ARRANGEMENT AGREEMENT BETWEEN GRAN TIERRA ENERGY INC. - and - PETROLIFERA PETROLEUM LIMITED January 17, 2011
Exhibit
2.1
BETWEEN
GRAN
TIERRA ENERGY INC.
-
and -
PETROLIFERA
PETROLEUM LIMITED
January
17, 2011
TABLE
OF CONTENTS
Page
|
||
ARTICLE
1
|
||
INTERPRETATION
|
||
1.1
|
Definitions
|
1
|
1.2
|
Interpretation
Not Affected by Headings, etc
|
10
|
1.3
|
Number,
etc
|
10
|
1.4
|
Date
for Any Action
|
11
|
1.5
|
Entire
Agreement
|
11
|
1.6
|
Currency
|
11
|
1.7
|
Accounting
Matters
|
11
|
1.8
|
Knowledge
|
11
|
1.9
|
Interpretation
Not Affected by Party Drafting
|
11
|
1.10
|
Schedules
|
11
|
ARTICLE
2
|
||
THE
ARRANGEMENT
|
||
2.1
|
Plan
of Arrangement
|
12
|
2.2
|
Interim
Order
|
12
|
2.3
|
Articles
of Arrangement
|
12
|
2.4
|
Adjustments
in the Share Exchange Ratio
|
13
|
2.5
|
Information
Circular and TargetCo Meeting
|
14
|
2.6
|
Employees
|
14
|
2.7
|
TargetCo
Board of Directors and Officers
|
16
|
2.8
|
Effective
Date
|
16
|
ARTICLE
3
|
||
COVENANTS
|
||
3.1
|
Covenants
of TargetCo
|
16
|
3.2
|
Covenants
of AcquireCo
|
23
|
3.3
|
Mutual
Covenants Regarding the Arrangement
|
25
|
3.4
|
Covenants
Regarding Non-Solicitation
|
25
|
3.5
|
Provision
of Information; Access
|
29
|
3.6
|
Additional
Covenants of AcquireCo
|
30
|
ARTICLE
4
|
||
REPRESENTATIONS
AND WARRANTIES
|
||
4.1
|
Representations
and Warranties of TargetCo
|
31
|
4.2
|
Representations
and Warranties of AcquireCo
|
45
|
4.3
|
Privacy
Issues
|
52
|
ARTICLE
5
|
||
CONDITIONS
PRECEDENT
|
||
5.1
|
Mutual
Conditions Precedent
|
53
|
5.2
|
Additional
Conditions to Obligations of TargetCo
|
54
|
5.3
|
Additional
Conditions to Obligations of AcquireCo
|
55
|
5.4
|
Notice
and Effect of Failure to Comply with Representations, Warranties and
Covenants
|
57
|
5.5
|
Satisfaction
of Conditions
|
58
|
-i-
TABLE
OF CONTENTS
(continued)
Page
|
||
ARTICLE
6
|
||
AGREEMENT
AS TO DAMAGES AND OTHER ARRANGEMENTS
|
||
6.1
|
AcquireCo
Damages
|
58
|
6.2
|
TargetCo
Damages
|
60
|
6.3
|
Fees
and Expenses
|
60
|
ARTICLE
7
|
||
AMENDMENT
|
||
7.1
|
Amendment
of Agreement
|
60
|
7.2
|
Amendment
of Plan of Arrangement
|
61
|
ARTICLE
8
|
||
TERMINATION
|
||
8.1
|
Termination
|
61
|
8.2
|
Effect
of Termination
|
62
|
8.3
|
Waiver
|
62
|
ARTICLE
9
|
||
NOTICES
|
||
9.1
|
Notices
|
63
|
ARTICLE
10
|
||
GENERAL
|
||
10.1
|
Binding
Effect
|
64
|
10.2
|
Assignment
|
64
|
10.3
|
Disclosure
|
64
|
10.4
|
Costs
|
64
|
10.5
|
Severability
|
64
|
10.6
|
Further
Assurances
|
64
|
10.7
|
Time
of Essence
|
65
|
10.8
|
Governing
Law
|
65
|
10.9
|
Officers'
and Directors' Insurance and Indemnities
|
65
|
10.10
|
Third
Party Beneficiaries
|
65
|
10.11
|
Counterparts
|
66
|
-ii-
THIS ARRANGEMENT AGREEMENT is
dated as of the 17th day of
January, 2011.
BETWEEN:
GRAN TIERRA ENERGY INC., a
corporation formed under the Laws of Nevada ("AcquireCo")
AND:
PETROLIFERA PETROLEUM LIMITED,
a corporation formed under the Federal Laws of Canada ("TargetCo")
WHEREAS:
A. The
Parties desire to enter into this Agreement to implement the indirect
acquisition of TargetCo by AcquireCo and certain other
transactions;
B. the
Parties intend to carry out the transactions contemplated herein by way of an
arrangement under the provisions of the CBCA;
C. AcquireCo
has entered into the Voting Agreements with certain TargetCo Securityholders;
and
D. the
Parties have entered into this Agreement to provide for the matters referred to
in the foregoing recitals and for other matters relating to such
arrangement.
NOW THEREFORE, in
consideration of the covenants and agreements herein contained and other good
and valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the Parties hereto do hereby covenant and agree as
follows:
ARTICLE
1
INTERPRETATION
1.1
|
Definitions
|
In this
Agreement (including the recitals hereto) the following defined terms have the
meanings hereinafter set forth:
|
(a)
|
"ABCA" means the Business Corporations
Act (Alberta), as amended, including the regulations promulgated
thereunder;
|
|
(b)
|
"Acceptable Confidentiality
Agreement" means a confidentiality agreement that contains
confidentiality and standstill provisions that are substantially similar
and no less favourable, in the aggregate, to TargetCo, than those
contained in the TargetCo Confidentiality
Agreement;
|
|
(c)
|
"AcquireCo" means Gran
Tierra Energy Inc., a corporation formed under the Laws of
Nevada;
|
|
(d)
|
"AcquireCo Board of
Directors" means the board of directors of AcquireCo as it may be
comprised from time to time;
|
|
(e)
|
"AcquireCo Confidentiality
Agreement" means the confidentiality agreement dated December 10,
2010 between AcquireCo and
TargetCo;
|
|
(f)
|
"AcquireCo Financial
Statements" means, collectively, the audited consolidated financial
statements of AcquireCo as at and for the years ended December 31, 2009
and 2008, together with the notes thereto and the auditors' report
thereon, and the unaudited consolidated financial statements of AcquireCo
as at and for the nine month periods ended September 30, 2010 and 2009,
together with the notes thereto;
|
|
(g)
|
"AcquireCo Information"
means the information furnished by or on behalf of AcquireCo to TargetCo
for inclusion in the Information Circular describing AcquireCo and its
business, operations and affairs;
|
|
(h)
|
"AcquireCo Option Plan"
means the stock option plan established by AcquireCo, as amended from time
to time, providing for the issuance of AcquireCo
Options;
|
|
(i)
|
"AcquireCo Options" means
options to acquire AcquireCo Shares pursuant to the AcquireCo Option
Plan;
|
|
(j)
|
"AcquireCo Reserve
Report" means the report prepared by GLJ dated February 1, 2010,
and effective December 31, 2009, evaluating the crude oil, natural gas
liquids and natural gas reserves of all of AcquireCo's (and its
subsidiaries') properties and the present value of the estimated future
net revenues associated with such
reserves;
|
|
(k)
|
"AcquireCo Shareholders"
means the holders from time to time of AcquireCo
Shares;
|
|
(l)
|
"AcquireCo Shares" means
the common stock of AcquireCo, US$0.001 par
value;
|
|
(m)
|
"AcquireCo Termination
Fee" has the meaning set forth in Section
6.2;
|
|
(n)
|
"AcquireCo Warrant
Indenture" means the warrant indenture to be entered into as of the
Effective Date between AcquireCo and a warrant trustee selected by
AcquireCo, providing for the issuance of the Replacement
Warrants;
|
|
(o)
|
"AcquireCo Warrants"
means warrants to acquire AcquireCo
Shares;
|
|
(p)
|
"Acquisition Proposal"
means any inquiry or the making of any proposal to TargetCo or TargetCo
Securityholders from any Person, or group of Persons "acting jointly or in
concert" (within the meaning of MI 62-104), which contemplates, relates to
or could reasonably be expected to lead to (in either case whether in one
transaction or a series of transactions): (i) the issuance, sale or other
disposition (including by way of merger, amalgamation, arrangement,
consolidation, share exchange or similar transaction) of 20% or more of
the voting or equity securities of TargetCo or any of its subsidiaries;
(ii) any acquisition of a substantial amount of assets of TargetCo or any
of its subsidiaries; (iii) an amalgamation, arrangement, merger,
consolidation or other business combination involving TargetCo or any of
its subsidiaries; (iv) any take-over bid, issuer bid, exchange offer,
recapitalization, liquidation, dissolution, reorganization or similar
transaction involving TargetCo or any of its subsidiaries; (v) any other
transaction, the consummation of which would or could reasonably be
expected to impede, interfere with, prevent, impair or delay the
transactions contemplated by this Agreement or the Arrangement or which
would or could reasonably be expected to materially reduce the benefits to
AcquireCo under this Agreement or the Arrangement; or (vi) any public
announcement of an intention to do any of the
foregoing;
|
- 2
-
|
(q)
|
"Administration Services
Agreement" means the administration services agreement dated
effective January 1, 2008 between TargetCo and Connacher Oil and Gas
Limited, as the same may be
amended;
|
|
(r)
|
"affiliate" has the
meaning set forth in MI 62-104;
|
|
(s)
|
"AMEX" means the NYSE
Amex LLC;
|
|
(t)
|
"Applicable Canadian Securities
Laws", in the context that refers to one or more Persons, means,
collectively, and as the context may require, the securities legislation
of each of the provinces and territories of Canada, the rules of the TSX,
and the rules, regulations and policies published and/or promulgated
thereunder, as such may be amended from time to time prior to the
Effective Time, as the foregoing apply to such Person or Persons or its or
their business, undertaking, property or securities and emanate from a
Person having jurisdiction over the Person or Persons or its or their
business, undertaking, property or
securities;
|
|
(u)
|
"Applicable Corporate
Laws" in the context that refers to one or more Persons, means all
corporate laws, including the ABCA and the CBCA, as the foregoing apply to
such Person or Persons or its or their business, undertaking, property or
securities and emanate from a Person having jurisdiction over the Person
or Persons or its or their business, undertaking, property or
securities;
|
|
(v)
|
"Applicable Laws", in the
context that refers to one or more Persons, means the Laws that apply to
such Person or Persons or its or their business, undertaking, property or
securities and emanate from a Person having jurisdiction over the Person
or Persons or its or their business, undertaking, property or
securities;
|
|
(w)
|
"Applicable Securities
Laws" means, collectively, Applicable Canadian Securities Laws and
Applicable U.S. Securities Laws;
|
|
(x)
|
"Applicable U.S. Securities
Laws" in the context that refers to one or more Persons, means,
collectively, and as the context may require, the federal and state
securities legislation of the United States and all rules, regulations and
orders promulgated thereunder, as amended from time to time, including the
U.S. Exchange Act, the U.S. Securities Act and SOX and the rules of the
AMEX, as the foregoing may apply to such Person or Persons or its or their
business, undertaking, property or securities and emanate from a Person
having jurisdiction over the Person or Persons or its or their business,
undertaking, property or
securities;
|
|
(y)
|
"Arrangement" means the
arrangement pursuant to section 192 of the CBCA set forth in the Plan of
Arrangement;
|
|
(z)
|
"Arrangement Resolution"
means the special resolution in respect of the Arrangement to be
considered at the TargetCo Meeting;
|
- 3
-
|
(aa)
|
"Articles of Arrangement"
means the articles of arrangement in respect of the Arrangement required
under subsection 192(6) of the CBCA to be sent to the Director after the
Final Order has been granted, giving effect to the
Arrangement;
|
|
(bb)
|
"Business Day" means any
day other than a Saturday, Sunday or statutory holiday in Calgary,
Alberta;
|
|
(cc)
|
"CBCA" means the Canada Business Corporations
Act, as amended, including the regulations promulgated
thereunder;
|
|
(dd)
|
"Claim" means any claim,
action, suit, hearing, investigation, complaint or other
proceeding;
|
|
(ee)
|
"Closing Time" shall be
11:00 a.m. (Calgary time) on the Effective Date, unless otherwise agreed
to by TargetCo and AcquireCo;
|
|
(ff)
|
"Code " means the U.S. Internal Revenue Code of
1986, as amended;
|
|
(gg)
|
"Competition Act" means
the Competition
Act (Canada), as amended from time to time, together with the
regulations promulgated thereunder;
|
|
(hh)
|
"Court" means the Court
of Queen's Bench of Alberta;
|
|
(ii)
|
"Designated Officers"
means, in respect of AcquireCo, the President and Chief Executive Officer,
the Chief Financial Officer and Chief Operating Officer and, in respect of
TargetCo, the Executive Chairman, the President and Chief Executive
Officer, the Chief Financial Officer and the Vice President, Exploration
and New Ventures;
|
|
(jj)
|
"Director" means the
Director duly appointed under section 260 of the
CBCA;
|
|
(kk)
|
"Dispute" has the meaning
set forth in Section 3.1(k);
|
|
(ll)
|
"Effective Date" means
the date the Arrangement is effective under the
CBCA;
|
|
(mm)
|
"Effective Time" means
the time at which the Articles of Arrangement are filed with the Director
under the CBCA;
|
|
(nn)
|
"Environmental Laws"
means all federal, municipal or local Laws of any Governmental Entity or
of any court, tribunal or other similar body, relating to environmental
matters in the jurisdictions applicable to such Person or its business,
activities, property, assets or undertaking, including legislation
governing the use and storage of Hazardous
Substances;
|
|
(oo)
|
"FCPA" has the meaning
set forth in Section 4.1(zz);
|
|
(pp)
|
"Final Order" means the
final order of the Court approving the Arrangement pursuant to subsection
192(4) of the CBCA to be applied for following the TargetCo Meeting as
such order may be affirmed, amended or modified by any court of competent
jurisdiction;
|
- 4
-
|
(qq)
|
"GAAP" means, with
respect to references to TargetCo matters, Canadian generally accepted
accounting principles, and with respect to references to AcquireCo
matters, generally accepted
accounting principles in the United States of
America;
|
|
(rr)
|
"GLJ" means GLJ Petroleum
Consultants Ltd., independent petroleum engineering consultants of
Calgary, Alberta;
|
|
(ss)
|
"Governmental Entity"
means: (i) any 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, whether domestic or foreign; (ii) any subdivision, agent,
commission, board, regulatory authority, administrative agency or other
authority of any of the foregoing; (iii) any self-regulatory authority,
including the TSX and the AMEX; or (iv) any quasi-governmental or private
body exercising any regulatory, expropriation or taxing authority under or
for the account of any of the
foregoing;
|
|
(tt)
|
"Government Official" has
the meaning set forth in Section
4.1(zz)(i);
|
|
(uu)
|
"Hazardous Substances"
means any pollutant, contaminant, waste of any nature, hazardous
substance, hazardous material, toxic substance, dangerous substance or
dangerous good as defined in any Environmental
Laws;
|
|
(vv)
|
"including" and "includes" means
"including, without limitation" and "includes, without limitation",
respectively;
|
|
(ww)
|
"Information Circular"
means the information circular of TargetCo to be sent by TargetCo to the
TargetCo Securityholders in connection with the TargetCo Meeting, as such
information circular may be affirmed, amended or modified subject to the
Agreement;
|
|
(xx)
|
"Interim Order" means the
interim order of the Court under subsection 192(4) of the CBCA containing
declarations and directions with respect to the TargetCo Meeting and the
Arrangement, as such order may be affirmed, amended or modified by the
Court;
|
|
(yy)
|
"Labour Representative"
has the meaning set forth in Section
4.1(gg);
|
|
(zz)
|
"Laws" means all laws,
statutes, regulations, by-laws, statutory rules, orders, ordinances
(including all Applicable Corporate Laws and Applicable Securities Laws),
and the terms and conditions of any grant of approval, permission,
authority or license, in each case of any court, Governmental Entity,
statutory body or self-regulatory authority (including the TSX and the
AMEX);
|
- 5
-
|
(aaa)
|
"Material Adverse Change"
or "Material Adverse
Effect" means, with respect to any Person, any change, effect,
fact, circumstance, occurrence or event that, individually or in the
aggregate: (a) is, or could reasonably be expected to be, material and
adverse to the business, operations, assets, cash flow, liabilities,
capitalization, financial condition or results of operations of such
Person and its subsidiaries, taken as a whole; or (b) could reasonably be
expected to prevent, materially delay or materially impair the ability of
TargetCo or AcquireCo to consummate the transactions contemplated by this
Agreement; provided, however, that neither a Material Adverse Change nor a
Material Adverse Effect shall include any change, effect, fact,
circumstance, occurrence or event relating to or resulting from: (i)
general economic, financial, credit, currency exchange, securities or
commodity prices in Canada or elsewhere; (ii) conditions affecting the oil
and gas exploration, development and production industry as a whole, and
not specifically relating to any Person and/or its subsidiaries; (iii) any
decline in crude oil or natural gas prices on a current or forward basis;
(iv) changes in Laws, including changes in Laws relating to Tax, or in
interpretations thereof; (v) any matter which has been disclosed by
AcquireCo to TargetCo in writing (including via e-mail) as of the date
hereof or any matter contained in the TargetCo Disclosure Letter; (vi) the
announcement of the transactions contemplated by this Agreement or other
communication by AcquireCo or its affiliates of its plans or intentions
(including in respect of employees) with respect the business of TargetCo
or its subsidiaries, including losses or threatened losses of employees,
customers, suppliers, distributors or others having relationships with
TargetCo or any of its subsidiaries; (vii) the failure
to meet analyst projections, in and of itself; (viii) a decline in such
Person’s stock price, in and of itself; (ix) any required changes in
accounting principles; (x) any natural disaster or any acts of war
(whether or not declared), terrorism or sabotage, or any escalation or
worsening thereof; (xi) any changes arising from matters permitted or
contemplated by this Agreement; (xii) any changes consented to or approved
in each case in writing by the Other Party following the date of this
Agreement; or (xiii) any unfavourable results in respect of xxxxx
currently being drilled by a Party or in respect of which drilling
commences prior to the Effective Date, provided that, with respect to
items (i), (ii), (iii) and (x) above, such matter does not have a
materially disproportionate effect on the Person relative to comparable
entities operating in the oil and gas exploration, exploitation,
development and production business for the purposes of determining
whether a Material Adverse Change or Material Adverse Effect has occurred,
and provided further, that with respect to items (vii) and (viii) above,
the facts and circumstances underlying such failure or decline may be
taken into account for the purposes of determining whether a Material
Adverse Change or Material Adverse Effect has
occurred;
|
|
(bbb)
|
"material change" means,
with respect to references to TargetCo matters, the meaning ascribed
thereto under Applicable Canadian Securities Laws, and with respect to
references to AcquireCo matters, the meaning ascribed
thereto under Applicable US Securities
Laws;
|
|
(ccc)
|
"MI 61-101" means
Multilateral Instrument 61-101 – Protection of Minority
Security Holders in Special Transactions of the Canadian Securities
Administrators, as amended or replaced from time to
time;
|
|
(ddd)
|
"MI 62-104" means
Multilateral Instrument 62-104 – Take-Over Bids and Issuer
Bids of the Canadian Securities Administrators, as amended or
replaced from time to time;
|
|
(eee)
|
"misrepresentation"
means, with respect to references to TargetCo matters, the meaning
ascribed thereto under Applicable Canadian Securities Laws, and with
respect to references to AcquireCo matters, the meaning ascribed
thereto under Applicable US Securities
Laws;
|
|
(fff)
|
"Other Party" means: (i)
with respect to TargetCo, AcquireCo; and (ii) with respect to AcquireCo,
TargetCo;
|
- 6
-
|
(ggg)
|
"Outside Date" means
April 30, 2011 or such other date as may be agreed to in writing by the
Parties;
|
|
(hhh)
|
"Parties" means,
collectively, the parties to this Agreement, and "Party" means any one of
them, or where implied by the context, means: (i) TargetCo; or (ii)
AcquireCo, as the case may be;
|
|
(iii)
|
"Permitted Encumbrances"
means: (i) any statutory exceptions to title; (ii) inchoate or statutory
liens of contractors, subcontractors, mechanics, workers, suppliers,
materialmen, carriers and others in respect of the construction,
maintenance, repair or operation of real or personal property for which
payment is not due; (iii) easements, rights of way, servitudes, licenses,
permits and other similar rights in real property (including easements,
rights of way and agreements for sewers, drains, gas and water mains or
electric light and power or telephone, telecommunications or cable
conduits, poles, wires and cables) which do not materially impair the use
of the applicable real property subject thereto as such property is being
used at the date hereof; or (iv) liens for Taxes in respect of real
property not yet due and payable;
|
|
(jjj)
|
"Person" includes any
individual, sole proprietorship, partnership, firm, joint venture, limited
partnership, limited liability company, unlimited liability company,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body, corporation, or Governmental Entity, and, where
the context requires, any of the foregoing when they are acting as
trustee, executor, administrator or other legal representatives of any
other entity, whether or not having legal
status;
|
|
(kkk)
|
"Plan of Arrangement"
means the plan of arrangement in the form set out in Schedule 1.1(kkk), as
amended or supplemented from time to time in accordance with article 6
thereof and Section 7.2;
|
|
(lll)
|
"Public Record" means all
information filed by either TargetCo or AcquireCo, as the case may be,
after December 31, 2009 and prior to the date of this Agreement with any
Securities Regulatory Authority in compliance, or intended compliance,
with any Applicable Canadian Securities Laws, to the extent such
information is readily available to the general
public;
|
|
(mmm)
|
"Puesto Xxxxxxx
Agreement" means the purchase and sale agreement regarding the
Puesto Xxxxxxx/Rinconada Concession dated November 26, 2004 between
Connacher Oil and Gas Limited (Sucursal Argentina) and TargetCo, as
amended by an amending agreement dated March 11,
2005;
|
|
(nnn)
|
"Purchaser" means Solana
Resources Limited or a yet to be formed direct or indirect subsidiary of
either Solana Resources Limited or Gran Tierra Exchangeco Inc., as
determined by AcquireCo prior to making application for the Interim
Order;
|
|
(ooo)
|
"Replacement Warrant" has
the meaning set forth in Section
2.3(c);
|
|
(ppp)
|
"Representative" has the
meaning set forth in Section
3.4(a);
|
|
(qqq)
|
"SEC" means the United
States Securities and Exchange
Commission;
|
- 7
-
|
(rrr)
|
"Securities Regulatory
Authorities" means all applicable securities regulatory
authorities, including: (i) the provincial and territorial securities
regulatory authorities in the provinces and territories of Canada in which
either AcquireCo or TargetCo is a reporting issuer (or the equivalent);
(ii) all applicable federal and state securities regulatory authorities in
the United States, including the SEC, in each case having or claiming
jurisdiction over AcquireCo and TargetCo; (iii) the TSX; and (iv) the
AMEX;
|
|
(sss)
|
"Share Exchange Ratio"
has the meaning set forth in Section
2.3(a);
|
|
(ttt)
|
"SOX" means the United
States Xxxxxxxx-Xxxxx
Act of 2002, including the rules and regulations promulgated
thereunder;
|
|
(uuu)
|
"subsidiary" has the
meaning ascribed thereto in MI
62-104;
|
|
(vvv)
|
"Superior Proposal" has
the meaning set forth in Section
3.4(a)(vii)(A);
|
|
(www)
|
"TargetCo" means
Petrolifera Petroleum Limited, a corporation formed under the Federal Laws
of Canada;
|
|
(xxx)
|
"TargetCo Board of
Directors" means the board of directors of TargetCo as it may be
comprised from time to time;
|
|
(yyy)
|
"TargetCo Change of Control
Payments" has the meaning set forth in Section
2.6(a);
|
|
(zzz)
|
"TargetCo Confidentiality
Agreement" means the confidentiality agreement dated September 17,
2010 between AcquireCo and
TargetCo;
|
|
(aaaa)
|
"TargetCo Credit
Facilities" means, collectively, the facilities and debt
instruments disclosed under Notes 4 and 5 of the TargetCo Financial
Statements for the period ended September 30,
2010;
|
|
(bbbb)
|
"TargetCo Disclosure
Letter" means the disclosure letter dated effective the date hereof
from TargetCo to AcquireCo;
|
|
(cccc)
|
"TargetCo Employees"
means the employees of TargetCo and its
subsidiaries;
|
|
(dddd)
|
"TargetCo Employment
Agreements" means the management employment agreements between
TargetCo and each of Xxxx Wine, Xxxxxxx Xxxxx and Xxxxxx Xxxxxx and the
severance agreement with Xxxxxxx
Xxxxxxx;
|
|
(eeee)
|
"TargetCo Fairness
Opinion" has the meaning set forth in Section
4.1(dd);
|
|
(ffff)
|
"TargetCo Financial
Statements" means, collectively, the audited consolidated financial
statements of TargetCo as at and for the years ended December 31, 2009 and
2008, together with the notes thereto and the auditors' report thereon,
and the unaudited consolidated financial statements of TargetCo as at and
for the nine month periods ended September 30, 2010 and 2009, together
with the notes thereto;
|
- 8
-
|
(gggg)
|
"TargetCo Meeting" means
the special meeting of TargetCo Shareholders to be held to consider, among
other things, the Arrangement and related matters, and any adjournment
thereof;
|
|
(hhhh)
|
"TargetCo Optionholders"
means the registered or beneficial holders of TargetCo
Options;
|
|
(iiii)
|
"TargetCo Options" means
options to acquire TargetCo Shares pursuant to the TargetCo Option
Plan;
|
|
(jjjj)
|
"TargetCo Option Plan"
means the stock option plan established by TargetCo, as amended from time
to time, providing for the issuance of TargetCo
Options;
|
|
(kkkk)
|
"TargetCo Plans" has the
meaning set forth in Section
4.1(ff);
|
|
(llll)
|
"TargetCo Reserve Report"
means the report prepared by GLJ dated March 5, 2010 and effective
December 31, 2009, evaluating the crude oil, natural gas liquids and
natural gas reserves of all of TargetCo's (and its subsidiaries')
properties and the present value of the estimated future net revenues
associated with such reserves;
|
|
(mmmm)
|
"TargetCo Securities"
means, collectively, the TargetCo Shares, the TargetCo Options and the
TargetCo Warrants;
|
|
(nnnn)
|
"TargetCo
Securityholders" means, collectively, the TargetCo Shareholders,
the TargetCo Optionholders and the TargetCo
Warrantholders;
|
|
(oooo)
|
"TargetCo Shareholders"
means the registered or beneficial holders of TargetCo Shares, including
TargetCo Shares acquired upon the exercise of TargetCo Options and
TargetCo Warrants;
|
|
(pppp)
|
"TargetCo Shares" means
the common shares of TargetCo;
|
|
(qqqq)
|
"TargetCo Termination
Fee" has the meaning set forth in Section
6.1;
|
|
(rrrr)
|
"TargetCo Warrantholders"
means the registered or beneficial holders of TargetCo
Warrants;
|
|
(ssss)
|
"TargetCo Warrants" means
warrants to acquire TargetCo
Shares;
|
|
(tttt)
|
"Tax" or "Taxes" means all taxes,
however denominated, including any instalments with respect thereto and
any interest, penalties or other additions that may become payable in
respect thereof, imposed by any Governmental Entity, which taxes shall
include, without limiting the generality of the foregoing, all income or
profits taxes (including, but not limited to, federal income taxes and
provincial income taxes), payroll and employee withholding taxes, social
insurance taxes, sales and use taxes, goods and services taxes, ad valorem taxes,
duties, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property governmental
charges, stamp taxes, insurance taxes, environmental taxes, transfer
taxes, capital taxes and other obligations of the same or of a similar
nature to any of the foregoing taxes including Canada Pension Plan and
provincial pension plan contributions, employment insurance payments and
workers' compensation premiums, and other taxes which a Party (or any of
its subsidiaries) is required to pay, withhold, remit or
collect;
|
- 9
-
|
(uuuu)
|
"Tax Act" means the Income Tax Act
(Canada), including the regulations promulgated thereunder, as amended
from time to time;
|
|
(vvvv)
|
"Tax Returns" means all
reports, estimates, elections, designations, forms, declarations of
estimated tax, information statements and returns relating to, or required
to be filed in connection with, any Taxes whether in tangible or
electronic form;
|
|
(wwww)
|
"TSX" means the Toronto
Stock Exchange;
|
|
(xxxx)
|
"United States" or "U.S." means the United
States of America, its territories and possessions, any State of the
United States and the District of
Columbia;
|
|
(yyyy)
|
"U.S. Exchange Act" means
the United States
Securities Exchange Act of 1934, as
amended;
|
|
(zzzz)
|
"U.S. holder" means any
Person or entity whose address appears on the records of TargetCo, or any
voting or other trustee, depositary, share transfer agent or other Person
or entity acting in a similar capacity on behalf of TargetCo, as being
located in the United States;
|
|
(aaaaa)
|
"U.S. Securities Act"
means the United States
Securities Act of 1933, as amended;
and
|
|
(bbbbb)
|
"Voting Agreements" means
the voting support agreements, each dated as of the date hereof, entered
into between AcquireCo and certain TargetCo Securityholders pursuant to
which, among other things, such TargetCo Securityholders have agreed,
subject to the terms and conditions thereof, to support the Arrangement
and either, as applicable: (i) vote their TargetCo Securities;
or (ii) otherwise cause any votes associated with such TargetCo Securities
to be voted, in favour of the Arrangement at the TargetCo
Meeting.
|
1.2
|
Interpretation
Not Affected by Headings, etc.
|
The
division of this Agreement into articles, sections and subsections is for
convenience of reference only and does not affect the construction or
interpretation of this Agreement. The terms "Agreement", "this Agreement", "hereof", "herein" and "hereunder" and similar
expressions refer to this Agreement (including the exhibit attached hereto) and
not to any particular article, section or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto.
1.3
|
Number,
etc.
|
Words
importing the singular number include the plural and vice versa, words importing
the use of any gender include all genders.
- 10
-
1.4
|
Date
for Any Action
|
With the
exception of the time frames contemplated by Section 3.4, if any date on which
any action is required to be taken hereunder by any of the Parties is not a
Business Day and a business day in the place where an action is required to be
taken, such action is required to be taken on the next succeeding day which is a
Business Day and a business day, as applicable, in such place.
1.5
|
Entire
Agreement
|
This
Agreement, the TargetCo Confidentiality Agreement and the AcquireCo
Confidentiality Agreement constitute the entire agreement between the Parties
pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written, among the
Parties with respect to the subject matter hereof.
1.6
|
Currency
|
All
references to "$" or sums of money that are referred to in this Agreement are
expressed in lawful money of Canada, unless specified otherwise.
1.7
|
Accounting
Matters
|
Unless
otherwise stated, all accounting terms used in this Agreement shall have the
meanings attributable thereto under GAAP and all determinations of an accounting
nature required to be made shall be made in a manner consistent with
GAAP.
1.8
|
Knowledge
|
Where in
this Agreement a representation or warranty is made on the basis of the
knowledge or awareness of TargetCo or AcquireCo, as the case may be, such
knowledge or awareness consists of the actual knowledge, as of the date of this
Agreement, of the Designated Officers of TargetCo or AcquireCo, as the case may
be, but which shall also include the knowledge that the applicable Designated
Officers would reasonably be expected to have had they conducted a reasonable
inquiry into the relevant subject matter.
1.9
|
Interpretation
Not Affected by Party Drafting
|
The
Parties hereto acknowledge that their respective legal counsel have reviewed and
participated in settling the terms of this Agreement, and the Parties agree that
any rule of construction to the effect that any ambiguity is to be resolved
against the drafting party will not be applicable in the interpretation of this
Agreement.
1.10
|
Schedules
|
The
following schedules attached hereto are incorporated into and form an integral
part of this Agreement:
Schedule
1.1(kkk)
|
-
|
Plan
of Arrangement
|
Schedule
1.1(bbbbb)
|
-
|
Form
of Voting Support Agreement
|
Schedule
2.6
|
-
|
Form
of Release
|
- 11
-
ARTICLE
2
THE
ARRANGEMENT
2.1
|
Plan
of Arrangement
|
|
(a)
|
TargetCo
will file, proceed with and diligently prosecute an application for an
Interim Order providing for, amongst other things, the calling and holding
of the TargetCo Meeting for the purpose of considering and, if deemed
advisable, approving the Arrangement Resolution and related matters to be
considered at the TargetCo Meeting.
|
|
(b)
|
Provided
all necessary approvals for the Arrangement Resolution are obtained from
the TargetCo Shareholders, TargetCo shall, subject to the terms of this
Agreement, submit the Arrangement to the Court and apply for the Final
Order.
|
|
(c)
|
Upon
issuance of the Final Order and subject to the conditions precedent in
Article 5, each of TargetCo on the one hand and AcquireCo on the other
hand shall execute and deliver such closing documents and instruments and
forthwith proceed at the Closing Time to file with the Director, the
Articles of Arrangement, the Final Order and such other documents as may
be required to give effect to the Arrangement, whereupon the transactions
comprising the Arrangement shall occur and shall be deemed to have
occurred in the order set out therein without any further act or
formality.
|
2.2
|
Interim
Order
|
TargetCo
shall apply for the Interim Order by not later than February 28, 2011, or on
such other date as agreed by the Parties, and the Interim Order shall provide
among other things:
|
(a)
|
that
the securities of TargetCo for which holders shall be entitled to vote on
the Arrangement Resolution at the TargetCo Meeting shall be the TargetCo
Shares;
|
|
(b)
|
that
each TargetCo Shareholder shall be entitled to one vote for each TargetCo
Share held by such holder;
|
|
(c)
|
that
the requisite approvals in respect of the Arrangement Resolution shall
be:
|
|
(i)
|
two
thirds of the votes cast by the TargetCo Shareholders present in person or
by proxy at the TargetCo Meeting;
and
|
|
(ii)
|
if
required, a majority of the votes cast by the TargetCo Shareholders
present in person or by proxy at the TargetCo Meeting, after excluding the
votes in respect of TargetCo Shares required to be excluded pursuant to MI
61-101;
|
|
(d)
|
for
the grant of dissent rights to TargetCo Shareholders;
and
|
|
(e)
|
for
the notice requirements with respect to the application by TargetCo to the
Court for the Final Order.
|
2.3
|
Articles
of Arrangement
|
The
Articles of Arrangement shall, with such other matters as are necessary to
effect the Arrangement, and all as subject to the provisions of the Plan of
Arrangement, provide substantially as follows (provided that, in the event of
any inconsistency between the Plan of Arrangement and this Section 2.3, the Plan
of Arrangement shall supersede this Section 2.3):
- 12
-
|
(a)
|
that
each outstanding TargetCo Share (other than the TargetCo Shares that are
held by holders who have exercised their dissent rights and who are
ultimately entitled to be paid the fair value for such TargetCo Shares)
shall be transferred by the holder thereof to Purchaser in exchange for
0.1241 of a fully paid and non-assessable AcquireCo Share (the fraction
specified in this Section 2.3(a), as such fraction may be adjusted in
accordance with Section 2.4, is hereinafter referred to as the "Share Exchange Ratio")
and the name of each such holder will be removed from the register of
holders of TargetCo Shares and added to the register of holders of
AcquireCo Shares and Purchaser will be recorded as the holder of such
TargetCo Shares so transferred and shall be deemed to be the legal and
beneficial owner thereof;
|
|
(b)
|
no
fractional AcquireCo Shares shall be delivered. In lieu
thereof, each holder of TargetCo Shares who otherwise would be entitled to
receive a fraction of an AcquireCo Share (after aggregating all fractional
shares of AcquireCo Shares issuable to such holder) shall receive the
nearest whole number of AcquireCo Shares determined in accordance with
section 5.7 of the Plan of Arrangement;
and
|
|
(c)
|
that
each TargetCo Warrant, if any are outstanding and unexercised immediately
prior to the Effective Time, will be sold, assigned and transferred to
AcquireCo in exchange for a warrant issued by AcquireCo to purchase
AcquireCo Shares (a "Replacement Warrant"),
provided that: (A) each Replacement Warrant issued by AcquireCo may be
exercised solely for one AcquireCo Share; (B) the number of Replacement
Warrants exchanged for each such TargetCo Warrant shall be equal to the
number of TargetCo Warrants immediately prior to the Effective Time
multiplied by the Share Exchange Ratio, rounded, if necessary, in
accordance with section 5.7 of the Plan of Arrangement; (C) the per share
exercise price under each such Replacement Warrant shall be the per share
exercise price under such TargetCo Warrant divided by the Share Exchange
Ratio and rounding up to the nearest whole cent; (D) the other terms of
the TargetCo Warrants shall remain substantially unchanged; and (E) the
Replacement Warrants shall be governed by the other terms and conditions
set forth in the AcquireCo Warrant Indenture; provided, however, that each
Replacement Warrant issued by AcquireCo in accordance with this Section
2.3(c) shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, division or
subdivision of shares, stock dividend, reverse stock split, consolidation
of shares, reclassification, recapitalization or other similar transaction
subsequent to the Effective Time. The AcquireCo Warrant Indenture
will be structured to provide a procedure for exercise to ensure that a
U.S. federal securities law exemption under section 3(a)(9) of the U.S.
Securities Act is available for the issuance of the AcquireCo Shares
underlying the Replacement
Warrants.
|
2.4
|
Adjustments
in the Share Exchange Ratio
|
If,
between the date of this Agreement and the Effective Time, the outstanding
TargetCo Shares or AcquireCo Shares are changed into a
different number or class of shares by reason of any stock split, division or
subdivision of shares, stock dividend, reverse stock split, consolidation of
shares, reclassification, recapitalization or other similar transaction, then
the Share Exchange Ratio shall be appropriately adjusted.
- 13
-
2.5
|
Information
Circular and TargetCo Meeting
|
|
(a)
|
As
promptly as practicable following the execution of this Agreement and in
compliance with the Interim Order and Applicable Laws, including
Applicable Securities Laws:
|
|
(i)
|
TargetCo
shall prepare the Information Circular together with any other documents
required by Applicable Laws in connection with the TargetCo Meeting, in
consultation with, and with assistance from,
AcquireCo;
|
|
(ii)
|
TargetCo
shall cause the Information Circular to be mailed to TargetCo
Securityholders and other Persons as may be required pursuant to the
Interim Order and Applicable Laws, and filed with applicable Governmental
Entities in all jurisdictions where the same is required to be mailed and
filed;
|
|
(iii)
|
TargetCo
shall convene and hold the TargetCo Meeting, and shall use its reasonable
commercial efforts to do so by March 30, 2011, and shall not adjourn,
postpone or cancel (or propose to adjourn, postpone or cancel) the
TargetCo Meeting without the prior written consent of AcquireCo
except:
|
|
(A)
|
as
required for quorum purposes (in which case the TargetCo Meeting shall be
adjourned and not cancelled) or by Applicable Laws or by a Governmental
Entity; or
|
|
(B)
|
for
an adjournment or postponement with the prior written consent of AcquireCo
for the purpose of attempting to obtain the requisite approval of the
Arrangement Resolution or an adjournment or postponement pursuant to
Section 5.4(b);
|
|
(b)
|
AcquireCo
shall, in a timely manner, furnish TargetCo with the AcquireCo Information
required to be included in the Information Circular pursuant to Applicable
Securities Laws; and
|
|
(c)
|
TargetCo
and AcquireCo shall cooperate in the preparation, filing and mailing of
the Information Circular. TargetCo shall provide AcquireCo and its
representatives with a reasonable opportunity to review and comment on the
Information Circular and any other relevant documentation and shall
incorporate all reasonable comments made by AcquireCo and its counsel; and
the Information Circular shall be reasonably satisfactory to AcquireCo and
its counsel before it is filed or distributed to the TargetCo
Securityholders.
|
2.6
|
Employees
|
|
(a)
|
The
Parties acknowledge that the Arrangement will result in a "change of
control" under the TargetCo Employment Agreements and the TargetCo Option
Plan. TargetCo represents and warrants that the obligations of
TargetCo and its subsidiaries pursuant to all employment or consulting
services agreements, termination, severance and retention plans or
policies for severance, termination or bonus payments or any other
payments related to any TargetCo option plan (including the TargetCo
Employment Agreements and the TargetCo Option Plan), arising directly as a
result of the Arrangement (collectively, the "TargetCo Change of Control
Payments") will not exceed $3.0 million. TargetCo
further represents and warrants that all TargetCo Options have been
granted pursuant to the form of stock option agreement (which remains in
full effect, unamended) provided to AcquireCo's legal counsel by
TargetCo's legal counsel on January 6,
2011.
|
- 14
-
|
(b)
|
(i)
|
The
Parties acknowledge that the Arrangement will result in a "change of
control" for purposes of the TargetCo Option Plan and that all awards
pursuant to the TargetCo Option Plan will be accelerated thereunder and,
in that regard:
|
|
(A)
|
the
Parties agree that, notwithstanding the schedule of vesting, all
outstanding TargetCo Options granted pursuant to the TargetCo Option Plan
shall be immediately vested and shall be exercised, terminated or
surrendered such that no TargetCo Options remain outstanding as at the
Effective Time.
|
|
(B)
|
AcquireCo
acknowledges that pursuant to the TargetCo Option Plan, a holder of
TargetCo Options may elect to exercise all of the TargetCo Options held by
such holder, whether previously vested or unvested, upon payment to
TargetCo of the exercise price therefor (and any withholding taxes
applicable to the exercise of such TargetCo Options) by way of bank draft
or other acceptable means of payment and receive TargetCo Shares in
respect of the number of TargetCo Options so exercised pursuant to the
terms of the TargetCo Option Plan; or, as the sole alternative thereto and
in accordance with the terms of the TargetCo Option Plan and the
applicable stock option agreements, the holder of TargetCo Options may
elect to surrender, without consideration, to TargetCo all unexercised
TargetCo Options, whether previously vested or unvested, pursuant to
section 8.03 of the applicable stock option agreement in consideration for
a cash payment, net of any applicable withholding taxes, determined in
accordance with section 8.03 of the applicable stock option
agreement. For purposes of determining the number of TargetCo
Shares to be issued in exchange for the surrendered TargetCo Options, the
"Exchange Date", as set forth in the applicable stock option agreement,
shall be deemed to be the Effective
Date.
|
|
(C)
|
AcquireCo
will cause TargetCo to elect, in prescribed form, in respect of the
TargetCo Options surrendered in accordance with the terms of the TargetCo
Option Plan after the date hereof (and AcquireCo will cause TargetCo to
file such election with the Minister of National Revenue in accordance
with the Tax Act), that neither TargetCo, nor any person who does not deal
at arm's length (within the meaning of the Tax Act) with TargetCo, will
deduct, in computing income for the purposes of the Tax Act, any amount in
respect of a cash payment made to holders of TargetCo Options in
consideration for the surrender of their TargetCo Options, and AcquireCo
will cause TargetCo to provide such holders of TargetCo Options with
evidence in writing of such
election.
|
|
(ii)
|
TargetCo
shall use its commercially reasonable efforts to cause the resignation of
all of the directors and officers of TargetCo and its subsidiaries on or
immediately following the Effective
Time.
|
- 15
-
|
(iii)
|
The
Parties agree that any TargetCo Change of Control Payments that are
payable in cash shall be paid by TargetCo prior to the Effective Date and
held in escrow (under terms as mutually agreed between TargetCo and
AcquireCo) by TargetCo's counsel for payment to the TargetCo Employees
entitled thereto immediately following the Effective Time concurrent with
the execution of full and final releases substantially in the form
attached hereto as Schedule 2.6.
|
|
(c)
|
The
"Retention Payments" to non-executive employees of TargetCo and its
subsidiaries as set forth in section 4.1(qq) of the TargetCo Disclosure
Letter will be payable to such non-executive employees no earlier than
April 30, 2011, but shall be held in escrow (under terms mutually agreed
between AcquireCo and TargetCo) from and after the Effective Date to April
30, 2011.
|
|
(d)
|
The
completion payments set forth in section 4.1(qq) of the TargetCo
Disclosure Letter shall be paid with the TargetCo Change of Control
Payments at the Effective Time.
|
2.7
|
TargetCo
Board of Directors and Officers
|
TargetCo
represents to AcquireCo that the TargetCo Board of Directors has determined
unanimously to use reasonable commercial efforts to: (i) enable AcquireCo to
reconstitute the TargetCo Board of Directors through resignations of the then
directors of TargetCo as soon as possible after the Effective Time and to cause
the appointment of AcquireCo's nominees to fill the vacancies so created to
effect the foregoing without the necessity of a TargetCo Shareholder meeting;
(ii) cause and obtain the resignation of all of the officers of TargetCo at the
Effective Time; and (iii) cause each of such directors and officers to provide a
release executed by the Parties and the respective director or officer of
TargetCo and each of its subsidiaries, which releases shall be delivered and
effective immediately following the Effective Time substantially in the form
attached hereto as Schedule 2.6.
2.8
|
Effective
Date
|
The
Arrangement shall become effective at the Effective Time on the Effective
Date. TargetCo shall use its reasonable commercial efforts to (a)
mail the Information Circular to the TargetCo Securityholders by March 2, 2011;
(b) hold the TargetCo Meeting by March 30, 2011; and (c) cause the Effective
Date to occur on or about March 31, 2011 or as soon thereafter as reasonably
practicable and in any event by the Outside Date.
ARTICLE
3
COVENANTS
3.1
|
Covenants
of TargetCo
|
TargetCo
(which for the purposes of this Section 3.1 includes each of its subsidiaries)
covenants and agrees that, from the date hereof until the earlier of the
Effective Date or termination of this Agreement, or except as otherwise
expressly permitted or specifically contemplated by this Agreement (including
the Plan of Arrangement) or as specifically disclosed in the TargetCo Disclosure
Letter (with specific reference to this Section 3.1) or as required by
Applicable Laws:
|
(a)
|
TargetCo
shall conduct its business only in, and not take any action except in, the
usual and ordinary course of business and consistent with past practice
and it shall use reasonable commercial efforts to maintain and preserve
its business, assets, goodwill and advantageous business
relationships;
|
- 16
-
|
(b)
|
TargetCo
shall not, directly or indirectly, do or permit to occur any of the
following:
|
|
(i)
|
issue,
grant, sell, pledge, lease, dispose of, encumber or agree to issue, grant,
sell, pledge, lease, dispose of or encumber any additional shares or
securities of, or any options, warrants, calls, conversion privileges or
rights of any kind to acquire any shares or securities of, TargetCo or its
subsidiaries (other than pursuant to the exercise of TargetCo Options and
TargetCo Warrants currently outstanding and disclosed in this Agreement to
AcquireCo);
|
|
(ii)
|
amend
or propose to amend its articles, by-laws or other constating
documents;
|
|
(iii)
|
split,
combine or reclassify any outstanding TargetCo Shares or other securities
of TargetCo, or declare, set aside or pay any dividends or other
distributions payable in cash, shares, property or otherwise with respect
to its outstanding securities, other than ordinary course interest
payments upon and as required by the terms and conditions of TargetCo
Credit Facilities and dividends or distributions made by one subsidiary to
another or directly to TargetCo;
|
|
(iv)
|
redeem,
purchase, offer to purchase or otherwise acquire any TargetCo Shares or
other securities of TargetCo, including under any normal course issuer
bid;
|
|
(v)
|
reorganize,
amalgamate, merge or otherwise continue TargetCo with any other Person or
other business organization
whatsoever;
|
|
(vi)
|
adopt
a plan of liquidation or resolutions providing for the liquidation,
dissolution, consolidation or reorganization of
TargetCo;
|
|
(vii)
|
acquire
or agree to acquire (by merger, amalgamation, arrangement, acquisition of
securities or assets or otherwise) any Person or other business
organization whatsoever (including any division), or make any investment
therein whether by purchase of shares or securities, contributions of
capital or property transfer;
|
|
(viii)
|
without
the prior written consent of AcquireCo (such consent not to be
unreasonably withheld, conditioned or delayed), expend or commit to any
capital expenditures in excess of $50,000 individually or $250,000 in the
aggregate, other than expenditures for: (a) matters that involve
environmental, safety or emergency situations where the consent of
AcquireCo cannot be received in a reasonably expedient manner; (b) capital
operations: (i) where TargetCo or its subsidiaries has contractual
obligations to effect such capital operations pursuant to agreements or
authorizations for expenditures with third parties and in respect of which
TargetCo has provided written notice to AcquireCo of the nature and cost
of such capital operations; (ii) where TargetCo has approved commitments
to industry partners; or (iii) as disclosed in section 3.1(b)(viii) of the
TargetCo Disclosure Letter; and (c) the fees and expenses contemplated
herein;
|
|
(ix)
|
without
the prior written consent of AcquireCo (such consent not to be
unreasonably withheld, conditioned or delayed), expend or commit to expend
any amounts with respect to any operating expenses other than in the
ordinary course of business or pursuant to the Arrangement and other
transactions contemplated by this
Agreement;
|
- 17
-
|
(x)
|
sell,
pledge, dispose of or encumber any assets, except for production in the
ordinary course;
|
|
(xi)
|
without
the prior written consent of AcquireCo (such consent not to be
unreasonably withheld, conditioned or delayed), acquire any assets with an
acquisition cost in excess of $50,000 individually or $250,000 in the
aggregate;
|
|
(xii)
|
incur
any indebtedness for borrowed money (including under the TargetCo Credit
Facilities) or, without the prior written consent of AcquireCo (such
consent not to be unreasonably withheld, conditioned or delayed),
refinance, amend or extend the TargetCo Credit Facilities or incur any
other material liability or obligation (such material liabilities or
obligations to exclude fees payable to legal, financial and other advisors
in the ordinary course of business or in respect of the Arrangement or in
connection with a Superior Proposal) or issue any debt securities or
assume, guarantee, endorse or otherwise become responsible for, the
obligations of any other individual or entity, or make any loans or
advances;
|
|
(xiii)
|
without
the prior written consent of AcquireCo (such consent not to be
unreasonably withheld, conditioned or delayed), authorize, recommend or
propose any release or relinquishment of any material contract right, or
waive, release, relinquish, grant or transfer any material rights of value
or modify or change in any material respect any existing material license,
lease, contract, agreement or other material document, including the
Administrative Services Agreement;
|
|
(xiv)
|
pay,
discharge or satisfy any material claims, liabilities or obligations other
than as reflected or reserved against in TargetCo Financial Statements or
otherwise in the ordinary course of business and consistent with past
practice;
|
|
(xv)
|
abandon
or fail to diligently pursue any application for any material licenses,
leases, permits, authorizations or registrations or take any action or,
fail to take any action, that could lead to termination of any such
licenses, leases, permit, authorizations or
registrations;
|
|
(xvi)
|
without
the prior written consent of AcquireCo (such consent not to be
unreasonably withheld, conditioned or delayed), enter into any agreements
for the sale of production having a term of more than 90
days;
|
|
(xvii)
|
without
the prior written consent of AcquireCo (such consent not to be
unreasonably withheld, conditioned or delayed), and then only as
contemplated by section 4.1(aa) of the TargetCo Disclosure Letter, enter
into any joint venture, operating agreement, farm-in or farm-out
agreement, unitisation agreement, transportation agreement or any other
similar agreement, arrangement or
relationship;
|
|
(xviii)
|
enter
into or terminate any xxxxxx, swaps or other financial instruments or like
transactions or any other rate fixing agreement, arrangement or
transaction, other than in the ordinary course of business and consistent
with past practice;
|
- 18
-
|
(xix)
|
enter
into any agreement that provides for an area of mutual interest or an area
of exclusion;
|
|
(xx)
|
enter
into any material consulting agreement that cannot be terminated on 30
days’ or less notice without
penalty;
|
|
(xxi)
|
adopt,
enter into, become bound by, amend or make any contribution to any bonus,
employee benefit, profit-sharing, option, pension, retirement, deferred
compensation, insurance, incentive compensation or other similar plan,
program, arrangement, agreement or fund for the benefit of TargetCo's
directors, officers, employees or consultants, except as is necessary to
comply with Applicable Laws or with respect to existing provisions of any
such plans, programs, arrangements, agreements or
funds;
|
|
(xxii)
|
(a)
grant any officer, director, employee or consultant of TargetCo an
increase in compensation in any form; (b) grant any general salary
increase; (c) take any action with respect to the amendment or grant of
any severance or termination pay policies or arrangements for any of
TargetCo's directors, officers, employees or consultants, including any
that may arise from the Arrangement or a change of control of TargetCo;
(d) enter into or become bound to pay for any employment agreement with
any director, officer, employee or consultant of TargetCo; or (e) advance
any loan to any director, officer, employee or consultant of TargetCo or
any other party not at arm's length to
TargetCo;
|
|
(xxiii)
|
settle
or compromise any claim brought by any present, former or purported holder
of any securities of TargetCo in connection with the transactions
contemplated by this Agreement or the Arrangement without the prior
written consent of AcquireCo;
|
|
(xxiv)
|
take
any action that would render, or that reasonably may be expected to
render, any representation or warranty made by it in this Agreement untrue
in any material respect at any time prior to the Effective Time;
or
|
|
(xxv)
|
except
as expressly permitted by Section 3.4, enter into any transaction, take
any action or omit or fail to take any action which would reasonably be
likely to prevent, materially delay or impair the ability of TargetCo or
AcquireCo to consummate the Arrangement or the transactions contemplated
by this Agreement.
|
|
(c)
|
without
limiting the generality of Section 3.1(a), TargetCo
shall:
|
|
(i)
|
use
reasonable commercial efforts to cause its current insurance (or
re-insurance) policies not to be cancelled or terminated or any of the
coverage thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies underwritten by insurance and
re-insurance companies of nationally recognized standing providing
coverage equal to or greater than the coverage under the cancelled,
terminated or lapsed policies for substantially similar premiums are in
full force and effect;
|
- 19
-
|
(ii)
|
use
reasonable commercial efforts to preserve intact its business
organizations, goodwill and Tax accounts, to keep available the services
of its officers and employees as a group and to maintain satisfactory
relationships with shippers, suppliers, contractors, agents, customers,
Governmental Entities and others having material business relationships
with it;
|
|
(iii)
|
use
reasonable commercial efforts to enable the conditions set forth in
Section 5.1 and Section 5.3 to be satisfied, subject to the terms and
conditions of this Agreement, to the extent that the satisfaction of the
same is within the control of
TargetCo;
|
|
(iv)
|
confer
on a regular basis with AcquireCo with respect to all material operational
matters involved in its business prior to taking any action (other than in
emergency situations) and with respect to unusual operational matters and
promptly notify AcquireCo orally and in writing of: (a) any Material
Adverse Change with respect to TargetCo or its businesses or properties;
(b) any complaints, investigations or hearings (or communications
indicating that the same may be contemplated) by Governmental Entities or
other Persons which could be material with respect to TargetCo or the
Arrangement; (c) any change in any representation or warranty provided by
TargetCo in this Agreement, or any fact or circumstance, which is or may
be of such a nature to render any representation or warranty misleading or
untrue in any material respect; or (d) any fact or circumstance which
would lead to the breach in any material respect of TargetCo's covenants
or obligations under this Agreement; and TargetCo shall in good faith
discuss with AcquireCo any change, fact or circumstance (actual,
anticipated, contemplated, or to the knowledge of TargetCo, threatened)
which is of such a nature that there may be a reasonable question as to
whether notice need to be given to AcquireCo pursuant to this
provision;
|
|
(v)
|
use
reasonable commercial efforts to assist AcquireCo to obtain any consents
required under the Competition Act for the transactions contemplated
hereby;
|
|
(vi)
|
use
reasonable commercial efforts to obtain the consent of its bankers (if
required) and any other third party consents required for the transactions
contemplated hereby and provide the same to AcquireCo on or prior to the
Effective Time;
|
|
(vii)
|
except
for proxies and non-substantive communications with TargetCo
Securityholders or if prohibited under Applicable Laws, furnish promptly
to AcquireCo and AcquireCo's counsel a copy of each notice, report,
schedule or other document delivered, filed or received by TargetCo in
connection with: (a) the Arrangement; (b) any filings under Applicable
Laws; and (c) any dealings with Governmental Entities in connection with
the transactions contemplated
hereby;
|
|
(viii)
|
make
all necessary filings and applications under Applicable Laws, including
Applicable Securities Laws required to be made on the part of TargetCo in
connection with the transactions contemplated herein and shall take all
reasonable action necessary to be in compliance with such Applicable
Laws;
|
|
(ix)
|
use
reasonable commercial efforts to obtain all necessary consents,
assignments, waivers and amendments to or terminations of any agreements,
leases, contracts and other instruments, to obtain all necessary approvals
and take such measures as may be appropriate to fulfill its obligations
hereunder and to carry out the transactions contemplated hereby;
and
|
- 20
-
|
(x)
|
take
all reasonable commercial actions to give effect to the transactions
contemplated by this Agreement and the
Arrangement;
|
|
(d)
|
TargetCo
will ensure that the Information Circular provides TargetCo
Securityholders with information in sufficient detail to permit them to
form a reasoned judgment concerning the matters before them, and shall
include or incorporate by reference, to the extent permissible by
Applicable Laws: (i) any financial statements in respect of
prior acquisitions made by TargetCo that are required to be included
therein in accordance with Applicable Laws; (ii) the unanimous
determination of the TargetCo Board of Directors that the Arrangement is
in the best interests of TargetCo and TargetCo Securityholders, and
include the unanimous recommendation of the TargetCo Board of Directors
that the TargetCo Shareholders vote in favour of the Arrangement
Resolution; (iii) the written TargetCo Fairness Opinion; and (iv) all
information required to be disclosed by TargetCo therein in accordance
with Applicable Canadian Securities Laws; provided that, notwithstanding
the covenants of TargetCo in this subsection, prior to the completion of
the Arrangement, the TargetCo Board of Directors may withdraw, modify or
change the recommendation regarding the Arrangement provided that the
TargetCo Board of Directors shall have fully complied with the provisions
of Sections 3.4 and 6.1;
|
|
(e)
|
TargetCo
shall indemnify and save harmless AcquireCo and the directors, officers
and agents of AcquireCo, as applicable, from and against any and all
liabilities, claims, demands, losses, costs, damages and expenses
(excluding any loss of profits or consequential damages) to which
AcquireCo, or any director, officer or agent thereof, may be subject or
which AcquireCo, or any director, officer or agent thereof may suffer,
whether under the provisions of any statute or otherwise, in any way
caused by, or arising, directly or indirectly, from or in consequence
of:
|
|
(i)
|
any
misrepresentation or alleged misrepresentation in the Information Circular
or in any material filed by or on behalf of TargetCo in compliance or
intended compliance with any Applicable
Laws;
|
|
(ii)
|
any
order made or any inquiry, investigation or proceeding by any Securities
Regulatory Authority or other Governmental Entity based upon any
misrepresentation or any alleged misrepresentation in the Information
Circular or in any material filed by or on behalf of TargetCo in
compliance or intended compliance with Applicable Canadian Securities
Laws, which prevents or restricts the trading in the TargetCo Shares;
and
|
|
(iii)
|
TargetCo
not complying with any requirement of Applicable Laws in connection with
the transactions contemplated in this
Agreement;
|
except
that TargetCo shall not be liable in any such case to the extent that any such
liabilities, claims, demands, losses, costs, damages and expenses arise out of
or are based solely upon any misrepresentation or alleged misrepresentation
contained in the AcquireCo Information included in the Information Circular, the
negligence of AcquireCo or the non-compliance by AcquireCo with any requirement
of Applicable Laws in connection with the transactions contemplated in this
Agreement;
- 21
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|
(f)
|
TargetCo
shall provide notice to AcquireCo of the TargetCo Meeting and allow
AcquireCo's representatives to attend such
meeting;
|
|
(g)
|
TargetCo
shall use all commercially reasonable efforts to secure the approval of
the Arrangement Resolution by TargetCo Shareholders and TargetCo shall
solicit proxies to be voted at the TargetCo Meeting in favour of the
Arrangement Resolution unless and until the TargetCo Board of Directors
has changed its recommendation in accordance with the terms of this
Agreement and the Agreement has been terminated in accordance with its
terms and shall, upon the request of AcquireCo (with the costs to be
shared equally between TargetCo and AcquireCo), engage a proxy
solicitation agent for such purpose. If so requested by
AcquireCo, TargetCo shall instruct such proxy solicitation agent to: (i)
report to AcquireCo and its designated representatives concurrently with
their reports to TargetCo and to advise AcquireCo as it may reasonably
request, on a daily basis of each of the last 15 Business Days prior to
the TargetCo Meeting, as to the aggregate tally of the proxies received by
TargetCo in respect of the Arrangement Resolution and any other matters to
be considered at the TargetCo Meeting; and (ii) to co-operate with
AcquireCo and any solicitation agents or other representatives of
AcquireCo hired to assist in the solicitations of proxies in respect of
the TargetCo Meeting;
|
|
(h)
|
TargetCo
shall conduct the TargetCo Meeting in accordance with all instruments
governing the TargetCo Meeting (including articles and by-laws of TargetCo
and the Interim Order), as applicable, and as otherwise required by
Applicable Laws;
|
|
(i)
|
TargetCo
shall have delivered, prior to, or contemporaneously with, the execution
of this Agreement, Voting Agreements executed by all directors and
officers of TargetCo and certain TargetCo Shareholders (including
Connacher Oil and Gas Limited) representing in the aggregate 21.0% of the
currently outstanding TargetCo
Shares;
|
|
(j)
|
TargetCo
shall promptly advise AcquireCo of the number of TargetCo Shares for which
TargetCo receives notices of dissent or written objections to the
Arrangement or notices to appear in connection with application for the
Final Order and shall promptly provide AcquireCo with copies of such
notices and written objections;
|
|
(k)
|
in
the event of and in relation to a dispute or any event which may lead to a
dispute and which relates to or may relate to TargetCo or its subsidiaries
(a "Dispute"),
TargetCo shall, and shall ensure that each of its subsidiaries shall,
until such time as any final compromise, agreement, expert determination
or non-appealable decision of a court or tribunal of competent
jurisdiction is made in respect of the Dispute or the Dispute is otherwise
finally disposed of:
|
|
(i)
|
consult
with AcquireCo, and take such action to assess, contest, dispute, defend,
appeal or compromise the Dispute as AcquireCo may reasonably
request;
|
|
(ii)
|
keep
AcquireCo promptly informed of the progress of the Dispute and provide, or
ensure that each relevant subsidiary provides, AcquireCo with copies of
all relevant documents and such other information in TargetCo's or any of
its subsidiary's possession as may be requested by AcquireCo, acting
reasonably; and
|
- 22
-
|
(iii)
|
not
cease to defend the Dispute or make any admission of liability, agreement,
settlement or compromise in relation to the Dispute without the prior
written consent of AcquireCo, such consent not to be unreasonably delayed
or withheld;
|
|
(l)
|
TargetCo
shall use its reasonable commercial efforts based upon the instruction of
AcquireCo to organize its internal control over financial reporting and
disclosure controls and procedures so as to enable AcquireCo to comply
with the applicable provisions of SOX and all reasonable costs associated
with such organization (other than salaries of employees of TargetCo or
its subsidiaries engaged in such process) shall be for the account of
AcquireCo; and
|
|
(m)
|
TargetCo
shall not enter into, modify or terminate any contract, agreement,
commitment or arrangement with respect to any of the matters set forth in
this Section 3.1, other than as contemplated by this Section
3.1.
|
3.2
|
Covenants
of AcquireCo
|
AcquireCo
(which for the purposes of this Section 3.2 includes each of its subsidiaries)
covenants and agrees that, from the date hereof until the earlier of the
Effective Time or termination of this Agreement, except with the prior written
consent of TargetCo (such consent not to be unreasonably withheld, conditioned
or delayed), or except as otherwise expressly permitted or specifically
contemplated by this Agreement (including the Plan of Arrangement) or as
disclosed in writing by AcquireCo to TargetCo on or before the date hereof or as
required by Applicable Laws:
|
(a)
|
AcquireCo
shall:
|
|
(i)
|
use
reasonable commercial efforts to enable the conditions set forth in
Section 5.1 and Section 5.2 to be satisfied, subject to the terms and
conditions of this Agreement, to the extent that the satisfaction of the
same is within the control of
AcquireCo;
|
|
(ii)
|
promptly
notify TargetCo orally and in writing of: (a) any Material Adverse Change
with respect to AcquireCo or its businesses or properties; (b) any
complaints, investigations or hearings (or communications indicating that
the same may be contemplated) by Governmental Entities or other Persons
which could be material with respect to AcquireCo or the Arrangement; (c)
any change in any representation or warranty provided by AcquireCo in this
Agreement, or any fact or circumstance, which is or may be of such a
nature to render any representation or warranty misleading or untrue in
any material respect; or (d) any fact or circumstance which would lead to
the breach in any material respect of AcquireCo's covenants or obligations
under this Agreement; and AcquireCo shall in good faith discuss with
TargetCo any change, fact or circumstance (actual, anticipated,
contemplated, or to the knowledge of AcquireCo, threatened) which is of
such a nature that there may be a reasonable question as to whether notice
need to be given to TargetCo pursuant to this
provision;
|
|
(iii)
|
use
reasonable commercial efforts to obtain any consents required under the
Competition Act for the transactions contemplated hereby and any consents
required by Section 5.1(d);
|
- 23
-
|
(iv)
|
use
reasonable commercial efforts to obtain the consent of its bankers (if
required) and any other third party consents required for the transactions
contemplated hereby and provide the same to TargetCo on or prior to the
Effective Time;
|
|
(v)
|
make
all necessary filings and applications under Applicable Laws, including
Applicable Securities Laws required to be made on the part of AcquireCo in
connection with the transactions contemplated herein and shall take all
reasonable action necessary to be in compliance with such Applicable
Laws;
|
|
(vi)
|
use
reasonable commercial efforts to obtain all necessary consents,
assignments, waivers and amendments to or terminations of any agreements,
leases, contracts and other instruments, to obtain all necessary approvals
and take such measures as may be appropriate to fulfill its obligations
hereunder and to carry out the transactions contemplated hereby;
and
|
|
(vii)
|
take
all reasonable commercial actions to give effect to the transactions
contemplated by this Agreement and the
Arrangement;
|
|
(b)
|
AcquireCo
shall indemnify and save harmless TargetCo and the directors, officers and
agents of TargetCo, as applicable, from and against any and all
liabilities, claims, demands, losses, costs, damages and expenses
(excluding any loss of profits or consequential damages) to which
TargetCo, or any director, officer or agent thereof, may be subject or
which TargetCo, or any director, officer or agent thereof may suffer,
whether under the provisions of any statute or otherwise, in any way
caused by, or arising, directly or indirectly, from or in consequence
of:
|
|
(i)
|
any
misrepresentation or alleged misrepresentation contained in the AcquireCo
Information in the Information
Circular;
|
|
(ii)
|
any
order made or any inquiry, investigation or proceeding by any Securities
Regulatory Authority or other Governmental Entity based upon any
misrepresentation or any alleged misrepresentation in the AcquireCo
Information in the Information Circular;
and
|
|
(iii)
|
AcquireCo
not complying with any requirement of Applicable Laws in connection with
the transactions contemplated in this
Agreement;
|
except
that AcquireCo shall not be liable in any such case to the extent that any such
liabilities, claims, demands, losses, costs, damages and expenses arise out of
or are based solely upon any misrepresentation or alleged misrepresentation
contained other than in the AcquireCo Information included in the Information
Circular, the negligence of TargetCo or the non-compliance by TargetCo with any
requirement of Applicable Laws in connection with the transactions contemplated
in this Agreement;
|
(c)
|
prior
to the mailing of the Information Circular as contemplated by Section
2.5(a)(ii), AcquireCo will make an application to the TSX for conditional
approval of the listing on the TSX of the AcquireCo Shares and the
Replacement Warrants to be issued to TargetCo Securityholders pursuant to
the Arrangement, as well as the AcquireCo Shares underlying the
Replacement Warrants. AcquireCo will similarly apply to the AMEX for
conditional approval of the listing on the AMEX of the AcquireCo Shares,
including those underlying the Replacement
Warrants.
|
- 24
-
3.3
|
Mutual
Covenants Regarding the Arrangement
|
From the
date hereof until the Effective Time, each of TargetCo and AcquireCo will use
its reasonable commercial efforts to satisfy (or cause the satisfaction of) the
conditions precedent to its obligations hereunder and to take, or cause to be
taken, all other action and to do, or cause to be done, all other things
necessary, proper or advisable under Applicable Laws to complete the
Arrangement, including using reasonable commercial efforts:
|
(a)
|
to
obtain all necessary consents, assignments, waivers and amendments to or
terminations of any loan agreements, leases and other contracts and
instruments and take such measures as may be appropriate to fulfill its
obligations hereunder and to carry out the transactions contemplated
hereby;
|
|
(b)
|
to
effect all necessary registrations and filings and submissions of
information requested by Governmental Entities required to be effected by
it in connection with the Arrangement, and each of TargetCo and AcquireCo
will use its reasonable commercial efforts to cooperate with the Other
Party in connection with the performance by the Other Party of its
obligations under this Section 3.3 including continuing to provide
reasonable access to information and to maintain ongoing communications as
between Representatives of AcquireCo and TargetCo, subject in all cases to
the TargetCo Confidentiality Agreement;
and
|
|
(c)
|
AcquireCo
and TargetCo shall take all such steps and actions as may reasonably be
requested by the Other Party and its tax advisors to effect the
Arrangement (including the steps of the Arrangement) in a tax effective
manner, and, in connection therewith, each Party agrees to assist the
Other Party and its tax advisors in making such investigations, inquiries
and taking such actions with respect to TargetCo and AcquireCo as the
Other Party and its tax advisors shall consider necessary, acting
reasonably, provided that TargetCo shall not be obligated to consent or
agree to any structuring that has a Material Adverse Effect on TargetCo or
which has the effect of reducing the pre-tax consideration, or changing
the form of the consideration, to be received under the Arrangement by the
TargetCo Securityholders or that requires the approval of the TargetCo
Securityholders other than as can be obtained at the TargetCo Meeting, and
provided further that the Party proposing the tax related steps and tax
related actions (the "Proposing Party") shall
be solely responsible for all reasonable costs and expenses related to any
such tax related steps and tax related actions taken by the Other Party at
the specific request of the Proposing Party and, in the event this
Agreement is terminated in any circumstance not requiring payment by
TargetCo of the TargetCo Termination Fee contemplated by Section 6.1, the
Proposing Party shall indemnify the Other Party for all costs, expenses,
liabilities and claims arising solely from or relating solely to any such
tax related actions or steps, except to the extent that the liability or
claim arises solely due to the Other Party's failure to undertake the
steps and actions requested by the Proposing Party in accordance with this
Agreement.
|
3.4
|
Covenants
Regarding Non-Solicitation
|
|
(a)
|
TargetCo
shall not, directly or indirectly, do or authorize or permit any of its
affiliates, officers, directors or employees or any financial advisor,
expert or other representative retained by it or otherwise acting at its
direction and on its behalf (any of the foregoing a "Representative") to
do, any of the following:
|
- 25
-
|
(i)
|
solicit,
initiate, encourage or knowingly facilitate any Acquisition
Proposal;
|
|
(ii)
|
enter
into or participate in any discussions or negotiations regarding an
Acquisition Proposal, or furnish or otherwise afford access to any other
Person any information with respect to its business, properties,
operations, prospects or conditions (financial or otherwise) in connection
with an Acquisition Proposal or otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt
of any other Person to do or seek to do any of the
foregoing;
|
|
(iii)
|
withhold,
withdraw, modify or qualify in any manner which is adverse to AcquireCo,
or which in the opinion of AcquireCo, acting reasonably, is adverse to
AcquireCo, the determination, approval or recommendation of the TargetCo
Board of Directors as referred to in Section 4.1(ww) with respect to this
Agreement or the Arrangement, or publicly propose to do any of the
foregoing;
|
|
(iv)
|
accept,
recommend, approve or enter into an agreement to implement an Acquisition
Proposal;
|
|
(v)
|
waive,
or otherwise forbear in the enforcement of, or enter into or participate
in any discussions, negotiations or agreements to waive or otherwise
forbear in respect of, any rights or other benefits under confidential
information agreements (including, for greater certainty, any Acceptable
Confidentiality Agreements entered into as required by the terms of this
Agreement), including any "standstill provisions" thereunder;
or
|
|
(vi)
|
resolve
or determine to do or take any action which would be reasonably likely to
result in any of the foregoing,
|
provided,
however, that notwithstanding any other provision of this Agreement, TargetCo
and its Representatives may:
|
(vii)
|
enter
into or participate in any discussions or negotiations with a third party
who (without any solicitation, initiation, encouragement or facilitation,
or any other breach of this Section 3.4, directly or indirectly, on or
after the date of this Agreement, by TargetCo or any of its
Representatives) seeks to initiate such discussions or negotiations and,
subject to execution of an Acceptable Confidentiality Agreement (provided
that such Acceptable Confidentiality Agreement shall provide for
disclosure thereof (along with all information provided thereunder) to
AcquireCo as set out below), may furnish to such third party information
concerning TargetCo and its business, properties, assets, operations,
prospects or conditions, in each case if, and only to the extent
that:
|
- 26
-
|
(A)
|
the
third party has first made a written bona fide Acquisition
Proposal (or has publicly announced a bona fide Acquisition
Proposal) to acquire 50% or more of the equity securities of TargetCo in
respect of which the TargetCo Board of Directors determines in good faith:
(i) that funds or other consideration necessary for the consummation of
such Acquisition Proposal are available or that adequate financing
arrangements (as such term is interpreted in MI 62-104) will be in place
in accordance with the terms of section 2.27 of MI 62-104 to ensure that
the third party will have the required funds necessary for the
consummation of the Acquisition Proposal at the time and on the basis set
out therein; (ii) (after consultation with its financial advisors) such
Acquisition Proposal would, or would be reasonably likely to, if
consummated in accordance with its terms, result in a transaction
financially superior for the TargetCo Shareholders than the transactions
contemplated by this Agreement; (iii) is not subject to a due diligence
condition; (iv) is reasonably capable of completion in accordance with its
terms taking into account all legal, financial, regulatory and other
aspects of such Acquisition Proposal; and (v) after receiving the advice
of outside counsel, as reflected in minutes of the TargetCo Board of
Directors, that the taking of such action is necessary for the TargetCo
Board of Directors in discharge of its fiduciary duties under Applicable
Laws and the constating documents of TargetCo (an Acquisition Proposal
that satisfies all of the foregoing requirements, a "Superior Proposal");
and
|
|
(B)
|
prior
to furnishing or affording access to such information to or entering into
or participating in any such discussions or negotiations with such third
party, TargetCo provides prompt written notice to AcquireCo to the effect
that it is furnishing or affording access to such information to or
entering into or participating in discussions or negotiations with such
third party, together with a copy of the Acceptable Confidentiality
Agreement referenced above and, if not previously provided to AcquireCo,
copies of all information provided to such third party (and if previously
provided to AcquireCo, a list of all such information provided to such
Person) concurrently with the provision of such information to such third
party; and provided further that TargetCo shall notify AcquireCo orally
and in writing of any inquiries, offers or proposals with respect to a
Superior Proposal (which written notice shall include a copy of any such
proposal (and any amendments or supplements thereto), the identity of the
Person making it, copies of all information provided to such Person (if
not previously provided to AcquireCo, and if previously provided to
AcquireCo, a list of all such information provided to such Person) and all
other information reasonably requested by AcquireCo), within 24 hours of
the receipt thereof, shall keep AcquireCo informed of the status and
details of any such inquiry, offer or proposal and answer AcquireCo's
questions with respect thereto;
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(viii)
|
comply
with Applicable Securities Laws relating to the provision of directors'
circulars and make appropriate disclosure with respect thereto to its
securityholders; and
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(ix)
|
if
the TargetCo Board of Directors receives, at any time, an Acquisition
Proposal that did not result from a breach of the provisions of this
Section 3.4, and which the TargetCo Board of Directors has determined
constitutes a Superior Proposal, the TargetCo Board of Directors may: (A)
withhold, withdraw, modify or qualify in any manner the determination,
approval or recommendation of the TargetCo Board of Directors with respect
to this Agreement or the Arrangement as set forth in Section 4.1(ww); or
(B) accept, recommend, approve or enter into an agreement to implement
such Superior Proposal, but only if prior to taking any of the foregoing
actions contemplated in (A) or (B) above: (i) the TargetCo Board of
Directors shall have concluded in good faith, after considering all
proposals from AcquireCo to adjust the terms and conditions of this
Agreement and the Arrangement as contemplated by Section 3.4(c) and after
receiving: (x) the advice of outside counsel, as reflected in minutes of
the TargetCo Board of Directors that the taking of such action is
necessary for the TargetCo Board of Directors in discharge of its
fiduciary duties under Applicable Laws; and (y) the advice of its
financial advisor that such proposals to amend or adjust this Agreement
and the Arrangement do not result in this Agreement and the Arrangement,
as so amended or adjusted, providing the TargetCo Shareholders with a
value per TargetCo Share equal to or greater, from a financial point of
view, than the value per TargetCo Share provided in the Acquisition
Proposal previously determined to be a Superior Proposal, having regard to
all relevant circumstances; (ii) TargetCo complies with its obligations
set forth in Section 3.4(c); (iii) in the event that the TargetCo Board of
Directors proposes to take any of the actions contemplated in (A) above,
TargetCo pays AcquireCo the TargetCo Termination Fee if required by
Section 6.1; and (iv) in the event that the TargetCo Board of Directors
proposes to take any of the actions contemplated by (B) above, TargetCo
first terminates this Agreement in accordance with Section 8.1(b), and
concurrently with such termination, TargetCo pays AcquireCo the TargetCo
Termination Fee required by Section
6.1.
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(b)
|
TargetCo
shall, and shall cause its Representatives, to: (i) immediately cease and
cause to be terminated all existing solicitations, initiations,
encouragements, facilitations, cooperation, discussions and negotiations
(including through any advisors or other parties on its behalf), if any,
with any third parties (other than AcquireCo and its representatives) with
respect to any Acquisition Proposal; (ii) immediately cease to provide any
third party (other than AcquireCo and its representatives) with any
information concerning TargetCo (including by discontinuing all access by
any third party to any data room (virtual or otherwise) containing any
such information); and (iii) immediately request the return or destruction
of all information provided to any third party who has entered into a
confidentiality agreement with TargetCo relating to an Acquisition
Proposal and shall use all reasonable commercial efforts to ensure,
including exercising all rights to require, that such requests are
honoured and shall promptly advise AcquireCo orally and in writing of any
response or action (actual, anticipated, contemplated or threatened) by
any recipient of such request which could hinder, prevent, delay or
otherwise adversely affect or impair the consummation of the Arrangement
or other transactions contemplated
hereby.
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(c)
|
TargetCo
shall give AcquireCo, orally and in writing, at least 72 hours advance
notice of any decision by the TargetCo Board of Directors to take any of
the actions contemplated in Section 3.4(a)(ix)(A) or (B) or any meeting of
the TargetCo Board of Directors at which it may take any of such actions
(a "Notice"),
which Notice shall confirm that TargetCo has received an Acquisition
Proposal which constitutes a Superior Proposal, shall identify the third
party making the Superior Proposal and shall provide a true and complete
copy thereof and any amendments or adjustments thereto and, if such
Superior Proposal includes any non-cash consideration, shall include the
value or range of values that the TargetCo Board of Directors has, in good
faith and in consultation with its financial advisors, determined shall be
ascribed to such non-cash consideration. During such 72 hour
period, TargetCo agrees not to accept, recommend, approve or enter into
any agreement to implement such Superior Proposal and not to release the
party making the Superior Proposal from any standstill provisions and
shall not withhold, withdraw, modify or qualify in any manner the
determination, approval or recommendation of the TargetCo Board of
Directors as referred to in Section 4.1(ww) with respect to this Agreement
or the Arrangement, or publicly propose to do any of the
foregoing. In addition, during such 72 hour period TargetCo
shall, and shall cause its financial and legal advisors to, negotiate in
good faith with AcquireCo and its financial and legal advisors to make
such amendments and adjustments in the terms and conditions of this
Agreement and the Arrangement as would enable TargetCo to proceed with the
Arrangement as amended rather than the Superior Proposal; provided that,
for greater certainty, AcquireCo will have the right, but not the
obligation, to offer to amend and adjust such terms and
conditions. If AcquireCo proposes to amend or adjust this
Agreement and the Arrangement to provide that the holders of the TargetCo
Shares shall receive a value per TargetCo Share equal to or having a value
greater than the value per TargetCo Share provided in the Superior
Proposal and so advises the TargetCo Board of Directors prior to the
expiry of such 72 hour period, the TargetCo Board of Directors shall not
accept, recommend, approve or enter into any agreement to implement such
Superior Proposal and shall not release the party making the Superior
Proposal from any standstill provisions and shall not withdraw, redefine,
modify or change its recommendation in respect of the Arrangement, and
TargetCo shall enter into an amended version of this Agreement with
AcquireCo reflecting such proposed amendments. Each successive
amendment or adjustment to any Superior Proposal that results in an
increase in, or other modification of, the consideration (or value of such
consideration) to be received by the TargetCo Shareholders, or that makes
any other material change to such Superior Proposal, shall constitute a
new Superior Proposal for the purposes of this Section 3.4(c) and Section
3.4(a)(ix) and AcquireCo shall be offered a new 72 hour notice period in
respect of each such Superior
Proposal.
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(d)
|
AcquireCo
agrees that all information that may be provided to it by TargetCo with
respect to any Superior Proposal pursuant to this Section 3.4 shall be
treated as if it were "Confidential Information" as that term is defined
in the TargetCo Confidentiality Agreement and shall not be disclosed or
used except in accordance with the provisions of the TargetCo
Confidentiality Agreement or to enforce its rights under this Agreement in
legal proceedings.
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(e)
|
TargetCo
shall ensure that its Representatives are aware of the provisions of this
Section 3.4. TargetCo shall be responsible for any breach of
this Section 3.4 by its
Representatives.
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(f)
|
For
the purposes of this Section 3.4, references to a "third party" shall
include two or more Persons "acting jointly or in concert" within the
meaning of MI 62-104.
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3.5
|
Provision
of Information; Access
|
From and
after the date hereof, TargetCo shall provide AcquireCo and its Representatives
access, during normal business hours and at such other time or times as
AcquireCo may reasonably request, to TargetCo's premises (including field
offices and sites), books, contracts, records, computer systems, assets,
employees and management personnel and shall furnish promptly to AcquireCo all
information concerning its business, assets and personnel as AcquireCo may
reasonably request, which information shall remain subject to the TargetCo
Confidentiality Agreement, to permit AcquireCo to be in a position to
expeditiously and efficiently integrate the business and operations of TargetCo
immediately upon but not prior to the Effective Date. TargetCo agrees
to use its reasonable commercial efforts to keep AcquireCo fully apprised in a
timely manner of every circumstance, action, occurrence or event occurring or
arising after the date hereof that would be relevant and material to a prudent
operator of the business and operations of TargetCo. TargetCo shall
confer with and obtain AcquireCo's approval (not to be unreasonably withheld,
conditioned or delayed), prior to taking action (other than in emergency
situations) with respect to any material operational matters involved in its
business.
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3.6
|
Additional
Covenants of AcquireCo
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(a)
|
AcquireCo
covenants that it has reserved for issuance and will, at all times while
any Replacement Warrants (other than Replacement Warrants held by
AcquireCo or its affiliates) are outstanding, keep available, free from
pre-emptive and other rights, out of its authorized and unissued capital
stock such number of AcquireCo Shares (or other shares or securities into
which AcquireCo Shares may be reclassified or changed): (a) as are
required to be issued upon the exercise of all rights to acquire
Replacement Warrants outstanding from time to time; and (b) as are now and
may hereafter be required to enable and permit AcquireCo to meet its
obligations under any security or commitment pursuant to the Arrangement
with respect to which AcquireCo may now or hereafter be required to issue
AcquireCo Shares.
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(b)
|
AcquireCo
will use reasonable commercial efforts to maintain its status as a
"reporting issuer" (or similar designated entity) not in default in at
least one of the provinces of Canada where it is currently a reporting
issuer in material compliance with all Applicable Canadian Securities Laws
and use reasonable commercial efforts to maintain the listing of the
outstanding AcquireCo Shares on the TSX in each case for a period of at
least two years following the date hereof, provided that, notwithstanding
the foregoing, nothing contained herein shall require AcquireCo to
maintain its status as a "reporting issuer" in any province of Canada or
maintain the listing of outstanding AcquireCo Shares upon the occurrence
of any of:
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(i)
|
the
purchase or acquisition of AcquireCo Shares and/or securities convertible
into AcquireCo Shares or carrying the right to acquire AcquireCo Shares as
a result of which a Person, group of Persons or Persons acting jointly or
in concert, or any affiliates or associates of any such Person, group of
Persons or any of such Persons acting jointly or in concert beneficially
own or exercise control or direction over AcquireCo Shares and/or
securities convertible into AcquireCo Shares such that, assuming after the
conversion of such convertible securities beneficially owned by the
holders thereof, would have the right to cast more than 50% of the votes
attached to all AcquireCo Shares;
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(ii)
|
the
approval by the shareholders of: (A) an amalgamation, arrangement, merger
or other consolidation or combination of AcquireCo with another entity
pursuant to which the shareholders of AcquireCo immediately thereafter do
not own securities of the successor or continuing entity which would
entitle them to cast more than 50% of the votes attaching to all of the
AcquireCo Shares; (B) a liquidation, dissolution or winding-up of
AcquireCo; or (C) the sale, lease or other disposition of all or
substantially all of the assets of
AcquireCo;
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|
(iii)
|
the
listing of the outstanding AcquireCo Shares on a recognized stock exchange
in the United States or
elsewhere;
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(iv)
|
the
reorganization of AcquireCo into another entity;
or
|
|
(v)
|
a
determination by the AcquireCo Board of Directors, made in good faith,
that ceasing to be a "reporting issuer" and/or the delisting of the
AcquireCo Shares is in the best interests of AcquireCo; provided that, the
AcquireCo Shares remain listed on a recognized stock exchange in Canada,
the United States or elsewhere.
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(c)
|
If
Purchaser is an entity to be formed, AcquireCo shall incorporate Purchaser
prior to the Effective Date for the purposes of Purchaser participating in
the Plan of Arrangement, and if Purchaser is Solana Resources Limited,
AcquireCo shall cause such entity to participate in the Plan of
Arrangement.
|
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES
4.1
|
Representations
and Warranties of TargetCo
|
TargetCo
hereby makes the representations and warranties set forth in this Section
4.1 to and in favour of AcquireCo and acknowledges that AcquireCo is
relying upon such representations and warranties in connection with the matters
contemplated by this Agreement.
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(a)
|
Organization and
Qualification. TargetCo is a corporation duly incorporated and
validly existing under the Federal Laws of Canada and has the requisite
corporate power and authority to own its assets as now owned and to carry
on its business as now conducted. TargetCo and each of its
subsidiaries is duly registered to conduct its affairs or do business, as
applicable, in each jurisdiction in which the character of its assets,
owned or leased, or the nature of its activities makes such registration
necessary, except where the failure to be so registered would not have a
Material Adverse Effect on TargetCo. Copies of the constating
documents of TargetCo and each of its subsidiaries provided to AcquireCo,
together with all amendments to date, are accurate and complete as of the
date hereof and have not been amended or
superseded.
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(b)
|
Authority Relative to
this Agreement. TargetCo has the requisite corporate power and
authority to execute this Agreement, and TargetCo has the requisite
corporate power and authority to carry out its obligations
hereunder. The execution and delivery of this Agreement and the
consummation by TargetCo of the transactions contemplated hereby have been
duly authorized by the TargetCo Board of Directors and, subject to the
requisite approval of the TargetCo Securityholders and the obtaining of
the Final Order, no other proceedings on the part of TargetCo are
necessary to authorize this Agreement or the transactions contemplated
hereby. This Agreement has been duly executed and delivered by
TargetCo and constitutes a legal, valid and binding obligation of TargetCo
enforceable against it in accordance with its terms, subject to the
qualification that such enforceability may be limited by bankruptcy,
insolvency, reorganization or other Laws of general application relating
to or affecting rights of creditors and that equitable remedies, including
specific performance, are discretionary and may not be
ordered.
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(c)
|
No Violations.
Except as disclosed in section 4.1(c) of the TargetCo Disclosure Letter,
or as contemplated by this
Agreement:
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(i)
|
neither
the execution and delivery of this Agreement by TargetCo nor the
consummation of the transactions contemplated hereby nor compliance by
TargetCo with any of the provisions hereof nor the consummation of the
Arrangement will: (a) violate, conflict with, or result in a breach of any
provision of, require any consent, approval or notice under, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) or result in a right of termination or acceleration
under, or result in the creation of any encumbrance upon any of the
properties or assets of TargetCo or any of its subsidiaries or cause any
indebtedness to come due before its stated maturity or cause any credit to
cease to be available, under any of the terms, conditions or provisions
of: (i) the articles, by-laws or other constating document of TargetCo and
each of its subsidiaries; or (ii) any material note, bond, mortgage,
indenture, loan agreement, deed of trust, agreement, lien, contract or
other instrument or obligation to which TargetCo or any of its
subsidiaries is a party or to which it, or any of its properties or
assets, may be subject or by which TargetCo or any of its subsidiaries is
bound; or (b) subject to compliance with applicable statutes and
regulations, violate any judgment, ruling, order, writ, injunction,
determination, award, decree, statute, ordinance, rule or regulation
applicable to TargetCo or any of its subsidiaries or any of its or their
properties or assets (except, in the case of each of clauses (a) and (b)
above, for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of encumbrances which, or any consents,
approvals or notices which if not given or received, would not have any
Material Adverse Effect on TargetCo or impede the ability of TargetCo to
consummate the transactions contemplated hereby); or (c) cause the
suspension or revocation of any authorization, consent, approval or
license currently in effect which would have a Material Adverse Effect on
TargetCo;
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(ii)
|
other
than in connection with or in compliance with the provisions of Applicable
Laws (including the Competition Act and the rules and policies of the TSX)
or which are required to be filed post-Arrangement or pursuant to this
Agreement, and except for the requisite approval of the TargetCo
Shareholders and obtaining the Final Order: (a) there is no legal
impediment to TargetCo's consummation of the transactions contemplated
hereby; and (b) no filing or registration with, or authorization, consent
or approval of, any domestic or foreign public body or authority is
required of TargetCo or any of its subsidiaries in connection with the
consummation of the Arrangement and the transactions contemplated by this
Agreement, except for such filings or registrations which, if not made, or
for such authorizations, consents or approvals which, if not received,
would not have a Material Adverse Effect on TargetCo, or significantly
impede the ability of TargetCo to consummate the Arrangement and the
transactions contemplated hereby;
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(iii)
|
there
is no non-competition, exclusivity or other similar agreement, commitment
or understanding in place, whether written or oral, to which TargetCo or
any of its subsidiaries, or any director, officer, employee or consultant
or any affiliate of TargetCo or any of its subsidiaries is a party or is
otherwise bound that would or could reasonably be expected to, now or
hereafter, in any way (a) limit the business or operations of TargetCo or
any of its subsidiaries in any material respect effect either in respect
of the type of business in which TargetCo or any of its subsidiaries (or,
after the Effective Time, AcquireCo or its subsidiaries) may engage or the
manner or locations in which it may so engage in any business; (b) require
the disposition of any material assets or line of business of TargetCo or
any of its subsidiaries or, after the Effective Time, AcquireCo or its
subsidiaries; or (c) prohibits or limits the right of TargetCo or any of
its subsidiaries to make, sell or distribute any products or services or
use, transfer, license, distribute or enforce any of its intellectual
property rights; and
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(iv)
|
the
execution, delivery and performance of this Agreement does not and will
not result in any restriction on TargetCo or any of its subsidiaries from
engaging in its and their businesses or from competing with any Person or
in any geographical area and do not and will not result in a Material
Adverse Effect in respect of TargetCo or trigger or cause to arise any
rights of any Person under any contract or arrangement to restrict any of
the foregoing from engaging in the business currently carried on by
TargetCo or any of its
subsidiaries.
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|
(d)
|
Litigation.
Except as disclosed in section 4.1(d) of the TargetCo Disclosure Letter,
there are no Claims in existence or pending or, to the knowledge of
TargetCo, threatened or for which there is a reasonable basis, affecting
or that would affect TargetCo or any of its subsidiaries or affecting or
that would affect its or their properties or assets at law or equity or
before or initiated by any Governmental
Entity.
|
|
(e)
|
Taxes, etc.
Except as disclosed in section 4.1(e) of the TargetCo Disclosure
Letter:
|
|
(i)
|
all
Tax Returns required to be filed by or on behalf of TargetCo or any
subsidiary have been duly filed and all such Tax Returns were true and
complete in all material respects. All Taxes shown to be payable on such
Tax Returns or on subsequent assessments with respect thereto have been
paid in full, and no other Taxes are payable by TargetCo or any subsidiary
with respect to items or periods covered by such Tax
Returns;
|
|
(ii)
|
TargetCo
and each subsidiary has paid or provided adequate accruals in its
consolidated financial statements for the fiscal year ended December 31,
2009 for TargetCo’s and its subsidiaries’ respective Taxes, including
income taxes and related future taxes, if applicable, for such periods, in
conformity with GAAP;
|
|
(iii)
|
for
all periods ended on or after December 31, 2009 AcquireCo has been
furnished by TargetCo true and complete copies of: (a) material portions
of income tax audit reports, statement of deficiencies, closing or other
agreements or correspondence concerning assessments or audits pursuant to
which a Governmental Entity has proposed amendments to previously filed
returns received by TargetCo or any subsidiary relating to the Taxes; and
(b) any material federal, provincial, state, local or foreign income or
franchise tax returns for TargetCo and each
subsidiary;
|
|
(iv)
|
none
of TargetCo nor any of its subsidiaries is or was a party to any action or
proceeding for assessment or collection of Taxes, nor, to the knowledge of
TargetCo, has such an event been asserted or threatened against TargetCo
or its subsidiaries or any of their respective assets. No
waiver or extension of any statute of limitations is in effect with
respect to Taxes or Tax Returns of TargetCo or its
subsidiaries. No audit, adjustment or assessment by a
Governmental Entity of TargetCo or its subsidiaries is in process or, to
the knowledge of TargetCo’s knowledge,
pending;
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(v)
|
TargetCo
has withheld from each payment made to any of its present or former
employees, officers and directors, and to all persons who are
non-residents of Canada for the purposes of the Tax Act, all amounts
required by Applicable Laws and will continue to do so until the Effective
Time and has remitted such withheld amounts within the prescribed periods
to the appropriate Governmental
Entity;
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|
(vi)
|
TargetCo
has remitted all Canada Pension Plan contributions, employment insurance
premiums, and other Taxes payable by it in respect of its employees and
has or will have remitted such amounts to the proper Governmental Entity
within the time required by Applicable
Laws;
|
|
(vii)
|
none
of TargetCo nor any of its subsidiaries has liability for the Taxes of any
other Person (other than any of TargetCo's subsidiaries) by reason of
Laws, contract, or otherwise, nor is TargetCo or any of its subsidiaries a
party to any agreement providing for the allocation, indemnification or
sharing of Taxes;
|
|
(viii)
|
to
the knowledge of TargetCo, none of TargetCo and its subsidiaries are
"controlled foreign corporations" within the meaning of Section 957 of the
Code as of the date of this
Agreement;
|
|
(ix)
|
none
of TargetCo nor any of its subsidiaries has participated, directly or
through a partnership, in a transaction or series of transactions
contemplated in subsection 247(2) of the Tax Act or any comparable law of
any province or territory in Canada, or in any other
jurisdiction;
|
|
(x)
|
there
are no circumstances existing which could result in the application of
sections 78, 80, 80.01, 80.02, 80.03, 80.04 or 160 of the Tax Act, or any
analogous provision of any comparable law of any province or territory of
Canada, to TargetCo or any of its
subsidiaries;
|
|
(xi)
|
there
are no Tax liens on any of the assets of TargetCo or any of its
subsidiaries except liens for Taxes not yet currently due and payable;
and
|
|
(xii)
|
TargetCo
and its subsidiaries have charged, collected and remitted on a timely
basis all Taxes as required by Applicable Laws on any sale, supply or
delivery whatsoever made by them.
|
|
(f)
|
Reporting Issuer
Status. TargetCo is a reporting issuer (where such concept exists)
in all provinces of Canada, other than Quebec, and is in material
compliance with all Applicable Canadian Securities Laws therein, and the
TargetCo Shares are listed and posted for trading on the TSX and TargetCo
is in material compliance with the rules of the
TSX.
|
|
(g)
|
Capitalization.
As of the date hereof, the authorized capital of TargetCo consists of an
unlimited number of TargetCo Shares and an unlimited number of preferred
shares. As of the date hereof, there were issued and
outstanding 145,477,660 TargetCo Shares and no issued and outstanding
preferred shares. Other than 9,026,454 TargetCo Shares issuable
pursuant to the TargetCo Options under the TargetCo Option Plan and
33,239,600 TargetCo Shares issuable pursuant to the TargetCo Warrants,
there are no options, warrants or other rights, agreements or commitments
of any character whatsoever requiring the issuance, sale or transfer by
TargetCo of any securities of TargetCo (including TargetCo Shares) or any
securities convertible into, or exchangeable or exercisable for, or
otherwise evidencing a right to acquire, any securities of TargetCo
(including TargetCo Shares). All outstanding TargetCo Shares
have been duly authorized and validly issued, are fully paid and
non-assessable and are not subject to, nor were they issued in violation
of, any pre-emptive rights and all TargetCo Shares issuable pursuant to
the TargetCo Options and TargetCo Warrants in accordance with their terms
will be duly authorized and validly issued as fully paid and
non-assessable and will not be subject to any pre-emptive
rights.
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|
(h)
|
Subsidiaries. TargetCo
has no material subsidiaries other than as set forth in section 4.1(h) of
the TargetCo Disclosure Letter, and other than such subsidiaries, TargetCo
does not have any equity interest in any Person that owns property or owns
or holds licenses or carries on
business.
|
|
(i)
|
Ownership of
Subsidiaries. As of the date hereof, TargetCo is the
beneficial direct or indirect owner of all of the outstanding shares,
partnership units and other securities, as applicable, of the subsidiaries
of TargetCo.
|
|
(j)
|
No
Orders. No order, ruling or determination having the
effect of suspending the sale of, or ceasing the trading of, the TargetCo
Shares or any other securities of TargetCo has been issued by any
Securities Regulatory Authority and is continuing in effect and no
proceedings for that purpose have been instituted, are pending or, to the
knowledge of TargetCo, are contemplated or threatened under any Applicable
Laws or by any other Governmental
Entity.
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|
(k)
|
Material
Agreements. There are no agreements material to the
conduct of any of TargetCo's or its subsidiaries' affairs or businesses,
except for those agreements disclosed in section 4.1(k) of the TargetCo
Disclosure Letter, and all such material agreements are valid and
subsisting and neither TargetCo or any of its subsidiaries is in material
default under any such agreements. TargetCo has provided or
made available to AcquireCo copies of all such material
agreements. Other than as disclosed in section 4.1(k) of the
Disclosure Letter, completion of the transactions contemplated by this
Agreement will not give rise to a right of termination (or result in any
additional or more onerous obligation of TargetCo or its subsidiaries)
under any such material contract.
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|
(l)
|
Filings. All
documents required to be filed by TargetCo and each of its subsidiaries
with applicable Governmental Entities (including in compliance with
Applicable Canadian Securities Laws) were, as of their respective dates,
in compliance in all material respects with all Applicable Laws and at the
time filed did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading. Neither TargetCo nor any of its
subsidiaries have failed to make any required filing with any applicable
Governmental Entity, which failure would result in a Material Adverse
Effect on TargetCo. TargetCo will deliver to AcquireCo, as soon as they
become available, true and complete copies of any material reports or
statements required to be filed by TargetCo or any of its subsidiaries
with any Governmental Entity subsequent to the date hereof. As
of their respective dates, such reports and statements (excluding any
information therein provided by AcquireCo, as to which TargetCo makes no
representation) will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they are made, not misleading and will comply in all material
respects with all Applicable Laws. TargetCo has not filed any
confidential material change reports which remain
confidential.
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|
(m)
|
No Material Adverse
Change. Since December 31, 2009: (i) TargetCo and each
of its subsidiaries has conducted its businesses only in the ordinary and
normal course; (ii) no liability or obligation of any nature (whether
absolute, accrued, contingent or otherwise) material to TargetCo and its
subsidiaries, taken as a whole, has been incurred other than in the
ordinary course of business; and (iii) there has not been any Material
Adverse Change in respect of
TargetCo.
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|
(n)
|
Books and
Records. The records and minute books of TargetCo and
each of its subsidiaries have been maintained substantially in accordance
with all Applicable Laws and are complete and accurate in all material
respects.
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|
(o)
|
Reports. As
of their respective dates: (i) the TargetCo Financial Statements; (ii)
TargetCo's Annual Information Form dated March 17, 2010 for the year ended
December 31, 2009; (iii) TargetCo's information circular for the annual
and special meeting of TargetCo Shareholders dated March 11, 2010; (iv)
all TargetCo press releases, material change reports, business acquisition
reports or similar documents filed with the Securities Regulatory
Authorities since January 1, 2009; and (v) all prospectuses or other
offering documents used by TargetCo in the offering of its securities or
filed with any Securities Regulatory Authorities since January 1, 2009,
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading and complied in all material respects with all Applicable
Laws. The TargetCo Financial Statements and other financial
statements of TargetCo included or incorporated by reference in such
forms, statements, prospectuses and other offering documents were prepared
in accordance with GAAP (except: (A) as otherwise indicated in such
financial statements and the notes thereto or, in the case of audited
statements, in the related report of TargetCo's independent auditors; or
(B) in the case of unaudited interim statements, to the extent they may
not include footnotes, are subject to normal year end adjustments or may
be condensed or summary statements), and present fairly in accordance with
GAAP the consolidated financial position, results of operations and
changes in financial position of TargetCo on a consolidated basis as of
the dates thereof and for the periods indicated therein (subject, in the
case of any unaudited interim financial statements, to normal year-end
audit adjustments) and reflect appropriate and adequate reserves in
respect of contingent liabilities, if any, of TargetCo on a consolidated
basis. There has been no material change in TargetCo accounting
policies, except as described in the notes to the TargetCo Financial
Statements, since January 1, 2009.
|
|
(p)
|
Absence of Undisclosed
Liabilities. Neither TargetCo nor its subsidiaries has
material liabilities of any nature (matured or unmatured, fixed or
contingent), other than:
|
|
(i)
|
those
set forth or adequately provided for in the balance sheets and associated
notes thereto included in the TargetCo Financial Statements (the "TargetCo Balance
Sheets");
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|
(ii)
|
those
incurred in the ordinary course of business since the dates of the
TargetCo Balance Sheets and consistent with past practice;
and
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(iii)
|
those
incurred in connection with the execution of this
Agreement.
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(q)
|
Information to
Independent Engineer. The TargetCo Reserve Report and,
if applicable, any updates to such report or any other reserve evaluation
reports which is or is deemed to be, included or incorporated by reference
in the Information Circular, whether in addition to or as a replacement to
the TargetCo Reserve Report, were an accurate and a reasonable estimate in
all material respects as at the effective dates of such reports and,
except for any impact of changes in commodity prices and as disclosed in
section 4.1(q) of the Disclosure Letter, which may or may not be material,
there has been no material adverse change in the production, costs, price,
reserves, estimates of future net production revenues or other relevant
information from that disclosed in those reports. TargetCo has provided to
GLJ all material information in its or its subsidiaries' possession
concerning land descriptions, well data, facilities and infrastructure,
ownership and operations, future development plans and historical
technical and operating data respecting the principal oil and gas assets
of TargetCo and its subsidiaries, in each case as at the effective dates
of such reports and, in particular, all material information respecting
the interests of TargetCo and its subsidiaries in its principal oil and
gas assets and royalty burdens and net profits interest burdens thereon,
and such information was accurate and correct in all material respects as
at the respective dates thereof and did not omit any information necessary
to make any such information provided not misleading as at the respective
dates thereof and there has been no material adverse change in any of the
material information so provided since the date
thereof. TargetCo has provided to AcquireCo all material
information in its or its subsidiaries' possession respecting the
interests of TargetCo and its subsidiaries in its principal oil and gas
assets and royalty burdens and net profits interest burdens thereon, and
such information was accurate and correct in all material respects as at
the respective dates thereof and did not omit any information necessary to
make any such information provided not misleading as at the respective
dates thereof.
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(r)
|
Environmental. Except
as disclosed in section 4.1(r) of the Disclosure Letter, there has not
occurred any material spills, emissions or pollution on any property of
TargetCo or its subsidiaries, nor has TargetCo or its subsidiaries been
subject to any stop orders, control orders, clean-up orders or reclamation
orders under applicable Environmental Laws, any of which might reasonably
be expected to have a Material Adverse Effect on TargetCo. All
operations of TargetCo and its subsidiaries have been and are now being
conducted in compliance with all applicable Environmental Laws except
where the failure to be in compliance would not have a Material Adverse
Effect on TargetCo. TargetCo is not subject to or aware of, and
neither TargetCo nor any of its subsidiaries has
received:
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|
(i)
|
any
orders or directives under Applicable Laws that relate to environmental,
health or safety matters and that require, or may require, any work,
repairs, construction or capital expenditures with respect to TargetCo's
or its subsidiaries' oil and gas assets, where such orders or directives
have not been complied with in all material respects;
or
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|
(ii)
|
any
demand or notice under Applicable Laws with respect to the breach of any
Environmental Laws applicable to TargetCo's or its subsidiaries' oil and
gas assets, including respecting the use, storage, treatment,
transportation or disposition of any Hazardous Substances;
and
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(iii)
|
any
material matter, condition or event that has arisen with respect to its
assets which could give rise to any such order, directive, demand or
notice.
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|
(s)
|
Title. Although
it does not warrant title to its or its subsidiaries' assets, there are no
defects, failures or impairments in the title of TargetCo or its
subsidiaries to their respective assets, whether or not an action, suit,
proceeding or inquiry is pending or threatened in writing or whether or
not discovered by any third party, which in the aggregate, could have a
material adverse effect on: (i) the quantity and pre-tax present worth
values of such assets; (ii) the current production volumes of TargetCo and
its subsidiaries; or (iii) the current consolidated cash flow of TargetCo
and its subsidiaries.
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|
(t)
|
No Reduction of
Interests. Except as is reflected in the TargetCo
Reserve Report or as disclosed in section 4.1(t) of the Disclosure Letter,
none of TargetCo's or its subsidiaries' oil and gas assets are subject to
reduction by reference to payout of or production penalty on any well or
otherwise or to change to an interest of any other size or nature by
virtue of or through any right or interest granted by, through or under
TargetCo or its subsidiaries, which would in the aggregate have a Material
Adverse Effect on TargetCo.
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|
(u)
|
Royalties, Rentals and
Taxes Paid. All royalties, and all ad valorem, property,
production, severance and similar Taxes, assessment and rentals payable on
or before the date hereof and based on, or measured by, TargetCo's and its
subsidiaries' ownership of its oil and gas assets, the production of
petroleum substances from their oil and gas assets or the receipt of
proceeds therefrom under the leases and other title and operating
documents pertaining to TargetCo's and its subsidiaries' oil and gas
assets and all ad
valorem, property, production, severance and similar Taxes and
assessments based upon or measured by the ownership of such assets or the
production of petroleum substances derived therefrom or allocated thereto
or the proceeds of sales thereof payable on or before the date hereof have
been properly paid in full and in a timely manner except to the extent
that such non-payment would not in the aggregate have a Material Adverse
Effect on TargetCo.
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|
(v)
|
Production Allowables
and Production Penalties.
|
|
(i)
|
None
of the xxxxx in which TargetCo and its subsidiaries' holds an interest has
produced in excess of applicable production allowables imposed by any
Applicable Laws or any Governmental Entity and TargetCo has no knowledge
of any impending change in production allowables imposed by any Applicable
Laws or any Governmental Entity that may be applicable to any of the xxxxx
in which it or its subsidiaries holds an interest, other than changes of
general application in the jurisdiction in which such xxxxx are situate;
and
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|
(ii)
|
neither
TargetCo nor any of its subsidiaries has received notice of any production
penalty or similar production restriction of any nature imposed or to be
imposed by any Governmental Entity, including gas-oil ratio, off-target
and overproduction penalties imposed by any Governmental Entity that may
be applicable, and, to its knowledge, none of the xxxxx in which it or its
subsidiaries holds an interest is subject to any such penalty or
restriction; except, in either case, to the extent that such events would
not in the aggregate have a Material Adverse Effect on
TargetCo.
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(w)
|
Operation and
Condition of Xxxxx. All xxxxx in which TargetCo and/or
any of its subsidiaries holds an
interest:
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|
(i)
|
for
which TargetCo or one of its subsidiaries was or is operator, were or have
been drilled and, if and as applicable, completed, operated and abandoned
(and if abandoned, plugged and abandoned and the wellsite therefor
properly restored) in accordance with good and prudent oil and gas
industry practices and all Applicable Laws;
and
|
|
(ii)
|
for
which neither TargetCo nor one of its subsidiaries was or is an operator,
to TargetCo’s knowledge, were or have been drilled and, if and as
applicable, completed, operated and abandoned (and if abandoned, plugged
and abandoned and the wellsite therefor properly restored) in accordance
with good and prudent oil and gas industry practices and all Applicable
Laws; except, in either case, to the extent that such non compliance with
prudent oil and gas industry practices or Applicable Law would not in the
aggregate have a Material Adverse Effect on
TargetCo.
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|
(x)
|
Operation and
Condition of Tangibles. TargetCo's and its subsidiaries'
tangible depreciable property used or intended for use in connection with
its and their oil and gas assets:
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|
(i)
|
for
which TargetCo or one of its subsidiaries was or is operator, was or has
been constructed, operated and maintained in accordance with good and
prudent oil and gas industry practices and all Applicable Laws during all
periods in which TargetCo or its subsidiaries was operator thereof and is
in good condition and repair, ordinary wear and tear excepted, and is
useable in the ordinary course of business;
and
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|
(ii)
|
for
which neither TargetCo nor one of its subsidiaries was or is an operator,
to TargetCo’s knowledge, was or has been constructed, operated and
maintained in accordance with good and prudent oil and gas industry
practices and all Applicable Laws during all periods in which TargetCo or
one of its subsidiaries was not operator thereof and is in good condition
and repair, ordinary wear and tear excepted, and is useable in the
ordinary course of business; except to the extent that such non compliance
with prudent oil and gas industry practices or Applicable Law or failure
to be in good condition and repair would not in the aggregate have a
Material Adverse Effect on
TargetCo.
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|
(y)
|
Outstanding
AFEs. Other than as set forth in section 4.1(y) of the
TargetCo Disclosure Letter, there are no outstanding authorizations for
expenditure pertaining to any of TargetCo's or its subsidiaries' oil and
gas assets or any other commitments, approvals or authorizations pursuant
to which an expenditure may be required to be made in respect of such
assets.
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|
(z)
|
Area of Mutual
Interest. Other than as set forth in section 4.1(z) of
the TargetCo Disclosure Letter, none of TargetCo's or its subsidiaries'
oil and gas assets is subject to an agreement that provides for an area of
mutual interest or an area of
exclusion.
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|
(aa)
|
Interest in
Assets. TargetCo's and each of its subsidiaries' title
to their material assets and undertakings (for the purpose of this clause,
the foregoing is referred to as the "TargetCo Interest") is
free and clear of adverse claims, except as disclosed in section 4.1(aa)
of the TargetCo Disclosure Letter or those arising in the ordinary course
of business, which are not material in the
aggregate.
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- 39
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(bb)
|
Licences. Except
as disclosed in section 4.1(bb) of the TargetCo Disclosure Letter,
TargetCo and each of its subsidiaries has obtained, holds and is in
material compliance with, and has made all required registrations of, all
licences, permits, certificates, consents, orders, grants, waivers,
approvals, qualifications and other authorizations (collectively, "Licenses") of or from
any Governmental Entity necessary or desirable in connection with the
ownership of its assets to conduct its and their businesses as it is now
being or is proposed to be conducted other than such Licenses, the absence
of which would not have a Material Adverse Effect on
TargetCo. Neither TargetCo nor any of its subsidiaries has
received any notice from any Governmental Entity alleging material default
under any such Licenses, nor is TargetCo aware of any fact or circumstance
that may reasonably be expected to give rise to such
notice. Except as disclosed in section 4.1(bb) of the TargetCo
Disclosure Letter, neither TargetCo nor any of its subsidiaries has taken
any action to suspend, revoke, nor has it received any notice of, or has
any Governmental Entity or other party threatened any suspension,
revocation or non-renewal of any License or asserted any right in respect
thereof. TargetCo has provided or made available to AcquireCo
copies of all Licenses.
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|
(cc)
|
Compliance with
Laws. TargetCo and each of its subsidiaries has complied
with and is in compliance with all Laws applicable to the operation of its
or their businesses, except where such non compliance would not have a
Material Adverse Effect on TargetCo or on the ability of TargetCo to
consummate the transactions contemplated
hereby.
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|
(dd)
|
TargetCo Fairness
Opinion. The TargetCo Board of Directors has received a
verbal opinion from its financial advisor and has been advised by its
financial advisors that it will receive, prior to the mailing of the
Information Circular, a written opinion of its financial advisor that the
consideration to be offered by AcquireCo to the TargetCo Shareholders
pursuant to the proposed Arrangement is fair, from a financial point of
view, to the TargetCo Shareholders (the "TargetCo Fairness
Opinion").
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|
(ee)
|
Long Term and
Derivative Transactions. Except as disclosed in section
4.1(ee) of the TargetCo Disclosure Letter, neither TargetCo nor any of its
subsidiaries has any obligations or liabilities, direct or indirect,
vested or contingent in respect of any rate swap transactions, basis
swaps, forward rate transactions, commodity swaps, commodity options,
equity or equity index swaps, equity or equity index options, bond
options, interest rate options, foreign exchange transactions, cap
transactions, floor transactions, collar transactions, currency swap
transactions, cross-currency rate swap transactions, currency options,
production sales transactions having terms greater than 90 days or any
other similar transactions (including any option with respect to any of
such transactions) or any combination of such
transactions.
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- 40
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(ff)
|
Employee Benefit
Plans. TargetCo provided to AcquireCo true, complete and
correct copies of each employee benefits plan (the "TargetCo Plans")
covering active, former or retired employees of TargetCo and its
subsidiaries, any related trust agreement, annuity or insurance contract
or other funding vehicle, and: (i) each TargetCo Plan has been maintained
and administered in material compliance with its terms and is, to the
extent required by Applicable Laws or contract, fully funded without
having any deficit or unfunded actuarial liability or adequate provision
has been made therefore; (ii) all required employer contributions under
any such TargetCo Plans have been made and the applicable funds have been
funded in accordance with the terms thereof; (iii) each TargetCo Plan that
is required or intended to be qualified under Applicable Laws or
registered or approved by a Governmental Entity has been so qualified,
registered or approved by the appropriate Governmental Entity, and nothing
has occurred since the date of the last qualification, registration or
approval to adversely affect, or cause, the appropriate Governmental
Entity to revoke such qualification, registration or approval; (iv) there
are no pending or, to the knowledge of TargetCo, anticipated material
Claims against or otherwise involving any of the TargetCo Plans and no
suit, action or other litigation (excluding Claims for benefits incurred
in the ordinary course of TargetCo Plan activities) has been brought
against or with respect to any TargetCo Plan; (v) all material
contributions, reserves or premium payments required to be made to the
TargetCo Plans have been made or provided for; and (vi) TargetCo does not
have any material obligations for retiree health and life benefits under
any TargetCo Plan.
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|
(gg)
|
Collective Bargaining
and Workers Compensation. Neither TargetCo nor any of
its subsidiaries is a party to or bound by any collective agreement or any
other contract with or commitment to any trade union, council of trade
unions, employee bargaining agent or affiliated bargaining agent (a "Labour
Representative"). No negotiations with respect to any
such future contracts or commitments have been entered into by TargetCo or
any of its subsidiaries and no Labour Representative holds bargaining
rights with respect to any employees. Neither it nor any of its
subsidiaries is subject to any application for certification or threatened
or apparent union organizing campaigns for employees not covered under a
collective agreement nor are there any current or, to the knowledge of
TargetCo, threatened strikes or lockouts or work stoppages affecting
TargetCo or any of its subsidiaries or any complaints of unfair labour
practices or any grievances (other than routine individual
grievances). There are no material outstanding decisions,
orders, settlements or current, pending or, to the knowledge of TargetCo,
threatened proceedings before any board or tribunal with respect to any
employment or labour matters. To the knowledge of TargetCo, all
material workplace or work related injuries and illnesses affecting
TargetCo's or its subsidiaries' employees have been reported to the
workers' compensation insurance carrier of TargetCo and its subsidiaries,
as applicable.
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|
(hh)
|
Insurance. Policies
of insurance are in force as of the date hereof naming TargetCo or its
subsidiaries as an insured that adequately cover all risks as are
customarily covered in the industry in which TargetCo and its subsidiaries
operate and having regard to the nature of the risk insured and the
relative cost of obtaining insurance to protect such
interests. All such policies will remain in force and effect
and will not be cancelled or otherwise terminated as a result of the
transactions contemplated by this Agreement. Except as set
forth in the in the Public Record or disclosed in writing to AcquireCo,
there have been no claims under any such policies of insurance since
December 31, 2009, nor are there any claims pending, or to the knowledge
of TargetCo, any facts or circumstances currently in existence which may
reasonably be expected to result in a claim. Neither TargetCo nor any of
its subsidiaries has failed to give any material notice or present any
material claim under any such insurance in a due and timely manner or
received written notice or otherwise has knowledge of any intent of an
insurer to either claim any default on the part of TargetCo or any of its
subsidiaries or not to renew any policy of insurance on its expiry or to
increase any deductible or
cost.
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- 41
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(ii)
|
Indebtedness To and By
Officers, Directors and Others. Other than as disclosed
in section 4.1(ii) in the TargetCo Disclosure Letter, neither TargetCo nor
any of its subsidiaries is indebted to any of the directors, officers,
employees or consultants or any of their respective associates or
affiliates or other parties not at arm's length to TargetCo or any of its
subsidiaries, except for amounts due as normal compensation or
reimbursement of ordinary business expenses, nor is there any indebtedness
owing by any such parties to TargetCo or any of its
subsidiaries.
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|
(jj)
|
Guarantees and
Indemnification. Neither TargetCo nor any of its
subsidiaries is a party to or bound by any agreement of guarantee,
indemnification (other than an indemnification of directors and officers
in accordance with the by-laws of the respective corporation or Applicable
Laws and other than standard indemnity agreements in underwriting and
agency agreements, the warrant indenture governing the TargetCo Warrants
and in the ordinary course provided to service providers or pursuant to
the joint operating agreements, farm-out agreements, carried working
interest agreements, overriding royalty agreements and similar agreements
as set forth in section 4.1(jj) of the TargetCo Disclosure Letter) or any
like commitment in respect of the obligations, liabilities (contingent or
otherwise) of indebtedness of any other
Person.
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|
(kk)
|
No Insider
Rights. Other than as disclosed in section 4.1(kk) of
the TargetCo Disclosure Letter, no director, officer, insider or other
party not at arm's length to TargetCo has any right, title or interest in
(or the right to acquire any right, title or interest in) any royalty
interest, participation interest or any other interest whatsoever, in any
properties or assets of TargetCo or any of its
subsidiaries.
|
|
(ll)
|
Disclosure. The
material data and information in respect of TargetCo and its subsidiaries
and its and their assets, liabilities, businesses, affairs and operations
(excluding data and information which is forward looking or relates to
projections or forecasts or geological interpretations) provided by or on
behalf of TargetCo to AcquireCo was and is accurate and correct in all
material respects as at the respective dates thereof and does not omit any
material data or information necessary to make any data or information
provided not misleading as at the respective dates
thereof.
|
(mm)
|
Debt. As
at December 31, 2010, TargetCo's consolidated long-term debt and bank debt
did not, in the aggregate, exceed $58.1 million, and as at September 30,
2010, TargetCo's working capital including cash was not less than $10.4
million, exclusive of any hedging obligations. Other than as
set forth in section 4.1(mm) of the TargetCo Disclosure Letter, TargetCo
does not have outstanding any promissory notes or other debt
securities.
|
|
(nn)
|
No Defaults under
Agreements. Except as disclosed in section 4.1(nn) of
the TargetCo Disclosure Letter:
|
|
(i)
|
Neither
TargetCo nor any of its subsidiaries has received notice of any default
under any of the leases and other title documents or any other agreement
or instrument pertaining to TargetCo's or any of its subsidiaries' assets
to which TargetCo or any of its subsidiaries is a party or by or to which
TargetCo or any such assets are bound or subject except to the extent that
such defaults would not in the aggregate have a Material Adverse Effect on
TargetCo.; and
|
- 42
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|
(ii)
|
(A)
TargetCo and each of its subsidiaries is in good standing under all, and
is not in default under any; and (B) to TargetCo’s knowledge there is no
existing condition, circumstance or matter which constitutes or which,
with the passage of time or the giving of notice, would constitute a
default under any, leases and other title documents or any other
agreements and instruments pertaining to its or their assets to which it
or any of its subsidiaries is a party or by or to which it or any of its
subsidiaries or such assets are bound or subject and all such leases,
title and operating documents and other agreements and instruments are in
good standing and in full force and effect and, to the knowledge of
TargetCo, none of the counterparties to such leases, title and operating
documents and other agreements and instruments is in default thereunder
except to the extent that such defaults would not in the aggregate have a
Material Adverse Effect on
TargetCo.
|
|
(oo)
|
No
Encumbrances. Neither TargetCo nor any of its
subsidiaries has encumbered or alienated its interest in TargetCo's or
such subsidiaries' assets or agreed to do so and such assets are free and
clear of all encumbrances except for or pursuant to encumbrances securing
the TargetCo Credit Facilities and derivative transactions with the
lenders (and other affiliates) thereunder or encumbrances disclosed in the
Public Record or the personal property registry in Alberta or Permitted
Encumbrances or as have been disclosed in section 4.1(oo) of the TargetCo
Disclosure Letter.
|
|
(pp)
|
Brokers and
Finders. TargetCo has not retained nor will it retain
any financial advisor, broker, agent or finder or pay, or agree to pay any
financial advisor, broker, agent or finder on account of this Agreement,
any transaction contemplated hereby or any transaction presently ongoing
or contemplated, except for RBC Capital Markets which have been retained
by TargetCo as financial advisor in connection with certain matters
including the transactions contemplated hereby and the payment of those
fees described in the agreement with RBC Capital Markets. After
the payment of such financial obligations to such financial advisor,
TargetCo will not have any continuing obligations to such advisor other
than those related to indemnification and
confidentiality. TargetCo has provided or made available to
AcquireCo copies of all agreements and arrangements with its financial
advisor.
|
|
(qq)
|
Employment and Officer
Obligations. Other than the TargetCo Employment
Agreements, the TargetCo Plans or as disclosed in section 4.1(qq) of the
TargetCo Disclosure Letter, there are no other employment or consulting
services agreements, termination, severance and retention plans or
policies of TargetCo or any of its subsidiaries. The
obligations of TargetCo and its subsidiaries under the TargetCo Employment
Agreements and all such employment or consulting services agreements,
termination, severance plans or policies for severance, termination or
bonus payments or any other payments related to any incentive or similar
plan of TargetCo or its subsidiaries, arising out of or in connection with
the Arrangement and the transactions contemplated by this Agreement, shall
not exceed $3 million.
|
|
(rr)
|
Confidentiality
Agreements. TargetCo hereby represents and warrants to
AcquireCo that, during the twelve month period prior to the date of this
Agreement, TargetCo has not entered into any confidentiality agreement in
connection with a potential "change of control" transaction that does not
include the restrictions substantially as set forth in paragraph 9 of the
TargetCo Confidentiality Agreement.
|
|
(ss)
|
No Rights
Plan. TargetCo has not adopted and it and its securities
are not otherwise subject to any shareholder rights plan or similar
plan.
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- 43
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(tt)
|
Outstanding
Acquisitions. Other than as disclosed in section 4.1(tt)
of the TargetCo Disclosure Letter, neither TargetCo nor any of its
subsidiaries has rights to purchase assets, properties or undertakings of
third parties under any agreements to
purchase.
|
|
(uu)
|
Tax
Residency. TargetCo is not a "non-resident" within the
meaning of the Tax Act.
|
|
(vv)
|
Competition
Act. The aggregate value of TargetCo's assets in Canada,
including its subsidiaries, determined as of the time and in the manner
that is prescribed by the Competition Act, does not exceed the amount set
out in sections 110(7) or (8) of the Competition Act, as the case may
be. The gross revenues from sales in or from Canada generated
by TargetCo's assets in Canada, determined for the annual period and in
the manner that is prescribed by the Competition Act, do not exceed the
amount set out in sections 110(7) or (8) of the Competition Act, as the
case may be.
|
(ww)
|
Board
Approval. The TargetCo Board of Directors has
unanimously approved the Arrangement and approved this Agreement, has
unanimously determined that the Arrangement and this Agreement are in the
best interests of TargetCo and the TargetCo
Securityholders.
|
|
(xx)
|
Conduct of
Business. Since December 31, 2009 and except as
contemplated herein, TargetCo and each of its subsidiaries has conducted
and is conducting its business substantially in accordance with industry
and other business and environmental practices and is in compliance in all
material respects with all material Applicable Laws (including Applicable
Securities Laws).
|
|
(yy)
|
Credit
Facilities. Neither TargetCo nor its subsidiaries has
incurred any indebtedness and do not have any material financial
liabilities or obligations other than the TargetCo Credit
Facilities. As of December 31, 2010, the aggregate amount of
indebtedness outstanding under the TargetCo Credit Facilities is $58.1
million. Other than as disclosed in section 4.1(yy) of the
TargetCo Disclosure Letter, no letters of credit, letters of guarantee,
performance, bonds or other similar instruments have been issued for the
benefit of TargetCo or its
subsidiaries.
|
|
(zz)
|
Foreign Corrupt
Practices Act (both in the US and in Canada, collectively, the
"FCPA"), Sanctions and
Government Officials.
|
|
(i)
|
TargetCo
is familiar with the FCPA and its purposes, including its prohibition
against taking corrupt actions in furtherance of an offer, payment,
promise to pay or authorization of the payment of anything of value,
including but not limited to cash, checks, wire transfers, tangible and
intangible gifts, favours, services, and those entertainment and travel
expenses that go beyond what is reasonable and customary and of modest
value, to: (A) an executive, official, employee or agent of a governmental
department, agency or instrumentality; (B) a director, officer, employee
or agent of a wholly or partially government-owned or controlled company
or business; (C) a political party or official thereof, or candidate for
political office; or (D) an executive, official, employee or agent of a
public international organization (e.g., the International Monetary Fund
or the World Bank) ("Government Official"),
in each case to obtain, retain or direct business, while knowing or having
a reasonable belief that all or some portion will be used for the purpose
of: (1) influencing any act, decision or failure to act by a Government
Official in his or her official capacity, (2) inducing a Government
Official to use his or her influence with a government or instrumentality
to affect any act or decision of such government or entity, or (3)
securing an improper advantage.
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(ii)
|
TargetCo
and each of its subsidiaries is now in compliance with all anti-bribery
and anticorruption Laws, and will remain in compliance with such Laws;
TargetCo and each of its subsidiaries is now in compliance with the FCPA
if it is subject to the FCPA; prior to the completion of this transaction
neither TargetCo nor any of its subsidiaries will authorize, offer or make
payments directly or indirectly to any Government Official that would
result in a violation of the FCPA; and that no part of the payments
received by them from AcquireCo will be used for any purpose that could
constitute a violation of the Laws of Canada or the
FCPA.
|
|
(iii)
|
TargetCo,
its subsidiaries and their representatives have each complied with all
applicable anti-money-laundering Laws and TargetCo and each of its
subsidiaries has established and maintained an anti-money-laundering
program in accordance with all applicable
Laws.
|
|
(aaa)
|
Place of Principal
Offices. The principal offices of TargetCo are not
located within the United States.
|
(bbb)
|
Location of Assets and
U.S. Sales. The assets and property of TargetCo are
located outside the United States and did not generate sales in or into
the United States exceeding U.S.$63.4 million during TargetCo's most
recent completed fiscal year.
|
|
(ccc)
|
Investment
Company. TargetCo is not an "investment company" within
the meaning of the United States Investment
Company Act of 1940, as
amended.
|
4.2
|
Representations
and Warranties of AcquireCo
|
AcquireCo
hereby makes the representations and warranties set forth in this Section
4.2 to and in favour of TargetCo and acknowledges that TargetCo is relying
upon such representations and warranties in connection with the matters
contemplated by this Agreement.
|
(a)
|
Organization and
Qualification. AcquireCo is a corporation duly formed
and validly existing under the Laws of Nevada and has the requisite
corporate power and authority to own its assets as now owned and to carry
on its business as now conducted. AcquireCo and each of its
subsidiaries is duly registered to conduct its affairs or do business, as
applicable, in each jurisdiction in which the character of its assets,
owned or leased, or the nature of its activities makes such registration
necessary, except where the failure to be so registered would not have a
Material Adverse Effect on AcquireCo. Copies of the constating
documents of AcquireCo provided to TargetCo, together with all amendments
to date, are accurate and complete as of the date hereof and have not been
amended or superseded.
|
|
(b)
|
Authority Relative to
this Agreement. AcquireCo has the requisite corporate
power and authority to execute this Agreement, and AcquireCo has the
requisite corporate power and authority to carry out its obligations
hereunder. The execution and delivery of this Agreement and the
consummation by AcquireCo of the transactions contemplated hereby have
been duly authorized by the AcquireCo Board of Directors and, subject to
the exercise by each of the TSX and the AMEX of its discretion to require
approval of the Arrangement by AcquireCo Shareholders, no other
proceedings on the part of AcquireCo are necessary to authorize this
Agreement or the transactions contemplated hereby. This
Agreement has been duly executed and delivered by AcquireCo and
constitutes a legal, valid and binding obligation of AcquireCo enforceable
against it in accordance with its terms, subject to the qualification that
such enforceability may be limited by bankruptcy, insolvency,
reorganization or other Laws of general application relating to or
affecting rights of creditors and that equitable remedies, including
specific performance, are discretionary and may not be
ordered.
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(c)
|
No
Violations. Except as disclosed in writing to TargetCo,
or as contemplated by this
Agreement:
|
|
(i)
|
neither
the execution and delivery of this Agreement by AcquireCo nor the
consummation of the transactions contemplated hereby nor compliance by
AcquireCo with any of the provisions hereof nor the consummation of the
Arrangement will: (a) violate, conflict with, or result in a breach of any
provision of, require any consent, approval or notice under, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) or result in a right of termination or acceleration
under, or result in the creation of any encumbrance upon any of the
properties or assets of AcquireCo or cause any indebtedness to come due
before its stated maturity or cause any credit to cease to be available,
under any of the terms, conditions or provisions of: (i) the articles,
by-laws or other constating document of AcquireCo; or (ii) any material
note, bond, mortgage, indenture, loan agreement, deed of trust, agreement,
lien, contract or other instrument or obligation to which AcquireCo or any
of its subsidiaries is a party or to which it, or any of its properties or
assets, may be subject or by which AcquireCo or any of its subsidiaries is
bound; or (b) subject to compliance with applicable statutes and
regulations, violate any judgment, ruling, order, writ, injunction,
determination, award, decree, statute, ordinance, rule or regulation
applicable to AcquireCo or any of its subsidiaries or any of its
properties or assets (except, in the case of each of clauses (a) and (b)
above, for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of encumbrances which, or any consents,
approvals or notices which if not given or received, would not have any
Material Adverse Effect on AcquireCo or impede the ability of AcquireCo to
consummate the transactions contemplated hereby); or (c) cause the
suspension or revocation of any authorization, consent, approval or
license currently in effect which would have a Material Adverse Effect on
AcquireCo;
|
|
(ii)
|
other
than in connection with or in compliance with the provisions of Applicable
Laws (including the Competition Act, the United States Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 and the rules and policies of the TSX and
the AMEX) or which are required to be filed post-Arrangement or pursuant
to this Agreement, and subject to the exercise by each of the TSX and the
AMEX of its discretion to require approval of the Arrangement by AcquireCo
Shareholders and the required approval of the TSX and the AMEX, as
applicable, for the listing of the AcquireCo Shares, the Replacement
Warrants and the AcquireCo Shares underlying the Replacement Warrants as
contemplated by Section 3.2(c): (a) there is no legal impediment to
AcquireCo's consummation of the transactions contemplated hereby; and (b)
no filing or registration with, or authorization, consent or approval of,
any domestic or foreign public body or authority is required of AcquireCo
or any of its subsidiaries in connection with the consummation of the
Arrangement and the transactions contemplated by this Agreement, except
for such filings or registrations which, if not made, or for such
authorizations, consents or approvals which, if not received, would not
have a Material Adverse Effect on AcquireCo, or significantly impede the
ability of AcquireCo to consummate the Arrangement and the transactions
contemplated hereby; and
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|
(iii)
|
the
execution, delivery and performance of this Agreement does not and will
not result in any restriction on AcquireCo or any of its subsidiaries from
engaging in its business or from competing with any Person or in any
geographical area and do not and will not result in a Material Adverse
Effect in respect of AcquireCo or trigger or cause to arise any rights of
any Person under any contract or arrangement to restrict any of the
foregoing from engaging in the business currently carried on by AcquireCo
or any of its subsidiaries.
|
|
(d)
|
Litigation. There
are no Claims in existence or pending or, to the knowledge of AcquireCo
threatened or for which there is a reasonable basis, affecting or that
would affect AcquireCo or affecting or that would affect its property or
assets at law or equity or before or initiated by any Governmental Entity
which Claim involves a possibility of any judgment against or liability of
AcquireCo which, if successful, would have a Material Adverse Effect on
AcquireCo, or would significantly impede or delay the ability of AcquireCo
to consummate the Arrangement and the transactions contemplated by this
Agreement.
|
|
(e)
|
Reporting Issuer
Status. AcquireCo is a reporting issuer in British
Columbia, Alberta and Ontario and is in material compliance with all
Applicable Canadian Securities Laws therein, and the AcquireCo Shares are
listed and posted for trading on the TSX and the AMEX and AcquireCo is in
material compliance with the rules of the TSX and the
AMEX.
|
|
(f)
|
Capitalization. As
of December 31, 2010, the authorized capital of AcquireCo consists of
595,000,002 authorized shares of capital stock, of which 570,000,000 are
designated as AcquireCo Shares, 25,000,000 are designated as preferred
stock, par value US$0.001 per share and two shares are designated as
special voting stock, par value US$0.001 per share. As of the
date hereof, there were issued and outstanding 240,440,830 AcquireCo
Shares, nil issued and outstanding preferred shares, and two issued and
outstanding shares of special voting stock. Other than
10,943,058 AcquireCo Shares issuable pursuant to the AcquireCo Options
under the AcquireCo Option Plan, 3,884,929 AcquireCo Shares issuable
pursuant to outstanding AcquireCo Warrants, 9,870,011 AcquireCo Shares
issuable upon the exchange of exchangeable shares of Gran Tierra
Exchangeco Inc. and 7,811,112 AcquireCo Shares issuable upon the exchange
of exchangeable shares of Goldstrike Exchange Co., there are no options,
warrants or other rights, agreements or commitments of any character
whatsoever requiring the issuance, sale or transfer by AcquireCo of any
securities of AcquireCo (including AcquireCo Shares) or any securities
convertible into, or exchangeable or exercisable for, or otherwise
evidencing a right to acquire, any securities of AcquireCo (including
AcquireCo Shares). All outstanding AcquireCo Shares have been
duly authorized and validly issued, are fully paid and non-assessable and
are not subject to, nor were they issued in violation of, any pre-emptive
rights and all AcquireCo Shares issuable pursuant to the AcquireCo Options
and AcquireCo Warrants in accordance with their terms will be duly
authorized and validly issued as fully paid and non-assessable and will
not be subject to any pre-emptive
rights.
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|
(g)
|
Subsidiaries. AcquireCo
has no material subsidiaries other than as disclosed in the Public Record,
and AcquireCo does not have any equity interest in any Person that owns
property or owns or holds licenses or carries on
business.
|
|
(h)
|
Ownership of
Subsidiaries. As of the date hereof, AcquireCo is the
beneficial direct or indirect owner of all of the outstanding shares,
partnership units and other securities, as applicable, of the subsidiaries
of AcquireCo.
|
|
(i)
|
No
Orders. No order, ruling or determination having the
effect of suspending the sale of, or ceasing the trading of, the AcquireCo
Shares or any other securities of AcquireCo has been issued by any
Securities Regulatory Authority and is continuing in effect and no
proceedings for that purpose have been instituted, are pending or, to the
knowledge of AcquireCo, are contemplated or threatened under any
Applicable Laws or by any other Governmental
Entity.
|
|
(j)
|
No Material Adverse
Change. Since December 31, 2009, other than as disclosed
in the Public Record: (i) AcquireCo and its subsidiaries has conducted its
businesses only in the ordinary and normal course; (ii) no liability or
obligation of any nature (whether absolute, accrued, contingent or
otherwise) material to AcquireCo and its subsidiaries, taken as a whole,
has been incurred other than in the ordinary course of business; and (iii)
there has not been any Material Adverse Change in respect of
AcquireCo.
|
|
(k)
|
Books and
Records. The records and minute books of AcquireCo and
each of its subsidiaries have been maintained substantially in accordance
with all Applicable Laws and are complete and accurate in all material
respects.
|
|
(l)
|
Reports. As
of their respective dates: (i) the AcquireCo Financial Statements; (ii)
AcquireCo's Form 10-K dated February 26, 2010 for the year ended December
31, 2009; (iii) AcquireCo's proxy statement for the annual meeting of
AcquireCo Shareholders dated April 30, 2010; (iv) all AcquireCo press
releases, material change reports, business acquisition reports or similar
documents filed with the Securities Regulatory Authorities since January
1, 2009; and (v) all prospectuses or other offering documents used by
AcquireCo in the offering of its securities or filed with any Securities
Regulatory Authorities since January 1, 2009, did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading and complied in
all material respects with all Applicable Laws. The AcquireCo
Financial Statements and other financial statements of AcquireCo included
or incorporated by reference in such forms, statements, prospectuses and
other offering documents were prepared in accordance with GAAP (except:
(i) as otherwise indicated in such financial statements and the notes
thereto or, in the case of audited statements, in the related report of
AcquireCo's independent auditors; or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes, are subject to
normal year end adjustments or may be condensed or summary statements),
and present fairly in accordance with GAAP the consolidated financial
position, results of operations and changes in financial position of
AcquireCo on a consolidated basis as of the dates thereof and for the
periods indicated therein (subject, in the case of any unaudited interim
financial statements, to normal year-end audit adjustments) and reflect
appropriate and adequate reserves in respect of contingent liabilities, if
any, of AcquireCo on a consolidated basis. There has been no
material change in AcquireCo accounting policies, except as described in
the notes to the AcquireCo Financial Statements, since January 1,
2009.
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|
(m)
|
Absence of Undisclosed
Liabilities. Neither AcquireCo nor its subsidiaries have
any material liabilities of any nature (matured or unmatured, fixed or
contingent), other than:
|
|
(i)
|
those
set forth or adequately provided for in the balance sheets and associated
notes thereto included in the AcquireCo Financial Statements (the "AcquireCo Balance
Sheets");
|
|
(ii)
|
those
incurred in the ordinary course of business since the dates of the
AcquireCo Balance Sheets and consistent with past practice;
and
|
|
(iii)
|
those
incurred in connection with the execution of this
Agreement.
|
|
(n)
|
Information to
Independent Engineer. The AcquireCo Reserve Report was
an accurate and a reasonable estimate in all material respects as at the
effective date of such report and, except for any impact of changes in
commodity prices, which may or may not be material, there has been no
material adverse change in the production, costs, price, reserves,
estimates of future net production revenues or other relevant information
from that disclosed in those reports. AcquireCo has provided to
GLJ all material information in its or its subsidiaries' possession
concerning land descriptions, well data, facilities and infrastructure,
ownership and operations, future development plans and historical
technical and operating data respecting the principal oil and gas assets
of AcquireCo and its subsidiaries, in each case as at the effective dates
of such report and, in particular, all material information respecting the
interests of AcquireCo and its subsidiaries in its principal oil and gas
assets and royalty burdens and net profits interest burdens thereon, and
such information was accurate and correct in all material respects as at
the respective dates thereof and did not omit any information necessary to
make any such information provided not misleading as at the respective
dates thereof and there has been no material adverse change in any of the
material information so provided since the date
thereof.
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|
(o)
|
Environmental. Except
as disclosed in writing to TargetCo or in the Public Record, there has not
occurred any material spills, emissions or pollution on any property of
AcquireCo or its subsidiaries, nor has AcquireCo or its subsidiaries been
subject to any stop orders, control orders, clean-up orders or reclamation
orders under applicable Environmental Laws, any of which might reasonably
be expected to have a Material Adverse Effect on AcquireCo. All
operations of AcquireCo and its subsidiaries have been and are now being
conducted in compliance with all applicable Environmental Laws except
where the failure to be in compliance would not have a Material Adverse
Effect on AcquireCo. AcquireCo is not subject to or aware of,
and neither AcquireCo nor any of its subsidiaries has
received:
|
|
(i)
|
any
orders or directives under Applicable Laws that relate to environmental,
health or safety matters and that require, or may require, any work,
repairs, construction or capital expenditures with respect to AcquireCo's
or its subsidiaries' oil and gas assets, where such orders or directives
have not been complied with in all material respects;
or
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- 49
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(ii)
|
any
demand or notice under Applicable Laws with respect to the breach of any
Environmental Laws applicable to AcquireCo's or its subsidiaries' oil and
gas assets, including respecting the use, storage, treatment,
transportation or disposition of any Hazardous Substances;
and
|
|
(iii)
|
any
material matter, condition or event that has arisen with respect to its
assets which could give rise to any such order, directive, demand or
notice.
|
|
(p)
|
Title. Although
it does not warrant title to its or its subsidiaries' assets, there are no
defects, failures or impairments in the title of AcquireCo or its
subsidiaries to their respective assets, whether or not an action, suit,
proceeding or inquiry is pending or threatened in writing or whether or
not discovered by any third party, which in the aggregate, could have a
material adverse effect on: (i) the quantity and pre-tax present worth
values of such assets; (ii) the current production volumes of AcquireCo
and its subsidiaries; or (iii) the current consolidated cash flow of
AcquireCo and its subsidiaries.
|
|
(q)
|
Conduct of
Business. Since December 31, 2009 and except as
contemplated herein, AcquireCo and each of its subsidiaries has conducted
and is conducting its business substantially in accordance with industry
and other business and environmental practices and is in compliance in all
material respects with all material Applicable Laws (including Applicable
Securities Laws).
|
|
(r)
|
Taxes,
etc.:
|
|
(i)
|
all
Tax Returns required to be filed by or on behalf of AcquireCo or any
subsidiary have been duly filed and all such Tax Returns were true and
complete in all material respects. All Taxes shown to be payable on such
Tax Returns or on subsequent assessments with respect thereto have been
paid in full, and no other Taxes are payable by AcquireCo or any
subsidiary with respect to items or periods covered by such Tax
Returns;
|
|
(ii)
|
AcquireCo
and each subsidiary has paid or provided adequate accruals in its
consolidated financial statements for the fiscal year ended December 31,
2009 for AcquireCo’s and its subsidiaries’ respective Taxes, including
income taxes and related future taxes, if applicable, for such periods, in
conformity with GAAP;
|
|
(iii)
|
for
all periods ended on or after December 31, 2009 TargetCo has been
furnished by AcquireCo true and complete copies of: (a) material portions
of income tax audit reports, statement of deficiencies, closing or other
agreements or correspondence concerning assessments or audits pursuant to
which a Governmental Entity has proposed amendments to previously filed
returns received by AcquireCo or any subsidiary relating to the Taxes; and
(b) any material federal, provincial, state, local or foreign income or
franchise tax returns for AcquireCo and each
subsidiary;
|
|
(iv)
|
none
of AcquireCo nor any of its subsidiaries is or was a party to any action
or proceeding for assessment or collection of Taxes, nor, to the knowledge
of AcquireCo, has such an event been asserted or threatened against
AcquireCo or its subsidiaries or any of their respective
assets. No waiver or extension of any statute of limitations is
in effect with respect to Taxes or Tax Returns of AcquireCo or its
subsidiaries. No audit, adjustment or assessment by a
Governmental Entity of AcquireCo or its subsidiaries is in process or, to
the knowledge of AcquireCo’s knowledge,
pending;
|
- 50
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|
(v)
|
AcquireCo
and/or a subsidiary has withheld from each payment made to any of its
present or former employees, officers and directors, and to all persons
who are non-residents of Canada for the purposes of the Tax Act, all
amounts required by Applicable Laws and will continue to do so until the
Effective Time and has remitted such withheld amounts within the
prescribed periods to the appropriate Governmental
Entity;
|
|
(vi)
|
AcquireCo
and/or a subsidiary has remitted all Canada Pension Plan contributions,
employment insurance premiums, and other Taxes payable by it in respect of
its employees and has or will have remitted such amounts to the proper
Governmental Entity within the time required by Applicable
Laws;
|
|
(vii)
|
none
of AcquireCo nor any of its subsidiaries has liability for the Taxes of
any other Person (other than any of AcquireCo's subsidiaries) by reason of
Laws, contract, or otherwise, nor is AcquireCo or any of its subsidiaries
a party to any agreement providing for the allocation, indemnification or
sharing of Taxes;
|
|
(viii)
|
none
of AcquireCo nor any of its Canadian subsidiaries has participated,
directly or through a partnership, in a transaction or series of
transactions contemplated in subsection 247(2) of the Tax Act or any
comparable law of any province or territory in Canada, or in any other
jurisdiction;
|
|
(ix)
|
there
are no circumstances existing which could result in the application of
sections 78, 80, 80.01, 80.02, 80.03, 80.04 or 160 of the Tax Act, or any
analogous provision of any comparable law of any province or territory of
Canada, to AcquireCo or any of its
subsidiaries;
|
|
(x)
|
there
are no Tax liens on any of the assets of AcquireCo or any of its
subsidiaries except liens for Taxes not yet currently due and payable;
and
|
|
(xi)
|
AcquireCo
and its subsidiaries have charged, collected and remitted on a timely
basis all Taxes as required by Applicable Laws on any sale, supply or
delivery whatsoever made by them.
|
|
(s)
|
Compliance with
Laws. AcquireCo and each of its subsidiaries has
complied with and is in compliance with all Laws applicable to the
operation of its or their businesses, except where such non compliance
would not have a Material Adverse Effect on AcquireCo or on the ability of
AcquireCo to consummate the transactions contemplated
hereby.
|
|
(t)
|
Disclosure. The
material data and information in respect of AcquireCo and its subsidiaries
and its and their assets, liabilities, businesses, affairs and operations
(excluding data and information which is forward looking or relates to
projections or forecasts or geological interpretations) provided by or on
behalf of AcquireCo to TargetCo was and is accurate and correct in all
material respects as at the respective dates
thereof.
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4.3
|
Privacy
Issues
|
|
(a)
|
For
the purposes of this Section 4.3, the following definitions shall
apply:
|
|
(i)
|
"applicable privacy laws"
means any and all Applicable Laws relating to privacy and the collection,
use and disclosure of Personal Information in all applicable
jurisdictions, including but not limited to the Personal Information
Protection and Electronic Documents Act (Canada) and/or any
comparable provincial law including the Personal Information
Protection Act (Alberta);
|
|
(ii)
|
"authorized authority"
means, in relation to any Person, transaction or event, any (a) federal,
provincial, municipal or local governmental body (whether administrative,
legislative, executive or otherwise), both domestic and foreign; (b)
agency, authority, commission, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining
to government; (c) court, arbitrator, commission or body exercising
judicial, quasi-judicial, administrative or similar functions; and (d)
other body or entity created under the authority of or otherwise subject
to the jurisdiction of any of the foregoing, including any stock or other
securities exchange, in each case having jurisdiction over such Person,
transaction or event; and
|
|
(iii)
|
"Personal Information"
means information (other than business contact information when used or
disclosed for the purpose of contacting such individual in that
individual's capacity as an employee or an official of an organization and
for no other purpose) about an identifiable individual transferred by a
Party to the Other Party in accordance with this Agreement and/or as a
condition of the Arrangement.
|
|
(b)
|
The
Parties acknowledge that they are responsible for compliance at all times
with applicable privacy laws which govern the collection, use and
disclosure of Personal Information acquired by or disclosed to any Party
pursuant to or in connection with this Agreement (the "Disclosed Personal
Information").
|
|
(c)
|
None
of the Parties shall use the Disclosed Personal Information for any
purposes other than those related to the performance of this Agreement and
the completion of the Arrangement.
|
|
(d)
|
Each
Party acknowledges and confirms that the disclosure of Personal
Information is necessary for the purposes of determining if the Parties
shall proceed with the Arrangement, and that the disclosure of Personal
Information relates solely to the carrying on of their respective
businesses and the completion of the
Arrangement.
|
|
(e)
|
Each
Party acknowledges and confirms that it has and shall continue to employ
appropriate technology and procedures in accordance with Applicable Laws
to prevent accidental loss or corruption of the Disclosed Personal
Information, unauthorized input or access to the Disclosed Personal
Information, or unauthorized or unlawful collection, storage, disclosure,
recording, copying, alteration, removal, deletion, use or other processing
of such Disclosed Personal
Information.
|
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|
(f)
|
Each
Party shall at all times keep strictly confidential all Disclosed Personal
Information provided to it, and shall instruct those employees or advisors
responsible for processing such Disclosed Personal Information to protect
the confidentiality of such information in a manner consistent with the
Party's obligations under the TargetCo Confidentiality Agreement and the
AcquireCo Confidentiality Agreement, as applicable, and
hereunder. Each Party shall ensure that access to the Disclosed
Personal Information shall be restricted to those of its employees or
advisors of the respective Party who have a bona fide need to
access such information to complete the
Arrangement.
|
|
(g)
|
Where
authorized by Applicable Law, each Party shall promptly notify the Other
Party of all inquiries, complaints, requests for access, and claims of
which the Party is made aware in connection with the Disclosed Personal
Information. To the extent permitted by Applicable Law, the
Parties shall fully co-operate with one another, with the persons to whom
the Personal Information relates, and any authorized authority charged
with enforcement of applicable privacy laws, in responding to such
inquiries, complaints, requests for access, and
claims.
|
|
(h)
|
Upon
the expiry or termination of this Agreement, or otherwise upon the
reasonable request of any Party, the Other Party shall forthwith cease all
use of the Personal Information acquired by the Other Party in connection
with this Agreement and will return to the Party or, at the Party's
request, destroy in a secure manner, the Disclosed Personal Information
(and any copies) in its possession.
|
ARTICLE
5
CONDITIONS
PRECEDENT
5.1
|
Mutual
Conditions Precedent
|
The
respective obligations of the Parties to consummate the transactions
contemplated hereby, and in particular the Arrangement, are subject to the
satisfaction, on or before the Effective Date or such other time specified in
the relevant condition precedent, of the following conditions, any of which may
be waived by the mutual consent of the Parties without prejudice to their right
to rely on any other of such conditions or any other conditions precedent set
forth herein:
|
(a)
|
the
Articles of Arrangement to be filed with the Director in accordance with
the Arrangement shall be in accordance with the terms of the Plan of
Arrangement and in form and substance satisfactory to each of TargetCo and
AcquireCo, acting reasonably;
|
|
(b)
|
the
Articles of Arrangement shall have been filed with the Director on or
prior to April 29, 2011 and the Effective Date shall occur on or prior to
the Outside Date, subject to any extension available to a Party as
provided in this Agreement;
|
|
(c)
|
this
Agreement shall not have been terminated pursuant to Article
8;
|
|
(d)
|
all
required domestic and foreign regulatory, governmental and third party
approvals and consents in respect of the completion of the Arrangement and
the transactions contemplated by this Agreement shall have been obtained
on terms and conditions satisfactory to TargetCo and AcquireCo, each
acting reasonably, including, without limitation, conditional approval of
the TSX and the AMEX of the Arrangement and the listing on the TSX and the
AMEX, as applicable, of the AcquireCo Shares, the Replacement Warrants and
the AcquireCo Shares underlying the Replacement Warrants as contemplated
by Section 3.2(c), and all applicable domestic and foreign statutory and
regulatory waiting periods shall have expired or have been terminated and
no unresolved material objection or opposition shall have been filed,
initiated or made during any applicable statutory or regulatory period;
and
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(e)
|
no
act, action, suit, proceeding, objection or opposition shall have been
threatened or taken before or by any Governmental Entity or by any elected
or appointed public official or private Person in Canada or elsewhere,
whether or not having the force of Law, and no Law, regulation, policy,
judgment, decision, order, ruling or directive (whether or not having the
force of Law) shall have been proposed, enacted, promulgated, amended or
applied, which in the sole judgment of TargetCo or AcquireCo (as
applicable), acting reasonably, in any such case makes illegal or
otherwise directly or indirectly restrains, enjoins or prohibits the
Arrangement or has had or, if the Arrangement and the transactions
contemplated by this Agreement was consummated, would result in a Material
Adverse Change in the affairs, operations or business of AcquireCo or
TargetCo, respectively, or would have a Material Adverse Effect on the
ability of the Parties to complete the
Arrangement.
|
The
foregoing conditions are for the mutual benefit of AcquireCo and TargetCo and
may be asserted by AcquireCo and TargetCo regardless of the circumstances and
may be waived by AcquireCo and TargetCo (with respect to such Party) in their
sole discretion, in whole or in part, at any time and from time to time without
prejudice to any other rights which AcquireCo or TargetCo may have.
5.2
|
Additional
Conditions to Obligations of
TargetCo
|
In
addition to the obligations set forth in Section 5.1, the obligations of
TargetCo to consummate the transactions contemplated hereby, and in particular
the Arrangement, is subject to the satisfaction, on or before the Effective Date
or such other time specified, of the following conditions:
|
(a)
|
the
Interim Order shall have been granted in form and substance satisfactory
to TargetCo, acting reasonably, and such order shall not have been set
aside or modified in a manner unacceptable to TargetCo, acting reasonably,
on appeal or otherwise;
|
|
(b)
|
the
Arrangement Resolution shall have been passed by the TargetCo Shareholders
in accordance with the Interim Order and in form and substance
satisfactory to TargetCo, acting
reasonably;
|
|
(c)
|
the
Final Order shall have been granted in form and substance satisfactory to
TargetCo, acting reasonably;
|
|
(d)
|
AcquireCo
shall not have breached and shall have performed each covenant to be
performed by it under this Agreement in all material respects; provided
that, other than a breach or a non-performance which is not curable,
AcquireCo shall have been provided with prompt written notice of such
breach or non-performance and shall have had ten Business Days (provided
that such period shall not extend beyond the Outside Date) from receipt of
such notice to cure, and shall have cured within such time period, such
breach or non-performance to the satisfaction of TargetCo, acting
reasonably;
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(e)
|
the
representations and warranties of AcquireCo contained in Section 4.2 of
this Agreement shall be true and correct in all respects as of the date of
this Agreement and as of the Effective Date as if made on and as of the
Effective Date (except: (i) for such representations and warranties which
address matters only as of a particular time, which shall have been true
and correct in all respects as of such particular time; and (ii) as such
representations and warranties may be affected by transactions expressly
required pursuant to this Agreement or pursuant to the written consent of
TargetCo), except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to all
such inaccuracies (considered collectively) do not constitute, and would
not reasonably be expected to have, a Material Adverse Effect on
AcquireCo; provided, however, that, for purposes of determining the truth
and completeness of such representations and warranties, all "Material
Adverse Effect" qualifications and other materiality qualifications
contained in such representations and warranties shall be disregarded;
provided that, other than a breach or untruth which is not curable,
AcquireCo shall have been provided with prompt written notice of such
breach or untruth and shall have had ten Business Days (provided that such
period shall not extend beyond the Outside Date) from receipt of such
notice to cure, and shall have cured within such time period, such breach
or untruth to the satisfaction of TargetCo, acting
reasonably;
|
|
(f)
|
no
Material Adverse Change with respect to AcquireCo shall have occurred from
and after the date hereof and prior to the Effective Date;
and
|
|
(g)
|
AcquireCo
shall have furnished TargetCo with certified copies of the resolutions
duly passed by the AcquireCo Board of Directors approving this Agreement
and the consummation of the transactions contemplated
hereby.
|
The
conditions in this Section 5.2 are for the exclusive benefit of TargetCo
and may be asserted by TargetCo regardless of the circumstances or may be waived
by TargetCo in its sole discretion, in whole or in part, at any time and from
time to time without prejudice to any other rights which TargetCo may
have.
5.3
|
Additional
Conditions to Obligations of
AcquireCo
|
In
addition to the obligations set forth in Section 5.1, the obligations of
AcquireCo to consummate the transactions contemplated hereby, and in particular
the Arrangement, is subject to the satisfaction, on or before the Effective Date
or such other time specified, of the following conditions:
|
(a)
|
on
or prior to March 29, 2011, the Interim Order shall have been granted in
form and substance satisfactory to AcquireCo, acting reasonably, and such
order shall not have been set aside or modified in a manner unacceptable
to AcquireCo, acting reasonably, on appeal or
otherwise;
|
|
(b)
|
the
Arrangement Resolution shall have been passed by the TargetCo Shareholders
on or prior to April 28, 2011, in accordance with the Interim Order and in
form and substance satisfactory to AcquireCo, acting
reasonably;
|
|
(c)
|
on
or prior to April 28, 2011, the Final Order shall have been granted in
form and substance satisfactory to AcquireCo, acting
reasonably;
|
|
(d)
|
TargetCo
shall have mailed the Information Circular and other documentation
required in connection with the TargetCo Meeting to TargetCo
Securityholders on or before March 29,
2011;
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(e)
|
TargetCo
shall have furnished AcquireCo
with:
|
|
(i)
|
certified
copies of the resolutions duly passed by the TargetCo Board of Directors
approving this Agreement and the consummation of the transactions
contemplated hereby; and
|
|
(ii)
|
certified
copies of the resolutions of TargetCo Shareholders duly passed at the
TargetCo Meeting, approving the Arrangement
Resolution;
|
|
(f)
|
TargetCo
shall not have breached and shall have performed each covenant to be
performed by it under this Agreement in all material respects; provided
that, other than a breach or a non-performance which is not curable,
TargetCo shall have been provided with prompt written notice of such
breach or non-performance and shall have had ten Business Days (provided
that such period shall not extend beyond the Outside Date) from receipt of
such notice to cure, and shall have cured within such time period, such
breach or non-performance to the satisfaction of AcquireCo, acting
reasonably;
|
|
(g)
|
the
representations and warranties of TargetCo contained in Section 4.1 of
this Agreement shall be true and correct in all respects as of the date of
this Agreement and as of the Effective Date as if made on and as of the
Effective Date (except: (i) for such representations and warranties which
address matters only as of a particular time, which shall have been true
and correct in all respects as of such particular time; and (ii) as such
representations and warranties may be affected by transactions expressly
required or contemplated pursuant to this Agreement or pursuant to the
written consent of AcquireCo), except that any inaccuracies in such
representations and warranties will be disregarded if the circumstances
giving rise to all such inaccuracies (considered collectively) do not
constitute, and would not reasonably be expected to have, a Material
Adverse Effect on TargetCo; provided, however, that, for purposes of
determining the truth and completeness of such representations and
warranties, all "Material Adverse Effect" qualifications and other
materiality qualifications contained in such representations and
warranties shall be disregarded; provided that, other than a breach or
untruth which is not curable, TargetCo shall have been provided with
prompt written notice of such breach or untruth and shall have had ten
Business Days (provided that such period shall not extend beyond the
Outside Date) from receipt of such notice to cure, and shall have cured
within such time period, such breach or untruth to the satisfaction of
AcquireCo, acting reasonably;
|
|
(h)
|
no
Material Adverse Change with respect to TargetCo shall have occurred or
have been ascertained by AcquireCo from and after the date hereof and
prior to the Effective Date;
|
|
(i)
|
AcquireCo
shall have received (i) resignations from the directors and officers of
TargetCo and its subsidiaries in form and substance satisfactory to
AcquireCo, acting reasonably, which resignations shall be effective on or
immediately following the Effective Time, and (ii) mutual releases
executed by the Parties and the directors and officers of TargetCo and
each of its subsidiaries, which mutual releases shall be delivered and
effective immediately following the Effective Time in form and substance
satisfactory to AcquireCo and such directors and officers acting
reasonably;
|
|
(j)
|
AcquireCo
shall be satisfied, acting reasonably, that there will be no options,
warrants or other rights (including any TargetCo Options and TargetCo
Warrants) requiring the issuance of any securities of TargetCo or any of
its subsidiaries or any securities convertible into, or exchangeable for,
or otherwise evidencing a right to acquire any securities or TargetCo or
any of its subsidiaries after giving effect to the
Arrangement;
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(k)
|
the
Administrative Services Agreement shall have been terminated without
additional obligation or liability of TargetCo or AcquireCo on terms
acceptable to AcquireCo, and TargetCo, acting reasonably, and AcquireCo
shall have received an unconditional release from Connacher Oil and Gas
Limited in respect of the same, on terms acceptable to AcquireCo, acting
reasonably;
|
|
(l)
|
AcquireCo
shall have been provided with a copy (stored on working electronic media
and complete and accurate as of immediately prior to the Effective Time)
of all electronic and computer data that pertains to the business and
operations of TargetCo (both current and historical) which is contained on
all computer systems and servers used by TargetCo in the operation of its
business (including those which may be owned or under the control of
Connacher Oil and Gas Limited), including, in particular, all electronic
email and payroll data;
|
|
(m)
|
AcquireCo
shall have received written confirmation from Connacher Oil and Gas
Limited, in form satisfactory to AcquireCo, acting reasonably, that from
and after the Effective Time, there will be no outstanding actions, causes
of action, suits, claims, demands, covenants, obligations, contracts,
liabilities, debts, duties, costs and damages in favour of Connacher Oil
and Gas Limited from TargetCo relating to the Puesto Xxxxxxx
Agreement;
|
|
(n)
|
holders
of not greater than 5% of the outstanding TargetCo Shares shall have
validly exercised rights of dissent in respect of the Arrangement that
have not been withdrawn as of the Effective Date;
and
|
|
(o)
|
there
shall not have been more than 187,743,714 TargetCo Shares outstanding on
the Effective Date, including any TargetCo Shares issuable pursuant to any
TargetCo Securities.
|
The
conditions in this Section 5.3 are for the exclusive benefit of AcquireCo
and may be asserted by AcquireCo regardless of the circumstances or may be
waived by AcquireCo in its sole discretion, in whole or in part, at any time and
from time to time without prejudice to any other rights which AcquireCo may
have.
5.4
|
Notice
and Effect of Failure to Comply with Representations, Warranties and
Covenants.
|
|
(a)
|
Each
of TargetCo and AcquireCo shall give prompt notice to the other of the
occurrence, or failure to occur, at any time from the date hereof to the
Effective Date of any event or state of facts which occurrence or failure
would, or would be reasonably likely to: (i) cause any of the
representations or warranties of such Party contained herein to be untrue
or inaccurate in any material respect (provided that such materiality
qualifier shall not apply to any representations and warranties containing
qualifiers as to materiality), or (ii) result in the failure to comply
with or satisfy any covenant, or agreement to be complied with by such
Party hereunder; provided, however, that no such notification will affect
the representations or warranties of the Parties, the covenants or
agreements of the Parties or the conditions to the obligations of the
Parties hereunder.
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(b)
|
If
any of the conditions precedent set forth in Sections 5.1, 5.2 or
5.3 hereof shall not be complied with or waived by the Party or
Parties for whose benefit such conditions are provided on or before the
date required for the performance thereof, then a Party for whose benefit
the condition precedent is provided may terminate this Agreement as
provided in Section 8.1; provided that, prior to the filing of the
Articles of Arrangement for the purpose of giving effect to the
Arrangement, the Party intending to rely thereon has delivered a written
notice to the Other Party, specifying in reasonable detail all breaches of
covenants, representations and warranties or other matters which the Party
delivering such notice is asserting as the basis for the non-fulfillment
of the applicable conditions precedent, and shall provide in such notice
that the Other Party shall be entitled to cure any breach of a covenant or
representation and warranty or other matters within ten Business Days
after receipt of such notice (except that no cure period shall be provided
for a breach which by its nature cannot be cured and, in no event, shall
any cure period extend beyond the Outside Date), and the Other Party shall
not have cured such breach of a covenant or representation and warranty or
other matters within such time period. More than one such
notice may be delivered by a Party. If such notice has been
delivered prior to the TargetCo Meeting, TargetCo or AcquireCo may elect
to postpone the TargetCo Meeting until the expiry of such cure
period.
|
5.5
|
Satisfaction
of Conditions
|
The
conditions set out in this Article 5 are conclusively deemed to have been
satisfied, waived or released when, with the agreement of the Parties, the
Articles of Arrangement are filed under the CBCA to give effect to the
Arrangement.
ARTICLE
6
AGREEMENT
AS TO DAMAGES AND OTHER ARRANGEMENTS
6.1
|
AcquireCo
Damages
|
If at any
time after the execution of this Agreement:
|
(a)
|
the
TargetCo Board of Directors:
|
|
(i)
|
withdraws,
modifies, qualifies or changes in any manner which in the opinion of
AcquireCo, acting reasonably, is adverse to AcquireCo, its determination,
approval or recommendation with respect to the Arrangement referred to in
Section 3.1(d) and Section 4.1(ww), resolves to do so or makes a
public announcement to that effect (unless AcquireCo is then in material
breach of its obligations hereunder and such withdrawal, modification,
change or qualification relates to such
breach);
|
|
(ii)
|
recommends
that TargetCo Shareholders deposit or tender their TargetCo Shares to,
vote in favour of or otherwise accept, an Acquisition Proposal;
or
|
|
(iii)
|
fails
to publicly reaffirm and maintain its determination, approval or
recommendation with respect to the Arrangement to the TargetCo
Securityholders, consistent with Section 3.1(d) and Section 4.1(ww) as
soon as practicable (and in any event within three Business Days) of any
written request to do so by AcquireCo or after the public announcement or
commencement of, or the public announcement of a bona fide intention to
make or propose, any bona fide Acquisition
Proposal or any variation of an existing bona fide Acquisition
Proposal (or if the TargetCo Meeting is scheduled to occur prior to the
end of that three Business Days, prior to the TargetCo Meeting) (unless
AcquireCo is then in material breach of its obligations hereunder and such
failure relates to such breach);
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(b)
|
this
Agreement is terminated by TargetCo pursuant to Section 8.1(b) to permit
TargetCo to enter into a binding written agreement with any Person in
respect of a Superior Proposal (other than an Acceptable Confidentiality
Agreement permitted by Section
3.4);
|
|
(c)
|
TargetCo
shall have breached or shall not have performed any covenant to be
performed by it under this Agreement, or if any representation or warranty
of TargetCo shall have been or become untrue, which breach,
non-performance or untruth (individually or in the aggregate) causes or
could reasonably be expected to cause a Material Adverse Change in respect
of TargetCo or materially impedes or could reasonably be expected to
impede the completion of the Arrangement and provided that, other than a
breach, non-performance or untruth which is not curable (which for greater
certainty shall include any breach of Section 3.4 or this Section
6.1), TargetCo shall have been provided with prompt written notice of such
breach, non-performance or untruth and shall have had ten Business Days
from receipt of such notice (or, if the Outside Date is less than ten
Business Days from the date of such notice, such lesser period of time) to
cure, and shall not have cured within such time period, such breach,
non-performance or untruth to the satisfaction of AcquireCo, acting
reasonably; or
|
|
(d)
|
a
bona fide
Acquisition Proposal (or amendment thereto) is publicly announced, offered
or made to the TargetCo Shareholders or to TargetCo prior to the TargetCo
Meeting and has not expired or been withdrawn at the time of the TargetCo
Meeting, and the TargetCo Shareholders do not approve the Arrangement or
the Arrangement is not submitted for their approval and such Acquisition
Proposal (or any other Acquisition Proposal) is consummated within 12
months of the date of the termination of this
Agreement.
|
TargetCo
shall pay to AcquireCo (or as directed by AcquireCo) $7.9 million cash (the
"TargetCo Termination
Fee"). Such payment shall be made to an account designated by
AcquireCo, within two Business Days after the first to occur of the events
described above. Following the occurrence of any of the events
described above but prior to the payment the TargetCo Termination Fee, TargetCo
shall be deemed to hold the TargetCo Termination Fee in trust for
AcquireCo. TargetCo shall only be obligated to make one payment
pursuant to this Section 6.1. Each Party acknowledges that the
payment amount set out in this Section 6.1 is payment of liquidated damages
which is a genuine pre-estimate of the damages which AcquireCo will suffer or
incur as a result of the event giving rise to such damages and resultant
termination of this Agreement and are not penalties. TargetCo
irrevocably waives any right it may have to raise as a defence that any such
liquidated damages are excessive or punitive. For greater certainty,
the Parties agree that the payment of the TargetCo Termination Fee pursuant to
this Section 6.1 is the sole monetary remedy of AcquireCo under this
Agreement. Notwithstanding the foregoing, the foregoing limitations
shall not apply in the event of fraud or wilful or intentional breach or
non-performance of this Agreement by TargetCo. Nothing herein shall
preclude AcquireCo from seeking injunctive relief to restrain any breach or
threatened breach of the covenants or agreements set forth in this Agreement or
the TargetCo Confidentiality Agreement or otherwise to obtain specific
performance of any of such act, covenants or agreements, without the necessity
of posting bond or security in connection therewith.
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6.2
|
TargetCo
Damages
|
If at any
time after the execution of this Agreement, AcquireCo shall have breached or
shall not have performed any covenant to be performed by it under this
Agreement, or if any representation or warranty of AcquireCo shall have been or
become untrue, which breach, non-performance or untruth (individually or in the
aggregate) causes or could reasonably be expected to cause a Material Adverse
Change in respect of AcquireCo or materially impedes or could reasonably be
expected to impede the completion of the Arrangement, and provided that, other
than a breach, non-performance or untruth which is not curable, AcquireCo shall
have been provided with prompt written notice of such breach, non-performance or
untruth and shall have had ten Business Days from receipt of such notice (or, if
the Outside Date is less than ten Business Days from the date of such notice,
such lesser period of time) to cure, and shall have cured within such time
period, such breach, non-performance or untruth to the satisfaction of TargetCo,
acting reasonably, AcquireCo shall pay to TargetCo (or as directed by TargetCo)
$3.0 million cash (the "AcquireCo Termination
Fee"). Such payment shall be made to an account designated by
TargetCo, within two Business Days after the first to occur of the events
described above. Following the occurrence of any of the events
described above but prior to the payment the AcquireCo Termination Fee,
AcquireCo shall be deemed to hold the AcquireCo Termination Fee in trust for
TargetCo. AcquireCo shall only be obligated to make one payment
pursuant to this Section 6.2. Each Party acknowledges that the
payment amount set out in this Section 6.2 is payment of liquidated damages
which is a genuine pre-estimate of the damages which TargetCo will suffer or
incur as a result of the event giving rise to such damages and resultant
termination of this Agreement and are not penalties. AcquireCo
irrevocably waives any right it may have to raise as a defence that any such
liquidated damages are excessive or punitive. For greater certainty,
the Parties agree that the payment of the AcquireCo Termination Fee pursuant to
this Section 6.2 is the sole monetary remedy of TargetCo under this
Agreement. Notwithstanding the foregoing, the foregoing limitations
shall not apply in the event of fraud or wilful or intentional breach or
non-performance of this Agreement by AcquireCo. Nothing herein shall
preclude TargetCo from seeking injunctive relief to restrain any breach or
threatened breach of the covenants or agreements set forth in this Agreement or
the AcquireCo Confidentiality Agreement otherwise to obtain specific performance
of any of such act, covenants or agreements, without the necessity of posting
bond or security in connection therewith.
6.3
|
Fees
and Expenses
|
Subject
to Sections 6.1 and 6.2 or as otherwise provided herein, all fees, costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees, costs or
expenses.
ARTICLE
7
AMENDMENT
7.1
|
Amendment
of Agreement
|
This
Agreement (excluding the Plan of Arrangement) may at any time and from time to
time before or after the holding of the TargetCo Meeting be amended by written
agreement of the Parties hereto without, subject to Applicable Laws, further
notice to or authorization on the part of the TargetCo Securityholders and any
such amendment may, without limitation:
|
(a)
|
change
the time for performance of any of the obligations or acts of the
Parties;
|
|
(b)
|
waive
any inaccuracies or modify any representation or warranty contained herein
or in any document delivered pursuant
hereto;
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(c)
|
waive
compliance with or modify any of the covenants herein contained and waive
or modify performance of any of the obligations of the Parties;
or
|
|
(d)
|
waive
compliance with or modify any other conditions precedent contained
herein,
|
provided
that no such amendment which is agreed to after the Parties are granted the
Interim Order by the Court may reduce or materially adversely affect the
consideration to be received by TargetCo Securityholders or without approval by
the TargetCo Securityholders given in the same manner as required for the
approval of the Arrangement or as may be ordered by the Court.
7.2
|
Amendment
of Plan of Arrangement
|
|
(a)
|
The
Parties may agree to amend the Plan of Arrangement at any time and from
time to time prior to the Effective Time, provided that each such
amendment must be: (i) set out in writing; (ii) filed with the
Court and, if made following the TargetCo Meeting, approved by the Court;
and (iii) communicated to TargetCo Securityholders if and as required by
the Court.
|
|
(b)
|
Any
amendment to the Plan of Arrangement agreed to by the Parties at any time
prior to or at the TargetCo Meeting, which is proposed and accepted by the
TargetCo Shareholders voting at the TargetCo Meeting, shall become part of
the Plan of Arrangement for all
purposes.
|
|
(c)
|
Any
amendment to the Plan of Arrangement that is approved by the Court
following the TargetCo Meeting shall be effective only if it is consented
to by each of the Parties.
|
ARTICLE
8
TERMINATION
8.1
|
Termination
|
This
Agreement may be terminated by written notice promptly given to the Other Party
hereto, at any time prior to the Effective Time:
|
(a)
|
by
either AcquireCo or TargetCo at any time following the Outside Date
provided that, if the Effective Time has not occurred prior to the Outside
Date as a result of the breach by the Party seeking to terminate this
Agreement pursuant to this Section 8.1(a) of any covenant, obligation,
representation or warranty of such Party under this Agreement, such Party
shall not be permitted to so terminate this Agreement pursuant to this
Section 8.1(a);
|
|
(b)
|
by
TargetCo to permit TargetCo to enter into a binding definitive acquisition
agreement with any Person in respect of a Superior Proposal (other than an
Acceptable Confidentiality Agreement permitted by Section 3.4); provided
that, TargetCo has complied with the provisions of Section 3.4 and
TargetCo pays the TargetCo Termination Fee to AcquireCo prior to or
concurrently with such termination;
|
|
(c)
|
by
AcquireCo if the TargetCo Termination Fee becomes payable by TargetCo to
AcquireCo in any of the circumstances contemplated by Section 6.1(a) or
Section 6.1(c);
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(d)
|
by
AcquireCo if the AcquireCo Termination Fee becomes payable by AcquireCo to
TargetCo and such AcquireCo Termination Fee is actually
paid;
|
|
(e)
|
by
TargetCo if the AcquireCo Termination Fee becomes
payable;
|
|
(f)
|
by
either AcquireCo or TargetCo if any Laws make the making or completion of
the Arrangement or the transactions contemplated by this Agreement illegal
or otherwise prohibited; provided that, if prohibited by way of order,
decree, ruling or similar action by any Securities Regulatory Authority or
other Governmental Entity, such order decree, ruling or other action shall
have become final and non-appealable and the Party seeking to terminate
this Agreement pursuant to this Section 8.1(f) shall have used all
commercially reasonable efforts to remove such order, decree, ruling or
other action;
|
|
(g)
|
by
mutual written consent of AcquireCo and TargetCo;
or
|
|
(h)
|
as
provided in Section 5.4(b).
|
8.2
|
Effect
of Termination
|
In the
event of the termination of this Agreement as provided in Section 8.1, this
Agreement shall forthwith become void and have no further force or effect and
there shall be no obligation or liability on the part of AcquireCo or TargetCo
hereunder, except as set forth in Sections 6.1, 6.2 and 6.3 and this Article 8,
which provisions shall survive the termination of this Agreement. Nothing
contained in this Section 8.2 shall relieve any Party from liability for any
wilful breach of any provision of this Agreement, from any fraud or intentional
misrepresentation and from any obligation to pay the fees and expenses set forth
in Sections 6.1, 6.2 and 6.3. No termination of this Agreement shall
affect the obligations of the Parties pursuant to the TargetCo Confidentiality
Agreement or the AcquireCo Confidentiality Agreement, as applicable, except to
the extent specified therein. Furthermore, for greater
certainty, Sections 10.9 and 10.10 shall survive any termination of this
Agreement following the time at which AcquireCo appoints or elects to the
TargetCo Board of Directors the individuals designated by AcquireCo pursuant to
Section 2.7.
8.3
|
Waiver
|
AcquireCo
and TargetCo may: (i) extend the time for the performance of any of the
obligations or other acts of the Other Party; (ii) waive compliance with any of
the Other Party's agreements or the fulfillment of any conditions to its own
obligations contained herein; or (iii) waive inaccuracies in any of the Other
Parties representations or warranties contained herein or in any document
delivered by the Other Party; provided, however, that any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such Party.
- 62
-
ARTICLE
9
NOTICES
9.1
|
Notices
|
All
notices that may or are required to be given pursuant to any provision of this
Agreement are to be given or made in writing and served personally or sent by
facsimile transmission:
|
(a)
|
in
the case of TargetCo, to:
|
Petrolifera
Petroleum Limited
000, 000
– 0xx Xxxxxx
XX
Xxxxxxx,
Xxxxxxx X0X 0X0
|
Attention:
|
Xxxxxxx
X. Xxxxxxx, Executive Chairman or Xxxx X. Wine, President and Chief
Operating Officer
|
Facsimile:
|
(000)
000-0000
|
with a
copy to:
Xxxxxxx
Xxxxx LLP
3700
Canterra Tower
000 Xxxxx
Xxxxxx X.X.
Xxxxxxx
Xxxxxxx X0X 0X0
|
Attention:
|
Xxxxxxxx
X. Xxxxxxx
|
|
Facsimile:
|
(000)
000-0000
|
|
(b)
|
in
the case of AcquireCo to:
|
Gran
Tierra Energy Inc.
300, 000
– 00xx Xxxxxx
XX
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention:
|
Xxxx
Xxxxxxxx, President and Chief Executive
Officer
|
|
Facsimile:
|
(000)
000-0000
|
with a
copy to:
Blake,
Xxxxxxx & Xxxxxxx LLP
3500, 000
– 0xx Xxxxxx
XX
Xxxxxxx,
Xxxxxxx X0X 0X0
|
Attention:
|
Xxxxx
X. Xxxxxxx and Xxxxx W.N. Xxxxxx
|
|
Facsimile:
|
(000)
000-0000
|
or such
other address as the Parties may, from time to time, advise to the other Parties
hereto by notice in writing. The date or time of receipt of any such notice will
be deemed to be the date of delivery or the time such telecopy is
received.
- 63
-
ARTICLE
10
GENERAL
10.1
|
Binding
Effect
|
This
Agreement shall be binding upon and enure to the benefit of the Parties
hereto.
10.2
|
Assignment
|
No Party
to this Agreement may assign any of its rights or obligations under this
Agreement without prior written consent of the Other Party.
10.3
|
Disclosure
|
Each
Party shall receive the prior consent, not to be unreasonably withheld or
delayed, of the Other Party prior to issuing or permitting any director,
officer, employee or agent to issue, any press release or other written
statement with respect to this Agreement or the transactions contemplated
hereby. Notwithstanding the foregoing, if any Party is required by law or
administrative regulation or requirement of any stock exchange to make any
disclosure relating to the transactions contemplated herein, such disclosure may
be made, but that Party will consult with the Other Party to the extent
reasonably practicable as to the wording of such disclosure prior to its being
made. Each of the Parties agrees that, promptly after the entering
into of this Agreement, TargetCo and AcquireCo shall jointly issue a press
release, which press release shall be satisfactory in form and substance to the
other Parties acting reasonably.
10.4
|
Costs
|
Except as
contemplated herein (including Article 6), each Party hereto covenants and
agrees to bear its own costs and expenses in connection with the transactions
contemplated hereby, whether or not the Arrangement is completed.
10.5
|
Severability
|
If any
one or more of the provisions or parts thereof contained in this Agreement
should be or become invalid, illegal or unenforceable in any respect in any
jurisdiction, the remaining provisions or parts thereof contained herein shall
be and shall be conclusively deemed to be, as to such jurisdiction, severable
therefrom and:
|
(a)
|
the
validity, legality or enforceability of such remaining provisions or parts
thereof shall not in any way be affected or impaired by the severance of
the provisions or parts thereof severed;
and
|
|
(b)
|
the
invalidity, illegality or unenforceability of any provision or part
thereof contained in this Agreement in any jurisdiction shall not affect
or impair such provision or part thereof or any other provisions of this
Agreement in any other
jurisdiction.
|
10.6
|
Further
Assurances
|
Each
Party hereto shall, from time to time and at all times hereafter, at the request
of the Other Party hereto, but without further consideration, do all such
further acts, and execute and deliver all such further documents and instruments
as may be reasonably required to fully perform and carry out the terms and
intent hereof.
- 64
-
10.7
|
Time
of Essence
|
Time
shall be of the essence of this Agreement.
10.8
|
Governing
Law
|
This
Agreement shall be governed by and construed in accordance with the Laws of the
Province of Alberta and the Parties hereto irrevocably attorn to the
jurisdiction of the courts of the Province of Alberta.
10.9
|
Officers'
and Directors' Insurance and
Indemnities.
|
TargetCo
shall be permitted to secure directors' and officers' liability insurance
coverage, on terms satisfactory to AcquireCo, acting reasonably, for TargetCo's
current and former directors and officers on a "trailing" or "run off" basis
from and after the Effective Time and for a period of up to ten years (subject
to availability), provided that the premiums for such coverage do not exceed
$412,500. If a trailing policy is not available, then AcquireCo
agrees that, for the entire period from the Effective Time until six years after
the Effective Time, AcquireCo will cause TargetCo or any successor to TargetCo
to maintain TargetCo's current directors' and officers' insurance policy (a true
and correct copy of which TargetCo has provided to AcquireCo prior to or as at
the date hereof) or an equivalent policy, subject in either case to terms and
conditions no less advantageous to the directors and officers of TargetCo than
those contained in the policy in effect on the date hereof, for all present and
former directors and officers of TargetCo, covering claims made prior to or
within six years after the Effective Time.
AcquireCo
agrees that, if it acquires TargetCo Shares pursuant to the Arrangement, it
shall cause each of TargetCo and its subsidiaries, and any successor thereto, to
fulfill its obligations pursuant to indemnities provided or available to past
and present officers and directors of TargetCo and its subsidiaries pursuant to
the provisions of the articles, by-laws or similar constating documents of
TargetCo and its subsidiaries, applicable corporate legislation and any written
indemnity agreements between any of TargetCo or its subsidiaries and its current
and past directors and officers, true and correct copies of which have been
provided to AcquireCo.
10.10
|
Third
Party Beneficiaries
|
The
provisions of Section 10.9 are: (i) intended for the benefit of
all present and former directors and officers of TargetCo and its subsidiaries,
as and to the extent applicable in accordance with their terms, and shall be
enforceable by each of such persons and his or her heirs, executors
administrators and other legal representatives (collectively, the "Director and Officer Third Party
Beneficiaries") and TargetCo shall hold the rights and benefits of
Section 10.9 in trust for and on behalf of the Directors and Officer Third Party
Beneficiaries and TargetCo hereby accepts such trust and agrees to hold the
benefit of and enforce performance of such covenants on behalf of the Director
and Officer Third Party Beneficiaries; and (ii) are in addition to, and not in
substitution for, any other rights that the Directors and Officer Third Party
Beneficiaries may have by contract or otherwise.
- 65
-
10.11
|
Counterparts
|
This
Agreement may be executed by facsimile or other electronic signature and in
counterparts, each of which shall be deemed an original, and all of which
together constitute one and the same instrument.
IN WITNESS WHEREOF the Parties
have executed this Agreement as of the date first above written.
GRAN
TIERRA ENERGY INC.
|
PETROLIFERA
PETROLEUM LIMITED
|
|||
By:
|
/s/Xxxxx X’Xxxxx
|
By:
|
/s/ Xxxx X. Wine
|
|
Name:
Xxxxx X’Xxxxx
|
Name: Xxxx
X. Wine
|
|||
Title: Chief
Operating Officer
|
Title: President
and Chief Executive Officer
|
|||
By:
|
/s/ Xxxxxx Xxxx
|
By:
|
/s/ Xxxxxxx X. Xxxxx
|
|
Name: Xxxxxx
Xxxx
|
Name: Xxxxxxx
X. Xxxxx
|
|||
Title: Chief
Operating Officer
|
Title: Vice
President Finance and Chief Financial
Officer
|
- 66
-
SCHEDULE
1.1(kkk)
PLAN
OF ARRANGEMENT
under
Section 192 of the
Canada
Business Corporations Act
ARTICLE 1
INTERPRETATION
1.1
|
In
this Plan of Arrangement, the following terms have the following
meanings:
|
|
(a)
|
"ABCA" means the Business Corporations
Act (Alberta), as amended, including the regulations promulgated
thereunder.
|
|
(b)
|
"AcquireCo" means Gran
Tierra Energy Inc., a corporation formed under the Laws of
Nevada.
|
|
(c)
|
"AcquireCo Shares" means
the common stock of AcquireCo, US$0.001 par
value.
|
|
(d)
|
"AcquireCo Replacement
Warrant" means a warrant to acquire one AcquireCo Share issued
pursuant to the AcquireCo Warrant Indenture in exchange for the TargetCo
Warrants.
|
|
(e)
|
"AcquireCo Warrant
Indenture" means the warrant indenture to be entered into as of the
Effective Date between AcquireCo and a warrant trustee selected by
AcquireCo, providing for the issuance of the AcquireCo Replacement
Warrants.
|
|
(f)
|
"AMEX" means the NYSE
Amex LLC.
|
|
(g)
|
"Arrangement", "Plan of Arrangement",
"herein", "hereof", "hereto", "hereunder" and similar
expressions mean and refer to this plan of arrangement as supplemented,
modified or amended, and not to any particular article, section or other
portion hereof.
|
|
(h)
|
"Arrangement Agreement"
means the arrangement agreement dated as of January 17, 2011 between
AcquireCo and TargetCo with respect to this Arrangement, and all
amendments thereto.
|
|
(i)
|
"Articles of Arrangement"
means the articles of arrangement in respect of this Arrangement required
under subsection 192(6) of the CBCA to be sent to the Director after the
Final Order has been granted, giving effect to this
Arrangement.
|
|
(j)
|
"Business Day" means any
day other than a Saturday, Sunday or statutory holiday in Calgary,
Alberta.
|
|
(k)
|
"CBCA" means the Canada Business Corporations
Act, as amended, including the regulations promulgated
thereunder.
|
|
(l)
|
"Certificate" means the
certificate which may be issued by the Director pursuant to
subsection 192(7) of the CBCA or, if no certificate is to be issued,
the proof of filing in respect of this
Arrangement.
|
|
(m)
|
"Court" means the Court
of Queen's Bench of Alberta.
|
|
(n)
|
"Depositary" means
Computershare Trust Company of Canada, or such other Person as may be
designated by AcquireCo and
TargetCo.
|
|
(o)
|
"Director" means the
Director duly appointed under section 260 of the
CBCA.
|
|
(p)
|
"Dissenting
Securityholders" means registered holders of TargetCo Shares who validly
exercise the rights of dissent with respect to this Arrangement provided
to them under the Interim Order and whose dissent rights remain valid
immediately before the Effective
Time.
|
|
(q)
|
"Effective Date" means
the date this Arrangement is effective under the
CBCA.
|
|
(r)
|
"Effective Time" means
the time at which the Articles of Arrangement are filed with the Director
under the CBCA.
|
|
(s)
|
"Exchange Ratio" means
0.1241.
|
|
(t)
|
"Final Order" means the
final order of the Court approving this Arrangement pursuant to subsection
192(4) of the CBCA to be applied for following the TargetCo Meeting as
such order may be affirmed, amended or modified by any court of competent
jurisdiction.
|
|
(u)
|
"Governmental Entity"
means: (i) any 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, whether domestic or foreign; (ii) any subdivision, agent,
commission, board, regulatory authority, administrative agency or other
authority of any of the foregoing; (iii) any self-regulatory authority,
including the TSX and the AMEX; or (iv) any quasi-governmental or private
body exercising any regulatory, expropriation or taxing authority under or
for the account of any of the
foregoing.
|
|
(v)
|
"Interim Order" means the
interim order of the Court under subsection 192(4) of the CBCA containing
declarations and directions with respect to the TargetCo Meeting and this
Arrangement, as such order may be affirmed, amended or modified by the
Court.
|
|
(w)
|
"Letter of Transmittal"
means the letter of transmittal to be sent to the holders of TargetCo
Shares and TargetCo Warrants pursuant to which holders of TargetCo Shares
and TargetCo Warrants are required to deliver certificates representing
their TargetCo Shares and TargetCo Warrants, as applicable, to receive the
AcquireCo Shares and/or AcquireCo Replacement Warrants, as applicable,
issuable or payable to them pursuant to this
Arrangement.
|
|
(x)
|
"Person" includes any
individual, sole proprietorship, partnership, firm, joint venture, limited
partnership, limited liability company, unlimited liability company,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body, corporation, or Governmental Entity, and, where
the context requires, any of the foregoing when they are acting as
trustee, executor, administrator or other legal representatives of any
other entity, whether or not having legal
status.
|
|
(y)
|
"Purchaser" means
●.
|
|
(z)
|
"TargetCo" means
Petrolifera Petroleum Limited, a corporation formed under the Federal laws
of Canada.
|
|
(aa)
|
"TargetCo Meeting" means
the special meeting of TargetCo Shareholders to be held to consider, among
other things, this Arrangement and related matters, and any adjournment
thereof.
|
|
(bb)
|
"TargetCo Securities"
means, collectively, the TargetCo Shares and the TargetCo
Warrants.
|
|
(cc)
|
"TargetCo
Securityholders" means, collectively, the TargetCo Shareholders and
the TargetCo Warrantholders.
|
|
(dd)
|
"TargetCo Shares" means
the common shares of TargetCo, as constituted on the date
hereof.
|
- 2
-
|
(ee)
|
"TargetCo Shareholders"
means the registered or beneficial holders of TargetCo Shares, including
TargetCo Shares acquired upon the exercise of TargetCo Warrants and any
other securities convertible into TargetCo
Shares.
|
|
(ff)
|
"TargetCo Warrantholders" means
the holders from time to time of the TargetCo
Warrants.
|
|
(gg)
|
"TargetCo Warrant
Indenture" means the warrant indenture dated August 28, 2009
between TargetCo and Valiant Trust Company, as the same may be amended
from time to time.
|
|
(hh)
|
"TargetCo Warrants" means
warrants to acquire TargetCo Shares issued pursuant to the TargetCo
Warrant Indenture.
|
|
(ii)
|
"Tax Act" means the Income Tax Act
(Canada), including the regulations promulgated thereunder, as amended
from time to time.
|
|
(jj)
|
"TSX" means the Toronto
Stock Exchange.
|
1.2
|
The
division of this Plan of Arrangement into articles and sections and the
insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Plan of
Arrangement.
|
1.3
|
Unless
reference is specifically made to some other document or instrument, all
references herein to articles and sections are to articles and sections of
this Plan of Arrangement.
|
1.4
|
Unless
the context otherwise requires, words importing the singular number shall
include the plural and vice versa; and words
importing any gender shall include all
genders.
|
1.5
|
In
the event that the date on which any action is required to be taken
hereunder by any of the parties is not a Business Day in the place where
the action is required to be taken, such action shall be required to be
taken on the next succeeding day which is a Business Day in such
place.
|
1.6
|
References
in this Plan of Arrangement to any statute or sections thereof shall
include such statute as amended or substituted and any regulations
promulgated thereunder from time to time in
effect.
|
1.7
|
All
dollar amounts referred to in this Plan of Arrangement are in Canadian
funds, unless otherwise indicated
herein.
|
ARTICLE 2
2.1
|
This
Plan of Arrangement is made pursuant to the Arrangement
Agreement.
|
2.2
|
This
Plan of Arrangement, upon the filing of the Articles of Arrangement and
the issue of the Certificate, if any, shall become effective on, and be
binding on and after, the Effective Time on: (i) the TargetCo
Securityholders; (ii) TargetCo; (iii) Purchaser; and (iv)
AcquireCo.
|
2.3
|
The
Articles of Arrangement and Certificate shall be filed and issued,
respectively, with respect to this Arrangement in its
entirety. The Certificate shall be conclusive evidence that
this Arrangement has become effective and that each of the provisions of
Article 3 has become effective in the sequence set out
therein.
|
- 3
-
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 in the following order without any further act or
formality except as otherwise provided
herein:
|
Dissenting
Securityholders
|
(a)
|
the
TargetCo Shares held by Dissenting Securityholders shall be deemed to have
been transferred to TargetCo (free of any claims) and cancelled and such
Dissenting Securityholders shall cease to have any rights as TargetCo
Shareholders other than the right to be paid the fair value of their
TargetCo Shares in accordance with
Article 4;
|
Exchange
of TargetCo Shares
|
(b)
|
the
TargetCo Shares held by TargetCo Shareholders (other than those previously
held by Dissenting Securityholders) shall be sold, assigned and
transferred to Purchaser (free and clear of all liens, claims and
encumbrances) in exchange for such number of AcquireCo Shares as is equal
to the number of TargetCo Shares so exchanged, multiplied by the Exchange
Ratio; and
|
Exchange
of TargetCo Warrants
|
(c)
|
each
outstanding TargetCo Warrant shall be sold, assigned and transferred to
AcquireCo in exchange for a number of AcquireCo Replacement Warrants equal
to the product of one multiplied by the Exchange Ratio; the exercise price
for each such AcquireCo Replacement Warrant will be equal to the exercise
price of the TargetCo Warrant so exchanged divided by the Exchange Ratio
(rounded up to the nearest whole cent); and the expiry date of such
AcquireCo Replacement Warrant will be the same as for the TargetCo Warrant
so exchanged. The AcquireCo Replacement Warrants shall be
governed by the AcquireCo Warrant
Indenture.
|
3.2
|
With
respect to each TargetCo Securityholder (other than Dissenting
Securityholders), at the Effective
Time:
|
|
(a)
|
upon
the exchange of TargetCo Shares for AcquireCo Shares pursuant to
Subsection 3.1(b):
|
|
(i)
|
each
former TargetCo Shareholder shall cease to be the holder of the TargetCo
Shares so exchanged and the name of each such TargetCo Shareholder shall
be removed from the register of holders of TargetCo
Shares;
|
|
(ii)
|
Purchaser
shall become the holder of the TargetCo Shares so exchanged and shall be
added to the register of holders of TargetCo Shares in respect thereof;
and
|
|
(iii)
|
each
such former TargetCo Shareholder shall become a holder of the AcquireCo
Shares so exchanged, which AcquireCo Shares will be issued and held in an
agency relationship by the Depositary for the benefit of such former
TargetCo Shareholder and released from such agency relationship to such
former TargetCo Shareholder upon the delivery to the Depositary of a duly
completed Letter of Transmittal, together with the certificates
representing such TargetCo Shares, and such former TargetCo Shareholder
shall be added to the register of holders of AcquireCo Shares on the
Effective Date; and
|
- 4
-
|
(b)
|
upon
the exchange of TargetCo Warrants for AcquireCo Replacement Warrants
pursuant to Subsection 3.1(c):
|
|
(i)
|
each
former TargetCo Warrantholder shall cease to be the holder of the TargetCo
Warrants so exchanged and the name of each such TargetCo Warrantholder
shall be removed from the register of holders of TargetCo
Warrants;
|
|
(ii)
|
AcquireCo
shall become the holder of the TargetCo Warrants so exchanged and shall be
added to the register of holders of TargetCo Warrants in respect thereof;
and
|
|
(iii)
|
each
such former TargetCo Warrantholder shall become a holder of the AcquireCo
Replacement Warrants so exchanged, which AcquireCo Replacement Warrants
will be issued and held in an agency relationship by the Depositary for
the benefit of such former TargetCo Warrantholder and released from such
agency relationship to such former TargetCo Warrantholder upon the
delivery to the Depositary of a duly completed Letter of Transmittal,
together with the certificates representing such TargetCo Warrants, and
such former TargetCo Warrantholder shall be added to the register of
holders of AcquireCo Replacement Warrants on the Effective
Date.
|
ARTICLE 4
DISSENTING
SECURITYHOLDERS
4.1
|
Each
registered holder of TargetCo Shares shall have the right to dissent with
respect to this Arrangement in accordance with the Interim
Order. A Dissenting Securityholder shall, at the Effective
Time, cease to have any rights as a TargetCo Shareholder and shall only be
entitled to be paid the fair value of the Dissenting Securityholder's
TargetCo Shares by TargetCo. A Dissenting Securityholder who is
paid the fair value of its TargetCo Shares shall be deemed to have
transferred its TargetCo Shares to TargetCo, notwithstanding the
provisions of section 190 of the CBCA. A Dissenting
Securityholder who for any reason is not entitled to be paid the fair
value of its TargetCo Shares shall be treated as if the Dissenting
Securityholder had participated in this Arrangement on the same basis as a
non-dissenting TargetCo Shareholder notwithstanding the provisions of
section 190 of the CBCA. The fair value of the TargetCo
Shares shall be determined as of the close of business on the last
Business Day before the day on which this Arrangement is approved by the
TargetCo Shareholders at the TargetCo Meeting; but in no event shall
AcquireCo or TargetCo be required to recognize such Dissenting Shareholder
as a securityholder of AcquireCo, TargetCo or Purchaser after the
Effective Time and the name of such holder shall be removed from the
applicable register as at the Effective Time. For greater
certainty, in addition to any other restrictions in section 190 of
the CBCA, no Person who has voted in favour of this Arrangement shall be
entitled to dissent with respect to this Arrangement. In addition, a
TargetCo Shareholder may only exercise dissent rights in respect of all,
and not less than all, of its TargetCo
Shares.
|
ARTICLE 5
OUTSTANDING
CERTIFICATES AND FRACTIONAL SECURITIES
5.1
|
From
and after the Effective Time, certificates formerly representing TargetCo
Securities that were exchanged under Section 3.1 shall represent only the
right to receive the consideration to which the TargetCo Securityholders
are entitled under this Arrangement, or as to those held by Dissenting
Securityholders, other than those Dissenting Securityholders deemed to
have participated in this Arrangement pursuant to Section 4.1, to receive
the fair value of the TargetCo Shares represented by such
certificates.
|
- 5
-
5.2
|
Subject
to the provisions of the Letter of Transmittal, AcquireCo shall, as soon
as practicable following the later of the Effective Date and the date of
deposit by a former TargetCo Shareholder of a duly completed Letter of
Transmittal and the certificates representing such TargetCo Shares,
either:
|
|
(a)
|
forward
or cause to be forwarded by first class mail (postage prepaid) to such
former holder at the address specified in the Letter of Transmittal;
or
|
|
(b)
|
if
requested by such holder in the Letter of Transmittal, make available or
cause to be made available at the Depositary for pickup by such
holder,
|
certificates
representing the number of AcquireCo Shares issued to such holder under this
Arrangement.
5.3
|
Subject
to the provisions of the Letter of Transmittal, AcquireCo shall, as soon
as practicable following the later of the Effective Date and the date of
deposit by a former TargetCo Warrantholder of a duly completed Letter of
Transmittal and the certificates representing such TargetCo Warrants,
either:
|
|
(a)
|
forward
or cause to be forwarded by first class mail (postage prepaid) to such
former holder at the address specified in the Letter of Transmittal;
or
|
|
(b)
|
if
requested by such holder in the Letter of Transmittal, make available or
cause to be made available at the Depositary for pickup by such
holder,
|
certificates
representing the number of AcquireCo Replacement Warrants issued to such holder
under this Arrangement.
5.4
|
If
any certificate which immediately prior to the Effective Time represented
an interest in outstanding TargetCo Shares or TargetCo Warrants that were
exchanged pursuant to Section 3.1 has been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Person claiming such
certificate to have been lost, stolen or destroyed, the Depositary will
issue and deliver in exchange for such lost stolen or destroyed
certificate the consideration to which the holder is entitled pursuant to
this Arrangement (and any dividends or distributions with respect thereto)
as determined in accordance with this Arrangement. The Person
who is entitled to receive such consideration shall, as a condition
precedent to the receipt thereof, give a bond to each of TargetCo and
AcquireCo and their respective transfer agents, which bond is in form and
substance satisfactory to each of the TargetCo and AcquireCo and their
respective transfer agents, or shall, to the extent agreed by AcquireCo
and TargetCo, otherwise indemnify TargetCo and AcquireCo and their
respective transfer agents against any claim that may be made against any
of them with respect to the certificate alleged to have been lost, stolen
or destroyed.
|
5.5
|
All
dividends or other distributions, if any, made with respect to any
AcquireCo Shares allotted and issued pursuant to this Arrangement but for
which a certificate has not been issued shall be paid or delivered to the
Depositary to be held by the Depositary, in trust, for the registered
holder thereof. Subject to Section 5.6, the Depositary shall
pay and deliver to any such registered holder, as soon as reasonably
practicable after application therefor is made by the registered holder to
the Depositary in such form as the Depositary may reasonably require, such
dividends and distributions to which such holder is entitled, net of
applicable withholding and other
taxes.
|
5.6
|
Any
certificate formerly representing TargetCo Shares or TargetCo Warrants
that is not deposited with all other documents as required by this Plan of
Arrangement on or before, in the case of the TargetCo Shares, the sixth
anniversary of the Effective Date and, in the case of the TargetCo
Warrants, the expiry date of such TargetCo Warrants, shall cease to
represent a right or claim of any kind or nature including the right of
the holder of such TargetCo Securities to receive AcquireCo Shares (and
any dividend and distributions thereon) and AcquireCo Replacement
Warrants, as applicable. In such case, any dividend and
distributions on the AcquireCo Shares will be delivered to AcquireCo and
such AcquireCo Shares and AcquireCo Replacement Warrants shall be
cancelled.
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- 6
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5.7
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No
certificates representing fractional AcquireCo Shares or AcquireCo
Replacement Warrants shall be issued under this Arrangement. In
lieu of any fractional shares or warrants (after aggregating all fractions
of AcquireCo Shares and AcquireCo Replacement Warrants issuable to such
TargetCo Shareholder or TargetCo Warrantholder, as applicable): (a) each
registered holder of TargetCo Shares otherwise entitled to a fractional
interest in an AcquireCo Share will receive the nearest whole number of
AcquireCo Shares, respectively (with fractions equal to or greater than
0.5 being rounded up); and (b) each registered holder of TargetCo Warrants
otherwise entitled to a fractional interest in an AcquireCo Replacement
Warrant will receive the nearest whole number of AcquireCo Replacement
Warrants (with fractions equal to or greater than 0.5 being rounded
up).
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ARTICLE 6
AMENDMENTS
6.1
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AcquireCo
or TargetCo may amend this Plan of Arrangement at any time and from time
to time and for any reason whatsoever prior to the Effective Time,
provided that each such amendment must be: (i) set out in writing; (ii)
approved by the other party; (iii) filed with the Court and, if made
following the TargetCo Meeting, approved by the Court; and (iv)
communicated to Target Securityholders if and as required by the
Court.
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6.2
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Any
amendment to this Plan of Arrangement may be proposed by AcquireCo or
TargetCo at any time prior to or at the TargetCo Meeting (provided that
the other party shall have consented thereto) with or without any other
prior notice or communication, and if so proposed and accepted by the
TargetCo Shareholders voting at the TargetCo Meeting, shall become part of
this Plan of Arrangement for all
purposes.
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6.3
|
AcquireCo
and TargetCo may amend, modify and/or supplement this Plan of Arrangement
at any time and from time to time after the TargetCo Meeting and prior to
the Effective Time with the approval of the
Court.
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6.4
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In
addition to and not withstanding the foregoing, any amendment,
modification or supplement to this Plan of Arrangement that concerns a
matter which, in the reasonable opinion of AcquireCo and TargetCo, is of
an administrative nature required to better give effect to the
implementation of this Plan of Arrangement and is not adverse to the
financial or economic interests of any former holder of TargetCo Shares
may be made prior to or following the Effective Time by AcquireCo and
TargetCo without filing with, or approval by, the
Court.
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ARTICLE 7
WITHHOLDING
RIGHTS
7.1
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AcquireCo,
TargetCo, Purchaser and the Depositary shall be entitled to deduct and
withhold from any consideration otherwise payable to any TargetCo
Securityholders such amounts as AcquireCo, TargetCo, Purchaser or the
Depositary determines, acting reasonably, are required or permitted
pursuant to the Tax Act, the United States Internal Revenue
Code of 1986, or any provision of federal, provincial, territorial,
state, local or foreign tax law, in each case, as amended. To the extent
that amounts are so withheld, such withheld amounts shall be treated for
all purposes hereof as having been paid to the TargetCo Securityholder in
respect of which such deduction and withholding was made; provided that,
such withheld amounts are actually remitted to the appropriate taxing
authority.
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ARTICLE 8
FURTHER
ASSURANCES
8.1
|
Notwithstanding
that the transactions and events set out herein shall occur and be deemed
to occur in the order set out in this Plan of Arrangement without any
further act or formality, each of the parties to the Arrangement Agreement
shall make, do and execute, or cause to be made, done and executed, all
such further acts, deeds, agreements, transfers, assurances, instruments
or documents as may reasonably be required by any of them to document or
evidence any of the transactions or events set out
herein. TargetCo and AcquireCo may agree not to implement this
Plan of Arrangement, notwithstanding the passing of the resolution
approving this Arrangement by the TargetCo Shareholders and the receipt of
the Final Order.
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- 7
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Certain
schedules have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. Gran Tierra undertakes to furnish supplemental copies of
any of the omitted schedules upon request by the Securities and Exchange
Commission.