless from and against) all liabilities
and obligations relating to the Purchased Assets
and the operation thereof, whether accruing prior
to or after the Closing Date, the replacement of
letters of credit (to be set forth in a schedule
to be provided at Closing) which are posted as
security for mining operations (with the
exception of the Excluded Liabilities and
Obligations), including, without limitation, all
liabilities and obligations for reclamation,
demolition, environmental or other associated
liabilities and obligations in respect of the
Purchased Assets.
- 2 -
EXCLUDED LIABILITIES
AND OBLIGATIONS: o All liabilities related to employment income and
bonuses, if any, of the Transferred Employees
arising prior to the Closing Date (apart from any
obligations and liabilities for severance pay,
termination pay, vacation pay, notice of
termination of employment or pay in lieu of such
notice, damages for wrongful dismissal or other
employee benefits or claims in respect of those
Transferred Employees who do not accept
AcquireCo's offer of employment on the Closing
Date, for which AcquireCo will be responsible).
o Liabilities and obligations arising directly as a
sole result of the negligence or willful
misconduct of the Vendor in its operation of the
Purchased Assets, prior to the Closing Date.
o All federal, provincial and municipal taxes.
PURCHASE PRICE
AND OTHER PAYMENTS: o Subject to the terms and conditions contained
herein, AcquireCo shall purchase from the Vendor
and the Vendor shall sell to AcquireCo, the
Purchased Assets on the Closing Date and
AcquireCo shall pay as the Purchase Price for the
Purchased Assets $225 million cash.
o The amount of consideration to be received by the
Vendor will be subject to an adjustment for
Working Capital transferred to AcquireCo.
o "Working Capital" is defined as the aggregate of
accounts receivable, inventory and prepaid
expenses (excluding deferred stripping costs and
prepaid insurance) less accounts payable and
accrued liabilities (excluding accrued
reclamation liabilities and income taxes), to the
extent such amounts relate to the Purchased
Assets or the Liabilities assumed by AcquireCo,
all as determined in accordance with Canadian
GAAP as of the Closing Date. Inventory includes
coal, spare parts and supplies and is valued at
the lower of cost and net realizable value.
o The Vendor will provide to AcquireCo, prior to
the Closing Date, a written statement setting
forth its good faith estimate of the Working
Capital as of the Closing Date. AcquireCo will
pay for the Working Capital on Closing based on
such estimate.
o Within 30 days following the Closing Date a
statement of Working Capital as at the Closing
Date shall be prepared by the Vendor for review
by AcquireCo, and an appropriate adjustment made
between the parties.
- 3 -
o The cash payments contemplated in respect of the
payment for the Working Capital adjustment shall
bear interest at a rate per annum equal to the
prevailing Royal Bank Prime Rate, from the
Closing Date until the payment is received.
CONFIRMATION OF
WORKING CAPITAL o In the event of a dispute between the parties as
PAYMENTS: to the amount of the Working Capital in respect
of the Purchased Assets, the Vendor shall at
AcquireCo's costs and expense, direct the Auditor
to audit the calculation by the Vendor of the
Working Capital and to provide their report
thereof to the Vendor and AcquireCo within 60
days after the Closing Date.
o "Auditor" is defined to mean an independent firm
of Chartered Accountants acceptable to the Vendor
and AcquireCo, and failing agreement, means
PricewaterhouseCoopers LLP.
ROYALTY: o The Vendor will be entitled to a Royalty
determined on arm's length terms, but in any
event no greater than 5% of Gross Revenues (the
"Royalty"), payable monthly based on production
after the Closing Date from the Purchased Assets
beyond levels as at the date of the Combination
Agreement (excluding the planned 2005 Genesee
expansion but including any other increase in
production, whether as a result of expansions or
property developments or otherwise). Sales of
currently non-producing properties in the
Purchased Assets will also be subject to the
Royalty.
o "Gross Revenue" is defined as the selling price
of product without any deductions, or in the case
of product that is deemed to be sold, the fair
market value for such product. Where AcquireCo
uses for its own commercial purposes or sells to
any of its affiliates any coal mined from any of
the Purchased Assets, such coal shall for the
purposes of this Term Sheet, be deemed to have
been sold by AcquireCo and the Royalty relating
to such coal shall be calculated on the basis of
the fair market value for such coal.
o When AcquireCo receives any monies on account of
or as the proceeds of sale of the Vendor's
interest in the product comprising the Royalty,
AcquireCo shall receive those monies as trustee
for the Vendor.
o AcquireCo shall have no right to set-off any
amounts owing by the Vendor against the Royalty
or to otherwise withhold any amounts owing under
the Royalty.
- 4 -
o AcquireCo shall keep accurate and current books,
records and accounts showing the quantity of coal
mined and produced from the Purchased Assets and
the sales and dispositions made thereof, which
shall be available for inspection at all
reasonable times by the Vendor.
o AcquireCo shall pay Royalties monthly and shall
submit to the Vendor monthly statements showing
the quantity and kind of coal mined and produced,
and deemed to be produced or sold from the
Purchased Assets in the immediately preceding
month.
o The Vendor, on notice to AcquireCo, shall have
the right to audit AcquireCo's books, accounts
and records for any month, insofar as they relate
to any matter or item on the Royalty, at any time
during the two (2) full calendar years following
the calendar year in which the month in question
falls.
o The Royalty shall be an interest in land and
shall run with the Purchased Assets.
o Any late payments in respect of a Royalty shall
bear interest at a rate equal to the prevailing
Royal Bank Prime Rate plus 2 1/2% per annum.
o The Royalty shall be subject to an adjustment at
year end based on actual revenues payable for the
year.
TRANSFERRED EMPLOYEES: o AcquireCo will become bound by the collective
agreements with respect to the union employees
employed in connection with the Purchased Assets
and be responsible for the employer's obligations
which arise after the Closing Date.
o AcquireCo will offer employment on the Closing
Date to all non-union employees employed in
connection with the Purchased Assets at the mine
sites ("Transferred Employees"), including,
without limitation, all employees on leave or
receiving benefits on the Closing Date, on terms
and conditions no less favourable in the
aggregate than those in effect on the Closing
Date. AcquireCo shall recognize in full and be
solely responsible for all past service of all
such employees. AcquireCo will also be
responsible for all employment obligations with
respect to those employees who accept employment
with AcquireCo following commencement of their
employment with AcquireCo and will also be
responsible for all obligations and liabilities
- 5 -
for severance pay, termination pay, vacation pay,
notice of termination of employment or pay in
lieu of such notice, damages for wrongful
dismissal or other employee benefits or claims in
respect of those Transferred Employees who do not
accept AcquireCo's offer of employment on the
Closing Date.
o AcquireCo will on the Closing Date, assume all
pension and post retirement assets and
obligations, effective as of the Closing Date,
with respect to the Transferred Employees.
o The Vendor and AcquireCo shall jointly retain an
independent actuary to determine the amount of
over-funding or under-funding of the pension
obligations as at the Closing Date in respective
of Transferred Employees. To the extent that such
independent actuary determines that, as at the
Closing Date, there was an over-funding of
pension obligations, then the Vendor shall be
entitled to receive, and AcquireCo shall pay, as
soon as practical after such determination by the
independent actuary, such over-funded amount. On
the other hand, if such independent actuary
should determine that there is an under-funding
of pension obligations as at the Closing Date,
then the Vendor shall remain obligated to pay
such under-funding. In that case, any amount of
under-funding payable by the Vendor shall be paid
to AcquireCo promptly following completion of the
actuarial determination.
TRANSFEREE AGREEMENT: o If AcquireCo transfers the Purchased Assets to
another person, AcquireCo agrees to cause the
transferee to become party to such agreements as
are necessary to effect the terms of this Term
Sheet, to the extent they remain executory.
CONSENTS: o AcquireCo and the Vendor shall cooperate and use
commercially reasonable efforts to obtain all
required consents and approvals for the
transaction (including any subsequent transfer by
AcquireCo to an affiliate at or immediately after
Closing) on terms acceptable to each of the
parties, acting reasonably. In the event any such
consents and approvals are not obtained by
Closing, the parties shall continue to pursue
them and all the benefits and liabilities shall
be held for the account of AcquireCo.
TRANSITION: o AcquireCo and Vendor shall cooperate to effect
the transfer of the Purchased Assets (including
all books, records, administrative services and
information technology) in an efficient manner
and in connection therewith the Vendor shall
provide, upon request by AcquireCo and at a cost
to be mutually agreed, access to and the support
- 6 -
of knowledgeable personnel of the Vendor to
effect the transfer and assist in transition and
training.
DEFINITIVE AGREEMENT: o A definitive purchase and sale agreement based on
this Term Sheet is intended to be settled as soon
as practicable between the Vendor and AcquireCo.
The applicable parties will negotiate in good
faith to complete and sign the definitive
purchase and sale agreement before the Closing
Date.
o Notwithstanding any failure of AcquireCo and the
Vendor to negotiate or enter into a definitive
purchase and sale agreement, the provisions of
this Term Sheet will nevertheless constitute the
terms of a binding agreement between them.
- 7 -
FINAL
SCHEDULE 2.3(D)
SCHEDULE 2.3(D) TO THE COMBINATION AGREEMENT
TECK CONTRIBUTION TERM SHEET
All capitalized terms used herein and not otherwise defined
shall have the meanings given to such terms in the Combination Agreement.
PARTIES: o Teck
o Teck Bullmoose Coal Inc. ("TBCI")
o Quintette Coal Partnership ("QCP")
o Fording Coal Partnership
CLOSING DATE: o As defined in the Combination Agreement
ASSETS CONVEYED: o All of the assets, tangible and intangible,
leased or owned, of Teck or its Affiliates used
in the operation of the Elkview Mine including,
without limitation, assets shown on the Teck Mine
Financial Statement, and all surface rights and
coal properties in the Elk River Valley and
surrounding area representing potential coal
reserves or resources owned by Teck or its
Affiliates. For clarity coal properties includes
crown coal leases or licenses and freehold coal
lands including lands that may be included as
part of titles including all mines and minerals
or other such title and also includes product and
stores inventory, working capital (other than
cash) and all contracts relating to the operation
of, and the sale and transportation of coal from,
the Elkview Mines and reclamation bonds and
sinking funds provided for reclamation.
o All of the issued and outstanding shares of
Elkview Coal Corporation ("ECC") and an
assignment of the agency agreement between Teck
and ECC.
o All properties with potential coal reserves or
resources owned by Teck or its Affiliates in
North America and associated surface rights other
than (a) the Quintette coal leases and licences
and overlying surface tenures (the balance of
which will be conveyed after completion of the
reclamation) and (b) mobile equipment and related
parts owned by QCP (the balance of the QCP Mobile
Equipment and related parts will be conveyed to
the Partnership after completion of reclamation)
and (c) any assets related to the Bullmoose mine
(the balance of which will be conveyed, subject
to receipt of joint venture consent, when
shutdown by TBCI has been completed and the mine
reclaimed).
- 2 -
o All the permits, licenses and reclamation
certificates relating to the existing, abandoned,
and/or reclaimed production areas and operations
on any of the foregoing properties.
o The property and assets being conveyed are
collectively called the "Teck Contributed
Assets".
o "QCP Mobile Equipment" means all mobile equipment
owned by QCP other than mobile equipment owned by
QCP and leased to Teck at January 13, 2003.
TITLE: o Title to assets to be registered in name of
nominee company on behalf of Partnership where
practicable, until time of registration to be
held in trust by respective owner for the
Partnership.
CONSENTS: o In the event that an asset requires consent to be
conveyed and such consent is not available, all
economic benefits of such asset to be held in
trust for Partnership.
WORKING CAPITAL: o Teck shall use best efforts to manage the working
capital at Elkview in the ordinary course so that
working capital contributed consistent with the
forecast levels disclosed to Fording.
NON-ARMS LENGTH o Non-arms length contracts for management,
CONTRACTS: administration and marketing to be terminated
without charge, subject to necessary transition,
if any, at option of Partnership.
EXCLUDED ASSETS: o Cash; mobile equipment used at Elkview leased
from QCP, Teck or TBCI; and for greater
certainty, Teck's and TBCI's interest in QCP.
LIABILITIES: o Partnership will assume all liabilities
associated with the Teck Contributed Assets,
except for greater certainty, no reclamation
liabilities relating to Bullmoose or Quintette
are assumed. However, if the Partnership acquires
Quintette's wash plant it shall assume any
demolition or reclamation obligations with
respect thereto.
EMPLOYEES: o All employees currently employed by ECC will
remain so employed on their current terms. The
Partnership will offer employment to all
non-unionized employees of Teck located on mine
site who are actively engaged in operations
relating to the Teck Contributed Assets and to
five non-mine site employees exclusively engaged
in respect of such operations. The Partnership
- 3 -
will offer employment to such employees on terms
and conditions not less favourable taken as a
whole, recognizing their service with Teck for
all purposes.
PENSIONS: o In respect to non-stand alone pension plans for
employees transferred to the Partnership, subject
to regulatory approval Teck will transfer plan
assets, including proportional share of any
surplus, to a Partnership plan established for
the purpose of receiving such assets. If there is
a transfer of assets in respect of a transferred
employee, the Partnership will assume liabilities
(on basis plan is fully funded) for payments to
the transferred employers. In all cases,
employees to be kept whole.
TAX PROVISIONS: o The parties will file elections under the Mineral
Tax Disposition of a Mine Regulation (BC Reg.
346/95) in relation to the contribution of
interests in the Elkview mine to the Partnership.
o The Partnership shall bear all transfer and sales
taxes applicable in relation to the contributions
of assets to the Partnership and the parties
shall cooperate to obtain rulings relating to
valuation issues which arise in relation to BC
property transfer tax and to minimize the
incidence of BC social services tax (more
commonly known as sales tax) to the contribution
of assets to the Partnership.
o The partners and the Partnership will file
elections under subsection 97(2) of the federal
Income Tax Act in relation to the transfer of
eligible assets to the Partnership so that the
transfers occur on an income tax deferred basis.
DEFINITIVE AGREEMENT: o A definitive purchase and sale agreement based on
this Term Sheet is intended to be settled as soon
as practicable between the parties. The
applicable parties will negotiate in good faith
to complete and sign the definitive purchase and
sale agreement before the Closing Date.
o Notwithstanding any failure of the Partnership
and Teck to negotiate or enter into a definitive
purchase and sale agreement, the provisions of
this Term Sheet will nevertheless constitute the
terms of a binding agreement between them.
FINAL
SCHEDULE 2.3(E) TO THE COMBINATION AGREEMENT
FORDING CONTRIBUTION TERM SHEET
All capitalized terms used herein and not otherwise defined
shall have the meanings given to such terms in the Combination Agreement.
PARTIES: o Fording Coal Partnership
o Fording Inc. and its relevant subsidiaries or
affiliates (collectively, "FORDING").
CLOSING DATE: o As defined in the Combination Agreement.
ASSETS CONVEYED: o All of the assets, tangible and intangible,
leased or owned, of Fording (including the Luscar
Contributed Assets but excluding the Excluded
Assets), including:
o All mines and related infrastructure; coal
reserves and resources; mineral resource
royalties; deferred stripping; machinery,
technology, equipment, leased rail equipment and
other personal property located at the site to
operate the facilities; transferable licences,
permits and approvals; contracts for sale of coal
and procurement of services; geological/mining
data and engineering surveys; intellectual
property and information technology; books,
operating records, operating safety and
maintenance manuals, other documentation related
to the facilities.
o All of the Vendor's mineral rights in
jurisdictions other than Alberta, Saskatchewan
and Manitoba.
EXCLUDED ASSETS: o Fording's rights and obligations in connection
with its interest in the Esquimault and Nanaimo
railway lands, including the former mining
operation located at the Mount Washington mine
site.
o Fording's Prairie Operations.
ASSUMED LIABILITIES
AND OBLIGATIONS: o The Partnership will on the Closing Date assume
and be responsible for (and shall indemnify and
hold Fording harmless from and against) all
liabilities and obligations relating to the
Assets and the operation thereof, whether
accruing prior to or after the Closing Date, the
replacement of letters of credit (to be set forth
in a schedule to be provided at Closing) which
are posted as security for mining operations
(with the exception of limitation, all
liabilities and obligations for reclamation,
demolition, environmental or other associated
liabilities and obligations in respect of the
Assets Conveyed.
EXCLUDED LIABILITIES
AND OBLIGATIONS: o All liabilities related to employment income and
bonuses, if any, of the Transferred Employees
arising prior to the Closing Date (apart from any
obligations and liabilities for severance pay,
termination pay, vacation pay, notice of
termination of employment or pay in lieu of such
notice, damages for wrongful dismissal or other
employee benefits or claims in respect of those
Transferred Employees who do not accept the
Partnership's offer of employment on the Closing
Date, for which the Partnership will be
responsible).
o Liabilities and obligations in respect of the
Excluded Assets.
TRANSFERRED EMPLOYEES: o The Partnership will become bound by the
collective agreements with respect to all of
Fording's union employees other than those
employed in connection with the Excluded Assets
and be responsible for the employer's obligations
which arise after the Closing Date.
o The Partnership will offer employment on the
Closing Date to all non-union employees
("Transferred Employees") other than those
employed in connection with the Excluded Assets
including, without limitation, all employees on
leave or receiving benefits on the Closing Date,
on terms and conditions no less favourable in the
aggregate than those in effect on the Closing
Date. The Partnership shall recognize in full and
be solely responsible for all past service of all
such employees. The Partnership will also be
responsible for all employment obligations with
respect to those employees who accept employment
with the Partnership following commencement of
their employment with Partnership and will also
be responsible for all obligations and
liabilities for severance pay, termination pay,
vacation pay, notice of termination of employment
or pay in lieu of such notice, damages for
wrongful dismissal or other employee benefits or
claims in respect of those Transferred Employees
who do not accept the Partnership's offer of
employment on the Closing Date.
o The Partnership will on the Closing Date, assume
all pension and post retirement assets and
obligations, effective as of the Closing Date,
with respect to the Transferred Employees.
- 2 -
TITLE: o Title to assets to be registered in name of
nominee company on behalf of the Partnership
where practicable, until time of registration to
be held in trust by respective owner for the
Partnership.
CONSENTS: o The Partnership and Fording shall cooperate and
use commercially reasonable efforts to obtain all
required consents and approvals for the
transaction on terms acceptable to each of the
parties, acting reasonably. In the event any such
consents and approvals are not obtained by
Closing, the parties shall continue to pursue
them and all the benefits and liabilities shall
be held for the account of Partnership.
TAX PROVISIONS: o The parties will file elections under the Mineral
Tax Disposition of a Mine Regulation (BC Reg.
346/95) in relation to the contribution of
interests in Fording River, Coal Mountain and
Greenhills mines to the Partnership.
o The Partnership shall bear all transfer and sales
taxes applicable in relation to the contributions
of assets to the Partnership and the parties
shall cooperate to obtain rulings relating to
valuation issues which arise in relation to BC
property transfer tax and to minimize the
incidence of BC social services tax (more
commonly known as sales tax) to the contribution
of assets to the Partnership.
o The partners and the Partnership will file
elections under subsection 97(2) of the federal
Income Tax Act in relation to the transfer of
eligible assets to the Partnership so that the
transfer occur on an income tax deferred basis.
DEFINITIVE AGREEMENT: o A definitive purchase and sale agreement based on
this Term Sheet is intended to be settled as soon
as practicable between the parties. The
applicable parties will negotiate in good faith
to complete and sign the definitive purchase and
sale agreement before the Closing Date.
o Notwithstanding any failure of the Partnership
and Fording to negotiate or enter into a
definitive purchase and sale agreement, the
provisions of this Term Sheet will nevertheless
constitute the terms of a binding agreement
between them.
- 3 -
FINAL
RECIPROCAL NON-COMPETITION AGREEMENT
TERM SHEET - JANUARY 12, 2003
PARTIES: o Luscar Energy Partnership and Luscar Ltd.
(collectively "LUSCAR"), Fording Inc., the
Fording Canadian Coal Trust (the "Trust") and a
general partnership (the "Partnership") organized
under the Trust (Fording Inc., the Trust and the
Partnership, collectively, "Fording"). For
greater certainty, Teck Cominco Limited shall not
be bound by this agreement.
FORDING NON-COMPETE: o Fording agrees that it will not operate, own,
lease or contract mine any assets or business
involving thermal coal in Canada for a period of
5 years from the Closing Date (as defined in the
Combination Agreement), except for assets or
businesses that primarily produce metallurgical
coal but where thermal coal is produced
incidentally from such operations or when such
coal is blended so as to be marketed as
metallurgical coal ("Byproduct Thermal"). Fording
is permitted to sell Byproduct Thermal without
restriction. Subject to the approval of the
independent trustees of the Trust, the
Partnership and Luscar shall enter into an
agreement to appoint Luscar as the marketing
agent of the Partnership with respect to
Byproduct Thermal sales to customers within
Canada other than sales under any contracts
already in place on the Closing Date, including
subsequent extensions. The agency contract shall
be on arms' length commercial terms. The contract
shall have a term of 5 years, terminable at the
election of the Partnership with the approval of
the independent trustees of the Trust at any time
after the expiry of 2 years.
LUSCAR NON- COMPETE: o Luscar agrees that it will not operate, own,
lease or contract mine any assets or business
involving metallurgical coal in Canada for a
period of 5 years from the Closing Date, except
for assets or businesses that primarily produce
thermal coal but where metallurgical coal is
produced incidentally from such operations
("Byproduct Metallurgical"). Luscar is only
permitted to sell Byproduct Metallurgical if
Fording acts as the marketing agent with respect
to those sales. Fording agrees to act in a
commercially reasonable manner as marketing agent
for such sales.
- 2 -
SEVERABILITY: o If a court or other tribunal of competent
jurisdiction determines that any one or more of
the provisions contained in the Term Sheet is
invalid, illegal or unenforceable in any respect
in any jurisdiction, the validity, legality and
enforceability of such provision or provisions
shall not in any way be affected or impaired
thereby in any other jurisdiction and the
validity, legality and enforceability of the
remaining provisions contained herein shall not
in any way be affected or impaired thereby,
unless in either case as a result of such
determination this Term Sheet would fail in its
essential purpose.
LUSCAR ENERGY PARTNERSHIP
January 12, 2003
Fording Inc.
Xxxxx 0000, 000 - 0xx Xxxxxx XX
Xxxxxxx, Xxxxxxx
X0X 0X0
Dear Sirs/Mesdames:
This agreement is being entered into in connection with the
transactions described in the combination agreement between Fording Inc.
("FORDING"), Teck Cominco Limited, Westshore Terminals Income Fund, Sherritt
International Corporation and Ontario Teachers' Pension Plan Board dated
January 12, 2003 (the "COMBINATION AGREEMENT"), including the term sheet
entered into between Fording, CONSOL Energy Inc. and Luscar Ltd. regarding the
purchase of the Luscar/CONSOL Joint Venture and related assets dated the date
hereof (the "LUSCAR/CONSOL TERM SHEET", which term shall include the definitive
purchase agreement, if and when entered into), and the term sheet entered into
between Fording and Sherritt Coal Partnership II regarding the purchase of
Fording's Prairie Operations and related assets dated the date hereof (the
"THERMAL ASSET TERM SHEET", which term shall include the definitive purchase
agreement, if and when entered into). Each of the Luscar/CONSOL Term Sheet and
the Thermal Asset Term Sheet provide that the amount of consideration to be
received by the respective vendors will be subject to an adjustment for Working
Capital (as such term is defined in the respective term sheet) transferred to
the purchaser.
For good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. The following formula determines the amount of any payments to be made
by the parties under this letter agreement:
Luscar/CONSOL Working Capital on the Closing Date
minus
Thermal Asset Working Capital on the Closing Date
in each case as determined on the basis set out in the Thermal
Asset Term Sheet, and such amount determined above divided by
two.
In the event the amount resulting from this formula is positive, Luscar Energy
Partnership will pay this amount to Fording (or the party designated by Fording
as the purchaser under the Luscar/CONSOL Term Sheet). In the event the amount
resulting from this formula is negative, Fording will pay this amount or cause
this amount to be paid to the Luscar Energy Partnership. All such payments
shall be made in Canadian dollars cash or by wire transfer of immediately
available funds.
- 2 -
2. Payments to be made under the terms of this agreement shall be made as
follows:
(a) on the Closing Date, a payment shall be made based on the
estimates of Working Capital prepared by the respective vendors
(the "ESTIMATE PAYMENT"); and
(b) within two business days of a final determination of the
Working Capital under each of the Luscar/CONSOL Term Sheet and
the Thermal Asset Term Sheet, a payment shall be made to
reconcile the Estimate Payment to the actual amount owing under
this agreement.
3. Based on the due diligence done to date, the parties expect that as at
February 28, 2003 the Working Capital pursuant to the Luscar/CONSOL
Term Sheet will be approximately $40 million (reflecting the reduction
of current inventories and the sale of certain receivables) and the
Working Capital pursuant to the Thermal Asset Term Sheet will be
approximately $6 million.
4. This agreement will be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable
therein.
All capitalized terms not defined herein shall have the same
meaning ascribed to them in the Combination Agreement.
If you agree with the terms described in this letter, please
sign both copies of this letter where indicated below and return one copy to
us.
Yours truly,
LUSCAR ENERGY PARTNERSHIP,
BY ITS PARTNERS,
ONTARIO TEACHERS' PENSION PLAN BOARD SHERRITT INTERNATIONAL CORPORATION
by: [SIGNATURE ILLEGIBLE] by: [SIGNATURE ILLEGIBLE]
-------------------------------- -------------------------------
Accepted and agreed to this 13th day of January, 2003
FORDING INC.
by: [SIGNATURE ILLEGIBLE]
--------------------------------
FINAL
SCHEDULE 2.4
FORDING CANADIAN COAL TRUST
GOVERNANCE AGREEMENT
TERM SHEET
PARTIES: o Fording Canadian Coal Trust (the "TRUST")
o New Fording
o Teck
o Westshore
o OTPP
o SCPII
o CONSOL
TRUSTEES:
o The Trust will have 9 Trustees. Initially, the
Trustees will be:
o Xxxxxxx X. Xxxxxxx
o Xxxxxxx Xxxxxxx
o Xxxxx X. Xxxxxxxx
o Xxxxxxx X. Xxxxxxx
o Xxxxxx X. Xxxxxx
o Xxxx Xxxxxxxx
o an independent nominee of SCPII
o a nominee of Teck
o a nominee of CONSOL
o Each of Teck, Westshore, SCPII and CONSOL shall have
the right to nominate one Trustee, provided that:
o no employee of the Fording Coal Partnership
shall be a Trustee;
o for CONSOL's right to nominate, CONSOL must hold
at least 2 million Units (representing
approximately 4.5% of the outstanding Units);
o for Teck's right to nominate, Teck must hold at
least 4.5% of the outstanding Units;
o for Westshore's right to nominate, Westshore
must hold at least 4.5% of the outstanding
Units; and
- 2 -
o for SCPII's right to nominate, SCPII must hold
at least 4.5% of the outstanding Units and the
nominee of SCPII must be independent of both
OTPP and Sherritt.
o The balance of the Trustees are to be nominated by
the Governance, Nomination and Compensation
Committee of the Trustees.
o Chairman will not have casting vote.
BOARD OF NEW FORDING: o The Board of New Fording will have 9 directors.
Initially, the directors will be:
o Xxxxxxx X. Xxxxxxx
o Xxxxxx X. Xxxxxx
o Xxxxxxx Xxxxxxx
o Xxxxx X. Xxxxxxxx
o Xxxxx X. Xxxxxxxx
o Xxxxxxx X. Xxxxxxx
o Xxxxx X. Xxxxxxxx
o an independent nominee of SCPII, provided that
the nominee shall be different than its nominee
for Trustee.
o a nominee of CONSOL, provided that the nominee
shall be different than its nominee for Trustee.
o Each of Teck, Westshore, SCPII and CONSOL shall have
the right to nominate one director of New Fording,
provided that:
o no employee of the Fording Coal Partnership
shall be a director of New Fording;
o for CONSOL's right to nominate, CONSOL must hold
at least 2 million units (representing
approximately 4.5% of the outstanding Units);
o for Teck's right to nominate, Teck must hold at
least 4.5% of the outstanding Units;
o for Westshore's right to nominate, Westshore
must hold at least 4.5% of the outstanding
Units; and
o for SCPII's right to nominate, SCPII must hold
at least 4.5% of the outstanding Units and the
nominee of SCPII must be independent of both
OTPP and Sherritt.
o Chairman will not have casting vote.
- 3 -
EXECUTIVE OFFICERS: o The Chairman and CEO of the Trust will be selected
by the Trustees from among the independent Trustees.
If a nominee for officer of the Trust is a director
or officer of Teck or of the Partnership, the
nominee must be ratified by the independent
Trustees. The initial Chairman and CEO of the Trust
will be Xxxxxxx Xxxxxxx. The initial officers of the
Trust will be Xxx Xxxxxxxx (President) and Xxxxx
Xxxxxxxx (CFO).
o The Chairman and CEO of New Fording will be selected
by the directors of New Fording from among the
independent directors of New Fording. If a nominee
for officer of New Fording is a director or officer
of Teck or of the Partnership, the nominee must be
ratified by the independent directors of New
Fording. The initial Chairman and CEO of New Fording
will be Xxxxxxx Xxxxxxx. The initial officers of New
Fording will be Xxx Xxxxxxxx (President) and Xxxxx
Xxxxxxxx (CFO).
o The initial officers of the Partnership will be Xxx
Xxxxxxxx (President and CEO) and Xxxxx Xxxxxxxx
(CFO).
FINAL
SCHEDULE 2.4(C)
FORDING CANADIAN COAL TRUST
DECLARATION OF TRUST
TERM SHEET
TRUSTEES
AND OFFICERS: o The Trust will have 9 Trustees. The initial Trustees
shall be:
(a) Xxxxxxx X. Xxxxxxx
(b) Xxxxxxx Xxxxxxx
(c) Xxxxx X. Xxxxxxxx
(d) Xxxxxxx X. Xxxxxxx
(e) Xxxxxx X. Xxxxxx
(f) Xxxx Xxxxxxxx
(g) an independent nominee of SCPII
(h) a nominee of Teck
(i) a nominee of CONSOL
o Thereafter, up to four of the Trustees shall be
nominated pursuant to the Governance Agreement (one
each by Teck, Westshore, SCPII and CONSOL) and the
balance shall be nominated by the Governance,
Nomination and Compensation Committee of the
Trustees.
o All Trustees are to be elected by the Unitholders.
o A majority of the Trustees shall be independent
Trustees. A nominee (as Trustee or as director of
New Fording) will be an "INDEPENDENT", if the
nominee:
(a) is not an associate of or acting jointly or in
concert with any of Teck, Westshore, SCPII,
Sherritt International Corporation, Luscar or
OTPP (collectively the "PRINCIPALS") or their
respective affiliates;
(b) would qualify as an "unrelated director" (under
the TSX definition) of each of the Principals,
if the nominee was a director of each of the
Principals; and
- 2 -
(c) would qualify as an "unrelated director" (under
the TSX definition) of the Trust or of New
Fording, as appropriate.
o A majority of the Trustees must be Canadian
residents.
o No employee of the Fording Coal Partnership shall be
a Trustee.
TRUSTEES
POWERS AND DUTIES:
o Trustees powers are subject to specific limitations
contained in the Declaration of Trust, and otherwise
Trustee's shall have full control over the assets
and affairs of the Trust.
o Trustees must disclose all conflicts of interest and
a Trustee's ability to vote on matters where a
conflict exists is restricted.
o Entering into contracts with a Related Party (as
defined in OSC Rule 61-501) is subject to the
approval of a majority of the Trustees and not less
than a majority of the Independent Trustees, except
to give effect to any transaction contemplated in
the Combination Agreement or any agreement referred
to therein.
o Up to four of the nominees as directors of New
Fording are to be selected in accordance with the
Governance Agreement (one each by Teck, Westshore,
SCPII and CONSOL) and the balance are to be
nominated by the Governance, Nomination and
Compensation Committee of the Trustees.
o Trustees shall vote the New Fording Common Shares in
favour of these nominees as directors of New
Fording, provided that: (a) the nominees shall be
approved by more than 50% of the votes cast at a
Unitholder meeting;
(b) none of the nominees is an employee of the
Fording Coal Partnership;
(c) a majority of the nominees are "independent",
as defined above; and
(d) a majority of the nominees shall not be
Trustees
- 3 -
INVESTMENTS OF TRUST: o The operations and investments of the Trust shall be
restricted to:
(a) investing in such securities as may be approved
by the Trustees from time to time, including
the New Fording Common Shares;
(b) issuing guarantees of the indebtedness of
wholly-owned subsidiaries;
(c) disposing of assets of the Trust;
(d) holding cash or other short term investments;
and (
e) undertaking such other activities as may be
approved by the Trustees from time to time
UNITS: o Beneficial interests in the Trust will be divided
into Units and all entitlements of the Unitholders
shall be determined on a PRO RATA basis.
o The Trust may create and issue rights, warrants or
options to subscribe for fully paid Units.
o A maximum of 49% of the Units may be held for the
benefit of non-residents of Canada.
o Units may be redeemed at the request of a holder for
the lesser of 90% of the "market price" or the
"closing market price" on the principal market on
which the Units trade on a "redemption date" on
terms that are typical for income funds listed and
posted for trading on the TSX, including providing
for the payment of all or part of the "redemption
price" in securities.
o Compulsory acquisition is to be provided for if a
take-over bid is made for the Units and not less
than 90% of the Units are acquired by an offeror
(excluding Units held by such offeror and its
affiliates or associates as at the date the
take-over bid was made).
o Dissent rights are to be granted to Unitholders in
connection with:
(a) a compulsory acquisition;
(b) the disposition of all or substantially all of
the assets of the Trust, or any merger,
amalgamation or arrangement of the Trust; and
- 4 -
(c) any transactions by New Fording, if such matter
is a matter for which a Unitholder would have
been granted the right to dissent under section
190 of the CBCA if such Unitholder was a
shareholder of New Fording and not a
Unitholder.
MEETEINGS o There shall be an annual meeting of the Unitholders
OF UNITHOLDERS and additional special meetings may be called by the
Trustees or upon the request of Unitholders holding
not less than 10% of the Units then outstanding.
o The approval of at least two-thirds of the votes
cast at a meeting of Unitholders is required to:
(a) authorize any combination, merger, amalgamation
or arrangement of the Trust or New Fording
(except in conjunction with an internal
reorganization);
(b) dispose of all or substantially all of the
assets of the Trust or New Fording;
(c) except in conjunction with an internal
reorganization or to Unitholders pursuant to
the redemption rights of Unitholders, dispose
of any securities of New Fording held by the
Trust;
(d) authorize the issuance of any shares in the
capital of New Fording other than to the Trust
or another wholly-owned subsidiary of the
Trust, or except in connection with the
satisfaction of the redemption rights in
respect of the Units;
(e) amend the articles of New Fording;
(f) liquidate or dissolve New Fording; or
(g) approve the voluntary termination, dissolution
or winding up of the Fund.
o So long as Luscar holds any Units of the Trust and
only for a period of 5 years from the Effective
Date, the approval of 75% of the votes cast at a
meeting of Unitholders is required for the Trust to
dispose of more than 90% of the common shares of New
Fording held by the Trust, except:
- 5 -
(a) in conjunction with an internal reorganization
such that the Trust remains the sole direct or
indirect common shareholder of New Fording, or
(b) to Unitholders pursuant to the redemption
rights of Unitholders.
MEETNIGS o Unless otherwise provided, the actions of Trustees
OF TRUSTEES require majority approval of the Trustees if
considered at a meeting, and unanimous written
approval if otherwise approved.
o Trustees may delegate powers to committees and the
Declaration of Trust will contemplate the creation
of an audit committee and a governance, nomination
and compensation committee as well as provide for
the creation of such other committees as the
Trustees may determine.
o Chairman will not have a casting vote.
DISTRIBUTIONS: o The Trust will distribute all of its Distributable
Cash, being all of the cash received by the Trust
from New Fording less:
(a) expenses and other obligations of the Trust;
and
(b) any amounts paid in cash by the Trust in
connection with the redemption of Units
o Distributions will be made quarterly to Unitholders
on the last business day of each calendar quarter
(March, June, September and December) with actual
payment to be made to such Unitholders on or about
the l5th day of the following month.
o Where the Trustees determine that the Trust does not
have sufficient available cash to make the full
amount of any distribution, the payment of such
distribution may be made in Units.
AMENDMENTS: o Trustees may only make minor amendments to the
Declaration of Trust without obtaining the approval
of two-thirds of the votes cast at a Unitholder
meeting.
- 6 -
o Amendments to the distribution policy of the Trust
require the approval of at least two-thirds of the
Unitholders.
TERMINATION: o The Trust shall continue in force and effect so long
as any property of the Trust is held by the
Trustees.
o The Trust may be terminated by the vote of at least
two-thirds of the votes cast at meeting of the
Unitholders called for that purpose.
LIABILITIES o The liabilities and indemnification of the Trustees
OF THE TRUSTEES: will be consistent with what is found in other
income trusts that trade on the TSX.
ATTENTION BUSINESS EDITORS:
MULTI-PARTY AGREEMENT CREATES SUPERIOR VALUE FOR FORDING SHAREHOLDERS
$35.00 per share, cash component of $21.75 per share plus 0.379 of a unit
plus special distributions totalling $1.48 per unit
Fording, Teck Cominco and Sherritt/Teachers'/CONSOL to Combine Assets to
Form a Major World Competitor in Metallurgical Coal
CALGARY, Jan. 13 /CNW/ - The Boards of Directors of Fording Inc.
(TSX/NYSE: FDG), Teck Cominco Limited (TSX: TEK.A, TEK.B), Westshore Terminals
Income Fund (TSX: WTE.UN) and Sherritt Coal Partnership II, a partnership of
Sherritt International Corporation (TSX: S) and Ontario Teachers' Pension Plan,
today announced an agreement to combine the metallurgical coal assets of
Fording, Teck Cominco and the Luscar Energy Partnership as part of a series of
transactions that will see Fording Inc. converted into the Fording Canadian
Coal Trust (the "FORDING TRUST") under a plan of arrangement.
The multi-party agreement will provide Fording shareholders with the
choice, subject to pro-ration, of receiving:
1. $35.00 cash per share, to a maximum cash consideration of $1.05
billion; or
2. One unit of the Fording Trust per share to a maximum of approximately
21.4 million units; or
3. A combination of cash and units subject to the maximums described
above.
In addition to Fording Trust's regular quarterly distributions, holders of
units will also be entitled to receive a special distribution of $1.48 per
unit, payable as to one half with each of the first two quarterly regular
distributions made by the Fording Trust to unitholders of record at these
times. Each special distribution will be in addition to Fording Trust's regular
quarterly distribution.
Teachers' will elect to receive units for each of the approximately 3.2
million Fording shares it owns. If all other shareholders elect to receive cash
for their Fording shares, they will receive $21.75 in cash, 0.379 of a unit of
Fording Trust for each Fording share plus $1.48 in total for each full unit
from the additional special distributions. On completion of the transaction,
approximately 47.1 million units would be outstanding.
As part of the agreement, Sherritt Coal Partnership II has agreed to
withdraw its amended offer dated January 6, 2003, and return any and all shares
tendered to that offer to the original holders.
The agreement builds on the previous transaction announced by Fording,
Teck Cominco and Westshore Terminals with the added participation of Sherritt,
Teachers' and CONSOL Energy Inc. The completion of the transaction is subject
to customary conditions including receipt of customary regulatory approvals.
- 2 -
"Even before this process began in October, our commitment has always been
to unlock the value in Fording for our shareholders. This agreement fulfills
our commitment and deserves the support of all Fording shareholders," said
Xxxxxxx Xxxxxxxx, Chairman of Fording Inc. "It allows shareholders to realize a
significant cash component for their Fording shares while also providing the
opportunity to continue as investors in the preeminent Canadian producer of
metallurgical coal."
The Agreement will result in the consolidation of metallurgical coal
operations in British Columbia's Elk Valley, providing even greater
opportunities for operational and marketing synergies than those available
under any previous proposal presented to Fording shareholders.
The coal partnership contemplated by the agreement will be the world's
second largest metallurgical coal company, producing approximately 20% of
global seaborne high-quality metallurgical coal and with estimated 2003 sales
of approximately 25 million tonnes compared with Fording's 14 million tonnes.
ARRANGEMENT STRUCTURE
As with the previously proposed combination, Fording Trust will hold an
interest in a coal partnership that will hold Fording's and Teck Cominco's
metallurgical coal assets, and to which will be added the metallurgical coal
assets of Luscar and CONSOL. The Luscar/CONSOL assets consist of the Line Creek
mine, the Luscar mine, the undeveloped Cheviot deposit and a 46.4% interest in
Neptune Bulk Terminals (Canada) Ltd.
Fording Trust will initially hold a 65% interest in the coal partnership
and 100% of Fording's industrial minerals business. Teck Cominco will
contribute its metallurgical coal assets, including the Elkview mine and $125
million to the partnership for an initial 35% interest. As manager of the coal
partnership, Teck Cominco will have the right to earn up to an additional 5%
interest over a four-year period, bringing its interest to 40%, if the
partnership achieves specified operating synergies.
Teck will no longer have the right to exchange its interest in the coal
partnership into units of the Fording Trust.
Existing Fording shareholders, other than Teachers', will hold 18.3
million units of Fording Trust representing 38.8% of the trust. (All trust
ownership percentages assume full cash election).
Sherritt Coal Partnership II will invest $375 million comprised of an
investment of $275 million by Teachers' and $100 million by Sherritt, and will
own a 22.7% interest in Fording Trust. Because Teachers' has agreed to accept
all units for its 3.2 million Fording shares, it will hold a 6.7% interest in
Fording Trust directly.
Teck Cominco and Westshore Terminals will each invest $150 million in
Fording Trust units and each will own 9.1% of Fording Trust. The coal
partnership also will enter into a long-term port services contract with
Westshore Terminals on commercial terms previously negotiated between Fording
and Westshore.
Luscar and CONSOL will each receive 3.2 million units of Fording Trust in
exchange for their contribution of assets, resulting in each having a 6.8%
interest.
- 3 -
Fording Trust is expected to have pro forma consolidated capitalization of
approximately $2.0 billion including pro forma consolidated debt of
approximately $336 million, before working capital. Fording's existing foreign
exchange hedge contracts will remain in place.
Sherritt Coal Partnership II will purchase all of Fording's prairie coal
operations and assets for $225 million. The Fording Trust will retain a
royalty, capped at a maximum of 5% of gross revenue, on production from certain
coal properties included in the sale.
Upon successful completion of the transaction, Fording has agreed to pay
the expenses incurred by Teck Cominco, Westshore Terminals and Sherritt Coal
Partnership II in carrying out the various transactions required to form the
new trust, to a maximum of $75 million.
The Board of Directors of Fording Inc. has received the opinion of its
financial advisors, RBC Capital Markets, that the consideration under the plan
of arrangement is fair, from a financial point of view, to Fording
shareholders. The Board of Directors of Fording unanimously recommends that
shareholders vote in favour of the new plan of arrangement.
Fording shareholders will vote on a revised plan of arrangement to effect
the proposed transaction at a special meeting to be scheduled shortly with the
intention of completing the transaction in February 2003. They will shortly
receive a supplement to Fording's information circular, including the reasons
for the Board's recommendation that shareholders approve the plan.
Fording expects that the combination, with its greater potential for
synergies, will result in significantly enhanced distributable cash flow per
unit compared with any of the previous alternatives presented to shareholders.
Since the closing of the plan of arrangement is expected to be deferred to
February 2003, the level of distributable cash for the first quarter will not
reflect the full benefits of the trust structure.
The Fording Trust will have strong corporate governance features that meet
the highest standards of independence. Fording Trust will have a majority of
independent trustees and its operating company will have a majority of
independent board members.
The Chairman and Chief Executive Officer of the Fording Trust will be
Xxxxxxx Xxxxxxx, who is currently an independent director of Fording. Xxx
Xxxxxxxx will be President and Chief Executive Officer of the coal partnership
and will be President of the Fording Trust.
Xxx X. Xxxxxxx, Chairman of Sherritt commented: "We are pleased that the
process we commenced in October has led to such a successful result for
Sherritt while at the same time contributing to the rationalization of the
Canadian coal industry. This consolidation transaction permits Sherritt to
leverage its investment in each of its metallurgical and thermal coal
businesses. The addition of the Fording Prairie operations and its substantial
reserves complement Luscar's already significant thermal coal position. By
adding the stable, long-term cash flow of the Genesee operation and the royalty
income from the thermal coal lands, Luscar's cash flow will be strengthened and
will become a larger influence on Sherritt's overall results. The consolidation
of our metallurgical operation with those of our new partners offers the
prospect of more efficient operations and a more substantial presence in the
international marketplace."
- 3 -
"Teachers' is pleased to have been the catalyst for the creation of this
new trust, which brings together Canada's premier metallurgical coal mining
properties," said Xxxxx X. Xxxxxx, Senior Vice-President of Global Active
Equities for Teachers'. "The high quality of the coal produced, the long life
of the reserve base, the prominent position the Fording Trust will have in
international metallurgical coal markets and the wealth of experience available
to manage these assets, makes the Fording Trust a benefit to Canada and an
attractive investment for Teachers'. Investors will be able to participate in a
trust that will have a sound capital structure with excellent corporate
governance. We intend to fully support this new plan and will exchange our
Fording shares for units."
Xxxxx Xxxxxxxx, Deputy Chairman and Chief Executive Officer of Teck
Cominco Limited said: "The agreement announced today creates a world class
competitor in the metallurgical coal industry. Teck Cominco, as manager of the
coal partnership, looks forward to creating substantial value through operating
efficiencies and other synergies. This transaction furthers our diversification
strategy, adding a substantial stake in a 25 million tonne coal producer to our
existing base metal and other interests."
Westshore Terminals Income Fund Chairman Xxxxxxx Xxxxxxx added: "Westshore
is pleased to make a significant investment in units of this exciting new trust
and to have played a supporting role in bringing together Canada's three
principal metallurgical coal companies, all of which have been key customers at
the Westshore coal terminal for over a quarter century. The scale and
efficiencies created by this agreement will benefit everyone involved."
"We are embarking on the most significant transformation in the history of
the Canadian coal industry," said Xxx Xxxxxxxx, President and Chief Executive
Officer of Fording Inc. "For the past several months, we have managed a process
that has resulted in substantial value realized for our shareholders. However,
on behalf of the management teams at each company, I want to assure all
employees of our commitment to making this transition as smooth as possible.
There will be changes, but we will all benefit from being part of a larger,
stronger and more competitive organization."
Fording Inc. is Canada's largest and most productive producer of export
metallurgical coal. Its three mines in southern British Columbia produce
high-quality metallurgical coal for the international steel industry. The
Company's Prairie Operations supply thermal coal to electrical utilities.
Fording is also the world's largest producer of the industrial mineral
wollastonite. Further information can be found at xxx.xxxxxxx.xx.
Sherritt International Corporation is a widely held, diversified Canadian
resource company that operates in Canada and internationally. Sherritt's 97.7
million restricted voting shares and $600 million 6% convertible debentures
trade on the Toronto Stock Exchange under the symbols S and S.DB, respectively.
Further information can be found at xxx.xxxxxxxx.xxx.
Ontario Teachers' Pension Plan Board is one of Canada's largest financial
institutions and a member of the Canadian Coalition for Good Governance with
net assets as of June 30, 2002 of $68 billion. With a solid track record of
investment in Canada and worldwide, Teachers' has achieved an 11.7 percent
average rate of return since its investment program began in 1990. Teachers'
invests to secure the retirement income of approximately 154,000 elementary and
secondary school teachers and 88,500 retired teachers and their families. The
pension plan is co-sponsored by the Ontario government and the plan members who
are represented by the Ontario Teachers' Federation. Further information can be
found at xxx.xxxxx.xxx.
- 4 -
Teck Cominco Limited is a diversified mining company, headquartered in
Vancouver, Canada, with assets totalling approximately $5 billion. Its shares
are listed on The Toronto Stock Exchange under the symbols TEK.A and TEK.B. The
company is a world leader in the production of zinc and its diversified
operations produce significant quantities of copper, coal and gold. The company
owns, or has interests in, eight operating mines and two refineries. Further
information can be found at xxx.xxxxxxxxxxx.xxx.
Westshore Terminals Income Fund, created in 1996, owns Westshore Terminals
Ltd., which operates Canada's leading coal export facility and the largest dry
bulk terminal on the west coast of the Americas. The Fund's units trade on The
Toronto Stock Exchange under the symbol WTE.UN. Further information is
available at xxx.xxxxxxxxx.xxx.
Certain information included in this document may be considered
forward-looking. Such forward-looking information involves numerous
assumptions, inherent risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results may differ
materially from those expressed in any forward-looking information made by or
on behalf of Fording, Sherritt International, Teck Cominco and Westshore
Terminals. Risks, uncertainties and other factors are discussed in public
filings of Fording, Sherritt International, Teck Cominco and Westshore
Terminals with the Canadian securities regulatory authorities and, in the case
of Fording, with the United States Securities and Exchange Commission.
NOTICE OF CONFERENCE CALL AND WEBCAST:
Fording Inc. will host a conference call and webcast for investors to
discuss the agreement.
Date: Today, January 13, 2003
Time: 11:30 a.m. Eastern Time,
9:30 a.m. Mountain Time,
8:30 a.m. Pacific Time.
Dial-in numbers: 000-000-0000 or 0-000-000-0000
(No Passcode Required)
The call can also be heard through the companies' websites xxx.xxxxxxx.xx,
xxx.xxxxxxxxxxx.xx, and xxx.xxxxxxxx.xxx.
Participants will include:
FROM FORDING INC:
Xxxxxxx Xxxxxxxx, Chairman of the Board of Directors
Xxx Xxxxxxxx, President and Chief Executive Officer
Xxxxx Xxxxxxxx, Vice President and Chief Financial Officer
FROM SHERRITT COAL PARTNERSHIP II:
Xxx X. Xxxxxxx, Chairman, Sherritt International Corporation
Xxxxx X. Xxxxxx, Senior Vice-President of Global Active Equities,
Ontario Teachers' Pension Plan Board
FROM TECK COMINCO LIMITED:
Xxxxx Xxxxxxxx, Deputy Chairman and Chief Executive Officer
FROM WESTSHORE TERMINALS INCOME FUND:
Xxxxxxx Xxxxxxxxx, Trustee
- 5 -
A recording of the call will also be available until Midnight, Wednesday,
January 15, 2003 by dialing 1-416-640-1917 or 1-877-289-8525 and entering
access code 232992, followed by the pound key. %SEDAR: 00016654E
For further information: Fording Inc. - Investors: Xxxx Xxx, CA, Director,
Investor Relations, Fording Inc., (000) 000 0000; Media: Xxxx Xxxx, Lute &
Company, (000) 000 0000 or (000) 000 0000 ex 222; Sherritt Coal Partnership II
- Xxxxx Xxxxxxx, (000) 000-0000; Teck Cominco Limited - Xxx Xxxxxxxx, Director,
Investor Relations, (000) 000-0000; Westshore Terminals Income Fund - Xxxx
Xxxxxxxxx, (000) 000-0000.
-30-
SCHEDULE 4.1
REGULATORY APPROVALS
CANADIAN FILINGS
Canadian Securities Regulatory Authorities
Competition Act
Toronto Stock Exchange
INTERNATIONAL FILINGS
European Community: Merger Task Force of Directorate-General for Competition of
the European Commission (if required, approvals in Belgium and Germany or other
member states will not be required)
Belgium: Ministere des Affaires econonomiques, and Competition Council (if
European Community approval not required)
Brazil: Conselho Administrativo de Defesa Economica (XXXX)
Germany: Bundeskartellamt (if European Community approval not required)
Japan: Fair Trade Commission
Mexico: Comision Federal de Competencia
UNITED STATES FILINGS
United States: Federal Trade Commission and Antitrust Division of the
Department of Justice (if required)
New York Stock Exchange
Any required competition filings determined to be triggered as a result of the
parties sharing information in connection with the proposed transactions.
