LOCK-UP AGREEMENT
July 21, 2005
Xx. Xxxxx Xxxxxxx
0000 X. 00 Xxxxxx
Xxxxxxxxx, X.X.
X0X 0X0
Dear Sir:
Re: | Arrangement Agreement dated
July 20, 2005 between Dynamic Oil & Gas, Inc., Sequoia Oil
& Gas Trust, Shellbridge Oil & Gas, Inc. and 0730008 B.C. Ltd.
(the "Arrangement Agreement") |
Reference is made to the Arrangement Agreement between Dynamic Oil & Gas, Inc. ("Dynamic"), Sequoia Oil & Gas Trust (the "Trust"), Shellbridge Oil & Gas, Inc. and 0730008 B.C. Ltd., contemplating a plan of arrangement (the "Arrangement") under the Business Corporations Act (British Columbia). Unless otherwise defined herein, all capitalized terms referred to herein shall have the meanings attributed thereto in the Arrangement Agreement.
We understand that you (the "Selling Securityholder") or your affiliates beneficially own, directly or indirectly, or exercise control or direction over, the number of Dynamic Shares and Dynamic Options set forth in your acceptance at the end of this agreement.
Any references in this agreement to Dynamic Shares owned or controlled by the Selling
Securityholder shall mean such number of Dynamic Shares and, where the context requires, shall include all Dynamic Shares issued to the Selling Securityholder after the date hereof pursuant to the exercise of Dynamic Options.
This agreement sets out the terms and conditions upon which the Selling Securityholder has agreed, among other things, to support the Arrangement and to vote, or cause to be voted in favour of the Arrangement, all of the Dynamic Shares (including Dynamic Shares issuable upon the exercise of Dynamic Options) held by the Selling Securityholder that are, or will be, beneficially owned or controlled by the Selling Securityholder.
This agreement is conditional on and shall only be effective on the execution of the Arrangement Agreement.
1. | Representations of Selling Securityholder
|
|
The Selling
Securityholder represents and warrants to the Trust that: |
||
(a)
|
it is the sole beneficial owner of the number of
Dynamic Shares and the number of Dynamic Options (collectively, the "Selling
Securityholder's Securities") set forth opposite the name of the Selling
Securityholder below and the Selling Securityholder's |
- 2 -
Securities are all of the Dynamic Shares and Dynamic
Options beneficially owned, directly or indirectly, by the Selling Securityholder;
|
||
(b) | if the Selling Securityholder is a corporation,
it is duly incorporated or created and validly existing under the laws
of its jurisdiction of incorporation, and it has corporate power and authority
to enter into this agreement and perform its obligations hereunder; |
|
(c) | the Selling Securityholder is duly authorized to
execute and deliver this agreement and this agreement is a valid and binding
agreement enforceable against the Selling Securityholder in accordance
with its terms; neither the execution of this agreement by the Selling
Securityholder nor the completion by the Selling Securityholder of the
transactions contemplated hereby will constitute a violation of or default
under, or conflict with, any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which the Selling Securityholder
will be a party or by which it will be bound at the time of such completion
or, if the Selling Shareholder is a corporation, its constating documents;
|
|
(d) | as of the record date for the Meeting, the Selling
Securityholder will have (without exception) valid and marketable title
to the Selling Securityholder's Securities free and clear of all claims,
liens, charges, encumbrances and security interests, except for the Selling
Securityholder's obligations under this agreement; |
|
(e) | except as contemplated by this agreement, the Selling
Securityholder has not previously granted or agreed to grant any proxy
in respect of the Dynamic Shares or entered into any voting trust, vote
pooling or other agreement with respect to the right to vote; and |
|
(f) | other than the Dynamic Options and options to purchase
shares that may be issued pursuant to Dynamic’s existing stock option
plan, the Selling Securityholder has no agreement, option, right or privilege
capable of becoming an agreement, option, right or privilege, for the
purchase, subscription or issuance of any of the unissued shares in the
capital of Dynamic or for the issue of any other securities of any nature
or kind of Dynamic. |
2. | Covenants of Selling Securityholder |
By the acceptance of this agreement, the Selling Securityholder hereby agrees, subject to the terms of Section 6 of this agreement, from the date hereof until the earlier of the termination of this agreement and the Effective Time, to:
(a) | not withdraw any proxy (if any) delivered to Dynamic
pursuant to the Arrangement, except in accordance with the provisions
of Section 6 hereof; |
|
(b) | vote all of the Selling Securityholder's Dynamic
Shares and any other Dynamic Shares (collectively, the "Dynamic Securities")
acquired by the Selling Securityholder prior to the Meeting and any other
Dynamic Securities over which control or direction is exercised by the
Selling Securityholder, in approval of the Arrangement and any resolutions
or matters relating thereto at any meeting of the securityholders of Dynamic
called to consider the same and, with respect to any other matter relating
to the Arrangement that may be put before the securityholders of Dynamic,
as the Trust may direct; |
- 3 -
(c) | not exercise any statutory rights of dissent or
appraisal in respect of any resolution approving the Arrangement, or any
aspect thereof, and not exercise any other securityholder rights or remedies
available at common law, pursuant to the Business Corporations Act
(British Columbia) or otherwise to delay, hinder, upset or challenge
the Arrangement; |
|
(d) | other than in connection with the exercise of the
Selling Securityholder’s Dynamic Options and the sale of the Dynamic
Shares acquired on exercise of the Dynamic Options, not (without the prior
consent of the Trust) sell, assign, transfer or otherwise convey or dispose
of any of the Selling Securityholder's Securities or any other Dynamic
Securities acquired by the Selling Securityholder prior to the Effective
Time (except to an affiliate of the Selling Securityholder provided that
such affiliate agrees to be bound by the terms of this agreement and provided
that the Selling Securityholder remains liable for the performance by
such affiliate of all terms and obligations of the Selling Securityholder
hereunder); |
|
(e) | not (without the prior consent of the Trust), directly
or indirectly, initiate, solicit or cause any offer, proposal or expression
of interest (confidential or otherwise) to acquire any assets of Dynamic
outside of the ordinary course of business of Dynamic or any of Dynamic's
issued or unissued securities, whether directly or indirectly; induce,
directly or indirectly, or attempt to induce any other person to initiate
any securityholder proposal; provide any information concerning securities,
assets or the business or operations of Dynamic to any third person out
of the ordinary course of business (except (i) to the Selling Securityholder’s
advisors, including Xxxxxx & Co. Limited, (ii) upon compulsion of
a regulatory authority or a court of competent jurisdiction and (iii)
as contemplated by the Arrangement Agreement); pursue any other material
corporate acquisition or disposition, amalgamation, merger, arrangement,
recapitalization, liquidation, dissolution, reorganization into a royalty
trust or income fund or purchase or sale of assets or make any other material
change to the business, capital or affairs of Dynamic (other than as contemplated
by the Arrangement Agreement); or conduct any activity otherwise detrimental
to the Arrangement; provided that the foregoing shall not prevent the
board of directors or officers of Dynamic from responding as required
by law to any unsolicited bona fide submission or proposal regarding any
acquisition or disposition of assets or any unsolicited proposal to amalgamate,
merge or effect an arrangement or any unsolicited acquisition proposal
generally or make any disclosure with respect thereto which in the judgment
of the board of directors, in good faith, or upon advice of counsel is
required or advisable under applicable law; |
|
(f) | vote as a securityholder of Dynamic against any
proposal submitted to the securityholders of Dynamic involving any person
other than the Trust concerning any merger, sale of substantial assets,
business combination, sale or purchase of shares or similar transaction
involving Dynamic or any of its subsidiaries; and |
|
(g) | vote as a securityholder of Dynamic against any
proposal submitted to the securityholders of Dynamic which may reduce
the likelihood of the Arrangement being successfully completed. |
3. | Dynamic Options |
The Selling Securityholder acknowledges and agrees that pursuant to the Arrangement, all outstanding Dynamic Options shall be exercised, cancelled or otherwise terminated. The Selling
- 4 -
Securityholder agrees to take all such steps and execute all such agreements as are deemed necessary by the Trust so that the Dynamic Options held by the Selling Securityholder are either exercised, cancelled or terminated as contemplated by the Arrangement Agreement.
4. | Fiduciary Duties |
Nothing herein shall restrict or limit the actions of any director or officer required to be taken in the discharge of his fiduciary duties as a director or officer of Dynamic.
5. | Expenses |
The Trust and the Selling Securityholder agree to pay their own respective expenses incurred in connection with this agreement.
6. | Termination |
It is understood and agreed that the respective rights and obligations hereunder of the Trust and the Selling Securityholder shall cease and this agreement shall terminate if the Arrangement Agreement is terminated by Dynamic or the Trust in accordance with its terms.
In the event of termination of this agreement, this agreement shall forthwith be of no further force and effect and there shall be no continuing obligation or liability on the part of either the Selling Securityholder or the Trust, except as set forth in Section 5 which provision shall survive the termination of this agreement. Nothing herein shall relieve any party from liability for any breach of this agreement.
7. | Amendment |
Except as expressly set forth herein, this agreement constitutes the whole of the agreement between the parties pertaining to the subject matter hereof and may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the parties hereto.
8. | Assignment |
Except as expressly set forth herein, no party to this agreement may assign any of its rights or obligations under this agreement without the prior written consent of the other party.
9. | Disclosure |
Prior to first public disclosure of the existence and terms and conditions of this agreement, none of the parties hereto shall disclose the existence of this agreement, or any details hereof, to any person other than the Trust, its directors and officers or other Dynamic Securityholders executing substantially similar agreements, without the prior written consent of the other parties hereto, except to the extent required by law or pursuant to a request from a stock exchange. The existence and terms and conditions of this agreement may be disclosed by Dynamic and the Trust in the press release issued in connection with the execution of the Arrangement Agreement.
10. | Enurement |
This agreement will be binding upon and enure to the benefit of the Trust, the Selling Securityholder and their respective executors, administrators, successors and permitted assigns.
- 5 -
11. | Applicable Law |
This agreement shall be governed and construed in accordance with the laws of the Province of Alberta and the federal laws of Canada applicable therein and each of the parties hereto irrevocably attorns to the jurisdictions of the courts of the Province of Alberta.
12. | Counterparts |
This agreement may be signed in counterparts which together shall be deemed to constitute one valid and binding agreement and delivery of such counterparts may be effected by means of telecopier.
Yours truly,
SEQUOIA OIL & GAS TRUST by its Administrator, | ||
SEQUOIA OIL & GAS LTD. | ||
Per: | /s/ Xxxx Xxxxxxxxx | |
Vice President, Finance and CFO |
ACCEPTANCE
The foregoing is hereby accepted as of and with effect from the date first above written and the Selling Securityholder hereby confirms that the Selling Securityholder beneficially owns 1,153,607 Dynamic Shares and 212,000 Dynamic Options to acquire a further 212,000 Dynamic Shares.
/s/ Xxxx Xxxxxxx | /s/ Xxxxx Xxxxxxx | ||
Witness: | Name: Xxxxx Xxxxxxx |