EXHIBIT 2
ARRANGEMENT AGREEMENT
THIS ARRANGEMENT AGREEMENT made and effective as of the 20th
day of July, 2005.
BETWEEN:
DYNAMIC OIL & GAS, INC., a corporation incorporated
under the laws of the Province of British Columbia
(hereinafter referred to as "DYNAMIC")
AND
SEQUOIA OIL & GAS TRUST, an open-ended unincorporated
investment trust organized under the laws of the Province of
Alberta (hereinafter referred to as "SEQUOIA")
AND
SHELLBRIDGE OIL & GAS, INC., a body corporate incorporated
under the laws of the Province of Alberta (hereinafter
referred to as "EXPLORECO")
AND
0730008 B.C. LTD., a body corporate incorporated under the
laws of the Province of British Columbia ("ACQUISITIONCO")
WHEREAS Dynamic wishes to reorganize its business for the
benefit of the Dynamic Securityholders (as defined herein);
AND WHEREAS Dynamic has caused ExploreCo to be incorporated
for the purpose of acquiring the Exploration Assets (as defined herein) from
Dynamic;
AND WHEREAS Dynamic will, prior to the Effective Date, cause
the Partnership (as defined herein) to be formed and the Partnership will
acquire the Non-exploration Assets (as defined herein) from Dynamic;
AND WHEREAS Dynamic and Sequoia propose a business combination
whereby: (i) Sequoia will, indirectly through AcquisitionCo, acquire all of the
Dynamic Shares (as defined herein) on the terms described in the Plan of
Arrangement (as defined herein) attached as EXHIBIT 1 in exchange for, in
aggregate, cash consideration equal to the Cash Consideration (as defined
herein) and the AcquisitionCo Note (as defined herein) and (ii) Dynamic
Shareholders will exchange the AcquisitionCo Note they receive from
AcquisitionCo with ExploreCo for the common shares of ExploreCo;
AND WHEREAS the parties hereto intend to carry out the
proposed business combination by way of an arrangement of Dynamic under the
provisions of the Business Corporations Act (British Columbia) (the
"ARRANGEMENT");
AND WHEREAS the board of directors of Dynamic has determined,
based in part upon advice from its financial advisors, that the consideration to
be received by the Dynamic Shareholders pursuant to the Arrangement is fair,
from a financial point of view, to the Dynamic Shareholders and that the board
of
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directors of Dynamic will cooperate with Sequoia with respect to the Arrangement
as set forth herein and recommend that the Dynamic Securityholders vote in
favour of the Arrangement;
AND WHEREAS the board of directors of Dynamic has unanimously
determined that it would be in the best interests of Dynamic and the Dynamic
Securityholders for the directors to recommend that the Dynamic Securityholders
vote in favour of the Arrangement;
AND WHEREAS the board of directors of Sequoia Oil & Gas Ltd.,
as administrator of Sequoia, has unanimously determined that it would be in the
best interests of Sequoia to enter into this Agreement;
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 covenant and
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 In this Agreement, unless the context otherwise requires:
(a) "ABCA" means the Business Corporations Act (Alberta), RSA 2000
c. B-9, as amended, including the regulations promulgated
thereunder, as is in effect on the date hereof;
(b) "ACCLAIM AGREEMENT" has the meaning ascribed thereto in the
ExploreCo Conveyance Agreement;
(c) "ACQUISITIONCO" means 0730008 B.C. Ltd., a corporation
incorporated under the BCBCA and wholly-owned by Sequoia;
(d) "ACQUISITIONCO NOTE" means the demand interest-free promissory
note issued by AcquisitionCo in favour of the Dynamic
Shareholders, having a principal amount equal to the ExploreCo
Principal Amount and issued pursuant to the Plan of
Arrangement;
(e) "AFFILIATE" has the meaning contemplated by the ABCA;
(f) "AGREEMENT" means this agreement, including the recitals and
all Exhibits to this agreement, as amended or supplemented
from time to time, and "HEREBY", "HEREOF", "HEREIN",
"HEREUNDER" and similar terms refer to this Agreement and not
to any particular provision of this Agreement;
(g) "APPLICABLE LAWS" means applicable corporate and securities
laws, regulations and rules, all policies thereunder
(including Rule 61-501 of the Ontario Securities Commission
and the rules of the United States Securities and Exchange
Commission) and rules of applicable stock exchanges, including
the TSX and NASDAQ;
(h) "ARRANGEMENT" means the arrangement under the provisions of
Division 5 of Part 9 under the BCBCA on the terms and
conditions set out in the Plan of Arrangement, as
supplemented, modified or amended;
(i) "ARRANGEMENT FILINGS" means the records and information
provided to the Registrar under section 292(a) of the BCBCA
that the Registrar requires and the records filed under
section 292(a) of the BCBCA that the Registrar requires to
give effect to any provision of the Arrangement, together with
a copy of the entered Final Order;
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(j) "ASSUMED LIABILITIES" has the meaning ascribed thereto in the
ExploreCo Conveyance Agreement;
(k) "BCBCA" means the Business Corporations Act (British
Columbia), S.B.C. 2002 c. 57, as amended, including the
regulation promulgated thereunder as is in effect on the date
hereof;
(l) "BUSINESS" means all of the assets, undertaking and
liabilities of Dynamic and its subsidiaries, including,
without limitation, its producing and non-producing petroleum
and natural gas properties and lands, facilities and related
equipment, and other assets except for the Exploration Assets;
(m) "BUSINESS DAY" means a day, other than a Saturday, Sunday or
statutory holiday, when banks are generally open in the City
of Calgary and the City of Vancouver for the transaction of
banking business;
(n) "CANADIAN GAAP" means Canadian generally accepted accounting
principles;
(o) "CASH CONSIDERATION" has the meaning ascribed thereto in the
Plan of Arrangement;
(p) "CLOSING" means the completion of the Arrangement;
(q) "CONTROL" means, with respect to control of a body corporate
by a person, the holding (other than by way of security) by or
for the benefit of that person of securities of that body
corporate to which are attached more than 50% of the votes
that may be cast to elect directors of the body corporate
(whether or not securities of any other class or classes shall
or might be entitled to vote upon the happening of any event
or contingency) provided that such votes, if exercised, are
sufficient to elect a majority of the board of directors of
the body corporate;
(r) "COURT" means the Supreme Court of British Columbia;
(s) "DEPOSITARY" means CIBC Mellon Trust Company;
(t) "DYNAMIC" means Dynamic Oil & Gas, Inc. a corporation
incorporated under the laws of British Columbia;
(u) "DYNAMIC ACQUISITION PROPOSAL" shall have the meaning ascribed
thereto in subsection 8.1(C)(I);
(v) "DYNAMIC BREAK FEE" has the meaning ascribed thereto in
Section 10.2 hereof;
(w) "DYNAMIC COUNSEL" means XxXxxxxx Xxxxxxxx LLP, or such other
legal counsel as may be designated by Dynamic;
(x) "DYNAMIC FINANCIAL STATEMENTS" means the audited financial
statements of Dynamic as at, and for the year ended December
31, 2004 and the unaudited financial statements of Dynamic as
at, and for the three months ended, March 31, 2005;
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(y) "DYNAMIC GP" means a corporation to be incorporated under the
ABCA, which will be a wholly-owned subsidiary of Dynamic and
will be a general partner of Partnership;
(z) "DYNAMIC OFFICE LEASE" means the lease dated as of March 13,
2005 between SunLife Assurance Company of Canada and Dynamic;
(aa) "DYNAMIC OPTIONHOLDERS" means the holders from time to time of
Dynamic Options;
(bb) "DYNAMIC OPTIONS" means, collectively, all outstanding
options, whether or not vested, entitling the holders to
acquire Dynamic Shares, details of which are set out in
EXHIBIT 4 hereto;
(cc) "DYNAMIC PUBLIC DOCUMENTS" means all documents or information
which has been filed by or on behalf of Dynamic in compliance
with or intended compliance with Applicable Laws;
(dd) "DYNAMIC RESERVE REPORT" means the report of Xxxxxxx dated May
18, 2005, and effective as of April 30, 2005, evaluating
certain of Dynamic's oil, natural gas liquids and natural gas
reserves and the estimated future cash flows from such
reserves;
(ee) "DYNAMIC SECURITYHOLDERS" means, collectively, Dynamic
Shareholders and Dynamic Optionholders;
(ff) "DYNAMIC SHAREHOLDERS" means the holders of Dynamic Shares;
(gg) "DYNAMIC SHARES" means the common shares of Dynamic as
constituted on the date hereof;
(hh) "EFFECTIVE DATE" means the date on which the Arrangement
Filings are filed with the Registrar;
(ii) "EFFECTIVE TIME" means the time on the Effective Date at which
the Arrangement is effective, as specified in the Plan of
Arrangement;
(jj) "ENCUMBRANCE" includes, without limitation, any mortgage,
pledge, assignment, charge, lien, security interest, claim,
trust, royalty or carried, participation, net profits or other
third party interest and any agreement, option, right of first
refusal, right or privilege (whether by law, contract or
otherwise) capable of becoming any of the foregoing;
(kk) "ENVIRONMENTAL LAWS" has the meaning ascribed thereto in
subsection 6.1(LL)(I);
(ll) "EXPLORATION ASSETS" means the assets owned by Dynamic and to
be sold to ExploreCo pursuant to the ExploreCo Conveyance
Agreement, all as more particularly described in EXHIBIT 2
hereto;
(mm) "EXPLORECO" means Shellbridge Oil & Gas, Inc., a body
corporate incorporated under the laws of the Province of
Alberta, as a wholly-owned subsidiary of Dynamic;
(nn) "EXPLORECO CONVEYANCE AGREEMENT" means the oil and gas asset
purchase agreement to be entered into between Dynamic and
ExploreCo concurrently with this Agreement and in a form
satisfactory to Sequoia effecting the sale by Dynamic to
ExploreCo of the Exploration Assets in exchange for the
ExploreCo Note;
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(oo) "EXPLORECO NOTE" means the demand interest-free promissory
note issued by ExploreCo in favour of Dynamic, having a
principal amount equal to the ExploreCo Principal Amount and
issued pursuant to the ExploreCo Conveyance Agreement;
(pp) "EXPLORECO PRINCIPAL AMOUNT" means $30,925,000;
(qq) "EXPLORECO SHARES" means the common shares in the capital of
ExploreCo as constituted on the date hereof;
(rr) "FAIRNESS ADVISORY FEE" has the meaning ascribed thereto in
Section 6.1(K);
(ss) "FAIRNESS OPINION" means the opinion of Xxxxxx & Co. Limited
that the consideration to be received by the Dynamic
Shareholders pursuant to the Arrangement is fair, from a
financial point of view, to the Dynamic Shareholders;
(tt) "FINAL ORDER" means the final order of the Court approving the
Arrangement under Section 291 of the BCBCA, as such order may
be affirmed, amended or modified by any court of competent
jurisdiction;
(uu) "FINANCIAL ADVISORY FEE" has the meaning ascribed thereto in
Section 6.1(K);
(vv) "GOVERNMENTAL AUTHORITY" includes any federal, provincial,
municipal or other political subdivision, government
department, commission, board, bureau, agency or
instrumentality, domestic or foreign;
(ww) "INFORMATION CIRCULAR" means the information circular - proxy
statement of Dynamic to be mailed to the Dynamic Shareholders
in connection with the holding of the Meeting;
(xx) "INTERIM ORDER" means an interim order of the Court to be
issued pursuant to the application referred to in SUBSECTION
8.1(O) of this Agreement and, containing declarations and
directions with respect to the Arrangement and the holding of
the Meeting, as such order may be affirmed, amended or
modified by any court of competent jurisdiction;
(yy) "LOCK-UP AGREEMENTS" means the lock-up agreements to be
entered into by all of the directors and officers of Dynamic
who are Dynamic Shareholders, representing not less than 8% of
the outstanding Dynamic Shares at the date hereof, on a
non-diluted basis, each of which provides that, inter alia,
such director or officer will vote in favour of the
Arrangement at the Meeting;
(zz) "MATERIAL ADVERSE CHANGE" means any change (or any condition,
event or development giving rise to a prospective change) in
or to the business, operations, results of operations, assets,
capitalization, financial condition, rights, liabilities,
prospects or privileges, whether contractual or otherwise, of
Sequoia or Dynamic, as applicable, which, or could reasonably
be expected to have, a Material Adverse Effect;
(aaa) "MATERIAL ADVERSE EFFECT" means any effect that is, or would
reasonably be expected to be, materially adverse to the
business, operations, results of operations, assets,
capitalization or financial condition of Sequoia or Dynamic,
as applicable, each on a consolidated basis taken as a whole,
but "Material Adverse Effect" shall not include an effect
resulting from (i) an action taken by Sequoia or Dynamic, as
the case may be, to which the other consented to in writing,
(ii) conditions affecting the oil and gas industry in the
jurisdictions in which Sequoia
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or Dynamic, as the case may be, holds its assets, each on a
consolidated basis including, without limitation, changes in
commodity prices, (iii) general economic, financial, currency
exchange, securities or commodity market conditions in Canada
including, without limitation, changes in currency exchange
rates, or (iv) conditions affecting the Exploration Assets
only;
(bbb) "MEETING" means the special meeting of the Dynamic
Securityholders to be called to, inter alia, consider and, if
thought advisable, authorize, approve and adopt the
Arrangement in accordance with the Interim Order, and any
adjournments thereof;
(ccc) "MISREPRESENTATION" includes any untrue statement of a
material fact, any omission to state a material fact that is
required to be stated and any omission to state a material
fact that is necessary to be stated in order for a statement
not to be misleading;
(ddd) "NASDAQ" means the NASDAQ Small Cap Market;
(eee) "NON-EXPLORATION ASSETS" means the assets owned by Dynamic and
to be sold to the Partnership pursuant to the Partnership
Conveyance Agreement, all as more particularly described in
EXHIBIT 3 hereto;
(fff) "PARTNERSHIP" means a general partnership to be formed on or
before September 1, 2005 under the laws of Alberta, having
Dynamic and Dynamic GP as its partners;
(ggg) PARTNERSHIP CONVEYANCE AGREEMENT" means the agreement to be
entered into among the Partnership, Dynamic and Dynamic GP,
with such representations, warranties, covenants and
indemnities which are customary for a transaction of this
nature and otherwise in a form satisfactory to Sequoia, acting
reasonably, effecting the sale by Dynamic to Partnership of
the Non-exploration Assets;
(hhh) "PERSON" includes any individual, partnership, firm, trust,
body corporate, government, governmental body, agency or
instrumentality, unincorporated body of persons or
association;
(iii) "PLAN OF ARRANGEMENT" means the plan of arrangement
substantially in the form set out in EXHIBIT 1 hereto as
amended or supplemented from time to time in accordance with
Article 13 hereof;
(jjj) "REGISTRAR" means the Registrar of Companies appointed under
the BCBCA;
(kkk) "REGULATIONS" means all statutes, laws, rules, orders,
directives and regulations in effect from time to time and
made by governments or governmental agencies having
jurisdiction over the Business;
(lll) "SEQUOIA" means Sequoia Oil & Gas Trust, an open-ended
unincorporated investment trust organized under the laws of
Alberta;
(mmm) "SEQUOIA BREAK FEE" has the meaning ascribed thereto in
Section 8.3 hereof;
(nnn) "SEQUOIA COUNSEL" means Gowling Xxxxxxx Xxxxxxxxx LLP, or such
other legal counsel as may be designated by Sequoia;
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(ooo) "SEQUOIA INFORMATION" means all information contained in the
Information Circular relating to Sequoia and its subsidiaries;
(ppp) "SEQUOIA TRUST INDENTURE" means the trust indenture dated as
of March 16, 2005, as amended from time to time, pursuant to
which Sequoia was created;
(qqq) "SEVERANCE OBLIGATIONS" has the meaning ascribed thereto in
subsection 6.1(X);
(rrr) "XXXXXXX" means Xxxxxxx Associates Limited, independent
petroleum engineering consultants;
(sss) "SUBSIDIARY" means, when used to indicate a relationship with
another body corporate or trust,
(i) a body corporate or trust which is controlled by (A)
that other, or (B) that other and one or more bodies
corporate or trusts, each of which is controlled by that
other, or (C) two or more bodies corporate or trusts
each of which is controlled by that other; or
(ii) a subsidiary of a body corporate or trust that is the
other's subsidiary;
(ttt) "TAX ACT" means the Income Tax Act (Canada), R.S.C. 1985, c.
1 (5th Supp), including the regulations promulgated
thereunder, as amended;
(uuu) "TAX POOLS" means undepreciated capital cost of any particular
class of depreciable property, cumulative Canadian exploration
expense, cumulative Canadian development expense, cumulative
Canadian oil and gas property expense, foreign exploration and
development expense, capital losses, non capital losses,
cumulative eligible capital and investment tax credits, all as
defined in the Tax Act, and financing expenses referred to in
Section 20(1)(e) of the Tax Act;
(vvv) "TAXES" means all taxes (including income, capital, profit,
state profit share, gross receipts, windfall or excess
profits, severance, royalty, production, sales, use, goods and
services, value added, property, license, excise, franchise,
surtax, education, health and payroll taxes, pension,
unemployment insurance and worker's compensation levies),
duties, premiums, assessments, rates, imposts, fees, levies or
other charges, including any governmental charges, penalties,
interest and fines imposed by or payable to any Governmental
Authority; and
(www) "TSX" means the Toronto Stock Exchange.
1.2 The following Exhibits form part of this Agreement:
Exhibit 1 -- Plan of Arrangement
Exhibit 2 -- Exploration Assets
Exhibit 3 -- Non-exploration Assets
Exhibit 4 -- Outstanding Dynamic Options
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ARTICLE 2
INTERPRETATION
2.1 The division of this Agreement into Articles, Sections, subsections and
paragraphs, the provision of a table of contents hereto and the
insertion of headings are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this Agreement.
2.2 Unless the contrary intention appears, references in this Agreement to
an Article, Section, subsection, paragraph, clause, subclause or
schedule by number or letter or both refer to the article, section,
subsection, paragraph, clause, subclause or schedule, respectively,
bearing that designation in this Agreement.
2.3 In this Agreement, unless the contrary intention appears, words
importing the singular include the plural and vice versa and; words
importing gender shall include all genders.
2.4 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.
2.5 References in this Agreement 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.
2.6 Unless otherwise specifically designated, all references in this
Agreement to sums of money are expressed in lawful money of Canada.
2.7 All representations, warranties, covenants and opinions in or
contemplated by this Agreement as to the enforceability of any
covenant, agreement or document are subject to enforceability being
limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws relating to or affecting
creditors' rights generally, and the discretionary nature of certain
remedies (including specific performance and injunctive relief and
general principles of equity).
2.8 All references to the date of this Agreement, "the date hereof" or
similar expressions or references shall mean July 20, 2005, except
as is expressly provided herein.
2.9 Unless otherwise stated, all accounting terms used in this Agreement
shall have the meanings attributable thereto under Canadian GAAP and
all determinations of an accounting nature required to be made shall be
made in a manner consistent with Canadian GAAP applied on a consistent
basis.
2.10 Whenever used in this Agreement, the words "includes" and "including"
and similar terms of inclusion shall not, unless expressly modified by
the words "only" or "solely", be construed as terms of limitation, but
rather shall mean "includes but is not limited to" and "including but
not limited to", so that references to included matters shall be
regarded as illustrative without being either characterizing or
exhaustive.
2.11 In this Agreement, whenever a representation or warranty is made on the
basis of the knowledge or awareness of Dynamic or Sequoia, as
applicable, such knowledge or awareness consists only of the actual
knowledge or awareness, as of the date of this Agreement, of the
directors and officers of Dynamic or Sequoia, as applicable, but does
not include the knowledge or awareness of any other individual or any
constructive, implied or imputed knowledge.
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ARTICLE 3
DYNAMIC'S CLOSING CONDITIONS
3.1 The obligation of Dynamic and ExploreCo to complete the transactions
contemplated herein are subject to the fulfilment of the following
conditions precedent on or before the Effective Date or such other time
as is specified below:
(a) the representations and warranties made by Sequoia
and AcquisitionCo in Section 7.1 of this Agreement
shall be true as of the Effective Date as if made on
and as of such date (except for representations and
warranties which refer to another date, which shall
be true as of that date) except where the failure of
such representations and warranties to be true and
correct would not, directly or indirectly, adversely
affect the completion of the Arrangement in
accordance with its terms and Sequoia shall have
provided to Dynamic a certificate of an officer of
Sequoia Oil & Gas Ltd. certifying as to such matters
on behalf of Sequoia on the Effective Date;
(b) Sequoia shall have provided Dynamic with opinions of
Sequoia Counsel satisfactory to Dynamic, acting
reasonably, dated the Effective Date and addressed to
Dynamic to the effect that:
(i) Sequoia is a duly formed and validly subsisting trust
organized under the laws of the Province of Alberta;
(ii) all necessary proceedings and actions of each of
Sequoia and AcquisitionCo have been taken to fully,
validly and effectively authorize this Agreement and
the transactions contemplated herein, including the
Arrangement, the performance by Sequoia and
AcquisitionCo of their obligations hereunder and
thereunder, and the execution and delivery by Sequoia
and AcquisitionCo of this Agreement and all documents
to be delivered pursuant hereto;
(iii) the execution and delivery by each of Sequoia and
AcquisitionCo of this Agreement and all related
documents to be delivered pursuant to this Agreement
to which Sequoia or AcquisitionCo is a party, the
performance by Sequoia and AcquisitionCo of their
obligations hereunder and thereunder, and the
consummation of the transactions contemplated herein
and therein will not:
(A) result in the breach of or violate any term or
provision of the Sequoia Trust Indenture or any
other governing documents of Sequoia or the
notice of articles or articles or other
governing documents of AcquisitionCo; or
(B) violate any provision of law or administrative
regulation or, in each case as known to Sequoia
Counsel, without special inquiry, any judicial
or administrative order, award, judgment or
decree applicable to Sequoia; and
(iv) this Agreement has been, and the documents delivered
pursuant hereto to which Sequoia or AcquisitionCo is
a party have been, duly executed and delivered by
Sequoia and AcquisitionCo and this Agreement and such
other documents are, valid and binding on Sequoia and
AcquisitionCo and enforceable against Sequoia and
AcquisitionCo in accordance with their terms,
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Sequoia shall also have provided to Dynamic customary
transaction opinions of Sequoia Counsel satisfactory to
Dynamic, acting reasonably, pertaining to AcquisitionCo in
respect to matters concerning due incorporation; due
authorization, execution, delivery, performance and
enforceability of the transaction agreements; and to breach of
governing documents or violation of laws, which opinions shall
be dated the Effective Date and shall be addressed to Dynamic.
In giving the foregoing opinions, Sequoia Counsel may rely, in
respect of matters governed by the laws of any jurisdiction
other than the Province of British Columbia or Alberta, or the
laws of Canada applicable therein, upon the opinion of local
counsel in such jurisdiction provided that Sequoia Counsel is
of the opinion that the opinion of such local counsel is one
upon which Sequoia Counsel may properly rely and, in respect
of matters of fact, upon certificates of senior officers of
Sequoia or any other appropriate persons reasonably acceptable
to Dynamic Counsel provided further that such opinion shall be
limited to the applicable federal and provincial laws of
Canada;
(c) Sequoia and AcquisitionCo shall have complied in all material
respects with their covenants in this Agreement and Sequoia
shall have provided to Dynamic a certificate of a senior
officer of Sequoia Oil and Gas Ltd. certifying, on behalf of
Sequoia and AcquisitionCo, as to such compliance and Sequoia
shall have no actual knowledge to the contrary; and
(d) no later than three (3) business days before the Effective
Date, an amount equal to the Cash Consideration payable by
AcquisitionCo pursuant to the Arrangement, shall have been
deposited with the Depositary in accordance with SECTION 5.2
of the Plan of Arrangement.
The foregoing conditions precedent are for the benefit of Dynamic and ExploreCo
and may be waived, in whole or in part, by Dynamic in writing at any time. If
any of the conditions precedent shall not be complied with or waived by Dynamic
on or before the date required for the performance thereof, Dynamic may, in
addition to the other remedies it may have at law or equity, rescind and
terminate this Agreement by written notice from Dynamic to Sequoia.
ARTICLE 4
SEQUOIA'S CLOSING CONDITIONS
4.1 The obligation of AcquisitionCo and Sequoia to complete the
transactions contemplated herein is subject to fulfilment of the
following conditions precedent on or before the Effective Date or such
other time as is specified below:
(a) the representations and warranties made by Dynamic in Section
6.1 of this Agreement shall be true as of the Effective Date
as if made on and as of such date (except for representations
and warranties which refer to another date, which shall be
true as of that date) except where the failure of such
representations and warranties to be true and correct would
not have a Material Adverse Effect on Dynamic and its
subsidiaries, taken as a whole; and Dynamic shall have
provided to Sequoia a certificate of an officer of Dynamic
certifying as to such matters on the Effective Date and
Dynamic shall have no actual knowledge to the contrary;
(b) Dynamic shall have provided Sequoia with opinions of Dynamic
Counsel satisfactory to Sequoia and Sequoia Counsel, acting
reasonably, dated the Effective Date and addressed to Sequoia:
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(i) to the effect that Dynamic is a valid and subsisting
corporation under the laws of the Province of British
Columbia and has full power and authority to enter
into this Agreement and perform its obligations
hereunder;
(ii) to the effect that all necessary corporate
proceedings and actions of Dynamic, have been taken
to fully, validly and effectively authorize this
Agreement and the Arrangement and the transactions
contemplated herein and therein, including the
performance by Dynamic of its obligations hereunder
and thereunder, and the execution and delivery by
Dynamic of this Agreement and all documents delivered
pursuant hereto or thereto;
(iii) to the effect that the execution and delivery by
Dynamic of this Agreement and all related documents
delivered pursuant to this Agreement to which Dynamic
is a party, the performance by Dynamic of its
obligations hereunder and thereunder, and the
consummation of the transactions contemplated herein
and therein will not:
(A) result in the breach of or violate any term or
provision of the notices of articles or articles
of Dynamic; or
(B) violate any provision of law or administrative
regulation or, in each case as known to Dynamic
Counsel, without special inquiry, any judicial
or administrative order, award, judgment or
decree applicable to Dynamic, or the Business.
(iv) to the effect that this Agreement and the documents
delivered pursuant hereto to which Dynamic is a party
have been duly executed and delivered by Dynamic and
this Agreement is, and such other documents are,
valid and binding on Dynamic and enforceable against
it in accordance with their respective terms; and
(v) as to the authorized and outstanding capital of
Dynamic immediately prior to the Effective Date.
Dynamic shall also have provided to Sequoia customary
transaction opinions of Dynamic Counsel satisfactory to
Sequoia, acting reasonably, pertaining to Dynamic's
subsidiaries in respect to matters concerning due formation or
incorporation (as applicable); due authorization, execution,
delivery, performance and enforceability of transaction
agreements; and to breach of governing documents or violation
of laws, which opinions shall be dated the Effective Date and
shall be addressed to Sequoia.
In giving such opinions, Dynamic Counsel may rely, in respect
of matters governed by the laws of any jurisdiction other than
the Provinces of British Columbia or Alberta or, the laws of
Canada applicable therein, upon the opinion of local counsel
in such jurisdiction provided that Dynamic Counsel is of the
opinion that the opinion of such local counsel is one upon
which Dynamic Counsel may properly rely and, in respect of
matters of fact, upon certificates of senior officers of
Dynamic or any other appropriate persons reasonably acceptable
to Sequoia Counsel;
(c) Dynamic shall have complied in all material respects with its
covenants in this Agreement and Dynamic shall have provided to
Sequoia a certificate of a senior officer certifying as to
such compliance and Dynamic shall have no actual knowledge to
the contrary;
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(d) Dynamic shall have received in cash the entire gross proceeds
payable upon the exercise of those Dynamic Options exercised
from the date of this Agreement until the Effective Time and
Dynamic shall have provided to Sequoia a certificate of its
Chief Financial Officer certifying as to such receipt;
(e) before giving effect to the transactions contemplated by this
Agreement, there shall have been no Material Adverse Change or
any condition event or development involving a prospective
Material Adverse Change in respect of Dynamic or the Business,
except as disclosed in the Dynamic Public Documents (including
the Dynamic Financial Statements) prior to the date hereof or
except as have been previously disclosed in writing to Sequoia
prior to the date hereof;
(f) the Partnership shall have been created and the
Non-Exploration Assets shall have been conveyed to the
Partnership pursuant to the Partnership Conveyance Agreement
on or before September 1, 2005;
(g) prior to the Effective Time, all of the outstanding Dynamic
Options shall have been exercised, cancelled or otherwise
terminated, as evidenced by a certificate from a senior
officer of Dynamic confirming that all Dynamic Options have
been exercised, cancelled or terminated, or Sequoia shall be
otherwise satisfied that the Dynamic Options will no longer
represent any right to acquire Dynamic Shares after giving
effect to the Arrangement;
(h) holders of not more than 5% of the issued and outstanding
Dynamic Shares shall have exercised rights of dissent in
relation to the Arrangement;
(i) the board of directors of Dynamic shall have made and shall
not have changed, withdrawn or modified its endorsement of the
Arrangement, its determination that the Arrangement is fair
and in the best interests of Dynamic and the Dynamic
Shareholders and its recommendation that Dynamic Shareholders
vote in favour of the Arrangement;
(j) each of the members of the board of directors of Dynamic and
each of the officers of Dynamic shall have provided their
written resignations as directors and officers effective on or
before the Effective Date together with a release
(satisfactory to Sequoia, acting reasonably) in favour of
Dynamic, in exchange for a release of Dynamic (satisfactory to
Sequoia acting reasonably) in favour of each of such directors
and officers (subject, in each case, to ongoing rights of
indemnity in favour of such directors and officers), and the
board of directors of Dynamic shall have been reconstituted
with nominees of Sequoia as at the Effective Date;
(k) Sequoia shall be satisfied that there are no outstanding
claims or rights or securities which could become claims or
rights to Dynamic Shares;
(l) immediately prior to the Effective Time: (i) the aggregate
number of Dynamic Shares, issued and outstanding (including
those which may be issued pursuant to the exercise of the then
outstanding Dynamic Options) does not exceed 26,467,278; (ii)
there are no other shares of Dynamic outstanding; and (iii) no
person has any agreement or option or any right or privilege
(whether by law, pre-emptive right, by contract or otherwise)
capable of becoming an agreement or option for the purchase,
subscription, allotment or issuance of any unissued Dynamic
Shares; and Dynamic shall have provided to Sequoia a
certificate from Dynamic's registrar and transfer agent as to
the issued and outstanding Dynamic Shares, as at the
13
Effective Date and before giving effect to the transactions
contemplated pursuant to the Arrangement;
(m) there shall be no action taken under any existing law,
regulation, rule or order, nor any statute, rule, regulation
or order which is enacted, enforced, promulgated or issued by
any court, department, commission, board, regulatory body,
government or regulatory authority or similar agency, domestic
or foreign, that imposes any material limitations on the
ability of AcquisitionCo to effectively exercise full rights
of ownership of the Dynamic Shares, including, without
limitation, the right to vote any such shares, or the ability
of Sequoia to operate, use and enjoy the Business; and
(n) Sequoia and the Dynamic Shareholders referred to in Section
1.1(YY) will have executed and delivered Lock-up Agreements
on or before 4:00 p.m. on July 21, 2005.
The foregoing conditions precedent are for the benefit of Sequoia and
AcquisitionCo and may be waived, in whole or in part, by Sequoia in writing at
any time. If any of the said conditions precedent shall not be complied with or
waived by Sequoia on or before the date required for the performance thereof,
Sequoia may, in addition to the other remedies it may have at law or equity,
rescind and terminate this Agreement by written notice to Dynamic.
ARTICLE 5
MUTUAL CLOSING CONDITIONS
5.1 The obligations of Sequoia, AcquisitionCo, Dynamic and ExploreCo to
complete the transactions contemplated herein and to file the
Arrangement Filings in order to give effect to the Arrangement are
subject to fulfilment of the following conditions precedent on or
before the Effective Date or such other time as is specified below:
(a) on or before September 1, 2005, the Interim Order shall have
been granted in form and substance satisfactory to each of
Sequoia and Dynamic, each acting reasonably, and such Interim
Order shall not have been set aside or modified in a manner
unacceptable to Sequoia or Dynamic, each acting reasonably;
(b) the "Arrangement Resolution" (as defined in the Plan of
Arrangement) shall have been passed by the Dynamic
Securityholders as required pursuant to the Interim Order and
all Applicable Laws, on or before September 29, 2005, in form
and substance satisfactory to each of Sequoia and Dynamic,
acting reasonably, duly approving the Arrangement in
accordance with the Interim Order;
(c) on or before September 30, 2005, the Final Order shall have
been granted in form and substance satisfactory to Sequoia and
Dynamic, each acting reasonably;
(d) the Arrangement shall have become effective on or before
September 30, 2005 in accordance with the terms of the Plan
of Arrangement;
(e) there shall be no action taken under any existing applicable
law, regulation, rule or order, nor any statute, rule,
regulation or order which is enacted, enforced, promulgated or
issued by any court, department, commission, board, regulatory
body, government or regulatory authority or similar agency,
domestic or foreign, that:
14
(i) makes illegal or otherwise directly or indirectly
restrains, enjoins or prohibits the Arrangement or
any other transactions contemplated herein which are
necessary to complete the Arrangement; or
(ii) results in a judgment or assessment of material
damages directly or indirectly relating to the
transactions contemplated herein;
(f) Dynamic and Sequoia shall have obtained all consents,
approvals and authorizations (including, without limitation,
all stock exchange, securities commission and other regulatory
approvals) required or necessary in connection with the
transactions contemplated herein on terms and conditions
satisfactory to Dynamic and Sequoia, acting reasonably, and
all applicable domestic and foreign statutory or regulatory
waiting periods to the transactions contemplated under the
Arrangement shall have expired or been terminated, and no
objection or opposition shall have been filed, initiated or
made by any regulatory authority during any applicable
statutory or regulatory period; and
(g) On or before the Effective Date, either the TSX or the TSX
Venture Exchange shall have conditionally approved the listing
of the ExploreCo Shares issuable under the Arrangement on
terms which ExploreCo is capable of satisfying after giving
effect to the Arrangement.
The foregoing conditions are for the mutual benefit of Sequoia and Dynamic and
may be waived, in whole or in part, by Sequoia and Dynamic together, at any
time. If any of the said conditions precedent shall not be complied with or
waived as aforesaid on or before the date required for the performance thereof,
Sequoia or Dynamic may, in addition to the other remedies it may have at law or
in equity, rescind and terminate this Agreement by written notice to the other
parties.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF DYNAMIC AND EXPLORECO
6.1 Dynamic represents, warrants and covenants to Sequoia that:
(a) Dynamic is duly organized and validly existing under the laws
of the Province of British Columbia, has the capacity, power
and authority to own or lease its property and assets and
carry on its business as now conducted by it;
(b) at the Effective Date, Dynamic GP will be duly organized and
validly existing under the laws of the Province of Alberta and
will have the capacity, power and authority to own or lease
its property and assets and carry on its business;
(c) Dynamic is, and at the Effective Date Dynamic GP will be, duly
qualified to carry on business and is in good standing in each
jurisdiction in which the nature of its business or the
property or assets owned or leased by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing will not have a Material Adverse
Effect on Dynamic or the Business;
(d) at the Effective Date, the Partnership will be a validly
existing partnership under the laws of the Province of Alberta
and will own the Non-exploration Assets;
(e) at the date hereof Dynamic does not have any subsidiaries
other than ExploreCo and at the Effective Date Dynamic will
not have any subsidiaries other than ExploreCo;
15
(f) Dynamic has all requisite corporate power and authority to
enter into this Agreement and, subject to the Dynamic
Securityholders approving the Arrangement Resolution pursuant
to and in accordance with the Interim Order, all documents to
be delivered pursuant hereto to which Dynamic will be a party
and, subject to the Dynamic Securityholders approving the
Arrangement Resolution pursuant to and in accordance
with the Interim Order, to perform its obligations hereunder
and thereunder;
(g) this Agreement has been duly authorized, executed and
delivered by Dynamic and all documents to be executed
and delivered by Dynamic pursuant to this Agreement
will be duly executed and delivered, and this Agreement
constitutes, and each of the other documents to be executed
and delivered by Dynamic pursuant to this Agreement will,
once executed, constitute, a legal, valid and binding
obligation of Dynamic enforceable against it in accordance
with its terms;
(h) the execution and delivery of this Agreement and all
documents to be delivered pursuant hereto to which
Dynamic will be a party, the performance of the terms
hereof and thereof and the consummation of the
transactions contemplated herein and therein do not
and will not:
(i) result in the breach of or violate any term or
provision of the notice of articles or articles of
Dynamic;
(ii) conflict with, result in a breach of, constitute a
default under, or accelerate or permit the
acceleration of the performance required by, any
agreement, contract, instrument, license, permit or
authority to which Dynamic is a party or by which it
is bound or to which any of its property is subject;
(iii) give to any person any material interest or right,
including the right of purchase, termination,
cancellation or acceleration under any such
agreement, contract instrument, license, permit or
authority;
(iv) result in the creation of any Encumbrance upon any
assets comprised in the Business; or
(v) violate any provision of law or administrative
regulation or any judicial or administrative order,
award, judgment or decree applicable to Dynamic, the
Dynamic Shares, or the Business,
except to the extent such result or occurrence as set forth in
this subsection 6.1(H) does not have a Material Adverse Effect
on Dynamic;
(i) Dynamic has complied with and is in compliance with all laws
or regulations applicable to the operation of the Business,
including all Applicable Laws and Regulations, except where
failure to do so would not have a Material Adverse Effect on
Dynamic, and Dynamic has all licenses, permits, orders or
approvals of, and has made all required registrations with any
government or regulatory body that are material to the conduct
of the Business;
(j) the board of directors of Dynamic, upon consultation with its
advisors and upon receipt of a Fairness Opinion, has
unanimously approved the Arrangement and Dynamic entering into
this Agreement and has determined that (i) the Arrangement is
fair to Dynamic Shareholders, (ii) the Arrangement is in the
best interests of Dynamic and the Dynamic Shareholders, and
16
(iii) that the board of directors of Dynamic will unanimously
recommend that Dynamic Shareholders vote in favour of
the Arrangement;
(k) Dynamic has not incurred any obligation or liability,
contingent or otherwise, for brokerage fees, finder's fees,
agent's commission, financial advisory fees or other similar
forms of compensation with respect to the transactions
contemplated herein, other than: (i) the fee payable
pursuant to the financial advisory agreement dated October
8, 2004 entered into between Orion Securities Inc. and
Dynamic (the "FINANCIAL ADVISORY FEE"), a copy of which has
been provided to Sequoia, and the Financial Advisory Fee
will not exceed $1,230,575; and (ii) the fee payable
pursuant to the financial advisory agreement dated June 22,
2005 entered into between Xxxxxx & Co. Limited and Dynamic
(the "FAIRNESS ADVISORY FEE"), a copy of which has been
provided to Sequoia, and the Fairness Advisory Fee will not
exceed $225,000;
(l) except as previously disclosed in writing to Sequoia, there
are no actions, suits, other legal, administrative or
arbitration proceedings or government investigations
commenced, or to the knowledge of Dynamic contemplated, at law
or in equity or before or by any court or other Governmental
Authority and which involve or affect Dynamic, or the
Business, including, without limitation, the title to, or
ownership of, the Business, which could have a Material
Adverse Effect on Dynamic or the Business and, to the best of
the knowledge, information and belief of Dynamic, there are no
grounds upon which any such actions, suits or proceedings may
be commenced with a reasonable likelihood of success;
(m) as of the date hereof, the authorized capital of Dynamic
consists of up to 60 million Dynamic Shares, of which as at
the date hereof, 24,558,978 Dynamic Shares are presently
issued and outstanding, all of which are issued as fully paid
and non-assessable;
(n) no person has any agreement, option, right or privilege
(including, without limitation, whether by law, pre emptive
right, contract or otherwise) to purchase, subscribe for,
convert into, exchange for or otherwise require the issuance
of, nor any agreement, option, right or privilege capable of
becoming any such agreement, option, right or privilege, any
of the unissued shares or other securities of Dynamic, except
for Dynamic Options to purchase in an aggregate not more than
1,908,300 Dynamic Shares, the particulars of which are set out
in EXHIBIT 4 hereto;
(o) except as disclosed in writing to Sequoia prior to the date
hereof, as at the date hereof the minute books of Dynamic are
complete, accurate and up to date in all material respects and
contain the minutes of all meetings and all resolutions of the
directors and shareholders of Dynamic;
(p) the Dynamic Financial Statements have been prepared in
accordance with Canadian GAAP applied on a basis consistent
with that of prior periods (except as stated therein) and
present fairly the financial position of Dynamic as of the
dates provided therein and the results of its operations and
the changes in financial position for the periods then ended
and reflect all assets, liabilities and obligations (absolute,
accrued, contingent or otherwise) of Dynamic as at the dates
thereof and in all material respects all accounts receivable
included in the Dynamic Financial Statements, except to the
extent collected since the date thereof, are bona fide,
collectible and not subject to set-off or counterclaim;
17
(q) no securities commission, stock exchange or similar regulatory
authority has issued any order preventing or suspending
trading of any securities of Dynamic, and Dynamic is not in
default of any requirement of Applicable Laws;
(r) the information and statements set forth in the Dynamic Public
Documents were true, correct and complete and did not contain
any material misrepresentations, as of their respective dates,
no material change has occurred in relation to Dynamic which
is not disclosed in such public record, and Dynamic has not
filed any confidential material change reports which continue
to be confidential;
(s) since December 31, 2004, Dynamic has:
(i) not amended its articles or notice of articles;
(ii) not disposed of any property or assets out of the
ordinary course of business and not disposed of any
material properties set forth in the Dynamic Reserve
Report;
(iii) conducted its business in all material respects in
the usual, ordinary and regular course and
consistent with past practice;
(iv) not suffered any Material Adverse Change in its
Business;
(v) not made any change in its accounting principles and
practices as theretofore applied including, without
limitation, the basis upon which its assets and
liabilities are recorded on its books and its
earnings and profits and losses are ascertained,
except as required under Canadian GAAP;
(vi) not paid any bonuses or other unusual payments other
than directors fees or as otherwise as disclosed in
writing to Sequoia prior to the date hereof;
(vii) not issued any guarantees or made any commitments
outside the normal course of business other than as
disclosed in writing to Sequoia prior to the date
hereof;
(viii) not incurred any material liabilities of any nature,
whether accrued, contingent or otherwise or which
would be required by Canadian GAAP to be reflected on
the balance sheet of Dynamic; and
(ix) except as disclosed in writing to Sequoia prior to
the date hereof, not entered into or closed any
hedge, swap or other like transactions;
(t) since December 31, 2004, there has been no Material Adverse
Change in the affairs, operations, capitalization, financial
condition, prospect, licenses, permits, rights or privileges,
whether conditional or otherwise, of Dynamic and its
subsidiaries on a consolidated basis;
(u) Dynamic has conducted and is conducting the Business and
operations of Dynamic in accordance with good oil and gas
industry practice and in compliance in all material respects
with all Applicable Laws and Regulations and, in particular,
all applicable licensing and environmental legislation,
regulations or by-laws or other lawful requirements of any
governmental or regulatory bodies applicable to Dynamic of
each jurisdiction in which it carries on business, and Dynamic
holds all licenses, registrations and qualifications material
18
to its business and assets (and which are necessary or
desirable to carry on its business) in all jurisdictions in
which it carries on business and where the failure to so
conduct business or be in such compliance would have a
Material Adverse Effect on the business and operations of
Dynamic, taken as a whole, and none of such licenses,
registrations or qualifications contains any burdensome term,
provision, condition or limitation which has or is likely to
have any Material Adverse Effect on the Business and
operations of Dynamic, taken as a whole;
(v) all ad valorem, property, production, severance and similar
taxes and assessments, royalties or lease rentals based on or
measured by the ownership of property or the production of
petroleum substances or the receipts of proceeds therefrom
payable by Dynamic in respect of any properties or assets up
to the date hereof and to the Effective Time have been or will
be properly and fully paid and discharged;
(w) except as disclosed in writing to Sequoia prior to the date
hereof, no officer, director, employee or consultant of
Dynamic, any associate or affiliate of any such person or any
party not at arm's length to Dynamic owns, has or is entitled
to any royalty, net profits interest, carried interest or
other Encumbrances of any nature whatsoever which are based on
production from Dynamic' properties or assets or any revenue
or rights attributed thereto;
(x) except as have been disclosed in writing to Sequoia prior to
the date hereof, there are no written contracts, bonus,
severance or other arrangements to which Dynamic is a party
with any director, officer, employee or consultant of Dynamic,
or any associate or affiliate of any such director, officer,
employee or consultant, nor is there any indebtedness owing by
Dynamic to any such parties or by any such parties to Dynamic
and the aggregate amount payable under all employment
contracts, bonus and severance arrangements or obligations,
whether by agreement, arrangement or required by law and
whether or not in writing, upon the completion of the
Arrangement does not exceed $1,773,650 (the "SEVERANCE
OBLIGATIONS");
(y) prior to the Effective Date Dynamic will not implement any
shareholder rights plan, amend its existing shareholder rights
plan or, except as contemplated in this Agreement, any other
form of plan, agreement, contract or instrument that will
trigger any rights to acquire Dynamic Shares or other
securities of Dynamic or rights, entitlements or privileges in
favour of any person upon the entering into of this Agreement
or on the Arrangement becoming effective;
(z) all policies of insurance in force as of the date hereof
naming Dynamic as an insured have been disclosed to Sequoia,
all such policies of insurance shall remain in force and
effect and shall not be cancelled or otherwise terminated as a
result of the transactions contemplated hereby or by the Plan
of Arrangement and, in the event such policies expire pursuant
to their terms, Dynamic will use reasonable commercial efforts
to renew such insurance for at least such period of time as is
necessary to have adequate insurance until after the Effective
Date;
(aa) Dynamic has made available to Xxxxxxx prior to the issuance of
the Dynamic Reserve Report, all information necessary for and
material to the accurate assessment of the petroleum and
natural gas reserves. None of such information contained a
material misrepresentation and (other than as may be affected
by the disposition of petroleum and natural gas assets in the
ordinary course of its business) Dynamic has no knowledge of
any Material Adverse Change to the petroleum and natural gas
reserves of Dynamic since the effective date of the Dynamic
Reserve Report;
19
(bb) Dynamic has renounced all amounts required to be renounced by
it under all flow-through agreements to which it is a party
and, as at the date hereof, Dynamic has outstanding
obligations to incur expenditures of not more than $1,421,838
pursuant to such flow-through agreements;
(cc) except as has been disclosed in writing to Sequoia prior to
the date hereof, Dynamic is not aware of any defects, failures
or impairments in the title of Dynamic to its petroleum and
natural gas properties or facilities which in aggregate could
have a Material Adverse Effect on Dynamic, taken as a whole,
or the anticipated cash-flow of Dynamic or the Business;
(dd) as of May 1, 2005, Dynamic's liabilities did not exceed
$29,000,000;
(ee) at or before Closing, Dynamic will have duly and timely
filed, in proper form, all returns in respect of Taxes under
the Tax Act, the Alberta Corporate Tax Act (Alberta), the
income tax legislation of any other province of Canada or
any foreign country in which it carries on business or to
the jurisdiction of which it is otherwise subject, the Mines
and Minerals Tax Act (Alberta), the Freehold Mineral Rights
Tax Act (Alberta) and similar legislation of other provinces
having jurisdiction over the affairs of Dynamic, the Excise
Tax Act (Canada) and any sales tax legislation of a province
of Canada or any foreign country in which it is liable to
pay or remit Taxes for all prior periods in respect of which
such filings are required and due under applicable
legislation; such returns are true, complete and correct in
all material respects; the tax liability of Dynamic is as
shown on such returns; all Taxes payable with respect to
periods ending on or prior to May 1, 2005 related to Dynamic
have been paid or reflected in the Dynamic Financial
Statements and calculated in accordance with Canadian GAAP;
all payments by Dynamic to any non-resident of Canada have
been made in accordance with all applicable legislation in
respect of withholding tax; Dynamic has withheld from each
payment made to any of its present or former officers,
directors and employees the amount of all Taxes (including,
without limitation, income tax) and other deductions
required to be withheld therefrom and has paid the same to
the proper tax or other authority within the time required
under any applicable tax legislation; Dynamic has remitted
any goods and services tax or sales tax payable by it or
collected by it to the proper tax authority within the time
required under any applicable tax legislation except for
such taxes arising as a result of the creation and existence
of the Partnership or which arise as a result of any action
or omission taken by AcquisitionCo or Sequoia; Dynamic has
made all instalment payments required to be made prior to
the date hereof under all applicable tax legislation and
will have made on or before the Effective Date all
instalment payments required to be made prior to the
Effective Date except for such instalment payments arising
as a result of the creation and existence of the Partnership
or which arise as a result of any action or omission taken
by AcquisitionCo or Sequoia; and Dynamic has paid all taxes
which are due and payable as at the date hereof and will
have paid all taxes due or payable prior to the Effective
Date on or before the Effective Date, except for such taxes
arising as a result of the creation and existence of the
Partnership or which arise as a result of any action or
omission taken by AcquisitionCo or Sequoia;
(ff) there are no outstanding agreements or waivers material to
Dynamic extending the statutory period of limitations
applicable to any federal, provincial or other income tax
return for any period and there are no proposed or issued
assessments or reassessments respecting Dynamic material to
Dynamic or the Business pursuant to which there are amounts
owing or discussions in respect thereof with any taxing
authority;
20
(gg) Dynamic has received notices of assessment with
respect to income tax for all periods ending on or
before December 31, 2003 and with respect to goods
and services tax for all periods ending on or before
March 31, 2005;
(hh) Dynamic has no liability, contingent or otherwise,
for Taxes, other than Taxes not now due and payable
with respect to its ordinary operations during the
current fiscal period. There are no contingent tax
liabilities or any grounds which could reasonably be
expected to prompt an assessment or reassessment of
Dynamic and Dynamic has not received any indication
from any taxing authority that an audit,
investigation, assessment or reassessment is proposed
or underway, regardless of its merits;
(ii) as of the Effective Date the Partnership has not had
a fiscal year ending on or before Closing and no tax
election forms have been completed or filed with
respect to the Partnership;
(jj) as at July 1, 2005, after accounting for income
accrued to July 1, 2005 and deductions from the Tax
Pools expected as a consequence of the transfer of
the Exploration Assets to ExploreCo pursuant to the
ExploreCo Conveyance Agreement, Dynamic had Tax Pools
of at least the following:
(i) undepreciated capital cost: $nil,
(ii) Canadian oil and gas property expense: $4,000,000,
(iii) Canadian development expense: $10,000,000, and
(iv) Canadian exploration expense: $2,500,000;
(kk) except as disclosed to Sequoia prior to the date hereof,
neither Dynamic nor ExploreCo is party to any
written contracts of employment or consulting agreements or
collective bargaining agreements and there are no currently
existing employment benefit plans, arrangements or agreements,
other than health and group insurance plans and customary
government plans such as Canada Pension Plan, Employment
Insurance and Workers Compensation, to which Dynamic
is a party or by which it is bound;
(ll) to the best of the knowledge of Dynamic, except to the extent
that any violation or other matter referred to in this
paragraph does not have a Material Adverse Effect on Dynamic,
taken as a whole:
(i) Dynamic is not in violation of any applicable
federal, provincial, municipal or local laws,
regulations, orders, government decrees, directives
or ordinances with respect to environmental, health
or safety matters (collectively, "ENVIRONMENTAL
LAWS");
(ii) Dynamic has operated the Business at all times and
has received, handled, used, stored, treated, shipped
and disposed of all contaminants without violation of
Environmental Laws;
(iii) except as disclosed in writing to Sequoia prior to
the date hereof including as disclosed in a report
entitled "Environmental Monitoring Programs, St.
Xxxxxx Gas Plant", prepared by Xxxxx Xxxxxxx, Manager
Health, Safety and Environment for Dynamic, there
have been no spills, releases, deposits or discharges
of hazardous or
21
toxic substances, contaminants or wastes which have
not been rectified on any of the real property owned
or leased by Dynamic or under its control;
(iv) there have been no releases, deposits or discharges,
in violation of Environmental Laws, of any hazardous
or toxic substances, contaminants or wastes into the
earth, air or into any body of water or any municipal
or other sewer or drain water systems by Dynamic;
(v) no orders, directions or notices of any Governmental
Authority have been issued and remain outstanding
pursuant to any Environmental Laws relating to the
business, assets or operations of Dynamic;
(vi) Dynamic has not failed to report to the proper
Governmental Authority the occurrence of any event
which is required to be so reported by any
Environmental Law; and
(vii) Dynamic holds all licenses, permits and approvals
required under any Environmental Laws in connection
with the operation of its business and the ownership
and use or operation of its assets, all such
licenses, permits and approvals are in full force
and effect, and except for (A) notifications and
conditions of general application to assets of the
type owned by Dynamic, and (B) notifications
relating to reclamation obligations under the
Environmental Protection and Enhancement Act
(Alberta), Dynamic has not received any notification
pursuant to any Environmental Laws that any work,
repairs, construction or capital expenditures are
required to be made by it as a condition of continued
compliance with any Environmental Laws, or any
license, permit or approval issued pursuant thereto,
or that any license, permit or approval referred to
above is about to be reviewed, made subject to
limitation or conditions, revoked, withdrawn or
terminated;
(mm) Dynamic is a "reporting issuer" or the equivalent thereof in
the provinces of British Columbia and Ontario and is a
registrant in the United States and is in material compliance
with all Applicable Laws of such jurisdictions and the rules
and policies of the TSX and NASDAQ and the Dynamic Shares are
listed only on the TSX and NASDAQ;
(nn) except for the approvals contemplated in this Agreement and
approvals that have been obtained and other than in the normal
course in connection with or in compliance with the provisions
of Applicable Laws and, the rules of the TSX and NASDAQ, (i)
there is no legal impediment to the consummation by Dynamic of
the transactions contemplated by this Agreement or any
agreement contemplated hereunder and (ii) other than certain
filings in the United States, no filing or registration with,
or authorization, consent or approval of, any domestic or
foreign public body or authority is necessary in connection
with the making of this Agreement by Dynamic or the
consummation of the transactions contemplated by this
Agreement or any agreement contemplated hereunder;
(oo) all information relating to Dynamic and the Business in the
Information Circular shall be true and complete in all
material respects and shall not contain any material
misrepresentation; and
(pp) all of the data and information relating to Dynamic, its
subsidiaries and the Business provided or disclosed to Sequoia
or any of its officers, employees, agents or other
22
representatives in writing was accurate and correct in all
material respects as at the date of such data and information.
6.2 ExploreCo represents, warrants and covenants to Sequoia that:
(a) ExploreCo is duly organized and validly existing under the
laws of the Province of Alberta, has the capacity, power and
authority to own or lease its property and assets and carry
on its business as now conducted by it;
(b) this Agreement has been duly authorized, executed and
delivered by ExploreCo and all documents to be executed and
delivered by ExploreCo pursuant to this Agreement including,
without limitation, the ExploreCo Conveyance Agreement will
be duly executed and delivered, and this Agreement
constitutes, and each of the other documents to be executed
and delivered by ExploreCo pursuant to this Agreement
will, once executed, constitute, a legal, valid and
binding obligation of ExploreCo enforceable against it in
accordance with its terms;
(c) the execution and delivery of this Agreement and all documents
to be delivered by ExploreCo pursuant hereto, the performance
of the terms hereof and thereof and the consummation of the
transactions contemplated herein and therein do not and will
not:
(i) result in the breach of or violate any term or
provision of the articles, by laws or governing
documents of ExploreCo;
(ii) conflict with, result in a breach of, constitute a
default under, or accelerate or permit the
acceleration of the performance required by, any
agreement, contract, instrument, license, permit or
authority to which ExploreCo is a party or by which
it is bound or to which any of its property is
subject;
(iii) give to any person any material interest or right,
including the right of purchase, termination,
cancellation or acceleration under any such
agreement, contract instrument, license, permit or
authority;
(iv) violate any provision of law or administrative
regulation or any judicial or administrative order,
award, judgment or decree applicable to ExploreCo;
except to the extent such result or occurrence as set forth in
this subsection 6.1(H) does not have a Material Adverse Effect
on ExploreCo;
(d) except as disclosed in writing to Sequoia prior to the date
hereof, ExploreCo is not party to any written contracts of
employment or consulting agreements or collective bargaining
agreements and there are no currently existing employment
benefit plans, arrangements or agreements, other than health
and group insurance plans and customary government plans such
as Canada Pension Plan, Employment Insurance and Workers
Compensation, to which ExploreCo is a party or by which it is
bound;
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SEQUOIA
7.1 Sequoia and AcquisitionCo jointly and severally represent, warrant and
covenant to Dynamic that:
23
(a) Sequoia is a trust duly created and validly existing under the
laws of Alberta and Sequoia Oil & Gas Ltd. and AcquisitionCo
are each a corporate body duly incorporated and organized and
validly existing under the laws of Alberta, and each has the
requisite power and capacity to undertake its investment
activities in the case of Sequoia and to carry on its business
in the case of Sequoia Oil & Gas Ltd. and AcquisitionCo as
such activities are or such business is now being conducted;
(b) Sequoia is the registered and beneficial owner of 100% of the
outstanding voting shares of Sequoia Oil & Gas Ltd. and the
beneficial owner of 100% of AcquisitionCo with good and valid
title to all such shares, free and clear of all liens and
encumbrances;
(c) Sequoia has the requisite trust power and capacity to enter
into this Agreement and all documents to be delivered pursuant
hereto to which Sequoia will be a party and to perform out
its obligations hereunder and thereunder. AcquisitionCo
has all requisite corporate power and authority to enter into
this Agreement and all documents to be delivered pursuant
hereto to which AcquisitionCo will be a party and to perform
its obligations hereunder and thereunder. This Agreement has
been duly authorized, executed and delivered by Sequoia and
AcquisitionCo and all documents to be executed and delivered
by Sequoia and AcquisitionCo pursuant to this Agreement will
be duly executed and delivered, and this Agreement
constitutes, and each of the other documents to be executed
and delivered by Sequoia or AcquisitionCo pursuant to this
Agreement will, once executed, constitute, a legal, valid and
binding obligation of Sequoia and AcquisitionCo, as
applicable, enforceable against it in accordance with its
terms.
(d) the execution and delivery of this Agreement and all documents
to be delivered pursuant hereto to which Sequoia or
AcquisitionCo will be a party, the performance of the terms
hereof and thereof and the consummation of the transactions
contemplated herein and therein do not and will not:
(i) result in the breach of or violate any term or
provision of the Sequoia Trust Indenture or any term
or provision of the notice of articles or articles or
other governing documents of AcquisitionCo or any of
the subsidiaries of Sequoia;
(ii) conflict with, result in a breach of, constitute a
default under, or accelerate or permit the
acceleration of the performance required by, any
agreement, contract, instrument, license, permit or
authority to which Sequoia or AcquisitionCo is a
party or by which either Sequoia or AcquisitionCo is
bound or to which any of their property is subject;
or
(iii) violate any provision of law or administrative
regulation or any judicial or administrative order,
award, judgment or decree applicable to Sequoia or
AcquisitionCo;
except to the extent such result or occurrence as set forth in
this subsection 7.1(D) will not, directly or indirectly,
adversely affect the completion of the Arrangement in
accordance with the terms of the Plan of Arrangement;
(e) completion of the Arrangement will not require the approval of
the unitholders of Sequoia;
(f) Sequoia has made arrangements such that it will have available
cash sufficient to permit AcquisitionCo to pay the Cash
Consideration payable as partial consideration for the
24
Dynamic Shares pursuant to the Plan of Arrangement and as
contemplated in Section 3.1(D) and Section 10.1(K) and will
advance the Cash Consideration to AcquisitionCo prior to three
(3) business days before the Effective Date to permit
AcquisitionCo to satisfy the condition set out in such section
and comply with Section 10.1(K); and
(g) all of the data and information relating to Sequoia and its
subsidiaries provided or disclosed to Dynamic or any of its
officers, employees, agents or other representatives was
accurate and correct in all material respects as at the date
of such data and information.
ARTICLE 8
COVENANTS OF DYNAMIC
8.1 Dynamic covenants and agrees with Sequoia that, until Closing or the
termination of this Agreement (except Section 8.1(I) and 8.1(M) which,
as set out in Section 12.4 will survive termination), whichever is the
earlier, except with the prior written consent of Sequoia:
(a) other than as contemplated herein or as otherwise approved by
Sequoia in writing, Dynamic will not, directly or indirectly,
do or permit to occur any of the following:
(i) pursue any corporate acquisition or disposition
outside of the ordinary course of business or
amalgamation, merger or arrangement or purchase or
sale of assets outside of the ordinary course of
business or make any material change to the business,
capital or affairs of Dynamic;
(ii) issue, enter into any agreement to issue or grant any
right to acquire (whether absolute or contingent) any
securities of Dynamic other than the issuance of
Dynamic Shares pursuant to outstanding Dynamic
Options;
(iii) amend any agreements relating to outstanding Dynamic
Options without Sequoia's prior written consent,
which consent shall not be unreasonably withheld;
(iv) propose or effect any changes in its capital
structure or its articles or notice of articles;
(v) split, combine or re-classify the outstanding Dynamic
Shares, or declare, set aside or pay any dividend or
other distribution payable in cash, stock, property
or otherwise in respect of Dynamic Shares;
(vi) redeem, purchase or offer to purchase any Dynamic
Shares, Dynamic Options or other securities;
(vii) reduce the stated capital of Dynamic or any of its
outstanding shares;
(viii) pay any dividends or make any distributions to the
Dynamic Shareholders;
(ix) acquire or agree to acquire (by merger, amalgamation,
acquisition of securities or assets or otherwise) any
person, corporation, partnership or other business or
organization or division or, except in the ordinary
course of business, any assets or property;
25
(x) conduct any activity or operations that would
otherwise be detrimental to completion of the
Arrangement;
(xi) other than pursuant to commitments entered into by
Dynamic prior to the date of the Agreement and
disclosed to Sequoia prior to the date hereof, expend
any amounts, incur any liabilities, create any
Encumbrance on any of its properties or assets, enter
into any agreements, arrangements, provide any loans,
or make any commitments outside of the ordinary
course of business (whether absolute, contingent or
otherwise), or make any offers that could result in
any agreements or commitments, whether or not in
the ordinary course of business (in each case, other
than with respect to the Exploration Assets) (A) in
respect of capital or operating expenditures, in an
amount in excess of $25,000 for any one transaction
and $100,000 in aggregate, and (B) in respect of
asset acquisitions, in an amount in excess of
$100,000 for any one transaction and $100,000 in
aggregate;
(xii) other than pursuant to commitments entered into by
Dynamic prior to the date of this Agreement and
disclosed to Sequoia prior to the date hereof, pay,
discharge or satisfy any material claims, liabilities
or obligations other than in the ordinary course of
business consistent with past practice;
(xiii) enter into or close any hedge, swaps or other like
transactions;
(xiv) other than pursuant to commitments entered into by
Dynamic prior to the date of this Agreement and
disclosed to Sequoia prior to the date hereof, sell,
dispose of, transfer, convey, encumber, surrender,
release or abandon the whole or any part of its
assets, other than in the ordinary course of
business, including through production;
(xv) make any payment to any director, officer or employee
outside of their ordinary and usual compensation for
services provided;
(xvi) except as disclosed in writing to Sequoia prior to
the date hereof, grant any officer or director an
increase in compensation in any form or take any
action with respect to the amendment or grant of any
severance or termination pay policies or
arrangements for any directors, officers or
employees, nor adopt or amend or make any
contribution to any bonus, profit sharing, option,
pension, retirement, deferred compensation,
insurance, incentive compensation, other compensation
or other similar plan for the benefit of directors,
officers or employees except as is necessary to
comply with applicable laws or the existing
provisions of any such plans or agreement, nor will
it make any loan to any director, officer, employee,
consultant or any other party not at arm's length
with Dynamic;
(xvii) terminate any employees which would give rise to
liability greater than disclosed in Section 6.1(X);
(xviii) take any action, refrain from taking any action,
permit any action to be taken or not taken,
inconsistent with this Agreement, which might
directly or indirectly interfere or affect the
consummation of the Arrangement;
(b) it shall:
26
(i) except as otherwise permitted in this Agreement,
conduct its business only in the usual ordinary
course of business consistent with past practice (for
greater certainty, where it is an operator of any
property, it shall operate and maintain such property
in the proper and prudent manner in accordance with
good industry practice and the agreements governing
the ownership and operation of such property) and
shall consult with Sequoia in respect of its ongoing
business and affairs and keep Sequoia up to date on
all material developments related thereto;
(ii) provide to Sequoia reports on Dynamic's operations
and affairs as may be reasonably requested from time
to time by Sequoia;
(iii) use its 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;
(iv) use its reasonable commercial efforts to preserve
intact its business organizations and goodwill and to
maintain satisfactory relationships with suppliers,
distributors, customers, joint operators and others
having business relationships with it;
(v) promptly notify Sequoia orally and in writing of any
Material Adverse Change to Dynamic or the Business,
and of any material governmental or third party
complaints, investigations or hearings (or
communications indicating that the same may be
contemplated); and
(vi) it shall retain all of the gross proceeds received
from the exercise of Dynamic Options occuring from
the date of this Agreement until the Effective Time
and may only use such proceeds in a manner permitted
by this Agreement;
(c) it shall not, and shall cause the directors, officers,
employees, advisors and other representatives of Dynamic and
its subsidiaries ("REPRESENTATIVES") not to, directly or
indirectly:
(i) solicit, facilitate, initiate, encourage or take
any action to solicit, facilitate, initiate,
entertain or encourage, any inquiries or
communication regarding or the making of any proposal
or offer that constitutes or may constitute a Dynamic
Acquisition Proposal (as defined below) (including,
without limitation, by way of furnishing information)
any inquiry or the making of any proposal to Dynamic
or its shareholders from any person which
constitutes, or may reasonably expect it to lead to
(in either case whether in one transaction or a
series of transactions): (A) an acquisition from
Dynamic or its shareholders of any securities of
Dynamic; (B) any acquisition of a substantial amount
of assets of Dynamic; (C) an amalgamation,
arrangement, merger, consolidation of any of Dynamic;
or (D) any take-over bid, issuer bid, exchange offer,
re-capitalization, liquidation, dissolution,
re-organization into a royalty trust or income fund
or similar transaction involving any of Dynamic or
any other transaction, the consummation of which
would or could reasonably be expected to impede,
interfere with, prevent or delay the Arrangement or
which would or could reasonably be expected to
materially reduce the benefits of the
27
Arrangement to Sequoia (any such inquiry or proposal
in respect of any of the foregoing referred to as a
"DYNAMIC ACQUISITION PROPOSAL"). Dynamic shall
immediately cease and cause to be terminated, and
shall cause its subsidiaries and all Representatives
to immediately terminate and cause to be terminated,
all existing discussions or negotiations with any
person conducted heretofore with respect to, or that
could reasonably be expected to lead to a Dynamic
Acquisition Proposal. Dynamic shall promptly notify
each Representative of its obligations under this
Section 8.1(C)(I) and without limiting the foregoing,
it is agreed that any violation of the restrictions
set forth above by any subsidiary of Dynamic or any
Representative, whether or not such person is
purporting to act on behalf of Dynamic, shall be
deemed to be a breach of this Section 8.1(C)(I);
(ii) enter into or participate in any discussions or
negotiations regarding a Dynamic Acquisition Proposal
or, except in the ordinary course of business,
furnish any other person any information with respect
to the business, properties, operations, prospects or
conditions (financial or otherwise) of Dynamic or of
a Dynamic 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; or
(iii) waive, or otherwise forbear (except in respect of
non-material matters) 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 of Dynamic in
any confidential information agreement, including,
without limitation, any "standstill provision"
thereunder;
provided that the foregoing shall not prevent the board of
directors of Dynamic from responding as required by law to any
bona fide unsolicited offer or proposal in writing regarding a
Dynamic Acquisition Proposal from a third party (provided that
prior to providing any additional information, such third
party first enters into a confidentiality agreement
substantially similar to the confidentiality agreement
provided to Sequoia and which confidentiality agreement shall
not in any way restrict disclosure to Sequoia by Dynamic,
including disclosure of prospective discussions and
negotiations between Dynamic and such third party) or making
any disclosure to its shareholders with respect thereto, if
and only to the extent that such third party has demonstrated
that the funds or other consideration necessary for the
Dynamic Acquisition Proposal are available and Dynamic's board
of directors shall have concluded in good faith after
receiving advice of its financial advisors, that such Dynamic
Acquisition Proposal would, if consummated in accordance with
its terms, result in a transaction financially more favourable
to Dynamic and the Dynamic Securityholders than the
Arrangement, and after considering applicable law and written
advice of its outside counsel, that any such response in
connection with such Dynamic Acquisition Proposal is necessary
in order for the board of directors of Dynamic to act in a
manner consistent with its fiduciary duties under applicable
law and after giving effect to all proposals to adjust the
terms and conditions of this Agreement and the Arrangement
which may be offered by Sequoia during the 48 hours notice
period set forth below. Dynamic shall give Sequoia orally and
in writing at least 48 hours advance notice of any meeting of
the board of directors of Dynamic to accept, recommend,
approve or implement a Dynamic Acquisition Proposal and such
notice shall include the principal business terms and
conditions of the Dynamic Acquisition Proposal and the general
attributes of any non cash consideration;
28
(d) it will notify Sequoia immediately if any inquiries or
proposals contemplated by subsection 8.1(C) are received by
Dynamic, its subsidiaries or Representatives and the details
of any such inquiries or proposals, or if any such information
is requested from or any such negotiations or discussions are
sought to be initiated or conducted with Dynamic, its
subsidiaries or Representatives;
(e) if any information is provided to a third party after the
execution of this Agreement for the purpose of assisting that
third party in making an offer or proposal to it or its
shareholders which has not been previously made available to
Sequoia, such information will simultaneously be provided to
Sequoia;
(f) it will keep Sequoia fully informed as to the decisions
required with respect to the most advantageous methods of
exploring, operating and producing from the Business;
(g) it will use reasonable commercial efforts to cooperate with
Sequoia to enable an orderly integration of the business and
affairs of Dynamic with Sequoia after the Effective Date;
(h) it will make available and cause to be made available to
Sequoia, its agents and advisors, as Sequoia may reasonably
request, all documents and agreements in any way relating to
or affecting the Business, or the business, operations,
prospects, affairs or financial status o Dynamic and
its subsidiaries (including without limitation, any
correspondence between Dynamic and its advisors or any
Governmental Authority and all minute books) and it will
provide Sequoia with access to Dynamic's premises, field
operations, records, computer systems and employees and
such other documents or agreements as may be necessary to
enable Sequoia to verify the truth of the representations
and warranties of Dynamic herein and compliance by Dynamic
with the terms and conditions hereof, except where
Dynamic is contractually precluded from making such document
or agreement available, and cooperate with Sequoia in
securing access for Sequoia to any such documentation not in
the possession or under the control of Dynamic;
(i) it will not disclose to any person, other than officers,
directors and key employees and professional advisors of
Dynamic or its subsidiaries, any confidential information
relating to Sequoia or its affiliates except such confidential
information required to be disclosed by law or otherwise known
to the public;
(j) it will not take any action or omit to take any action which
results in a reduction of the Tax Pools of Dynamic except for
actions contemplated by the Plan of Arrangement or the
ExploreCo Conveyance Agreement, through the ordinary course of
business or as a result of any flow-through share renunciation
associated with flow-through share issuances completed prior
to the date of this Agreement;
(k) it will not make any elections or designations under the Tax
Act on or before the Effective Date without the written
consent of Sequoia, which consent shall not be unreasonably
withheld;
(l) it will not take any action that would render, or that may
reasonably be expected to render, any representation or
warranty made by Dynamic in this Agreement untrue at any time
prior to the Effective Time;
(m) it shall indemnify and save harmless Sequoia and the
directors, officers and agents of Sequoia from and against any
and all liabilities, claims demands, losses, costs, damages
and
29
expenses (excluding any loss of profits or consequential
damages) to which Sequoia, or any director, officer, advisor
or agent thereof, may be subject or which Sequoia, 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 any misrepresentation or alleged misrepresentation in the
Information Circular relating or any material in respect of
Dynamic or its affiliates filed in compliance or intended
compliance with Applicable Laws;
(n) it will use its reasonable commercial efforts to fulfill or
cause the fulfilment of the conditions set forth in Sections
4.1 and 5.1, to the extent the fulfilment of the same is
within the control of Dynamic;
(o) it will forthwith file, proceed with and diligently prosecute
an application to the Court under the BCBCA for an Interim
Order of the Court with respect to the matters pertaining to
the Arrangement and acceptable to Sequoia, acting reasonably;
(p) it will:
(i) forthwith carry out the terms of the Interim Order to
the extent applicable to it;
(ii) convene the Meeting and solicit proxies to be voted
at the Meeting in favour of the Arrangement;
(iii) provide notice to Sequoia of the Meeting and allow
Sequoia's representatives to attend the Meeting
unless such attendance is prohibited by rules
governing such Meeting; and
(iv) conduct the Meeting in accordance with the Interim
Order, the articles of Dynamic and any instrument
governing such Meeting, as applicable, and as
otherwise required by law;
(q) it will prepare (in consultation with Sequoia), file and
distribute to the Dynamic Securityholders, in a timely, and
expeditious manner the Information Circular, and any
amendments or supplements to the Information Circular, and
will include the Fairness Opinion as a schedule thereto, all
as required by the Interim Order or by applicable law, in all
jurisdictions where the same is required, complying in all
material respects with all applicable legal requirements on
the date of issue thereof;
(r) subject to the provisions of Section 8.2, it will include in
the Information Circular the unanimous recommendation of the
board of directors of Dynamic that the Dynamic Shareholders
vote in favour of the Arrangement;
(s) it will, subject to the approval of the Arrangement in
accordance with the provisions of the Interim Order, forthwith
file, proceed with and diligently prosecute an application for
the Final Order;
(t) it will forthwith carry out the terms of the Final Order to
the extent applicable to Dynamic and will forthwith file the
Arrangement Filings, with the Registrar;
(u) except for proxies and other non-substantive communications
with Dynamic Securityholders, Dynamic will furnish promptly to
Sequoia a copy of each notice, report, schedule or other
30
document delivered, filed or received by Dynamic in connection
with: (i) the Arrangement; (ii) the Meeting; (iii) any filings
under Applicable Laws; and (iv) any dealings with regulatory
agencies in connection with the transactions contemplated
herein;
(v) it will make other necessary filings and applications under
Applicable Laws required on the part of Dynamic or ExploreCo
in connection with the transactions contemplated herein and
take all reasonable action necessary to be in compliance with
such Applicable Laws;
(w) it will promptly advise Sequoia of the number of Dynamic
Shares for which Dynamic has received notices of dissent (if
required by the Interim Order) or written objections to the
Arrangement and will provide Sequoia with copies of such
notices or written objections; and
(x) it will not, unless approved by Sequoia in advance and in
writing, which approval shall not be unreasonably withheld,
amend the ExploreCo Conveyance Agreement in any manner
whatsoever.
8.2 Notwithstanding the representation in subsection 6.1(J) and the
covenant in Section 8.1(R)and subject to compliance with subsection
8.1(C), if prior to the completion of the Arrangement, another bona
fide Dynamic Acquisition Proposal is proposed, offered or made to the
holders of Dynamic Shares or to Dynamic which, in the reasonable
opinion of the board of directors of Dynamic, after consultation with
its financial advisors, would result in a financially superior
transaction, directly or indirectly, for the holders of Dynamic Shares
than that contemplated by the Arrangement, the board of directors of
Dynamic may withdraw, modify or change the recommendation regarding the
Arrangement if, in the opinion of such board of directors acting
reasonably and upon the advice of its outside legal counsel, such
withdrawal, modification or change is required in discharge of the
fiduciary duties of the board of directors of Dynamic.
8.3 Dynamic agrees to pay to Sequoia in cash (on the date of the occurrence
of any event below) the amount of $2,160,000 (the "SEQUOIA BREAK FEE")
if:
(a) the board of directors of Dynamic fails to recommend that
Dynamic Securityholders vote in favour of the Arrangement or
the board of directors of Dynamic withdraws, modifies or
changes its recommendation to Dynamic Securityholders to vote
in favour of the Arrangement (other than as a result of and in
direct response to a material breach by Sequoia of its
obligations under this Agreement that would or reasonably
could be expected to result in the non-satisfaction of the
conditions precedent to the closing of the transactions
contemplated by this Agreement or a material misrepresentation
by Sequoia of any of its representations or warranties
contained in this Agreement);
(b) a bona fide Dynamic Acquisition Proposal has been announced by
any third party and has not been withdrawn prior to the date
of the Meeting to all or substantially all holder of Dynamic
Shares, the Arrangement is not approved by the requisite
majority of Dynamic Securityholders at the Meeting and such
Dynamic Acquisition Proposal is implemented within 180 days of
the Meeting;
(c) a breach or non-performance by Dynamic of any of its
obligations, covenants, agreements, representations and
warranties in the Agreement (except where such breach is
itself the result of a material breach or non-performance by
Sequoia of any of its obligations, representations, warranties
or covenants contained in this Agreement) which breach or
non-performance makes it impossible or unlikely that all of
the conditions of the Arrangement will be satisfied, and which
Dynamic fails to cure within five business days
31
after receipt of written notice thereof from Sequoia (except
that no cure period shall be provided for a breach by Dynamic
which by its nature cannot be cured and in no event shall a
cure period extend beyond Closing).
8.4 Dynamic acknowledges that the payment amount set out in Section 8.3
constitutes liquidated damages and is a genuine pre-estimate of the
damages which Sequoia will suffer or incur in the event of the
occurrence of one of the events set forth above, and Sequoia will not
be able to seek further damages or participate in any legal action or
suits in connection with such events.
8.5 Dynamic covenants and agrees with Sequoia that it will assist and
cooperate with Sequoia in its applications to have Dynamic's Shares
delisted from the TSX and NASDAQ upon Closing.
ARTICLE 9
COVENANTS OF EXPLORECO
9.1 ExploreCo covenants and agrees with Sequoia that, until Closing or the
termination of this Agreement, whichever is the earlier, except with
the prior written consent of Sequoia:
(a) other than as contemplated herein or as otherwise approved by
Sequoia in writing, ExploreCo will not, directly or
indirectly, do or permit to occur any of the following:
(i) carry on any business, enter into any transaction or
effect any corporate act whatsoever;
(ii) issue, enter into any agreement to issue or grant any
right to acquire (whether absolute or contingent) any
securities of ExploreCo other than pursuant to a
private placement of up to $4,000,000 of common
shares of ExploreCo; or
(iii) it will not, unless approved by Sequoia in advance
and in writing, which approval shall not be
unreasonably withheld, amend the ExploreCo Conveyance
Agreement in any manner whatsoever;
(b) it will not disclose to any person, other than officers,
directors and key employees and professional advisors of
ExploreCo, any confidential information relating to Sequoia or
its affiliates except Sequoia Information required to be
disclosed by law or otherwise known to the public; and
(c) it will not take any action that would render, or that may
reasonably be expected to render, any representation or
warranty made by ExploreCo in this Agreement untrue at any
time prior to the Effective Time.
9.2 ExploreCo covenants and agrees with Sequoia that:
(a) it will forthwith carry out the terms of the Final Order to
the extent applicable to ExploreCo; and
(b) it shall indemnify and save harmless Sequoia and the
directors, officers, advisors and agents of Sequoia from and
against any and all liabilities, claims demands, losses,
costs, damages and expenses (excluding any loss of profits or
consequential damages) to which Sequoia, or any director,
officer, advisor or agent thereof, may be subject or which
Sequoia, or any director, officer, advisor or agent thereof,
may suffer, whether under the provisions of any
32
statute or otherwise, in any way caused by, or arising,
directly or indirectly, from or in consequence of:
(i) the breach by ExploreCo of any of the terms of this
Agreement; or
(ii) any representation or warranty made by ExploreCo
herein not being true or ceasing to be true.
ARTICLE 10
COVENANTS OF SEQUOIA
10.1 Sequoia and AcquisitionCo covenant and agrees with Dynamic that, until
the Closing or the termination of this Agreement (except Sections
10.1(F) and 10.1(H) which, as set out in Section 12.4, will survive
termination), whichever is the earlier:
(a) other than as contemplated herein, Sequoia and its
subsidiaries will not do any of the following:
(i) conduct any activity or operations that would
otherwise be detrimental to the Arrangement; or
(ii) take any action, refrain from taking any action,
permit any action to be taken or not taken,
inconsistent with this Agreement, which might
directly or indirectly interfere or affect the
consummation of the Arrangement;
(b) Sequoia shall promptly notify Dynamic orally and in writing of
any Material Adverse Change in its business;
(c) Sequoia and AcquisitionCo will use their reasonable commercial
efforts to fulfil or cause the fulfilment of the conditions
set forth in Sections 3.1 and 5.1 as soon as reasonably
possible to the extent the fulfilment of the same is within
the control of Sequoia and AcquisitionCo ;
(d) Sequoia and AcquisitionCo will assist Dynamic in the
preparation of the Information Circular and provide to
Dynamic, in a timely and expeditious manner, all information
as may be reasonably requested by Dynamic or is required by
the Interim Order or applicable law, with respect to Sequoia
and its subsidiaries, the Arrangement and the transactions to
be completed at the Meeting for inclusion in the Information
Circular and any amendments or supplements to the Information
Circular, in each case complying in all material respects with
all applicable legal requirements on the date of issue
thereof;
(e) from and after the Effective Date, Sequoia and AcquisitionCo
will cause Dynamic or any successor to Dynamic to: (i) fulfil
its obligations pursuant to indemnities provided or available
to past and present directors and officers of Dynamic pursuant
to the provisions of the articles of Dynamic and applicable
corporate legislation and any written indemnity agreements
between Dynamic and its past and present directors and
officers, and (ii) maintain any trailing liability or "run
off" insurance secured by Dynamic for Dynamic's past and
present directors and officers and not take any action to
terminate such insurance;
(f) Sequoia shall indemnify and save harmless Dynamic and the
directors, officers, advisors and agents of Dynamic from and
against any and all liabilities, claims demands, losses,
costs, damages and expenses (excluding any loss of profits or
consequential damages) to which
33
Dynamic, or any director, officer, advisor or agent thereof
may be subject or which Dynamic, 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 any
misrepresentation or alleged misrepresentation in any material
in respect of Sequoia or Sequoia Commercial Trust filed in
compliance or intended compliance with Applicable Laws;
(g) Sequoia and AcquisitionCo will forthwith carry out the terms
of the Interim Order and the Final Order to the extent
applicable to Sequoia and AcquisitionCo provided that nothing
shall require Sequoia or AcquisitionCo to consent to any
material modification of this Agreement, the Arrangement or
the obligations of Sequoia and AcquisitionCo hereunder or
thereunder;
(h) Sequoia and AcquisitionCo will not disclose to any person,
other than officers, directors and key employees and
professional advisors of Sequoia, any confidential information
relating to Dynamic or its affiliates except information
disclosed in the Information Circular, required to be
disclosed by law or otherwise known to the public;
(i) Sequoia and AcquisitionCo will not take any action that would
render, or that may reasonably be expected to render, any
representation or warranty made by Sequoia and AcquisitionCo
in this Agreement untrue at any time prior to the Effective
Time;
(j) Sequoia and AcquisitionCo will make all necessary filings and
applications under Applicable Laws and Regulations required on
the part of Sequoia and AcquisitionCo in connection with the
transactions contemplated herein and take all reasonable
commercial action necessary to be in compliance with such laws
and regulations; and
(k) Sequoia and AcquisitionCo will take all necessary actions to
give effect to the transactions contemplated by this Agreement
and the Arrangement, including, without limitation, if the
Final Order is obtained and subject to the fulfilment or
the waiver of each of the conditions referred to in Article 3,
(other than the conditions in Section 3.1(D), 4 and 5, on or
before three Business Days prior to the Effective Date, 2005
AcquisitionCo will, and Sequoia will cause AcquisitionCo to,
deposit with the Depositary the cash consideration payable by
AcquisitionCo pursuant to the Arrangement in the amount of the
Cash Consideration together with an irrevocable direction
authorizing and directing the Depositary to pay the Cash
Consideration payable pursuant to the Arrangement to the
Dynamic Shareholders who are entitled to receive the Cash
Consideration pursuant to and in accordance with the terms
and conditions of the Plan of Arrangement;
10.2 Sequoia agrees to pay to Dynamic in cash (on the date of the occurrence
of any event below) the amount of $2,160,000 (the "DYNAMIC BREAK FEE")
in the event of a breach or non-performance by Sequoia of any of its
obligations, representations and warranties in this Agreement, which
breach or non-performance individually or in the aggregate would or
reasonably could be expected to result in the non-satisfaction of the
conditions precedent to the closing of the transactions contemplated by
this Agreement or a material misrepresentation by Sequoia of any of its
representations or warranties contained in this Agreement, and which
Sequoia fails to cure within five business days after receipt of
written notice thereof from Dynamic (except that no cure period shall
be provided for a breach by Sequoia which by its nature cannot be cured
and in no event shall any cure period extend beyond Closing), except
where such breach is itself directly the result of a material breach or
non-performance by Dynamic of any of its representations, warranties or
covenants contained in this Agreement.
34
10.3 Sequoia acknowledges that the payment amount set out in Section 10.2
constitutes liquidated damages and is a genuine pre-estimate of the
damages which Dynamic will suffer or incur in the event of the
occurrence of one of the events set forth above, and Dynamic will not
be able to seek further damages or participate in any legal action or
suits in connection with such events.
10.4 After the Closing, Sequoia shall cause Dynamic to incur sufficient
expenditures to fullfil all of Dynamic's outstanding obligations under
all flow-through agreements to which it is a party.
ARTICLE 11
LIMITATION OF LIABILITY
11.1 The parties hereto acknowledge that Sequoia Oil & Gas Ltd. (the
"ADMINISTRATOR") is entering into this agreement solely in its capacity
as administrator on behalf of Sequoia and the obligations of Sequoia
hereunder shall not be personally binding upon the Administrator or any
of the unitholders of Sequoia (a "UNITHOLDER") such that any recourse
against Sequoia, the trustee of Sequoia or the Administrator or any
Unitholder in any manner in respect of any indebtedness, obligation or
liability of Sequoia arising hereunder or arising in connection
herewith or from the matters to which this agreement relates, if any,
including without limitation claims based in contract, on negligence,
tortious behaviour or otherwise, shall be limited to, and satisfied
only out of, the Trust Fund as defined in the Trust Indenture dated
March 16, 2005, as amended, restated or replaced from time to time,
relating to Sequoia.
ARTICLE 12
TERMINATION
12.1 Notwithstanding any other rights contained herein, Sequoia may
terminate this Agreement provided that it is not materially in default
of any of its representations, warranties or covenants under this
Agreement upon notice to Dynamic:
(a) if the Plan of Arrangement is amended, modified or
supplemented in any manner unacceptable to Sequoia, acting
reasonably;
(b) if the Information Circular is not mailed by Dynamic to the
Dynamic Shareholders in compliance with Applicable Laws on or
prior to September 1, 2005;
(c) if the Interim Order is set aside or modified in a manner
unacceptable to Sequoia, acting reasonably, on appeal or
otherwise;
(d) if the Arrangement is not approved by Dynamic Securityholders
in accordance with the terms of the Interim Order and all
Applicable Laws on or before September 29, 2005;
(e) if the Final Order has not been granted in form and substance
satisfactory to Sequoia, acting reasonably on or before
September 29, 2005;
(f) if the Arrangement has not become effective on or before
September 30, 2005;
(g) if the Sequoia Break Fee shall have become payable;
(h) if the Dynamic Break Fee shall have become payable and been
paid by Sequoia;
35
(i) if the Court, or any other court or a Governmental Authority
shall have issued an order or taken any other action, in each
case which has become final and non appealable and which
restrains, enjoins or otherwise prohibits the Arrangement; or
(j) upon any other circumstances hereunder that give rise to a
termination of this Agreement by Sequoia, including those set
forth in Sections 4.1 and 5.1 hereof.
12.2 Notwithstanding any other rights contained herein, Dynamic may
terminate this Agreement provided that it is not materially in default
of any of its representations, warranties or covenants under this
Agreement upon notice to Sequoia:
(a) if the Plan of Arrangement is amended, modified or
supplemented in any manner unacceptable to Dynamic and the
board of directors of Dynamic, in each case acting reasonably;
(b) if the Interim Order is set aside or modified in a manner
unacceptable to Dynamic, acting reasonably, on appeal or
otherwise;
(c) if the Arrangement is not approved by Dynamic Securityholders
in accordance with the terms of the Interim Order and all
Applicable Laws on or before September 29, 2005;
(d) if the Final Order has not been granted in form and substance
satisfactory to Dynamic, acting reasonably on or before
September 29, 2005;
(e) if the Arrangement has not become effective on or before
September 30, 2005;
(f) if Sequoia Break Fee shall have become payable and been paid
by Dynamic;
(g) if the Dynamic Break Fee shall have become payable;
(h) if the Court, or any other court or a Governmental Authority
shall have issued an order or taken any other action, in each
case which has become final and non appealable and which
restrains, enjoins or otherwise prohibits the Arrangement; or
(i) upon any other circumstances hereunder that give rise to a
termination of this Agreement by Dynamic including those set
forth in Sections 3.1 and 5.1 hereof.
12.3 Unless otherwise provided herein, the exercise by any party of any right
of termination hereunder shall be without prejudice to any other remedy
available to such party.
12.4 If this Agreement is validly terminated pursuant to any provision of
this Agreement:
(a) the parties shall return all materials and copies of all
materials delivered to Dynamic or Sequoia, as the case may be,
or their agents and, except for the rights and obligations set
forth in this Section and Sections 8.1(I), 8.1(M), 8.3,
10.1(F), 10.1(H), 10.2, 15.1, 22.1 and 22.2 (which shall
survive any termination of this Agreement and continue in full
force and effect), no party shall have any further obligations
to any other party hereunder with respect to this Agreement;
and
(b) if, prior to the termination of this Agreement, Dynamic has
taken any steps to create the Partnership and convey the
Non-exploration Assets to the Partnership pursuant to the
36
Partnership Conveyance Agreement, Sequoia shall indemnify
Dynamic for the costs (including transfer and other
incremental taxes) reasonably incurred to create the
Partnership and convey the Non-exploration Assets to the
Partnership and to dissolve the Partnership, including, but
not limited to, the costs to convey the Non-exploration Assets
from the Partnership to Dynamic.
ARTICLE 13
AMENDMENT
13.1 This Agreement may, at any time and from time to time before or after
the holding of the Meeting, be amended by written agreement of the
parties hereto without further notice to or authorization on the part
of their respective shareholders, and any such amendment may, without
limitation:
(a) change the time for performance of any of the obligations or
acts of the parties hereto;
(b) waive any inaccuracies or modify any representation, term or
provision contained herein or in any document delivered
pursuant hereto; or
(c) waive compliance with or modify any of the covenants or
conditions herein contained and waive or modify performance of
any of the obligations of the parties hereto;
provided that any such amendment may not reduce or materially adversely
affect the consideration to be received by a Dynamic Securityholder.
ARTICLE 14
COSTS
14.1 Except as contemplated in the Arrangement and herein, each party hereto
covenants and agrees to bear its own costs and expenses in connection
with the transactions contemplated hereby.
ARTICLE 15
DISCLOSURE
15.1 Unless previously issued, upon execution of this Agreement, the parties
hereto shall issue a joint press release which announces that the
parties hereto have entered into a formal agreement providing for the
implementation of the Arrangement. No party hereto shall disclose, by
press release, any aspect of the transactions contemplated hereby
without prior consent of the other party. Notwithstanding the
foregoing, if either party is required by law or administrative
regulation to make any disclosure relating to the transactions
contemplated herein, such disclosure may be made, but that party will
inform, to the extent reasonably feasible, the other party as to the
wording of such disclosure prior to its being made.
ARTICLE 16
NOTICES
16.1 The address for service of each of the parties hereto shall be as
follows:
if to Sequoia:
Sequoia Oil & Gas Trust
0000, 000 - 0xx Xxxxxx X.X.
00
Xxxxxxx, Xxxxxxx X0X 0X0
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx and Xxxx Xxxxxxxx
with a copy to:
Gowling Xxxxxxx Xxxxxxxxx LLP
0000, 000 - 0xx Xxxxxx X.X.
Xxxxxxx, XX X0X 0X0
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx Xxxx
if to Dynamic or ExploreCo:
Dynamic Oil & Gas, Inc.
000 - 00000 Xxxxxxxxxxx Xxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Telecopier No.: (000) 000-0000
Attention: Xxx X. Xxxxxx, Vice President,
Chief Operating Officer
with a copy to:
XxXxxxxx Xxxxxxxx LLP
Suite 3300, 000 - 0xx Xxxxxx X.X.
Xxxxxxx, XX X0X 0X0
Telecopier No.: (000) 000-0000
Attention: Xxx Xxxx
ARTICLE 17
TIME
17.1 Time shall be of the essence in this Agreement.
ARTICLE 18
ENTIRE AGREEMENT
18.1 This Agreement:
(a) from the date hereof constitutes the entire agreement and
supersedes all other prior agreements and undertakings, both
written and oral, among the parties with respect to the
subject matter hereof; and
(b) is not intended to confer upon any other person any rights or
remedies hereunder unless expressly provided for herein.
ARTICLE 19
SEVERABILITY
19.1 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
38
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.
ARTICLE 20
FURTHER ASSURANCES
20.1 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 shall be reasonably required
in order to fully perform and carry out the terms and intent hereof.
ARTICLE 21
GOVERNING LAW
21.1 This Agreement shall be governed by, and be construed in accordance
with, the laws of the Province of Alberta and applicable laws of Canada
but the reference to such laws shall not, by conflict of laws rules or
otherwise, require the application of the law of any jurisdiction other
than the Province of Alberta.
21.2 Each party hereto hereby irrevocably attorns to the jurisdiction of the
Courts of the Province of Alberta in respect of all matters arising
under or in relation to this Agreement.
21.3 Each of the parties hereto hereby irrevocably and unconditionally
consents to and submits to the jurisdiction of the courts of the
Province of Alberta in respect of all actions, suits or proceedings
arising out of or relating to this Agreement or the matters
contemplated hereby (and agrees not to commence any action, suit or
proceeding relating thereto except in such courts) and further agrees
that service of any process, summons, notice or document by single
registered mail to the addresses of the parties set forth in this
Agreement shall be effective service of process for any action, suit or
proceeding brought against either party in such court. The parties
hereby irrevocably and unconditionally waive any objection to the
laying of venue of any action, suit or proceeding arising out of this
Agreement or the matters contemplated hereby in the courts of the
Province of Alberta and hereby further irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such
action, suit or proceeding so brought has been brought in an
inconvenient forum.
ARTICLE 22
THIRD PARTY BENEFICIARIES
22.1 Subsection 8.1(M) hereof is intended for the benefit of the present and
former directors and officers of Sequoia and shall be enforceable by
each of such persons and his or her heirs, executors, administrators
and other legal representatives (collectively the "SEQUOIA THIRD PARTY
BENEFICIARIES") and Sequoia and any successor to Sequoia shall hold the
rights and benefits of this Section 22.1 in trust for and on behalf of
the Sequoia Third Party Beneficiaries and Sequoia hereby accepts such
trust and agrees to hold the benefit of and enforce performance of such
covenants on
39
behalf of the Sequoia Third Party Beneficiaries, and such are in
addition to, and not in substitution for, any other rights that any
Sequoia Third Party Beneficiary may have by contract or otherwise.
22.2 Subsections 10.1(E) and 10.1(F) hereof are intended for the benefit of
the present and former directors and officers of Dynamic and shall be
enforceable by each of such persons and his or her heirs, executors,
administrators and other legal representatives (collectively the
"DYNAMIC THIRD PARTY BENEFICIARIES") and Dynamic and ExploreCo and any
successors to Dynamic and ExploreCo shall hold the rights and benefits
of this Section 22.2 in trust for and on behalf of the Dynamic Third
Party Beneficiaries and Dynamic and ExploreCo hereby accept such trust
and agrees to hold the benefit of and enforce performance of such
covenants on behalf of the Dynamic Third Party Beneficiaries, and such
are in addition to, and not in substitution for, any other rights that
any Dynamic Third Party Beneficiary may have by contract or otherwise.
ARTICLE 23
EXECUTION IN COUNTERPARTS
23.1 This Agreement may be executed in identical counterparts, each of which
is and is hereby conclusively deemed to be an original and counterparts
collectively are to be conclusively deemed one instrument.
ARTICLE 24
WAIVER
24.1 No waiver by any party hereto shall be effective unless in writing and
any waiver shall affect only the matter, and the occurrence thereof,
specifically identified and shall not extend to any other matter or
occurrence.
ARTICLE 25
ENUREMENT AND ASSIGNMENT
25.1 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This
Agreement may not be assigned by any party hereto without the prior
consent of the other party hereto except that Sequoia may assign all or
a portion of its rights under this Agreement to any subsidiary of
Sequoia, but no assignment shall relieve Sequoia of its obligations
hereunder.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
40
IN WITNESS WHEREOF the parties hereto have executed this Agreement.
SEQUOIA OIL & GAS TRUST BY ITS ADMINISTRATOR
SEQUOIA OIL & GAS LTD.
Per: /s/Xxxxxxx Xxxxxxx
------------------
XXXXXXX XXXXXXX,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Per: /s/Xxxx Xxxx
------------
XXXX XXXX,
SECRETARY
DYNAMIC OIL & GAS, INC.
Per: /s/Xxxxx Xxxxxxx
----------------
XXXXX XXXXXXX,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Per: /s/Xxx Xxxxxx
-------------
XXX XXXXXX,
VICE PRESIDENT AND CHIEF OPERATING OFFICER
SHELLBRIDGE OIL & GAS, INC.
Per: /s/Xxxxx Xxxxxxx
----------------
XXXXX XXXXXXX,
PRESIDENT
Per: /s/Xxx Xxxxxx
-------------
XXX XXXXXX,
CHIEF FINANCIAL OFFICER
0730008 B.C. LTD.
Per: /s/Xxxxxxx Xxxxxxx
------------------
XXXXXXX XXXXXXX,
PRESIDENT
Per: /s/Xxxx Xxxx
------------
XXXX XXXX,
SECRETARY
EXHIBIT 1
PLAN OF ARRANGEMENT
PLAN OF ARRANGEMENT
UNDER THE PROVISIONS OF DIVISION 5 OF PART 9
OF THE BUSINESS CORPORATIONS ACT (BRITISH COLUMBIA)
ARTICLE 1 -
INTERPRETATION
1.1 Definitions
In this Plan of Arrangement, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the respective
meanings set out below and grammatical variations of such terms shall have
corresponding meanings:
"ACQUISITIONCO" means 0730008 B.C. Ltd., a corporation incorporated under the
laws of British Columbia;
"ACQUISITIONCO NOTE" means the demand interest-free promissory note issued by
AcquisitionCo in favour of Shareholders (other than Dissenting Shareholders)
forming part of the consideration paid by AcquisitionCo for the Dynamic Shares,
such promissory note having a principal amount equal to the ExploreCo Principal
Amount, which note is to be assigned and transferred by the Shareholders to
ExploreCo in accordance with this Plan of Arrangement and, following such
assignment and transfer, shall mean the promissory note of AcquisitionCo then
held by ExploreCo;
"ARRANGEMENT" "HEREIN", "HEREOF" "HERETO" HEREUNDER" and similar expressions
mean and refer to the arrangement under the provisions of Division 5 of Part 9
of the BCBCA on the terms and conditions set out in this Plan of Arrangement, as
supplemented, modified or amended, and not to any particular article, section or
parties hereof;
"ARRANGEMENT AGREEMENT" means the agreement made and effective as of July 20,
2005, among Dynamic, Sequoia, ExploreCo and AcquisitionCo with respect to the
Arrangement and all amendments thereto;
"ARRANGEMENT FILINGS" means the records and information provided to the
Registrar under section 292(a) of the BCBCA that the Registrar requires and the
records filed under section 292(a) of the BCBCA that the Registrar requires to
give effect to any provision of the Arrangement, together with a copy of the
entered Final Order;
"ARRANGEMENT RESOLUTION" means the special resolution in respect of the
Arrangement to be considered at the Meeting, the full text of which is attached
as [APPENDIX [B]] to the Information Circular;
"BCBCA" means the Business Corporations Act (British Columbia), S.B.C. 2002,
c. 57;
"BOARD OF DIRECTORS" OR "BOARD" means the board of directors of Dynamic;
"BUSINESS DAY" means a day, other than a Saturday, Sunday or statutory holiday,
when banks are generally open in the City of Calgary and the City of Vancouver
for the transaction of banking business;
"CANADIAN RESIDENT" means a person who is a resident or deemed to be a resident
of Canada for purposes of the ITA;
"CASH CONSIDERATION" means the cash payment of $1.71 for each Dynamic Share
payable pursuant to section 3.1.2(d)(i);
"COURT" means the Supreme Court of British Columbia;
"DEPOSITARY" means CIBC Mellon Trust Company or such other trust company as may
be designated by Dynamic;
"DEPOSITARY AGREEMENT" means an agreement entered into between Dynamic,
AcquisitionCo and the Depositary in respect of the Arrangement and the deposit
and disbursement of the Cash Consideration;
"DISSENTING SHAREHOLDER" means a registered Shareholder who dissents in respect
of the Arrangement in strict compliance with the Dissent Procedures;
"DISSENT PROCEDURES" has the meaning set out in section 4.1;
"DYNAMIC" means Dynamic Oil & Gas, Inc., a corporation incorporated under the
laws of British Columbia;
"DYNAMIC OPTIONS" means the options issued by Dynamic entitling the holders
thereof to acquire Dynamic Shares;
"DYNAMIC SHARES" means the common shares of Dynamic as constituted on July [ ],
2005;
"EFFECTIVE DATE" means the date on which the Arrangement Filings are filed with
the Registrar;
"EFFECTIVE TIME" means the time on the Effective Date at which the Arrangement
Filings are filed with the Registrar;
"EXPLORATION ASSETS" means the assets owned by Dynamic and to be sold to
ExploreCo pursuant to, and as specifically described in, the Exploration
Conveyance Agreement;
"EXPLORATION CONVEYANCE AGREEMENT" means the oil and gas asset purchase
agreement to be entered into between Dynamic and ExploreCo effecting the sale by
Dynamic to ExploreCo of the Exploration Assets, in substantially the form set
out in Exhibit 4 to the Arrangement Agreement;
"EXPLORECO" means Shellbridge Oil & Gas, Inc., a corporation incorporated under
the laws of Alberta;
"EXPLORECO NOTE" means the demand interest-free promissory note issued by
ExploreCo in favour of Dynamic forming the consideration paid by ExploreCo for
the Exploration Assets, such promissory note having a principal amount equal to
the ExploreCo Principal Amount;
"EXPLORECO PRINCIPAL AMOUNT" means $30,925,000;
"EXPLORECO SHARES" means the common shares of ExploreCo;
"FINAL ORDER" means the final order of the Court approving the Arrangement under
section 291 of the BCBCA, as such order may be affirmed, amended or modified by
any court of competent jurisdiction;
"HOLDER" means, when used with reference to any Dynamic Shares or Dynamic
Options, the holder of such securities shown from time to time on the central
securities register or the register of Dynamic Options maintained by or on
behalf of Dynamic in respect of such securities;
"INFORMATION CIRCULAR" means the information circular - proxy statement of
Dynamic to be mailed to the Securityholders in connection with the holding of
the Meeting;
"INTERIM ORDER" means the interim order of the Court dated August [ ], 2005
under section 291 of the BCBCA containing declarations and directions with
respect to the Arrangement and the holding of the Meeting, as such order may be
affirmed, amended and modified by any court of competent jurisdiction;
"ITA" means the Income Tax Act (Canada), R.S.C. 1985, c.1, (5th Suppl.);
"LETTER OF TRANSMITTAL" means the Letter of Transmittal in the form which will
accompany the Information Circular sent to the Securityholders to be used in
connection with the transfer of Dynamic Shares pursuant to the Arrangement;
"MEETING" means the special meeting of Securityholders to be held on or about
September [ ], 2005, and any adjournment(s) or postponement(s) thereof, to
consider and to vote on the Arrangement Resolution and any other matters set out
in the Notice of Meeting;
"NOTICE OF MEETING" means the notice to the Securityholders of the Meeting,
which notice will accompany the Information Circular;
"OPTION AGREEMENTS" means the agreements between Dynamic and a holder of Dynamic
Options, evidencing the holder's right to subscribe for Dynamic Shares upon
payment of the exercise price of such Dynamic Options;
"PERSON" includes an individual, partnership, firm, trust, body corporate,
government, governmental body, agency or instrumentality, unincorporated body of
persons or association;
"PLAN OF ARRANGEMENT" means this plan of arrangement as amended or supplemented
from time to time;
"REGISTRAR" means the Registrar of Companies appointed under the BCBCA;
"SEQUOIA" means Sequoia Oil & Gas Trust, an open-ended unincorporated investment
trust organized under the laws of Alberta;
"SECURITYHOLDERS" means collectively, or any combination of, Shareholders and
holders of Dynamic Options; and
"SHAREHOLDERS" means the holders from time to time of Dynamic Shares.
1.2 Sections and Headings
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. 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.
1.3 Number, Gender and Persons
In this Plan of Arrangement, unless otherwise expressly stated or the context
otherwise requires, words importing the singular number shall include the plural
and vice versa, and words importing gender shall include all genders.
1.4 Statutory References
References in this Plan of Arrangement to a statute means that statute, as
amended and in effect as of the date of the Arrangement Agreement, and includes
each and every regulation and rule made thereunder and in effect as of the date
of the Arrangement Agreement.
1.5 Money
Unless otherwise stated all references in this Plan of Arrangement to sums of
money are expressed in lawful money of Canada.
1.6 Business Day
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.
1.7 Governing Law
This Plan of Arrangement shall be governed by and construed in accordance with
the laws of the Province of British Columbia and the laws of Canada applicable
therein.
ARTICLE 2 -
THE ARRANGEMENT AGREEMENT
2.1 Arrangement Agreement
This Plan of Arrangement is made pursuant to, is subject to the provisions of,
and forms part, of the Arrangement Agreement.
2.2 Binding Effect
This Plan of Arrangement will become effective at, and be binding at and after,
the Effective Time on (i) Dynamic; (ii) the Securityholders; (iii)
AcquisitionCo; and (iv) ExploreCo.
2.3 Conclusive Evidence
The filing of the Arrangement Filings shall be conclusive evidence that the
Arrangement has become effective and that each of the provisions of Article 3
has become effective in the sequence and at the times set out therein.
ARTICLE 3 -
ARRANGEMENT
3.1 Arrangement
(a) Vesting of Dynamic Options
Immediately prior to the Effective Time, the vesting of all Dynamic Options
shall accelerate and all such Dynamic Options not previously vested shall become
exercisable immediately prior to the Effective Time.
(b) Other Transactions
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:
(i) each Dynamic Option (including Dynamic Options subject to
accelerated vesting under section 3.1.1) not exercised
immediately prior to the Effective Time will be terminated for
no consideration and will be cancelled and the rights of the
holders of such Dynamic Options to subscribe for and acquire
Dynamic Shares pursuant to such Dynamic Options shall be
extinguished and the registers of Dynamic Options and holders
thereof shall be amended to reflect the termination and
cancellation of such Dynamic Option and that the holder
thereof is no longer the holder thereof;
(ii) Dynamic Shares held by Dissenting Shareholders as of the
Effective Time shall be deemed to have been transferred to
AcquisitionCo and, as of the Effective Time, such Dissenting
Shareholders shall cease to have any rights as Shareholders
other than the right to be paid the fair value of their
Dynamic Shares, and the names of such Dissenting Shareholders
shall be removed from the register of holders of Dynamic
Shares;
(iii) the Exploration Conveyance Agreement shall become effective,
Dynamic shall transfer the Exploration Assets to ExploreCo and
ExploreCo shall issue and deliver the ExploreCo Note to
Dynamic and assume the liabilities to be assumed by it
pursuant to the Exploration Conveyance Agreement;
(iv) each Dynamic Share issued and outstanding at the Effective
Time (including Dynamic Shares issued pursuant to the exercise
of any Dynamic Option, duly exercised prior to the Effective
Time in accordance with the provisions of the Dynamic Stock
Option Plan and the Option Agreement evidencing any such
Dynamic Option), other than any Dynamic Share held by a
Dissenting Shareholder, will be and be deemed to be
transferred by the holder thereof to AcquisitionCo in exchange
for:
A. a cash payment of $1.71 (the "CASH CONSIDERATION")
from AcquisitionCo; and
B. a beneficial interest in the AcquisitionCo Note equal
to a principal amount of such AcquisitionCo Note
equal to the ExploreCo Principal Amount divided by
the number of Dynamic Shares that are issued and
outstanding at the Effective Date (including Dynamic
Shares held by Dissenting Shareholders and
Dynamic Shares issuable pursuant to the exercise of
Dynamic Options prior to the Effective Time);
(v) each beneficial interest in the AcquisitionCo Note will be and
be deemed to be assigned and transferred by the former holder
of Dynamic Shares to ExploreCo and the former holder of
Dynamic Shares will be deemed to have subscribed for a number
of ExploreCo Shares equal to the number of Dynamic Shares
formerly held by such former holder of Dynamic Shares as at
the Effective Time which shall be issued by ExploreCo to the
former holder of the Dynamic Share in consideration of the
subscription price in the form of the beneficial interest in
the AcquisitionCo Note assigned and transferred by such former
holder; and
(vi) the ExploreCo Note shall be assigned and transferred by
Dynamic to ExploreCo in exchange for the AcquisitionCo Note
held by ExploreCo.
3.2 Transfers and Cancellations
With respect to each holder of Dynamic Shares (other than Dissenting
Shareholders), at the Effective Time:
(i) upon the exchange of Dynamic Shares for the Cash Consideration
and the AcquisitionCo Note pursuant to section 3.1.2(d):
A. such holder shall cease to be a holder of Dynamic
Shares so exchanged and the name of such holder shall
be removed from the central securities register for
the Dynamic Shares;
B. AcquisitionCo shall become the holder of the Dynamic
Shares so exchanged and shall be added to the central
securities register for the Dynamic Shares; and
C. AcquisitionCo shall issue to such holder a beneficial
interest in the AcquisitionCo Note on the basis set
forth in section 3.1.2(d) and the name of such holder
shall be added to the register of holders and
beneficial owners of the AcquisitionCo Note, provided
that no physical promissory note or other evidence of
indebtedness shall be delivered to such holder
evidencing the AcquisitionCo Note or beneficial
interest therein issuable to such holder and the
AcquisitionCo Note issuable to all Shareholders
(other than Dissenting Shareholders) will be
evidenced by a single global physical promissory
note;
(ii) upon the exchange of the AcquisitionCo Note for
ExploreCo Shares pursuant to section 3.1.2(e):
A. such holder shall cease to be a holder of any
beneficial interest in the AcquisitionCo Note so
exchanged and the name of each holder shall be
removed from the register of holders and beneficial
owners of the AcquisitionCo Note;
B. ExploreCo shall become the holder of the
AcquisitionCo Note so exchanged and shall be added to
the register of holders and beneficial owners of the
AcquisitionCo Note; and
C. ExploreCo shall allot and issue to such holder the
number of ExploreCo Shares issuable to such holder on
the basis set forth in section 3.1.2(e) and the name
of such holder shall be added to the register of
holders of ExploreCo Shares, and ExploreCo shall add
to the stated capital account maintained for the
ExploreCo Shares an amount equal to the principal
amount of the former holder's beneficial interest in
the AcquisitionCo Note with respect to each ExploreCo
Share issued; and
(iii) upon the exchange of the AcquisitionCo Note for the
ExploreCo Note pursuant to section 3.1.2(f):
A. ExploreCo shall cease to be the holder of the
AcquisitionCo Note and the name of ExploreCo shall be
removed from the register of holders and beneficial
owners of the AcquisitionCo Note and the name of
Dynamic
shall be added to such register of holders and
beneficial owners of the AcquisitionCo Note; and
B. Dynamic shall cease to be the holder of the ExploreCo
Note and the name of Dynamic shall be removed from
the register of holders of the ExploreCo Note and the
ExploreCo Note shall be cancelled.
ARTICLE 4 -
RIGHTS OF DISSENT
4.1 Rights of Dissent
Holders of Dynamic Shares may exercise rights of dissent pursuant to and in the
manner set forth in sections 237 to 247 of the BCBCA as modified by the Interim
Order and this Article 4 (the "Dissent Procedures") in connection with the
Arrangement; provided that, notwithstanding sections 237 to 247 of the BCBCA,
the written notice of dissent must be received by Dynamic not later than 5:00
p.m. (Vancouver time) on the last Business Day preceding the date of the
Meeting.
4.2 Rights Following Dissent Notice
Holders of Dynamic Shares who duly exercise rights of dissent pursuant to
section 4.1 and who:
(i) are ultimately entitled to be paid fair value for their
Dynamic Shares shall be deemed to have had their Dynamic
Shares transferred to AcquisitionCo on the Effective Date; or
(ii) are ultimately not entitled, for any reason, to be paid the
fair value for the Dynamic Shares in respect of which they
have exercised rights of dissent pursuant to section 4.1 shall
be deemed to have participated in the Arrangement on the same
basis as a holder of Dynamic Shares that has not exercised
rights of dissent pursuant to section 4.1 as at and from the
Effective Date and will be entitled to receive only the
consideration contemplated by section 3.1.2 which such holder
would have received pursuant to the Arrangement if such holder
had not exercised rights of dissent;
but in no event shall Dynamic, ExploreCo or AcquisitionCo be required
to recognize such Dissenting Shareholder as a shareholder of Dynamic
after the Effective Time, and the names of such holders of Dynamic
Shares shall be deleted from the central securities register for the
Dynamic Shares at the Effective Time. Notwithstanding sections 237 to
247 of the BCBCA, a Dissenting Shareholder shall not transfer the
Dissenting Shareholder's Dynamic Shares to Dynamic but shall, on the
Effective Date, be deemed to have transferred the holder's Dynamic
Shares to AcquisitionCo pursuant to section 4.2(a). The fair value of
the Dynamic Shares shall be determined as at the point in time
immediately prior to the time the Arrangement Resolution is approved at
the Meeting. For greater certainty, in addition to any other
restrictions in sections 237 to 247 of the BCBCA, no Dynamic
Shareholder who has voted in favour of the Arrangement shall be
entitled to dissent with respect to the Arrangement.
4.3 Transfers and Cancellations
With respect to each Dissenting Shareholder, at the Effective Time, upon the
transfer of Dynamic Shares in accordance with section 4.2(a):
(i) such Dissenting Shareholder shall cease to be a holder of
Dynamic Shares and the name of such Dissenting Shareholder
shall be removed from the central securities register for the
Dynamic Shares;
(ii) the certificate representing any such Dynamic Shares will be
deemed to have been cancelled as of the Effective Date; and
(iii) AcquisitionCo shall become the holder of such Dynamic Shares
so transferred and shall be added to the central securities
register for the Dynamic Shares.
ARTICLE 5 -
CERTIFICATES AND FRACTIONAL SHARES
5.1 Deposit of Cash Consideration
Prior to the Effective Time, AcquisitionCo will deposit, and Sequoia will cause
AcquisitionCo to deposit, with the Depositary, that amount of the Cash
Consideration payable in accordance with section 3.1.2(d). Such amount shall be
held by the Depositary as agent and nominee for AcquisitionCo until the
Effective Time and, provided the Arrangement Filings are made, thereafter shall
be paid to the former holders of Dynamic Shares in accordance with the
provisions of section 3.1.2(d). Pursuant to the Depositary Agreement, the amount
deposited with the Depositary shall be held in an interest bearing account, and
any interest earned thereon or on any portion thereof from the time it has been
so deposited until the time it is paid by the Depositary to the former holders
of Dynamic Shares shall be solely for the account of AcquisitionCo.
5.2 Right to Receive Consideration Only
From and after the Effective Time, certificates formerly representing Dynamic
Shares under the Arrangement shall represent only the right to receive the
consideration to which the holders are entitled under the Arrangement, or as to
those held by Dissenting Shareholders, other than those
Dissenting Shareholders deemed to have participated in the Arrangement pursuant
to section 4.2 hereof, to receive the fair value of the Dynamic Shares
represented by such certificates.
5.3 Surrender of Certificates Representing Dynamic Shares
As soon as practicable following the later of the Effective Date and the date of
deposit with the Depositary by a former holder of Dynamic Shares (other than a
Dissenting Shareholder) of a duly completed Letter of Transmittal and the
certificates representing Dynamic Shares formerly held by such former holder:
(i) ExploreCo shall 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 a certificate representing that number
(rounded down to the nearest whole number) of
ExploreCo Shares issued to such holder under the
Arrangement (together with any dividends or distributions
with respect thereto pursuant to section 5.4); and
(ii) the Depositary shall either:
A. forward or cause to be forwarded to such former
holder the Cash Consideration payable to such former
holder under the Arrangement; or
B. if requested by the former holder in the Letter of
Transmittal, make or cause to be made available the
Cash Consideration at the Depositary for pick-up by
the former holder.
After the Effective Date, no further transfer of Dynamic Shares will be made
except as provided in this Plan of Arrangement. In the event of a transfer of
ownership of Dynamic Shares which is not registered in the transfer records of
Dynamic, (i) a certificate representing the proper number of ExploreCo Shares
and (ii) the Cash Consideration, may be issued or paid to the transferee if the
certificate representing such Dynamic Shares is presented to the Depositary,
accompanied by a duly completed Letter of Transmittal and all documents required
to evidence and effect such transfer to the transferee.
5.4 Distributions with Respect to Unsurrendered Certificates
No dividends or other distributions declared or made after the Effective Time
with respect to ExploreCo Shares with a record date after the Effective Time
shall be paid to any former holder of Dynamic Shares, unless and until the
former holder of record of such Dynamic Shares delivers all documents required
in accordance with section 5.3. Subject to applicable law, at the time of such
delivery (or in the case of clause (ii) below, at the appropriate payment date),
there shall be paid to the former holder of record of the Dynamic Shares,
without interest, (i) the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
ExploreCo Share, and (ii) on the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to such delivery and a payment date subsequent to such delivery payable
with respect to such whole ExploreCo Share, as the case may be.
5.5 No Fractional Shares
No fraction of ExploreCo Shares shall be issued pursuant to section 3.1.2(e) and
no certificates or scrip representing fractional ExploreCo Shares shall be
issued pursuant to section 5.3(a) and no dividend, stock split or other change
in the capital structure of ExploreCo shall relate to any such fractional
security and such fractional interest shall not entitle the owner thereof to
exercise any rights as a securityholder of ExploreCo. The aggregate number of
ExploreCo Shares for which no certificates are issued as a result of the
foregoing provisions of this section 5.5 shall be deemed to have been
surrendered by the person which would otherwise be entitled thereto, to Dynamic,
for no additional consideration at the Effective Time.
5.6 Lost Certificates
In the event any certificate which immediately prior to the Effective Time
represented one or more outstanding Dynamic Shares that were exchanged for the
Cash Consideration and AcquisitionCo Note pursuant to section 3.1.2(d) shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such certificate to be lost, stolen or destroyed,
(i) ExploreCo will issue in relation to such lost, stolen or destroyed
certificate, one or more certificates representing one or more ExploreCo Shares
(and any dividends or distributions with respect thereto) deliverable in
accordance with such holder's Letter of Transmittal and (ii) the Depositary will
pay in relation to such lost, stolen or destroyed certificate, the Cash
Consideration deliverable in accordance with such holder's Letter of
Transmittal. When authorizing such payment in exchange for any lost, stolen or
destroyed certificate, the person to whom certificates representing ExploreCo
Shares are to be issued and Cash Consideration is to be paid, shall, as a
condition precedent to the receipt of such ExploreCo Shares and Cash
Consideration, give a bond to each of ExploreCo, Dynamic and the Depositary,
which bond is in form and substance satisfactory to each of ExploreCo, Dynamic
and the Depositary in such sum as ExploreCo and Dynamic may direct or otherwise
indemnify ExploreCo, Dynamic and the Depositary, in a manner satisfactory to
ExploreCo, Dynamic and the Depositary, against any claim that may be made
against any of them, with respect to the certificate alleged to have been lost,
stolen or destroyed.
5.7 No Interest
No interest shall accrue or be payable on any consideration payable pursuant to
the Arrangement, including, without limitation, the Cash Consideration, and no
portion of the consideration payable pursuant to the Arrangement shall be
construed as representing interest.
5.8 Extinction of Rights
Subject to any applicable escheat laws, any certificate formerly representing
Dynamic Shares that is not deposited with all other documents as required by
this Plan of Arrangement on or prior to the sixth anniversary of the Effective
Date shall cease to represent the right or claim of any kind or nature to
receive the consideration to which a former Shareholder is entitled under this
Plan of Arrangement and, for greater certainty, the right of such former
Shareholder to receive certificates representing ExploreCo Shares and Cash
Consideration shall be deemed to be surrendered to Dynamic, together with all
dividends, distributions and cash payments thereon held for such former holder.
5.9 Withholding and Sale Rights
Dynamic, AcquisitionCo and ExploreCo shall each be entitled to deduct and
withhold from (i) any ExploreCo Shares or Cash Consideration or other
consideration otherwise issuable or payable pursuant to this Plan of Arrangement
to any person who is not a Canadian Resident or has not certified that such
person is resident in Canada for income tax purposes, or (ii) any dividend or
consideration otherwise payable to any holder of Dynamic Shares, such amounts as
Dynamic, AcquisitionCo or ExploreCo, respectively, is required to deduct and
withhold with respect to any or all such issuances or payments, as the case may
be, under the ITA, the United States Internal Revenue Code of 1986 or any
provision of provincial, state, local or foreign tax law, in each case as
amended. To the extent that the amount so required to be deducted or withheld
from the ExploreCo Shares or Cash Consideration, dividends or consideration
otherwise issuable or payable to a holder exceeds the cash portion of the
consideration otherwise payable to such holder, Dynamic and AcquisitionCo are
hereby authorized to sell or otherwise dispose of, at such times and at such
prices as they determine, in their sole discretion, such portion of the
ExploreCo Shares or other non-cash consideration otherwise issuable or payable
to such holder as is necessary to provide sufficient funds to Dynamic,
AcquisitionCo or ExploreCo, as the case may be, to enable them to comply with
such deduction or withholding requirement, and shall notify the holder thereof
and remit to such holder any unapplied balance of the net proceeds of such sale
or disposition (after deducting applicable sale commissions and any other
reasonable expenses relating thereto) in lieu of the ExploreCo Shares or other
consideration so sold or disposed of. To the extent that amounts are so withheld
or ExploreCo Shares or other consideration are so sold or disposed of, such
withheld amounts, or shares or other consideration so sold or disposed of, shall
be treated for all purposes as having been paid to the holder of the shares in
respect of which such deduction, withholding, sale or disposition was made,
provided that such withheld amounts, or the net proceeds of such sale or
disposition, as the case may be, are actually remitted to the appropriate taxing
authority. None of Dynamic, AcquisitionCo nor ExploreCo shall be obligated to
seek or obtain a minimum price for any of the ExploreCo Shares or other
consideration sold or disposed of by it hereunder, nor shall any of them be
liable for any loss arising out of any such sale or disposition.
ARTICLE 6 -
AMENDMENTS
6.1 Right to Amend
Dynamic reserves the right to amend, modify or supplement (or do all of the
foregoing) this Plan of Arrangement from time to time and at any time prior to
the Effective Date provided that any such amendment, modification and/or
supplement must be contained in a written document that is:
(i) agreed to by AcquisitionCo, Dynamic and ExploreCo;
(ii) filed with the Court and, if made following the Meeting,
approved by the Court; and
(iii) communicated to Securityholders in the manner required by the
Court (if so required).
6.2 Amendment Before Meeting
Any amendment, modification or supplement to this Plan of Arrangement may be
proposed by Dynamic at any time prior to or at the Meeting, provided that
AcquisitionCo and ExploreCo shall have consented thereto, with or without any
other prior notice or communication, and if so proposed and accepted by the
persons voting at the Meeting (other than as may be required under the Interim
Order), shall become part of this Plan of Arrangement for all purposes.
6.3 Amendment After Meeting
Any amendment, modification or supplement to this Plan of Arrangement which is
approved by the Court following the Meeting shall be effective only:
(i) if it is consented to by AcquisitionCo, Dynamic and ExploreCo;
and
(ii) if required by the Court or applicable law, it is consented to
by the Securityholders.
ARTICLE 7 -
FURTHER ASSURANCES
7.1 Further Assurances
Notwithstanding that the transactions and events set out herein shall occur and
be deemed to occur at the time and in the manner 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 or
executed, all such further acts, deeds, agreements, transfers, assurances,
instruments or documents as may reasonably be required by any of them in order
to further document or evidence any of the transactions or events set out
herein.
EXHIBIT 2
EXPLORATION ASSETS
THE "ASSETS" (AS SUCH TERM IS DEFINED IN THE EXPLORECO CONVEYANCE AGREEMENT).
EXHIBIT 3
NON-EXPLORATION ASSETS
ALL PETROLEUM AND NATURAL GAS RIGHTS AND INTERESTS, TANGIBLE INTERESTS AND
MISCELLANEOUS INTERESTS OWNED BY DYNAMIC AS OF MAY 1, 2005 EXCEPT THE "ASSETS"
(AS SUCH TERM IS DEFINED IN THE EXPLORECO CONVEYANCE AGREEMENT)
EXHIBIT 4
OUTSTANDING DYNAMIC OPTIONS
--------------------------------------------------------------------------------
NUMBER OF OPTIONS EXERCISE PRICE EXPIRY DATE
--------------------------------------------------------------------------------
10,000 $1.45 January 23, 2005
--------------------------------------------------------------------------------
30,000 $1.75 July 30, 2005
--------------------------------------------------------------------------------
298,000 $2.10 September 28, 2005
--------------------------------------------------------------------------------
20,250 $2.17 February 28, 2006
--------------------------------------------------------------------------------
30,000 $1.70 April 3, 2006
--------------------------------------------------------------------------------
30,800 $2.25 April 14, 2006
--------------------------------------------------------------------------------
265,000 $1.75 February 27, 2007
--------------------------------------------------------------------------------
30,000 $3.80 February 16, 2008
--------------------------------------------------------------------------------
45,000 $5.30 June 18, 2008
--------------------------------------------------------------------------------
215,500 $4.66 July 15, 2008
--------------------------------------------------------------------------------
30,000 $5.43 August 21, 2008
--------------------------------------------------------------------------------
65,000 $4.75 April 29, 2009
--------------------------------------------------------------------------------
45,000 $4.08 June 18, 2009
--------------------------------------------------------------------------------
30,000 $4.18 August 21, 2009
--------------------------------------------------------------------------------
145,000 $3.66 September 20, 2009
--------------------------------------------------------------------------------
25,000 $1.45 January 23, 2010
--------------------------------------------------------------------------------
65,000 $2.36 April 29, 2010
--------------------------------------------------------------------------------
45,000 $2.65 June 18, 2010
--------------------------------------------------------------------------------
112,500 $1.72 August 16, 2010
--------------------------------------------------------------------------------
18,750 $2.10 September 28, 2010
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
52,500 $2.15 April 29, 2011
--------------------------------------------------------------------------------
60,000 $2.10 August 22, 2011
--------------------------------------------------------------------------------
57,500 $1.65 April 29, 2012
--------------------------------------------------------------------------------
60,000 $1.75 August 21, 2012
--------------------------------------------------------------------------------
15,000 $2.95 December 16, 2012
--------------------------------------------------------------------------------
12,500 $3.91 April 2, 2013
--------------------------------------------------------------------------------
65,000 $4.10 April 29, 2013
--------------------------------------------------------------------------------
1,878,300(1)
--------------------------------------------------------------------------------
(1) An additional 30,000 stock options are to be granted on August 22, 2005.