STOCK PURCHASE AGREEMENT among COLD FLOW ENERGY ULC, SURGE GLOBAL ENERGY, INC., PEACE OIL CORP. and SHAREHOLDERS OF PEACE OIL CORP. Dated as of November 30, 2006
Exhibit
10.5
among
COLD
FLOW ENERGY ULC,
PEACE
OIL CORP.
and
SHAREHOLDERS
OF
PEACE
OIL CORP.
Dated
as of November 30, 2006
TABLE
OF CONTENTS
ARTICLE 1. THE TRANSACTION |
1
|
|
1.1
|
Purchase and Sale of Shares |
1
|
1.2
|
Amount and Closing |
1
|
ARTICLE 2. CONSIDERATION FOR TRANSFER |
2
|
|
2.1
|
Purchase Price, Payment |
2
|
2.2
|
Allocation of Purchase Price |
2
|
ARTICLE 3. PURCHASER’S SECURITIES |
3
|
|
3.1
|
Exchangeable Shares |
3
|
3.2
|
Other Agreements |
3
|
ARTICLE 4. CLOSING AND CLOSING DELIVERIES |
3
|
|
4.1
|
Closing; Time and Place |
3
|
4.2
|
Deliveries by Shareholders |
3
|
4.3
|
Deliveries by Purchaser |
4
|
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS |
5
|
|
5.1
|
Organization and Good Standing |
5
|
5.2
|
Authority; Binding Nature of Agreements |
5
|
5.3
|
No Conflicts; Required Consents |
5
|
5.4
|
Brokers |
6
|
5.5
|
Shares |
6
|
5.6
|
Shareholder Legal Proceedings |
6
|
5.7
|
Residence of Shareholders |
6
|
5.8
|
Private Placement |
6
|
5.9
|
Full Disclosure |
9
|
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER |
9
|
|
6.1
|
Organization and Good Standing |
9
|
6.2
|
Capitalization. |
9
|
6.3
|
Authority; Binding Nature of Agreements |
9
|
6.4
|
No Conflicts; Required Consents |
10
|
6.5
|
Brokers |
10
|
6.6
|
Exchangeable Shares |
10
|
6.7
|
Investment Company |
10
|
-i-
6.8
|
Foreign Issuer; No Substantial U.S. Market |
10
|
6.9
|
Business of Purchaser |
10
|
6.10
|
Full Disclosure |
10
|
ARTICLE 7. REPRESENTATIONS AND WARRANTIES CONCERNING TARGET COMPANY |
11
|
|
7.1
|
Organization, Good Standing, Qualification |
11
|
7.2
|
Private Issues |
12
|
7.3
|
Charter Documents; Books and Records. |
12
|
7.4
|
Capitalization |
12
|
7.5
|
No Conflicts; Required Consents |
13
|
7.6
|
No Subsidiaries |
13
|
7.7
|
Financial Statements |
14
|
7.8
|
Absence of Undisclosed Liabilities |
14
|
7.9
|
Absence of Changes |
14
|
7.10
|
Transactions with Affiliates |
14
|
7.11
|
Bank Accounts |
15
|
7.12
|
Material Contracts |
15
|
7.13
|
Insurance |
18
|
7.14
|
Assets |
18
|
7.15
|
Real Property. Target Company owns no real property |
19
|
7.16
|
Intellectual Property |
19
|
7.17
|
Operation of Assets |
19
|
7.18
|
Target Company Products and Services |
19
|
7.19
|
Employees and Consultants |
19
|
7.20
|
Target Company Benefit Plans |
20
|
7.21
|
Compliance with Laws |
21
|
7.22
|
Governmental Approvals |
21
|
7.23
|
Proceedings and Orders |
21
|
7.24
|
Environmental Matters |
22
|
7.25
|
Taxes |
22
|
7.26
|
Brokers |
23
|
7.27
|
No Other Agreement |
23
|
7.28
|
Foreign Corrupt Practices |
24
|
-ii-
7.29
|
No Prepayments |
24
|
7.30
|
Production Sales Contracts |
24
|
7.31
|
Calls on Production |
24
|
7.32
|
Xxxxx |
24
|
7.33
|
Leases |
24
|
7.34
|
Oil and Gas |
25
|
7.35
|
Derivative Transactions and Hedging |
25
|
7.36
|
Investment Company |
25
|
7.37
|
Disclosure |
25
|
ARTICLE 8. REPRESENTATIONS AND WARRANTIES CONCERNING SURGE |
26
|
|
8.1
|
Organization, Good Standing, Qualification |
26
|
8.2
|
Capitalization |
26
|
8.3
|
Authority; Binding Nature of Agreements |
27
|
8.4
|
No Conflicts; Required Consents |
27
|
8.5
|
No Subsidiaries |
27
|
8.6
|
Surge SEC Reports |
27
|
8.7
|
Surge Financial Statements |
28
|
8.8
|
Absence of Undisclosed Liabilities |
28
|
8.9
|
Absence of Changes |
28
|
8.10
|
Transactions with Affiliates |
28
|
8.11
|
Compliance with Laws |
29
|
8.12
|
Governmental Approvals |
29
|
8.13
|
Proceedings and Orders |
29
|
8.14
|
Environmental Matters |
29
|
8.15
|
Taxes |
30
|
8.16
|
Brokers |
30
|
8.17
|
Foreign Corrupt Practices |
30
|
8.18
|
Oil and Gas |
31
|
8.19
|
Derivative Transactions and Hedging |
31
|
8.20
|
Investment Company; Shell Company |
31
|
8.21
|
Surge Securities |
31
|
8.22
|
Full Disclosure |
31
|
-iii-
ARTICLE 9. PRE-CLOSING COVENANTS |
32
|
|
9.1
|
Target Company’s Conduct of the Business Prior to Closing |
32
|
9.2
|
Restrictions on Target Company’s Conduct of the Business Prior to Closing |
33
|
9.3
|
No Solicitation |
35
|
9.4
|
Certain Notifications |
36
|
9.5
|
Updating the Disclosure Schedules |
37
|
9.6
|
Access to Information |
38
|
9.7
|
Best Efforts |
38
|
9.8
|
Compliance with Privacy Laws |
38
|
ARTICLE 10. POST CLOSING COVENANTS |
39
|
|
10.1
|
Cooperation |
39
|
10.2
|
Area of Exclusion |
39
|
10.3
|
Nondisclosure |
40
|
10.4
|
Registration Statement |
40
|
10.5
|
General Release |
41
|
10.6
|
Private Placement |
41
|
ARTICLE 11. CONDITIONS TO CLOSING |
41
|
|
11.1
|
Conditions to Purchaser’s Obligation to Close |
41
|
11.2
|
Conditions to Shareholders’ Obligation to Close |
43
|
11.3
|
Conditions to Obligations of Each Party to Close |
43
|
ARTICLE 12. TERMINATION |
44
|
|
12.1
|
Circumstances for Termination |
44
|
12.2
|
Effect of Termination |
44
|
ARTICLE 13. INDEMNIFICATION |
44
|
|
13.1
|
Survival of Representations and Covenants |
44
|
13.2
|
Indemnification By Shareholders |
45
|
13.3
|
Indemnification By Purchaser and Surge |
46
|
13.4
|
Environmental Indemnity |
47
|
13.5
|
No Contribution |
47
|
13.6
|
Defense of Third Party Claim |
47
|
13.7
|
Exercise Of Remedies By Indemnitees Other Than Parties To This Agreement |
48
|
13.8
|
Interest |
48
|
-iv-
ARTICLE 14. MISCELLANEOUS PROVISIONS |
49
|
|
14.1
|
Further Assurances |
49
|
14.2
|
Fees and Expenses |
49
|
14.3
|
Attorneys’ Fees |
50
|
14.4
|
Notices |
50
|
14.5
|
Governing Law |
51
|
14.6
|
Successors and Assigns |
52
|
14.7
|
Remedies Cumulative; Specific Performance |
52
|
14.8
|
Public Announcements |
52
|
14.9
|
Headings |
52
|
14.10
|
Counterparts |
52
|
14.11
|
Waiver |
52
|
14.12
|
Disclosure Schedule |
53
|
14.13
|
Parties in Interest |
53
|
14.14
|
Entire Agreement |
53
|
14.15
|
Amendments |
53
|
14.16
|
Severability |
53
|
14.17
|
Construction |
53
|
14.18
|
Time is of the Essence |
54
|
14.19
|
Survival |
54
|
14.20
|
Compelled Disclosure of Information |
54
|
-v-
EXHIBITS
AND SCHEDULES
Exhibits | |
Exhibit A | Certain Definitions |
Exhibit 1.2 | Escrow Agreement |
Exhibit 3.1 | Articles of Amendment of Purchaser |
Exhibit 3.2(a) | Form of Support Agreement |
Exhibit 3.2(b) | Form of Exchange Agreement |
Exhibit 4.2(b) | General Release - Shareholders |
Exhibit 4.2(e) | Legal Opinion of Target Company Counsel |
Exhibit 4.3(e) | Legal Opinion of Purchaser Counsel |
Exhibit 4.3(f) | Legal Opinion of Surge Counsel |
Exhibit 10.2 | Exclusion Area |
Exhibit 10.5 | General Release - Target Company |
Exhibit 10.6 | Form of Subscription Agreement |
Schedules | |
Schedule 1 | Schedule of Shareholders |
Schedule 2 | Purchaser Disclosure Schedule |
Schedule 3 | Target Disclosure Schedule |
Schedule 4 | Surge Disclosure Schedule |
-vi-
THIS
STOCK PURCHASE AGREEMENT
(the
“Agreement”)
is
made and entered as of November 30, 2006, by and among COLD
FLOW ENERGY ULC,
a
corporation incorporated under the laws of Alberta, Canada (“Purchaser”),
SURGE
GLOBAL ENERGY, INC.,
a
corporation incorporated under the laws of Delaware (“Surge”),
PEACE
OIL CORP.,
a
corporation incorporated under the laws of Alberta, Canada (“Target
Company”),
and
Shareholders of
Target
Company (each, a “Shareholder”
and
collectively, “Shareholders”)
identified on Schedule 1
hereto
(the “Schedule
of Shareholders”).
Capitalized terms used in this Agreement are defined on Exhibit A
hereto.
RECITALS
A. Shareholders
are the legal and beneficial owners of 800 Class “A” Shares and 6,333,332 Class
“I” Shares in the capital stock of Target Company, in the amounts indicated
opposite their names on the Schedule of Shareholders, which constitute all
of
the issued and outstanding shares in the capital of Target Company (the
“Shares”).
B. Purchaser
desires to purchase from Shareholders, and Shareholders desire to sell to
Purchaser, all of the Shares on the terms and subject to the conditions set
forth in this Agreement.
AGREEMENT
NOW,
THEREFORE,
in
consideration of the foregoing recitals and the mutual representations,
warranties, covenants and promises contained herein, the adequacy and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE
1.
THE
TRANSACTION
1.1 Purchase
and Sale of Shares.
At the
Closing, each Shareholder shall sell, assign, transfer and deliver to Purchaser,
and Purchaser shall purchase from each Shareholder, such Shareholder’s
respective Shares, free and clear of any Encumbrances, on the terms and subject
to the conditions of this Agreement.
1.2 Amount
and Closing.
On or
before December 4, 2006, Purchaser shall deliver to Burstall Winger LLP, in
its
capacity as escrow agent (the “Escrow
Agent”),
a
certified cheque or bank draft in the amount of $150,000 (the “Initial
Deposit”)
to be
held by Escrow Agent in accordance with this Agreement and an escrow agreement,
substantially in the form attached hereto as Exhibit 1.2
(the
“Escrow
Agreement”).
In
addition:
(a) If
the
Closing has not occurred on or before January 18, 2007, and Purchaser
elects, in its sole and absolute discretion, to extend the Closing Date to
March 2, 2007, in Purchaser’s sole discretion, Purchaser shall deliver to
Escrow Agent a certified cheque or bank draft in the amount of $450,000 on
or
before January 18, 2007 (the “Additional
Deposit”
and,
together with the Initial Deposit, collectively, the “Escrow
Amount”)
to be
held by Escrow Agent in accordance with this Agreement and the Escrow Agreement
(in which case the Closing shall be extended to, and occur no later than,
March 2, 2007);
1
(b) At
Closing, the Escrow Amount and the interest earned thereon from the date
following receipt up to but excluding the Closing Date shall be applied in
partial satisfaction of the Purchase Price payable by Purchaser at Closing
pro
rata to the account of each Shareholder in proportion to their respective
allocations of the Purchase Price as set out in the Schedule of
Shareholders;
(c) If
Closing does not occur because (i) Purchaser has wrongfully terminated this
Agreement, (ii) one or both of the conditions in Sections 11.1(f)
or
11.1(g)
have not
been satisfied or waived, or (iii) Purchaser has wrongfully repudiated or
failed to perform one or more of its obligations hereunder, Shareholders shall,
as their sole and exclusive remedy, be paid the Escrow Amount and all interest
earned thereon by the Escrow Agent in full satisfaction for all damages, costs,
losses and liabilities suffered or incurred by Shareholders as a consequence
of
such wrongful termination, repudiation or failure by Purchaser. In this regard,
the Escrow Amount and such interest shall be forfeited to Shareholders as
liquidated damages, and constitutes a genuine pre-estimate by Shareholders
and
Purchaser of liquidated damages suffered to be suffered by Shareholders by
virtue of the failure of Purchaser to close and complete the transaction
contemplated herein in accordance with the terms of this Agreement;
and
(d) If
Closing does not occur for any reason or circumstance other than (i) as
described in Section 1.2(c)
or
(ii) as a result of the non-satisfaction of the conditions in Sections 11.1(f)
or
11.1(g),
Purchaser shall be entitled to the return of the Escrow Amount and all interest
earned thereon, and the Escrow Agent shall pay the Escrow Amount and such
interest to Purchaser.
ARTICLE
2.
CONSIDERATION
FOR TRANSFER
2.1 Purchase
Price, Payment.
As full
consideration for the sale, assignment, transfer and delivery of the Shares
by
Shareholders to Purchaser, Purchaser shall deliver (or cause to be delivered)
to
Shareholders, at the Closing, an aggregate $16,350,000 (the “Purchase
Price”),
payable in the following manner:
(a) A
wire
transfer of immediately available funds in an aggregate amount of $6,350,000,
less the Escrow Amount and accrued interest; and
(b) Certificates
for an aggregate 8,965,390 exchangeable shares in the capital of Purchaser
(the
“Exchangeable
Shares”).
2.2 Allocation
of Purchase Price.
The
Purchase Price shall be allocated among Shareholders in the proportion set
out
under the column entitled “Allocation of Purchase Price” adjacent to each
Shareholder’s name as set forth on the Schedule of Shareholders.
2
ARTICLE
3.
PURCHASER'S
SECURITIES
3.1 Exchangeable
Shares.
Purchaser will, prior to the Closing, authorize the sale and issuance 8,965,390
Exchangeable Shares having the rights, privileges, preferences and restrictions
set forth in the draft Articles of Amendment of Purchaser attached hereto as
Exhibit 3.1.
3.2 Other
Agreements.Purchaser
and Surge covenant to enter into the Support Agreement and the Exchange
Agreement on or prior to the Closing substantially on the terms and in the
form
of the Support Agreement attached hereto as Exhibit 3.2(a)
and in
the form of the Exchange Agreement attached hereto as Exhibit 3.2(b),
respectively, and Purchaser and Surge agree not to modify the Support Agreement
and the Exchange Agreement without the prior written consent of the Shareholder
Representative, which consent may not be unreasonably withheld or
delayed.
ARTICLE
4.
CLOSING
AND CLOSING DELIVERIES
4.1 Closing;
Time and Place.
The
closing of the purchase and sale of the Shares hereunder (the “Closing”)
shall
occur at the offices of Stikeman Elliott LLP, 0000 Xxxxxxx Xxxx Xxxx,
000-0xx
Xxxxxx,
X.X., Xxxxxxx, Xxxxxxx X0X 0X0, at 10:00 A.M. (local time) on the latest to
occur of: (i) January 18, 2007, (ii) if Purchaser pays the
Additional Deposit to the Escrow Agent in accordance with Section 1.2,
March 2, 2007, and (iii) such other date as mutually agreed to by the
Parties.
For
purposes of this Agreement, “Closing
Date”
shall
mean the date as of which the Closing actually takes place, and “Effective
Time”
shall
mean the time as of which the Closing actually takes place.
4.2 Deliveries
by Shareholders.
At the
Closing, Shareholders shall deliver, or cause to be delivered, to Purchaser
the
following items, duly executed by each Shareholder and Target Company, as
applicable, all of which shall be in a form and substance reasonably acceptable
to Purchaser and Purchaser’s counsel:
(a) Stock
Certificates.
Stock
certificates representing the Shares, duly endorsed in blank or accompanied
by
duly executed assignments or irrevocable security transfer powers of attorney
separate from the certificate(s) endorsing the certificates in Purchaser’s
name;
(b) General
Release.
Releases in the form of Exhibit 4.2(b),
executed by Shareholders;
(c) Resignations.
Resignations of all of the directors and officers of Target
Company;
(d) Receipts.
Receipts from Shareholders for their portion of the Purchase Price;
3
(e) Opinion
of Counsel.
An
opinion of counsel for Shareholders and Target Company substantially in the
form
of Exhibit 4.2(e);
(f) Certificate
of Representations, Warranties and Covenants.
A
certificate executed by Target Company’s President, certifying the matters in
Section 11.1(a)
(the
“Closing
Certificate”);
and
(g) Shareholder
Loans.
All
promissory notes made by Target Company in favor of any and all Shareholders,
marked “cancelled,” and if there is no promissory note, an acknowledgement by
each such Shareholder that all Shareholder loans made to the Target Company
have
been paid in full by the Target Company as of the Effective Time.
4.3 Deliveries
by Purchaser.
At the
Closing, Purchaser shall deliver the following items, duly executed by
Purchaser, as applicable, all of which shall be in a form and substance
reasonably acceptable to the Requisite Shareholders:
(a) Wire
Transfer.
A wire
transfer to Burstall Winger LLP on behalf of Shareholders on or before the
Closing Date, in an amount equal to the amount set forth in Section 2.1(a)
and
representing, together with the Escrow Amount and any accrued interest thereon,
the aggregate cash component of the Purchase Price to be allocated among
Shareholders pursuant to Section 2.2;
(b) Stock
Certificates.
Stock
certificates for the Exchangeable Shares representing each Shareholder’s
allocable portion of the Purchase Price to be paid in Exchangeable Shares as
determined in accordance with Section 2.2;
(c) Certificate
of Representations and Warranties.
A
Certificate executed by Purchaser’s President, certifying the matters in
Section 11.2(a);
and
(d) Opinion
of Counsel.
An
opinion of counsel for Purchaser substantially in the form of Exhibit 4.3(e);
(e) Opinion
of Counsel.
An
opinion of counsel for Surge substantially in the form of Exhibit 4.3(f);
(f) Other
Agreements.
The
Exchange Agreement and the Support Agreement, each of which shall be fully
executed; and
(g) Shareholder
Loans.
A wire
transfer to Burstall Winger LLP on behalf of Shareholders, in an amount equal
to
$250,000 and representing the aggregate outstanding Shareholder loans to the
Target Company as of the Effective Time.
4
ARTICLE
5.
REPRESENTATIONS
AND WARRANTIES OF SHAREHOLDERS
Each
Shareholder, severally and not jointly, represents and warrants to Purchaser
as
of the date hereof as follows:
5.1 Organization
and Good Standing.
Shareholder (if an Entity) is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization.
5.2 Authority;
Binding Nature of Agreements.
Shareholder has all requisite power and authority (including full corporate
or
other Entity power and authority) to execute and deliver this Agreement and
all
other Transaction Agreements to which it is a party and to carry out the
provisions of this Agreement and the other Transaction Agreements. The
execution, delivery and performance by Shareholder of this Agreement and the
other Transaction Agreements have been approved by all requisite action on
the
part of Shareholder. This Agreement has been duly and validly executed and
delivered by Shareholder. Each of this Agreement and the other Transaction
Agreements constitutes, or upon execution and delivery, will constitute, the
legal, valid and binding obligation of Shareholder, enforceable against
Shareholder in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles related to or limiting creditors’ rights generally and by
general principles of equity.
5.3 No
Conflicts; Required Consents.
The
execution, delivery and performance of this Agreement or any other Transaction
Agreement by Shareholder do not and will not (with or without notice or lapse
of
time):
(a) conflict
with, violate or result in any Breach of, or render Shareholders in default
of,
or result in the termination or in a right of termination or cancellation of,
or
accelerate the performance required by or result in being declared void,
voidable or without further binding effect, (i) if Shareholder is an
Entity, any provision of its charter, bylaws or other governing documents;
(ii) if Shareholder is an Entity, any resolutions adopted by Shareholder’s
stockholders, board of directors or committees thereof (or other similar
governing body), or partners or members if Shareholder is a partnership or
limited liability company; (iii) any of the terms or requirements of any
Governmental Approval held by Shareholder or any of its employees or that
otherwise relates to Shareholder’s business; (iv) any provision of a
Contract to which Shareholder is a party; or (v) result in the imposition
or creation of an Encumbrance on or with respect to the Shares.
(b) give
any
Governmental Authority or other Person the right to (i) challenge the
Transaction; (ii) exercise any remedy or obtain any relief under any Legal
Requirement or any Order to which Target Company or any of its Assets are
subject; or (iii) declare a default of, exercise any remedy under,
accelerate the performance of, cancel, terminate or modify any Contract to
which
Shareholder or Target Company is a party; or
(c) require
Shareholder to obtain any Consent or make or deliver any filing or notice to
a
Governmental Authority.
5
5.4 Brokers.
Granite
Financial Group, Inc. has been engaged to act as the exclusive investment
banking advisor of the Target Company (the “Granite
Engagement”).
Except for the Granite Engagement, Shareholders have not retained any broker
or
finder or incurred any liability or obligation for any brokerage fees,
commissions or finders fees with respect to this Agreement or the
Transaction.
5.5 Shares.
Each
Shareholder is the true, lawful registered and beneficial owner of the Shares
set forth next to Shareholder’s name on the Schedule of Shareholders with good
legal and beneficial title thereto, and as of the Closing, Shareholder will
convey such Shares to Purchaser free and clear of any restrictions on transfer
(as contained in the articles of Target Company or otherwise), Taxes,
Encumbrances, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. Shareholder has the exclusive right to sell,
assign and transfer the Shares owned by it as provided in this Agreement. The
Shares set forth next to Shareholder’s name on the Schedule of Shareholders
constitute all of the Shares of capital stock of Target Company owned
beneficially or of record by Shareholder. Shareholder is not a party to, nor
is
there any, option, warrant, purchase right, or other contract or commitment
(other than this Agreement) that could require Shareholder to sell, transfer
or
otherwise dispose of any capital stock of Target Company. Shareholder is not
a
party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of Target Company.
5.6 Shareholder
Legal Proceedings.
There
is no Proceeding pending or threatened against any of Shareholders before any
Governmental Authority that questions the validity of this Agreement or the
other Transaction Agreements.
5.7 Residence
of Shareholders.
Shareholder is not a non-resident of Canada for purposes of the Tax
Act.
5.8 Private
Placement.
(a) Each
Shareholder (i) is not located in the United States, (ii) is not a
U.S. Person, (iii) is not acquiring the Exchangeable Shares and will not
acquire the Surge Securities for the account or benefit of a U.S. Person or
a
person in the United States, and (iv) did not execute or deliver this
Agreement in the United States.
(b) Each
Shareholder understands and agrees that if it decides to offer, sell, pledge
or
otherwise transfer any of the Surge Securities, it will not offer, sell, pledge
or otherwise transfer any of such securities, directly or indirectly, unless
such securities are registered for resale under the Securities Act and under
any
applicable state securities laws, if required, or: (i) the transfer is to
Surge; (ii) the transfer is made outside the United States in accordance
with the provisions of Regulation S and in compliance with applicable local
laws
and regulations; (iii) the transfer is made in compliance with an exemption
from registration under the Securities Act provided by Rule 144 thereunder,
if available, and in accordance with applicable state securities laws; or
(iv) the transfer is made in another transaction that does not require
registration under the Securities Act or any applicable state securities laws
after the seller furnishes to Surge an opinion of outside counsel in form and
substance reasonably satisfactory to Surge or other evidence reasonably
satisfactory to Surge to such effect. Each Shareholder acknowledges and agrees
that it will not engage in any hedging transactions with regard to the Surge
Securities unless in compliance with the Securities Act. Each Shareholder
acknowledges and agrees that a legend reflecting the restrictions and
limitations on transfer and hedging set forth in this Section
5.8(b)
will be
placed on the certificates representing the Surge Securities, and all
certificates issued in exchange therefor or in substitution thereof, until
such
time as it is no longer required under the Securities Act or applicable state
securities laws. Each Shareholder consents to Surge making a notation on its
records or giving instructions to any transfer agent for the Surge Securities
in
order to implement the restrictions on transfer set forth and described
herein.
6
(c) Each
Shareholder understands and acknowledges that the Exchangeable Shares and the
Surge Securities have not been registered under the Securities Act or the
securities laws of any state of the United States and that the issuance of
such
securities contemplated hereby will be made in reliance upon an exclusion from
such registration requirements and, in the case of the Surge Securities, such
securities will be “restricted securities” within the meaning of Rule 144 under
the Securities Act. Each Shareholder is familiar with Rule 144 promulgated
under
the Securities Act, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act. SHAREHOLDER UNDERSTANDS
AND ACKNOWLEDGES HEREIN THAT AN INVESTMENT IN THE EXCHANGEABLE SHARES AND SURGE
SECURITIES INVOLVES AN EXTREMELY HIGH DEGREE OF RISK AND MAY RESULT IN A
COMPLETE LOSS OF ITS INVESTMENT. Shareholder has no immediate need for liquidity
in connection with this investment, does not anticipate that Shareholder will
be
required to sell its Exchangeable Shares or Surge Securities in the foreseeable
future.
(d) Without
in any way limiting the representations set forth above, each Shareholder
further understands and agrees not to make any disposition of all or any portion
of the Exchangeable Shares unless and until the transferee has agreed in writing
for the benefit of Purchaser and Surge to make the representations and
agreements set forth in this Section 5.8
and be
bound by the provisions of Section
10.6.
(e) Each
Shareholder understands and acknowledges that upon the original issuance of
the
Surge Securities, and until such time as the same is no longer required under
applicable requirements of the Securities Act or applicable state securities
laws, certificates representing the Surge Securities and all certificates issued
in exchange therefor or in substitution thereof, may bear the following
legend:
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE LAWS OF ANY
STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES,
AGREES FOR THE BENEFIT OF THE CORPORATION THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION,
(B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE
LOCAL LAWS AND REGULATIONS, (C) IN COMPLIANCE WITH THE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF
AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR
(D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS AFTER THE SELLER
FURNISHES TO THE CORPORATION AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE CORPORATION OR OTHER EVIDENCE REASONABLY
SATISFACTORY TO THE CORPORATION TO SUCH EFFECT. HEDGING TRANSACTIONS INVOLVING
THE SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH
THE SECURITIES ACT.”
7
provided, that, if any of the Surge Securities are being sold pursuant to Rule 144 of the Securities Act, the legend may be removed by delivery to Surge’s transfer agent of an opinion of counsel in form and substance satisfactory to the Surge, to the effect that the legend is no longer required under applicable requirements of the Securities Act or state securities laws.
(f) Each
Shareholder acknowledges that it is not relying upon any Person other than
Purchaser and its officers and directors in making Shareholder’s investment or
decision to invest in the Exchangeable Shares and the Surge Securities
exchangeable therefor.
(g) Each
Shareholder has had the opportunity to obtain independent tax and investment
advice respecting entering into this Agreement and completing the transactions
contemplated hereby.
(h) Each
Shareholder is acquiring the Exchangeable Shares and will acquire the Surge
issuable upon exchange of the Exchangeable Shares for investment for such
Shareholder’s own account, not as a nominee or agent and not with a view to the
resale or distribution of any part thereof in violation of United States federal
or state securities laws.
(i) Each
Shareholder has received all the information it considers necessary or
appropriate for deciding whether to obtain the Exchangeable Shares as
consideration in this Transaction. Each Shareholder has had an opportunity
to
ask questions and receive answers from Purchaser regarding the rights,
preferences and privileges under the Exchangeable Shares and the business,
properties, prospects and financial condition of Purchaser and
Surge.
(j) Each
Shareholder has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of owning the Exchangeable
Shares and the Surge Securities. Each Shareholder acknowledges that such
Shareholder’s ownership of the Exchangeable Shares involves a high degree of
risk and that such Shareholder is able, without materially impairing its
financial condition, to hold the Exchangeable Shares for an indefinite period
of
time and to suffer a complete loss of its investment.
(k) Each
Shareholder understands that the representations, warranties , covenants and
acknowledgements set forth in this Section 5.8
constitute a material inducement to Purchaser and Surge to enter into this
Agreement.
8
5.9 Full
Disclosure.
None of
the representations and warranties contained in this Article 5,
when
all such representations and warranties are read together in their entirety,
(i) contains any untrue statement of fact or (ii) omits or will omit
to state any fact necessary to make such representations and warranties (in
light of the circumstances under which they were made) not
misleading.
ARTICLE
6.
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
Except
as
specifically set forth in Schedule 2
(the
“Purchaser
Disclosure Schedule”)
attached to this Agreement (the parts of which are numbered to correspond to
the
applicable Section numbers of this Agreement), Purchaser hereby represents
and
warrants as of the date hereof to Shareholders as follows:
6.1 Organization
and Good Standing.
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the ABCA.
6.2 Capitalization.
(a) The
authorized capital of Purchaser consists of an unlimited number of Common Shares
and an unlimited number of Exchangeable Shares (collectively, “Purchaser
Stock”),
of
which 1,000 Common Shares designated in the name of Surge and no Exchangeable
Shares are and will be, immediately prior to Closing, issued and outstanding.
No
other shares of capital stock or securities of Purchaser are issued or
outstanding.
(b) There
is
no: (i) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any Purchaser Stock or that has
the
right to vote on any matters on which shareholders of Purchaser may vote;
(iii) Contract under which Purchaser is or may become obligated to sell,
issue or otherwise dispose of or redeem, purchase or otherwise acquire any
of
its securities; or (iv) stockholder agreement, voting trust or other
agreement, arrangement or understanding that may affect the exercise of voting
or any other rights with respect to the securities of Purchaser.
(c) The
Exchangeable Shares to be issued pursuant to Section 2.1(b),
upon
issuance in consideration for the Shares in the manner contemplated herein,
shall be validly issued as fully paid and non-assessable shares in the capital
stock of Purchaser in full compliance with all applicable securities laws and
other applicable Legal Requirements and will be free and clear of all
Encumbrances, other than Encumbrances created by the Transaction Agreements
or
imposed by federal, state or local securities law or any other regulatory
Encumbrances.
6.3 Authority;
Binding Nature of Agreements.
Purchaser has all requisite corporate power and authority to execute and deliver
this Agreement and all other Transaction Agreements to which it is a party
and
to carry out the provisions of this Agreement and the other Transaction
Agreements. The execution, delivery and performance by Purchaser of this
Agreement and the other Transaction Agreements have been approved by all
requisite action on the part of Purchaser. This Agreement has been duly and
validly executed and delivered by Purchaser. Each of this Agreement and the
other Transaction Agreements constitutes, or upon execution and delivery, will
constitute, the legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles related to or limiting creditors’ rights generally and by
general principles of equity.
9
6.4 No
Conflicts; Required Consents.
The
execution, delivery and performance of this Agreement or any other Transaction
Agreement by Purchaser do not and will not (with or without notice or lapse
of
time):
(a) conflict
with, violate or result in any Breach of (i) any of the provisions of
Purchaser’s articles of incorporation, articles of amendment or bylaws;
(ii) any resolutions adopted by Purchaser’s stockholders, or its board of
directors or committees thereof; (iii) any of the terms or requirements of
any Governmental Approval held by Purchaser or any of its employees or that
otherwise relates to Purchaser’s business; (iv) any provision of a Contract
to which Purchaser is a party; or (v) any federal, provincial, local or foreign
order, writ, injunction, decree, statute, rule or regulation to Purchaser or
any
of its assets.
(b) give
any
Governmental Authority or other Person the right to (i) challenge the
Transaction; (ii) exercise any remedy or obtain any relief under any Legal
Requirement or any Order to which Purchaser or any of its assets is subject;
or
(iii) declare a default of, exercise any remedy under, accelerate the
performance of, cancel, terminate or modify any Contract to which Purchaser
is a
party; or
(c) require
Purchaser to obtain any Consent or make or deliver any filing or notice to
a
Governmental Authority.
6.5 Brokers.
Purchaser has not retained any broker or finder or incurred any liability or
obligation for any brokerage fees, commissions or finder’s fees with respect to
this Agreement or the Transaction.
6.6 Exchangeable
Shares.
The
Exchangeable Shares will, when issued and delivered in accordance with this
Agreement, be duly authorized and validly issued as fully paid and
non-assessable Exchangeable Shares.
6.7 Investment
Company.
Purchaser is not, and as a result of the issuance of the Exchangeable Shares
contemplated hereby will not be, an “investment company,” as such term is
defined in the Investment Company Act of 1940, as amended.
6.8 Foreign
Issuer; No Substantial U.S. Market.
Purchaser is a “foreign issuer,” as such term is defined in Regulation S under
the Securities Act, with no “substantial U.S. market interest,” as such term is
defined in Regulation S under the Securities Act, in the Exchangeable
Shares.
6.9 Business
of Purchaser.
Purchaser was incorporated on June 1, 2006, and has no material assets or
material liabilities and to Purchaser’s Knowledge will not have any material
assets or material liabilities prior to Closing other than as contemplated
by
this Agreement or the Transaction Agreements.
10
6.10 Full
Disclosure.
(a) None
of
the representations and warranties contained in this Article 6, when all
such representations and warranties are read together in their entirety,
(i) contains any untrue statement of fact or (ii) omits or will omit
to state any fact necessary to make such representations and warranties (in
light of the circumstances under which they were made) not
misleading.
(b) Target
Company make no representations or warranties (whether in contract or in tort)
except as expressly set forth in this Agreement.
(c) Each
of
the Shareholders confirms that such Shareholder has not relied on any covenants,
representations or warranties outside this Agreement (whether in contract or
in
tort) and in particular, and without limitation, each of the Shareholders hereby
expressly negate any representations or warranties by Purchaser and Surge not
contained in this Agreement, the Closing Certificate or the Disclosure Schedule,
whether contained in any information memorandum or otherwise.
(d) The
maximum cumulative liability of Purchaser and Surge to Shareholders as a result
of any misrepresentations or breach of warranty contained in this Agreement
shall not exceed the Purchase Price.
Each
representation and warranty set forth in this Agreement is not qualified in
any
way whatsoever except as explicitly provided therein, will not merge on Closing
or by reason of the execution and delivery of any Contract at the Closing,
will
remain in force on and immediately after the Effective Time, is given with
the
intention that liability is not limited to Breaches discovered before Closing,
is separate and independent and is not limited by reference to any other
representation or warranty or any other provision of this Agreement, and is
made
and given with the intention of inducing Shareholders to enter into this
Agreement.
ARTICLE
7.
REPRESENTATIONS
AND WARRANTIES CONCERNING TARGET COMPANY
Except
as
specifically set forth in Schedule 3
(the
“Target
Disclosure Schedule”)
attached to this Agreement (the parts of which are numbered to correspond to
the
individual Section numbers of this Article 7),
Target
Company hereby represents and warrants to Purchaser as follows:
7.1 Organization,
Good Standing, Qualification.
Part
7.1
sets
forth Target Company’s jurisdiction of incorporation and each jurisdiction in
which Target Company is qualified to do business. Target Company (i) is a
corporation duly incorporated, validly existing and in good standing under
the
ABCA; (ii) is duly qualified and licensed to conduct business and is in
corporate and tax good standing under the laws of each jurisdiction in which
the
nature of its business, the operation of its Assets or the ownership or leasing
of its properties requires such qualification or licensing; (iii) has full
corporate power and authority required to own, lease, use and operate its
Assets, to carry on its business as now being conducted and as presently
proposed to be conducted, and to perform its obligations under all
Contracts.
11
7.2 Private
Issues.
Target
Company is a “private issuer” as defined in National Instrument 45-106
Prospectus and Registration Exemptions adopted by the Canadian Securities
Administrators.
7.3 Charter
Documents; Books and Records.
(a) Target
Company has made available to Purchaser accurate, correct and complete copies
of
(i) the certificate and articles of incorporation and bylaws of Target
Company, including all amendments thereto, as presently in effect; (ii) all
stock records of Target Company, including Target Company’s stock ledger and
copies of any stock certificates issued by Target Company; (iii) all
minutes and other records of all meetings and other proceedings (including
any
actions taken by written consent or otherwise without a meeting) of the
stockholders of Target Company, Target’s Board and all committees of Target’s
Board (collectively, the “Resolutions”);
and
(iv) all books of account and other financial records of Target
Company.
(b) The
minute books of Target Company accurately and completely reflect all material
corporate actions of its stockholders, Target’s Board and any committees of the
Target’s Board. The register of shareholders and register of transfers of Target
Company contained in its minute books are complete and accurate in all material
respects since the date Target Company was formed. The books of account and
other financial records of Target Company are accurate and complete and have
been maintained in accordance with sound business practices.
(c) Target
Company is not in violation of any of the provisions of its certificate of
incorporation, bylaws or Resolutions, and to the Knowledge of Shareholders,
no
condition or circumstance exists that likely would (with or without notice
or
lapse of time) constitute or result directly or indirectly in such a
violation.
(d) Part
7.3(d)
accurately sets forth (i) the names of the members of the Target’s Board,
(ii) the names of the members of each committee of the Target’s Board, and
(iii) the names and titles of Target Company’s officers.
7.4 Capitalization.
(a) The
authorized capital of Target Company consists of an unlimited number of Class
“A”, Class “B”, Class “C”, Class “D”, Class “E”, Class “F”, Class “G”, Class
“H”, Class “I”, Class “J”, Class “K”, and Class “L” shares of common stock
(collectively, “Target
Company’s Stock”),
of
which 800 Class “A” and 6,333,332 Class “I” shares (“Outstanding
Target Company Stock”)
are
and will be, immediately prior to Closing, issued and outstanding. All shares
of
the Outstanding Target Company Stock are owned by Shareholders in the amounts
indicated on the Schedule of Shareholders and are being sold to Purchaser
hereunder. No other shares of capital stock or securities of Target Company
are
issued or outstanding. All Outstanding Target Company Stock has been duly
authorized and validly issued, is fully paid and non-assessable, is been issued
in full compliance with all applicable securities laws and other applicable
Legal Requirements and is free and clear of all Encumbrances.
12
(b) There
is
no: (i) outstanding pre-emptive right, subscription, commitment, option,
call, warrant or other right to acquire any securities of Target Company,
including the Shares; (ii) outstanding security, instrument or obligation
that is or may become convertible into or exchangeable for any securities of
Target Company, including the Shares or that has the right to vote on any
matters on which shareholders of Target Company may vote; (iii) Contract
under which Target Company is or may become obligated to sell, issue or
otherwise dispose of or redeem, purchase or otherwise acquire any of its
securities, including the Shares; or (iv) stockholder agreement, voting
trust or other agreement, arrangement or understanding that may affect the
exercise of voting or any other rights with respect to the securities of Target
Company, including the Shares.
7.5 No
Conflicts; Required Consents.
The
execution, delivery and performance of this Agreement or any other Transaction
Agreement by Target Company do not and will not (with or without notice or
lapse
of time):
(a) conflict
with, violate or result in any Breach of (i) any of the provisions of
Target Company’s articles of incorporation or bylaws; (ii) any Resolutions;
(iii) any of the terms or requirements of any Governmental Approval held by
Target Company or any of its Employees or that otherwise relates to the business
or assets of Target Company; (iv) any provision of any Contract to which
Target Company is a party; or (v) any federal, provincial, local or foreign
order, writ, injunction, decree, statute, rule or regulation to Target Company
or any of its Assets.
(b) give
any
Governmental Authority or other Person the right to (i) challenge the
Transaction; (ii) exercise any remedy or obtain any relief under any Legal
Requirement or any Order to which Target Company, or any of Target Company’s
assets, is subject; (iii) declare a default of, exercise any remedy under,
accelerate the performance of, cancel, terminate, modify or receive any payment
under any Contract to which Target Company is a party; or (iv) revoke,
suspend or modify any Governmental Approval;
(c) cause
Target Company or Purchaser to become subject to, or to become liable for the
payment of, any Tax, or cause any of Target Company’s assets or properties to be
reassessed or revalued by any Tax Authority or other Governmental
Authority;
(d) result
in
the imposition or creation of any Encumbrance upon or with respect to any of
Target Company’s Assets; or
(e) require
Target Company to obtain any Consent or make or deliver any filing or notice
to
a Governmental Authority.
7.6 No
Subsidiaries.
Target
Company does not own any shares of capital stock or other securities of, or
control, directly or indirectly, any other Entity and has never owned,
beneficially or otherwise, any shares or other securities of, or any direct
or
indirect equity interest in, any Entity.
13
7.7 Financial
Statements.
(a) Target
Company has made available to Purchaser the following financial statements
(collectively, the “Financial
Statements”):
the
audited balance sheet, and the related statements of operations, changes in
shareholders’ equity, and cash flows, of Target Company as at September 30,
2006, together with the notes thereto.
(b) All
of
the Financial Statements (i) are true, accurate and complete in all
respects; (ii) are consistent with the Books and Records of Target Company;
(iii) present fairly and accurately the financial condition of Target
Company as of the date thereof and the results of operations, changes in
shareholder’s equity and cash flows of Target Company for the periods covered
thereby; and (iv) have been prepared in accordance with GAAP, applied on a
consistent basis throughout the periods covered.
7.8 Absence
of Undisclosed Liabilities.
(a) Target
Company has no Liabilities other than (i) those set forth in the Financial
Statements; (ii) accounts payable and accrued salaries that have been
incurred by Target Company since September 30, 2006, in the Ordinary Course
of Business; and (iii) those Liabilities under the Title and Operating
Documents and the Contracts identified in Part 7.12(a).
(b) Target
Company will not have any indebtedness for borrowed money at the Closing and
will specifically have repaid in full and discharged those certain loans from
Shareholders specified in Part 7.8(b).
7.9 Absence
of Changes.
Since
September 30, 2006, (i) Target Company has conducted its business and
operations in the Ordinary Course of Business; (ii) no event or
circumstance has occurred that could reasonably have, or result in, a Material
Adverse Effect on Target Company, the Assets or the Tangibles; and
(iii) Target Company has not taken any action, agreed to take any action,
or omitted to take any action that would constitute a Breach of Sections 9.1
or
9.2
if such
action or omission were taken between the date of this Agreement and the
Effective Time.
7.10 Transactions
with Affiliates.
Except
as set forth in the Financial Statements, no Affiliate (a) owns, directly
or indirectly, any debt, equity or other interest in any Entity with which
Target Company is affiliated, has a business relationship or competes other
than
Affiliates that own less than five percent (5%) of the issued and outstanding
capital stock of a publicly-traded competitor of Target Company; (b) is
indebted to Target Company, nor is Target Company indebted (or committed to
make
loans or extend or guarantee credit) to any Affiliate other than with respect
to
any of Target Company’s obligations to pay accrued salaries, reimbursable
expenses or other standard employee benefits; (c) has any direct or
indirect interest in any asset, property or other right used in the conduct
of
or otherwise related to the business or operations of Target Company;
(d) has any claim or right against Target Company, and no event has
occurred, and no condition or circumstance exists, that might (with or without
notice or lapse of time) directly or indirectly give rise to or serve as a
basis
for any claim or right in favor of any Affiliate against Target Company;
(e) is a party to any Contract or has had any direct or indirect interest
in, any Contract, transaction or business dealing of any nature involving Target
Company; or (f) received from or furnished to Target Company any goods or
services (with or without consideration) since September 30, 2006.
14
7.11 Bank
Accounts. Part
7.11
sets
forth an accurate and complete list of all Bank Accounts, including the names
and addresses of the financial institutions in which Target Company has a Bank
Account and the names of all persons authorized to draw thereon or with access
thereto.
7.12 Material
Contracts.
(a) Part
7.12(a)
and
Part
7.33
sets
forth an accurate, correct and complete list of all Contracts (the “Material
Contracts”)
to
which (x) any of the descriptions set forth below may apply and
(y) which involve any payment or obligation or any series of payments or
obligations which equal or exceed, or could reasonably be expected to equal
or
exceed, $50,000 individually or in the aggregate during the term of such
Contract, except as otherwise indicated below:
(i) Real
property leases, personal property leases, insurance, Contracts affecting any
Target Intellectual Property, Contracts with contractors;
(ii) Governmental
Approvals;
(iii) Any
Contract for capital expenditures or for the purchase of goods or services,
except those incurred in the Ordinary Course of Business and to be performed
in
three (3) months or less;
(iv) Any
Contract obligating Target Company to sell or deliver any product or service
at
a price which does not cover the cost (including labor, materials and production
overhead) plus the customary profit margin associated with such product or
service;
(v) Any
Contract involving financing or borrowing of money, or evidencing indebtedness,
any liability for borrowed money, any obligation for the deferred purchase
price
of property (excluding normal trade payables) or guaranteeing in any way any
Contract in connection with any Person;
(vi) Any
joint
venture, partnership, cooperative arrangement or any other Contract involving
a
sharing of profits (the proviso in Section
7.12(a)(y)
above
shall not apply);
(vii) Any
Contract affecting any right, title or interest in or to real
property;
(viii) Any
Contract with any Governmental Authority;
(ix) Any
Contract with respect to the discharge, storage or removal of effluent, waste
or
pollutants;
15
(x)
Any
Contract relating to any license or royalty arrangement;
(xi) Any
power
of attorney, proxy or similar instrument (the proviso in Section 7.12(a)(y)
above shall not apply);
(xii) any
Contract among shareholders of Target Company (including, without limitation,
any voting trust agreement, unanimous shareholder agreement or share pooling
agreement) (the proviso in Section
7.12(a)(y)
above
shall not apply);
(xiii) Any
Contract for the manufacture, service or maintenance of any product of Target
Company;
(xiv) Any
Contract for the purchase or sale of any Assets other than in the Ordinary
Course of Business or for the option or preferential rights to purchase or
sell
any assets;
(xv) Any
requirement or output Contract;
(xvi) Any
Contract to indemnify any Person or to share in or contribute to the liability
of any Person (the proviso in Section
7.12(a)(y)
above
shall not apply);
(xvii) Any
Contract for the purchase or sale of foreign currency or otherwise involving
foreign exchange transactions;
(xviii) Any
Contract containing covenants not to compete in any line of business or with
any
Person in any geographical area (the proviso in Section 7.12(a)(y)
above
shall not apply);
(xix)
Any
Contract related to the acquisition of a business or the equity of any other
Entity;
(xx)
Any
other
Contract that involves future payments, performance of services or delivery
of
goods or materials to or by Target Company, or that otherwise is material to
the
business or prospects of Target Company;
(xxi) Any
agreement for the purchase, sale, transportation, processing, gathering or
storage of electric power, natural gas, natural gas liquids, crude oil or
condensate, or any financial product instrument related thereto, involving
annual revenues to or payments by any of the Companies in excess of $50,000,
in
the aggregate;
(xxii) Any
production sharing agreement, balancing agreement, farm-out or farm-in
agreement, enhanced oil recovery agreement, utilization and pooling agreement
or
other similar contract or agreement relating to the exploration, development
and
production of Petroleum Substances (the proviso in Section 7.12(a)(y)
above
shall not apply);
16
(xxiii) Any
take-or-pay agreement or other similar agreement that entitles purchasers of
production to receive delivery of Petroleum Substances without paying
therefor;
(xxiv) Any
agreement for the sale of any working interests in any oil or gas leases which
involves payment to any of the Companies; and
(xxv) Any
proposed arrangement of a type that, if entered into, would be a Contract
described in any of (i) through (xxiv) above.
(b) Target
Company has made available to Purchaser accurate, correct and complete copies
of
all Material Contracts, including all amendments, supplements, modifications
and
waivers thereof. All Material Contracts are in writing. All nonmaterial
contracts of Target Company do not, in the aggregate, represent a material
portion of the Liabilities of Target Company.
(c) To
the
Knowledge of Target Company, each Material Contract is currently valid and
in
full force and effect, and is enforceable by Target Company in accordance with
its terms.
(d) To
the
Knowledge of Target Company, Target Company is not in default, and no party
has
notified Target Company that it is in default, under any Material Contract.
No
event has occurred, and no circumstance or condition exists, that might (with
or
without notice or lapse of time or as a result of the Transaction)
(a) result in a violation or Breach of any of the provisions of any
Material Contract; (b) give any Person the right to declare a default or
exercise any remedy under any Material Contract; (c) give any Person the
right to accelerate the maturity or performance of any Material Contract or
to
cancel, terminate or modify any Material Contract; or (d) otherwise have a
Material Adverse Effect on Target Company in connection with any Material
Contract;
(e) Target
Company has not waived any of its rights under any Material Contract;
and
(f)
To
the
Knowledge of Target Company, no other party to such Material Contract is in
default in any respect therein.
(g) To
the
Knowledge of Target Company, each Person against which Target Company has or
may
acquire any rights under any Contract is (i) solvent and (ii) able to
satisfy such Person’s material obligations and liabilities to Target
Company.
(h) The
performance of the Material Contracts will not result in any violation of or
failure by Target Company to comply with any Legal Requirement.
(i)
The
Material Contracts constitute all of the Contracts necessary to enable Target
Company to conduct its business and operations in the manner in which such
business and operations are currently being conducted.
17
7.13 Insurance.
Part
7.13
sets
forth an accurate and complete list of all insurance policies, self-insurance
arrangements and fidelity bonds, currently in effect, that insure Target Company
and its business and Assets (collectively, the “Insurance
Policies”).
Target Company has made available to Purchaser true, correct and complete copies
of all Insurance Policies. Each Insurance Policy is valid, binding, and in
full
force and effect. Target Company is not in Breach of any Insurance Policy,
and
no event has occurred which, with notice or the lapse of time, would constitute
such a Breach, or permit termination, modification, or acceleration, of any
Insurance Policy. Target Company has not received any notice of cancellation
or
non-renewal of any Insurance Policy. The consummation of the Transaction will
not cause a Breach, termination, modification, or acceleration of any Insurance
Policy. There is no claim under any Insurance Policy that has been improperly
filed or as to which any insurer has questioned, disputed or denied
liability.
7.14 Assets.
(a)
Target
Company does not warrant title to Assets that are not Tangibles, but does
warrant that, except for Permitted Encumbrances, the Assets are now and at
the
Closing Date will be free and clear of Encumbrances or other burdens created
by,
through or under it or of which it is otherwise actually aware.
(b) Target
Company has good and marketable title to, is the equitable owner of the
Tangibles, including: (i) all Tangibles owned and reflected on the
Financial Statements; and (ii) all other Tangibles reflected in its Books
and Records as being owned by Target Company. The Tangibles are owned by Target
Company free and clear of all Encumbrances of any kind or nature, except for
Permitted Encumbrances. The joint venture created between Target Company and
North Peace Energy Inc. pursuant to the Joint Venture Agreement is the legal
owner of the Tangibles and has good and marketable title to such
Tangibles.
(c) To
the
Knowledge of Target Company, all Tangibles are (i) in good operating
condition and repair, ordinary wear and tear excepted; (ii) suitable and
adequate for continued use in the manner in which they are presently being
used;
(iii) adequate to meet all present requirements of Target Company; and
(iv) free of patent defects.
(d) Target
Company:
(i) is
not in
default or will be in default on the completion of the Transaction under any
Title and Operating Document; or
(ii) has
failed to comply with, perform, observe or satisfy, in any material respect,
any
term, condition, obligation or liability which has heretofore arisen under
the
provisions of any Title and Operating Document;
which
defaults or failures could reasonably be expected to have a Material Adverse
Effect on Target Company.
(e) as
set
forth in Part
7.14(e)
and
except for operating costs incurred in Ordinary Course of the Business, there
are no outstanding authorizations for expenditure or other financial commitments
respecting the Assets which are due as at the date hereof pursuant to which
individual expenditures of greater than $20,000 may be required by Target
Company after the Effective Time.
18
7.15 Real
Property.
Target
Company owns no real property.
7.16 Intellectual
Property.
Target
Company does not own, license or otherwise possesses any rights to use, any
trademarks, trade names, service marks, service names, xxxx registrations,
logos, assumed names, registered and unregistered copyrights, patents or
applications and registrations (collectively, the “Intellectual
Property”).
There
are no pending or, to the Knowledge of Target Company, threatened claims by
any
person alleging infringement by Target Company for use of Intellectual Property.
The conduct of the business of Target Company does not infringe any Intellectual
Property rights of any Person.
7.17 Operation
of Assets.
(a)
Except
as
provided in Part
7.17(a),
to
Target Company’s Knowledge, Target Company is not a party to a Contract
containing area of mutual interest or area of exclusion provisions applicable
to
or binding on Target Company that materially restricts the right of Target
Company to continue its business as currently conducted after
Closing.
(b)
No
officer, director or consultant of Target Company, any associate or Affiliate
of
any such person or any party not at arm’s length to Target Company will own or
will have or be entitled to any royalty, net profits interest, carried interest
or other encumbrance of any nature whatsoever which are based on production
from
the Assets or any revenue or rights attributed thereto.
(c)
To
Target
Company’s Knowledge, all operations in respect of the Assets have been conducted
in accordance with good oilfield practices in Canada in effect at the time
that
the operations were conducted.
(d)
Target
Company has obtained all material permits, licenses and other authorizations
which are required under Legal Requirements to own or operate the
Assets.
7.18 Target
Company Products and Services.
As of
the date of this Agreement, Target Company has never manufactured, processed,
distributed, shipped or sold any products to third parties.
7.19 Employees
and Consultants.
(a)
No
Employee of Target Company has been granted the right to continued employment
by
Target Company or to any material compensation following termination of
employment with Target Company.
19
(b)
Part
7.19(b)
sets
forth an accurate, correct and complete list of all (i) Employees of Target
Company, including each Employee’s name, title or position, present annual
compensation (including bonuses, commissions and deferred compensation), accrued
and unused paid vacation and other paid leave, years of service, interests
in
any incentive compensation plan, and estimated entitlements to receive
supplementary retirement benefits or allowances (whether pursuant to a
contractual obligation or otherwise) and (ii) individuals who are currently
performing services for Target Company related to the business of Target Company
who are classified as “consultants” or “independent contractors.” Part
7.20(b)
sets
forth all (i) bonuses, severance payments, termination pay and other
special compensation of any kind paid to, accrued with respect to, or that
would
be payable to (as a result of the Transaction), any present or former contractor
since September 30, 2006; (ii) increases in any Employee’s wage or salary
since September 30, 2006 or (iii) increases or changes in any other
benefits or insurance provided to any Employees since September 30,
2006.
(c)
Target
Company has no collective bargaining agreements with any of its employees.
There
is no labor union organizing or election activity pending or, to the Knowledge
of Shareholders or Target Company, threatened with respect to Target
Company.
7.20 Target
Company Benefit Plans.
(a)
Target
Company:
(i) has
never
established or maintained any employee Benefit Plans;
(ii) is
not a
party to or bound by or subject to any agreement or arrangement with respect
to
Benefit Plans;
(iii) is
not a
party to or bound by or subject to any collective bargaining agreement or
arrangement with any labor union or employee association; or
(iv) is
not a
party to or bound by or subject to any written employment agreement, written
or
oral, consulting or service agreement with or respecting its
Employees.
(b) No
collective bargaining agreement is currently being negotiated by Target Company
with respect to any Employee. There are no certification proceedings outstanding
in respect of the Employees and, to the Knowledge of Shareholders, there are
no
attempts to organize or certify any of the Employees. There is no current or
pending labor strike, dispute, work slowdown or work stoppage against Target
Company or, to the Knowledge of Shareholders, threatened against Target Company.
To the Knowledge of Shareholders, no trade union or employee association has
applied to have Target Company declared a related or successor employer pursuant
to any Legal Requirement.
(c) Target
Company has complied with all Legal Requirements related to the employment
of
its employees, including provisions related to wages, hours, leaves of absence,
equal opportunity, occupational health and safety, workers’ compensation,
severance, employee handbooks or manuals, collective bargaining and the payment
of social security and other Taxes. Target Company has no Liability under any
Legal Requirements related to employment and attributable to an event occurring
or a state of facts existing prior to the date thereof.
20
7.21 Compliance
with Laws.
(a)
Target
Company is, and at all times since the date of its incorporation has been,
in
full compliance, with each Legal Requirement that is applicable to Target
Company or any of Target Company’s properties, Assets, operations or businesses,
and no event has occurred, and no condition or circumstance exists, that
could
reasonably be expected to (with or without notice or lapse of time) constitute,
or result directly or indirectly in, a default under, a Breach or violation
of,
or a failure to comply with, any such Legal Requirement. Target Company has
not
received any notice from any third party regarding any actual, alleged or
potential violation of any Legal Requirement.
(b)
To
the
Knowledge of Target Company and Shareholders, no Governmental Authority has
proposed or is considering any Legal Requirement that could reasonably be
expected to affect Target Company or Target Company’s Assets, operations or
businesses, or Target Company’s rights thereto, except to the extent that any
such Legal Requirement, if adopted or otherwise put into effect, individually
or
in the aggregate, will not have a Material Adverse Effect on Target
Company.
7.22 Governmental
Approvals.
(a)
Target
Company has all Governmental Approvals that are necessary or appropriate in
connection with Target Company’s ownership and use of its Assets or operation of
its businesses. Target Company has made all filings with, and given all
notifications to, all Government Authorities as required by all applicable
Legal
Requirements. Each such Governmental Approval, filing and notification is valid
and in full force and effect, and there is not, to the Knowledge of Target
Company, pending or threatened any Proceeding which could result in the
suspension, termination, revocation, cancellation, limitation or impairment
of
any such Governmental Approval, filing or notification. No violations have
been
recorded in respect of any Governmental Approvals, and neither Shareholders
nor
Target Company knows of no meritorious basis therefor. No fines or penalties
are
due and payable in respect of any Governmental Approval or any violation
thereof.
(b)
Target
Company has delivered or made available to Purchaser accurate and complete
copies of all of the Governmental Approvals, filings and notifications,
including all renewals thereof and all amendments thereto.
(c)
No
material Governmental Approvals are required on the part of Shareholders or
Target Company in connection with the Transaction.
7.23 Proceedings
and Orders.
(a)
There
is
no Proceeding pending or, to the Knowledge of Target Company or Shareholders,
threatened against or affecting Target Company, any of Target Company’s Assets,
operations or businesses, or Target Company’s rights relating thereto. To
Shareholders’ or Target Company’s Knowledge, no event has occurred, and no
condition or circumstance exists, that might directly or indirectly give rise
to
or serve as a basis for the commencement of any such Proceeding.
21
(b)
Neither
Target Company, its officers, directors, agents or employees, nor any of
Target
Company’s Assets, operations or businesses), nor Target Company’s rights
relating to any of the foregoing, is subject to any Order or any proposed
Order.
(c)
No
Proceeding has ever been commenced by or has ever been pending against Target
Company.
7.24 Environmental
Matters.
(a)
Except
as
would not, individually or in the aggregate, have a Material Adverse Effect,
(i) Target Company and, to Shareholders and Target Company’s Knowledge,
Target Company has conducted its business in accordance with good oilfield
practice and in compliance with all applicable Environmental Laws and holds
all
applicable environmental Permits, (ii) there has been no release of any
Hazardous Substance by Target Company in any manner that could reasonably
be
expected to give rise to any remedial obligation or corrective action
requirement under applicable Environmental Laws, (iii) Target Company has
not received in writing any environmental protection order, enforcement order,
control order, stop order, remedial order or other administrative complaints,
directions or sanctions issued, filed, or imposed by a Governmental Entity
pursuant to Environmental Law and having the force of law, or any notices,
demand letters or requests for information from any federal, state, local
or
foreign or provincial Governmental Entity asserting that Target Company may
be
in violation of, or liable under, any Environmental Law, (iv) to
Shareholders and Target Company’s Knowledge no Hazardous Substance has been
disposed of, released or transported in violation of any applicable
Environmental Law, or in a manner giving rise to any liability under
Environmental Law, from any properties while owned or operated by Target
Company
or as a result of any operations or activities of Target Company and (v)
neither Target Company nor any of its properties are, or, to the Knowledge
of
Shareholders and Target Company, threatened to become, subject to any
liabilities relating to any suit, settlement, court order, administrative
order,
regulatory requirement, judgment or written claim asserted or arising under
any
Environmental Law or any agreement relating to Environmental
Liabilities.
(b)
On
or
before the Closing, Target Company shall make available to Purchaser all
Environmental Documentation in the possession or control of Shareholders
or
Target Company in respect of the Assets produced for or received by Shareholders
or Target Company.
7.25 Taxes.
(a)
Target
Company has timely filed all Tax Returns that it was required to file, and
such
Tax Returns are true, correct and complete in all respects. All Taxes shown
to
be payable on such Tax Returns or on subsequent assessments with respect
thereto
have been paid in full on a timely basis, and no other Taxes are payable
by
Target Company with respect to any period ending prior to the date of this
Agreement, whether or not shown due or reportable on such Tax Returns, other
than Taxes for which adequate accruals have been provided in its Financial
Statements. Target Company has withheld and paid all Taxes required to have
been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party. Target
Company has no liability for unpaid Taxes accruing after the date of its
latest
Financial Statements except for Taxes incurred in the ordinary course of
business. There are no liens for Taxes on the properties of Target Company,
other than liens for Taxes not yet due and payable.
22
(b) Part
7.25(b)
lists
all Tax Returns filed by Target Company for all taxable periods since its
inception, indicates those Tax Returns that have been audited or appealed,
and
indicates those Tax Returns that currently are subject of audit. To the
Knowledge of Shareholders and Target Company, no other audit or appeal of
any
Tax Return is currently pending or threatened. No claim has ever been made
by
any Governmental Authority in a jurisdiction where Target Company does not
file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
Target Company has delivered or made available to Purchaser correct and complete
copies of all Tax Returns filed, examination reports, and statements of
deficiencies assessed or agreed to by Target Company since its inception.
Target
Company has not waived any statute of limitations in respect of any Tax or
agreed to an extension of time with respect to any Tax assessment or
deficiency.
(c)
Target
Company is not a party to or bound by any tax indemnity agreement, tax sharing
agreement or similar contract. Target Company is not a party to any joint
venture, partnership, or other arrangement or contract which could be treated
as
a partnership for United States federal income tax purposes.
(d)
Target
Company is not obligated under any agreement, contract or arrangement that
may
result in the payment of any amount that would not be deductible by Target
Company.
(e)
Target
Company is a taxable Canadian corporation (as defined in the Tax Act), and
is
duly registered under Subdivision (d) of Division V of Part IX of the Excise
Tax
Act (Canada) with respect to the goods and services tax.
(f)
Target
Company has not acquired property from a non-arm’s length Person, within the
meaning of the Tax Act, for consideration, the value of which is less than
the
fair market value of the property acquired in circumstances which would subject
it to a liability under section 160 of the Tax Act.
(g)
For
all
transactions between Target Company and any non-resident Person with whom
any of
them was not dealing at arm’s length during a taxation year ending on or before
the Effective Time, each has made or obtained records or documents that meet
the
requirements of paragraphs 247(4)(a) to (c) of the Tax Act.
7.26 Brokers.
Except
for the Granite Engagement, Target Company has not retained any broker or
finder
or incurred any liability or obligation for any brokerage fees, commissions
or
finders fees with respect to this Agreement or the Transaction.
7.27 No
Other Agreement.
Neither
Target Company nor any of its Representatives has entered into any Contract
with
respect to the sale or other disposition of any Assets or capital stock of
Target Company except as set forth in this Agreement.
23
7.28 Foreign
Corrupt Practices.Neither
Target Company, nor any of its Representatives has (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment
or
other unlawful expenses related to foreign or domestic political activity,
(ii) made any unlawful payment to foreign or domestic government officials
or employees or to any foreign or domestic political parties or campaigns
from
corporate funds, (iii) failed to disclose fully any contribution made by
Target Company (or made by any person acting on its behalf of which Target
Company is aware) which is in violation of law.
7.29 No
Prepayments.
There
have been no advances, take or pay or other prepayments with respect to the
Assets that would obligate Target Company or Purchaser to deliver Petroleum
Substances from the Assets after the Closing without receiving full payment
therefor.
7.30 Production
Sales Contracts.
There
are no production sales contracts pertaining to the Assets that cannot be
cancelled at any time upon ninety (90) calendar days (or less) prior
notice.
7.31 Calls
on
Production.None
of
the Assets are subject to any calls on production.
7.32 Xxxxx.Xx
of the
date of this Agreement, Target Company has drilled only the xxxxx set forth
in
Part 7.32.
7.33 Leases.
Part
7.33
sets
forth a correct and complete list of all Leases which Target Company owns
or in
which it has an interest, either directly, as a joint venturer or otherwise.
Company owns, holds, posses or lawfully uses in the operation of the business
all Leases necessary for the business as it is presently conducted and necessary
for ownership and full use of the Assets. To Target Company’s Knowledge and
except as set forth in Part 7.33
and for
such matters that would not and would not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect:
(a)
The
Leases have been maintained according to their terms, in material compliance
with all arrangements to which the Leases are subject;
(b)
The
Leases are presently in full force and effect as currently set forth
therein;
(c)
No
other
party to any Lease is in breach or default with respect to any of its
obligations thereunder; and
(d)
There
has
not occurred any event, fact or circumstance that, with or without notice
or
lapse of time or both, may contravene, conflict with, or result in a violation
or breach of, or result in the loss of any benefit to which Target Company
is
entitled under, or give Target Company or any other Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of any obligation under, or to cancel, terminate, or modify,
any
Lease.
24
7.34
Oil
and Gas.
(a) As
of the
date of this Agreement, Target Company has no oil or gas production. Target
Company has not entered into any agreement or accepted any payment regarding
the
sale of any Petroleum Substances.
(b) The
Target Company has no third party reports containing information contrary to
the
information set forth in the report prepared by Xxxxxxx Associates Limited
dated
as of June 30, 2006, and delivered by Target Company to Purchaser for review.
The Target Company has no third party reports estimating or evaluating Target
Company’s oil or gas reserves or undeveloped lands.
(c) All
rentals, royalties and other payments payable by Target Company have been
properly and timely paid and there is no existing default (or event that, with
notice or lapse of time or both, would become a default) under any oil and
gas
leases or other agreements, except, in each case, as individually or in the
aggregate has not had, and would not be reasonably likely to have or result
in,
a Material Adverse Effect on Target Company.
7.35 Derivative
Transactions and Hedging.
No
Derivative Transactions (including each outstanding Petroleum Substances or
financial hedging position attributable to the Petroleum Substances production
of Target Company) have been entered into by Target Company or for the account
of any of its customers as of the date of this Agreement.
7.36 Investment
Company.
Target
Company is not an “investment company,” a company “controlled” by an “investment
company,” or an “investment adviser” within the meaning of the Investment
Company Act of 1940, as amended, or the Investment Advisers Act of 1940, as
amended.
7.37
Disclosure.
(a) None
of
the representations and warranties contained in this Article 7, when all
such representations and warranties are read together in their entirety,
(i) contains any untrue statement of fact or (ii) omits or will omit
to state any fact necessary to make such representations and warranties (in
light of the circumstances under which they were made) not
misleading.
(b) Target
Company and Shareholders make no representations or warranties (whether in
contract or in tort) except as expressly set forth in this
Agreement.
(c) Except
for the representations and warranties contained in this Agreement, Purchaser
acknowledges that it is acquiring the Assets pursuant hereto on a “as is, where
is” basis. Purchaser confirms that it has not relied on any covenants,
representations or warranties outside this Agreement (whether in contract or
in
tort) and in particular, and without limitation, Target Company and Shareholders
hereby expressly negate any representations or warranties by them not contained
in this Agreement, the Closing Certificate or the Disclosure Schedule, whether
contained in any information memorandum or otherwise, with respect
to:
25
(i) any
data
or information supplied by them to Purchaser or its
representatives;
(ii) the
quality, quantity or recoverability of Petroleum Substances within or under
the
Lands or any lands pooled or unitized therewith;
(iii) the
value
of the Assets or the future cash therefrom; or
(iv) the
quality, condition, fitness or merchantability of any tangible depreciable
equipment or property interests in which are comprised in the
Assets.
(d) The
maximum cumulative liability of Shareholders to Purchaser as a result of
any
misrepresentations or breach of warranty contained in Article 7
shall
not exceed the Purchase Price.
(e) Each
representation and warranty set forth in this Agreement is not qualified
in any
way whatsoever except as explicitly provided therein, will not merge on Closing
or by reason of the execution and delivery of any Contract at the Closing,
will
remain in force on and immediately after the Effective Time, is given with
the
intention that liability is not limited to Breaches discovered before Closing
(except as otherwise limited by the provisions of Section
1.2(c)),
is
separate and independent and is not limited by reference to any other
representation or warranty or any other provision of this Agreement, and
is made
and given with the intention of inducing Purchaser to enter into this
Agreement.
ARTICLE
8.
REPRESENTATIONS
AND WARRANTIES CONCERNING SURGE
Except
as
disclosed in (i) Surge’s Annual Report on Form 10-KSB for the year ending
December 31, 2005, and any Surge SEC Reports filed subsequent to such Form
10-KSB, and (ii) the disclosure letter delivered by Surge to Target Company
dated as of the date hereof and attached as Schedule 4
to this
Agreement (the “Surge
Disclosure Schedule”)
(the
parts of which are numbered to correspond to the individual Section numbers
of
this Article 8),
and
except to the extent the public announcement of the transactions contemplated
by
the Transaction Agreements affects Surge’s financial conditions, results of
operations, expenses, assets or liabilities constitutes an exception to any
of
the following representations and warranties, Surge hereby represents and
warrants to Target Company as follows:
8.1 Organization,
Good Standing, Qualification.
Surge
is a corporation duly incorporated, validly existing and in good standing
under
the laws of Delaware.
8.2 Capitalization.
(a) The
capitalization of Surge is as set forth on Part 8.2.
All
such outstanding shares have been duly authorized and validly issued and
are
fully paid and non-assessable. No other shares of capital stock or securities
of
Surge are issued or outstanding.
(b) Other
than the Support Agreement and the Exchange Agreement, each of which will
be
executed prior to the Closing, there is no: (i) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any Surge Stock or that has the right to vote on any matters on which
shareholders of Surge may vote; (iii) Contract under which Surge is or may
become obligated to sell, issue or otherwise dispose of or redeem, purchase
or
otherwise acquire any of its securities; or (iv) stockholder agreement,
voting trust or other agreement, arrangement or understanding that may affect
the exercise of voting or any other rights with respect to the securities
of
Surge.
26
8.3 Authority;
Binding Nature of Agreements.
Surge
has all requisite corporate power and authority to execute and deliver
this
Agreement and all other Transaction Agreements to which it is a party and
to
carry out the provisions of this Agreement and the other Transaction Agreements.
The execution, delivery and performance by Surge of this Agreement and
the other
Transaction Agreements have been approved by all requisite action on the
part of
Surge. This Agreement has been duly and validly executed and delivered
by Surge.
Each of this Agreement and the other Transaction Agreements constitutes,
or upon
execution and delivery, will constitute, the legal, valid and binding obligation
of Surge, enforceable against Surge in accordance with its terms, except
as may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles related to or limiting creditors’ rights
generally and by general principles of equity.
8.4 No
Conflicts; Required Consents.
The
execution, delivery and performance of this Agreement or any other Transaction
Agreement by Surge do not and will not (with or without notice or lapse
of
time):
(a) conflict
with, violate or result in any Breach of (i) any of the provisions of
Surge’s certificate of incorporation or bylaws; (ii) any resolutions
adopted by Surge’s stockholders, or its board of directors or committees
thereof; (iii) any of the terms or requirements of any Governmental
Approval held by Surge or any of its employees or that otherwise relates
to
Surge’s business; (iv) any provision of a Contract to which Surge is a
party; or (v) any federal, state, local or foreign order, writ, injunction,
decree, statute, rule or regulation to Surge or any of its assets.
(b) give
any
Governmental Authority or other Person the right to (i) challenge the
Transaction; (ii) exercise any remedy or obtain any relief under any Legal
Requirement or any Order to which Surge or any of its assets is subject;
(iii) declare a default of, exercise any remedy under, accelerate the
performance of, cancel, terminate or modify any Contract to which Surge
is a
party; or (iv) revoke, suspend or modify any Governmental Approval;
or
(c) require
Surge to obtain any Consent or make or deliver any filing or notice to
a
Governmental Authority.
8.5 No
Subsidiaries.
Other
than Purchaser, Signet and Xxxxxxx, Surge does not own any shares of capital
stock or other securities of, or control, directly or indirectly, any other
Entity and has never owned, beneficially or otherwise, any shares or other
securities of, or any direct or indirect equity interest in, any
Entity.
8.6 Surge
SEC Reports.
Surge
has filed all forms, reports, schedules, statements and other documents
(including all exhibits, notes, and schedules thereto and documents incorporated
by reference therein) required to be filed by it under the Securities Act
and
Exchange Act during the 12 months immediately preceding the date of this
Agreement (collectively, as supplemented and amended since the time of
filing,
the “Public
Disclosure Documents”).
The
Public Disclosure Documents (i) at the time filed, with respect to all of
the Public Disclosure Documents other than registration statements filed
under
the Securities Act, or at the time of their respective effective dates,
with
respect to registration statements filed under the Securities Act, complied
as
to form in all material respects with the applicable requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time filed or at the time of their respective effective dates, as the
case
may be (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing), contain any untrue statement
of a
material fact or omit to state a material fact required to be stated in
such
Public Disclosure Documents or necessary in order to make the statements
in such
Public Disclosure Documents, in the light of the circumstances under which
they
were made, not misleading.
27
8.7 Surge
Financial Statements
(a)
Each
of
the financial statements (including, in each case, any related notes) contained
in the Public Disclosure Documents at the time filed or at the time of
their
respective effective dates, as the case may be, complied as to form in
all
material respects with the applicable published rules and regulations of
the SEC
with respect thereto, was prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis throughout
the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form
10-QSB
of the SEC) and fairly presented the financial position of Surge at the
respective dates and the results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements
were
or are subject to normal and recurring year-end adjustments.
8.8 Absence
of Undisclosed Liabilities.
Surge
has no Liabilities other than (i) those set forth in the Financial
Statements; and (ii) accounts payable and accrued salaries that have been
incurred by Surge since September 30, 2006, in the Ordinary Course of
Business.
8.9 Absence
of Changes.
Since
September 30, 2006, (i) Surge has conducted its business and operations in
the Ordinary Course of Business; and (ii) no event or circumstance has
occurred that could reasonably have, or result in, a Material Adverse Effect
on
Surge.
8.10
Transactions
with Affiliates.
Except
as set forth in the Financial Statements, no officer or director of Surge
(a) owns, directly or indirectly, any debt, equity or other interest in any
Entity with which Surge is affiliated, has a business relationship or competes
other than officers or directors of Surge that own less than five percent
(5%)
of the issued and outstanding capital stock of a publicly-traded competitor
of
Surge; (b) is indebted to Surge, nor is Surge indebted (or committed to
make loans or extend or guarantee credit) to any officer or director of
Surge
other than with respect to any of Surge’s obligations to pay accrued salaries,
reimbursable expenses or other standard employee benefits; (c) has any
direct or indirect interest in any asset, property or other right used
in the
conduct of or otherwise related to the business or operations of Surge;
(d) has any claim or right against Surge, and no event has occurred, and no
condition or circumstance exists, that might (with or without notice or
lapse of
time) directly or indirectly give rise to or serve as a basis for any claim
or
right in favor of any officer or director of Surge against Surge; (e) is a
party to any Contract or has had any direct or indirect interest in, any
Contract, transaction or business dealing of any nature involving Surge;
or
(f) received from or furnished to Surge any goods or services (with or
without consideration) since September 30, 2006.
28
8.11
Compliance
with Laws.
(a) Surge
is,
and at all times since the date of its incorporation has been, in full
compliance with each Legal Requirement that is applicable to Surge or any
of
Surge’s properties, assets, operations or businesses, and no event has occurred,
and no condition or circumstance exists, that could reasonably be likely
to
(with or without notice or lapse of time) constitute, or result directly
or
indirectly in, a default under, a Breach or violation of, or a failure
to comply
with, any such Legal Requirement. Surge has not received any notice from
any
third party regarding any actual, alleged or potential violation of any
Legal
Requirement.
(b) To
the
Knowledge of Surge, no Governmental Authority has proposed or is considering
any
Legal Requirement that could reasonably be likely to affect Surge or Surge’s
Assets, operations or businesses, or Surge’s rights thereto, except to the
extent that any such Legal Requirement, if adopted or otherwise put into
effect,
individually or in the aggregate, will not have a Material Adverse Effect
on
Surge.
8.12
Governmental
Approvals.
Surge
has all Governmental Approvals that are necessary or appropriate in connection
with Surge’s operation of its businesses. Surge has made all filings with, and
given all notifications to, all Government Authorities as required by all
applicable Legal Requirements. Each such Governmental Approval, filing
and
notification is valid and in full force and effect, and there is not pending
or
threatened any Proceeding which could result in the suspension, termination,
revocation, cancellation, limitation or impairment of any such Governmental
Approval, filing or notification. No violations have been recorded in respect
of
any Governmental Approvals, and to the Knowledge of Surge, there is no
meritorious basis therefor. No fines or penalties are due and payable in
respect
of any Governmental Approval or any violation thereof.
8.13
Proceedings
and Orders.
(a) There
is
no Proceeding pending or, to the Knowledge of Surge, threatened against
or
affecting Surge. To Surge’s Knowledge, no event has occurred, and no condition
or circumstance exists, that might directly or indirectly give rise to
or serve
as a basis for the commencement of any such Proceeding.
(b) Neither
Surge, its officers, directors, agents or employees, is subject to any
Order or
any proposed Order.
(c) No
Proceeding has ever been commenced by or has ever been pending against
Surge.
8.14
Environmental
Matters.
Except
as would not, individually or in the aggregate, have a Material Adverse
Effect,
(i) to Surge’s Knowledge, Surge has conducted its business in accordance
with good oilfield practice and in compliance with all applicable Environmental
Laws and holds all applicable environmental Permits, (ii) there has been no
release of any Hazardous Substance by Surge in any manner that could reasonably
be expected to give rise to any remedial obligation or corrective action
requirement under applicable Environmental Law, (iii) Surge has not
received in writing any environmental protection order, enforcement order,
control order, stop order, remedial order or other administrative complaints,
directions or sanctions issued, filed, or imposed by a Governmental Entity
pursuant to Environmental Law and having the force of law, or any notices,
demand letters or requests for information from any federal, state, local
or
foreign or provincial Governmental Entity asserting that Surge may be in
violation of, or liable under, any Environmental Law, (iv) to Surge’s
Knowledge, no Hazardous Substance has been disposed of, released or transported
in violation of any applicable Environmental Law, or in a manner giving
rise to
any liability under Environmental Law, from any properties while owned
or
operated by Surge or as a result of any operations or activities of Surge
and
(v) neither Surge nor any of its properties are, or, to the Knowledge of
Surge, threatened to become, subject to any liabilities relating to any
suit,
settlement, court order, administrative order, regulatory requirement,
judgment
or written claim asserted or arising under any Environmental Law or any
agreement relating to environmental liabilities.
29
8.15
Taxes.
(a) Surge
has
timely filed all Tax Returns that it was required to file, and such Tax
Returns
are true, correct and complete in all respects. All Taxes shown to be payable
on
such Tax Returns or on subsequent assessments with respect thereto have
been
paid in full on a timely basis, and no other Taxes are payable by Surge
with
respect to any period ending prior to the date of this Agreement, whether
or not
shown due or reportable on such Tax Returns, other than Taxes for which
adequate
accruals have been provided in its Financial Statements. Surge has withheld
and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party. Surge has no liability for unpaid Taxes
accruing after the date of its latest Financial Statements except for Taxes
incurred in the ordinary course of business. There are no liens for Taxes
on the
properties of Surge, other than liens for Taxes not yet due and
payable.
(b) Surge
is
not a party to or bound by any tax indemnity agreement, tax sharing agreement
or
similar contract. Surge is not a party to any joint venture, partnership,
or
other arrangement or contract which could be treated as a partnership for
United
States federal income tax purposes.
8.16
Brokers.
Surge
has not retained any broker or finder or incurred any liability or obligation
for any brokerage fees, commissions or finder’s fees with respect to this
Agreement or the Transaction.
8.17
Foreign
Corrupt Practices.
Surge
has
not (i) directly or indirectly, used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by Surge (or made by any person acting on its behalf
of
which Surge is aware) which is in violation of law.
8.18
Oil
and Gas.
(a) Surge
has
no oil or gas production and has not entered into any agreement or accepted
any
payment regarding the sale of any Petroleum Substances.
(b) Surge
has
no report estimating proved oil and gas reserves of Surge.
30
(c) All
rentals, royalties and other payments payable by Surge have been properly
and
timely paid and there is no existing default (or event that, with notice
or
lapse of time or both, would become a default) under any oil and gas leases
or
other agreements, except, in each case, as individually or in the aggregate
has
not had, and would not be reasonably likely to have or result in, a Material
Adverse Effect on Surge.
(d) All
equipment, personal property, fixtures and real property improvements included
in Surge’s assets, including all gathering lines, pipelines, meter stations,
compressors and compressor stations, valves, pumps, tanks and other equipment,
are in operable state adequate to maintain normal operations in a manner
consistent with the past practices of Surge. Surge has title to or an interest
in its respective personal property sufficient to allow Surge to conduct
its
business, as currently being conducted, without material adverse
interference.
8.19
Derivative
Transactions and Hedging.
No
Derivative Transactions (including each outstanding Petroleum Substances
or
financial hedging position attributable to the Petroleum Substances production
of Surge) have been entered into by Surge.
8.20
Investment
Company; Shell Company.
Surge
is not, and as a result of the issuance of the Surge Securities contemplated
hereby will not be, an “investment company,” as such term is defined in the
Investment Company Act of 1940, as amended. Surge is not a “shell company” as
such term is defined in Rule 12b-2 of the Exchange Act.
8.21
Surge
Securities.
The
Surge Securities are duly authorized and reserved for issuance and, upon
issuance, shall be validly issued as fully paid and non-assessable shares
in
the capital stock of Surge in full compliance with all applicable United
States federal and state and Canadian securities laws and other applicable
Legal
Requirements and will be free and clear of all Encumbrances.
8.22
Full
Disclosure.
(a) None
of
the representations and warranties contained in this Article 8,
when
all such representations and warranties are read together in their entirety,
(i) contains any untrue statement of fact or (ii) omits or will omit
to state any fact necessary to make such representations and warranties
(in
light of the circumstances under which they were made) not
misleading.
(b) Surge
make no representations or warranties (whether in contract or in tort)
except as
expressly set forth in this Agreement.
31
(c) Each
of
the Shareholders confirms that such Shareholder has not relied on any covenants,
representations or warranties outside this Agreement (whether in contract
or in
tort) and in particular, and without limitation, each of the Shareholders
hereby
expressly negate any representations or warranties by Purchaser and Surge
not
contained in this Agreement, the Closing Certificate or the Disclosure
Schedule,
whether contained in any information memorandum or otherwise.
(d) The
maximum cumulative liability of Purchaser and Surge to Shareholders as
a result
of any misrepresentations or breach of warranty contained in this Agreement
shall not exceed the Purchase Price.
Each
representation and warranty set forth in this Agreement is not qualified
in any
way whatsoever except as explicitly provided therein, will not merge on
Closing
or by reason of the execution and delivery of any Contract at the Closing,
will
remain in force on and immediately after the Effective Time, is given with
the
intention that liability is not limited to Breaches discovered before Closing,
is separate and independent and is not limited by reference to any other
representation or warranty or any other provision of this Agreement, and
is made
and given with the intention of inducing Shareholders to enter into this
Agreement.
ARTICLE
9.
PRE-CLOSING
COVENANTS
9.1 Target
Company’s Conduct of the Business Prior to Closing.
During
the period from the date of this Agreement through the Closing Date (the
“Pre-Closing
Period”),
Target
Company shall, and shall cause its Representatives to:
(a) Conduct
its business and operations only in the Ordinary Course of Business and only
as
contemplated and authorized by the Joint Venture Agreement, except as otherwise
specifically permitted by this Agreement;
(b) Pay
all
of its Liabilities and Taxes when due, subject to good faith disputes over
such
Liabilities or Taxes;
(c) Maintain
insurance coverage in amounts adequate to cover the reasonably anticipated
risks
of Target Company;
(d) Use
Best
Efforts to (i) preserve intact all rights of Target Company and the current
business organization of Target Company, (ii) keep available the services
of the current officers, employees and agents of Target Company,
(iii) maintain good relationships with employees, licensors, licensees,
suppliers, contractors, distributors, customers, and others having business
dealings with Target Company, and (iv) operate, or cause to be operated,
the Assets in a good and workmanlike manner and in the usual, regular and
ordinary manner consistent with past practices;
(e) Confer
with Purchaser concerning operational matters of a material nature;
(f) Report
periodically to Purchaser concerning the status of the business, operations
and
finances of Target Company;
32
(g) Preserve
in full force and effect all Title and Operating Documents, insurance and
agreements that relate to the Assets; and
(h) Consult
with Purchaser prior to voting under any operating, joint venture, partnership
or similar agreement or electing to non-consent any operation under an
operating
agreement, including the Joint Venture Agreement.
9.2 Restrictions
on Target Company’s Conduct of the Business Prior to
Closing.
During
the Pre-Closing Period, Target Company shall not, and shall cause its
Representatives not to:
(a) Enter
into, create, incur or assume (i) any borrowings under capital leases or
(ii) any obligations which would have a Material Adverse Effect on Target
Company or Purchaser’s ability to conduct Target Company’s business and
operations in substantially the same manner and condition as currently
conducted
by Target Company;
(b) Acquire
by merging or consolidating with, or by purchasing any equity securities
or
assets (which are material, individually or in the aggregate, to Target
Company)
of, or by any other manner, any business or any Entity;
(c) Sell,
transfer, lease, license or otherwise encumber any of its Assets;
(d) Enter
into any agreements or commitments with another Person, except on commercially
reasonable terms in the Ordinary Course of Business;
(e) Violate
any Legal Requirement applicable to Target Company;
(f) Violate,
terminate or amend any Contract or Governmental Approval;
(g) Commence
a Proceeding other than for injunctive relief on the grounds that Target
Company
has suffered immediate and irreparable harm not compensable in money damages
if
Target Company has obtained the prior written consent of Purchaser, such
consent
not to be unreasonably withheld;
(h) Declare,
authorize or pay any dividends on, make any other distributions with respect
to,
or redeem, repurchase or otherwise acquire any of its capital
stock;
(i) Purchase,
lease, license or otherwise acquire any assets, except for supplies acquired
by
Target Company in the Ordinary Course of Business;
(j) Make
any
capital expenditure in excess of $50,000, individually or in the aggregate,
except for operations conducted pursuant to the Joint Venture Agreement
or
pursuant to AFEs specified in Part 7.14(e);
(k) Write
off
as uncollectible, or establish any extraordinary reserve with respect to,
any
indebtedness;
33
(l) Provide
any credit, loan, advance, guaranty, endorsement, indemnity, warranty or
mortgage to any Person, including any of the customers, stockholders, officers,
employees or directors of Target Company;
(m) Borrow
from any Person by way of a loan, advance, guaranty, endorsement, indemnity,
or
warranty;
(n) Discharge
any Encumbrance, indebtedness or other Liability in excess of $50,000,
individually or in the aggregate, except for Liabilities reflected or reserved
against in the Financial Statements and accounts payable in the Ordinary
Course
of Business;
(o) Change
its credit practices, accounting methods or practices or standards used
to
maintain its books, accounts or business records;
(p) Change
the terms of its accounts or other payables or take any action directly
or
indirectly to cause or encourage any acceleration or delay in the payment,
collection or generation of its accounts;
(q) Incur
or
become subject to any Liability or Encumbrance, contingent or otherwise,
except
current Liabilities in the Ordinary Course of Business or pursuant to the
Title
and Operating Documents;
(r) Make
any
material change affecting Target Company’s business or operations, including
(i) changes in wholesaler alignments, inventory levels, management
organization or personnel arrangements with sales brokers, market research
projects, working capital levels (payables and receivables); (ii) changes
in discretionary costs, such as maintenance and repairs, research and
development, and training; (iii) any capital expenditures or deferrals of
capital expenditures; (iv) deviations from operating budgets or plans on
sales and profitability; or (v) other than in the Ordinary Course of
Business, change any of its business policies, including, pricing, purchasing,
production, personnel, sales, returns, budget or product acquisition
policies;
(s) Amend
its
Certificate of Incorporation or Bylaws;
(t) Split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in lieu of, or in substitution for, shares
of
its capital stock;
(u) Issue,
sell, dispose of or encumber, or authorize the issuance, sale, disposition
or
encumbrance of, any shares of its capital stock or grant, enter into or
accept
any options, warrants, convertible securities or other rights to acquire
any
shares of such capital stock or any other ownership interest in Target
Company;
(v) Hire
any
new employee other than in the Ordinary Course of Business, terminate any
officer or key employee of Target Company, increase the annual level of
compensation of any existing employee, establish or adopt any Benefit Plan,
or
grant any bonuses, benefits or other forms of direct or indirect compensation
to
any employee, officer, director or consultant;
34
(w) Make
any
severance payments to any employee, officer or director, except payments
made
pursuant to written agreements outstanding as of the date of this
Agreement;
(x) Make
or
change any election in respect of Taxes, adopt or change any accounting
method
in respect of Taxes, file any amendment to a Tax Return, enter into any
closing
agreement, settle any claim or assessment in respect of Taxes, or consent
to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(y) Fail
to
maintain Target Company’s assets and properties in good repair, order and
condition, reasonable wear and tear excepted;
(z)
Enter
into any “non-compete” or similar agreement that would materially restrict the
businesses of Target Company following the Closing or that would in any
way
restrict the businesses of Purchaser or its affiliates or take any action
that
may impose new or additional material regulatory requirements on Target
Company
or any affiliate of Purchaser;
(aa) Become
a
party to any Derivative Transaction;
(bb) Take
any
action or undertake any commitment which would have, or which would reasonably
be expected to have, an adverse effect on the Petroleum and Natural Gas
Rights
(including failing to make payments or fund any obligation or working interest
which would result in, or which would reasonably be expected to result
in, a
reduction in the Petroleum and Natural Gas Rights);
(cc) Fail
to
provide Purchaser with any details relating to any proposed acquisition
of or
application for Lands, including full details of any minimum exploration
commitment in connection therewith, except to the extent it would violate
applicable law to do so;
(dd) Amend
or
otherwise modify any of the Leases or the Joint Venture Agreement as each
is in
effect as of the date of this Agreement; and
(ee) Enter
into any Contract or agree, in writing or otherwise, to take any of the
actions
described in Section 9.2(a)
through
(dd) above, or any action that would make any of its representations or
warranties contained in this Agreement untrue or incorrect in any material
respect or prevent it from performing or cause it not to perform its covenants
hereunder.
9.3 No
Solicitation.
During
the Pre-Closing period, neither Target Company nor any of Shareholders
shall,
directly or indirectly, (i) initiate, solicit or encourage (including by
way of furnishing information regarding Target Company’s business or operations)
any inquiries, or make any statements to third parties which may reasonably
be
expected to lead to any proposal concerning the sale of Target Company,
the
business or operations of Target Company (whether by way of merger, purchase
of
capital shares, purchase of assets or otherwise) (a “Competing
Transaction”);
or
(ii) hold any discussions or enter into any agreements with, or provide any
information or respond to, any third party concerning a proposed Competing
Transaction or cooperate in any way with, agree to, assist or participate
in,
solicit, consider, entertain, facilitate or encourage any effort or attempt
by
any third party to do or seek any of the foregoing. If at any time the
Pre-Closing Period, Target Company or any Shareholder is approached in
any
manner by a third party concerning a Competing Transaction (a “Competing
Party”),
Target Company shall promptly inform Purchaser regarding such contact and
furnish Purchaser with a copy of any inquiry or proposal, or, if not in
writing,
a description thereof, including the name of such Competing Party, and
Target
Company shall keep Purchaser informed of the status and details of any
future
notices, requests, correspondence or communications related thereto, except
to
the extent disclosure of such information will result in a breach of the
fiduciary duties of Target Company’s board of directors.
35
9.4 Certain
Notifications.
(a) Target
Company.
During
the Pre-Closing Period, Target Company shall promptly notify Purchaser
in
writing regarding any:
(i) Action
taken by Target Company not in the Ordinary Course of Business and any
circumstance or event that could reasonably be expected to have a Material
Adverse Effect on the business and operations of Target Company;
(ii) Fact,
circumstance, event, or action by a Shareholder or Target Company
(i) which, if known on the date of this Agreement, would have been required
to be disclosed in or pursuant to this Agreement; or (ii) the existence,
occurrence, or taking of which would result in any of the representations
and
warranties of any Shareholder or Target Company contained in this Agreement
or
in any Transaction Agreement not being true and correct when made or at
Closing;
(iii) Breach
of
any covenant or obligation of any Shareholder or Target Company hereunder;
and
(iv) Circumstance
or event which will result in, or could reasonably be expected to result
in, the
failure of any Shareholder or Target Company to timely satisfy any of the
closing conditions specified in Article 11
of this
Agreement.
(b) Purchaser
and Surge.
During
the Pre-Closing Period, Purchaser and Surge shall promptly notify Target
Company
in writing regarding any:
(i) Action
taken by Purchaser or Surge not in the Ordinary Course of Business and any
circumstance or event that could reasonably be expected to have a Material
Adverse Effect on the business and operations of Purchaser or
Surge;
(ii) Fact,
circumstance, event, or action by Purchaser or Surge (i) which, if known on
the date of this Agreement, would have been required to be disclosed in or
pursuant to this Agreement; or (ii) the existence, occurrence, or taking of
which would result in any of the representations and warranties of Purchaser
or
Surge contained in this Agreement or in any Transaction Agreement not being
true
and correct when made or at Closing;
36
(iii) Breach
of
any covenant or obligation of Purchaser or Surge hereunder;
(iv) Circumstance
or event which will result in, or could reasonably be expected to result
in, the
failure of Purchaser or Surge to timely satisfy any of the closing conditions
specified in Article 11
of this
Agreement; and
(v) Promptly
disclose the terms and conditions of any issuance of equity by either Purchaser
or Surge, provided such disclosure would (i) not result in a breach of the
provisions of any agreement relating thereto, (ii) be a violation of
applicable securities laws, (iii) result in any breach of the fiduciary
duties of the board of directors of either Purchaser or Surge, and
(iv) prior to receiving any such information, Target Company shall execute
a confidentiality agreement mutually acceptable to Target Company and Surge
regarding the disclosure and use of such information. Target Company shall
have
an opportunity to promptly and reasonably comment to Purchaser or Surge,
as
applicable, on any information disclosed pursuant to this Section 9.4(b)(v);
however, any terms and conditions relating to any issuance of equity by
Purchaser or Surge, as applicable, shall be determined and agreed to in
the sole
and absolute discretion of Purchaser or Surge, as applicable.
9.5 Updating
the Disclosure Schedules.
(a) Target
Company Disclosure Schedule.
If any
event, condition, fact or circumstance that is required to be disclosed pursuant
to Section
9.4(a)
would
require a change to the Target Disclosure Schedule if the Target Disclosure
Schedule were dated as of the date of the occurrence, existence or discovery
of
such event, condition, fact or circumstance, then Target Company shall promptly
deliver to Purchaser an update to the Target Disclosure Schedule specifying
such
change and shall use its Best Efforts to remedy same, as applicable;
provided,
however,
that no
such update shall be deemed to supplement or amend the Target Disclosure
Schedule for the purpose of (i) determining the accuracy of any of the
representations and warranties made by Target Company or any of Shareholders
in
this Agreement or (ii) determining whether any of the conditions set forth
in Article
11
have
been satisfied.
(b) Purchaser
and Surge Disclosure Schedules.
If any
event, condition, fact or circumstance that is required to be disclosed pursuant
to Section
9.4(b)
would
require a change to either Purchaser Disclosure Schedule or the Surge Disclosure
Schedule if either such Disclosure Schedule were dated as of the date of
the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Purchaser and Surge shall promptly deliver to Target Company
an update to each such Disclosure Schedule specifying such change and shall
use
its Best Efforts to remedy same, as applicable; provided,
however,
that no
such update shall be deemed to supplement or amend any such Disclosure Schedule
for the purpose of (i) determining the accuracy of any of the
representations and warranties made by Purchaser or Surge in this Agreement
or
(ii) determining whether any of the conditions set forth in Article 11
have
been satisfied.
37
9.6 Access
to Information.
During
the Pre-Closing Period, Target Company shall: (i) afford Purchaser and its
Representatives and prospective lenders and their Representatives (collectively,
“Purchaser
Advisors”)
free
and complete access during regular business hours, and in a manner so as
not to
interfere with the normal business operations of Target Company, to all
premises, properties (including subsurface testing), personnel, Persons
having
business relationships with Target Company (including suppliers, licensors,
auditors and engineers), Books and Records (including Tax records), Contracts,
Assets and documents of or pertaining to Target Company; (ii) furnish
Purchaser and Purchaser’s Advisors with all financial, operating and other data
and information related to the business and operations of Target Company
(including copies thereof), as Purchaser may reasonably request; and
(iii) otherwise cooperate and assist, to the extent reasonably requested by
Purchaser’s and Purchaser’s Advisors, with Purchaser and Purchaser Advisors’
investigation of the business and operations of Target Company. No information
or knowledge obtained in any investigation pursuant to this Section 9.6
shall
affect or be deemed to modify any representation or warranty contained
herein or
the conditions to the obligations of the parties to consummate the
Transaction.
9.7 Best
Efforts.
During
the Pre-Closing Period, each of Purchaser, Surge, Target Company and
Shareholders shall use their respective Best Efforts to cause to be fulfilled
and satisfied all of the conditions to Closing set forth in Article 11
to which
they are responsible for satisfying.
9.8 Compliance
with Privacy Laws.
(a) Each
of
Shareholders acknowledges and confirms that Target Company has complied
in all
material respects at all times with Privacy Laws which govern the collection,
use and disclosure of Personal Information disclosed to Purchaser pursuant
to or
in connection with this Agreement (the “Disclosed
Personal Information”).
Each of
Shareholders hereby covenants and agrees to advise Purchaser of all purposes
for
which Disclosed Personal Information was initially collected from or in
respect
of the Employee to which that Disclosed Personal Information relates and
all
additional purposes where such Shareholder has notified the Employee of
that
additional purpose, and disclosure of Personal Information, if any, unless
that
use or disclosure is permitted or authorized by law, without notice to,
or
consent from, that Employee; provided, however, that in such case Shareholder
shall have advised Purchaser of the legislative provisions on which Shareholder
is relying.
(b) Before
Closing, none of the parties shall use the Disclosed Personal Information
for
any purposes other than those related to the performance of this Agreement
and
the completion of the Transaction.
(c) Each
of
the parties acknowledges and confirms that the disclosure of Personal
Information is necessary for the purposes of determining if the parties
shall
proceed with the Transaction, and that the disclosure of Personal Information
relates solely to the carrying on of the business, or the completion of
the
Transaction.
(d) Purchaser
shall at all times keep strictly confidential all Disclosed Personal Information
provided to it, and shall instruct those employees responsible for processing
such Disclosed Personal Information to protect the confidentiality of that
information in a manner consistent with Purchaser’s obligations hereunder.
Purchaser shall ensure that access to the Disclosed Personal Information
shall
be restricted to those employees or service providers of Purchaser who
have a
bona fide need to access that information in order to fulfill their obligations
in the course of their employment or in providing services to
Purchaser.
38
(e) The
parties shall fully co-operate with one another, with the Employees to
whom the
Personal Information relates, and any Governmental Authority charged with
enforcement of Privacy Laws, in responding to inquiries, complaints, requests
for access, and claims in respect of Disclosed Personal
Information.
(f) Purchaser
undertakes, after Closing, to utilize the Disclosed Personal Information
only
for those purposes for which the Disclosed Personal Information was initially
collected from or in respect of the applicable Employees.
(g) If
Closing does not occur, on the request of any Shareholder, Purchaser shall
forthwith cease all use of the Disclosed Personal Information acquired
by
Purchaser in connection with this Agreement and will return to such Shareholder
or, at such Shareholder’s request, destroy in a secure manner, the Disclosed
Personal Information (and any copies thereof) and provide such Shareholder
with
a certificate of a senior officer of Purchaser confirming such
destruction.
ARTICLE
10.
POST
CLOSING COVENANTS
10.1 Cooperation.
After
the Closing, upon the request of Purchaser, each of Shareholders shall
(i) execute and deliver any and all further materials, documents and
instruments of conveyance, transfer or assignment as may reasonably be requested
by Purchaser to effect, record or verify the transfer to, and vesting in
Purchaser, of Shareholders’ right, title and interest in and to the Shares, free
and clear of all Encumbrances, in accordance with the terms of this Agreement;
and (ii) cooperate with Purchaser, at Purchaser’s expense, to enforce the
terms of any Contracts, including terms relating to confidentiality and
Intellectual Property Rights, and to contest or defend against any Proceeding
relating to the Transaction or to the operation of Target Company’s business and
operations before the Effective Time. After the Closing, Seller shall (a)
cooperate with Purchaser in its efforts to continue and maintain for the
benefit
of Purchaser those business relationships of Target Company existing prior
to
the Closing and relating to the business to be operated by Target Company
after
the Closing; and (b) promptly deliver to Purchaser (i) any mail,
packages and other communications addressed to Target Company relating to
Target
Company and (ii) any cash or other property that any Shareholder receives
and that properly belongs to Target Company, including any insurance proceeds,
payments with respect to Receivables, and interest payable thereon. No
Shareholder or any of its officers, employees, agents or stockholders shall
take
any action that would tend to diminish the value of Target Company after
the
Closing or that would interfere with the business of Target Company or Purchaser
to be engaged in after the Closing, including disparaging the name or business
of Target Company, Purchaser or Surge.
10.2 Area
of Exclusion. As
of the Closing Date, an area of exclusion is hereby established for a period
of
two (2) years from the Effective Time to include any interest in Oil Sands
Rights underlying those lands within the boundaries of the area outlined
in blue
on Exhibit 10.2
(the
“Exclusion
Area”).
Each
of Shareholders, for themselves and for each of their respective Affiliates,
hereby agrees that if such Shareholder or any of such Shareholder’s Affiliates
acquires any right or interest within the Exclusion Area during the such
two (2)
year term other than a right or interest made available through Surge or
Purchaser, within 30 days of that acquisition, 100% of such right or interest
shall be immediately offered to Purchaser for a like amount of the consideration
expended by Shareholder, or its Affiliate, for such right or interest, whether
such consideration be monetary, incurred obligations or otherwise.
39
10.3 Nondisclosure.
After
the
Effective Time, except as may be required for Tax purposes or other regulatory
purposes, neither Shareholders nor any of their respective successors and
assigns shall (a) retain any document, databases or other media embodying
any confidential or proprietary know-how which constitutes the assets or
properties of Target Company or use, publish or disclose to any third person
any
such confidential or proprietary know-how. In the event of any termination
of
this Agreement, (i) Shareholders shall treat, and cause Target Company to
treat, as confidential and proprietary and shall not disclose or use, directly
or indirectly, in any manner whatsoever, or permit others under its control
to
disclose or to use, any information concerning Purchaser, Surge or their
respective businesses or products obtained pursuant to or in connection
with the
Transaction which are the subject matter of this Agreement, unless such
information is or becomes a matter of public knowledge through no fault
of any
Shareholder or Target Company and (ii) Shareholders shall promptly return,
and cause Target Company to return, to Purchaser or Surge, as applicable,
upon
written request all written information and documents received from any
other
party, its affiliates, accountants or counsel, in connection with such
Transaction, including all copies thereof. The provisions of this Section 10.3
shall
survive any termination of this Agreement.
10.4 Registration
Statement.
(a)
Within
45
days following the Closing, Surge covenants to prepare and file with the
SEC a
registration statement on Form SB-2 (“SB-2
Registration Statement”)
registering the Surge Securities for resale by Shareholders. Surge covenants
to
keep the SB-2 Registration Statement effective for up to two years following
the
date the SB-2 Registration Statement becomes effective or, if earlier,
until
Shareholders have completed the distribution related thereto. Surge shall
prepare and file with the SEC such amendments and supplements to the SB-2
Registration Statement and the prospectus used in connection with such
SB-2
Registration Statement as may be necessary to comply with the provisions
of the
Securities Act with respect to the disposition of all securities covered
by the
SB-2 Registration Statement. Surge shall furnish to Shareholders such number
of
copies of a prospectus in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of the Surge Securities owned by them. Surge
shall
notify each Shareholder by written notice to the address set forth on the
books
of Purchaser (unless Purchaser is notified in writing of a different address
for
a Shareholder) at any time when a prospectus relating thereto is required
to be
delivered under the Securities Act of the happening of any event as a result
of
which the prospectus included in the SB-2 Registration Statement as then
in
effect, includes an untrue statement of a material fact or omits to state
a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.
40
(b)
Notwithstanding
anything to the contrary in Section 10.4(a),
if
Surge becomes eligible to register the Surge Securities on Form S-3, Purchaser
shall cause Surge to (i) prepare and file with the SEC a registration
statement on Form S-3 (“S-3
Registration Statement”)
registering the Surge Securities for resale by Shareholders; and (ii) Surge
shall keep the S-3 Registration Statement effective for a period of up
to three
years following the date the SB-2 Registration Statement (as opposed to
the S-3
Registration Statement) became effective or, if earlier, until Shareholders
have
completed the distribution related thereto. At such time as the SEC declares
the
S-3 Registration Statement effective, Surge shall no longer have any obligations
under Section 10.4(a).
Surge
shall furnish to Shareholders such number of copies of a prospectus in
conformity with the requirements of the Securities Act, and such other
documents
as they may reasonably request in order to facilitate the disposition of
the
Surge Securities owned by them. Surge shall notify each Shareholder by
written
notice to the address set forth on the books of Purchaser (unless Purchaser
is
notified in writing of a different address for a Shareholder) at any time
when a
prospectus relating thereto is required to be delivered under the Securities
Act
of the happening of any event as a result of which the prospectus included
in
the S-3 Registration Statement as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light
of the circumstances then existing.
(c)
It
shall
be a condition precedent to the obligations of Surge to take any action
under
this Section 10.4
that the
selling Shareholders shall furnish to Surge such information regarding
themselves, the Surge Securities held by them and the intended method of
disposition of such securities as may be reasonably requested by Surge
and as
shall be required to effect the registration of their Surge
Securities.
10.5 General
Release.
Promptly following the Effective Time, the Target Company shall execute
and
deliver a release in the form of Exhibit 10.5
to the
Shareholder Representative.
10.6 Private
Placement
(l)
Each
time
a Shareholder desires to acquire Surge Securities in exchange for Exchangeable
Shares, such Shareholder shall provide Surge with a Subscription Agreement
substantially in the form of Exhibit 10.6
to this
Agreement. Surge is hereby required to refuse to register any transfer
of any
Surge Securities issued to Shareholders (and all certificates issued in
exchange
therefor or in substitution thereof) not made in accordance with the provisions
of Regulation S, pursuant to registration under the Securities Act, or
pursuant
to an available exemption from registration.
ARTICLE
11.
CONDITIONS
TO CLOSING
11.1 Conditions
to Purchaser’s Obligation to Close.
Purchaser’s obligation to purchase the Shares and to take the other actions
required to be taken by Purchaser at the Closing shall be subject to the
satisfaction, on or prior to the Effective Time, of each of the following
conditions, any of which may be waived by Purchaser in writing:
41
(a)
Representations,
Warranties and Covenants.
(i) Each of the representations and warranties made by Target Company and
Shareholders in this Agreement and in each of the Transaction Agreements
shall
have been true and correct in all material respects (considered collectively
and
individually) as of the date of this Agreement and shall be true and correct
in
all material respects (considered collectively and individually) as of
the
Effective Time (or, to the extent such representations and warranties speak
only
as of an earlier date, they shall be true and correct in all material respects
as of such earlier date); (ii) each of the representations and warranties
of Target Company and Shareholders in this Agreement that contain an express
materiality qualification shall have been true and correct in all respects
(considered collectively and individually) as of the date of this Agreement
and
shall be true and correct in all respects (considered collectively and
individually) as of the Effective Time (or, to the extent such representations
and warranties speak only as of an earlier date, they shall be true and
correct
in all respects as of such earlier date); and (iii) Target Company and
Shareholders shall have performed, in all material respects (considered
collectively and individually), all covenants and obligations in this Agreement
required to be performed by Target Company and Shareholders as of the Effective
Time;
(b)
Documents.
Target
Company and Shareholders shall have delivered, or caused to be delivered,
to
Purchaser all of the documents and agreements set forth in Section 4.2;
(c)
Consents.
Target
Company and Shareholders shall have delivered, or cause to be delivered,
to
Purchaser all Consents identified in each Disclosure Schedule and all other
Consents required for (i) the consummation of the Transaction; and
(ii) to prevent a Breach or termination of any Contract, and each such
Consent shall be in full force and effect;
(d)
Opinion
of Counsel.
Shareholders shall have delivered to Purchaser an Opinion of Shareholders’
counsel, substantially in the form attached hereto as Exhibit 4.2(e);
and
(e)
Shareholder
Approval.
To the
extent required under applicable Legal Requirements or the Certificate
of
Incorporation or Bylaws of any Shareholder, this Agreement and the consummation
of the Transaction shall have been approved and adopted by the requisite
vote of
the stockholders of such Shareholder;
(f)
No
Proceedings.
Since
the date of this Agreement, no third party Proceeding shall have been commenced
or threatened against Purchaser, or against any Representative of Purchaser
(a) involving any challenge to, or seeking Damages or other relief in
connection with, the Transaction; or (b) that may have the effect of
preventing, delaying, making illegal, imposing limitations or conditions
on or
otherwise interfering with the Transaction;
(g)
Financing.
Purchaser shall have obtained on terms and conditions satisfactory to it
all of
the financing it needs to consummate the Transaction and fund the working
capital requirements of Target Company after the Closing;
(h)
Stock
Ownership and Sale Proceeds.
Since
the date of this Agreement, no claim shall have been made or threatened
by any
Person asserting that such Person (a) is the holder or the beneficial owner
of, or has the right to acquire or obtain beneficial ownership of, any
stock of,
or any other voting, equity, or ownership interest in, Target Company (including
the Shares), or (b) is entitled to all or any portion of the Purchase Price
payable for the Shares; and
42
(i)
No
Prohibition.
Neither
the consummation nor the performance of the Transaction will, directly
or
indirectly (with or without notice or lapse of time), materially contravene,
or
conflict with, or result in a material violation of, or cause Purchaser
or any
Person affiliated with Purchaser to suffer any material adverse consequence
under, (a) any applicable Legal Requirement or Order, or (b) any Legal
Requirement or Order that has been published, introduced, or otherwise
proposed
by or before any Governmental Authority.
11.2 Conditions
to Shareholders’ Obligation to Close.
Shareholders’ obligation to sell the Shares and to take the other actions
required to be take by Shareholders at the Closing shall be subject to the
satisfaction, on or prior to the Effective Time, of each of the following
conditions, any of which may be waived by the Requisite Shareholders in
writing:
(a)
Representations,
Warranties and Covenants.
(i) Each of the representations and warranties made by Purchaser and Surge
in this Agreement and in each of the Transaction Agreements shall have been
true
and correct in all material respects (considered collectively and individually)
as of the date of this Agreement and shall be true and correct in all material
respects (considered collectively and individually) as of the Effective Time
(or, to the extent such representations and warranties speak as of an earlier
date, they shall be true and correct in all material respects as of such
earlier
date); (ii) each of the representations and warranties of Purchaser and
Surge in this Agreement that contain an express materiality qualification
shall
have been true and correct in all respects (considered collectively and
individually) as of the date of this Agreement and shall be true and correct
in
all respects (considered collectively and individually) as of the Effective
Time
(or, to the extent such representations and warranties speak only as of an
earlier date, they shall be true and correct in all respects as of such earlier
date); and (iii) Purchaser and Surge shall have performed, in all material
respects (considered collectively and individually), all covenants and
obligations in this Agreement required to be performed by Purchaser and Surge
as
of the Effective Time; and
(b)
Documents.
Purchaser shall have delivered to Shareholders (or to Burstall Winger LLP)
all
of the documents, agreements and other items set forth in Section 4.3.
11.3 Conditions
to Obligations of Each Party to Close.
The
respective obligations of each party to this Agreement to consummate the
Transaction shall be subject to the satisfaction, on or prior to the Effective
Time, of each of the following condition(s), any of which may be waived by
Purchaser or the Requisite Shareholders, as applicable, in writing:
(a)
No
Legal Impediments to Closing.
There
shall not be in effect any Order issued by any Governmental Authority preventing
the consummation of the Transaction, seeking any Damages as a result of the
Transaction, or otherwise affecting the right or ability of Purchaser or
Target
Company to own, operate or control the business and operations of Target
Company
and its properties, nor shall any Proceeding be pending that seeks any of
the
foregoing. There shall not be any Legal Requirement prohibiting Shareholders
from selling or Purchaser from owning, operating or controlling the Shares
or
Target Company, or that makes this Agreement or the consummation of the
Transaction illegal.
43
ARTICLE
12.
TERMINATION
12.1 Circumstances
for Termination.
At any
time prior to the Closing, this Agreement may be terminated by written notice
explaining the reason for such termination (without prejudice to other remedies
which may be available to the parties under this Agreement, at law or in
equity):
(a)
by
the
mutual written consent of Purchaser and the Requisite Shareholders;
(b)
by
either
Purchaser or the Requisite Shareholders if (i) the non-terminating party is
in material Breach of any material provision of this Agreement and such Breach
shall not have been cured within thirty (30) days of receipt by such party
of written notice from the terminating party of such Breach; and (ii) the
terminating party is not, on the date of termination, in material Breach
of any
material provision of this Agreement;
(c)
by
either
Purchaser or the Requisite Shareholders if (i) the Closing has not occurred
on or prior to the Closing Date (as determined pursuant to Section 1.2)
for any
reason; and (ii) the failure of the terminating party to fulfill any
obligation under this Agreement has not been the cause of, or resulted in,
the
failure of the closing of the transactions contemplated by this Agreement
to
have occurred on or before the Closing Date (as determined pursuant to
Section 1.2);
or
(d)
by
either
Purchaser or the Requisite Shareholder if (i) satisfaction of a closing
condition of the terminating party in Article 11
is
impossible; and (ii) the terminating party is not, on the date of
termination, in material Breach of any material provision of this
Agreement.
12.2 Effect
of Termination.
If this
Agreement is terminated in accordance with Section 12.1,
all
obligations of the parties hereunder shall terminate, except for the obligations
set forth in this Article 12;
provided,
however,
that
nothing herein shall relieve any party from liability for the Breach of any
of
its representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE
13.
INDEMNIFICATION
13.1 Survival
of Representations and Covenants.
(a)
Subject
to Section
13.1(c),
the
representations, warranties, covenants and obligations of each party to this
Agreement shall survive (i) the Closing; (ii) any sale or other
disposition of any or all of the Shares by Purchaser; and (iii) the death
or dissolution of any party to this Agreement. All of such representations,
warranties, covenants and obligations shall remain in full force and effect
and
shall survive indefinitely unless a shorter period of time is set forth
expressly in Section 13.1(c).
44
(b)
The
representations, warranties, covenants and obligations of Shareholders,
Target
Company, Purchaser and Surge and the rights and remedies that may be exercised
by the Indemnitees, shall not be limited or otherwise affected by or as
a result
of any information furnished to, or any investigation made by or any knowledge
of, any of the Indemnitees or any of their Representatives.
(c)
Subject
to Section
13.1(d),
(i) all representations and warranties of Shareholders, Purchaser, Target
Company and Surge shall survive for a period of one (1) year (i.e., 12
calendar
months) following the Closing Date (the “Survival
Period”);
provided,
however,
that if
a Claim Notice (as defined below) relating to any representation or warranty
is
given to the indemnifying party on or prior to the applicable Survival
Period,
then, notwithstanding anything to the contrary contained in this Section 13.1(c),
such
representation or warranty shall not so expire, but rather shall remain
in full
force and effect until such time as such claim has been fully and finally
resolved, either by means of a written settlement agreement executed on
behalf
of Shareholders and Purchaser or by means of a final, non-appealable judgment
issued by a court of competent jurisdiction.
(d)
Notwithstanding
anything to the contrary contained in Section 13.1(c),
if the
indemnifying party had knowledge, on or prior to the Closing Date, of any
fact,
event or circumstance that constitutes or that has given rise or could
be
expected to give rise, directly or indirectly, to any Breach of any
representation or warranty of the indemnifying party set forth in Article 5,
in the
case of Shareholders, Article 6
in the
case of Purchaser, Article 7
in the
case of Shareholders or Target Company, or Article
8
in the
case of Surge, without disclosing such fact, event or circumstance, on
the
applicable Disclosure Schedule, then such representation or warranty shall
not
expire, but rather shall remain in full force and effect for an unlimited
period
of time (regardless of whether any Claim Notice relating to such representation
or warranty is ever given).
(e)
For
purposes of this Agreement, a “Claim
Notice”
relating to a particular representation or warranty shall be deemed to
have been
given if any Indemnitee, acting in good faith, delivers to the indemnifying
party a written notice stating that such Indemnitee believes that there
is or
has been a Breach of such representation or warranty and containing (i) a
description in reasonable detail of the circumstances supporting such
Indemnitee’s good faith belief that there is or has been such a Breach, and
(ii) a non-binding, preliminary estimate of the aggregate dollar amount of
the actual and potential Damages that have arisen and may arise as a direct
or
indirect result of such Breach.
(f)
For
purposes of this Agreement, each statement or other item of information
set
forth in any Disclosure Schedule shall be deemed to be a representation
and
warranty made in this Agreement.
13.2 Indemnification
By Shareholders.
(a)
Shareholders,
severally and not jointly, shall hold harmless and indemnify each of Purchaser
Indemnitees from and against, and shall compensate and reimburse each of
Purchaser Indemnitees for, any Damages that are directly or indirectly suffered
or incurred by any of Purchaser Indemnitees or to which any of Purchaser
Indemnitees may otherwise become subject at any time (regardless of whether
or
not such Damages relate to any third-party claim) and that arise directly
or
indirectly from or as a direct or indirect result of, or are directly or
indirectly connected with:
45
(i) any
Breach of any of the representations or warranties made by Shareholders
or
Target Company in this Agreement, in the Closing Certificate or in any
of the
other Transaction Agreements;
(ii) any
Breach of any representation, warranty, statement, information or provision
contained in any Disclosure Schedule;
(iii) any
Breach of any covenant or obligation of any Shareholder or Target Company
contained in any of the Transaction Agreements; and
(iv) any
Proceeding relating directly or indirectly to any Breach, alleged Breach,
Liability or matter of the type referred to in clause “(i),” “(ii),”or “(iii)”
above (including any Proceeding commenced by any Indemnitee for the purpose
of
enforcing any of its rights under this Section 13.2).
(b)
Shareholders
acknowledge and agree that, if Target Company suffers, incurs or otherwise
becomes subject to any Damages as a result of or in connection with any
inaccuracy in or breach of any representation, warranty, covenant or obligation,
then (without limiting any of the rights of Target Company as an Indemnitee)
Purchaser shall also be deemed, by virtue of its ownership of the stock
of
Target Company, to have incurred Damages as a result of and in connection
with
such inaccuracy or breach.
13.3 Indemnification
By Purchaser and Surge.
Purchaser
and Surge, jointly and severally, shall hold harmless and indemnify each
of
Shareholder Indemnitees from and against, and shall compensate and reimburse
each of Shareholder Indemnitees for, any Damages that are directly or indirectly
suffered or incurred by any of Shareholder Indemnitees or to which any of
Shareholder Indemnitees may otherwise become subject at any time (regardless
of
whether or not such Damages relate to any third-party claim) and that arise
directly or indirectly from or as a direct or indirect result of, or are
directly or indirectly connected with:
(a) any
Breach of any of the representations or warranties made by Purchaser or Surge
in
this Agreement or in the Closing Certificate;
(b) any
Breach of any representation, warranty, statement, information or provision
contained in any Disclosure Schedule delivered by Surge or
Purchaser;
(c) any
Breach of any covenant or obligation of Purchaser or Surge contained in any
of
the Transaction Agreements;
(d) any
Proceeding relating directly or indirectly to any Breach, alleged Breach,
Liability or matter of the type referred to in clause “(a),” “(b),” or
“(c)” above (including any Proceeding commenced by any Indemnitee for the
purpose of enforcing any of its rights under this Section
13.3).
46
13.4 Environmental
Indemnity.
Purchaser has taken into account Purchaser’s assumption of responsibility for
Environmental Liabilities and Abandonment and Reclamation Obligations and
the
release of Shareholders from responsibility therefor when Purchaser evaluated
the Assets and determined the Purchase Price. Surge, Purchaser and Target
Company shall be liable for, and in addition indemnify Shareholders from
and
against all Environmental Liabilities and all Damages in respect thereto,
arising from the conduct of Target Company on, prior to or subsequent to
the
Closing Date and all Abandonment and Reclamation Obligations. Surge, Purchaser
and Target Company shall not be entitled to exercise and hereby waive any
rights
or remedies Surge, Purchaser or Target Company may now or in the future
have
against Shareholders in respect of such Environmental Liabilities or the
Abandonment and Reclamation Obligations, whether such rights and remedies
are
pursuant to the common law or statute or otherwise, including without
limitation, the right to name Shareholder as a third party to any action
commenced by any third party against Surge, Purchaser or Target
Company.
13.5 No
Contribution.
Each
Shareholder waives, and acknowledges and agrees that he shall not have
and shall
not exercise or assert (or attempt to exercise or assert), any right of
contribution, right of indemnity or other right or remedy against Target
Company
in connection with any indemnification obligation or any other Liability
to
which he may become subject under or in connection with this
Agreement.
13.6 Defense
of Third Party Claim.
(a)
In
the
event of the assertion or commencement by any Person of any claim or Proceeding
(whether against Purchaser, against any other Indemnitee or against any other
Person) with respect to which any of Shareholders may become obligated
to
indemnify, hold harmless, compensate or reimburse any Indemnitee pursuant
to
this Article 13,
Purchaser shall have the right, at its election, to designate a representative
of Shareholders (the “Shareholder
Representative”)
to
assume the defense of such claim or Proceeding at the sole expense of
Shareholders. If Purchaser so elects to designate Shareholder Representative
to
assume the defense of any such claim or Proceeding:
(i) Shareholder
Representative shall proceed to defend such claim or Proceeding in a diligent
manner with counsel satisfactory to Purchaser;
(ii) Purchaser
shall make available to Shareholder Representative any non-privileged documents
and materials in the possession of Purchaser that may be necessary to the
defense of such claim or Proceeding;
(iii) Shareholder
Representative shall keep Purchaser informed of all material developments
and
events relating to such claim or Proceeding;
(iv) Purchaser
shall have the right to participate in the defense of such claim or
Proceeding;
47
(v) Shareholder
Representative shall not settle, adjust or compromise such claim or Proceeding
without the prior written consent of Purchaser; and
(vi) Purchaser
may at any time (notwithstanding the prior designation of Shareholder
Representative to assume the defense of such claim or Proceeding) assume
the
defense of such claim or Proceeding.
(b)
If
Purchaser does not elect to designate Shareholder Representative to assume
the
defense of any such claim or Proceeding (or if, after initially designating
Shareholder Representative to assume such defense, Purchaser elects to assume
such defense), Purchaser may proceed with the defense of such claim or
Proceeding on its own. If Purchaser so proceeds with the defense of any such
claim or Proceeding on its own:
(i) all
expenses relating to the defense of such claim or Proceeding (whether or
not
incurred by Purchaser) shall be borne and paid exclusively by
Shareholders;
(ii) Shareholders
shall make available to Purchaser any documents and materials in the possession
or control of either of Shareholders that may be necessary to the defense
of
such claim or Proceeding;
(iii) Purchaser
shall keep Shareholder Representative informed of all material developments
and
events relating to such claim or Proceeding; and
(iv) Purchaser
shall have the right to settle, adjust or compromise such claim or Proceeding
with the consent of Shareholder Representative; provided,
however,
that
Shareholder Representative shall not unreasonably withhold such
consent.
13.7 Exercise
Of Remedies By Indemnitees Other Than Parties To This
Agreement.
No
Indemnitee (other than the parties to this Agreement or any successor thereto
or
assign thereof) shall be permitted to assert any indemnification claim or
exercise any other remedy under this Agreement unless the respective party
to
this Agreement entitled to indemnification (or any successor thereto or assign
thereof) shall have consented to the assertion of such indemnification claim
or
the exercise of such other remedy.
13.8 Interest.
Any
Shareholder who is required to hold harmless, indemnify, compensate or reimburse
any Indemnitee pursuant to this Article 13
with
respect to any Damages shall also be liable to such Indemnitee for interest
on
the amount of such Damages (for the period commencing as of the date on which
Shareholder Representative received the notice in Section 13.1
and
ending on the date on which the liability of Shareholder to such Indemnitee
is
fully satisfied by such Shareholder) at a floating rate equal to the rate
of
interest publicly announced by Bank of America, N.T. & S.A. from time to
time as its prime, base or reference rate.
48
ARTICLE
14.
MISCELLANEOUS
PROVISIONS
14.1 Further
Assurances.
Each
party hereto shall execute and cause to be delivered to each other party
hereto
such instruments and other documents, and shall take such other actions,
as such
other party may reasonably request (prior to, at or after the Closing) or
which
are reasonably necessary for the purpose of carrying out or evidencing any
of
the transactions contemplated by this Agreement. The parties shall execute,
if
necessary, Form T2057 of the Tax Act to enable the Shareholders to defer,
if
possible and where applicable, Canadian capital gains tax arising from the
transactions contemplated under the Agreement.
14.2 Fees
and Expenses.
(a)
Shareholders
shall bear and pay all fees, costs and expenses (including legal, accounting
and
other professional advisory fees and expenses) not paid in full in cash by
the
Target Company prior to the Effective Time that have been incurred or that
are
in the future incurred by, on behalf of or for the benefit of Shareholders
or
Target Company in connection with: (i) the negotiation, preparation,
review, execution and delivery of any letter of intent or similar document
relating to any of the transactions contemplated by this Agreement;
(ii) the investigation and review conducted by Shareholders, Target Company
and their respective Representatives with respect to the transactions
contemplated by this Agreement; (iii) the negotiation, preparation and
review of this Agreement, the other Transaction Agreements and all assignments,
certificates, opinions and other instruments and documents delivered or to
be
delivered in connection with the transactions contemplated by this Agreement;
(iv) the preparation and submission of any filing or notice required to be
made or given in connection with any of the transactions contemplated by
this
Agreement, and the obtaining of any Consent required to be obtained in
connection with any of the transactions contemplated by this Agreement; and
(v) the consummation and performance of the transactions contemplated by
this Agreement.
(b)
Purchaser
and Surge shall bear and pay all fees, costs and expenses (including legal,
accounting and other professional advisory fees and expenses) that have been
incurred or that are in the future incurred by, on behalf of or for the benefit
of Purchaser and Surge in connection with: (i) the negotiation,
preparation, review, execution and delivery of any letter of intent or similar
document relating to any of the transactions contemplated by this Agreement;
(ii) the investigation and review conducted by Purchaser, Surge and their
respective Representatives with respect to the transactions contemplated
by this
Agreement; (iii) the negotiation, preparation and review of this Agreement,
the other Transaction Agreements and all assignments, certificates, opinions
and
other instruments and documents delivered or to be delivered in connection
with
the transactions contemplated by this Agreement; (iv) the preparation and
submission of any filing or notice required to be made or given in connection
with any of the transactions contemplated by this Agreement, and the obtaining
of any Consent required to be obtained in connection with any of the
transactions contemplated by this Agreement; and (v) the consummation and
performance of the transactions contemplated by this Agreement.
49
14.3 Attorneys’
Fees.
If any
legal action or other legal proceeding relating to this Agreement or the
enforcement of any provision of this Agreement is brought against any party
to
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys’ fees, costs and disbursements (in addition to any other relief to
which the prevailing party may be entitled).
14.4 Notices.
All
notices, demands and other communications to be given or delivered under
or by
reason of the provisions of this Agreement shall be in writing and shall
be
deemed to have been given (i) when personally delivered, sent by telex,
cable or telecopy (with hard copy to follow) or sent by reputable overnight
express courier (charges prepaid), or (ii) three (3) Business Days
following mailing by certified or registered mail, postage prepaid and
return
receipt requested. Unless another address is specified in writing, notices,
demands and communications shall be sent to the addresses indicated
below:
If
to
Purchaser:
Cold
Flow
Energy ULC
00000
Xx
Xxxxxx Xxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
With
a
copy to:
Xxxxxx
Xxxxxxxx, Esq.
Xxxxxxxxx
Traurig, LLP
000
Xxxx
Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxx
Xxxx, Xxxxxxxxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
-
and
-
Xxxxx
Xxxxxxx, Esq.
Stikeman
Elliott LLP
0000
Xxxxxxx Xxxx Xxxx
000-0xx
Xxxxxx,
X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Telephone: (000)
000-0000
Facsimile:
(000)
000-0000
50
If
to
Target Company:
c/o Xxxxx Xxxxxxxxx
Burstall
Winger LLP
1600,
000
- 0xx
Xxxxxx
X.X.
Xxxxxxx,
Xxxxxxx
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
If
to any
Shareholders:
To
the
respective addresses listed on Schedule 1
With
a
copy to:
Xxxxx
Xxxxxxxxx
Burstall
Winger LLP
1600,
000
- 0xx
Xxxxxx
X.X.
Xxxxxxx,
Xxxxxxx
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
If
to
Surge:
00000
Xx
Xxxxxx Xxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
With
a
copy to:
Xxxxxx
Xxxxxxxx, Esq.
Xxxxxxxxx
Traurig, LLP
000
Xxxx
Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxx
Xxxx, Xxxxxxxxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
-
and
-
Xxxxx
Xxxxxxx, Esq.
Stikeman
Elliott LLP
0000
Xxxxxxx Xxxx Xxxx
000-0xx
Xxxxxx,
X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Telephone: (000)
000-0000
Facsimile:
(000)
000-0000
14.5 Governing
Law.
This
Agreement shall be construed in accordance with, and governed in all respects
by, the laws of Alberta, Canada and the laws of Canada applicable therein
(without giving effect to principles of conflicts of laws).
51
14.6 Successors
and Assigns.
This
Agreement shall inure to the benefit of, be enforceable by, and be binding
upon:
Surge and its successors and assigns (if any); Purchaser and its successors
and
assigns (if any); Shareholders, and their personal representatives, executors,
administrators, estate, heirs, successors and assigns (if any); and Target
Company and its successors and assigns (if any). Neither this Agreement
nor any
benefits, rights or obligations under this Agreement shall be assignable
by any
party, by operation of Legal Requirement or otherwise, without the prior
express
written consent of the other parties, which consent may be arbitrarily
withheld.
14.7 Remedies
Cumulative; Specific Performance.
Subject
to the limitations on remedies set forth in Section 1.2(c),
the
rights and remedies of the parties hereto shall be cumulative and not
alternative. The parties hereto agree that: (a) in the event of any Breach
or threatened Breach by any party hereto of any covenant, obligation or
other
provision set forth in this Agreement, the other parties shall be entitled
(in
addition to any other remedy that may be available to them) to (i) a decree
or order of specific performance to enforce the observance and performance
of
such covenant, obligation or other provision, and (ii) an injunction
restraining such Breach or threatened Breach; and (b) neither such other
parties nor any other Indemnitee shall be required to provide any bond
or other
security in connection with any such decree, order or injunction or in
connection with any related action or Proceeding.
14.8 Public
Announcements.
Any
public announcement or similar publicity with respect to this Agreement
or the
Transaction will be issued, if at all, at such time and in such manner
as
Purchaser determines. Unless consented to by Purchaser in advance or required
by
Legal Requirements, prior to the Closing, Shareholders shall, and shall
cause
Target Company to, keep this Agreement strictly confidential and may not
make
any disclosure of this Agreement to any Person. Shareholders and Purchaser
will
consult with each other concerning the means by which Target Company’s
employees, customers, and suppliers and others having dealings with Target
Company will be informed of the Transaction, and Purchaser will have the
right
to be present for any such communication.
14.9 Headings.
The
underlined headings contained in this Agreement are for convenience of
reference
only, shall not be deemed to be a part of this Agreement and shall not
be
referred to in connection with the construction or interpretation of this
Agreement.
14.10 Counterparts.
This
Agreement may be executed in several counterparts, each of which counterpart,
when executed and delivered, shall constitute an original and all of which,
when
taken together, shall constitute one agreement and a signed counterpart
delivered by facsimile or other electronic means shall be considered as
valid as
an original counterpart.
14.11 Waiver.
(a)
No
failure on the part of any Person to exercise any power, right, privilege
or
remedy under this Agreement, and no delay on the part of any Person in
exercising any power, right, privilege or remedy under this Agreement,
shall
operate as a waiver of such power, right, privilege or remedy; and no single
or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege
or
remedy.
52
(b)
No
Person
shall be deemed to have waived any claim arising out of this Agreement,
or any
power, right, privilege or remedy under this Agreement, unless the waiver
of
such claim, power, right, privilege or remedy is expressly set forth in
a
written instrument duly executed and delivered on behalf of such Person;
and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
14.12 Disclosure
Schedule.
In the
event of any inconsistency between the statements in the body of this Agreement
and those in any Disclosure Schedule (other than an exception expressly
set
forth as such in the Disclosure Schedule with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
14.13 Parties
in Interest.
Except
for the provisions of Article 13
hereof,
none of the provisions of this Agreement is intended to provide any rights
or
remedies to any Person other than the parties to this Agreement and their
respective successors and assigns (if any). Without limiting the generality
of
the foregoing, (i) no employee of Target Company shall have any rights
under this Agreement or under any of the other Transaction Agreements,
and
(ii) no creditor of Target Company or any Shareholder shall have any rights
under this Agreement or any of the other Transaction Agreements.
14.14 Entire
Agreement.
This
Agreement, the Confidentiality Agreement and the other Transactional Agreements
set forth the entire understanding of the parties relating to the subject
matter
hereof and thereof and supersede all prior agreements and understandings
among
or between any of the parties relating to the subject matter hereof and
thereof
(including any letter of intent).
14.15 Amendments.
This
Agreement (including the schedules hereto) may not be amended,
modified, altered or supplemented except by means of a written instrument
duly
executed and delivered by all of the parties hereto.
14.16 Severability.
In the
event that any provision of this Agreement, or the application of any such
provision to any Person or set of circumstances, shall be determined to
be
invalid, unlawful, void or unenforceable to any extent, the remainder of
this
Agreement, and the application of such provision to Persons or circumstances
other than those as to which it is determined to be invalid, unlawful,
void or
unenforceable, shall not be impaired or otherwise affected and shall continue
to
be valid and enforceable to the fullest extent permitted by law.
14.17 Construction.
For
purposes of this Agreement, including the Exhibits hereto, whenever the
context
requires: the singular number shall include the plural, and vice versa;
the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders. The parties hereto agree
that
any rule of construction to the effect that ambiguities are to be resolved
against the drafting party shall not be applied in the construction or
interpretation of this Agreement. As used in this Agreement, the words
“include”
and “including,” and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words “without
limitation.” Except as otherwise indicated, all references in this Agreement to
“Sections” and “Exhibits” are intended to refer to Sections of this Agreement
and Exhibits to this Agreement and have been inserted solely for convenience
of
reference and are not intended to be complete or accurate description of
the
contents thereof. All references to time in this Agreement are references
to
local time in Calgary, Alberta. Reference to “and” and “or” shall be deemed to
mean “and/or.”
53
14.18 Time
is of the Essence.
Time
shall be of the essence of this Agreement.
14.19 Survival.
Each
Shareholder’s obligations and liability under this Agreement and the other
Transaction Agreements shall survive such Shareholder’s death (and shall be
binding upon such Shareholder’s personal representatives, executors,
administrators, estate, heirs and successors) and shall not be limited
in any
way by: (i) any failure on the part of Purchaser or any other Purchaser
Indemnitee to exercise any right or assert any claim against any Shareholder
or
Target Company; (ii) the dissolution or insolvency of, or the appointment
of any receiver, conservator or liquidator for, or the commencement of
any
bankruptcy, reorganization, moratorium, arrangement or other proceeding
by,
against or with respect to, any Shareholder or Target Company; or (iii) any
merger or consolidation of any Shareholder with or into any other
Entity.
14.20 Compelled
Disclosure of Information.
Notwithstanding anything to the contrary in the Confidentiality Agreement,
in
the event that Surge, Purchaser or any of their respective Representatives
are
requested pursuant to, or required by, applicable law or regulation (including,
without limitation, any rule, regulation or policy statement of any national
securities exchange, market or automated quotation system on which any
of
Surge’s or Purchaser’s securities are listed or quoted) or by legal process to
disclose any Confidential Information, Surge or Purchaser shall provide
Target
Company with advanced notice of such request or requirement, to the extent
reasonably possible, in order to enable Target Company (a) to seek an
appropriate protective order or other remedy, (b) to consult with Surge or
Purchaser with respect to Target Company’s taking steps to resist or narrow the
scope of such request or legal process or (c) to waive compliance, in whole
or in part, with the terms of the Confidentiality Agreement. In the event
that
such protective order or other remedy is not obtained, or Target Company
waives
compliance, in whole or in part, with the terms of the Confidentiality
Agreement, Surge, Purchaser or their respective Representatives, as the
case may
be, shall use commercially reasonable efforts to disclose only that portion
of
the Confidential Information which Surge or Purchaser is legally required
to be
disclosed and exercise its commercially reasonable efforts to cooperate
with
Target Company to obtain reliable assurances that confidential treatment
will be
accorded to the Confidential Information so disclosed. To the extent any
provision of this Section
14.20
conflicts with the provisions of the Confidentiality Agreement, the provisions
of this Section
14.20
shall
control.
[Signatures
Follow On a Separate Page]
54
IN
WITNESS WHEREOF,
the
parties have signed this Agreement on the date first written above and each
of
the individuals signing below warrants that he or she has the authority to
sign
for and on behalf of the respective parties.
PURCHASER:
|
|
COLD FLOW ENERGY ULC | |
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
|
|
|
SURGE:
|
|
SURGE GLOBAL ENERGY, INC. | |
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
|
|
|
TARGET COMPANY:
|
|
PEACE OIL CORP. | |
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
|
SHAREHOLDERS
OF PEACE OIL:
|
|
1229679 ALBERTA
INC.
|
|
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
|
1216848 ALBERTA LTD. | |
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
55
______________________________________________ | ______________________________________________ |
Witness
|
Xxxx
Xxxxxx individually and as trustee of the Cairns Family
Trust
|
______________________________________________ | ______________________________________________ |
Witness |
Xxxx
Xxxxxx individually and as trustee of the Xxxxxx
Family Trust
|
______________________________________________ | ______________________________________________ |
Witness | Xxxx Xxxxxxxx as trustee of the Stouthearted Trust |
______________________________________________ | ______________________________________________ |
Witness | Xxxxx Xxx as trustee of the Liu Family Trust |
______________________________________________ | ______________________________________________ |
Witness | Xxxxxx Xx as trustee of the Ma Family Trust |
56
EXHIBIT
A
CERTAIN
DEFINITIONS
“ABCA”
means
the Business
Corporations Act
(Alberta) and the regulations promulgated thereunder, as from time to time
amended.
“Abandonment
and Reclamation Obligations”
means
all obligations to abandon the Xxxxx and restore and reclaim the surface sites
thereof, to decommission and remove the facilities and equipment comprised
in
the Tangibles and restore and reclaim the surface sites thereof and to reclaim
and restore the lands to which the Surface Rights relate, including such
obligations relating to Xxxxx which were abandoned prior to the Effective
Time.
“Additional
Deposit”
shall
have the meaning specified in Section 1.2.
“AFE”
shall
mean an authorization for expense pursuant to the Joint Venture Agreement as
set
forth in Part
7.14(e)
of the
Target Disclosure Schedule.
“Affiliate”
means,
as to a Person, any other Person controlling, controlled by or under common
control with that Person where “control”, “controlling” or “controlled” means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of another Person, whether through
the
ownership of voting securities or by contract, partnership agreement, trust
arrangement or other means, either directly or indirectly, that results in
control in fact; provided that direct or indirect ownership of shares of a
corporation carrying more than 50% of the voting rights shall constitute control
of that corporation; and further provided that:
(a) Target
Company and each of its subsidiaries shall be conclusively deemed to be
Affiliates of Shareholders as to any matter or thing relating to the period
before the Closing; and
(b) Target
Company and each of its subsidiaries shall be conclusively deemed to be
Affiliates of Purchaser as to any matter or thing relating to the period from
and after the Closing.
“Agreement”
shall
mean the Stock Purchase Agreement to which this Exhibit A
is
attached (including each Disclosure Schedule and all other schedules and
exhibits attached hereto or thereto), as it may be amended from time to
time.
“Assets”
means
the Petroleum and Natural Gas Rights, the Tangibles, and the Miscellaneous
Interests.
“Bank
Accounts”
means
all bank accounts, lock boxes, safe deposit boxes and the contents thereof
which
contain any assets of Target Company.
1
“Benefit
Plans”
means
all plans and arrangements to which Target Company is a party or by which Target
Company is bound or under which Target Company has, or will have, any liability
or contingent liability, relating to:
(a) arrangements
relating to retirement savings or pensions, including pension plans, pensions
or
supplemental pensions whether registered or unregistered, funded or unfunded,
“registered retirement savings plans” (as defined in the Tax Act), “registered
pension plans” (as defined in the Tax Act) and “retirement compensation
arrangements” (as defined in the Tax Act);
(b) any
and
all employment benefits and plans relating to disability or wage continuation
during periods of absence from work (including short term disability and long
term disability), hospitalization, health, medical or dental treatments or
expenses, life insurance, death or survivor’s benefits and supplementary
employment insurance, in each case regardless of whether or not those benefits
are insured or self-insured; or
(c) any
and
all employment benefits and plans relating to bonuses, incentive pay or
compensation, performance compensation, deferred compensation, profit sharing
or
deferred profit sharing, share purchase, share option, stock appreciation,
phantom stock, vacation or vacation pay, sick pay, severance or termination
pay,
employee loans or separation from service benefits, and any other type of
arrangement providing for compensation additional to base pay or
salary;
with
respect to any of its Employees or former Employees (or any dependants or
beneficiaries of any such Employees or former Employees), other than statutory
plans with which Target Company is required to comply, including the Canada
Pension Plan and the Canada Employment Insurance Plan, and plans administered
pursuant to applicable provincial health and workers’ compensation
legislation.
“Best
Efforts”
shall
mean the efforts that a prudent Person desiring to achieve a particular result
would use in similar circumstances to achieve such result as expeditiously
as
possible; provided,
however,
that a
person required to use his Best Efforts under this Agreement will not be thereby
required to take actions that would result in a materially adverse change in
the
benefits to such person of this Agreement and the Transaction, or to dispose
of
or make any change to its business, expend any material funds or incur any
other
material burden.
“Books
and Records”
means
all books and records of Target Company and its subsidiaries, including
financial, corporate, operations and sales books, inventory and other asset
records, books of account, sales and purchase records, the Title and Operating
Documents, customer files, production data, equipment maintenance data,
accounting records, sales and promotional data, advertising materials, cost
and
pricing information, supplier lists, customer lists, business reports, plans
and
projections and all other similar documents, surveys, plans, files, records,
correspondence, and other data and information, financial or otherwise,
including all data and information stored on computer-related or other
electronic media.
2
“Breach”
shall
mean the occurrence of any inaccuracy in or breach of, or any failure to comply
with or perform, a representation, warranty, covenant, obligation or other
provision of any Contract and this Agreement.
“Business
Day”
means
any day other than (i) a Saturday or a Sunday or (ii) a day on which
banking and savings and loan institutions are authorized or required by law
to
be closed in Calgary, Alberta.
“Closing”
shall
have the meaning specified in Section 4.1.
“Closing
Certificate”
shall
have the meaning specified in Section
4.2(f).
“Closing
Date”
shall
have the meaning specified in Section 4.1.
“Common
Shares”
means
common shares in the capital stock of Purchaser.
“Competing
Party”
shall
have the meaning specified in Section 9.3.
“Competing
Transaction”
shall
have the meaning specified in Section 9.3.
“Confidentiality
Agreement”
means
that certain Confidentiality Agreement dated September 27, 2006, between Target
Company and Surge.
“Consent”
shall
mean any approval, consent, ratification, permission, waiver or authorization
(including any Governmental Approval).
“Contract”
shall
mean any agreement, contract, consensual obligation, promise, understanding,
arrangement, commitment or undertaking of any nature (whether written or oral
and whether express or implied), whether or not legally binding, including,
without limitation, production sales contracts, farmout agreements, operating
agreements, service agreements and similar arrangements.
“Xxxxxxx”
shall
mean Xxxxxxx Holdings Limited.
“Damages”
shall
mean and include any loss, damage, injury, decline in value, lost opportunity,
Liability, claim, demand, settlement, judgment, award, fine, penalty, Tax,
fee
(including any legal fee, accounting fee, expert fee or advisory fee), charge,
cost (including any cost of investigation) or expense of any
nature.
“Derivative
Transaction”
means
any swap transaction, option, warrant, forward purchase or sale transaction,
futures transaction, cap transaction, floor transaction or collar transaction
relating to one or more currencies, commodities, bonds, equity securities,
loans, interest rates, catastrophe events, weather-related events,
credit-related events or conditions or any indexes, or any other similar
transaction (including any option with respect to any of these transactions)
or
combination of any of these transactions, including collateralized mortgage
obligations or other similar instruments or any debt or equity instruments
evidencing or embedding any such types of transactions, and any related credit
support, collateral or other similar arrangements related to such
transactions.
3
“Disclosed
Personal Information”
shall
have the meaning specified in Section
9.8(a).
“Disclosure
Schedule”
means
any of the Surge Disclosure Schedule, the Purchaser Disclosure Schedule or
the
Target Disclosure Schedule.
“Distribution
Compliance Period”
shall
have the meaning specified in Section
5.8(c).
“Effective
Time”
shall
have the meaning specified in Section 4.1.
“Employees”
means
all individuals employed by Target Company or any of its subsidiaries, including
those employees on long term disability leave or other absence.
“Encumbrance”
shall
mean any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, equity, trust, equitable interest, claim, preference, right of
possession, lease, tenancy, license, encroachment, covenant, infringement,
interference, Order, proxy, option, right of first refusal, pre-emptive right,
community property interest, legend, defect, impediment, exception, reservation,
limitation, impairment, imperfection of title, condition or restriction of
any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset).
“Entity”
shall
mean any corporation (including any non-profit corporation), general
partnership, limited partnership, unincorporated associations, unincorporated
syndicate, unincorporated organization, joint venture, estate, trust (or a
natural person’s capacity as trustee, executor, administrator or other legal
representative) or company (including any limited liability company, unlimited
liability company or joint stock company).
“Environmental
Documentation”
means
all environmental site assessments, environmental audits, environmental reports
and other reports relating to the application of Environmental Law to Target
Company or the Assets.
“Environmental
Law”
shall
mean any Legal Requirement relating to (i) the protection, preservation or
restoration of the environment (including air, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life
or
any other natural resource), or (ii) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances, in each
case
as in effect at the date hereof.
“Environmental
Liabilities”
means
all liabilities in respect of the environment which relate to the Assets or
which arise in connection with the ownership thereof or operations pertaining
thereto, including, without limitation, liabilities related to or arising
from:
(a) transportation,
storage, use or disposal of toxic or hazardous substances;
(b) release,
spill, escape or emission of toxic or hazardous substances; or
(c) pollution
or contamination of or damage to the environment;
4
including,
without limitation, liabilities to compensate Third Parties for damages and
losses resulting from the items described in items (a), (b) and (c) above
(including, without limitation, damage to property, personal injury and death)
and obligations to take action to prevent or rectify damage to or otherwise
protect the environment and, for purposes of this Agreement, “the environment”
includes, without limitation, the air, the surface and subsurface of the earth,
bodies of water (including, without limitation, rivers, streams, lakes and
aquifers) and plant and animal life (including humans) but does not include
Abandonment and Reclamation Obligations.
“Escrow
Agent”
shall
have the meaning specified in Section
1.2;
“Escrow
Agreement”
shall
have the meaning specified in Section 1.2.
“Escrow
Amount”
shall
mean the sum of the Initial Deposit and the Additional Deposit, if any, plus
all
accrued interest on the Initial Deposit and Additional Deposit.
“Exchange
Act”
means
the United States Securities Exchange Act of 1934, as amended.
“Exchangeable
Shares”
shall
have the meaning specified in Section
2.1.
“Exchange
Agreement”
means
that certain Voting and Exchange Trust Agreement among Purchaser, Surge and
Computershare Trust Company of Canada to be dated as of the Closing Date
substantially in the form of Exhibit 3.2(b).
“Exclusion
Area”
shall
have the meaning specified in Section
10.2.
“Financial
Statements”
shall
have the meaning specified in Section 7.7(a).
“GAAP”
means
Canadian generally accepted accounting principles in effect on the date on
which
they are to be applied pursuant to this Agreement, applied consistently
throughout the relevant periods.
“Governmental
Approval”
shall
mean any: (a) permit, license, certificate, concession, approval, consent,
ratification, permission, clearance, confirmation, exemption, waiver, franchise,
certification, designation, rating, registration, variance, qualification,
accreditation or authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Authority or pursuant
to
any Legal Requirement; or (b) right under any Contract with any
Governmental Authority.
“Governmental
Authority”
shall
mean any: (a) nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi governmental authority of any nature (including
any governmental division, subdivision, department, agency, bureau, branch,
office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal); (d) multinational organization or body; or (e) individual,
Entity or body exercising, or entitled to exercise, any executive, legislative,
judicial, administrative, regulatory, police, military or taxing authority
or
power of any nature.
5
“Granite
Engagement”
shall
have the meaning specified in Section
5.4.
“Hazardous
Substance”
shall
mean any substance listed, defined, identified, designated, judicially
interpreted, classified or regulated as hazardous, toxic, radioactive or
dangerous under any Environmental Law. Hazardous Substance includes any
substance to which exposure is regulated by any Governmental Authority or any
Environmental Law as a toxic waste, pollutant, contaminant, hazardous substance,
toxic substance, hazardous waste, special waste or petroleum or any derivative
or byproduct thereof, radon, radioactive material, asbestos or asbestos
containing material, urea formaldehyde, foam insulation or polychlorinated
biphenyls.
“Initial
Deposit”
shall
have the meaning specified in Section
1.2.
“Indemnitee”
shall
mean Shareholder Indemnitees and Purchaser Indemnitees.
“Insurance
Policies”
shall
have the meaning specified in Section 7.13.
“Intellectual
Property”
shall
have the meaning specified in Section
7.16.
“Joint
Venture Agreement”
means
that certain Joint Venture Agreement dated December 12, 2005 between Target
Company and North Peace Energy Inc., as in effect on the date of this Agreement,
relating to the rights and obligations of the parties to certain
lands.
“Knowledge”
An
individual shall be deemed to have “Knowledge” of a particular fact or other
matter if: (i) such individual is actually aware of such fact or other
matter or (ii) (except when Knowledge is stated to be “actual Knowledge”) a
prudent individual could be expected to discover or otherwise become aware
of
such fact or other matter in the course of conducting a reasonably comprehensive
investigation concerning the truth or existence of such fact or other matter.
An
Entity shall be deemed to have “Knowledge” of a particular fact or other matter
if any of its respective directors, officers or employees, if any, with the
authority to establish policy for such Entity has actual knowledge of such
fact
or other matter after due and diligent inquiry.
“Lands” means
the
lands set forth and described in Part 7.33, subject to restrictions and
exclusions as to geological formations and Petroleum Substances as may appear
in
Part 7.33 but only insofar as rights to the Petroleum Substances underlying
those lands are granted by the Leases.
“Leases”
means
the leases, licenses, reservations, permits and other documents of title
including without limitation, those set forth and described in Part 7.33, by
virtue of which the holder thereof is entitled to drill for, win, take, own
or
remove the Petroleum Substances within, upon or under the Lands or by virtue
of
which the holder thereof is deemed to be entitled to a share of Petroleum
Substances produced or removed or a share in the proceeds from, or measured
or
calculated by reference to a value, price, quantity or quality of Petroleum
Substances which are produced or the rights or options to acquire any of the
foregoing but only to the extent that the foregoing pertains to Petroleum
Substances within, upon or under the Lands or any lands with which the Lands
are
pooled or unitized and includes, if applicable, all replacements, renewals
and
extensions of such documents and all documents issued in substitution
therefor.
6
“Legal
Requirement”
shall
mean any federal, state, local, municipal, foreign or other law, statute,
legislation, constitution, principle of common law, resolution, ordinance,
code,
Order, edict, decree, proclamation, treaty, convention, rule, regulation,
permit, ruling, directive, pronouncement, requirement (licensing or otherwise),
specification, determination, decision, opinion or interpretation (including
Environmental Law and Privacy Laws) that is, has been or may in the future
be
issued, enacted, adopted, passed, approved, promulgated, made, implemented
or
otherwise put into effect by or under the authority of any Governmental
Authority (whether administrative, regulatory, legislative, executive or
otherwise).
“Liability”
shall
mean any debt, obligation, duty or liability of any nature (including any
unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect,
conditional, implied, vicarious, derivative, joint, several or secondary
liability), regardless of whether such debt, obligation, duty or liability
would
be required to be disclosed on a balance sheet prepared in accordance with
GAAP
and regardless of whether such debt, obligation, duty or liability is
immediately due and payable.
“Material
Adverse Effect”
means
(i) with respect to Purchaser, any event, change or effect that, when taken
individually or together with all other adverse events, changes and effects,
is
or is reasonably likely (a) to be materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations,
results of operations or prospects of Purchaser or its subsidiaries, taken
as a
whole or (b) to prevent or materially delay consummation of the Transaction
or otherwise to prevent Purchaser or its subsidiaries from performing their
obligations under this Agreement and (ii) with respect to Target Company,
any event, change or effect that, when taken individually or together with
all
other adverse events, changes and effects, is or is reasonably likely
(a) to be materially adverse to the condition (financial or otherwise),
properties, assets, liabilities, business, operations, results of operations
or
prospects of Target Company or (b) to prevent or materially delay
consummation of the Transaction or otherwise to prevent Shareholders from
performing their obligations under this Agreement.
“Material
Contracts”
shall
have the meaning specified in Section 7.12(a).
“Miscellaneous
Interests”
means
the entire interest of Shareholders in and to all property, assets and rights
on
or with respect to the Lands, other than the Petroleum and Natural Gas Rights
and the Tangibles, to the extent such property, assets and rights are directly
related to the Petroleum and Natural Gas Rights or the Tangibles, or any rights
relating thereto (together with, in the case of any information that is stored
electronically, the media on which the same is stored), including, without
limitation, the entire interest of Shareholders in:
(a) all
contracts, agreements, files, records and documents, to the extent that they
relate directly to the Petroleum and Natural Gas Rights or the Tangibles,
including, without limitation, the Sale, Processing and Transportation
Agreements of Petroleum Substances and the Title and Operating
Documents;
(b) the
Surface Rights;
7
(c) all
subsisting rights to perform operations relating to the property, assets and
rights on or with respect to the Lands, Petroleum and Natural Gas Rights,
Tangibles, Xxxxx, and Surface Rights and including, without limitation, all
easements, well, pipeline and other permits licenses and
authorizations;
(d) all
Petroleum Substances in the course of production from the Lands or lands with
which the Lands are pooled or unitized but not at the Effective Time beyond
the
points of delivery to Purchaser of production from the Lands or lands with
which
the Lands are pooled or unitized; and
(e) all
Xxxxx
including all wellbores and casing owned by Shareholders located on the
Lands.
“Oil
Sands Rights”
shall
mean crude oil, heavy oil, bitumen, crude bitumen, natural gas, condensate,
natural gas liquids and related hydrocarbons and all other substances produced
in association therewith (whether hydrocarbons or not).
“Order”
shall
mean any: (a) temporary, preliminary or permanent order, judgment,
injunction, edict, decree, ruling, pronouncement, determination, decision,
opinion, verdict, sentence, stipulation, subpoena, writ or award that is or
has
been issued, made, entered, rendered or otherwise put into effect by or under
the authority of any court, administrative agency or other Governmental
Authority or any arbitrator or arbitration panel; or (b) Contract with any
Governmental Authority that is or has been entered into in connection with
any
Proceeding.
“Ordinary
Course of Business”
shall
describe any action taken by a party if (a) such action is consistent with
such party’s past practices and is taken in the ordinary course of such party’s
normal day to day operations; (b) such action is taken in accordance with
sound and prudent business practices; (c) such action is not required to be
authorized by such party’s stockholders, board of directors or any committee
thereof and does not require any other separate or special authorization of
any
nature; and (d) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in the
ordinary course of the normal day to day operations of other Entities that
are
engaged in businesses similar to such party’s business; and (e) with
respect to Target Company, shall include any actions or spending as authorized
or permitted by the Joint Venture Agreement.
“Outstanding
Target Company Stock”
shall
have the meaning specified in Section
7.4(a).
“Person”
shall
mean any individual, sole proprietorship, Entity or Governmental
Authority.
“Personal
Information”
means
information about an Employee, but does not include an individual’s name,
position name or title, business telephone number, business address, business
email or business fax number.
“Permitted
Encumbrances”
means:
(a) liens
for
taxes, assessments and governmental charges for which payment is not
due;
8
(b) undetermined
or inchoate liens arising in the Ordinary Course of Business and incidental
to
current operations (including liens of carriers, warehousemen, mechanics,
materialmen, builders, operators, processors and landlords) which have not
been
filed pursuant to applicable laws or in respect of which no steps or proceedings
to enforce such lien have been initiated or which relate to obligations which
are not due or delinquent, or if due or delinquent, any such lien which is
being
contested by Target Company in good faith by appropriate proceedings diligently
pursued, provided that proceeding with that action will not create a material
risk of the forfeiture or loss of, or interference with the use or
operation of, a material part of the Assets;
(c) easements,
rights of way, servitudes and other similar rights in land (including, without
limitation, rights of way and servitudes for roads, railways, sewers, drains,
gas and oil pipelines, gas and water mains and electric light, power, telephone,
telegraph and cable television conduits, poles, wires and cables);
(d) the
right
reserved to or vested in any municipality or government or other public
authority by the terms of any lease, license, franchise, grant or permit or
by
any statutory provision, to terminate any such lease, license, franchise, grant
or permit or to require annual or other periodic payments as a condition of
the
continuance thereof;
(e) rights
of
general application reserved to or vested in any governmental authority to
levy
taxes on Petroleum Substances or any of them or the income therefrom, and
governmental requirements and limitations of general application as to
production rates or the operations of any property;
(f) royalty
burdens, liens, adverse claims, penalties, reductions in interests, conversion
rights upon payout and other encumbrances set out in Part 7.34 of the Target
Disclosure Schedule under the heading “Encumbrance(s)”;
(g) the
reservations, limitations, provisions and conditions in any original grants
from
the crown of any of the Lands or interests therein and statutory exceptions
to
title;
(h) the
terms
and conditions of the Leases and the Title and Operating Documents;
(i) provisions
for penalties and forfeitures under agreements as a consequence of
non-participation in operations; and
(j) liens
granted in the ordinary course of business to a public utility, municipality
or
governmental authority with respect to operations pertaining to any of the
Assets.
“Petroleum
and Natural Gas Rights” means
the
entire interest of Target Company in and to the Lands and, insofar as they
pertain to the Lands or lands with which the Lands are pooled or unitized,
the
Leases and includes interests and rights known as “working interests”, “earned
working interests”, “royalty interests”, “overriding royalty interests”, “gross
overriding royalty interests”, “production payments”, “profit interests”, “net
profit interests”, “income interests” “net income interests”, “economic
interests” and other interests and fractional or undivided interests in any of
the foregoing and fee simple, freehold, leasehold or other interests and
non-consent penalties which Target Company is entitled to receive, including,
without limitation, the interests of Target Company set forth in Part
7.34.
9
“Petroleum
Substances”
means
petroleum, natural gas and all related hydrocarbons (including liquid
hydrocarbons) and all other mineral substances, whether solid or gaseous and
whether hydrocarbon or not (including sulphur and hydrogen sulphide) produced
in
association with petroleum, natural gas or related hydrocarbons.
“Pre-Closing
Period”
shall
have the meaning specified in Section
9.1.
“Privacy
Laws”
means
any and all Legal Requirements relating to privacy and the collection, use
and
disclosure of Personal Information in all applicable jurisdictions, including
the Personal Information Protection and Electronic Documents Act (Canada) and
any comparable provincial law (including the Personal Information Protection
Act
(Alberta)).
“Proceeding”
shall
mean any action, suit, litigation, arbitration, proceeding (including any civil,
criminal, administrative, investigative or appellate proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation that
is,
has been or may in the future be commenced, brought, conducted or heard at
law
or in equity or before any Governmental Authority or any arbitrator or
arbitration panel.
“Public
Disclosure Documents”
shall
have the meaning specified in Section
8.6.
“Purchase
Price”
shall
have the meaning specified in Section 2.1.
“Purchaser”
shall
mean Cold Flow Energy ULC, a corporation incorporated pursuant to the
ABCA.
“Purchaser
Advisors”
shall
have the meaning specified in Section
9.6.
“Purchaser
Disclosure Schedule”
shall
have the meaning specified in Article 6.
“Purchaser
Indemnitees”
shall
mean the following Persons: (a) Purchaser; (b) Surge;
(c) Purchaser’s current and future Affiliates; (d) the respective
Representatives of the Persons referred to in clauses “(a)” and “(c)” above; and
(e) the respective successors and assigns of the Persons referred to in clauses
“(a)”, “(b)”, “(c)” and “(d)” above.
“Purchaser
Stock”
shall
have the meaning specified in Section 6.2(a).
“Regulation S”
means
Regulation S under the Securities Act.
“Representatives”
shall
mean officers, directors, employees, attorneys, accountants, advisors,
consultants, agents, distributors, licensees, shareholders, subsidiaries and
lenders of a party.
10
“Requisite
Shareholders”
means
any combination of Shareholders holding collectively a majority of the Shares
as
set forth in the Schedule of Shareholders.
“Resolutions”
shall
have the meaning specified in Section 7.3(a)(iii).
“SB-2
Registration Statement”
shall
have the meaning specified in Section 10.3(a).
“Schedule
of Shareholders”
has
the
meaning specified in the preamble of this Agreement.
“SEC”
means
the United States Securities and Exchange Commission.
“Securities”
means,
collectively, the Exchangeable Shares and the Surge Securities for which the
Exchangeable Shares may be exchanged under the Exchange Agreement.
“Securities
Act”
shall
mean the United States Securities Act of 1933, as amended.
“Shareholders”
has
the
meaning specified in the preamble of this Agreement.
“Shares”
has
the
meaning specified in Recital A
of this
Agreement.
“Shareholder
Indemnitees”
shall
mean the following Persons: (a) Shareholders and (b) the respective
successors and assigns of Shareholders.
“Shareholder
Representative”
shall
have the meaning specified in Section
13.6.
“Signet”
shall
mean Signet Energy, Inc.
“Support
Agreement”
means
that certain Support Agreement between Surge and Purchaser to be dated as of
the
Closing Date in the form attached as Exhibit 3.2(a).
“Surface
Rights”
means
(i) all rights to use or occupy the surface of lands (including, but not
limited to, the Lands) which are used or held for use in connection with the
Petroleum and Natural Gas Rights or the Tangibles, including rights to enter
upon, occupy or cross the surface of lands on which the Tangibles and the Xxxxx
are located and rights to use the surface of lands to gain access
thereto.
“Surge”
means
Surge Global Energy, Inc., a Delaware corporation.
“Surge
Disclosure Schedule”
shall
have the meaning specified in Article 8.
“Surge
Securities”
shall
mean the securities to be issued by Surge in exchange for the Exchangeable
Shares in accordance with the provisions thereof, the Support Agreement and
the
Exchange Agreement.
“Surge
Stock”
shall
have the meaning specified in Section 8.2(a).
“Survival
Period”
shall
have the meaning specified in Section 13.1(c).
11
“Tangibles”
means
the interests of Target Company which are directly related to the Petroleum
and
Natural Gas Rights in all other tangible depreciable property, equipment, real
property and assets used or intended to be used in producing, processing,
gathering, treating, storage, measuring, transferring or injecting Petroleum
Substances or any of them from the Lands or lands pooled or unitized therewith
or in connection with water injection or removal operations that pertain to
the
Petroleum and Natural Gas Rights whether same are located on the Lands, lands
pooled or unitized therewith or otherwise located elsewhere for the purposes
described herein.
“Target’s
Board”
means
the board of directors of Target Company.
“Target
Company”
means
Peace Oil Corp., an Alberta corporation.
“Target
Company’s Stock”
shall
have the meaning specified in Section 7.4(a).
“Target
Disclosure Schedule”
shall
have the meaning specified in Article 7.
“Tax”
(and,
with correlative meaning, “Taxes” and “Taxable”) means any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use,
ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount and any interest
on such penalty, addition to tax or additional amount, imposed by any Tax
Authority.
“Tax
Act”
means
the Income
Tax Act
(Canada).
“Tax
Authority”
means
Governmental Authority responsible for the imposition, assessment or collection
of any Tax (domestic or foreign).
“Tax
Return”
shall
mean any return, statement, declaration, notice, certificate or other document
that is or has been filed with or submitted to, or required to be filed with
or
submitted to, any Governmental Authority in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement related to any Tax.
“Title
and Operating Documents”
means,
to the extent directly related to the Petroleum and Natural Gas Rights or the
Tangibles:
(a) the
Leases;
(b) unit
agreements, assignments, trust declarations, operating agreements, royalty
agreements, overriding royalty agreements, gross overriding agreements,
participation agreements, farm-in agreements, sale and purchase agreements,
pooling agreements, common stream agreements, easements, surface leases and
pipeline crossing agreements;
12
(c) agreements
for construction, ownership and operation of gas plants, gas gathering systems
and other facilities;
(d) permits,
licenses and approvals; and
(e) other
agreements which relate to the Petroleum and Natural Gas Rights or the Tangibles
or the ownership, operation or exploitation thereof.
“Transaction”
shall
mean, collectively, the transactions contemplated by this
Agreement.
“Transaction
Agreements”
shall
mean this Agreement and all other agreements, certificates, instruments,
documents and writings to be delivered by all or any of the following parties
in
connection this Transaction or as contemplated by this Agreement: Purchaser,
Surge, Target Company and the Shareholders (and shall specifically include
the
Support Agreement, the Escrow Agreement and the Exchange
Agreement).
“U.S.
Person”
means
a
“U.S. person” as such term is defined in Rule 902(k) of Regulation S promulgated
under the Securities Act, as presently in effect.
“United
States”
means
the United States of America, its territories and possessions, any state of
the
United States and the District of Columbia.
“Xxxxx”
means
all xxxxx (including without limitation producing, shut-in, suspended, capped,
abandoned, water source, injection and disposal xxxxx, including the wellbores
and casing therein), located on the Lands or lands pooled or unitized
therewith.
“$”
means
dollars in lawful currency of Canada.
13
EXHIBIT
1.2
ESCROW
AGREEMENT
(See
attached)
1
EXHIBIT
3.1
ARTICLES
OF AMENDMENT OF PURCHASER
(See
attached)
COLD
FLOW ENERGY ULC
(hereinafter
referred to as the "Corporation")
PROVISIONS
ATTACHING TO
THE
EXCHANGEABLE SHARES
The
Exchangeable Shares in the capital of the Corporation shall have the following
rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1
|
For
the purposes of these share provisions:
|
"ABCA"
means
the Business
Corporations Act(Alberta),
as amended from time to time;
"Acquiror"
means
Surge Global Energy, Inc., a corporation incorporated under the laws of
Delaware;
"Acquiror
Control Transaction"
means
any merger, amalgamation, tender offer, material sale of shares or rights
or
interests therein or thereto or similar transactions involving Acquiror,
or any
proposal to carry out the same;
"Acquiror
Dividend Declaration Date"
means
the date on which the board of directors of Acquiror declares any dividend
on
the Acquiror Shares;
"Acquiror
Shares"
means
the shares in the common stock of Acquiror and any other securities into
which
such shares may be changed, exchanged or converted;
"Acquisition
Agreement"
means
the acquisition agreement by and between Acquiror, the Corporation, Peace
and
the Shareholders dated November
30,
2006,
as amended and restated from time to time, providing for, among other things,
the acquisition of all of the Peace Shares by the Corporation;
"Affiliate"
has the
meaning ascribed thereto in the Securities Act, unless otherwise expressly
stated herein;
"Board
of Directors"
means
the board of directors of the Corporation;
"Business
Day"
means
any day on which commercial banks are generally open for business in Calgary,
Alberta, other than a Saturday, a Sunday or a day observed as a holiday in
Calgary, Alberta under the laws of the Province of Alberta or the federal
laws
of Canada applicable therein;
-1-
"Canadian
Dollar Equivalent"
means
in respect of an amount expressed in a currency other than Canadian dollars
(the
"Foreign
Currency Amount")
at any
date the product obtained by multiplying:
(a)
|
the
Foreign Currency Amount, by
|
(b)
|
the
noon spot exchange rate on such date for such foreign currency
expressed
in Canadian dollars as reported by the Bank of Canada or, in the
event
such spot exchange rate is not available, such spot exchange rate
on such
date for such foreign currency expressed in Canadian dollars as
may be
deemed by the Board of Directors to be appropriate for such
purpose;
|
“Closing
Date”
means
the date on which the transactions contemplated by the Acquisition Agreement
are
completed;
"Common
Shares"
means
the common shares in the capital of the Corporation;
"Corporation"
means
Cold Flow Energy ULC, a corporation incorporated under the ABCA;
"Current
Market Price"
means,
in respect of an Acquiror Share on any date, the Canadian Dollar Equivalent
of
the average of the closing bid and asked prices of Acquiror Shares during
a
period of 20 consecutive trading days ending not more than three trading
days before such date on any stock exchange on which the Acquiror Shares
are
then listed, or, if the Acquiror Shares are not then listed on a stock exchange,
on or through such other exchange or automated quotation system on which
the
Acquiror Shares are listed or quoted, as the case may be, as may be selected
by
the Board of Directors for such purpose; provided, however, that if in the
opinion of the Board of Directors the public distribution or trading activity
of
Acquiror Shares during such period does not create a market which reflects
the
fair market value of an Acquiror Share, then the Current Market Price of
an
Acquiror Share shall be determined by the Board of Directors, in good faith
and
in its sole discretion, and provided further that any such selection, opinion
or
determination by the Board of Directors shall be conclusive and
binding;
"Exchangeable
Shares"
mean
the non-voting exchangeable shares in the capital of the Corporation, having
the
rights, privileges, restrictions and conditions set forth
herein;
-2-
"Exchangeable
Share Consideration"
means,
with respect to each Exchangeable Share, for any acquisition of, redemption
of
or distribution of assets of the Corporation in respect of, or purchase pursuant
to, these share provisions, the Support Agreement or the Voting and Exchange
Trust Agreement:
(a)
|
the
Current Market Price of two Acquiror Shares deliverable in connection
with
such action; plus
|
(b)
|
a
cheque or cheques payable at par at any branch of the bankers of
the payor
in the amount of all declared, payable and unpaid, and all undeclared
but
payable, cash dividends deliverable in connection with such action;
plus
|
(c)
|
such
stock or other property constituting any declared and unpaid non-cash
dividends deliverable in connection with such action,
|
provided
that (i) the part of the consideration which represents (a) above
shall be fully paid and satisfied by the delivery of two Acquiror Shares,
such
shares to be duly issued, fully paid and non-assessable, (ii) the part of
the consideration which represents (c) above shall be fully paid and
satisfied by delivery of such non-cash items, (iii) any such consideration
shall be delivered free and clear of any lien, claim, encumbrance, security
interest or adverse claim or interest and (iv) any such consideration shall
be paid less any tax required to be deducted and withheld therefrom and without
interest;
"Exchangeable
Share Price"
means,
for each Exchangeable Share, an amount equal to the aggregate of:
(a)
|
the
Current Market Price of two Acquiror Shares; plus
|
(b)
|
an
additional amount equal to the full amount of all cash dividends
declared,
payable and unpaid, on such Exchangeable Share; plus
|
(c)
|
an
additional amount equal to the full amount of all dividends declared
and
payable or paid on Acquiror Shares which have not been declared
or paid on
Exchangeable Shares in accordance herewith; plus
|
(d)
|
an
additional amount representing the full amount of all non-cash
dividends
declared, payable and unpaid, on such Exchangeable Share;
|
"Exchangeable
Share Voting Event"
means
any matter in respect of which Holders of Exchangeable Shares are entitled
to
vote as shareholders of the Corporation, other than an Exempt Exchangeable
Share
Voting Event, and, for greater certainty, excluding any matter in respect
of
which Holders of Exchangeable Shares are entitled to vote (or instruct the
Trustee to vote) in their capacity as Beneficiaries under (and as that term
is
defined in) the Voting and Exchange Trust Agreement;
-3-
"Exempt
Exchangeable Share Voting Event"
means
any matter in respect of which Holders of Exchangeable Shares are entitled
to
vote as shareholders of the Corporation in order to approve or disapprove,
as
applicable, any change to, or in the rights of the Holders of, the Exchangeable
Shares, where the approval or disapproval, as applicable, of such change
would
be required to maintain the equivalence of the Exchangeable Shares and the
Acquiror Shares;
"Governmental
Entity"
means
any (a) multinational, federal, provincial, territorial, state, regional,
municipal, local or other government, governmental or public department,
central
bank, court, tribunal, arbitral body, commission, board, bureau or agency,
domestic or foreign, (b) subdivision, agent, commission, board, or
authority of any of the foregoing, or (c) quasi-governmental or private
body exercising any regulatory, expropriation or taxing authority under or
for
the account of any of the foregoing;
"Holder"
means,
when used with reference to the Exchangeable Shares, the holders of Exchangeable
Shares shown from time to time in the register maintained by or on behalf
of the
Corporation in respect of the Exchangeable Shares;
"Liquidation
Amount"
has the
meaning ascribed thereto in Section 5.1 of these share
provisions;
"Liquidation
Date"
has the
meaning ascribed thereto in Section 5.1 of these share
provisions;
“Other
Corporation”
has
the
meaning ascribed thereto in Section 11.3(c) of these share
provisions;
“Other
Shares”
has
the
meaning ascribed thereto in Section 11.3(c) of these share
provisions;
“Peace”
means
Peace Oil Corp., a corporation incorporated under the ABCA;
“Peace
Shares”
means
all of the issued and outstanding shares in the capital of Peace of any class
or
series;
"Person"
includes any individual, firm, partnership, joint venture, venture capital
fund,
limited liability company, unlimited liability company, association, trust,
trustee, executor, administrator, legal personal representative, estate,
group,
body corporate, corporation, unincorporated association or organization,
Governmental Entity, syndicate or other entity, whether or not having legal
status;
-4-
"Redemption
Date"
means
the date, if any, established by the Board of Directors for the redemption
by
the Corporation of all but not less than all of the outstanding Exchangeable
Shares pursuant to Article 7
of these
share provisions, which date shall be no earlier than the third
anniversary of the Closing Date, unless:
(a)
|
there
are less than 1,000,000
Exchangeable Shares outstanding (other than Exchangeable Shares
held by
Acquiror and its Affiliates);
|
(b)
|
an
Acquiror Control Transaction occurs, in which case, provided that
the
Board of Directors determines, in good faith and in its sole discretion,
that it is not reasonably practicable to substantially replicate
the terms
and conditions of the Exchangeable Shares in connection with such
an
Acquiror Control Transaction and that the redemption of all but
not less
than all of the outstanding Exchangeable Shares is necessary to
enable the
completion of such Acquiror Control Transaction in accordance with
its
terms, the Board of Directors may accelerate such redemption date
to such
date prior to the third
anniversary of the Closing Date as it may determine, upon such
number of
days' prior written notice to the registered Holders of the Exchangeable
Shares and the Trustee as the Board of Directors may determine
to be
reasonably practicable in such circumstances;
|
(c)
|
an
Exchangeable Share Voting Event is proposed, in which case, provided
that
the Board of Directors has determined, in good faith and in its
sole
discretion, that it is not reasonably practicable to accomplish
the
business purpose intended by the Exchangeable Share Voting Event,
which
business purpose must be bona
fide
and not for the primary purpose of causing the occurrence of a
Redemption
Date, the redemption date shall be the Business Day prior to the
record
date for any meeting or vote of the holders of the Exchangeable
Shares to
consider the Exchangeable Share Voting Event and the Board of Directors
shall give such number of days' prior written notice of such redemption
to
the registered Holders of the Exchangeable Shares and the Trustee
as the
Board of Directors may determine to be reasonably practicable in
such
circumstances; or
|
(d)
|
an
Exempt Exchangeable Share Voting Event is proposed and the Holders
of the
Exchangeable Shares fail to take the necessary action at a meeting
or
other vote of Holders of Exchangeable Shares, to approve or disapprove,
as
applicable, the Exempt Exchangeable Share Voting Event, in which
case the
redemption date shall be the Business Day following the day on
which the
Holders of the Exchangeable Shares failed to take such
action,
|
-5-
provided,
however, that the accidental failure or omission to give any notice of
redemption under clauses (a), (b) or (c) above to any of such Holders of
Exchangeable Shares shall not affect the validity of any such
redemption;
"Redemption
Price"
has the
meaning ascribed thereto in Section 7.1
of these
share provisions;
"Retracted
Shares"
has the
meaning ascribed thereto in Section 6.1(a)
of these
share provisions;
"Retraction
Date"
has the
meaning ascribed thereto in Section 6.1(b)
of these
share provisions;
"Retraction
Price"
has the
meaning ascribed thereto in Section 6.1
of these
share provisions;
"Retraction
Request"
has the
meaning ascribed thereto in Section 6.1
of these
share provisions;
"Securities
Act"
means
the Securities
Act
(Alberta) and the rules, regulations and policies made thereunder, as now
in
effect and as they may be amended from time to time;
“Shareholders”
means
collectively, 1216848 Alberta Ltd., Cairns Family Trust, Xxxxxx Family Trust,
Liu Family Trust, Ma Family Trust, Southearted Trust, 1229697 Alberta Inc.,
Xxxx
Xxxxxx and Xxxx X. Xxxxxx;
“Subdivision”
has
the
meaning ascribed thereto in Section 3.2 of these share provisions;
"Support
Agreement"
means
the agreement dated l,
2007
made between Acquiror and the Corporation;
"Transfer
Agent"
means
such Person as may from time to time be appointed by the Corporation as the
registrar and transfer agent for the Exchangeable Shares;
"Trustee"
means
Computershare Trust Company of Canada or such other trustee as is chosen
by
Acquiror and Shareholders, acting reasonably, to act as trustee under the
Voting
and Exchange Trust Agreement, being a corporation organized and existing
under
the laws of Canada, and any successor trustee appointed under the Voting
and
Exchange Trust Agreement; and
-6-
"Voting
and Exchange Trust Agreement"
means
the agreement dated l,
2007
made among Acquiror, the Corporation and the Trustee.
ARTICLE 2
RANKING
OF EXCHANGEABLE SHARES
2.1
|
The
Exchangeable Shares shall be entitled to a preference over the
Common
Shares and any other shares ranking junior to the Exchangeable
Shares with
respect to the payment of dividends and the distribution of assets
in the
event of the liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, or any other distribution of
the assets
of the Corporation, among its shareholders for the purpose of winding-up
its affairs.
|
ARTICLE 3
DIVIDENDS
3.1
|
A
Holder of an Exchangeable Share shall be entitled to receive and
the Board
of Directors shall, subject to applicable law, on each Acquiror
Dividend
Declaration Date, declare a dividend on each Exchangeable
Share:
|
(a)
|
in
the case of a cash dividend declared on the Acquiror Shares, in
an amount
in cash for each Exchangeable Share in U.S. dollars, or the Canadian
Dollar Equivalent thereof on the Acquiror Dividend Declaration
Date, in
each case, corresponding to the cash dividend declared on each
Acquiror
Share;
|
(b)
|
in
the case of a stock dividend declared on the Acquiror Shares, to
be paid
in Acquiror Shares, subject to Section 3.2,
by the issue or transfer by the Corporation of such number of Exchangeable
Shares for each Exchangeable Share as is equal to the number of
Acquiror
Shares to be paid on each Acquiror Share; or
|
(c)
|
in
the case of a dividend declared on the Acquiror Shares in property
other
than cash or Acquiror Shares, in such type and amount of property
for each
Exchangeable Share as is the same as or economically equivalent
to (to be
determined by the Board of Directors as contemplated by
Section 3.6)
the type and amount of property declared as a dividend on each
Acquiror
Share.
|
-7-
Such
dividends shall be paid out of money, assets or property of the Corporation
properly applicable to the payment of dividends, or out of authorized but
unissued shares of the Corporation, as applicable.
3.2
|
In
the case of a stock dividend declared on the Acquiror Shares to
be paid in
Acquiror Shares, in lieu of declaring the stock dividend contemplated
by
Section 3.1(b)
on
the Exchangeable Shares, the Board of Directors may, in good faith
and in
its discretion and subject to applicable law and to obtaining all
required
regulatory approvals, subdivide, redivide or change (the "Subdivision")
each issued and unissued Exchangeable Share on the basis that each
Exchangeable Share before the subdivision becomes a number of Exchangeable
Shares equal to the sum of (i) one Acquiror Share and (ii) the
number of Acquiror Shares to be paid as a share dividend on each
Acquiror
Share. In making such Subdivision, the Board of Directors shall
consider
the effect thereof upon the then outstanding Exchangeable Shares
and the
general taxation consequences of the Subdivision to the Holders
of the
Exchangeable Shares. In such instance, and notwithstanding any
other
provision hereof, such Subdivision shall become effective on the
effective
date specified in Section 3.4
without any further act or formality on the part of the Board of
Directors
or of the Holders of Exchangeable Shares. For greater certainty,
subject
to applicable law, no approval of the Holders to an amendment to
the
articles of the Corporation shall be required to give effect to
such
Subdivision.
|
3.3
|
Cheques
of the Corporation payable at par at any branch of the bankers
of the
Corporation shall be issued in respect of any cash dividends contemplated
by Section 3.1(a)
and the sending of such a cheque to each Holder of an Exchangeable
Share
shall satisfy the cash dividend represented thereby unless the
cheque is
not paid on presentation. Subject to applicable law, certificates
registered in the name of the registered Holder of Exchangeable
Shares
shall be issued or transferred in respect of any stock dividends
contemplated by Section 3.1(b)
or
any Subdivision contemplated by Section 3.2
and the sending of such a certificate to each Holder of an Exchangeable
Share shall satisfy the stock dividend represented thereby. Such
other
type and amount of property in respect of any dividends contemplated
by
Section 3.1(c)
shall be issued, distributed or transferred by the Corporation
in such
manner as it shall determine and the issuance, distribution or
transfer
thereof by the Corporation to each Holder of an Exchangeable Share
shall
satisfy the dividend represented thereby. No Holder of an Exchangeable
Share shall be entitled to recover by action or other legal process
against the Corporation any dividend that is represented by a cheque
that
has not been duly presented to the Corporation's bankers for payment
or
that otherwise remains unclaimed for a period of six years from
the date
on which such dividend was first payable.
|
-8-
3.4
|
The
record date for the determination of the Holders of Exchangeable
Shares
entitled to receive payment of, and the payment date for, any dividend
declared on the Exchangeable Shares under Section 3.1
shall be the same dates as the record date and payment date, respectively,
for the corresponding dividend declared on the Acquiror Shares.
The record
date for the determination of the Holders of Exchangeable Shares
entitled
to receive Exchangeable Shares in connection with any Subdivision
of the
Exchangeable Shares under Section 3.2
and the effective date of such Subdivision shall be the same dates
as the
record date and payment date, respectively, for the corresponding
dividend
declared on the Acquiror Shares.
|
3.5
|
If
on any payment date for any dividends declared on the Exchangeable
Shares
under Section 3.1
the dividends are not paid in full on all of the Exchangeable Shares
then
outstanding, any such dividends that remain unpaid shall be paid
on the
earliest subsequent date or dates determined by the Board of Directors
on
which the Corporation shall have sufficient moneys, assets or property
properly applicable to the payment of such dividends.
|
3.6
|
The
Board of Directors shall determine, in good faith and in its sole
discretion, economic equivalence for the purposes of
Sections 3.1
and 3.2
and Article 11,
and each such determination shall be conclusive and binding on
the
Corporation and its shareholders. In making each such determination,
the
following factors shall, without excluding other factors determined
by the
Board of Directors to be relevant, be considered by the Board of
Directors:
|
(a)
|
in
the case of any stock dividend or other distribution payable in
Acquiror
Shares, the number of such shares issued in proportion to the number
of
Acquiror Shares previously outstanding;
|
(b)
|
in
the case of the issuance or distribution of any rights, options
or
warrants to subscribe for or purchase Acquiror Shares (or securities
exchangeable for or convertible into or carrying rights to acquire
Acquiror Shares), the relationship between the exercise price of
each such
right, option or warrant and the Current Market Price, the volatility
of
the Acquiror Shares and the term of any such instrument;
|
(c)
|
in
the case of the issuance or distribution of any other form of property
(including any shares or securities of Acquiror of any class other
than
Acquiror Shares, any rights, options or warrants other than those
referred
to in Section 3.6(b)
above, any evidences of indebtedness of Acquiror or any assets
of
Acquiror) the relationship between the fair market value (as determined
by
the Board of Directors in the manner above contemplated) of such
property
to be issued or distributed with respect to each outstanding Acquiror
Share and the Current Market Price; and
|
-9-
(d)
|
in
all such cases, the general taxation consequences of the relevant
event to
Holders of Exchangeable Shares to the extent that such consequences
may
differ from the taxation consequences to Holders of Acquiror Shares
as a
result of differences between taxation laws of Canada and the United
States (except for any differing consequences arising as a result
of
differing marginal taxation rates and without regard to the individual
circumstances of Holders of Exchangeable Shares).
|
3.7
|
Except
as provided in this Article 3,
the Holders of Exchangeable Shares shall not be entitled to receive
dividends in respect thereof.
|
ARTICLE 4
CERTAIN
RESTRICTIONS
4.1
|
So
long as any of the Exchangeable Shares are outstanding, the Corporation
shall not at any time without, but may at any time with, the approval
of
the Holders of the Exchangeable Shares given as specified in
Section 10.2
of
these share provisions:
|
(a)
|
pay
any dividends on the Common Shares or any other shares ranking
junior to
the Exchangeable Shares with respect to the payment of dividends,
other
than stock dividends payable in Common Shares or any such other
shares
ranking junior to the Exchangeable Shares, as the case may
be;
|
(b)
|
redeem
or purchase or make any capital distribution in respect of Common
Shares
or any other shares ranking junior to the Exchangeable Shares with
respect
to the payment of dividends or on any liquidation, dissolution
or
winding-up of the Corporation or any other distribution of the
assets of
the Corporation;
|
(c)
|
redeem
or purchase or make any capital distribution in respect of any
other
shares of the Corporation ranking equally with the Exchangeable
Shares
with respect to the payment of dividends or on any liquidation,
dissolution or winding-up of the Corporation or any other distribution
of
the assets of the Corporation; or
|
(d)
|
issue
any Exchangeable Shares or any other shares of the Corporation
ranking
equally with, or superior to, the Exchangeable Shares other than
by way of
stock dividends to the Holders of such Exchangeable Shares;
|
-10-
provided
that the restrictions in Sections 4.1(a),
(b),
(c)
and (d)
shall
not apply if all dividends on the outstanding Exchangeable Shares corresponding
to dividends declared and paid to date on the Acquiror Shares shall have
been
declared and paid on the Exchangeable Shares.
ARTICLE 5
DISTRIBUTION
ON LIQUIDATION
5.1
|
In
the event of the liquidation, dissolution or winding-up of the
Corporation
or any other distribution of the assets of the Corporation among
its
shareholders for the purpose of winding up its affairs, a Holder
of
Exchangeable Shares shall be entitled, subject to applicable law,
to
receive from the assets of the Corporation in respect of each Exchangeable
Share held by such Holder on the effective date (the "Liquidation
Date")
of such liquidation, dissolution, winding-up or distribution of
assets,
before any distribution of any part of the assets of the Corporation
among
the Holders of the Common Shares or any other shares ranking junior
to the
Exchangeable Shares, an amount per share equal to the Exchangeable
Share
Price applicable on the last Business Day prior to the Liquidation
Date
(the "Liquidation
Amount").
|
5.2
|
On
or promptly after the Liquidation Date, the Corporation shall cause
to be
delivered to the Holders of the Exchangeable Shares the Liquidation
Amount
for each such Exchangeable Share upon presentation and surrender
of the
certificates representing such Exchangeable Shares, together with
such
other documents and instruments as may be required to effect a
transfer of
Exchangeable Shares under the ABCA and the articles and by-laws
of the
Corporation and such additional documents and instruments as the
Transfer
Agent, if any, and the Corporation may reasonably require, at the
registered office of the Corporation or at any office of the Transfer
Agent, if any, as may be specified by the Corporation by notice
to the
Holders of the Exchangeable Shares. Payment of the total Liquidation
Amount for such Exchangeable Shares shall be made by delivery to
each
Holder, at the address of the Holder recorded in the register of
the
Corporation for the Exchangeable Shares or by holding for pick-up
by the
Holder at the registered office of the Corporation or at any office
of the
Transfer Agent, if any, as may be specified by the Corporation
by notice
to the Holders of Exchangeable Shares, on behalf of the Corporation
of the
Exchangeable Share Consideration representing the total Liquidation
Amount. On and after the Liquidation Date, the Holders of the Exchangeable
Shares shall cease to be Holders of such Exchangeable Shares and
shall not
be entitled to exercise any of the rights of Holders in respect
thereof
(including any rights under the Voting and Exchange Trust Agreement),
other than the right to receive their proportionate part of the
total
Liquidation Amount, unless payment of the total Liquidation
Amount for such Exchangeable Shares shall not be made upon presentation
and surrender of share certificates in accordance with the foregoing
provisions, in which case the rights of the Holders shall remain
unaffected until the total Liquidation Amount to which such Holders
are
entitled shall have been paid to such Holders in the manner hereinbefore
provided. The Corporation shall have the right at any time on or
before
the Liquidation Date to deposit or cause to be deposited the Exchangeable
Share Consideration in respect of the Exchangeable Shares represented
by
certificates that have not at the Liquidation Date been surrendered
by the
Holders thereof in a custodial account with any chartered bank
or trust
company in Canada. Upon such deposit being made, the rights of
the Holders
of Exchangeable Shares, after such deposit, shall be limited to
receiving
their proportionate part of the total Liquidation Amount for such
Exchangeable Shares so deposited, against presentation and surrender
of
the said certificates held by them, respectively, in accordance
with the
foregoing provisions. Upon such payment or deposit of such Exchangeable
Share Consideration, the Holders of the Exchangeable Shares shall
thereafter be considered and deemed for all purposes to be holders
of the
Acquiror Shares delivered to them or the custodian on their
behalf.
|
-11-
5.3
|
After
the Corporation has satisfied its obligations to pay the Holders
of the
Exchangeable Shares the Liquidation Amount per Exchangeable Share
pursuant
to Section 5.1
of
these share provisions, such Holders shall not be entitled to share
in any
further distribution of the assets of the Corporation.
|
ARTICLE 6
RETRACTION
OF EXCHANGEABLE SHARES BY HOLDER
6.1
|
A
Holder of Exchangeable Shares shall be entitled at any time, upon
compliance with the provisions of this Article 6,
to require the Corporation to redeem any or all of the Exchangeable
Shares
registered in the name of such Holder for an amount per share equal
to the
Exchangeable Share Price applicable on the last Business Day prior
to the
Retraction Date (the "Retraction
Price"),
which shall be satisfied in full by the Corporation causing to
be
delivered to such Holder the Exchangeable Share Consideration representing
the Retraction Price. To effect such redemption, the Holder shall
present
and surrender at the registered office of the Corporation or at
any office
of the Transfer Agent, if any, as may be specified by the Corporation
by
notice to the Holders of Exchangeable Shares, the certificate or
certificates representing the Exchangeable Shares which the Holder
desires
to have the Corporation redeem, together with such other documents
and
instruments as may be required to effect a transfer of Exchangeable
Shares
under the ABCA and the articles and by-laws of the Corporation
and such
additional documents and instruments as the Transfer Agent, if
any, and
the Corporation may reasonably require, and together with a duly
executed
statement (the "Retraction
Request")
in the form of Schedule “A” hereto or in such other form as may be
acceptable to the Corporation:
|
-12-
(a)
|
specifying
that the Holder desires to have all or any number specified therein
of the
Exchangeable Shares represented by such certificate or certificates
(the
"Retracted
Shares")
redeemed by the Corporation; and
|
(b)
|
stating
the Business Day on which the Holder desires to have the Corporation
redeem the Retracted Shares (the "Retraction
Date"),
provided that the Retraction Date shall be not less than 10 Business
Days nor more than 15 Business Days after the date on which the
Retraction Request is received by the Corporation and further provided
that, in the event that no such Business Day is specified by the
Holder in
the Retraction Request, the Retraction Date shall be deemed to
be the
15th
Business Day after the date on which the Retraction Request is
received by
the Corporation.
|
6.2
|
Upon
receipt by the Corporation or the Transfer Agent, if any, in the
manner
specified in Section 6.1
of
a certificate or certificates representing the number of Retracted
Shares,
together with a Retraction Request and such additional documents
and
instruments as the Transfer Agent, if any, and the Corporation
may
reasonably require, and provided that the Retraction Request is
not
revoked by the Holder in the manner specified in Section 6.6,
the Corporation shall redeem the Retracted Shares effective at
the close
of business on the Retraction Date and shall cause to be delivered
to such
Holder the total Retraction Price with respect to such shares in
accordance with Section 6.3.
If only a part of the Exchangeable Shares represented by any certificate
is redeemed, a new certificate for the balance of such Exchangeable
Shares
shall be issued to the Holder at the expense of the
Corporation.
|
6.3
|
The
Corporation shall deliver or cause the Transfer Agent, if any,
to deliver
to the relevant Holder, at the address of the Holder recorded in
the
register of the Corporation for the Exchangeable Shares or at the
address
specified in the Holder's Retraction Request or, if specified in
such
Retraction Request, by holding for pick-up by the Holder at the
registered
office of the Corporation or at any office of the Transfer Agent,
if any,
as may be specified by the Corporation by notice to such Holder
of
Exchangeable Shares, the Exchangeable Share Consideration representing
the
total Retraction Price and such delivery of such Exchangeable Share
Consideration to the Holder or the Transfer Agent, if any, shall
be deemed
to be payment of and shall satisfy and discharge all liability
for the
total Retraction Price to the extent that the same is represented
by such
Exchangeable Share
Consideration.
|
-13-
6.4
|
On
and after the close of business on the Retraction Date, the Holder
of the
Retracted Shares shall cease to be a Holder of such Retracted Shares
and
shall not be entitled to exercise any of the rights of a Holder
in respect
thereof, other than the right to receive the total Retraction Price
unless
upon presentation and surrender of certificates in accordance with
the
foregoing provisions, payment of the total Retraction Price shall
not be
made as provided in Section 6.3,
in which case the rights of such Holder shall remain unaffected
until the
total Retraction Price has been paid in the manner hereinbefore
provided.
On and after the close of business on the Retraction Date, provided
that
presentation and surrender of certificates and payment of the total
Retraction Price has been made in accordance with the foregoing
provisions, the Holder of the Retracted Shares so redeemed by the
Corporation shall thereafter be considered and deemed for all purposes
to
be the holder of Acquiror Shares delivered to it.
|
6.5
|
Notwithstanding
any other provision of this Article 6,
the Corporation shall not be obligated to redeem Retracted Shares
specified by a Holder in a Retraction Request to the extent that
such
redemption of Retracted Shares would be contrary to solvency requirements
or other provisions of applicable law. If the Corporation believes,
acting
reasonably, that on any Retraction Date it would not be permitted
by any
of such provisions to redeem the Retracted Shares tendered for
redemption
on such date, the Corporation shall only be obligated to redeem
Retracted
Shares specified by a Holder in a Retraction Request to the extent
of the
maximum number that may be so redeemed (rounded down to a whole
number of
shares) as would not be contrary to such provisions and shall notify
the
Holder at least two Business Days prior to the Retraction Date
as to the
number of Retracted Shares which will not be redeemed by the Corporation.
In any case in which the redemption by the Corporation of Retracted
Shares
would be contrary to solvency requirements or other provisions
of
applicable law, the Corporation shall redeem the maximum number
of
Exchangeable Shares which the Board of Directors determines the
Corporation is permitted to redeem as of the Retraction Date on
a
pro
rata
basis and shall issue to each Holder of Retracted Shares a new
certificate, at the expense of the Corporation, representing the
Retracted
Shares not redeemed by the Corporation pursuant to
Section 6.2.
Provided that the Retraction Request is not revoked by the Holder
in the
manner specified in Section 6.6,
the Holder of any such Retracted Shares not redeemed by the Corporation
pursuant to Section 6.2
as
a result of solvency requirements or other provisions of applicable
law
shall be deemed by giving the Retraction Request to have instructed
the
Trustee to require Acquiror to purchase such Retracted Shares from
such
Holder on the Retraction Date or as soon as practicable thereafter
on
payment by Acquiror to such Holder of the Retraction Price for
each such
Retracted Share, all as more specifically provided in the Voting
and
Exchange Trust Agreement.
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6.6
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A
Holder of Retracted Shares may, by notice in writing given by the
Holder
to the Corporation before the close of business on the Business
Day
immediately preceding the Retraction Date, withdraw its Retraction
Request, in which event such Retraction Request shall be null and
void.
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ARTICLE 7
REDEMPTION
OF EXCHANGEABLE SHARES BY THE CORPORATION
7.1
|
Subject
to applicable law, the Corporation shall on the Redemption Date
redeem all
but not less than all of the then outstanding Exchangeable Shares
for an
amount per share equal to the Exchangeable Share Price applicable
on the
last Business Day prior to the Redemption Date (the "Redemption
Price").
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7.2
|
In
any case of a redemption of Exchangeable Shares under this Article 7,
the Corporation shall, at least 45 days before the Redemption Date
(other than a Redemption Date established in connection with an
Acquiror
Control Transaction, an Exchangeable Share Voting Event or an Exempt
Exchangeable Share Voting Event), send or cause to be sent to each
Holder
of Exchangeable Shares a notice in writing of the redemption by
the
Corporation of the Exchangeable Shares held by such Holder. In
the case of
a Redemption Date established in connection with an Acquiror Control
Transaction, an Exchangeable Share Voting Event or an Exempt Exchangeable
Share Voting Event, the written notice of redemption by the Corporation
will be sent on or before the Redemption Date, on as many days
prior
written notice as may be determined by the Board of Directors to
be
reasonably practicable in the circumstances. In any such case,
such notice
shall set out the formula for determining the Redemption Price
and the
Redemption Date. In the case of any notice given in connection
with a
possible Redemption Date, such notice will be given contingently
and will
be withdrawn if the contingency does not occur.
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7.3
|
On
or after the Redemption Date, the Corporation shall cause to be
delivered
to the Holders of the Exchangeable Shares to be redeemed the Redemption
Price for each such Exchangeable Share upon presentation and surrender
at
the registered office of the Corporation or at any office of the
Transfer
Agent, if any, as may be specified by the Corporation in the notice
described in Section 6.6
of
the certificates representing such Exchangeable Shares, together
with such
other documents and instruments as may be required to effect a
transfer of
Exchangeable Shares under the ABCA and the articles and by-laws
of the
Corporation and such additional documents and instruments as the
Transfer
Agent, if any, and the Corporation may reasonably require.
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Payment
of the total Redemption Price for such Exchangeable Shares shall
be made
by delivery to each Holder, at the address of the Holder recorded
in the
securities register of the Corporation or by holding for pick-up
by the
Holder at the registered office of the Corporation or at any office
of the
Transfer Agent, if any, as may be specified by the Corporation
in such
notice, on behalf of the Corporation of the Exchangeable Share
Consideration representing the total Redemption Price. On and after
the
Redemption Date, the Holders of the Exchangeable Shares called
for
redemption shall cease to be Holders of such Exchangeable Shares
and shall
not be entitled to exercise any of the rights of Holders in respect
thereof, other than the right to receive their proportionate part
of the
total Redemption Price, unless payment of the total Redemption
Price for
such Exchangeable Shares shall not be made upon presentation and
surrender
of certificates in accordance with the foregoing provisions, in
which case
the rights of the Holders shall remain unaffected until the total
Redemption Price has been paid in the manner hereinbefore provided.
The
Corporation shall have the right at any time after the sending
of notice
of its intention to redeem the Exchangeable Shares as aforesaid
to deposit
or cause to be deposited the Exchangeable Share Consideration with
respect
to the Exchangeable Shares so called for redemption, or of such
of the
said Exchangeable Shares represented by certificates that have
not at the
date of such deposit been surrendered by the Holders thereof in
connection
with such redemption, in a custodial account with any chartered
bank or
trust company in Canada named in such notice. Upon the later of
such
deposit being made and the Redemption Date, the Exchangeable Shares
in
respect whereof such deposit shall have been made shall be redeemed
and
the rights of the Holders thereof after such deposit or Redemption
Date,
as the case may be, shall be limited to receiving their proportionate
part
of the total Redemption Price for such Exchangeable Shares so deposited,
against presentation and surrender of the said certificates held
by them,
respectively, in accordance with the foregoing provisions. Upon
such
payment or deposit of such Exchangeable Share Consideration, the
Holders
of the Exchangeable Shares shall thereafter be considered and deemed
for
all purposes to be holders of Acquiror Shares delivered to them
or the
custodian on their behalf.
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Article 8
PURCHASE
FOR CANCELLATION
8.1
|
Subject
to applicable law and the articles of the Corporation and notwithstanding
Section 8.2,
the Corporation may at any time and from time to time purchase
for
cancellation all or any part of the Exchangeable Shares by private
agreement with any Holder of Exchangeable
Shares.
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8.2
|
Subject
to applicable law and the articles of the Corporation, the Corporation
may
at any time and from time to time purchase for cancellation all
or any
part of the outstanding Exchangeable Shares by tender to all the
Holders
of record of Exchangeable Shares then outstanding or through the
facilities of any stock exchange on which the Exchangeable Shares
are
listed or quoted, if any, at any price per share together with
an amount
equal to all declared and unpaid dividends thereon for which the
record
date has occurred prior to the date of purchase. If in response
to an
invitation for ten |