EXHIBIT 2.1
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28 OCTOBER 2004
ENCANA (U.K.) HOLDINGS LIMITED
NEXEN ENERGY HOLDINGS INTERNATIONAL LIMITED
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AGREEMENT
FOR THE SALE AND PURCHASE OF
ENCANA (U.K.) LIMITED
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[GRAPHIC OMITTED]
LOGO FRESHFIELDS BRUCKHAUS ▇▇▇▇▇▇▇▇
CONTENTS
CLAUSE PAGE
1. SALE AND PURCHASE..........................................................1
2. PRICE......................................................................2
3. CONDITIONS TO CLOSING......................................................8
4. PRE-CLOSING UNDERTAKINGS..................................................10
5. CLOSING...................................................................10
6. REDEMPTION OF PREFERENCE SHARES...........................................10
7. WARRANTIES AND UNDERTAKINGS...............................................11
8. ENVIRONMENT AND DECOMMISSIONING...........................................13
9. ▇▇▇▇▇ ▇▇▇▇▇▇▇ INDEMNITY...................................................14
10. CONDUCT OF CLAIMS.........................................................16
11. EMPLOYEES.................................................................17
12. NO RIGHTS OF RESCISSION OR TERMINATION....................................18
13. TAX.......................................................................18
14. INSURANCE.................................................................19
15. CHANGES OF NAME...........................................................20
16. PAYMENTS..................................................................21
17. DEALING WITH AND VOTING ON THE SHARES.....................................21
18. RELEASE AND INDEMNITY FOR OUTSTANDING GUARANTEES..........................22
19. ANNOUNCEMENTS.............................................................22
20. CONFIDENTIALITY...........................................................23
21. ASSIGNMENT................................................................25
22. FURTHER ASSURANCES........................................................25
23. COSTS.....................................................................25
24. NOTICES...................................................................26
25. CONFLICT WITH OTHER AGREEMENTS............................................28
26. ENTIRE AGREEMENT..........................................................28
27. WAIVERS, RIGHTS AND REMEDIES..............................................29
28. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999.............................29
29. GENERAL...................................................................30
30. INTERPRETATION............................................................31
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31. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS.......................31
SCHEDULE 1....................................................................32
PART A DETAILS OF THE COMPANY............................................32
PART B DETAILS OF SUBSIDIARIES OF THE COMPANY............................33
PART C LICENCES..........................................................35
SCHEDULE 2 SELLER WARRANTIES..................................................37
PART A GENERAL/COMMERCIAL................................................37
PART B IP/IT.............................................................48
PART C REAL ESTATE.......................................................49
PART D TAXATION..........................................................51
PART E ENVIRONMENT.......................................................55
PART F EMPLOYMENT........................................................56
PART G PENSIONS..........................................................58
SCHEDULE 3 LIMITATIONS ON LIABILITY...........................................60
SCHEDULE 4 PURCHASER WARRANTIES...............................................66
SCHEDULE 5....................................................................68
CONDUCT OF THE TARGET COMPANIES PRE-CLOSING..............................68
SCHEDULE 6 CLOSING ARRANGEMENTS...............................................72
SCHEDULE 7 PROPERTIES.........................................................75
SCHEDULE 8 TAX COVENANT.......................................................77
SCHEDULE 9 FINANCIAL ADJUSTMENTS..............................................93
PART A...................................................................93
PART B FORM OF THE FINAL CLOSING STATEMENT...............................95
PART C INTERIM STATEMENT AND CLOSING STATEMENT FORMAT....................96
SCHEDULE 10 INTERPRETATION....................................................97
ANNEX 1......................................................................111
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THIS AGREEMENT is made on 28 October 2004.
BETWEEN:
(1) ENCANA (U.K.) HOLDINGS LIMITED a company incorporated in England
(registered number 4825184) whose registered office is at ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇ (▇▇▇ SELLER); and
(2) NEXEN ENERGY HOLDINGS INTERNATIONAL LIMITED a company incorporated in
Jersey, Channel Islands (registered number 60007) whose registered office
is at St ▇▇▇▇▇ House, New St ▇▇▇▇▇ Place, St Helier, Jersey, JE4 8WH
Channel Islands (the PURCHASER).
WHEREAS:
(A) EnCana (U.K.) Limited (the COMPANY) is a private company limited by
shares incorporated in England. The Seller is the sole legal and beneficial
owner of the issued share capital of the Company.
(B) The Seller has agreed to sell and the Purchaser has agreed to purchase
all of the issued share capital of the Company on the terms and subject to the
conditions set out in the Transaction Documents.
IT IS AGREED as follows:
1. SALE AND PURCHASE
1.1 Subject to and in accordance with this Agreement and the Debt Assignment
Deed, the Seller shall sell and transfer, and the Purchaser shall purchase:
(a) the Shares; and
(b) the Holdings Loan and Intra-Group Debt,
with Full Title Guarantee and free from all Encumbrances with effect from
Closing, together with all rights attaching to them at Closing including in the
case of (a) the right to receive all distributions and dividends declared, paid
or made in respect of the Shares after Closing.
1.2 The Seller irrevocably waives any rights of pre-emption conferred on it
by the articles of association of the Company or otherwise over any of the
Shares.
1.3 The Parties acknowledge that the transfer of the Shares shall be
completed on the basis of the share transfer and other arrangements set out or
referred to in Clause 5 (Closing) and Schedule 6 (Closing Arrangements).
1.4 Subject to Clauses 1.5 and 1.6 below, the Purchaser is allowed to serve
written notice on the Seller not later than the Record Date, to elect that the
Company shall, at Closing, redeem the Preference Shares at par in which event
Clause 6 shall apply.
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1.5 The Seller has the right (by written notice) to unilaterally terminate
Clause 1.4 in its absolute discretion.
1.6 The Seller has the right to reject the notice referred to in Clause 1.4
and if it exercises such right the Company shall not redeem the Preference
Shares.
2. PRICE
2.1 (a) The price for the Shares shall be $2,100,000,000 (the INITIAL
PRICE):
(i) minus the principal amount outstanding under the Holdings Loan
being $300,000,000;
(ii) minus the Intra-Group Payables as at the Economic Date;
(iii) plus or minus (as the case may be) the Economic Date Working
Capital;
(iv) plus interest as determined in accordance with Clause 2.3;
(v) plus an amount equal to simple interest at the Agreed Interest
Rate on the increase in the Intra-Group Debt from the Economic
Date until Closing, such interest sum being simple interest
calculated on each increase or decrease from the date of such
increase or decrease until (but not including) Closing;
(vi) minus an amount equal to the nominal value of the Preference
Shares (the REDEMPTION SUM) in the event that Clause 6 applies;
(vii) minus an amount equal to the difference between:
(A) the interest payable under the Holdings Loan for the period
from and including the Economic Date up to but not
including the Closing Date; and
(B) the amount which would have been payable had such interest
been calculated at the Agreed Interest Rate,
(the amount resulting from these additions and subtractions to the Initial Price
being the SHARE CONSIDERATION for the Shares) which shall be apportioned as
follows:
(aa) $1 for each Preference Share transferred; and
(bb) the balance of Share Consideration for the total
number of ordinary shares transferred.
(b) The price for the Holdings Loan shall be $300,000,000, plus any interest
accrued but not paid at the Closing Date such amount being referred to as
the HOLDINGS LOAN CONSIDERATION and is payable pursuant to the Holdings
Loan Assignment Deed (and, for the avoidance of doubt, not this
Agreement);
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(c) The price for the Intra-Group Debt shall be an amount equal to the par
value of the amount of the Intra-Group Debt at Closing such amount being
referred to as the DEBT CONSIDERATION and is payable pursuant to the Debt
Deed (and, for the avoidance of doubt, not this Agreement).
2.2 Where any sums are paid pursuant to a claim under Clause 7 (Warranties
and Undertakings), Clause 13 (Tax), Schedule 2 (Seller Warranties) and Schedule
8 (Tax Covenant) the same shall operate by way of increases or decreases, as the
case may be, to the Share Consideration.
INTEREST
2.3 The interest to be added to the Initial Price shall be an amount
equivalent to:
(a) simple interest calculated on the basis of a 360 day year on the Initial
Price plus or minus (as the case may be) the amount referred to in Clause
2.1(a)(iii) minus the amount referred to in Clause 2.1(a)(i) from and
including the Economic Date; less
(b) simple interest calculated on the basis of a 360 day year on an amount
equal to the Deposit from the date of this Agreement,
in each case at the Agreed Interest Rate from the respective dates in Clauses
2.3(a) and (b) up to but not including the Closing Date.
INTERIM CLOSING STATEMENT
2.4 The interim closing statement (the INTERIM CLOSING STATEMENT) specifying:
(a) the estimated Economic Date Working Capital;
(b) the estimated Intra-Group Payables as at the Economic Date;
(c) the estimated amounts under Clauses 2.1(a)(iv), 2.1(a)(v) and
2.1(a)(vii);
(d) the Closing Price; and
(e) an estimate of the amount referred to in Clause 2.1(c) (being the
ESTIMATED DEBT CONSIDERATION),
is set out in column A of Part C of Schedule 9.
PAYMENT AT CLOSING
2.5 At Closing, the Purchaser shall pay to the Seller in Dollars the Closing
Price (less the Deposit) and the Deposit shall be retained by the Seller.
Pursuant to clause 3 of the Holdings Loan Assignment Deed the Purchaser shall
pay (or procure the payment of) the Holdings Loan Consideration and pursuant to
clause 3 of the Debt Assignment Deed the Purchaser shall pay the Estimated Debt
Consideration.
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FINAL CLOSING STATEMENT
2.6 Within sixty days after Closing, the Purchaser shall provide the Seller
with a written final closing statement (the FINAL CLOSING STATEMENT) in the
format set out in Part C of Schedule 9 giving its calculation of the final
amounts of each of:
(a) the Intra-Group Payables as at the Economic Date;
(b) the Economic Date Working Capital;
(c) amounts each as calculated under Clauses 2.1(a)(iv), 2.1(a)(v) and
2.1(a)(vii);
(d) the Debt Consideration;
(e) the other items in column C of Part C of Schedule 9; and
(f) the Final Closing Amounts.
The Seller will have a period of 15 Business Days from the date of delivery of
the Final Closing Statement to review and agree or dispute the Final Closing
Statement. If the Seller disputes the Final Closing Statement it must notify the
Purchaser in writing within the 15 Business Day period referred to above, giving
full details of each of the matters in dispute. The Final Closing Statement
shall constitute the final and binding Final Closing Statement unless the Seller
has served written notice of its disagreement, including full details to the
Purchaser within the 15 Business Day period referred to above. If the Final
Closing Statement has been disputed by the Seller, the Seller and the Purchaser
shall have a period of five Business Days in which to resolve the matters in
dispute. During this period the Seller and the Purchaser may, by notice in
writing to the other in each case, propose further adjustments and notify the
other of additional matters in dispute, but only where such additional
adjustments or matters arise out of any disagreement notified by the Seller. At
the end of this period the Final Closing Statement shall be revised to reflect
any agreed adjustments. Payment of any agreed adjustments shall be made within
five Business Days following agreement of the Parties. If any matter remains in
dispute at the end of the five Business Day period referred to above (the
DISPUTED AMOUNTS) such matters may be referred by either the Seller or the
Purchaser to the Reporting Accountants.
PAYMENT OF CONSIDERATION
2.7 The Share Consideration shall be satisfied by:
(a) a payment in cash of the Closing Price by the Purchaser to the Seller at
Closing in accordance with Clause 2.5; and
(b) payment in cash by the Seller to the Purchaser of the Final Closing Share
Amount calculated in accordance with the provisions of Schedule 9 if such
sum is a positive sum and payment in cash by the Purchaser to the Seller
of the Final Closing Share Amount calculated in accordance with Schedule
9 if such sum is a negative amount.
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The Debt Consideration shall be satisfied by a payment at Closing in cash of the
Estimated Debt Consideration pursuant to the Debt Assignment Deed and the
payment of the amount (if any) payable pursuant to the Final Closing Debt
Amount.
The consideration payable for the Holdings Loan shall be satisfied by a payment
at Closing of an amount equal to the price payable pursuant to clause 3 of the
Holdings Loan Assignment Deed.
2.8 Payment of the Final Closing Amounts shall be made within five Business
Days of it being agreed or otherwise determined and the amount of the Final
Closing Share Amount due in respect of the Share Consideration shall, for the
avoidance of doubt, be treated as adjusting the Closing Price, thus resulting
after such adjustment in the Share Consideration.
2.9 The Share Consideration (subject to any further adjustment, if
applicable, pursuant to Clause 2.16) shall be adopted for all Tax reporting
purposes and, for the avoidance of doubt, the provisions of this Clause 2.9
shall not apply to any Tax adjustments pursuant to Clause 13.
INDEPENDENT DETERMINATION
2.10 The Reporting Accountants shall be instructed to determine the Disputed
Amounts and act on the following basis:
(a) In respect of each Disputed Amount, the Seller and the Purchaser will
each submit to the Reporting Accountants the amount they consider should
be included in the Final Closing Statement within such time limit as may
be required by the Reporting Accountants.
(b) The Reporting Accountants shall act as an expert and not as an arbitrator
and shall be appointed on their then applicable standard terms and
conditions to which both the Seller and the Purchaser shall agree
(including a waiver of any claims against the Reporting Accountants that
any of the Parties may have).
(c) The Disputed Amounts shall be notified to the Reporting Accountants in
writing by the Seller and/or the Purchaser within 15 Business Days of the
Reporting Accountants being appointed.
(d) The terms of reference of the Reporting Accountants shall be to determine
the Disputed Amounts only, including the finalisation of the form and
content of the Final Closing Statements on the basis of the provisions of
this Agreement, within 30 days of receipt of the final submissions of the
Seller and Purchaser or as soon as practicable thereafter.
(e) The Reporting Accountants shall decide the procedure to be followed in
the determination and shall be entitled to make such assumptions and
investigations as they see fit.
(f) The determination of the Reporting Accountants shall (in the absence of
fraud or manifest error or collusion) be final and binding on the
parties.
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(g) The costs of the Reporting Accountants shall be borne by the Seller and
the Purchaser in such proportions as the Reporting Accountants shall
determine and in the absence of any such determination, in equal shares.
(h) The Reporting Accountants shall be KPMG or if KPMG are unable or
unwilling to act, an independent chartered accountant nominated by the
parties, or, in the absence of agreement between the Parties within five
Business Days of a Party notifying the other that it proposes to refer
the dispute to an expert, by the President of the Institute of Chartered
Accountants in England and Wales on the application of either of the
Parties.
OTHER MATTERS
2.11 Subject to Clause 2.12, Seller and Purchaser shall promptly provide to
each other and their respective accountants:
(a) all information, supporting documentation and explanations in their
respective possession or control relating to the Target Companies
(including access at all reasonable times to all relevant books and
records and reasonable co-operation and assistance from staff and
management); and
(b) such explanations and clarifications, as, in each case, may reasonably be
required to enable the production, review, agreement or determination of
the Final Closing Statement to take place pursuant to the provisions of
this Agreement.
(c) For the avoidance of doubt the Seller shall provide the Purchaser with
copies of all Operator's reports, billing statements and correspondence
and any and all other relevant documentation in its possession or under
its control necessary to support the statements referred to in Clauses
2.4 and 2.6 not already in the possession of the Purchaser.
2.12 For the avoidance of doubt, nothing in Clause 2.11 shall entitle the
Seller or the Purchaser or any of their respective advisers to have access to
any correspondence between the Seller and its advisers or the Purchaser and its
advisers, as the case may be concerning disputes or potentially disputed items
in the Final Closing Statement.
2.13 The costs of the Seller's Accountants and Purchaser's Accountants shall
be borne by the Seller and Purchaser respectively. The Parties agree that the
Seller's Accountants shall owe a duty of care to the Seller only and the
Purchaser's Accountants shall have a duty of care to the Purchaser only.
2.14 Where any sums payable by the Purchaser to the Seller or by the Seller to
the Purchaser are expressed in currencies other than Dollars, the same shall be
translated into Dollars at the arithmetical average of the spot closing midpoint
rates quoted in the Financial Times for the currency concerned on each Business
Day during the calendar month in which the relevant payment is made or received
(as the case may be) and shall be paid to the Seller or the Purchaser in
Dollars.
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2.15 Where this Agreement provides for any payment to the Seller's Bank
Account, the Seller irrevocably authorises and instructs the Purchaser to make
that payment to the Seller's Bank Account, confirmation of the delivery to which
account shall be an effective discharge of the Purchaser's obligation to pay the
amount concerned. The Purchaser shall not be concerned to see to the application
of any such amounts so paid. Likewise, where this Agreement provides for any
payment to the Purchaser's Bank Account, the Purchaser irrevocably authorises
and instructs the Seller to make the payment to the Purchaser's Bank Account,
delivery to which account shall be an effective discharge of the Seller's
obligation to pay the amount concerned. The Seller shall not be concerned to see
to the application of any such amounts so paid.
2.16 All payments made under this Agreement in respect of Purchaser
Obligations or Seller Obligations shall, so far as possible, be made by way of
adjustment to the Share Consideration.
2.17 The Purchaser shall immediately upon the execution of this Agreement pay
the Deposit into the Seller's Bank Account.
2.18 If Closing does not occur due to any failure by the Purchaser to comply
with its obligations under this Agreement, this Agreement shall terminate, the
Seller shall be entitled to retain the Deposit and accrued interest thereon by
way of liquidated damages as an exclusive remedy, and the Seller and Purchaser
shall be released from all liabilities and obligations under this Agreement
other than the Surviving Provisions. The Parties agree that the Deposit and such
interest represents a genuine pre-estimate of the loss which may be sustained by
the Seller in respect of such failure.
2.19 Without prejudice to the Seller's right to retain the Deposit set out in
Clause 2.18 if:
(a) the Condition specified in Clause 3.1(a) is not satisfied or waived on or
prior to the Longstop Date (otherwise than as a result of the failure by
the Purchaser to comply with its obligations under Clause 3.2); or
(b) a Material Adverse Change shall occur prior to Closing,
the Seller shall
(i) if non-satisfaction of the Condition specified in Clause 3.1(a) is
as a result of the Seller's failure to comply with its obligations
under Clause 3, repay the Deposit and shall pay simple interest
thereon at the Agreed Interest Rate calculated on a daily basis on
the basis of a 360 day year for the period from the date hereof to
the date of repayment as set out below (less any applicable
withholding for or on account of Tax) to the Purchaser's Bank
Account;
(ii) in all other circumstances, repay the Deposit and any accrued
interest for the period from the date hereof to the date of
repayment as set out below (less any applicable withholding for or
on account of Tax) to the Purchaser's Bank Account;
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Such repayment shall take place:
(A) in the case of a termination pursuant to Clause 2.19(a) ,
on the date being three Business Days after the Longstop
Date; or
(B) in the case of a termination pursuant to 2.19(b), on the
date being three Business Days after the date on which the
Parties agree that a Material Adverse Change has occurred,
or as the case may be, after the MAC Umpire has determined
that a Material Adverse Change has occurred.
2.20 If the Deposit is repaid in the circumstances set out in Clause 2.19 this
Agreement shall automatically terminate (other than the Surviving Provisions).
In such event, neither Party shall have any claim under this Agreement of any
nature whatsoever against the other Party (except in respect of any rights and
liabilities which have accrued before termination or in relation to any of the
Surviving Provisions).
3. CONDITIONS TO CLOSING
3.1 Closing shall be conditional upon:
(a) receipt of any required consent, approval or confirmation of the
Secretary, including but not limited to confirmation that the Secretary
does not intend to exercise her power, under any of the model clauses in
any of the Licences or otherwise, to revoke any of the Licences or to
require a further change of control of the Company as a result of Closing
under this Agreement and such consent, approval or confirmation is not
given on condition that there be a change of Operator in respect of any
of the Licences of which the Company is the Operator; and
(b) no Material Adverse Change having occurred after the date of this
Agreement.
3.2 The Parties shall use all reasonable endeavours to obtain fulfilment of
the Condition set out in Clause 3.1(a) as soon as reasonably practicable after
the date of this Agreement and in any event by no later than the Longstop Date.
The Parties shall keep each other informed of the progress of satisfying such
Condition and the date when it is fulfilled.
3.3 Each of the Seller and the Purchaser shall notify the other promptly upon
becoming aware that the Condition set out in Clause 3.1(a) has been fulfilled or
deemed to be fulfilled.
3.4 The first Business Day in London on or by which, prior to 4.00 p.m., the
Condition set out in Clause 3.1(a) has been fulfilled without a Material Adverse
Change occurring shall be deemed to be the RECORD DATE.
3.5 If at any time either Party becomes aware of a fact or circumstance that
might prevent or materially delay the satisfaction of the Conditions, it shall
promptly notify the other.
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3.6 If the Purchaser has reasonable cause to believe a Material Adverse
Change has occurred between the signing of this Agreement and before the Closing
Date, it may serve on the Seller written notice, giving reasonable details of
the Material Adverse Change claimed (the MAC CLAIM).
3.7 If within five Business Days of the receipt by the Seller of the written
notice of the MAC Claim (excluding the day of receipt) the Seller fails to give
the Purchaser notice in writing (the MAC DISAGREEMENT NOTICE) of any respect in
which it is not satisfied with the basis or validity of the MAC Claim, the said
MAC Claim shall be accepted as satisfying the definition of Material Adverse
Change and shall be final and binding between the Parties (as it shall be if
within the period of five Business Days the Seller gives written notice to the
Purchaser that it so satisfies such definition).
3.8 If the Seller does give a MAC Disagreement Notice within five Business
Days of it receiving the MAC Claim (excluding the day of receipt), the Seller
and the Purchaser shall use their reasonable endeavours to resolve the matters
in dispute. If within 10 Business Days of the Purchaser receiving the MAC
Disagreement Notice (excluding the day of receipt), the Seller and the Purchaser
have failed to resolve the matters in dispute, those matters remaining in
dispute shall be referred either by the Seller or the Purchaser for final
determination to an umpire (the MAC UMPIRE), who shall act as an expert and not
as an arbitrator. The decision of the MAC Umpire as to the validity of the MAC
Claim shall be final and binding between the Parties. The provisions of Clauses
3.9 and 3.10 shall apply in relation to any reference to such MAC Umpire.
3.9 The MAC Umpire shall be an engineer from Lloyds' Shipping Register, or if
an engineer from Lloyds' Shipping Register is unavailable, from Stone and
▇▇▇▇▇▇▇, and as agreed by the Seller and the Purchaser or, if they cannot agree
on such within five Business Days of any party giving notice in writing to the
other that it desires a MAC Umpire to be appointed, such engineer or firm of
engineers as may be nominated on the application of any of the Parties by the
President or other senior officer for the time being of the Institute of
Petroleum Engineers in England and Wales.
3.10 The Parties hereby agree and undertake that if any MAC Claim under this
Agreement is referred to the MAC Umpire:
(a) the Parties will instruct the MAC Umpire to determine the matters in
dispute and, as a result, shall request the MAC Umpire to notify its
decision to the Seller and the Purchaser within 20 Business Days of being
instructed;
(b) the Parties will each use all reasonable endeavours to co-operate with
the MAC Umpire in resolving such disagreement or dispute, and for that
purpose will provide to him all such information and documentation as he
may reasonably require;
(c) the MAC Umpire shall have the right to seek such professional assistance
and advice as he may require in fulfilling his duties; and
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(d) the fees of the MAC Umpire (and any professional fees incurred by him)
shall be borne as to half by the Purchaser and as to half by the Seller
provided that if either Party fails to pay its share of any such fee
within five Business Days of the relevant invoice being rendered to the
Parties of either of them the other Party shall be entitled to pay the
full amount of the fee and thereafter to recover one half from the
first-mentioned Party as a debt due and payable on demand.
3.11 If on or by one of the dates fixed for Closing a MAC Claim is outstanding
(that is to say a notice has been served by the Purchaser pursuant to Clause 3.6
and by the relevant date the Parties have neither agreed, nor has the MAC Umpire
determined, whether the MAC Claim is valid), then Closing shall take place on
the second Business Day following the later of:
(a) the date on which the Condition set out in Clause 3.1(a) is satisfied;
and
(b) the date on which the MAC Claim is either agreed by the parties not to
constitute a Material Adverse Change or determined by the MAC Umpire (in
accordance with the foregoing provisions of this Clause 3) not to be
valid.
4. PRE-CLOSING UNDERTAKINGS
During the period from the date of this Agreement to Closing, the Seller shall
perform its obligations set out in Schedule 5 (Conduct of the Target Companies
Pre-Closing).
5. CLOSING
5.1 Closing shall take place at the London offices of the Seller's Solicitors
on the later of:
(a) 1 December 2004; and
(b) the third Business Day after the Record Date,
(the CLOSING DATE).
5.2 At Closing each of the Seller and the Purchaser shall deliver or perform
(or procure that there is delivered or performed) all those documents, items and
actions respectively listed in relation to that Party or the members of the
Seller Group or the Purchaser Group (as the case may be) in Schedule 6 (Closing
Arrangements).
5.3 The Tax Covenant shall come into full force and effect at Closing.
6. REDEMPTION OF PREFERENCE SHARES
If the Purchaser shall have exercised its option under Clause 1.4, on Closing,
the Company shall redeem the Preference Shares at the Redemption Sum and the
Seller shall provide such assistance as the Purchaser may reasonably require to
facilitate such redemption. Such assistance shall include, without limitation,
procuring that the terms of the Preference Shares are amended or waived to the
extent necessary to allow such redemption at such time and value. Subject to
such redemption taking place, the
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Seller hereby waives for the benefit of the Purchaser any and all accrued rights
it may have in respect of the Preference Shares as at the date of redemption.
7. WARRANTIES AND UNDERTAKINGS
7.1 The Seller warrants to the Purchaser as at the date of this Agreement in
the terms of the Warranties set out in Schedule 2 (Seller Warranties). The Title
Warranties shall be deemed to be repeated by the Seller to the Purchaser
immediately prior to Closing. The Warranties (including the Title Warranties
deemed to be so repeated) are given subject to:
(a) so far as the Warranties (other than the Title Warranties and the
Warranty in Paragraph 7 of Part A of Schedule 2) are concerned, any
matters fairly disclosed by or under this Agreement, the Disclosure
Letter, and/or the Disclosed Documents;
(b) so far as the Warranty in Paragraph 7 of Part A of Schedule 2 is
concerned, any matters specifically disclosed in the Disclosure Letter;
(c) the other limitations and qualifications set out in this Clause 7 and in
Schedule 3 (Limitations on Liability); and
(d) so far as the Tax Warranties only are concerned the limitations and
qualifications set out in the Tax Covenant insofar as they are expressed
to apply to the Tax Warranties.
7.2 The Purchaser acknowledges and agrees that:
(a) any Claims, and where expressly stated in Schedule 3, Tax Demands shall
be subject to the limitations on liabilities and other provisions set out
in Schedule 3 (Limitations on Liability);
(b) the Warranties are the only warranties or representations of any kind
given by or on behalf of the Seller or any other member of the Seller
Group on which the Purchaser or any other member of the Purchaser Group
may rely in entering into this Agreement; and
(c) neither it, nor any of the employees or advisers of any member of the
Purchaser Group involved in evaluating the Proposed Transaction has
actual knowledge of any fact or matter which would or is likely to
constitute a breach of any of the Warranties and acknowledges that if the
Seller can establish that the Purchaser or any of such employees or
advisers had actual knowledge of such facts or matters prior to the date
of this Agreement which would or are likely to give rise to a Claim
which, had such facts or matters been fairly disclosed in the Disclosure
Letter or in the Disclosed Documents, would prevent the Purchaser from
bringing a Claim, the Purchaser shall not be entitled to bring a Claim in
respect of the loss arising from such breach.
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7.3 None of the limitations in this Clause 7 or Schedule 3 (Limitations on
Liability) shall apply to any Claim or Tax Demand that arises (or to the extent
that it is increased) as a consequence of fraud or fraudulent misrepresentation
by any director or officer of any member of the Seller Group.
7.4 The Purchaser undertakes to the Seller (for the Seller itself and as
agent for each individual and entity referred to in this Clause 7.4) that,
except in the case of fraud or fraudulent misrepresentation, it waives and shall
not make any claim against any Connected Persons of the Seller on whom it may
have relied in relation to any information supplied or omitted to be supplied by
any such person in connection with the Warranties or any of the Transaction
Documents provided however that nothing in this Clause 7.4 shall affect the
rights of the Purchaser to make a claim under the Seller Parent Company
Guarantee in respect of the obligations of the Seller under this Agreement.
7.5 Each of the Paragraphs in Schedule 2:
(a) shall be construed as a separate and independent warranty; and
(b) unless expressly provided in this Agreement (including the Tax Covenant
set out in Schedule 8), shall not be limited by reference to any other
Paragraph in Schedule 2 or by any other provision of this Agreement or
the Tax Covenant
and the Purchaser shall have a separate claim and right of action in respect of
every breach of a Warranty.
7.6 The Warranties shall not in any respect be extinguished or affected by
Closing.
7.7 The Seller agrees with the Purchaser (for itself and as trustee for each
Target Company and each Target Company's directors and employees) to waive any
right or claim which it may have against any Target Company and/or any of its
directors, officers or employees in respect of any misrepresentation or error
in, or omission from any information or opinion supplied or given by any Target
Company and/or any of its directors, officers or employees in the course of
negotiating this Agreement or any of the Transaction Documents or in preparing
the Disclosure Letter, and that any such right or claim shall not constitute a
defence to any claim by the Purchaser under or in relation to this Agreement or
any Transaction Document.
7.8 The Purchaser warrants to the Seller as at the date of this Agreement in
the terms of the warranties set out in Schedule 4 (Purchaser Warranties), which
warranties shall be deemed to be repeated by the Purchaser to the Seller
immediately prior to Closing.
7.9 The Seller undertakes to notify the Purchaser in writing promptly if the
directors and officers of either the Seller or the Company become aware of any
circumstance or fact arising after the date of this Agreement and prior to the
Closing Date that would cause any Warranty (if the Warranties were repeated with
reference to the factors and circumstances then existing) to become untrue,
inaccurate or misleading in any material respect.
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7.10 If prior to Closing it shall be found that there has been a material
breach of the obligations contained in Clause 4 (Pre-Closing Undertakings) and
such breach is incapable of remedy or, if capable of remedy, is not remedied by
the Seller within 30 days of notice to the Seller of the breach (or within such
longer period as is agreed between the Seller and the Purchaser if such breach
is capable of remedy), the Purchaser shall be entitled to the exclusion of all
other rights to terminate this Agreement by notice to the Seller, and the Seller
shall within five Business Days of such termination pay the Deposit plus an
amount equivalent to simple interest on the Deposit calculated on a daily basis
on the basis of a 360 day year at the Agreed Interest Rate applied to the
Deposit for the period from and including the date of this Agreement up to but
not including the date it is returned (less any applicable withholding for or on
account of Tax) to the Purchaser's Bank Account. Notwithstanding termination of
this Agreement under this Clause 7.10, the Surviving Provisions shall continue
in full force and effect.
7.11 For the purposes of Clause 7.10, a MATERIAL BREACH shall be deemed to
arise where the total loss suffered or incurred, or likely to be suffered or
incurred by the Purchaser would exceed $150,000,000.
8. ENVIRONMENT AND DECOMMISSIONING
8.1 The Purchaser shall at its cost and expense perform and shall be
responsible for decommissioning and/or removing and/or making safe all plant,
equipment and machinery, ▇▇▇▇▇ and other installations (including pipelines) and
facilities relating to operations under the Licences and/or under each and any
Operating Agreement or other Licensed Interest Document to the extent that such
obligations are attributable to the Interests whether such Losses and Expenses
are incurred under or pursuant to any of the Licensed Interest Documents or
under statutory, common law or other obligation or under any former licences
and/or each and any operating agreement or other licensed interest document to
which a Target Company was a party or are attributable to the interests
previously owned by a Target Company, whether such Losses and Expenses are
incurred under or pursuant to any of such licensed interest documents or under
statutory, common law or other obligation.
8.2 The Purchaser covenants that it shall indemnify and hold the Seller and
its Connected Persons harmless against:
(a) any and all Losses and Expenses which the Seller or any of its Connected
Persons may incur arising out of or in connection with the
Decommissioning Liabilities regardless of whensoever such Decommissioning
Liabilities may arise or may have arisen, regardless of whosoever is or
was a licensee under the relevant licence or a party to the relevant
operating agreement or owned or leased the relevant property and
regardless of whether such Losses and Expenses arise as a consequence of
negligence on the part of the Seller or any of its Connected Persons or
any other operator or any of its Connected Persons provided that for the
avoidance of doubt the Purchaser shall not be required to reimburse the
Seller for amounts actually expended by the Seller or any other person
prior to the Closing Date in respect of Decommissioning Liabilities; and
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(b) the Environmental Liabilities regardless of whensoever such Environmental
Liabilities may arise or may have arisen, regardless of whosoever is or
was a licensee under the relevant licence or a party to the relevant
operating agreement or owned or leased the relevant property and
regardless of whether such Losses and Expenses arise as a consequence of
negligence or breach of any Environmental Law on the part of the Seller
or any of its Connected Persons or any other person.
8.3 Notwithstanding the provisions of Clauses 8.2(a) and 8.2(b) in the event
that any operations under any former licences previously held by any Target
Company and/or under each and any operating agreement or other licensed document
to which a Target Company was a party results in Losses and Expenses for any
Decommissioning Liability or Environmental Liability, the Purchaser's liability
under Clauses 8.2(a) and 8.2(b) in respect of such Losses and Expenses so caused
shall not exceed $10,000,000. Such Losses and Expenses so caused in excess of
$10,000,000 shall be the sole responsibility of the Seller and the Seller shall
indemnify the Purchaser and the Target Companies in respect thereof.
8.4 Upon the Seller's request from time to time, the Purchaser will support
any application by the Seller to obtain from the relevant authorities an
irrevocable release of the Seller from its obligations and liabilities under the
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ or other relevant statute, regulations, order from any
competent authority or guidelines and all notices and regulations served and
issued pursuant thereto, insofar as the same relate to the Interests. Without
prejudice to the foregoing, if, following the Closing Date, the Secretary
requests that the Seller prepares and implements a programme or requirement for
or in respect of any part of the Decommissioning Liabilities, whether pursuant
to the terms of the ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ or other relevant statute, regulations,
order from any competent authority or guidelines, the Seller shall do so in
accordance with the requirements of the ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ or other relevant
statute, regulation, order or guidelines, as the case may be, and all other
relevant statutes, regulations, orders and guidelines and the indemnity in
Clause 8.2 shall extend to all Losses and Expenses incurred by or on behalf of
the Seller in the preparation and implementation of such programme.
8.5 The Seller covenants that it shall indemnify and hold the Purchaser and
its Connected Persons harmless against any and all Losses and Expenses which the
Purchaser or any of its Connected Parties may incur arising out of or in
connection with the decommissioning and/or removing and/or making safe of the
▇▇▇▇▇ whether such claims, costs, charges, expenses, liabilities or obligations
are incurred pursuant to any of the Licensed Interest Documents or under
statutory, common law or other obligation. The Purchaser shall procure that the
Company shall use its reasonable endeavours to manage and integrate such work
with other work being carried out by the Company or on its behalf in order to
minimise such Losses and Expenses.
9. ▇▇▇▇▇ ▇▇▇▇▇▇▇ INDEMNITY
9.1 The provisions of this Clause 9 shall only take effect once Closing has
occurred.
9.2 The Seller covenants that it will indemnify the Purchaser against:
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(a) the net loss (including reasonable legal fees and expenses) to the
Company arising from the Reallocation and in determining such loss
account shall be taken of:
(i) any liability which the Company may suffer or incur to its
co-venturers (past or present) under the relevant Licensed
Interest Documents applicable to the ▇▇▇▇▇ Field and Telford Field
by reason of any action taken by it at any time prior to the
Closing Date in connection with the Reallocation; and
(ii) the additional volume of oil allowance utilised in addition to the
Cumulative Oil Allowance for chargeable periods up to and
including that ended on 30 June 2004 (the ADDITIONAL OIL
ALLOWANCE) where that additional use of oil allowance is directly
attributable to any increased petroleum revenue tax assessable
income resulting from an actual or deemed re-allocation of
production or liftings from the Telford Field to the ▇▇▇▇▇ Field.
Such payment is intended to reflect the agreed value of each
metric tonne of oil allowance utilised in periods to 30 June 2004,
and therefore not available for use in future periods; and
(b) any stamp duty including any penalty and interest in respect thereof
which is payable by the Company in the event that all or any of the ▇▇▇▇▇
▇▇▇▇▇▇▇ Agreements are required to be produced in legal proceedings in
relation to the Reallocation.
9.3 The Seller and Purchaser agree that the loss (including reasonable legal
fees and expenses) (referred to in Clause 9.2 above) in respect of the
Additional Oil Allowance shall be limited to $46 per additional metric tonne
(over 2,914,042) which is utilised by the Company and the Purchaser shall have
no further remedy in respect of such loss and that such loss shall be the only
loss in the circumstances where the Reallocation is only a reallocation by
virtue of sub-Paragraph (ii) of the definition of `Reallocation'.
9.4 Without prejudice to the generality of Clause 10 (Conduct of Claims),
Schedule 3 (Limitations of Liability) and Schedule 8 (Tax Covenant):
(a) a Reallocation Claim will be a Third Party Claim, a Tax Demand and a Tax
claim as defined in Schedule 8 and the provisions of this Agreement will
apply accordingly;
(b) the Purchaser shall procure that the Seller shall have the right and be
able (in the name of the Company but at the Seller's expense):
(i) to take such action as the Seller may consider appropriate to
enforce any rights of the Company against Amerada ▇▇▇▇ Limited
pursuant to the Amerada ▇▇▇▇ Sale Agreement, Enterprise Oil
Limited pursuant to the Enterprise Sale Agreement, Amoco U.K.
Exploration Company pursuant to the BP Sale Agreement, and any
other claims the Company may have against a third party, in
respect of the subject matter of the Reallocation Claim and the
Purchaser shall (and shall procure that the
Page 15
Company shall), not take any action which may prejudice such
rights and claims; and
(ii) to conduct all proceedings and/or negotiations of whatsoever
nature arising in connection with such rights (but so that the
Purchaser shall procure that the Company shall provide such
information and assistance as the Seller may reasonably request in
connection with the preparation for and conduct of any such
proceedings and/or negotiations); and
(iii) to take full control and conduct of the petroleum revenue tax
returns which relate to the increased petroleum revenue tax
assessable which is referred to in Clause 9.2 above,
provided that the Purchaser and the Company are indemnified by
the Seller against all reasonable out of pocket costs and
expenses in respect thereof.
(c) The Purchaser shall procure that none of it, the Company and any other
member of the Purchaser Group shall, without the prior written consent of
the Seller, take any action or omit to take any action which might cause
any ▇▇▇▇▇ ▇▇▇▇▇▇▇ Agreement to be required to be produced in legal
proceedings in relation to the Reallocation.
9.5 The Purchaser agrees it will and agrees to procure that each Target
Company will use best endeavours to ensure that a claim does not arise under
this Clause.
9.6 The sole remedy of the Purchaser in respect of a Reallocation Claim shall
be under this Clause and if there is any conflict between the terms of this
Clause and the other provisions of this Agreement the terms of this Clause shall
prevail.
10. CONDUCT OF CLAIMS
10.1 If the Purchaser becomes aware of any claim or potential claim by a third
party (A THIRD PARTY CLAIM) which might result in a Claim being made, the
Purchaser shall:
(a) promptly (and in any event within 10 days of it becoming aware of it)
give notice of such Third Party Claim to the Seller and procure that the
Seller and its representatives are given all reasonable facilities
including access to documents and cooperation of staff to investigate it;
(b) not make (and procure that each member of the Purchaser Group and any
Target Company shall not make) any admission of liability, agreement or
compromise with any person, body or authority in relation to that Third
Party Claim without prior written approval of the Seller;
(c) subject to the Purchaser or the relevant member of the Purchaser Group
and any Target Company being indemnified by the Seller against all
reasonable out of pocket costs and expenses incurred in respect of that
Third Party Claim:
Page 16
(i) take (and procure that each member of the Purchaser Group and any
Target Company shall take) such action as the Seller may
reasonably request to avoid, resist, dispute, appeal, compromise
or defend such Third Party Claim;
(ii) allow (or, as appropriate, procure that the relevant member of the
Purchaser Group or relevant Target Company shall allow) the Seller
to take over the conduct of all proceedings and/or negotiations of
whatsoever nature arising in connection with the Third Party Claim
in question;
(iii) provide (or procure that the relevant member of the Purchaser
Group or relevant Target Company shall provide) such information
and assistance including access to documents and cooperation of
staff as the Seller may reasonably require in connection with the
preparation for and conduct of any proceedings and/or negotiations
relating to that Third Party Claim.
10.2 If the Purchaser makes a Claim against the Seller or notifies the Seller
of any Third Party Claim which might lead to such a Claim being made, the
Purchaser shall:
(a) make available to accountants and other representatives appointed by the
Seller such access to the personnel, records and information of any
Target Company as the Seller reasonably requests in connection with such
Claim or Third Party Claim; and
(b) to the extent reasonably requested by the Seller, use all reasonable
endeavours to procure that the auditors (both past and then current)
relating to any relevant Target Company make available their audit
working papers in respect of audits of the accounts of that Target
Company for any accounting period relevant to such Claim or Third Party
Claim.
11. EMPLOYEES
11.1 The Purchaser agrees that if the Purchaser, the Company or any other
Purchaser Company dismisses any of the Employees without Cause within twelve
months of the Closing Date, the Purchaser will procure that a severance payment
(in addition to any contractual right to payment on termination) is made to such
Employees equal to at least one month's gross salary for each year of service
(such payment to be pro-rated to include service for part of any year) with the
Seller, Seller Group or Target Companies. The minimum entitlement under this
Clause 11.1 for any Employee shall be three months' gross salary, and the
maximum entitlement shall be twenty-four months' gross salary, irrespective of
length of service. The Purchaser shall indemnify the Seller Group and the
Employees against any Losses and Expenses arising as a consequence of the
Purchaser failing to procure the offer of such a severance payment.
11.2 By Closing the Parties shall use their reasonable endeavours to procure
that the Secondment Agreement shall be entered into, if required.
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11.3 The Seller undertakes that it shall not, and shall procure that no member
of the Seller Group shall, for a period of twelve months from Closing, solicit
or entice away or endeavour to solicit or entice away any Employee, whether or
not that person would commit a breach of his or her contract of employment by
reason of leaving the service of the relevant Target Company. This Clause 11.3
shall not prevent any member of the Seller Group from employing any person who
(i) responds to a public advertisement for the relevant vacancy placed by or on
behalf of the relevant member of the Seller Group; or (ii) is made redundant or
whose employment is terminated after Closing by any member of the Purchaser
Group.
12. NO RIGHTS OF RESCISSION OR TERMINATION
Save as otherwise provided in this Agreement neither Party shall be entitled to
rescind or terminate this Agreement in any circumstances whatsoever (whether
before or after Closing), other than pursuant to any such rights that arise in
respect of fraud or fraudulent misrepresentation or which arise under Clause 3
(Conditions to Closing).
13. TAX
13.1 The Seller and the Purchaser shall, with effect from Closing, comply with
the provisions of Schedule 8.
13.2 All sums payable under this Agreement shall be paid free and clear of all
deductions or withholdings whatsoever save only as provided in this Agreement or
as may be required by law.
13.3 If any deduction or withholding is required by law from any payment in
respect of a Purchaser Obligation or a Seller Obligation then, except in
relation to interest, the person making the payment shall be obliged to pay the
other person such additional sum as will, after such deduction or withholding
has been made, leave the other person with the same amount as it would have been
entitled to receive in the absence of any such requirement to make a deduction
or withholding.
13.4 If any Tax authority brings into charge to Tax any sum paid by a person
to any other person under this Agreement in respect of a Purchaser Obligation or
a Seller Obligation, then, except in relation to interest, the amount so payable
shall be grossed up by such amount as will ensure that, after payment of the Tax
so charged, there will be left a sum equal to the amount that would otherwise
have been payable had the sum in question not been so charged to Tax.
13.5 If any person receiving payment (RECIPIENT) under this Agreement in
respect of a Purchaser Obligation or a Seller Obligation receives a credit for,
refund of or relief from any Tax or other monies payable by it or similar
benefit by reason of any deduction or withholding for or on account of Tax or by
reason of any Tax charged in respect of which there is a gross up under Clause
13.4, then it shall reimburse to the other relevant persons such part of such
additional payments paid to it pursuant to Clause 13.3 or Clause 13.4 by such
other persons as the Recipient, acting reasonably, certifies to the other
persons will leave it (after such reimbursement) in no better or worse position
than it would have been in if no deduction or withholding had been
Page 18
required or no tax charge had arisen or (where applicable) if the matter giving
rise to the payment had not arisen.
13.6 In determining the amount payable in respect of any Purchaser Obligation
or Seller Obligation (other than the amount of a payment under the Tax Covenant
or for breach of any Tax Warranty), account shall be taken of any relief or
other benefit available to the Recipient or any of its Affiliates in respect of
the matter giving rise to the payment, insofar as not taken into account
pursuant to Clause 13.5 above.
13.7 If any Party shall have assigned the benefit in whole or in part of this
Agreement in accordance with the provisions of Clause 21, the liability of any
other person to the other person under Clauses 13.3 and 13.4 shall be limited to
that (if any) which it would have been had no such assignment taken place.
13.8 Clauses 13.3 and 13.4 shall not apply to the extent that the deduction or
withholding or Tax would not have arisen but for:
(a) the Recipient not being tax resident in the UK, or having some connection
with a territory of the UK; or
(b) a change in law after Closing; or
(c) an assignment by the Recipient of any of its rights under this Agreement.
13.9 For the avoidance of doubt, Clauses 13.3 to 13.6 shall not apply to any
payment in respect of the Consideration or any payment pursuant to Clause 2.
13.10 All sums payable under this Agreement are (unless expressly stated
otherwise) exclusive of any applicable VAT chargeable on any supply to which
such sums relate and an amount equal to such VAT shall in each case be paid by
the party making such payment on receipt of an appropriate VAT invoice.
14. INSURANCE
14.1 Upon Closing, all insurance cover provided in relation to the Target
Companies by the Seller Group (whether under policies maintained with third
party insurers or other members of the Seller Group) shall cease and the
Purchaser shall procure that no Target Company or member of the Purchaser Group
shall make any claim under any such policies in relation to any event, fact,
circumstance or matter arising after Closing. The Seller shall be entitled to
make arrangements with its insurers to reflect the principle of this Clause
14.1.
14.2 The Seller agrees with the Purchaser that if, following the Closing Date,
any member of the Seller Group or any Target Company is entitled to claim on any
insurance policy maintained by the Seller Group (a SELLER GROUP INSURANCE
POLICY) in respect of any matter which relates to the carrying on of the UK
Business prior to the Closing Date, the Seller shall at the Purchaser's cost and
at the Purchaser's request make (or procure that the relevant member of the
Seller Group shall make) all necessary claims or, if permissible under a Seller
Group Insurance Policy, permit the Purchaser or a Target Company to make all
necessary claims under the relevant
Page 19
Seller's Group Insurance Policy and the Purchaser (or such member of the
Purchaser Group as the Purchaser may nominate) shall be entitled to be paid any
proceeds actually received under the Seller Group Insurance Policy (after taking
into account any withholding or deductions made and less any Tax suffered on the
proceeds and any reasonable out of pocket expenses suffered or incurred by any
members of the Seller Group) provided always that:
(a) any payment so received shall reduce to the same extent any entitlement
to make a Claim in respect of the loss, damage or destruction which is
the subject of the relevant insurance claim;
(b) the Seller shall not be required, pursuant to any requests made by the
Purchaser to undertake or threaten litigation or incur any expenditure or
liability without being put in funds by the Purchaser prior to incurring
any such expenditure or liability;
(c) the Purchaser or any member of the Purchaser's Group shall not be
entitled to any proceeds received by any member of the Seller Group under
any Seller Group Insurance Policy to the extent that such proceeds relate
to a claim in respect of:
(i) a matter other than the carrying on of the UK Business prior to
Closing;
(ii) any loss of profits arising in a period prior to the Economic
Date;
(iii) any matters for which the Seller or a member of the Seller Group
has already reimbursed the relevant Target Company or for which
payment has been made to any member of the Purchaser Group
pursuant to the terms of this Agreement or any Transaction
Document; and
(d) nothing in this Clause 14 shall prevent any member of the Seller Group
from making any claim and receiving and retaining the proceeds under any
Seller Group Insurance Policy to the extent that it relates to a loss
suffered or incurred by such member.
15. CHANGES OF NAME
15.1 The Purchaser undertakes to the Seller to procure that:
(a) as soon as reasonably practicable after the Closing Date and in any event
within 30 days afterwards, the name of each Target Company is changed to
a name which does not include the word "EnCana" or any name which, in the
reasonable opinion of the Seller, is substantially or confusingly
similar;
(b) as soon as reasonably practicable after the Closing Date and in any event
within 30 days afterwards, the Target Companies shall cease in any manner
whatsoever to use or display any trade or service name or ▇▇▇▇, business
name, logo or domain name used or held by any member of the Seller Group
Page 20
or any ▇▇▇▇, name or logo which, in the reasonable opinion of the Seller,
is substantially or confusingly similar to any of them.
16. PAYMENTS
16.1 Any payment to be made pursuant to this Agreement by the Purchaser or any
member of the Purchaser Group shall be made to the Seller's Bank Account or such
other account as the Seller shall nominate in writing in immediately available
funds by electronic transfer in Dollars on the due date for payment. The Seller
agrees to pay each member of the Seller Group that part of each payment to which
it is entitled. Receipt of such sums in the relevant bank account shall be an
effective discharge of the obligation of the Purchaser or any member of the
Purchaser Group to pay such sums to the Seller or a member of the Seller Group,
as the case may be, and neither the Purchaser nor any member of the Purchaser
Group shall be concerned to see to the application or be answerable for loss or
misapplication of such amount.
16.2 Any payment to be made pursuant to this Agreement by the Seller or any
member of the Seller Group shall be made to the Purchaser's Bank Account or such
other account as the Purchaser shall nominate in writing in immediately
available funds by electronic transfer in Dollars on the due date for payment.
The Purchaser agrees to pay each member of the Purchaser Group that part of each
payment to which it is entitled. Receipt of such sums in the relevant bank
account shall be an effective discharge of the obligation of the Seller or any
member of the Seller Group to pay such sums to the Purchaser or a member of the
Purchaser Group, as the case may be, and neither the Seller nor any member of
the Seller Group shall be concerned to see to the application or be answerable
for loss or misapplication of such amount.
16.3 If any sum due for payment under or in accordance with this Agreement is
not paid on the due date (the DUE DATE), the person in default shall pay
interest at the Default Interest Rate on that sum from but excluding the Due
Date to and including the date of actual payment calculated on a daily basis.
17. DEALING WITH AND VOTING ON THE SHARES
17.1 The Seller declares that for so long as it remains the registered holder
of any of the Shares after Closing it shall:
(a) hold the Shares and the dividends and other distributions of profits or
surplus or other assets declared, paid or made in respect of them after
Closing and all rights arising out of or in connection with them in trust
for the Purchaser and its successors in title; and
(b) deal with and dispose of the Shares and all such dividends, distributions
and rights as the Purchaser or any such successor may direct; and
(c) if so requested by the Purchaser:
(i) vote at all meetings which it shall be entitled to attend as the
registered holder of the Shares in such manner as the Purchaser or
any such successor may direct; and
Page 21
(ii) execute all instruments of proxy or other documents which the
Purchaser may reasonably require and which may be necessary or
desirable or convenient to enable the Purchaser or any such
successor to attend and vote at any such meeting.
17.2 The Seller authorises and directs:
(a) the Company to send any notices in respect of his holding of Shares to
the Purchaser; and
(b) the Purchaser to complete in such manner as it thinks fit and to return
proxy cards, consents to short notice and any other document required to
be signed by it in his capacity as a member.
18. RELEASE AND INDEMNITY FOR OUTSTANDING GUARANTEES
The Seller shall:
(a) in respect of any of the same which are not released at Closing pursuant
to Schedule 6 use reasonable endeavours to secure as soon as practicable
after Closing the release of the Target Companies without cost to any
Target Company from all guarantees and other contingent liabilities given
or undertaken by any Target Company to secure or support the obligations
of the Seller or any member of the Seller Group or any director of the
Seller or any member of the Seller Group (including, if required,
offering its own guarantee or liability on the same terms, as and in
substitution for the existing guarantee or other liability of each Target
Company); and
(b) indemnify and keep indemnified the Purchaser (which takes the benefit of
this indemnity for itself and as trustee for each Target Company) against
all actions, proceedings, losses, costs, claims, damages, liabilities and
expenses which it or any Target Company may suffer or incur in respect of
any claim made under any such guarantee or other contingent liabilities
after Closing.
19. ANNOUNCEMENTS
19.1 Neither the Seller nor the Purchaser shall make or issue any public
announcement, circular or disclosure in connection with the existence or the
subject matter of this Agreement or any of the other Transaction Documents (and,
subject to Clause 19.2 the Seller and the Purchaser shall procure that none of
its Affiliates makes or issues any such announcement, circular or disclosure)
except as hereinafter specified.
19.2 Any announcements regarding the consummation of the transactions
contemplated hereby shall be made pursuant to a text agreed jointly by Seller
and Purchaser, to which effect the Parties shall cooperate in good faith. Any
press releases in connection with the consummation of the transactions
contemplated hereby shall only be made after all mandatory notices have been
properly given, and shall be released with the prior consent of the Parties.
Page 22
19.3 The restrictions in Clauses 19.1 and 19.2 shall not apply to the extent
that announcement or disclosure is required by law or by any stock exchange,
governmental or other regulatory or supervisory body or authority of competent
jurisdiction to whose rules the Party or its Affiliate making the announcement
or disclosure is subject, whether or not having the force of law. Should either
Party be compelled to make an announcement as permitted herein, such Party
shall, if practicable in the circumstances, use reasonable efforts to allow the
other Party reasonable time to comment on such notice or announcement in advance
of its issuance.
20. CONFIDENTIALITY
20.1 For the purposes of this Clause 20:
(a) CONFIDENTIAL INFORMATION means:
(i) (in relation to the obligations of the Purchaser under this Clause
20) any information received or held by the Purchaser (or any of
its Representatives) where such information relates to the Seller
Group or, prior to Closing, any of the Target Companies; or
(ii) (in relation to the obligations of the Seller under this Clause
20) any information received or held by the Seller (or any of its
Representatives) where such information relates to the Purchaser
Group or, following Closing, any of the Target Companies; and
(iii) information relating to the provisions and subject matter of, and
negotiations leading to, this Agreement and the other Transaction
Documents;
and includes not only written information but information transferred
or obtained orally, visually, electronically or by any other means;
(b) REPRESENTATIVES means, in relation to a Party, its respective Affiliates
and the directors, officers, employees, agents, external legal advisers,
accountants, consultants and financial advisers of that Party and/or of
its respective Affiliates.
20.2 Each of the Seller and the Purchaser undertakes that it shall (and shall
procure that each of its Representatives shall) maintain Confidential
Information in confidence and not disclose that Confidential Information to any
person except as permitted by this Clause 20 or with the prior written approval
of the other Party.
20.3 The confidentiality obligation under Clause 20.2 shall not apply if and
to the extent that the Seller or the Purchaser (as the case may be) can
demonstrate that:
(a) such disclosure is required by law or regulation or by any stock exchange
or any regulatory, governmental or antitrust body (including, for the
avoidance of doubt, any Tax authority) having applicable jurisdiction;
Page 23
(b) the Confidential Information concerned was lawfully in the relevant
party's possession or the possession of any of its Representatives (in
either case as evidenced by written records) and not subject to any
obligation of secrecy on its part prior to its being received or held as
described in Clause 20.2;
(c) the Confidential Information concerned has come into the public domain
other than through its fault (or that of its Representatives) or the
fault of any person to whom such Confidential Information has been
disclosed in accordance with this Clause 20.3;
(d) the disclosure is required for the purpose of any arbitral or judicial
proceedings arising out of this Agreement or any other Transaction
Document;
(e) the disclosure is to a Party's Representative for the purposes of the
Proposed Transaction, upon obtaining a similar undertaking of
confidentiality (but excluding this proviso) from such Representative;
(f) the disclosure is to any bank or financial institution from whom such
Party is seeking or obtaining finance for the purposes of the Proposed
Transaction or otherwise relating to the UK Business upon obtaining a
similar undertaking of confidentiality (but excluding this proviso) from
such bank or institution; or
(g) the disclosure is to any of its Affiliates upon obtaining a similar
undertaking of confidentiality from such Affiliates.
20.4 Each of the Seller and the Purchaser undertakes that it (and its
Affiliates) shall only disclose Confidential Information to Representatives if
it is reasonably required for the purposes of exercising the rights or
performing the obligations under the Transaction Documents and only if the
Representatives are informed of the confidential nature of the Confidential
Information.
20.5 If this Agreement is terminated in accordance with its terms, the
Purchaser shall as soon as practicable on request by the Seller:
(a) return to the Seller all written documents and other materials relating
to the Seller or any Target Company or the subject matter of this
Agreement (including any Confidential Information) which have been
provided to the Purchaser (or its Representatives) by the Seller (or its
Representatives) without keeping any copies thereof, save to the extent
required to do so by law;
(b) destroy all information or other documents derived from such Confidential
Information, save to the extent required to do so by law; and
(c) so far as it is practicable to do so, expunge such Confidential
Information from any computer, word processor or other device.
20.6 The provisions of this Clause 20 shall survive termination and/or Closing
of this Agreement.
Page 24
21. ASSIGNMENT
21.1 Subject to Clauses 21.2 and 21.3 no Party may assign or transfer all or
any of its rights or obligations under this Agreement or dispose of any right or
interest in this Agreement without the prior written consent of the other Party
(such consent not to be unreasonably withheld).
21.2 The Purchaser may assign or transfer all or any of its rights and
obligations under this Agreement or dispose of any right or interest in this
Agreement to any member of the Purchaser Group provided that:
(a) if such undertaking ceases to be a member of the Purchaser Group the
Purchaser shall first procure that such undertaking shall transfer all of
its rights and obligations to a continuing member of the Purchaser Group
and provided that no such assignment or transfer shall prejudice the
obligations of Nexen Inc. under the Purchaser Parent Company Guarantee;
(b) such assignment or transfer shall not prejudice or increase the liability
of the other party hereunder; and
(c) prior notice is given to the Seller.
21.3 The Seller may assign or transfer all of any of its rights and
obligations under this Agreement or dispose of any right or interest in this
Agreement to any member of the Seller Group provided that:
(a) if such undertaking ceases to be a member of the Seller Group the Seller
shall first procure that such undertaking shall transfer all of its
rights and obligations to a continuing member of the Seller Group and
provided that no such assignment or transfer shall prejudice the
obligations of EnCana Corporation under the Seller Parent Company
Guarantee;
(b) such assignment or transfer shall not prejudice or increase the liability
of the other party hereunder; and
(c) prior notice is given to the Purchaser.
22. FURTHER ASSURANCES
22.1 Each of the Seller and the Purchaser agrees to execute (or procure the
execution of) such further documents as may be required by law or as may be
necessary to implement and give effect to this Agreement.
22.2 In the absence of specific agreement to the contrary, each Party shall be
responsible for its own costs and expenses (including, for the avoidance of
doubt, those of its Affiliates) incurred in giving effect to the provisions of
Clause 22.1.
23. COSTS
23.1 Subject to Clause 23.2 and except as otherwise provided in this
Agreement, each of the Seller and the Purchaser shall be responsible for its own
costs, charges and
Page 25
other expenses (including those of its Affiliates) incurred in connection with
the negotiation, preparation, entering into and completion of the Transaction
Documents, and for the avoidance of doubt:
(a) the Seller shall indemnify the Purchaser and any Target Company and their
respective Affiliates in respect of any commission or remuneration
payable or alleged to be payable to any broker or other intermediary
engaged by the Seller Group in connection with implementing and giving
effect to this Agreement; and
(b) the Purchaser shall indemnify the Seller and its Affiliates in respect of
any commission or remuneration payable or alleged to be payable to any
broker or other intermediary engaged by the Purchaser Group in connection
with implementing and giving effect to this Agreement.
23.2 The Purchaser or its Affiliates shall bear all stamp, notarisation fees
or other documentary or transaction duties, stamp duty reserve tax, stamp duty
land tax and any other transfer Taxes arising in any jurisdiction as a result,
or in consequence, of the Transaction Documents or of their respective
implementation.
24. NOTICES
24.1 Any notice or other communication to be given by either Party to the
other Party under, or in connection with, this Agreement shall be in writing and
signed by or on behalf of the party giving it. It shall be served by sending it
by fax to the number set out in Clause 24.2, or delivering it by hand to the
address set out in Clause 24.2 and in each case marked for the attention of the
relevant party set out in Clause 24.2 (or as otherwise notified from time to
time in accordance with the provisions of this Clause 24). Any notice so served
by hand or fax shall be deemed to have been duly given:
(a) in the case of delivery by hand, when delivered; and
(b) in the case of fax, at the time of transmission;
provided that in each case where delivery by hand or by fax occurs after 6pm on
a Business Day or at any time on a day which is not a Business Day, service
shall be deemed to occur at 9am on the next following Business Day.
References to time in this Clause are to local time at the address to which the
relevant notice is sent.
24.2 The addresses and fax numbers of the parties for the purpose of Clause
24.1 are as follows:
SELLER
Address: EnCana (U.K.) Holdings
Charter Place, Vine Street,
Uxbridge, ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Page 26
Fax: ▇▇▇-▇▇▇▇-▇▇▇-▇▇▇
For the attention of the Company Secretary.
With a copy to: EnCana Corporation
1800, ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
For the attention of the General Counsel.
PURCHASER
Address: Nexen Energy Holdings International Limited
▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Channel Islands
Fax: ▇▇▇-▇▇▇▇-▇▇▇-▇▇▇
For the attention of the Company Secretary.
With a copy to: Nexen Petroleum International Limited
▇▇▇- ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
For the attention of the Senior Vice President and General Counsel.
24.3 A party may notify any other party to this Agreement of a change to its
name, relevant addressee, address or fax number for the purposes of this Clause
24, provided that such notice shall only be effective on:
(a) the date specified in the notice as the date on which the change is to
take place; or
(b) if no date is specified or the date specified is less than five Business
Days after the date on which notice is given, the date which is the fifth
Business Day after notice of any change has been given.
24.4 In proving such service it shall be sufficient to prove that the envelope
containing such notice was properly addressed and delivered to the address shown
Page 27
thereon or that the notice was transmitted by fax to the fax number of the
relevant party set out in this Clause 24 (or as otherwise notified under it).
24.5 The parties agree that the provisions of this Clause 24 shall not apply
to the service of any claim form, summons, order, judgment or other document
relating to or in connection with any arbitration proceedings.
24.6 All notices, demands, requests, statements, certificates or other
communications under this Agreement shall be in English unless otherwise agreed
in writing.
25. CONFLICT WITH OTHER AGREEMENTS
In the event of any conflict between this Agreement and any other agreement
relating to the Proposed Transaction, this Agreement shall prevail (as between
the parties to this Agreement and as between any other members of the Seller
Group and the Purchaser Group) unless:
(a) such other agreement expressly states that it (or any part of it)
overrides this Agreement in any respect and the Seller and the Purchaser
are either also parties to that other agreement or otherwise expressly
agree in writing that such other agreement shall override this Agreement
in that respect; or
(b) the contrary is expressly provided elsewhere in this Agreement.
26. ENTIRE AGREEMENT
26.1 The Transaction Documents together set out the entire agreement and
understanding between the parties in respect of the sale and purchase of the
Shares. This Agreement and the other Transaction Documents supersede all prior
agreements, understandings or arrangements (whether oral or written) relating to
the sale and purchase of the Shares which shall cease to have any further force
or effect. It is agreed that:
(a) no Party has entered into the Transaction Documents in reliance upon, nor
shall any Party (or any of its Connected Persons) have any claim or
remedy in respect of, any statement, representation, warranty, promise,
forecast, undertaking, assurance, collateral contract or other provision
made by or on behalf of any other Party (or any of its Connected Persons)
which is not expressly set out in this Agreement or any other Transaction
Document;
(b) the only right or remedy of a Party in relation to any statement,
representation, warranty, undertaking, assurance, collateral contract or
other provision set out in this Agreement or any other Transaction
Document shall be for breach of this Agreement or the relevant
Transaction Document to the exclusion of all other rights and remedies;
(c) except for any liability which a Party (or any of its Connected Persons)
has under or in respect of any breach of this Agreement or any of the
other Transaction Documents, no Party (or any of its Connected Persons)
shall owe
Page 28
any duty of care or have any liability in tort or otherwise to any other
Party (or its respective Connected Persons) in respect of, arising out
of, or in any way relating to the Proposed Transaction;
provided that this Clause shall not exclude any liability for (or remedy in
respect of) fraudulent misrepresentation.
The agreements and undertakings in this Clause 26 are given by each Party on its
own behalf and as agent for each of its Connected Persons. Each Party
acknowledges that the other Party gives such agreements and undertakings as
agent with the full knowledge and authority of each of its respective Connected
Persons.
27. WAIVERS, RIGHTS AND REMEDIES
27.1 Except as otherwise provided in this Agreement, no failure or delay by
any party in exercising any right or remedy provided by law or under or pursuant
to this Agreement or any of the Transaction Documents shall impair such right or
remedy or operate or be construed as a waiver or variation of it or preclude its
exercise at any subsequent time and no single or partial exercise of any such
right or remedy shall preclude any further exercise of it or the exercise of any
other remedy.
27.2 Without prejudice to the additions, subtractions and adjustments to the
Consideration every payment payable by one Party to the other Party under or
pursuant to the Transaction Documents shall be made in full without any set-off
or counterclaim howsoever arising.
28. CONTRACTS (RIGHTS OF THIRD PARTIES) ▇▇▇ ▇▇▇▇
28.1 Subject to Clause 28.2
(a) each Party undertakes that each of its Connected Persons shall have the
right to enforce the terms of Clauses 7.4 and 26 (Entire Agreement); and
(b) each Party undertakes that the Employees shall have the right to enforce
the terms of Clause 11 (Employees),
(in each case) under the Contracts (Rights of Third Parties) ▇▇▇ ▇▇▇▇.
28.2 The rights of Connected Persons and Employees under Clause 28.1 are
subject to:
(a) the term that the Parties may by agreement terminate or rescind or vary
the terms of the Transaction Documents in any way without the consent of
any Connected Person or Employee; and
(b) the other terms and conditions of the Transaction Documents.
28.3 Except as provided in Clause 28.1, a person who is not a Party shall have
no right under the Contracts (Rights of Third Parties) ▇▇▇ ▇▇▇▇ to enforce any
of its terms.
Page 29
29. GENERAL
29.1 This Agreement may be executed in counterpart and by the Parties on
separate counterparts, each of which is an original but all of which taken
together shall constitute one and the same instrument.
29.2 The Parties may elect to execute this Agreement by way of faxed
signatures from each other subject to a Party who so elects undertaking to give
the other Party the original signature page as soon as reasonably practicable
after execution.
29.3 No amendment, variation or waiver of the Transaction Documents shall be
valid unless it is in writing and duly executed by or on behalf of all of the
parties to it. The expression VARIATION shall include any variation, supplement,
deletion or replacement howsoever effected. Unless expressly agreed, no
variation shall constitute a general waiver of any provision of this Agreement,
nor shall it affect any rights, obligations or liabilities under or pursuant to
this Agreement which have already accrued up to the date of variation, and the
rights and obligations under or pursuant to this Agreement shall remain in full
force and effect except and only to the extent that they are so varied.
29.4 All provisions of this Agreement shall so far as they are capable of
being performed or observed continue in full force and effect notwithstanding
Closing except in respect of those matters then already performed and Closing
shall not constitute a waiver of either Party's rights in relation to this
Agreement or any of the Transaction Documents. Subject to Clause 12, all rights
and remedies conferred on the Parties under this Agreement are cumulative and
are additional to, and not exclusive of, any rights or remedies provided by law
or otherwise available at any time to the relevant Party.
29.5 Each of the provisions of this Agreement and each of the provisions in
any of the Transaction Documents is severable. If any such provision is held to
be or becomes illegal, invalid or unenforceable in any respect under the law of
any jurisdiction:
(a) so far as it is illegal, invalid or unenforceable, it shall be given no
effect and shall be deemed not to be included in this Agreement or the
relevant Transaction Document but it shall not affect or impair the
legality, validity or enforceability in that jurisdiction of any other
provisions of this Agreement or the relevant Transaction Document (or of
the provisions of this Agreement or that Transaction Document in any
other jurisdiction); and
(b) the parties shall use all reasonable endeavours to replace it with a
valid and enforceable substitute provision or provisions satisfactory to
any relevant competent authority but differing from the replaced
provision as little as possible and the effect of which is as close to
the intended effect of the illegal, invalid or unenforceable provision.
Page 30
30. INTERPRETATION
30.1 Words and expressions used in this Agreement shall have the meanings set
out in Schedule 10.
30.2 The Schedules and Annexes comprise schedules and annexes to this
Agreement and form part of this Agreement.
31. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS
31.1 This Agreement and the legal relationships established by or otherwise
arising in connection with this Agreement shall be governed by, and interpreted
in accordance with, English law.
31.2 Each of the Parties agrees that the courts of England are to have
exclusive jurisdiction to settle any disputes (including claims for set-off and
counterclaims) which may arise in connection with the creation, validity,
effect, interpretation or performance of, or the legal relationships established
by, this Agreement or otherwise arising in connection with this Agreement, and
for such purposes irrevocably submit to the jurisdiction of the English courts.
31.3 Each Party irrevocably waives any objections to the jurisdiction of any
court referred to in this Clause.
31.4 Each Party irrevocably agrees that a judgment or order of any court
referred to in this Clause in connection with this Agreement is conclusive and
binding on it and may be enforced against it in the courts of any other
jurisdiction.
AS WITNESS this Agreement has been signed on behalf of the parties the day and
year first before written.
Page 31
SCHEDULE 1
PART A
DETAILS OF THE COMPANY
1. Name: EnCana (U.K.) Limited
2. Date of Incorporation: 24 April 1972
3. Place of Incorporation: England
4. Class of Company: Private limited with share capital
5. Registered Number: 01051137
6. Registered Office: ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
7. Directors: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
8. Company Secretary: ▇▇▇▇ ▇'▇▇▇▇▇
9. Authorised Capital: (pound)100,000,000 divided into
100,000,000 ordinary shares of (pound)1
each $500,000,000 5.25% preference
shares of US $1 each
10. Issued Capital: (pound)100 ordinary shares $152,070,812
preference shares
11. Registered Shareholder: The Seller
12. Accounting Reference Date: 31 December
13. Auditors: PricewaterhouseCoopers LLP
14. Tax Residence: United Kingdom
15. Shareholdings: EnCana (Ettrick) Limited
EnCana Exploration (U.K.) Limited
16. Mortgages and charges: None
Page 32
PART B
DETAILS OF SUBSIDIARIES OF THE COMPANY
1. Name: EnCana (Ettrick) Limited
2. Date of Incorporation: 13 April 2000
3. Place of Incorporation: England
4. Class of Company: Private limited with share capital
5. Registered Number: 03976014
6. Registered Office: ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
7. Directors: ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
8. Company Secretary: ▇▇▇▇ ▇'▇▇▇▇▇
9. Authorised Capital: (pound)10,000,000 divided into
10,000,000 ordinary shares of (pound)1
each
10. Issued Capital: (pound)655,000 ordinary shares
11. Registered Shareholder: The Company
12. Accounting Reference Date: 31 December
13. Auditors: PricewaterhouseCoopers LLP
14. Tax Residence: United Kingdom
15. Shareholdings: None
16. Mortgages and charges: None
Page 33
1. Name: EnCana Exploration (U.K.) Limited
2. Date of Incorporation: 16 November 2001
3. Place of Incorporation: England
4. Class of Company: Private limited with share capital
5. Registered Number: 04323945
6. Registered Office: ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
7. Directors: ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
8. Company Secretary: ▇▇▇▇ ▇'▇▇▇▇▇
9. Authorised Capital: (pound)10,000,000 divided into
10,000,000 ordinary shares of (pound)1
each
10. Issued Capital: (pound)894,060 ordinary shares
11. Registered Shareholder: The Company
12. Accounting Reference Date: 31 December
13. Auditors: PricewaterhouseCoopers LLP
14. Tax Residence: United Kingdom
15. Shareholdings: None
16. Mortgages and charges: None
Page 34
PART C
LICENCES
A. THE COMPANY
BUZZARD FIELD AND PERCENTAGE
BUZZARD AREA BLOCK HOLDING
--------------------------------------------------------------------------------------------------------
Licence P.928 Blocks 19/5(a) and 20/1(S) 43.21254%
Licence P.986 Blocks 19/10 and 20/6 43.21254%
Licence P.215 Blocks 21/29b(SE) and 21/29b(SW) 18.978%
Licence P.272 Block 20/7a 12.402%
Licence P.928 Block 20/1(N) 30%
Licence P.1046 Block 20/2c 50%
Licence P.1097 Blocks 19/3 and 19/4 42.5%
Licence P.1098 Blocks 19/8 and 19/9 60%
Licence P.1099 Block 19/15 60%
Licence P.815 Block 15/23d 42%
Licence P.1101 Block 20/11 30%
Licence P. 226 Block 15/27b 35.885%
Licence P. 226 Block 15/27c 14%
ETTRICK
Licence P.317 Block 20/2a 74.694%
Licence P.273 Block 20/3a 32.98934%
▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
AND ▇▇▇▇▇ AREA
Licence ▇.▇▇▇ ▇▇▇▇▇ ▇▇/▇▇ (▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇) 78.275%
Licence ▇.▇▇▇ ▇▇▇▇▇ ▇▇/▇▇ (▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇) 69.429%
Licence ▇.▇▇▇ ▇▇▇▇▇ ▇▇/▇▇▇ (▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇) 42.003%
Licence P.240 Block 14/30a 30.64%
Licence P.967 Blocks 214/4, 214/5, 214/9 and 214/10 10%
Licence P.1086 Blocks 14/24b and 14/25b 75%
Licence P.1090 Block 14/30c 75%
Licence P.218 Block 15/21a Residual Area 42.083%
▇▇▇▇▇ ▇▇/▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇/▇▇▇, ▇▇▇▇▇
Licence P.588 15/21d 42.083%
Licence P.1091 Block 15/21e 90%
Licence P.185 13/16a 100%
Page ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ HOLDING
--------------------------------------------------------------------------------------------------------
Licence P.639 Block 14/30b 21%
Licence P.114 Block 22/27a Residual Area 13.22%
Licence P.244 Block 29/06a 4.75%
Licence ▇.▇▇▇ ▇▇▇▇▇ ▇▇/▇▇▇(▇) ▇▇▇ ▇▇▇▇▇ 29/09a(S) 8.20%
Licence P.227 Block 29/08b 8.66%
Licence ▇.▇▇▇ ▇▇▇▇▇ ▇▇/▇▇▇ ▇▇.▇▇▇▇%
▇▇▇▇▇▇▇ ▇.▇▇▇▇ ▇▇▇▇▇ 38/5 45%
Licence ▇.▇▇▇▇ ▇▇▇▇▇ ▇▇/▇▇, 39/7 30%
Licence P.233 Block 22/22b 38%
Licence P.988 Block 20/05d 40%
Licence P.1044 Block 15/28c 55%
Licence P.489 Block 15/23b 100%
Licence P.185 Block 15/22 (Excluding ▇▇▇▇▇ and ▇▇▇▇▇▇▇) 51.5384%
EXPLORATION
Licence P.637 Block 13/26a 45%
Licence P.981 Block 12/22a, 12/27a 40%
Licence P.1100 Block 20/4a, 20/9 60%
Licence P.1154 Block 13/26b 45%
Licence P.489 Block 15/23c 67.40%
Licence P.120 Block 21/15a main area 92.33%
Licence P.120 Block 21/15a sub-area 91.7527%
Licence P.1040 Block 15/18b + 15/19b 50%
Licence P.244 Block 21/02 (NJR) 35%
Licence P.244 Block 21/02 (S) 16.5625%
Licence P.244 Block 21/02 (NCR) 17.50%
Licence P.213 Block 28/05A 47.84%
Licence P.357 Block 22/19A 10.00%
FARRAGON
Licence P.1045 Block 16/18b 50%
Licence P.092 Block 16/28 (exc ▇▇▇▇▇▇ & Cyrus) 20%
B. ENCANA (ETTRICK) LIMITED
Licence P.272 Block 20/7a 19.816%
Licence P.273 Block 20/3a 61.85590%
C. ENCANA EXPLORATION LIMITED
Licence P.244 Block 29/06a 6.25%
Page 36
SCHEDULE 2
SELLER WARRANTIES
PART A
GENERAL/COMMERCIAL
1. THE SELLER GROUP AND THE SHARES
1.1 AUTHORISATIONS, VALID OBLIGATIONS, FILINGS AND CONSENTS
(a) The Seller has obtained all corporate authorisations and (other than to
the extent relevant to the Condition) all other applicable governmental,
statutory, regulatory or other consents, licences, authorisations,
waivers or exemptions (APPROVALS) required to empower it to enter into
and perform its obligations under the Transaction Documents to which it
is a party.
(b) The Transaction Documents which are to be entered into by a member of the
Seller Group will, when executed, constitute valid and binding
obligations of the relevant member of the Seller Group.
(c) Entry into and performance by each member of the Seller Group of any of
the Transaction Documents to which it is a party will not breach the
provisions of its memorandum and articles of association, certificate of
incorporation, by-laws or equivalent constitutional documents in its
jurisdiction of incorporation where such breach would materially and
adversely affect its ability to enter into or perform its obligations
under this Agreement and/or any Transaction Document to which it is a
party in accordance with their terms.
(d) Subject to fulfilment of the Conditions, neither entry into this
Agreement nor entry into, and implementation of, the Proposed Transaction
will:
(i) result in a breach of any applicable laws or regulations in
its jurisdiction of incorporation; or
(ii) amount to a breach of any order, decree or judgment of any
court or any governmental or regulatory authority in its
jurisdiction of incorporation,
by any member of the Seller Group where, in each case, such breach
would materially and adversely affect its ability to enter into or
perform its obligations under this Agreement and/or any Transaction
Document to which is it a party.
(e) No Target Company has agreed to or is otherwise liable to pay any bonus,
commission or other benefit to any Employee in connection with the sale
of the Shares.
Page 37
1.2 THE SELLER GROUP, THE SHARES AND THE TARGET COMPANIES
(a) The Seller and the Target Companies are validly incorporated, in
existence and duly registered under the laws of England and Wales and
have full power under their memorandum and articles of association to
conduct their business as conducted at the date of this Agreement.
(b) The Shares are fully paid and the Seller is the sole owner of the Shares
free from all Encumbrances, there is no agreement or commitment to give
or create any such Encumbrance and no person has made any claim to be
entitled to any right over or affecting the Shares.
(c) No person has the right (exercisable now or in the future and whether
contingent or not) to call for the issue of any share or loan capital in
any Target Company.
(d) The Seller is entitled to transfer the full legal and beneficial
ownership in Shares on the terms set out in this Agreement.
(e) The Shares constitute the whole of the issued and allotted share capital
of the Company.
(f) The information in respect of the Target Companies set out in Schedule 1
is accurate.
1.3 SUBSIDIARIES
(a) No shares in any Subsidiary are held by a person other than the Company.
(b) All shares in the Subsidiaries are fully paid are wholly owned by the
Company free from Encumbrances and there is no agreement or commitment to
give or create any such Encumbrance.
1.4 OTHER INTERESTS
No Target Company:
(a) owns or has any interest of any nature whatsoever in any shares,
debentures or other securities issued by any undertaking (other than
another Target Company) or any partnership other than OPOL and Oil Spill
Response Limited;
(b) has a branch, place of business or permanent establishment outside the
United Kingdom (overseas branch) or substantial assets outside the United
Kingdom and no Target Company has an outstanding obligation to acquire
any such interest or overseas branch.
The Company has not made any dividend or distribution except out of profits
available for the purpose and none of the reserves appearing in the Last
Accounts are undistributable reserves except to the extent stated in the Last
Accounts.
Page 38
2. FINANCIAL MATTERS
2.1 THE LAST ACCOUNTS
The Last Accounts, in relation to the Target Companies to which they relate:
(a) give a true and fair view of the state of affairs of such Target
Company's assets and liabilities as at the Last Accounts Date and of the
results thereof for the financial year ended on the Last Accounts Date;
(b) comply with the requirements of the Companies ▇▇▇ ▇▇▇▇; and
(c) have been prepared in accordance with UK GAAP and, subject to any changes
to UK GAAP during the immediately preceding two years, on a basis
consistent with the basis upon which the audited accounts of the Target
Companies have been prepared in respect of the immediately preceding two
years.
2.2 POSITION SINCE LAST ACCOUNTS DATE
Since the Last Accounts Date:
(a) the operation of each of the Target Companies has been carried on in the
ordinary course;
(b) no payments have been made other than in the ordinary course of business;
(c) no dividend or other distribution (whether in cash, stock or in kind) has
been declared, authorised, paid or made, nor has there been any reduction
of paid-up share capital, by any Target Company (except for any dividends
provided for in the Accounts); and
(d) no share or loan capital has been issued or agreed to be issued or
redeemed or repaid by any Target Company.
2.3 STATUTORY BOOKS
The statutory books of each Target Company have been maintained in all material
respects in accordance with the laws of England and Wales.
2.4 CAPITAL COMMITMENTS
There are no material outstanding capital commitments of the Target Companies
which are not budgeted for in the Company 2004 Budget or the Field Development
Plan.
2.5 UNITED STATES TURNOVER
The Target Companies have not sold product in the United States of America in
the 12 month period prior to the Last Accounts Date having an aggregate value in
excess of $50,000,000.
Page 39
3. FINANCIAL DEBT
3.1 None of the Target Companies has outstanding any Financial Debt owing by
it to any person outside the Seller Group.
3.2 No Target Company is a party to, or has any liability (including without
limitation any prospective or contingent liability) under any guarantee to
support the obligations of any member of the Seller Group.
3.3 No guarantee which remains outstanding has been given by any member of
the Seller Group or by any other person to support the obligations of any Target
Company.
4. REGULATORY MATTERS
4.1 LICENCES
Each Target Company has obtained all licences, permissions, authorisations
(public or private) or consents required for carrying on its business in the
places and in the manner in which it is carried on at the date of this Agreement
in accordance with all applicable laws and regulations, such licences,
permissions, authorisations and consents are in full force and effect and have
been complied with in all material respects and so far as the Seller is aware
there are no circumstances which indicate that any of such licences,
permissions, authorisations and consents will be revoked or not renewed.
4.2 COMPLIANCE
Each of the Target Companies has conducted its business and corporate affairs in
all material respects in accordance with:
(a) its memorandum and articles of association;
(b) all applicable laws and regulations of the United Kingdom and of any
other jurisdiction in which such Target Company does business.
4.3 There has been no default by any Target Company under any order, decree or
judgment of any court or any governmental or regulatory authority which applies
to the Target Company.
5. THE UK BUSINESS ASSETS
For the purposes of this Paragraph 5, a MATERIAL ASSET shall mean an asset with
a book value in the Last Accounts (or, if acquired since the Last Accounts Date,
an acquisition cost) of not less than $500,000 but does not include any of the
Properties.
5.1 OWNERSHIP
Page 40
Each of the Target Companies:
(a) owns or is entitled to use free from Encumbrances all the material assets
necessary to carry on its business as currently carried on.
(b) have not (outside the ordinary and normal course of business) disposed
of, or agreed to dispose of, any material asset included in the Last
Accounts.
5.2 POSSESSION
The material assets of the Target Companies are in the possession or under the
control of the Target Companies.
5.3 USE
Since October 2003 all the plant, machinery and equipment owned or operated by
the Target Companies have been regularly maintained in accordance with good
industry practice.
5.4 Where any material assets are used but not owned by any Target Company
the Disclosure Letter or the Disclosed Documents contains true, complete and
up-to-date details of the basis on which they are made available to the Company.
There has not occurred any event of default and there is no other event or
circumstance which may entitle any third party to terminate any agreement or
licence in respect of the provision of such assets.
6. CONTRACTUAL MATTERS
6.1 MATERIAL CONTRACTS
Except as disclosed in the Disclosed Documents there is not outstanding any
agreement to which a Target Company is a party:
(a) which, by virtue of the Proposed Transaction or the Transaction
Documents, is likely to result in:
(i) any other party being relieved of any material obligation or becoming
entitled to exercise any material right (including any right of
termination or any right of pre-emption or other option); or
(ii) any Target Company being in material default under any such agreement;
(b) which was entered into otherwise than in the ordinary course of the
business;
(c) which was entered into with any member of the Seller Group otherwise than
by way of bargain at arm's length; and
(d) which establishes any joint venture, consortium, partnership or profit
(or loss) sharing agreement.
6.2 With regard to each of the Material Contracts:
Page 41
(a) each such Material Contract is legally binding on the parties to it and
is in full force and effect;
(b) the Seller and so far as the Seller is aware each of the parties
(including the relevant Target Company or Companies) has complied in all
material respects with and is in compliance with its material obligations
under such Material Contract;
(c) so far as the Seller is aware there are no circumstances which constitute
a ground on which any such Material Contract may be avoided, rescinded,
repudiated, prematurely determined (whether as a result of this
Agreement, the sale of the Shares, a breach or event of default or other
termination right under such Material Contract) or declared to be invalid
and no Target Company has received any written notice of a claim to that
effect or notice indicating that such a claim may be made; and
(d) none of the Material Contracts is incapable of termination in accordance
with its terms on less than 6 months' notice.
6.3 DEFAULTS
No Target Company has received written notice that it is in material default
under any contract to which it is a party.
6.4 BUZZARD FIELD AND ▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
(a) The Disclosed Documents contain true, complete and up to date copies of
all Material Contracts, change orders under the Material Contracts and
the Operating Agreements.
(b) A true, complete and up-to-date copy of the Field Development Plan has
been provided to the Purchaser. There have been no revisions or re-drafts
of the Field Development Plan and no such re-drafts or revisions have
been proposed or, so far as the Seller or any Target Company is aware,
contemplated. Neither the Seller nor any Target Company is aware of any
matter, fact or circumstance which will, or is likely to, require any
revision or variation to the Field Development Plan.
(c) The amount spent by the Company for the joint account of the Buzzard
Field Interest owners up to and including 30 September 2004 on items of
expenditure required under the Field Development Plan is not less than
(pound)212,000,000.
(d) A true and complete copy of the Report dated in or about September 2004
entitled "Range of Abandonment Liability" in respect of the ▇▇▇▇▇ and
Telford Fields has been provided to the Purchaser, and neither the Seller
nor any Target Company is aware of any matter, fact or circumstance which
renders the information contained in such report inaccurate, incomplete
or misleading.
Page 42
6.5 HEDGING
No Target Company is a party to any currency, interest rate or commodity hedging
contract or arrangement.
7. LITIGATION
No Target Company is a claimant or defendant in or otherwise a party to any
litigation, arbitration or administrative proceedings which are in progress or,
so far as the Seller is aware, threatened in writing by or against it or
affecting any of the assets of the relevant Target Company. For this purpose
there shall be excluded any proceedings for collection by a Target Company of
debts of less than $50,000 arising in the ordinary course of its business.
8. INSOLVENCY
8.1 WINDING UP
No order has been made, petition presented or meeting convened for the winding
up of the Seller or any Target Company or for the appointment of any provisional
liquidator (or equivalent in the jurisdiction of its incorporation).
8.2 ADMINISTRATION AND RECEIVERSHIP
No receiver (including any administrative receiver or the equivalent to a
receiver or administrative receiver in the relevant jurisdiction) has been
appointed in respect of the whole or any material part of the property, assets
and/or undertaking of any Target Company.
8.3 VOLUNTARY ARRANGEMENT ETC.
None of the Seller or the Target Companies or any of their direct or indirect
holding companies has made any voluntary arrangement with any of its creditors.
8.4 INSOLVENCY
None of the Target Companies is unable to pay its debts as they fall due.
9. LICENSED INTEREST DOCUMENTS
9.1 The Target Companies are the legal and beneficial owner of the interests
in the Licences as set out in Part C of Schedule 1 and of all property, rights
and interests attributable to those Licences under the Licensed Interest
Documents.
9.2 The Licences and the Licensed Interest Documents are in full force and
effect and no act or omission by the Target Companies, the Seller or, so far as
the Seller is aware, any third party has occurred which would entitle the
Secretary to revoke a Licence and no notice has been given to the Target
Companies or the Seller of any such intention to revoke a Licence.
Page 43
9.3 The Licences have not been, and are not in the course of being,
surrendered in whole or in part nor are liable to forfeiture; no proposal to
surrender or abandon any Licence has been made or received by the Target
Companies; and, so far as the Seller is aware, no proposal exists or is pending
to surrender or abandon a Licence.
9.4 The Company is a party to the Licensed Interest Documents as set out in
Annex 1 to this Agreement, true, complete, up-to-date and accurate copies of
which have been disclosed to the Purchaser.
9.5 The Licensed Interest Documents are the only material documents to which
the Target Companies are party which govern or relate to the creating, existence
and validity of the Licences.
9.6 Neither the Target Companies nor the Seller has transferred or assigned
its respective interest in any Licensed Interest Documents to any third party or
encumbered it in any manner.
9.7 All the material obligations contained in the Licensed Interest Documents
requiring performance by the Target Companies and/or the Seller and its or their
respective successors in title prior to the date of this Agreement and, so far
as the Seller is aware, all other parties thereto have been performed.
9.8 Neither the Seller nor the Target Companies has given to or received from
any other party to any of the Licences and/or the Licensed Interest Documents
any notice of withdrawal or notice to leave from such agreements or of any
proposed assignment of all or part of an interest in any of the Licences.
9.9 Neither the Seller nor the Target Companies have:
(a) committed any material breach of, nor are in default under, any agreement
comprised in the Licensed Interest Documents; or
(b) received any notice (nor are otherwise aware) that any of the other
parties to the Licensed Interest Documents have committed any breach of,
or are in default under, any of the Licensed Interest Documents which
breach or default, at the date of this Agreement, is of a material nature
and subsisting.
9.10 Since the Economic Date no outstanding sole risk and non-consensual
operations have been proposed or carried out by any person in relation to the
Licences and so far as the Seller is aware no such operations are likely to be
proposed and no notices have been sent by any party to the Licensed Interest
Documents in respect of sole risk and non-consensual operations.
9.11 No third party is entitled to participate on payment of a sole risk
penalty in any hydrocarbon discovery in which any Target Company participates
other than the Blackhorse P.185 Block 15/22.
9.12 No Target Company is entitled to participate in any hydrocarbon discovery
by payment of a sole risk penalty.
Page 44
9.13 No notice prohibiting or suspending the activities of the Operator or any
contractor of the Operator has been served pursuant to any legislation
regulating matters of health and safety and/or the environment in relation to
the area governed by the Licensed Interest Documents.
9.14 Except as provided in the Licensed Interest Documents and subject to any
statutory or regulatory restrictions, each Target Company is able freely to
dispose of its interests in the Licences and all Petroleum attributable or which
may become attributable to those interests.
9.15 The Licensed Interest Documents are all of the permits, licences,
consents or authorisations held or obtained by the Target Companies pursuant to
which the Target Companies have rights to explore, search for, bore for, get,
produce or develop Petroleum and no Target Company has, by itself or with any
other party, made any application for any other such permit, licence, consent or
authorisation which application is still outstanding.
9.16 No Target Company is a party to any outstanding bidding or area of mutual
interest arrangements.
9.17 Except as provided in the Licensed Interest Documents or as arising in
the ordinary course of operations, none of the Target Companies' interests in
the Licences is subject to any Encumbrance or royalty or net production interest
or equitable interest, nor is any Target Company party to any agreement to
create any Encumbrance or royalty or net production interest or equitable
interest over any of the Target Companies' interests in the Licences.
9.18 The Disclosure Letter contains details of any liability of the Target
Companies in respect of any interest in petroleum production licence disposed of
by such Target Company prior to the date of this Agreement.
9.19 All cash calls due and payable by the Target Companies as at the date of
this Agreement have been paid in full.
9.20 The Secretary has not given any indication of her intention to require
any works to be carried out in excess of those referred to in the Licences or to
call for the submission of a development plan in respect of any Licence.
9.21 All work obligations to be performed by the Target Companies under the
Licences have been performed.
9.22 ABANDONMENT
(a) None of the ▇▇▇▇▇ which have been completed in an area covered by a
Licence have not been, or are not in the course of being, plugged and
abandoned in compliance with all requirements under law and the relevant
Licence.
(b) No payments have (save as set out in the Last Accounts) been made by any
Target Company in respect of or on account of or by way of provision
(other than accounting provision) for any future abandonment obligations
relating to
Page 45
any of the interests of the Target Companies in the Licences and, except
as provided in the Licensed Interest Documents:
(i) no abandonment agreement has been entered into in relation to the
interests of the Target Companies in the Licences; and
(ii) subject to all legislation and regulation, no Target Company is
under any obligation to make any such payments save pursuant to
any abandonment agreement to be entered into pursuant to any
Operating Agreement.
(c) No Target Company has received a notice from the Secretary under section
1 of the ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ requiring submission of an abandonment
programme in respect of any of the equipment or facilities constructed or
utilised in connection with operations carried on pursuant to the
Licensed Interest Documents.
9.23 OPERATOR
(a) No Operator of any of the Licences has given any formal notice of its
resignation as Operator which is still current.
(b) No formal notice has been given by any of the non-Operators, and no vote
has been passed by the non-Operators, requiring the removal of the
Operator of any of the Licences.
(c) The Operator has not received any notice given pursuant to any health and
safety legislation in the United Kingdom prohibiting or suspending the
activities of any Operator.
9.24 The Company has not, in its capacity as an Operator, incurred or agreed to
incur any material expenditure which is not authorised under the terms of the
relevant Operating Agreement.
10. INSURANCE
10.1 INSURANCE POLICIES
The Disclosure Letter contains a list of each current insurance and indemnity
policy in respect of which any Target Company has an interest (together the
INSURANCE POLICIES). The Insurance Policies have been in place at all material
times since their commencement.
10.2 STATUS OF THE INSURANCE POLICIES
So far as the Seller is aware all of the conditions of the Insurance Policies
have been performed and observed, each of the Insurance Policies is valid and
enforceable and is not void or voidable.
Page 46
10.3 CLAIMS
No claim in excess of $500,000 is outstanding under any of the Insurance
Policies and, so far as the Seller is aware, no fact or circumstance exists
which is likely to give rise to a claim under any of the Insurance Policies.
11. UNITED STATES ASSETS
11.1 No Target Company has any assets in the United States of America.
Page 47
PART B
IP/IT
1. LICENCES IN AND LICENCES OUT
(a) The Disclosure Letter lists all material Licences In and the Licences
Out.
(b) So far as the Seller is aware, no Target Company has received any written
notice in the twelve months prior to the date of this Agreement alleging
that a licensee under any Licence Out is in material breach of that
Licence Out.
(c) So far as the Seller is aware, no Target Company has received any written
notice in the twelve months prior to the date of this Agreement alleging
that a Target Company is in material breach of any Licence In.
2. NO INFRINGEMENT BY SELLER GROUP OR TARGET COMPANIES
(a) So far as the Seller is aware, no Target Company has received any written
notice in the twelve months prior to the date of this Agreement alleging
that the operations of the Target Companies infringe the Intellectual
Property Rights of a third party.
(b) So far as the Seller is aware, none of the operations of the Target
Companies infringes the Intellectual Property Rights of a third party in
any material respect.
3. NO INFRINGEMENT BY THIRD PARTIES
(a) So far as the Seller is aware, no claim has been made in writing to any
Target Company which alleges that a third party is infringing the
Intellectual Property Rights owned by a Target Company.
(b) So far as the Seller is aware, no third party is infringing the
Intellectual Property Rights owned by the Target Companies in any
material respect.
Page 48
PART C REAL ESTATE
1. GENERAL
The information in respect of the Properties set out in Schedule 7 is true and
accurate and not misleading in any respect and the Properties are the only
properties owned or occupied by the Target Companies.
2. POSSESSION AND OCCUPATION
The relevant Target Company is in possession of the whole of each of the
Properties, none of which is vacant, and no other person is in or actually or
conditionally entitled to possession, occupation, use or control of any of the
Properties.
3. TITLE
The relevant Target Company has good title to each of the Properties and:
(a) there is no Encumbrance in or over or affecting any of the Properties;
and
(b) no Property is affected by a subsisting contract for sale.
4. ADVERSE INTERESTS
So far as the Seller is aware:
(a) none of the Properties is subject to any matter which materially
adversely affects the ability to continue to carry on the UK Business
from any Property in substantially the manner as at present; and
(b) no Target Company is in breach of any material covenant, restriction,
condition or obligation (whether statutory or otherwise) affecting the
Properties.
5. OUTGOINGS
The Properties are not subject to the payment of any material outgoings other
than the usual rates, taxes, rent, insurance rent and service charge.
6. DISPUTES
There are no material current disputes, liabilities, claims or demands relating
to or in respect of the Properties.
7. PLANNING MATTERS
The current use of each of the Properties is an authorised use under all
legislation intended to control or regulate the construction, demolition,
alteration or use of land or buildings or to preserve or protect the national
heritage and any orders, by-laws or regulations made or granted under any of
them and no notices have been received from any relevant authority alleging any
breach of such legislation which would have
Page 49
a material effect on the UK Business nor, so far as the Seller is aware, are
there any circumstances rendering the service of such notices likely.
8. LEASEHOLD MATTERS
In relation to the Properties:
(a) there are no subsisting notices alleging a material breach of any
covenants, conditions and agreements contained in the relevant leases, on
the part of the tenant;
(b) no rent is or could be currently under review;
(c) the relevant Target Company has not commuted any rent or other payment or
paid any rent or other payment ahead of the due date for payment;
(d) no tenancy is being continued after the contractual expiry date whether
pursuant to statute or otherwise.
9. DUE DILIGENCE AND INFORMATION
The Seller has provided true and complete copies of all material deeds,
documents and other information relevant to the relevant Target Company's
interest in or use of the Properties.
10. CONTINGENT LIABILITIES
No Target Company has any actual or contingent liability in respect of any
property formerly owned or occupied by it or in respect of which it acted as
guarantor.
Page 50
PART D
TAXATION
1. RETURNS
Each Target Company has within the last six years made in a timely manner all
material returns and supplied all other material information required to be
supplied to all relevant Tax authorities. All such returns and other information
were complete, accurate in all material respects and made on a proper basis.
None is being disputed by the relevant Tax authority in any material respect,
and so far as the Seller is aware there is no fact or circumstance currently
existing which might cause such a dispute.
2. DISPUTES AND INVESTIGATIONS
No Target Company is involved in any material current dispute with any Tax
authority or so far as the Seller is aware is or has in the last six years been
the subject of any investigation or non-routine visit by any Tax authority and
no Target Company has become liable to pay any penalty, surcharge, fine or
interest in respect of Tax.
3. RESIDENCE
Each Target Company is and has at all times in the last six years been resident
in the United Kingdom for Tax purposes and is not and has not at any time in
that period been treated as resident in any other jurisdiction for any Tax
purpose (including any double taxation arrangement).
4. TREASURY CONSENTS
No Target Company has in the last six years carried out or caused or permitted
to be carried out any of the transactions specified at the relevant time in
section 765(1) of the Taxes Act otherwise than with the prior consent of H.M.
Treasury or specified at the relevant time in section 765A of the Taxes Act
without having duly provided the required information to the Inland Revenue.
5. VALUE ADDED TAX
For the purposes of sub-Paragraph 5 of this Part D the expression VAT
LEGISLATION shall include the Value Added Tax ▇▇▇ ▇▇▇▇ and all other enactments
in relation to value added tax and all notices, provisions and conditions made
or issued thereunder including the terms of any agreement reached with H.M.
Commissioners of Customs and Excise or any concession referred to in the
Disclosure Letter. Sub-Paragraph 5 shall apply, with appropriate modifications
(including the definition of VAT legislation), to any equivalent sales or
turnover tax in any jurisdiction other than the UK to which the Company is
subject.
Each Target Company:
(a) is registered for the purposes of value added tax in the UK (and not
elsewhere), has been so registered at all times in the last six years
that it has been required to be registered by VAT legislation, and such
registration is not
Page 51
subject to any conditions imposed by or agreed with H.M. Customs and
Excise; and
(b) has complied with and observed in all material respects the terms of VAT
legislation in the last six years.
(c) does not make exempt supplies
6. LOSSES AND CAPITAL ALLOWANCES AS AT 1 JANUARY 2004
The amount of trading losses for the purposes of corporation tax which were
available to the Company for carry forward as at 1 January 2004 was
(pound)90,223,327 ((pound)95,556,886 in respect of the Supplementary Charge) and
the amount of the Capital Allowances Pool as at 1 January 2004 was
(pound)33,540,343, consisting of (pound)26,493,529 in respect of Part 2 of the
Capital ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ 25% pool and (pound)7,046,814 in respect of Part 5
of the Capital ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ 25% pool.
7. MISCELLANEOUS
7.1 All Tax for which the Target Companies are liable or for which they are
liable to account for up to the date of this Agreement has been duly paid (or a
reasonable estimate has been duly paid).
7.2 The Target Companies have preserved all material records required for the
delivery of correct and complete returns as required by any legislation relating
to Tax.
7.3 The amount of any Tax chargeable on any Target Company during any
accounting period has not, to any material extent, depended upon any concession,
agreement or other arrangement with any Tax authority.
7.4 The book value shown in or adopted for the purposes of the Last Accounts
as the value of each of the assets of a Target Company on the disposal of which
a chargeable gain or allowable loss could arise, does not exceed the amount
which on a disposal of such asset at the date of this agreement would be
deductible under section 38 of the Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇.
7.5 The Disclosure Letter gives full details of:
(a) all claims, elections, disclaimers, withdrawals of claims or notification
assumed to have been made for the purposes of the provisions or reserves
for Tax included in the Last Accounts that have not actually been made at
the date of this Agreement; and
(b) any arrangements entered into by any Target Company (whether legally
binding or not) for or in relation to the surrender of group relief to or
by the Target Company under sections 402 to 413 (inclusive) Taxes Act in
respect of accounting periods beginning on or before Closing, including
any liability (whether contingent or otherwise) to make payments for (or
repayments in respect of) the surrender of such group relief.
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7.6 No Target Company has entered into any transaction the consideration for
which was or so far as the Seller is aware will be determined otherwise than on
arm's length terms, nor has any Target Company agreed to do so, in circumstances
that the Target Company's income or capital gains or other Tax basis could be
required to be adjusted for Tax purposes, and each Target Company holds
documentation (including any pricing methodology) which is sufficient to satisfy
any requirement to demonstrate that any transaction to which it was a party was
entered into on arm's length terms.
7.7 Since the Last Accounts Date:
(a) no disposal has taken place or other event occurred which will have or
may have the effect of crystallising any liability to Tax or of causing
any amount to be treated as disposal value in the Capital Allowance Pool;
(b) no Target Company has been involved in any transaction which has given
rise to a liability to Tax on that company (or would have given or might
give rise to such a liability but for the availability of any relief)
other than Tax in respect of normal trading income or receipts of such
company arising from transactions entered into by it in the ordinary
course of business; and
(c) no Target Company has paid or declared any dividend or other distribution
(whether in cash, stock or in kind) nor has there been any reduction of
paid up share capital.
7.8 No Target Company has entered into any scheme, transactions or
arrangement which so far as the Seller is aware could be subject to the
application of principles in ▇.▇ ▇▇▇▇▇▇ LIMITED V IRC (54 TC101) as developed in
subsequent cases.
7.9 No Target Company:
(a) constitutes or has at any time constituted a permanent establishment of
another person, business or enterprise for any Tax purpose; and
(b) is or has been liable to Tax in any other jurisdiction for any Tax
purposes (including for the purpose of any double taxation agreement).
7.10 No Target Company has made any claim for relief from stamp duty or stamp
duty land tax which may be withdrawn as a result of any event or circumstance
subsequently occurring (whether before, at or after Closing).
7.11 The Inland Revenue have confirmed in the attachment to their letter of 26
July 2004 the terms on which interest due and payable in respect of the $300m
drawing under the Loan Facility dated 24 February 2004 will be deductible under
section 494 Taxes Act 1988 against the relevant Target Company's ring fence
profits for corporation tax purposes.
7.12 The Last Accounts make proper provision for Tax (in accordance with UK
GAAP), including in respect of deferred tax and provision in respect of deferred
petroleum revenue tax.
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8. LOSSES AS AT 1 OCTOBER 2004
The amount of trading losses, for the purposes of corporation tax, which were
available to the Company for carry forward as at 1 October 2004 (on the
assumption that 30 September 2004 was the end of the accounting period) is
(pound)159,000,000 in addition to the amounts referred to in Paragraph 6 of this
Part D of Schedule 2.
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PART E
ENVIRONMENT
For the purposes of this Part E, MATERIAL in the context of any liability under
the Warranty in this Part E, shall be deemed to refer to facts, matters,
circumstances, issues or events which have resulted in, or are likely to result
in an aggregate cost to the UK Business of not less than $2,000,000.
1. So far as the Seller is aware, no event or incident has occurred in
respect of the UK Business (other than pursuant to prevailing oil and gas field
practice conducted in accordance with any legislation in force at the time of
the relevant activity) which has given rise or is likely to give rise to any
material Environmental Liability, nor has it received in relation to the UK
Business any demands or notices under any Environmental Law which require any
further material action.
2. So far as the Seller is aware, in the twelve months prior to the date of
this Agreement each of the Target Companies has conducted the UK Business in all
material respects in accordance with Environmental Laws.
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PART F
EMPLOYMENT
1. DISCLOSED DOCUMENTS ITEMS
The Disclosed Documents contain:
(a) copies of the contracts of employment for all directors of the Company;
and
(b) copies of the standard terms and conditions of employment applicable to
all Employees.
2. TRADE UNIONS
No Target Company recognises any trade union or other body representing its
Employees or any of them for the purpose of collective bargaining or
negotiating.
3. INCENTIVE SCHEMES
Except as disclosed in the Disclosed Documents, no Target Company has, nor has
any of them agreed to introduce, any share incentive scheme, share option scheme
or profit sharing, bonus, commission or other incentive scheme for any directors
or Employees or other workers engaged in the UK Business.
4. NOTICE ON TERMINATION
There is not in existence any written or unwritten contract of employment or
contract for services or secondment between any Target Company and any director,
officer, Employee, worker or contractor that cannot be terminated by the
relevant Target Company on three months notice or less without giving rise to a
claim for damages or compensation (other than a statutory redundancy payment or
statutory compensation for unfair dismissal) or, in either case, the equivalent
in any relevant jurisdiction.
5. Since the Last Accounts Date no change has been made to the terms of
employment or engagement of any Employee of any Target Company entitled to
remuneration at a rate in excess of (pound)50,000 per annum and no such change,
and no negotiation or request for such a change is due or expected.
6. Each Target Company has in relation to each of its Employees and each of
its former employees complied in all material respects with:
(a) all obligations imposed on it under such employees' terms and conditions
of employment and any collective agreement and arrangements which relate
to any such employees; and
(b) all obligations imposed on it by, and all orders and awards made under,
all statutes, regulations and practice and customs which are relevant to
such employees or their terms and conditions of employment or any
recognised trade union including without limitation all obligations under
the Health and Safety at Work etc. ▇▇▇ ▇▇▇▇ and the Working Time
Regulations 1998.
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8. So far as the Seller is aware no Target Company is involved in any
dispute or negotiation with any of the Employees or any of its former employees,
any trade union or employee representative or other such body and there are no
circumstances (including signing of this Agreement or Closing) which are likely
to give rise to any such dispute and no gratuitous payment has been made or
promised by any Target Company in connection with the termination or proposed
termination of employment of any present or former director, officer or
employee.
9. So far as the Seller is aware, within one year preceding the date of this
Agreement, there has been no industrial action or trade disputes involving or
relating to any current or former director, officer or employee of any Target
Company.
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PART G
PENSIONS
1. RETIREMENT BENEFITS/SELLER EMPLOYEE BENEFIT PLANS
All material particulars of the Target Company's obligations to contribute to
the Pension Arrangements are provided in the Disclosed Documents. Other than the
Pension Arrangements (and any statutory social security plans operated under
public law, statute or regulation), neither the Seller nor the Target Company
nor any member of the Seller Group provides or contributes to, or has at any
time prior to the date of this Agreement provided or contributed to, or is
liable or has at any time prior to the date of this Agreement been liable to
provide or contributed to the provision of Retirement Benefits for or in respect
of any present or past Employee or director of any Target Company.
2. NO PROPOSALS
No proposal has been announced and no agreement has been made to establish,
contribute to or fund any other arrangement for providing any Retirement
Benefits or to continue or increase any Retirement Benefits under any Pension
Arrangement for or in respect of any present or past Employee or director of any
Target Company, or to maintain any such Retirement Benefits or the level of any
such Retirement Benefits generally for any period.
3. PAYMENTS IN RESPECT OF THE SELLER EMPLOYEE BENEFIT PLANS
The Disclosed Documents set out the rates at which contributions to the Pension
Arrangements are paid.
4. DUE PAYMENT
All amounts due to be paid to or in respect of the Pension Arrangements by any
Target Company or member of the Seller Group on or before the date of this
Agreement (including all insurance premiums, taxes and expenses) have been duly
paid in full on the due dates for such payments.
5. DEATH AND DISABILITY BENEFITS
Any benefits payable on the death of an Employee or director of any Target
Company whilst in employment or during a period of sickness or disability are
fully insured, all premiums due to the insurance company have been paid and each
such Employee or director has been covered for such insurance by an insurance
company of repute at normal rates and on normal terms for persons in good
health.
6. CLAIMS
To the best of the Seller's knowledge and awareness, there are no arbitrations,
mediations, claims to the Pensions Advisory Service, Pensions Ombudsman
complaints, complaints to the Occupational Pensions Regulatory Authority,
actions, suits or claims in progress, pending, threatened or anticipated by any
Employee or
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director of any Target Company or anyone claiming through them in relation to
the Pension Arrangements, and there is no fact or circumstances likely to give
rise to any such proceedings.
7. ABSENT EMPLOYEES
Other than as disclosed, there are no Employees of any Target Company on
long-term sick leave or absent from work in circumstances likely to lead to
long-term sick leave.
8. EMPLOYMENT CONTRACT TRANSFERS
No Employee or director of any Target Company or former Employee has had his
contract of employment transferred to any Target Company under the Transfer of
Undertakings (Protection of Employment) Regulations 1981 in circumstances where
such contract gives rise to any liability to provide relevant benefits (as
defined in section 612 of Taxes Act) arising from an occupational pension scheme
(as defined in section 1 of the Pensions Schemes Act 1993) and the Seller has no
obligation to provide or fund the provision of such relevant benefits as a
result of any such transfer.
9. BENEFITS
The Pension Arrangements provide only money purchase benefits within the meaning
of section 181 of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇.
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SCHEDULE 3
LIMITATIONS ON LIABILITY
1. TIME LIMITS
(a) Other than in respect of an Indemnity Claim, the Seller shall not be
liable for any Claim unless the Seller receives from the Purchaser
written notice in accordance with Paragraph 1(b) prior to the date which
is twelve months from the Closing Date in case of a Claim for breach of
Schedule 5 (Conduct of the Target Companies Pre-Closing) and eighteen
months from the Closing Date in the case of any other Claim.
(b) The Purchaser shall give notice, and reasonable details, of the Claim to
the Seller as soon as reasonably practicable after becoming aware of the
Claim.
2. THRESHOLDS FOR CLAIMS
The Seller shall not be liable for any single Claim or Tax Demand:
(a) other than in respect of a Claim for breach of Title Warranties unless
the amount of the liability pursuant to that single Claim or Tax Demand
exceeds (i) $500,000 in the case of Claim for breach of Paragraph 2(s) of
Schedule 5, (ii) $250,000 in the case of a Claim for breach of the
remainder of the provisions in Schedule 5, or (iii) $1,750,000 in the
case of any other Claim or Tax Demand (in which case the Purchaser shall
be able to claim the whole amount of such Claim or Tax Demand and not
only for the excess); and
(b) other than in respect of a Claim for breach of Schedule 5 or a Claim for
breach of the Title Warranties unless the aggregate amount of the
liability of the Seller for all Claims (other than Claims in respect of a
breach of Schedule 5 and Claims for breach of the Title Warranties) and
Tax Demands not excluded by sub-Paragraph (a) exceeds $15,000,000 (in
which case the Purchaser shall be entitled to claim for the whole amount
of such Claim and not only the excess).
This Paragraph 2 does not apply to Indemnity Claims.
3. CLAIM OR CLAIM FOR BREACH OF TAX WARRANTY TO BE WITHDRAWN UNLESS
LITIGATION COMMENCED
Any Claim or claim for breach of Tax Warranty shall (if it has not been
previously satisfied, settled or withdrawn) be deemed to have been withdrawn
unless legal proceedings in respect of it have been commenced by both being
issued and served within 6 months of notice having been given by the Purchaser
pursuant to Paragraph 1 of this Schedule 3 (or in the case of the Tax Warranties
pursuant to Paragraph 3.1(b) of Schedule 8) (except where the Claim or claim for
breach of Tax Warranty relates to a contingent liability in which case it shall
be deemed to have been withdrawn unless legal proceedings in respect of it have
been commenced by being both issued and
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served within 6 months of it having become an actual liability). No new Claim or
claim for breach of Tax Warranty may be made in respect of the facts, matters,
events or circumstances giving rise to any such withdrawn Claim or claim for
breach of Tax Warranty.
4. MAXIMUM LIMIT FOR ALL CLAIMS
The aggregate amount of the liability of the Seller in respect of the aggregate
of all Claims (whether under the Title Warranties or otherwise) and Tax Demands
shall not exceed 100 per cent of the Consideration provided however that the
aggregate amount of the liability of the Seller in respect of the aggregate of
all Claims (other than under the Title Warranties) and claims for breach of Tax
Warranties shall not exceed 50 per cent. of the Consideration.
Nothing in this Paragraph 4 shall allow the aggregate amount of the liability of
the Seller in respect of the aggregate of all Claims (whether under the Title
Warranties or otherwise) and Tax Demands to exceed 100 per cent. of the
Consideration.
5. CLAIMS ONLY TO BE BROUGHT UNDER RELEVANT WARRANTIES
The Purchaser acknowledges and agrees that the only Warranties given in relation
to:
(a) Intellectual Property Rights and information technology or any related
claims, liabilities or other matters (IPR MATTERS) are those set out in
Part B of Schedule 2 and each of the other Warranties shall be deemed not
to be given in relation to IPR Matters;
(b) the Properties, any real estate and planning and zoning matters or any
related claims, liabilities or other matters (REAL ESTATE MATTERS) are
those set out in of Part C of Schedule 2 and each of the other Warranties
shall be deemed not to be given in relation to Real Estate Matters;
(c) taxation or any related claims, liabilities or other matters (TAX
MATTERS) are those set out in Part D of Schedule 2 and each of the other
Warranties shall be deemed not to be given in relation to Tax Matters;
(d) environment or any related claims, liabilities or other matters
(ENVIRONMENTAL MATTERS) are those set out in Part E of Schedule 2 and
each of the other warranties shall be deemed not to be given in relation
to Environmental Matters; and
(e) the employment of any past or present employee of any Target Company or
any member of the Seller Group or any related claims, liabilities or
other matters (EMPLOYEE MATTERS) are those set out in Part F of Schedule
2 and each of the other Warranties shall be deemed not to be given in
relation to Employment Matters
except that none of the restrictions in this Paragraph 5 (save for Paragraph
5(c)) shall apply to limit any Claim for breach of the Warranties contained in
Paragraph 2.1 (Last
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Accounts), Paragraph 2.2 (Position Since Last Accounts Date) and Paragraph 7
(Litigation) of Part A of Schedule 2.
6. MATTERS DISCLOSED OR TAKEN INTO ACCOUNT IN ADJUSTMENTS
The Seller shall not be liable for any Claim for breach of the Warranties or in
the case of sub-Paragraph 6(a) below a claim for breach of the Tax Warranties if
and to the extent that the fact, matter, event or circumstance giving rise to
such Claim or for breach of the Tax Warranties where applicable
(a) is disclosed, allowed, provided or reserved for in the Last Accounts; or
(b) is reflected, provided for or otherwise taken into account in the Interim
Closing Statement or the Final Closing Statement or any consequent
adjustment to the Initial Price.
7. CONTINGENT LIABILITIES
If any Claim for breach of the Warranties or a claim for breach of Tax
Warranties is based upon a liability which is contingent only, the Seller shall
not be liable to make any payment unless and until such contingent liability
becomes an actual liability (but, subject as provided in Paragraph 1 of this
Schedule 3, without prejudice to the right of the Purchaser to give notice of
that Claim and to issue and serve proceedings in respect of it before such
time).
8. NO LIABILITY FOR CLAIMS ARISING FROM ACTS OR OMISSIONS OF PURCHASER
The Seller shall not be liable for any Claim that would not have arisen or would
not have been increased but for any voluntary act, omission or transaction
carried out:
(a) after Closing by the Purchaser or any member of the Purchaser Group or
its respective directors, employees or agents or successors in title
(otherwise, than as required by law or pursuant to a legally binding
obligation incurred prior to Closing and otherwise than in the ordinary
and usual course of business of a Target Company as carried on in the
same manner as in the period up to Closing); or
(b) before Closing by any member of the Seller Group or any Target Company at
the written direction or request of or on behalf of the Purchaser or any
member of the Purchaser Group.
9. NOTHING TO RESTRICT PURCHASER'S DUTY TO MITIGATE
Nothing in this Schedule 3 shall in any way restrict or limit the general
obligation at law of the Purchaser and, following Closing, any member of the
Purchaser Group to mitigate any loss or damage which it may suffer in
consequence of any breach by the Seller of the terms of this Agreement or any
fact, matter, event or circumstance likely to give rise to a Claim or a claim
for breach of Tax Warranty. For the avoidance of doubt, the Seller shall not be
liable to the Purchaser for a Claim or claim for breach of Tax Warranty if and
to the extent that any member of the Purchaser Group has a right
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to claim against any third party in respect of the subject matter of the
relevant Claim and has not exhausted such claim or would have had a claim
against such third party but for any action taken by a member of the Purchaser
Group after Closing.
10. EXHAUSTING ALL POSSIBLE CLAIMS
Notwithstanding any other provision in this Agreement the Seller shall only be
liable to the Purchaser for a Claim if and to the extent that:
(a) the Company or the Purchaser has not been otherwise reimbursed (in which
case, the Seller's liability to the Purchaser shall be reduced by the
amount of monies reimbursed); and/or
(b) the Company, if entitled to claim on any insurance policy in relation to
any Claim, has used its reasonable endeavours to pursue such claim and
the amount of insurance monies recovered has not reimbursed the Company
in full (in which case, the Seller's liability to the Purchaser shall be
reduced by the amount of monies recovered); and/or
(c) the Purchaser and members of the Purchaser Group have not waived any
rights against any third party in respect of the subject matter of the
Claim.
11. RECOVERY FROM THIRD PARTIES
Where the Seller has made a payment to the Purchaser in relation to any Claim
and the Purchaser or any member of the Purchaser Group has a right of
reimbursement against any other person in respect of the subject matter of that
Claim, the Purchaser shall:
(a) promptly notify the Seller of that fact; and
(b) provide (or procure that any relevant member of the Purchaser Group
provides) such information as the Seller may reasonably require; and
(c) take (or procure that any relevant member of the Purchaser Group shall
take) all steps or proceedings as the Seller may reasonably require to
enforce such right.
If the Purchaser or any member of the Purchaser Group shall be reimbursed any
amount in respect of the subject matter of that Claim, the Purchaser shall
immediately pay the Seller an amount equal to the amount reimbursed less any
reasonable costs of recovery. Thereafter, that Claim shall be limited (in
addition to the limitations on the liability of the Seller referred to in this
Schedule 3) to the amount by which the loss or damage suffered by the Purchaser
as a result of such breach exceeds the amount so recovered.
12. SUMS OR BENEFITS RECEIVED BY PURCHASER GROUP
Without prejudice to Paragraph 11 of this Schedule 3 this Paragraph shall apply
if the Seller makes any payment to the Purchaser in relation to any Claim (the
DAMAGES
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PAYMENT) and the Purchaser or any member of the Purchaser Group receives any sum
or benefit otherwise than from the Seller or any member of the Seller Group
(whether by payment, discount, credit, relief or otherwise including from any
Tax authority) which would not have been received but for the circumstance
giving rise to that Claim, such benefit to include any benefit arising in
connection with Clause 9.4(b). The Purchaser shall (or shall procure that the
relevant member of the Purchaser Group shall), once it or the relevant member of
the Purchaser Group has received such sum or benefit, as soon as reasonably
practicable repay to the Seller an amount equal to such sum or benefit (net of
Taxation thereon and reasonable costs of recovery) or, if less, the Damages
Payment (except to the extent that the amount of such sum or benefit has been
taken into account in calculating the Damages Payment).
13. NO LIABILITY FOR LEGISLATION OR CHANGES IN RATES OF TAX
The Seller shall not be liable for any Claim if and to the extent it is
attributable to or the amount of such Claim is increased as a result of:
(a) any legislation not in force at the date of this Agreement;
(b) any change of law (or any change in interpretation on the basis of case
law), regulation, directive, requirement or administrative practice which
takes effect retroactively; or
(c) any change in the rates of Taxation in force at the date of this
Agreement.
14. NO DOUBLE RECOVERY
The Purchaser shall not be entitled to recover damages or obtain payment,
reimbursement, restitution or indemnity more than once in respect of any one
liability, loss, cost, shortfall, damage, deficiency, breach or other set of
circumstances which gives rise to more than one Claim or Tax Demand.
15. WAIVER OF RIGHT OF SET-OFF
The Purchaser hereby waives and relinquishes any right of set-off or
counterclaim, deduction or retention which the Purchaser might otherwise have in
respect of any Claim or Tax Demand out of any payments which the Purchaser may
be obliged to make (or procure to be made) to the Seller pursuant to this
Agreement or otherwise.
16. SELLER TO HAVE OPPORTUNITY TO REMEDY BREACHES
A breach of the Warranties which is capable of remedy shall not entitle the
Purchaser to compensation unless the Seller is given written notice of the
breach by the Purchaser and such breach is not remedied within 30 days after the
date on which such notice is served on the Seller. Without prejudice to its duty
to mitigate any loss, the Purchaser shall (or shall procure that the relevant
member of the Purchaser Group shall) provide all reasonable assistance to the
Seller to remedy any such breach at the Seller's cost.
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17. LOSS
17.1 The Purchaser shall not be entitled to bring a Claim against the Seller
for any indirect or special loss, loss of profits or punitive damages.
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SCHEDULE 4
PURCHASER WARRANTIES
1. The Purchaser is validly incorporated, in existence and duly registered
under the laws of Jersey and has full power to conduct its business as conducted
at the date of this Agreement.
2. The Purchaser has obtained all corporate authorisations and (other than
to the extent relevant to the Conditions) all other applicable governmental,
statutory, regulatory or other consents, licences, authorisations, waivers or
exemptions required to empower it to enter into and perform its obligations
under this Agreement and any other Transaction Document to which it is (or is
proposed to be) a party.
3. The Transaction Documents which are to be entered into by a member of the
Purchaser Group will, when executed, constitute valid and binding obligations of
the relevant member of the Purchaser Group.
4. Entry into and performance by the Purchaser of this Agreement and/or any
Transaction Document to which it is a party will not violate or conflict with
the provisions of its memorandum and articles of association, certificate of
incorporation, by-laws, or in any way that would materially adversely affect its
ability to enter into or perform its obligations under this Agreement and/or any
Transaction Document to which it is a party.
5. Subject to fulfilment of the Conditions neither entry into this Agreement
nor entry into, and implementation of, the Proposed Transaction will:
(a) result in violation or breach of any applicable laws or regulations in
any relevant jurisdiction; or
(b) amount to a violation or default with respect to any statute, regulation,
order, decree or judgment of any court or any governmental or regulatory
authority in any jurisdiction;
by any member of the Purchaser Group, which, in each case, would materially and
adversely affect its ability to enter into or perform its obligations under this
Agreement and/or any Transaction Document to which it is a party.
6. Neither entry into this Agreement nor entry into, and implementation of,
the Proposed Transaction will (subject to fulfilment of the Conditions) result
in a requirement for the Purchaser to obtain any consent or approval, or give
any notice to or make any registration with, any governmental regulatory or
other authority which has not been obtained or made as at the date of this
Agreement.
7. No order has been made, petition presented or meeting convened for the
winding up of the Purchaser or any of its direct or indirect holding companies,
or for the appointment of any provisional liquidator (or equivalent in the
jurisdiction of its incorporation) (or other process whereby the business is
terminated and the assets of
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the company concerned are distributed amongst the creditors and/or shareholders
or other contributors), and there are no cases or proceedings under any
applicable insolvency, reorganisation or similar laws in any relevant
jurisdiction, and no events have occurred which, under applicable laws, would
justify any such cases or proceedings.
8. So far as the Purchaser is aware, neither the Purchaser nor any member of
the Purchaser Group is subject to any order, judgment, direction, investigation
or other proceedings by any Governmental Entity that will, or are reasonably
likely to, prevent or delay the fulfilment the Conditions.
9. The Purchaser will have available funds to pay the Initial Price and meet
its other obligations under this Agreement at or prior to Closing.
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SCHEDULE 5
CONDUCT OF THE TARGET COMPANIES PRE-CLOSING
1. During the period from the date of this Agreement until Closing, the
Seller shall (except as may otherwise be required or permitted in accordance
with the terms of any Transaction Document or as may be approved by the
Purchaser, such approval not to be unreasonably withheld or delayed):
(a) procure that the UK Business of the Target Companies is in all respects
conducted only in the ordinary course (and in accordance with the terms
of the Licences) so as to protect and maintain the same in accordance
with good oilfield practice;
(b) procure that no share or loan capital is or is agreed to be issued,
allotted, redeemed, repaid or repurchased by the Target Companies; and
(c) procure that the Target Companies maintain in force all insurance
policies normally kept in force on the same material terms to provide a
similar level of cover as in force at the date of this Agreement for the
benefit of the Target Companies and, subject to the agreement of the
underwriters and other than in relation to captive insurance and
directors' and officers' insurance policies, cause the interest of the
Buyer to be noted on each relevant policy from the date of this
Agreement; and
(d) inform the Purchaser of any material changes to:
(i) any approvals and permits required for the operation of the UK
Business; and
(ii) the financial condition of the Company and its assets rights and
interests.
2. Without prejudice to the generality of Paragraph 1 and subject to
Paragraph 3, between the date of this Agreement and the Closing Date, the Seller
shall procure that the Target Companies shall not, without the prior written
consent of the Purchaser (such consent not to be unreasonably withheld or
delayed) make any material decision concerning its business, assets or affairs
and shall not do or agree to do any of the following:
(a) other than in respect of the ▇▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ approve
any work, programme, budget, expenditure or capital commitment relating
to any Licence involving capital expenditure in excess of $5 million per
item and $20 million in aggregate, except for capital expenditures:
(i) which are required by the Operator or other counterparties to the
Licensed Interest Documents (including without limitation any
emergency spend) or which would otherwise subject the relevant
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Target Company to nonconsent or sole risk penalties under the
Licensed Interest Documents; and
(ii) in respect of which the Purchaser has given its prior written
approval (such approval not to be unreasonably withheld or
delayed);
(b) enter into or amend or terminate any contract or arrangement not in the
ordinary course of the UK Business, and which either:
(i) is not capable of being terminated without compensation at any
time with 3 months' notice or less; or
(ii) involves total annual expenditure in excess of $1 million;
(c) incur any additional borrowing or incur any other indebtedness or enter
into any forward contracts, hedging or other derivative instruments for
the sale of hydrocarbons or any currency or interest rate swap agreement
or other financial derivative instruments other than in the ordinary
course of the UK Business;
(d) acquire or agree to acquire or dispose of or agree to dispose of any
material asset, shares or other interest in any company, partnership or
other venture;
(e) fail to keep proper accounting records;
(f) amend any insurance contract (other than in respect of the renewal
thereof), fail to notify any material insurance claim in accordance with
the provisions of the relevant policy or settle any such claim below the
amount claimed, provided that the relevant Target Company may purchase
additional insurance coverage and shall notify the Purchaser of any such
purchase;
(g) make any material change in the accounting practices or policies of the
relevant Target Company (except to the extent required to comply with any
changes in generally accepted accountancy practice in the United Kingdom)
or amend its memorandum or articles of association, or pay its creditors
and procure payment by its debtors other than in the usual course of
business;
(h) declare or pay any dividend, or make any return of capital, with respect
to any outstanding shares of the relevant Target Company;
(i) reduce its share capital;
(j) resolve to be voluntarily wound up;
(k) pass any resolution or obtain any consent from any of its members;
(l) amend in a material respect or terminate any agreement relating to a
Licence or execute any new agreement in respect of the Licences unless
required to do so by the Secretary;
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(m) sell, pledge, charge, lease or otherwise dispose of any of the Target
Companies' material assets;
(n) create any royalty or net profit interest or net production interest or
any other analogous interest or any encumbrance over any of the Licences
or any part thereof;
(o) settle, compromise, waive or make any material claim or institute,
threaten or make any material legal proceedings, expert reference or
arbitration under or in connection with any of the Licences;
(p) make any material change to the nature of the organisation of the UK
Business;
(q) discontinue or cease to operate all or a material part of the UK Business
or depart from continuing its business in its ordinary course;
(r) save as required by law, make any material change in the terms and
conditions of employment or engagement of any of its employees or
officers, dismiss any senior employee without reasonable cause or engage
any senior employee;
(s) by any act or omission contravene any applicable law, order or regulation
where such contravention would have a material adverse effect on the
business or financial condition of that Target Company.
3. The Target Companies may take such actions as may be required:
(a) to give effect to and comply with this Agreement;
(b) in relation to expenditure contained in an approved budget (a copy of
which has been provided to the Purchaser); or
(c) in connection with an approved field development programme.
4. During the period from the date of this Agreement until Closing, the
Seller shall, and, as appropriate, shall procure that the Target
Companies shall:
(a) to the extent practicable in the circumstances, inform the Purchaser of
any matter requiring its vote under the Operating Agreements and take
account of the Purchaser's reasonable representations but so that nothing
in this sub-Paragraph shall operate to ▇▇▇▇▇▇ the discretion of the
Seller and the relevant Target Company in exercising its discretion in
connection with such vote;
(b) inform the Purchaser of how any vote under the Operating Agreements was
exercised;
(c) subject to any confidentiality obligations by which the Seller and/or the
relevant Target Company is bound, on a regular and frequent basis report
material operational matters and the general status of ongoing operations
to the Purchaser and provide the Purchaser with copies of all material
correspondence, board papers, management reports and accounts and such
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other information relating to each Target Company as the Purchaser may
reasonably require; and
(d) give to the Purchaser and its authorised representatives full access to
all the books and records of each Target Company and procure that the
directors and employees of each Target Company are instructed to give
promptly all such information and explanations with respect to the
business and affairs of each Target Company as the Purchaser may
reasonably request.
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SCHEDULE 6
CLOSING ARRANGEMENTS
SELLER OBLIGATIONS
1. At Closing, the Seller shall deliver or procure that there is delivered
to the Purchaser (or made available to the Purchaser's reasonable satisfaction):
(a) duly executed transfers into the name of the Purchaser (or such other
person as the Purchaser may direct) in respect of all the Shares;
(b) the share certificates in respect of all the Shares;
(c) duly executed transfers into the name of the Purchaser (or such other
person as the Purchaser may direct) of all shares in the Subsidiaries not
registered in the name of any Target Company;
(d) the share certificates relating to all the issued shares in the capital
of each of the Subsidiaries;
(e) such other documents as may be reasonably required to give a good title
to the Shares and to enable the Purchaser or its nominees to become the
registered holders of them;
(f) in respect of each Target Company, the certificate of incorporation,
common seal (if it exists), share register or ledger and share
certificate book (with any unissued share certificates) and other
documents and records and all minute books and other statutory books
(which shall be written up to but not including Closing);
(g) a letter of resignation in the Agreed Form duly executed by such auditors
as the Purchaser may notify to the Seller prior to Closing in respect of
their position as auditors of the Target Companies along with a statement
under section 394 of the Companies ▇▇▇ ▇▇▇▇ that there are no
circumstances connected with their ceasing to hold office which they
consider should be brought to the attention of the members or creditors
of each Target Company;
(h) a copy (certified by a duly appointed officer as true and correct) of a
resolution of the board of directors of the Seller authorising the
execution of and the performance by the relevant company of its
obligations under the Transaction Documents to be executed by it;
(i) evidence in a form satisfactory to the Purchaser that any guarantees
given by any Target Company in respect of liabilities of the Seller or
any member of the Seller's Group or any director of any such company,
have been released;
(j) counterparts of the Holdings Loan Assignment Deed and the Debt Assignment
Deed, duly executed by the Seller; and
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(k) a deed of termination duly executed by the Company and EnCana Energy
Services Inc. terminating the North Sea Marketing Agency Agreement
entered into between the Company and EnCana Energy Services Inc.,
releasing each party from any obligations and liabilities thereunder.
2. The Seller shall:
(a) cause the transfers mentioned in Paragraphs 1(a) and (c) of this Schedule
6 to be resolved to be registered (subject only to their being duly
stamped) notwithstanding any provision to the contrary in the articles of
association of any Target Company; and
(b) cause such persons as the Purchaser shall nominate by the Record Date to
be validly appointed as additional directors of each Target Company
provided such persons agree to be so appointed.
PURCHASER OBLIGATIONS
3. At Closing, the Purchaser shall:
(a) deliver (or procure that there is delivered to the Seller) a copy of a
resolution (certified by a duly appointed officer as true and correct) of
the board of directors of the Purchaser authorising the execution of and
the performance by the relevant company of its obligations under this
Agreement and each of the Transaction Documents to be executed by it;
(b) pay to the Seller the Closing Price in accordance with Clause (the Seller
being also entitled to retain the Deposit together with any interest
accrued thereon); and
(c) deliver to the Seller counterparts of the Holdings Loan Assignment Deed
and the Debt Assignment Deed duly executed by the Assignees (as defined
therein).
GENERAL
4. At or before Closing, the Seller and the Purchaser shall use their
reasonable endeavours to procure that the following documents to the extent
required by this Agreement shall be executed on or before Closing, namely:
(a) the Secondment Agreement; and
(b) the Transitional Services Agreement
and shall agree the forms of the press releases to be released by each of them
on Closing.
5. All documents and items delivered at Closing pursuant to this Schedule 6
shall be held by the recipient to the order of the person delivering the same
until such time as Closing shall be deemed to have taken place in accordance
with Paragraph 6 below.
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6. Simultaneously with:
(a) delivery of all documents required to be delivered at Closing (or waiver
of the delivery thereof by the person entitled to receive the relevant
document); and
(b) receipt of an electronic funds transfer to the Seller's Bank Account in
immediately available funds of the Closing Price,
the documents and items delivered in accordance with this Schedule 6 shall cease
to be held to the order of the person delivering the same and Closing shall be
deemed to have taken place.
7. If the Seller or the Purchaser (the AFFECTED PARTY) fails or is unable
to comply with any of its obligations under the preceding provisions of Schedule
6 on the Closing Date then the other (the UNAFFECTED Party) may:
(a) defer Closing to a date not more than 28 days after that date (in which
case the provisions of this Paragraph 7 shall apply to Closing as so
deferred); or
(b) proceed to Closing so far as practicable but without prejudice to the
Unaffected Party's rights where the Affected Party has not complied with
its obligations under this Agreement.
8. If Closing is deferred in accordance with Paragraph 7 and, at the date
of that deferred Closing, the requirement of Paragraphs 1 and 2 above are not
complied with on that date, the Party that is able to complete and fulfil its
obligations thereunder shall be entitled to terminate this Agreement. If the
Affected Party is the Seller, the Seller shall within five Business Days
thereafter repay the Deposit plus an amount equivalent to simple interest on the
Deposit calculated on a daily basis on the basis of a 360 day year at the Agreed
Interest Rate applied to the Deposit for the period from and including the date
of this Agreement up to but not including the date it is returned (less any
applicable withholding for or on account of Tax) to the Purchaser's Bank
Account.
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SCHEDULE 7
PROPERTIES
-------------------------------------------------------------------------------------------------------------------------------
PROPERTY DATE OF PARTIES TERM ANNUAL REVIEW DATES TENANT'S
ADDRESS LEASE RENT (POUND) BREAK DATE
-------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ House 24 October Amerada ▇▇▇▇ 1 913,787 1 October 1 October
(New), Hareness and 17 Property Services October 2008 2013
Road, Altens November Limited 2003
Industrial 2003 1 October
Estate, Aberdeen The Company to 2013
as Varied
by deed of 30
variation September
on 9 March 2018
2004
-------------------------------------------------------------------------------------------------------------------------------
Part Upper 20 November Sun Alliance and 20 [497,880] 20 November 25 December
Ground Floor, 1997 London Assurance November 2002 2007
One Charter Company Limited 1997
Place, Vine ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Services to 2007
Uxbridge, UB8 Limited
1JG 25
Coca-Cola Export December
Corporation 2012
-------------------------------------------------------------------------------------------------------------------------------
Part Ground 28 November Sun Alliance and 25 194,000 25 December ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ (▇▇▇▇) ▇▇▇▇ ▇▇▇▇▇▇ Assurance December 2008 2007
One Charter Company Limited 2003
Place (as above)
The Company to
24
December
2012
-------------------------------------------------------------------------------------------------------------------------------
West Showroom 28 November Sun Alliance and 25 20,440 25 December 24 December
(Showroom 1) on ▇▇▇▇ ▇▇▇▇▇▇ Assurance December 2008 2007
Ground Floor of Company Limited 2003
One Charter
Place (as above) The Company to
24
December
2012
-------------------------------------------------------------------------------------------------------------------------------
Page 75
-------------------------------------------------------------------------------------------------------------------------------
PROPERTY DATE OF PARTIES TERM ANNUAL REVIEW DATES TENANT'S
ADDRESS LEASE RENT (POUND) BREAK DATE
-------------------------------------------------------------------------------------------------------------------------------
East Showroom 28 November Sun Alliance and 1 20,440 25 December 24 December
(Showroom 2) on ▇▇▇▇ ▇▇▇▇▇▇ Assurance February 2008 2007
Ground Floor of Company Limited 2004
One Charter
Place (as above) The Company to
24
December
2012
-------------------------------------------------------------------------------------------------------------------------------
Store Room, 21 October Sun Alliance and 28 1,300 25 December 24 December
Car Park Level, 2004 London Assurance November 2008 2007
1 Charter Place Company Limited 2003
(as above)
The Company to
12
December
2012
-------------------------------------------------------------------------------------------------------------------------------
Page 76
SCHEDULE 8
TAX COVENANT
1. INTERPRETATION
1.1 In this Schedule the following definitions shall have the following
meanings:
EVENT means any act, transaction, occurrence or omission and includes the sale
of the Shares to the Purchaser by the Seller pursuant to this Agreement;
OVERPROVISION means, applying the accounting policies, principles and practices
adopted in relation to the preparation of the Final Closing Statement (and
ignoring the effect of any change in law made or action taken by the Purchaser
or any Target Company after Closing in circumstances where Paragraphs 3.1(e) or
(g) apply, or the effect of any Purchaser's relief), the amount by which any
contingency or provision in the Final Closing Statement relating to Tax (other
than deferred Tax and provision in respect of deferred petroleum revenue tax) is
overstated;
PURCHASER'S GROUP means Nexen Inc. and any other company or companies which
either are or become after Closing, or have within the six years ending at
Closing been, treated as members of the same group as, or otherwise connected or
associated in any way with, the Purchaser for any tax purpose;
PURCHASER'S RELIEF means:
(a) any Relief to the extent that it arises either in respect of an Event
occurring or period commencing after Closing; and
(b) any Relief arising to any member of the Purchaser's Group (other than a
Target Company);
RELIEF includes, unless the context otherwise requires, any loss, allowance,
credit, deduction, exemption or set-off in respect of any Tax or relevant to the
computation of any income, profits or gains for the purposes of any Tax, or any
right to repayment of or saving of Tax, and any reference to the use or set off
of relief shall be construed accordingly;
RETAINED GROUP means EnCana Corporation and any other company or companies
(other than a Target Company) which either are or become after Closing, or have
within the six years ending at Closing been, treated as members of the same
group as, or otherwise connected or associated in any way with, EnCana
Corporation for any Tax purpose;
TAX means (a) taxes on income, profits and gains (whether within or outside the
UK), and (b) all other taxes, levies, duties, imposts, charges and withholdings
in the nature of taxation (whether within or outside the United Kingdom),
including (without limitation) corporation tax, income tax, withholding tax, any
excise, property, value added, sales, transfer, north sea royalty, petroleum
revenue tax, supplementary charge,
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franchise and payroll taxes, stamp duties, stamp duty land tax and any national
insurance or social security contributions, together with all penalties, charges
and interest relating to any of the foregoing or to any late or incorrect return
in respect of any of them;
TAX AUTHORITY means any taxing or other authority (whether within or outside the
United Kingdom) competent to impose or administer any Tax liability;
TAX CLAIM means:
(a) the issue of any notice, demand, assessment, letter or other document by
or on behalf of any Tax authority or the taking of any other action by or
on behalf of any Tax authority (including the imposition, or any document
referring to the possible imposition, of any withholding of or on account
of Tax); or
(b) the preparation or submission of any notice, return, assessment, letter
or other document by the Purchaser, any Target Company, or any other
person,
from which it appears that a Tax liability may be incurred by or may be imposed
on a Target Company, being a Tax liability which could give rise to a liability
for the Seller under this Schedule or under the Tax Warranties (whether alone or
in conjunction with other Claims);
TAX LIABILITY means:
(a) a liability of any Target Company to make or suffer an actual payment of,
or in respect of, Tax; and
(b) the use or set off of any Purchaser's relief in circumstances where, but
for such use or set off, a Target Company would (after first taking into
account all Reliefs other than Purchaser's reliefs to the extent allowed
by law) have had an actual liability to Tax in respect of which the
Purchaser would have been able to make a claim against the Seller under
this Schedule (the amount of the Tax liability for these purposes being
deemed to be equal to the amount of the actual liability to Tax that is
saved by the use or set off of the Purchaser's relief); and
TAXES ACT means the Income and Corporation Taxes ▇▇▇ ▇▇▇▇.
1.2 Persons shall be treated as connected for the purposes of this Schedule
if they are connected within the meaning of section 839 of the Taxes Act.
1.3 The headings in this Schedule shall not affect its interpretation.
1.4 All payments made by the Seller to the Purchaser or by the Purchaser to
the Seller under this Schedule, other than payments of interest, shall so far as
possible be made by way of adjustment to the consideration for the sale of the
Shares.
1.5 Reference to income, profits or gains earned, accrued or received
includes income, profits or gains that are deemed, for the purposes of any Tax,
to be earned,
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accrued or received and references to events occurring on or before a certain
time include events which are deemed to have occurred for the purposes of any
Tax.
2. COVENANT TO PAY
2.1 The Seller hereby covenants with the Purchaser to pay to the Purchaser an
amount equivalent to any Tax liability arising in respect of, by reference to or
in consequence of:
(a) (i) any income, profits or gains earned, accrued or received on or before
Closing; and
(ii) any Event which occurred on or before Closing ; and
(a) any liability of any Target Company (other than to any other Target
Company or to any member of the Purchaser's Group) to repay any payment
for group relief (in accordance with Chapter IV of Part X of the Taxes
Act) received by such Target Company pursuant to any agreement or
arrangement entered into before Closing to the extent that such liability
has not been taken into account in the Final Closing Statement; and
(b) any Tax liability of any Target Company (other than to any other Target
Company or to any member of the Purchaser's Group) where such Tax
liability would not have arisen but for any election made on or before
Closing in respect of a period or event occurring before Closing to treat
a disposal or gain to have been made for Tax purposes by such Target
Company; or
(c) any Tax liability of any Target Company which is a primary Tax liability
of any other person (not being another Target Company or a member of the
Purchaser's Group) and for which the Target Company is secondarily liable
as a result of its ownership, control or membership of any group (other
than the Purchaser's Group) for Tax purposes (or by reason of any changes
in the ownership, control or membership of such a group), in both cases,
before Closing ; and
(d) any Tax liability of any Target Company under Paragraph 4, Schedule 15,
Finance ▇▇▇ ▇▇▇▇ which is attributable to unpaid tax for a period ended
on or before Closing,
together with any costs and expenses referred to in Paragraph 5.
3. EXCLUSIONS
3.1 The covenant contained in Paragraph 2.1(a), (b), and (c) (and, in the
case of Paragraphs 3.1 (b) (c) and (m)(ii) only, Paragraph 2.1(d)) shall not
cover any Tax liability to the extent that:
(a) notice of a claim in respect of the Tax liability in a form complying
with the provisions of Paragraph 9.1 is not given to the Seller prior to
(i) the seventh
Page 79
anniversary of Closing or, if later, (ii) six years and three months from
the end of the accounting period of the Target Company in which Closing
occurs; or
(b) the Tax liability was reflected, provided for or otherwise taken into
account in the preparation of the Final Closing Statement; or
(c) the Tax liability was paid or discharged before Closing, and such payment
or discharge was taken into account in the preparation of the Final
Closing Statement; or
(d) the Tax liability arises in respect of, by reference to or in consequence
of:
(A) any income, profits or gains earned, accrued or received in respect
of the period between the Economic Date and Closing either: (aa) in the
ordinary course of business of the Target Company to which the Tax
liability relates, or (bb) to the extent that the Target Company
concerned retains the benefit of such income, profit or gain at Closing
and the Purchaser has paid for such income, profits or gains on a pound
sterling ((pound)1) for pound sterling basis ((pound)1), or (cc) to the
extent that such income, profit or gain has been expended in the ordinary
course of business of the relevant Target Company; or
(B) any Event occurring between the Economic Date and Closing in the
ordinary course of business of the Target Company to which the Tax
liability relates; or
(e) the income, profits or gains in respect of which the Tax liability arises
are actual (and not deemed income, profits or gains), and are in the
ordinary course of business and are attributable to the period beginning
on the last Accounts Date and ending on the Economic Date and which
income profits or gains were not taken in to account in the Final Closing
Statement; or
(f) the Tax liability arises as a result of any change in rates of tax made
after Closing or of any change in legislation, regulation, directive or
requirement, or the published practice of any Tax authority, made after
Closing; or
(g) the Tax liability would not have arisen but for a transaction, action or
omission carried out or effected by any of the Purchaser, a Target
Company, or any other person connected with any of them, at any time
after Closing, except that this exclusion shall not apply where any such
transaction, action or omission:
(i) is carried out or effected by the relevant Target Company pursuant
to a legally binding commitment created on or before Closing; or
(ii) is carried out or effected by the relevant Target Company
concerned in the ordinary course of business of such Target
Company as carried on at Closing, provided that for this purpose
the following shall be deemed not to be in the ordinary course of
business if they otherwise would be (with the effect that the
exclusion contained in this Paragraph 3.1(g) shall apply):
Page 80
(A) any disposal (or deemed disposal for any Tax purpose) of
assets other than trading stock by the Target Company;
(B) any change in the use of an asset by the Target Company;
(C) anything which has the result of requiring disposal value
to be brought into account, or which crystallises a
balancing charge, for capital allowances purposes (or has
any similar effect under the laws of any relevant foreign
jurisdiction); or
(h) without prejudice to 3.1(g) above the Tax liability would not have arisen
but for a cessation, or any change in the nature or conduct, of any trade
carried on by a Target Company at Closing, being a cessation or change
occurring after Closing; or
(i) the Tax liability would not have arisen but for the sale or transfer of
whole or part of the shares in the Target Companies or the sale or
transfer of the whole or part of their assets on/or in each case after
Closing (other than the sale of the Shares by the Seller pursuant to this
Agreement); or
(j) the Tax liability comprises interest or penalties arising by virtue of an
underpayment (in respect of the accounting period current at Closing) of
Tax prior to Closing, insofar as such underpayment would not have been an
underpayment but for a bona fide estimate made prior to Closing of the
amount of income, profits or gains to be earned, accrued or received
after Closing proving to be incorrect, or but for any other event or
events occurring after Closing; or
(k) the Tax liability arises solely as a result of a change after Closing in
the length of any accounting period for Tax purposes of a Target Company,
or (other than a change which is necessary in order to comply with the
law or generally accepted accounting principles applicable to the
relevant Target Company at Closing) a change after Closing in any
accounting policy or tax reporting practice of the relevant Target
Company; or
(l) such Tax liability arises as a result of a Target Company failing to
submit the returns and computations required to be made by them or not
submitting such returns and computations within the appropriate time
limits or submitting such returns and computations otherwise than on a
proper basis, in each case after Closing (other than as a result of a
failure by the Seller to comply with its obligations in Paragraphs 12 and
13); or
(m) any Relief (i) arising in respect of an Event occurring or period ending
on or prior to Closing other than a Purchaser's relief is available, or
(ii) which is for no consideration made available by the Seller, to a
Target Company to set against or otherwise mitigate the Tax liability
(and so that (A) for this purpose any Relief arising in respect of an
accounting period falling partly before and partly after Closing shall be
apportioned on a time basis, unless some other basis is more reasonable
and (B) any Relief that is so available in relation to more than one Tax
liability to which this Schedule applies shall be deemed, so
Page 81
far as possible, to be used in such a way as to reduce to the maximum
extent possible the Seller's total liability hereunder); or
(n) the Tax liability would not have arisen but for:
(i) the making of a claim, election, surrender or disclaimer, the
giving of a notice or consent, or the doing of any other thing
under the provisions of any enactment or regulation relating to
Tax, in each case after Closing and by the Purchaser or a Target
Company or any person connected with any of them, in circumstances
where the Purchaser has actual knowledge that such an act would
result in there being a Tax liability and otherwise than as a
result of a direction by the Seller under Paragraphs 12 or 13 of
this Schedule 8; or
(ii) the failure or omission on the part of the relevant Target Company
after Closing (otherwise than as a result of a direction by the
Seller under 12 or 13 of this Schedule 8) to make any such valid
claim, election, surrender or disclaimer, or to give any such
notice or consent or to do any other such thing, in circumstances
where the making, giving or doing of which was taken into account
in the preparation of the Final Closing Statement and full details
of which are to be notified to the Purchaser at least 15 Business
Days prior to the last date upon which the claim, election,
surrender or disclaimer may validly be made, given or done; or
(o) the Tax liability is a liability to Tax comprising interest, penalties,
charges or costs in so far as attributable to the unreasonable delay or
default of the Purchaser or the relevant Target Company after Closing,
otherwise than as a result of a default by the Seller in complying with
its obligations under this Schedule; or
(p) the Tax liability arises (whether directly or indirectly) in respect of a
Reallocation Claim;
(q) the Tax liability arises as a result of any transaction, action or
omission carried out by the Seller (or a Target Company on or prior to
Closing) at the specific request in writing of a member of the
Purchaser's Group (made between the period commencing on signing of this
Agreement and ending on Closing) including without limitation any request
pursuant to Clause 1.4 of this Agreement which is agreed to by the
Seller; or
(r) the Tax liability is in respect of stamp and/or stamp duty reserve tax
and is payable in respect of the transfer of the Shares or the assignment
of the Holdings Loan or Intra-Group Debt pursuant to this agreement or
the Holdings Loan Assignment Deed or the Debt Assignment Deed in both
cases pursuant to the terms of this Agreement; or
3.2 Subject as expressly provided in this Schedule and pursuant to the Tax
Warranties the Seller shall have no liability to the Purchaser under any part of
this Agreement in respect of any non-availability, inability to use, or loss or
restriction of
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any Relief (FAILURE OF RELIEF) where such failure of relief does not give rise
to a Tax liability to which Paragraph 2.1 applies.
3.3 The provisions of Paragraph 3.1 shall also operate to limit or reduce the
liability of the Seller in respect of claims under the Tax Warranties.
4. OVERPROVISIONS
4.1 The Seller may require the auditors for the time being of each Target
Company to certify, at its request and expense, the existence and amount of any
Overprovision and the Purchaser shall provide, or procure that each Target
Company provides, any information or assistance required for the purpose of
production by the auditors of a certificate to that effect.
4.2 Subject to Paragraph 4.4 below any Overprovision shall first be set
against any payment then due from the Seller under this Schedule or for breach
of any Tax Warranty, and any surplus shall be carried forward to set against
other claims under this Schedule or for breach of the Warranties.
4.3 Either the Seller or the Purchaser may, at its expense, require any
certificate produced in accordance with Paragraph 4.1 above to be reviewed by
the auditors for the time being of the relevant Target Company in the event that
there are relevant circumstances or facts of which it was not aware, and which
were not taken into account, at the time when such certificate was produced, and
to certify whether the certificate remains correct or whether it should be
amended.
4.4 If following a request under Paragraph 4.3 the certificate is amended,
the revised amount of Overprovision shall be substituted for the purposes of
Paragraph 4.2, and any adjusting payment that is required shall be made
forthwith.
5. COSTS AND EXPENSES
The covenant contained in this Schedule 8 shall extend to all costs and expenses
properly incurred by the Purchaser and the Target Companies in connection with a
bona fide claim made under this Schedule 8, or in satisfying or settling any Tax
liability in accordance with Paragraph 9 in respect of which a bona fide claim
is made under this Schedule 8.
6. DOUBLE RECOVERY
The Purchaser shall not be entitled to recover any amount pursuant to this
Schedule 8 in respect of any Tax liability to the extent that it is in respect
of a Reallocation Claim or the Purchaser or any Target Company has already
recovered any amount in respect of such liability under the Warranties or under
any other provision of this Agreement (including without limitation this
Schedule) or pursuant to any other agreement with the Seller or any company
connected with the Seller, or to the extent that recovery has already been made
under this Schedule 8 in respect of the same liability.
Page 83
7. TAX REFUNDS
7.1 The Purchaser shall promptly notify the Seller of any right to receive or
actual receipt of any amount by way of repayment of Tax or interest on overpaid
Tax or repayment supplement (and for the avoidance of doubt references to Tax in
this Paragraph 7 include, without limitation, VAT), being an amount to which any
Target Company is or becomes entitled or receives in respect of an event
occurring or period (or part period) prior to the Economic Date, where or to the
extent that such amount is not a payment or Relief to which Paragraph 11 below
applies or is not a Purchaser's relief (a TAX REFUND).
7.2 Any Tax refund actually obtained after Closing, whether by repayment or
set off (and less any reasonable costs of obtaining it and any actual Tax
suffered in respect of it) shall be dealt with as follows:
(a) the amount of the Tax refund shall be set against any payment then due
from the Seller under this Schedule 8 or for breach of any Tax Warranty;
and
(b) to the extent that there is an excess such surplus shall be carried
forward to set against other claims under this Schedule or for breach of
any Warranty.
8. SECONDARY LIABILITIES
8.1 The Purchaser covenants with the Seller to pay to the Seller an amount
equivalent to any Tax or any amount on account of Tax which any member of the
Retained Group is required to pay as a result of a failure by a Target Company,
or any other member of the Purchaser's Group, to discharge that Tax.
8.2 The covenant contained in Paragraph 8.1 shall:
(a) extend to any proper costs incurred in connection with such Tax or a
claim under Paragraph 8.1 ;
(b) not apply to Tax to the extent that the Purchaser could claim payment in
respect of it under Paragraph 2.1 (or would have been able to claim but
for Paragraph 3.1(a) of Schedule 8 of this Agreement), except to the
extent a payment has been made pursuant to Paragraph 2.1 and the Tax to
which it relates was not paid by the Target Company concerned;
(c) not apply to Tax to the extent it has been recovered under any relevant
statutory provision (and the Purchaser or the Seller, as the case may be,
shall procure that no such recovery is sought to the extent that payment
is made hereunder).
8.3 Paragraphs 9.1, 9.2 and 10 (conduct of disputes and due date for payment)
shall apply to the covenant contained in Paragraphs 8.1 as they apply to the
covenants contained in Paragraph 2.1, replacing references to the Seller by the
Purchaser (and vice versa) where appropriate, and making any other necessary
modifications.
Page 84
9. NOTIFICATION OF CLAIMS AND CONDUCT OF DISPUTES
9.1 If the Purchaser or any Target Company become aware of any Tax claim, the
Purchaser shall give notice to the Seller of that Tax claim (including such
detail of such Tax claim, the due date for any payment, the time limits for any
appeal and the amount of the claim under this Schedule 8 or under the Tax
Warranties in respect thereof as is practicable) as soon as possible (and in any
event not more than 30 days after the Purchaser or the Target Company concerned
becomes aware of such claim). The Purchaser shall take (or procure that the
Target Company shall take) such action as the Seller may request being a request
which the Seller considers in good faith to be necessary to avoid, dispute,
resist, appeal, compromise or defend any Tax claim (whether notified by the
Purchaser, or being a Tax claim of which the Seller was already aware) and any
adjudication in respect thereof. The Seller shall be kept fully informed of any
actual or proposed developments (including any meetings) and shall be provided
with copies of all correspondence and documentation relating to such Tax claim
or action, and such other information, assistance and access to records and
personnel as it reasonably requires.
9.2 The Seller shall within 10 Business Days reimburse to the Purchaser its
reasonable costs and expenses properly incurred in connection with any such
action or proceedings as are referred to in Paragraph 9.1.
9.3 Subject to Paragraph 9.4 and except where such action is taken by the
Purchaser pursuant to its obligations to the Seller in Paragraphs 12 and 13, the
Purchaser shall procure that no Tax claim, action or issue in respect of which
the Seller could be required to make a payment under this Schedule or for breach
of any Tax Warranty is settled or otherwise compromised without the Seller's
prior written consent, such consent not to be unreasonably withheld or delayed,
and the Purchaser shall, and shall procure that each Target Company and any of
its advisers shall, not submit any correspondence or return or send any other
document to any Tax authority where the Purchaser or any such person is aware or
should reasonably be expected to be aware that the effect of submitting such
correspondence or return or sending such document would or could be to put such
Tax authority on notice of any matter which could give rise to, or could
increase, a claim under this Schedule 8 or for breach of any Tax Warranty,
without first affording the Seller a reasonable opportunity to comment thereon
and without taking account of such comments so far as it is reasonable to do so.
9.4 If the Seller does not request the Purchaser to take any appropriate
action within 30 Business Days of notice to the Seller or fails to reimburse the
Purchaser and the relevant Target Company as required pursuant to this Clause
for their costs, the Purchaser shall be free to satisfy or settle the relevant
Tax liability on such terms as it may reasonably think fit.
9.5 The Purchaser shall not be required to comply with any request by the
Seller under this Paragraph 9 which involves contesting any assessment of Tax of
a Target Company over (pound)1million before any court or appellate body
(including any tribunal) unless they have been advised in writing (at the
expense of the Seller) by leading tax counsel (of at least ten years standing)
selected by the Purchaser from three options
Page 85
provided by the Seller that an appeal against any such assessment would on the
balance of probabilities be won by the relevant Target Company;
10. DUE DATE OF PAYMENT AND INTEREST
10.1 Subject to Paragraph 10.2 the Seller shall pay to the Purchaser any
amount payable under Paragraph 2 of this Schedule on or before the date ten
Business Days after demand is made therefor by the Purchaser (the DEMAND DATE)
save that where the amount payable under Clause 2 is in respect of a liability
to make an actual payment of or in respect of Tax to a Tax authority that date
for payment shall be the later of the demand date and two Business Days before
the first date on which the Tax in question becomes recoverable by the Tax
authority demanding the same. Provided that:
(a) if the date on which the Tax can be recovered is deferred following
application to the relevant Tax authority, the date for payment by the
Seller shall be two Business Days before such later date when the amount
of Tax is finally and conclusively determined (and for this purpose, an
amount of Tax shall be deemed to be finally determined when, in respect
of such amount, an agreement under section 54 of the Taxes Management ▇▇▇
▇▇▇▇ or any legislative provision corresponding to that section is made,
or a decision of a court or tribunal is given or any binding agreement or
determination is made, from which either no appeal lies or in respect of
which no appeal is made within the prescribed time limit); and
(b) if a payment or payments to the relevant Tax authority prior to the date
otherwise specified by this Paragraph would avoid or minimise interest or
penalties, the Seller may at its option pay the whole or part of the
amount due to the Purchaser on an earlier date or dates, and the
Purchaser shall procure that the Tax in question (or the appropriate part
of it) is promptly paid to the relevant Tax authority.
The Seller may, with the Purchaser's consent, not to be unreasonably withheld or
delayed, make a direct payment in respect of the Tax liability in question to
the relevant Tax authority (including through use of certificates of Tax deposit
or the equivalent) and the Seller's liability to the Purchaser shall be treated
as reduced or eliminated accordingly.
10.2 Where a claim under Paragraph 2 of this Schedule relates to the use or
set off of a Purchaser's relief, the Seller shall pay to the Purchaser the
amount due under this Schedule in respect thereof on the later of the date which
is two Business Days before the first date on which actual Tax which would not
have been payable but for such use or set off becomes recoverable by the Tax
authority demanding the same, and ten Business Days after demand is made
therefor by the Purchaser such demand to be accompanied by reasonably sufficient
evidence of such use or set off and of such Tax liability.
10.3 Any sum not paid by the Seller on the due date for payment specified in
Paragraph 10.1 or 10.2 shall bear interest (which shall accrue from day to day
after as well as before any judgment for the same) at a rate of 4.5% per annum
from the due date to and including the day of actual payment of such sum,
provided that such
Page 86
interest shall not accrue to the extent that the Seller's liability under
Paragraph 2 or Paragraph 5 extends to interest or penalties arising after the
due date. Any interest due under this Paragraph shall be paid on the demand of
the Purchaser on or following the date of payment of such sum.
11. RECOVERY FROM THIRD PARTIES/TAX SAVINGS
11.1 If any actual payment is made by the Seller under this Schedule or for
breach of any Tax Warranty in respect of a Tax liability and the Purchaser or
any Target Company (or any person connected with either of them) either
receives, or is entitled to recover or obtain, from any person (other than the
Purchaser or any Target Company or any such connected person) a payment or
Relief (other than a Purchaser's relief) which would not have arisen but for the
Tax liability or other matter in question or the circumstances giving rise to
such payment (including without limitation in circumstances where a payment
under this Schedule is made in respect of a Tax liability which arises because a
deduction or other Relief assumed to be available in preparing the Final Closing
Statement is in fact available only in a subsequent period or periods), then:
(a) the Purchaser shall notify the Seller of that fact as soon as practicable
after the Purchaser or any member of the Purchaser's Group becomes aware
of such receipt or entitlement and if so required by the Seller shall (at
the Seller's expense) take (or shall procure that the Target Company or
other person concerned shall take) such action as the Seller may
reasonably request to enforce such recovery or to obtain such payment or
Relief (keeping the Seller fully informed of the progress of any action
taken and providing it with copies of all relevant correspondence and
documentation); and
(b) if the Purchaser or the Target Company or other person concerned receives
or obtains such a payment or Relief, the Purchaser shall pay to the
Seller the amount received or the amount that the Purchaser or the Target
Company or other person concerned has saved by virtue of the payment or
the Relief (less any reasonable costs of recovering or obtaining such
payment or Relief and any Tax actually suffered thereon) (the BENEFIT) to
the extent that the amount of the Benefit does not exceed the aggregate
payments previously made by the Seller under this Schedule 8 and for
breach of any Tax Warranty, and except where any amount so saved would
otherwise have given rise to a claim under this Schedule 8, or for breach
of any Tax Warranty (in which event there shall be no obligation for the
Purchaser to make a payment in respect of such Benefit). Any amount of
the Benefit not so paid to the Seller shall be carried forward and set
off against any future claims under this Schedule 8, or for breach of any
Tax Warranty.
11.2 Any payment required to be made by the Purchaser pursuant to Paragraph
11.1 shall be made:
(a) in a case where the Purchaser or Target Company or other person concerned
receives a payment, within five Business Days of the receipt thereof; and
Page 87
(b) in a case where the Purchaser or Target Company or other person concerned
obtains a Relief, on the date on which Tax would have become recoverable
by the appropriate Tax authority but for the use of such Relief.
11.3 The Purchaser shall procure that any such Relief as is referred to in
Paragraph 11.2(b) is used as soon as reasonably practicable (although the
Purchaser shall be entitled to use a Purchaser's relief in priority). The Seller
shall be entitled to require that the Target Company's and/or other person's
auditors shall certify the amount and date of use of such relief for the
purposes of this Paragraph 11
11.4 Any sum not paid by the Purchaser on the due date of payment specified in
Paragraph 11.2 shall bear interest (which shall accrue from day to day after as
well as before any judgment for the same) at a rate per annum equal to the rate
of 4.5% per annum from the due date to and including the day of actual payment
of such sum compounded six monthly. Such interest shall be paid on the demand of
the Seller.
12. MANAGEMENT OF PRE-COMPLETION TAX AFFAIRS
INTERPRETATION
12.1 In this Paragraph 12 and in Paragraph 13:
ACCOUNTING PERIOD means any period by reference to which any income, profits or
gains, or any other amounts relevant for the purposes of Tax, are measured or
determined;
PRE-COMPLETION TAX AFFAIRS means the Tax affairs of the Target Companies for
which the Seller is responsible under this Paragraph 12;
TAX DOCUMENTS means the tax returns, claims and other documents which the Seller
is required to prepare on behalf of the Target Companies under Paragraphs
12.2(a) and 12.2(b);
TAX RETURN means any return required to be made to any Tax authority of income,
profits or gains or of any other amounts or information relevant for the
purposes of Tax, including any related accounts, computations and attachments;
and
TIME LIMIT means the latest date on which a tax document can be executed or
delivered to a relevant Tax authority either without incurring interest or a
penalty, or in order to ensure that such tax document is effective.
RIGHTS AND OBLIGATIONS OF THE SELLER
12.2 Subject to and in accordance with the provisions of this Paragraph 12 the
Seller or its duly authorised agents shall, in respect of all accounting periods
ending on or before Closing, and at its own cost:
(a) prepare and submit the tax returns of the Target Companies for the
purposes of Tax;
Page 88
(b) prepare and submit on behalf of the Target Companies all claims,
elections, surrenders, disclaimers, notices and consents for the purposes
of Tax; and
(c) deal with all matters relating to Tax which concern or affect any Target
Company including the conduct of all negotiations and correspondence and
the reaching of all agreements relating thereto or to any tax documents,
but excluding payment of Tax.
12.3 The Seller or its duly authorised agents shall deliver all tax documents
which are required to be signed by or on behalf of any Target Company to the
Purchaser for authorisation and signing. If a time limit applies in relation to
any tax document, the Seller shall ensure that the Purchaser receives the tax
document no later than 10 Business Days before the expiry of the time limit.
12.4 The Seller shall procure that:
(a) the Purchaser receives copies of all written correspondence with any Tax
authority insofar as it is relevant to the pre-Completion tax affairs;
(b) the Purchaser is afforded the opportunity to comment on any material tax
document prior to its submission to the relevant Tax Authority and that
its comments are considered by the Seller acting in good faith (although
nothing in this Paragraph 12 shall oblige the Seller to take such
comments into account); and
(c) no tax document is submitted to any Tax authority which is not, in the
opinion of the Seller (or its advisers) acting in good faith, true and
accurate in all respects, and not misleading.
OBLIGATIONS OF THE PURCHASER
12.5 The Purchaser shall procure that:
(a) the Seller and its duly authorised agents are afforded such access
(including the taking of copies) to the books, accounts and records of
the Target Company and such other assistance as it or they reasonably
require to enable the Seller to discharge its obligations under Paragraph
12.2 and to enable the Seller and any member of the Retained Group to
comply with its own Tax obligations or facilitate the management or
settlement of its own Tax affairs;
(b) the Seller is promptly sent a copy of any communication from any Tax
authority insofar as it relates to the pre-Completion tax affairs;
(c) no voluntary action is taken by any Target Company after Closing (whether
by disclaiming any Relief, withdrawing or revoking any claim or consent
or otherwise) which would or is likely adversely to affect the Tax
position of the Seller (or cause any member of the Retained Group to
incur a Tax liability envisaged by Paragraph 8) and the Purchaser further
undertakes to not liquidate the Target Companies immediately after
Closing;
Page 89
(d) there is given to such person or persons as may for the time being be
nominated by the Seller in writing authority to conduct pre-Completion
Tax affairs, and that such authority is confirmed to any relevant Tax
authority.
12.6 The Purchaser shall (subject to Paragraph 12.7 below) be obliged to
procure that each Target Company shall cause any tax document delivered to it
under Paragraph 12.3 to be authorised and signed without delay and without
amendment, and returned to the Seller for submission without delay (and in any
event within any relevant time limit).
RIGHTS OF THE PURCHASER
12.7 The Purchaser shall be under no obligation to procure the authorisation
or signing to a Tax authority of any tax document delivered to it under this
Paragraph which it considers in its reasonable opinion to be incorrect, false or
misleading in a material respect, but for the avoidance of doubt shall be under
no obligation to make any enquiry as to the completeness or accuracy thereof and
shall be entitled to rely entirely on the Seller and its agents.
13. MANAGEMENT OF OTHER TAX AFFAIRS
13.1 Subject to Paragraph 9 and to the following sub-Paragraphs, the Purchaser
or its duly authorised agents shall have sole conduct of all Tax affairs of the
Target Companies which are not pre-Completion tax affairs and shall be entitled
to deal with such Tax affairs in any way in which it, in its absolute
discretion, considers fit.
13.2 In respect of any accounting period for Tax purposes commencing prior to
Closing and ending after Closing (the STRADDLE PERIOD) the Purchaser shall
procure that the tax returns of each Target Company shall be prepared on a basis
which is consistent with the manner in which the tax returns of the Target
Companies were prepared for all accounting periods ending prior to Closing so
far as legally permissible.
13.3 The Purchaser shall procure that each Target Company provide to the
Seller all tax returns for Tax purposes relating to the Straddle Period no later
than 20 Business Days before the date on which such tax returns are required to
be filed with the appropriate Tax authority without incurring interest or
penalties. The Seller shall be entitled to make reasonable comments in respect
of such return and the Purchaser shall take account of those comments unless the
amendments requested by the Seller would place the relevant Target Company in
breach of any law, result in it making a return which is incorrect, false or
misleading in a material respect or if it would materially increase the post
Closing Tax liabilities of the Target Companies and shall, subject as aforesaid,
procure that such tax return is signed and submitted to the relevant Tax
authority as amended provided that the Purchaser or relevant Target Company
shall not do anything in respect of the tax returns which prejudices the
availability of any Relief warranted in Paragraphs 6 and 8 of Part D of Schedule
2.
13.4 The Seller shall provide such assistance as the Purchaser shall
reasonably request in preparing all tax returns relating to the Straddle Period.
Page 90
14. VAT
14.1 In this Paragraph "Seller's VAT Group" means a group of companies
registered as a group, pursuant to section 43 VATA 1994 under VAT reference
830947615 of which EnCana (U.K.) Limited is the representative member.
14.2 The Seller and the Purchaser shall co-operate to procure that the Seller
leaves the Seller's VAT Group as of Closing, so far as it is still a member.
14.3 The Seller (as a member of the Seller's VAT Group) shall contribute to
EnCana (U.K.) Limited such proportion of any VAT for which EnCana (U.K.) Limited
is accountable as is properly attributable to supplies, acquisitions and
importations (supplies) made by the Seller whilst a member of the Seller's VAT
Group (less such amount of deductible input tax as is properly attributable to
such supplies), such contribution to be made in cleared funds on the day which
is the later of two Business Days after demand is made therefore, and two
Business Days before the day on which EnCana (U.K.) Limited is required to
account for such VAT to HM Customs & Excise (or if relevant the Inland Revenue).
The Purchaser shall pay or shall procure that EnCana (U.K.) Limited shall pay to
the Seller an amount equivalent to any repayment of VAT received by EnCana
(U.K.) Limited from HM Customs & Excise (or if relevant the Inland Revenue) or
of any VAT credit obtained by reference to an excess of deductible input tax
over output tax that is in each case properly attributable to supplies made to
and by the Seller whilst a member of Seller's VAT Group, promptly after its
receipt by, or offset against a liability of EnCana (U.K.) Limited.
15. LOSSES AND ALLOWANCES
1 JANUARY 2004
15.1 If on the sixth anniversary of Closing it has been determined by the
auditors of EnCana (U.K.) Limited for the time being that:
(i) the amount of trading losses for the purposes of corporation tax which were
available to the Company for carry forward as at 1 January 2004 was less than
(pound)90,223,327; and/or
(ii) the amount of the Capital Allowances Pool as at 1 January 2004 was less
than (pound)33,540,343,
the amount of the shortfall in aggregate (less (pound)12,380,000) shall be the
"A Shortfall". Within 10 Business Days after and following receipt of written
notice of the A Shortfall to the Seller by the Purchaser (accompanied by
reasonably sufficient evidence of the A Shortfall), the Seller shall pay to the
Purchaser an amount equal to the A Shortfall multiplied by the corporation tax
rate (including supplemental charge) on the sixth anniversary of Closing ("the A
Shortfall Payment").
15.2 If on or before the A Shortfall Payment is made by the Seller to the
Purchaser an amount has already been paid by the Seller to compensate for a
breach of the Tax Warranty in Paragraph 6 of Part D of Schedule 2 ("the
Allowances
Page 91
Warranty"), the A Shortfall Payment shall be reduced by an amount equal to the
amount already paid in respect of such breach (but disregarding any amount
thereof which is attributable to interest, penalties, costs or expenses). Once a
payment has fallen due under this Paragraph, the Seller shall be under no
further liability under this Paragraph or for a breach of the Allowances
Warranty.
15.3 If the Purchaser liable to Tax on receipt of the A Shortfall Payment from
the Seller the Purchaser shall be responsible for such Tax (and notwithstanding
any other provision of this Agreement the Seller shall have no liability under
this Agreement or otherwise in respect of such Tax).
1 OCTOBER 2004
15.4 If on the sixth anniversary of Closing it has been determined by the
auditors of EnCana (U.K.) Limited for the time being that the amount of trading
losses for the purposes of corporation tax which were available to the Company
for carry forward as at 1 October 2004 (on the assumption that 30 September 2004
was the end of an accounting period) was less than (pound)159,000,000 (in
addition to the amount dealt with in Paragraph 16.1 above), the amount of the
shortfall in aggregate (less (pound)31,800,000) shall be the "B Shortfall".
Within 10 Business Days after and following receipt of written notice of the B
Shortfall to the Seller by the Purchaser (accompanied by reasonably sufficient
evidence of the B Shortfall), the Seller shall pay to the Purchaser an amount
equal to the B Shortfall multiplied by the corporation tax rate (including
supplemental charge) on the sixth anniversary of Closing ("the B Shortfall
Payment").
15.5 If on or before the B Shortfall Payment is made by the Seller to the
Purchaser an amount has already been paid by the Seller to compensate for a
breach of the Tax Warranty in paragraph 8 of Part D of Schedule ▇ ("▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇"), the B Shortfall Payment shall be reduced by an amount equal to the
amount already paid in respect of such breach (but disregarding any amount
thereof which is attributable to interest, penalties, costs or expenses). Once a
payment has fallen due under this Paragraph, the Seller shall be under no
further liability under this Paragraph or for a breach of the Losses Warranty.
15.6 If the Purchaser liable to Tax on receipt of the B Shortfall Payment from
the Seller the Purchaser shall be responsible for such Tax (and notwithstanding
any other provision of this Agreement the Seller shall have no liability under
this Agreement or otherwise in respect of such Tax).
15.7 The Purchaser shall not be entitled to recover any amount in respect of
any Relief pursuant to Paragraph 15.4 to the extent that the Purchaser has
already recovered an amount in respect of the same Relief under Paragraph 15.1
and vice versa.
16. WAIVER
The rights and remedies of the parties under this Schedule shall not be
affected, and the parties' liabilities under this Schedule shall not, subject to
compliance with any applicable notice requirements of this agreement, be
released, discharged or impaired, by expiry of any limitation period prescribed
by law.
Page 92
SCHEDULE 9
FINANCIAL ADJUSTMENTS
PART A
1. BASIS OF PREPARATION
1.1 The Share Consideration and the Debt Consideration shall be calculated
with reference to the Final Closing Statement which shall be prepared in UK
Pounds Sterling in the format set out in Part C of this Schedule 9 and on the
basis of the amounts recorded in the Final Closing Statement converted to US
dollars at the rate set out in Paragraph 1.4 below. Any asset or liability may
be reflected only once within the Final Closing Statement.
1.2 The Final Closing Statement shall comprise the consolidated individual
net asset statements of the Target Companies which shall be prepared on the
basis set out in Paragraph 1 of Part A of this Schedule and in accordance with
the Accounting Policies set out in Section 2 of Part A of this Schedule and in
the form set out in Part B of this Schedule.
1.3 The Final Closing Statement shall be prepared as at the close of business
on the Economic Date. The Final Closing Statement shall be drawn up excluding
any effect of the change of control of the Target Companies contemplated by this
agreement as if the Target Companies had remained under the ultimate control of
the Seller. In preparing the Final Closing Statement, no account shall be taken
of events taking place after the 60 Business Days period for preparing the Final
Closing Statement. In preparing the Final Closing Statement, regard shall be had
to information available to the Parties up to the date of the delivery of the
draft Final Closing Statement to the Seller in accordance with Clause 2.6. In
reaching agreement on the Final Closing Statement, the Parties may take into
account information available up to the time of the Seller's agreement of any
disputed amounts.
1.4 Notwithstanding Clause 2.13 of the Agreement, for the purpose of this
Schedule, amounts denominated in currencies other than UK Pounds Sterling shall
be converted to UK Pounds Sterling at the rates applied in the preparation of
the September 2004 Management Accounts on the Closing Date which for the
avoidance of doubt used a US Dollar to UK Pounds Sterling exchange rate of
1.8101 to 1.
1.5 For the purposes of this Schedule a positive number is an asset and a
negative number, indicated by brackets, is a liability.
2. ACCOUNTING POLICIES
2.1 The Final Closing Statement shall be prepared in accordance with the
policies that appear, and in the order shown, below:
(a) the specific accounting policies set out in 2.2 below;
Page 93
(b) to the extent not inconsistent with Paragraph 2.1(a) in accordance with
the accounting policies, procedures and practices of the Company as
applied in preparation of the September 2004 Management Accounts; and
(c) to the extent not inconsistent with Paragraphs 2.1(a) and 2.1(b) in
accordance with Canadian GAAP
2.2 The specific accounting policies to be applied in preparing the Final
Closing Statement are as follows:
(a) The Final Closing Statement line items referred to in Part B of this
Schedule shall be extracted from the September 2004 Management Accounts
as follows:
MANAGEMENT ACCOUNTS
LINE ITEM DESCRIPTION OBJECT ACCOUNTS
-------------------------------------------------------------------------
A Fixed Assets 2515, 2525, 2530, 2535,
2670, 2671, 2672, 2673,
2674, 2675, 2676, 2677,
2678, 2679, 2680, 2681,
2700, 2705, 2715, 2720,
2735, 2740, 2750, 2762,
2801, 2805, 2820, 2830,
2835
B Investments -
C Cash 1010, 1020, 1030, 1040,
1070
D Inventory - ▇▇▇▇▇ Exploration 2010
E Inventory - Products 1230, 1235
F A/R VAT, Net 1130, 1132, 3045
G A/R 1101, 1115, 1145
H A/R Blackfriars 1101
I Other Assets/Prepayments 1110, 1205, 1155
J Accounts Payable 3005, 3020, 3030, 3080
K Corporate Income Taxes 3055
L Intra-Group Payables and
Loan Notes 1137, 1140, 4030
M Provisions 4201, 4050
-------------------------------------------------------------------------
(b) Line Item I, Other Assets/Prepayments, may be adjusted to exclude prepaid
insurance relating to insurance coverage which will be terminated from
the Closing Date.
Page 94
PART B
FORM OF THE FINAL CLOSING STATEMENT
DESCRIPTION AMOUNT
--------------------------------------------------------------------------------
Fixed Assets A
Investments B
Cash C
Inventory - ▇▇▇▇▇ & Exploration D
Inventory Products E
Accounts Receivable VAT, net F
Accounts Receivable G
Accounts Receivable Blackfriars H
Other Assets/Prepayments I
Accounts Payable (J)
Corporate Income Taxes (K)
Working Capital comprising the total of
C+D+E+F+G+H+I+J+K
Intra-Group Payables (L)
Provisions (M)
Page 95
PART C
INTERIM STATEMENT AND CLOSING STATEMENT FORMAT
(US $)
DESCRIPTION A B C
CLAUSE INTERIM FINAL CLOSING FINAL CLOSING
REFERENCE CLOSING STATEMENT AMOUNTS
STATEMENT C=A-B
Initial Price 2.1(a) 2,100,000,000 2,100,000,000 0
Holdings Loan 2.1(a)(i) (300,000,000) (300,000,000) 0
Intra-Group Payables as at 2.1(a)(ii) (89,662,524) [ ] [ ]
Economic Date
Economic Date
Economic Date
Economic Date Working Capital 2.1(a)(iii) 12,440,350 [ ] [ ]
Interest Payable 2.1(a)(iv) 10,087,667 [ ] [ ]
2.1(a)(v) 104,609 [ ] [ ]
2.1(a)(vii) (1,194,583) [ ] [ ]
Redemption Sum 2.1(a)(vi) - - -
------------- ------------- -------------
Closing Price 1,731,775,519
Share Consideration E
=============
Final Closing Share Amount F
=============
Deposit (200,000,000)
=============
PAYMENT AT CLOSING 2.5 1,531,775,519
=============
DEBT AMOUNT
Holdings Loan 2.1(b) 300,000,000
Holdings Loan Accrued Interest 2.1(b) 4,582,500
-------------
Holdings Loan Consideration 304,582,500
Estimated Debt Consideration 2.1(c) 122,267,835
Debt Consideration G
Final Closing Debt Amount H
=============
CLOSING DEBT AMOUNT 426,850,335
=============
Page 96
SCHEDULE 10
INTERPRETATION
1. In this Agreement, the following words and expressions shall have the
following meanings:
ACCOUNTS means:
in relation to any financial year of each Target Company:
(a) the audited balance sheet of the company (and, where relevant, the
audited consolidated balance sheet of the company and its subsidiary
undertakings) as at the Accounts Date in respect of that financial year;
and
(b) the audited profit and loss account of the company (and, where relevant,
the audited consolidated profit and loss account of the company and its
subsidiary undertakings) as at the Accounts Date in respect of that
financial year; and
each in the Agreed Form together with any notes, reports, statements or
documents included in or annexed or attached to them;
ACCOUNTS DATE means 31 December;
ADDITIONAL OIL ALLOWANCE has the meaning given in Clause 9.2;
AFFECTED PARTY has the meaning given in Paragraph 7 of Schedule 6;
AFFILIATE means in relation to any party, any subsidiary undertaking or parent
undertaking of that party and any subsidiary undertaking of any such parent
undertaking, in each case from time to time;
AGREED FORM means, in relation to a document relating to this Agreement, the
form of that document which has been initialled on the date of this Agreement
for the purpose of identification by or on behalf of the Seller and the
Purchaser (in each case with such amendments as may be agreed in writing by or
on behalf of the Seller and the Purchaser);
AGREED FORM DOCUMENTS means the documents in the Agreed Form;
AGREED INTEREST RATE means the rate of interest equal to 3.5 per cent. per
annum;
AGREEMENT means this Agreement including its Schedules;
AMERADA ▇▇▇▇ SALE AGREEMENT means the sale and purchase agreement entered into
between the Company and Amerada ▇▇▇▇ Limited dated 6 June 2003;
APPROVALS has the meaning given in Part A to Schedule 2;
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BP SALE AGREEMENT means the sale and purchase agreement entered into between the
Company and Amoco U.K. Exploration Company, dated 1 December 1999;
BUSINESS DAY means a day (other than a Saturday or Sunday) on which banks
generally are open in London and Canada for the transaction of normal banking
business;
BUZZARD FIELD means the Buzzard Field located in UKCS Licences P.928 South and
P.986, in Quadrants 19 and 20;
CANADIAN GAAP means the generally accepted accounts principles and practices
which are in effect from time to time in Canada, as determined by the Accounting
Standards Board of the Canadian Institute of Chartered Accountants.
CAPITAL ALLOWANCES POOL means in respect of the Company/Target Companies the
aggregate of the pools of qualifying expenditure within the provisions of Part 2
and Part 5 of the Capital Allowances Act 2001 as at 1 January 2004;
CAUSE means the material breach by an Employee of his terms and conditions of
employment with the Company, the Seller or any other Purchaser Company.
CLAIM means any claim under, or for breach of, this Agreement but excluding a
Tax Demand;
CLOSING means completion of the sale and purchase of the Shares in accordance
with the provisions of this Agreement;
CLOSING DATE has the meaning given in Clause 5.1;
CLOSING PRICE means an amount specified as being the Closing Price in column A
of Part C of Schedule 9;
COMPANY 2004 BUDGET means the budget of the Company as approved by the board of
the directors of the Company;
CONDITIONS means the conditions to Closing set out in Clause 3.1, and CONDITION
shall be construed accordingly;
CONFIDENTIAL INFORMATION has the meaning given in Clause 20;
CONNECTED PERSONS means (in relation to the Seller or the Purchaser) the
Affiliates of that Party and the directors, officers, employees, agents and
advisers of that Party or any of its Affiliates;
CONSIDERATION means the aggregate of the Share Consideration, the Debt
Consideration and the Holdings Loan Consideration;
COSTS means losses, damages, costs (including reasonable legal costs) and
expenses (including Taxation), in each case of any nature whatsoever but not
including any indirect or consequential losses or exemplary or punitive damages;
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CUMULATIVE OIL ALLOWANCE means the cumulative volume of oil allowance utilised
to date in petroleum revenue tax assessments for the ▇▇▇▇▇ Field made in respect
of the 40.986% interest currently held by the Company (and including oil
allowance utilised in assessments made on companies from whom the 40.986%
interest was acquired by the Company) and which is estimated at 2,914,042 metric
tonnes for all chargeable periods up to and including that chargeable period
ended on 30 June 2004;
DEBT ASSIGNMENT DEED means the deed in the Agreed Form assigning the Intra-Group
Debt between the Seller and the Purchaser;
DEBT CONSIDERATION has the meaning given in Clause 2.1(c);
DECOMMISSIONING LIABILITIES means any and all claims, costs, charges, expenses,
liabilities or obligations incurred in relation to decommissioning and/or
removing and making safe all of the property related to the UK Business
(including but not limited to platforms, pipelines, plant, machinery, ▇▇▇▇▇,
facilities and all other offshore and onshore installations and structures)
whether such claims, costs, charges, expenses, liabilities or obligations are
incurred under or pursuant to any of the Licensed Interest Documents or in
relation to any operations under any former licences and/ or under each and any
operating agreement or other licensed interest document to which a Target
Company was a party or under statutory, common law or other obligation and
including, without limitation, any residual liability for anticipated and/or
necessary continuing insurance, maintenance and monitoring costs;
DEFAULT INTEREST RATE means the Agreed Interest Rate plus 1 per cent;
DEPOSIT means $200,000,000 (two hundred million dollars);
DESIGNATED SITES means ▇▇▇▇ ▇▇▇▇▇▇ (Norway), Dragados (Spain) and Burnt Island
(Scotland);
DISCLOSED DOCUMENTS means the documents relating to the Target Companies as
listed in the index attached to the Disclosure Letter, such index being in
Agreed Form;
DISCLOSURE LETTER means the letter in the Agreed Form from the Seller to the
Purchaser executed and delivered by the Seller immediately before the signing of
this Agreement together with a supplemental letter in the Agreed Form from the
Seller to the Purchaser executed and delivered by the Seller immediately before
signing this Agreement in respect of Paragraph 1.1(e) of Part A of Schedule 2;
DISPUTED AMOUNTS has the meaning given in Clause 2.6;
DOLLARS or $ means the lawful currency of the United States of America;
DUE DATE has the meaning given in Clause 16.3;
ECONOMIC DATE means 00:01 hours (London time) on 1 October 2004;
ECONOMIC DATE DEBT means the aggregate amount of the Intra-Group Payables;
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ECONOMIC DATE WORKING CAPITAL means the amount of the Working Capital at the
close of business on 30 September 2004;
EMPLOYEE MATTERS has the meaning given in Paragraph 5(e) of Schedule 3;
EMPLOYEES means those employees employed by the Target Companies at the date of
this Agreement together with additional employees recruited by the Target
Companies prior to Closing with the express prior written agreement of the
Purchaser and excluding Employees who are no longer employed by the Target
Company at the Closing Date and Employee shall be construed accordingly;
ENCUMBRANCE means any interest or equity of any person (including any right to
acquire, option or right of pre-emption or conversion) or any mortgage, charge,
pledge, lien, assignment, hypothecation, security interest, title retention or
any other security agreement or arrangement, or any agreement to create any of
the above;
ENTERPRISE SALE AGREEMENT means the sale and purchase agreement entered into
between the Company and Enterprise Oil Limited dated 18 December 2003;
ENVIRONMENT means all or any of the following media, namely air (including the
air within buildings or other natural or man-made structures above or below
ground), water or land;
ENVIRONMENTAL LAWS means all international, European Union, national, state,
federal, regional or local laws (including common law, statute law, civil and
criminal law) from time to time which relate to Environmental Matters;
ENVIRONMENTAL LIABILITIES means any and all claims, costs, charges, expenses,
liabilities or obligations in respect of the UK Business under any Environmental
Laws or in relation to cleaning up, decontamination of, removing and disposing
of debris or any property (including, but not limited to, platforms, pipelines,
plant, machinery, ▇▇▇▇▇, facilities and all other offshore and onshore
installations and structures) from and for reinstating any area of land,
foreshore or seabed, wherever situated, whether such claims, costs, charges,
expenses, liabilities or obligations are incurred under or pursuant to any of
the Licensed Interest Documents or in relation to any operations under any
former licences and/ or under each and any operating agreement or other licensed
interest document to which a Target Company was a party or under any
Environmental Laws or other obligation and including, without limitation, any
residual liability for anticipated and/or necessary continuing insurance,
maintenance and monitoring costs and ENVIRONMENTAL LIABILITY shall be construed
accordingly;
ENVIRONMENTAL MATTERS has the meaning given in Paragraph 5(d) of Schedule 3;
ESTIMATED DEBT CONSIDERATION has the meaning given in Clause 2.4(e);
FIELD DEVELOPMENT PLAN means the development plan for the Buzzard Field approved
by the Secretary;
FINAL CLOSING DEBT AMOUNT means the amount marked `H' in column C of Part C of
Schedule 9, being the amount resulting from the subtraction of the amount marked
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`G' in column B in such Part C from the amount of US$122,267,835 set out in
column A in such Part C;
FINAL CLOSING SHARE AMOUNT means the amount marked `F' in column C of Part C of
Schedule 9 being the amount resulting from the subtraction of the amount marked
`E' in column B of such Part C from the amount of US$1,731,775,519 (being the
Closing Price) set out in column A in such Part C;
FINAL CLOSING AMOUNTS being the Final Closing Share Amount and Final Closing
Debt Amount being the amounts specified in Part C of Schedule 9;
FINAL CLOSING STATEMENT has the meaning given in Clause 2.6;
FINANCIAL DEBT means borrowings and indebtedness in the nature of borrowing
(including by way of acceptance credits, discounting or similar facilities, loan
stocks, bonds, debentures, notes, overdrafts or any other similar arrangements
the purpose of which is to raise money) owed to any banking, financial,
acceptance credit, lending or other similar institution or organisation;
FULL TITLE GUARANTEE means with the benefit of the implied covenants set out in
Part 1 of the Law of Property (Miscellaneous Provisions) ▇▇▇ ▇▇▇▇ when a
disposition is expressed to be made with full title guarantee;
GOVERNMENTAL ENTITY means, in relation to anywhere in the world, any
supra-national, national, state, municipal or local government (including any
subdivision, court, administrative agency or commission or other authority
thereof) or any quasi-governmental or private body exercising any regulatory,
taxing, importing or other governmental or quasi-governmental authority,
including the European Union;
HOLDING COMPANY means any company which holds a majority of the voting rights in
another company, or which is a member of another company and has the right to
appoint or remove a majority of its board of directors, or which is a member of
another company and controls a majority of the voting rights in it under an
agreement with other members;
HOLDINGS LOAN means the loan arising pursuant to the facility agreement dated 24
February 2004 between the Company and the Seller;
HOLDINGS LOAN ASSIGNMENT DEED means the deed in the Agreed Form assigning the
Holdings Loan between the Seller and the Purchaser;
HOLDINGS LOAN CONSIDERATION has the meaning given in Clause 2.1(b);
INDEMNITY CLAIM means a claim by the Purchaser or the Company under Clauses 8.2,
8.3, 8.5 or 9;
INITIAL PRICE has the meaning given in Clause 2.1(a);
Page 101
INSTITUTE OF CHARTERED ACCOUNTANTS means the body of the Institute of Chartered
Accountants in England and Wales with its registered office at Chartered
▇▇▇▇▇▇▇▇▇▇▇' ▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇;
INTELLECTUAL PROPERTY RIGHTS or IPR means patents, trade marks, service marks,
logos, get-up, trade names, internet domain names, rights in designs, copyright
(including rights in computer software) and moral rights, database rights,
semi-conductor topography rights, utility models, rights in know-how and other
intellectual property rights, in each case whether registered or unregistered
and including applications for registration, and all rights or forms of
protection having equivalent or similar effect anywhere in the world;
INTERESTS means the Target Companies' interests in and under:
(a) each Operating Agreement;
(b) the Licenses,
together in each case with all rights and obligations attaching thereto;
INTERIM CLOSING STATEMENT has the meaning given in Clause 2.4;
INTRA-GROUP DEBT means the Economic Date Debt plus all amounts advanced by any
member of the Seller Group to the Target Companies after the Economic Date less,
in either case, any amounts repaid to the Seller Group;
INTRA-GROUP PAYABLES means, in relation to each Target Company, any amounts owed
as at the Economic Date by that Target Company to any member of the Seller Group
(which are not amounts in respect of tax or group relief), but shall exclude the
Holdings Loan, and for the purposes of Clause 2.1(a)(ii) only (but in no other
context) shall include any amount payable to a third party in the nature of debt
and INTRA-GROUP PAYABLE shall be construed accordingly;
IPR MATTERS has the meaning given in Paragraph 5(a) of Schedule 3;
LAST ACCOUNTS means, in relation to any Target Company, the Accounts of that
entity in respect of its financial year ended on the Last Accounts Date in the
Agreed Form;
LAST ACCOUNTS DATE means 31 December 2003;
LICENSED INTEREST DOCUMENTS means the licences, deeds, agreements, letters and
offer documents relating to the interests specified in Annex 1 to this Agreement
and, where the context so admits, any one or more of such documents;
LICENSES means the United Kingdom Petroleum Production licences, details of
which are set out in Part C of Schedule 1 and, where the context so admits, any
one or more of such licences;
LICENCES IN means any material licence of Intellectual Property Rights which has
been granted by a third party to a Target Company in relation to its business or
any part of it;
Page 102
LICENCES OUT means any material licence of Intellectual Property Rights which
has been granted by a Target Company to a third party;
LONGSTOP DATE means 31 March 2005 or such later date as the Parties may agree;
LOSSES AND EXPENSES means actions, proceedings, losses, damages, liabilities,
claims, demands, charges, compensation awards, reasonable costs and expenses
including fines, penalties, clean-up costs, legal and other professional fees
and any VAT payable in relation to any such matter, circumstances or item, and
LOSS AND EXPENSE shall be construed accordingly;
MAC CLAIM has the meaning given in Clause 3.6;
MAC DISAGREEMENT NOTICE has the meaning given in Clause 3.7;
MAC UMPIRE has the meaning given in Clause 3.8;
MATERIAL ADVERSE CHANGE means either of the following events which occurs after
the signing of this Agreement and prior to Closing:
(a) destruction of or damage to the whole or part of the Buzzard facilities
being constructed at any of the Designated Sites where the repair or replacement
cost would exceed 50 per cent. of the total cost expended prior to such event on
the construction of the Buzzard facilities at such site; or
(b) destruction of or damage to the facilities for the production of
hydrocarbons from the ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or transportation of those
hydrocarbons from such facilities to the point of entry into (in the case of
crude oil) the Forties pipeline system and (in the case of natural gas) to the
SAGE pipeline system, such that the aggregate of (i) the repair cost of such
damage, and (ii) the projected value of the loss of production in the 6 months
immediately following the date of such event which is caused by such damage
exceeds $200 million;
MATERIAL CONTRACTS means agreements or contracts under which the relevant Target
Company is committed to expenditure over $5,000,000;
OPERATING AGREEMENT means the joint operating agreements and unitisation
agreements to which a Target Company is a party;
OPERATOR means the entity appointed operator pursuant to an Operating Agreement;
OPOL means Offshore Pollution Liability Agreement;
PARENT UNDERTAKING has the meaning given in Paragraph 2(m) of Schedule 10;
PARTY or PARTIES means a party or parties to this Agreement;
PENSION ARRANGEMENTS means the personal pension arrangement(s) disclosed in the
Disclosed Documents;
PETROLEUM has the meaning given in the Licences;
Page 103
PLANNING AND ZONING MATTERS means any matter which relates to the construction,
demolition, alteration or use of land or the preservation or protection of the
national heritage;
PREFERENCE SHARES means the preference shares in the Company as set out in Part
A of Schedule 1 (Details of the Company);
PROPERTIES means the freehold and leasehold interests of the Target Companies
brief particulars of which are set out in Schedule 7;
PROPOSED TRANSACTION means the transaction contemplated by the Transaction
Documents;
PURCHASER GROUP means the Purchaser and its Affiliates from time to time;
PURCHASER OBLIGATION means any representation, warranty or undertaking to
indemnify (including any covenant to pay pursuant to the Tax Covenant and any
payment under Clause 7) given by the Purchaser to the Seller under this
Agreement;
PURCHASER PARENT COMPANY GUARANTEE means the guarantee in the Agreed Form from
Nexen Inc. to EnCana Corporation;
PURCHASER'S ACCOUNTANTS means Ernst and Young;
PURCHASER'S BANK ACCOUNT means the Purchaser's bank account at Bank of America,
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇; account name Nexen Energy
Holdings International Limited; account number 12332-19870; Bank Number
▇▇▇▇▇▇▇▇▇; SWIFT code ▇▇▇▇▇▇▇▇ or such other bank account as the Purchaser shall
notify to the Seller in writing not less than 2 Business Days prior to the date
on which the relevant payment is due;
REAL ESTATE MATTERS has the meaning given in Paragraph 5(b) of Schedule 3;
REALLOCATION means in relation to the matters set out in the report entitled
EnCana (U.K.) Ltd ▇▇▇▇▇ ▇▇▇▇▇▇▇ Allocation issued for comment 15 June 2004
prepared by Ingen Rhomax Engineering:
(a) any net reallocation of production or liftings between the Telford Field
and the ▇▇▇▇▇ Field as ultimately judicially determined or agreed between
the prospective field owners; and/or
(b) any deemed or notional reallocation of such production or liftings for
the purposes of petroleum revenue tax as is either agreed with the Oil
Taxation Office or as ultimately judicially determined;
for any period prior to the Economic Date;
REALLOCATION CLAIM means a request, claim or potential claim (including any
claim or potential claim from the Oil Taxation Office) arising from or relating
to the reallocation of production or liftings between the Telford Field and the
▇▇▇▇▇ Field in relation to the matters set out in the report entitled EnCana
(U.K.) Ltd ▇▇▇▇▇ ▇▇▇▇▇▇▇
Page 104
Allocation Audit issued for comment 15 June 2004 prepared by Ingen Rhomax
Engineering for any period prior to the Economic Date;
RECIPIENT has the meaning given in Clause 13.5;
RECORD DATE has the meaning given in Clause 3.4;
REDEMPTION SUM has the meaning given in Clause 2.1(a)(vi);
REGISTERED, in relation to Intellectual Property Rights, includes registrations
and applications for registration;
RELIEF means Relief as defined in the Tax Covenant;
REPORTING ACCOUNTANTS has the meaning given in Clause 2.10(h);
REPRESENTATIVES has the meaning given in Clause 20.1;
RETIREMENT BENEFITS means relevant benefits as defined in section 612(1) of the
Taxes Act;
▇▇▇▇▇ FIELD means the ▇▇▇▇▇ Field located in Block 15/22 of UKCS Licences P.185
and P.218;
▇▇▇▇▇ ▇▇▇▇▇▇▇ AGREEMENTS means the Amerada ▇▇▇▇ Sale Agreement, the BP Sale
Agreement and Enterprise Agreement, or any of them;
SCHEDULES means the Schedules to this Agreement, and SCHEDULE shall be construed
accordingly;
SECONDMENT AGREEMENT means the agreement to be signed, if necessary, by EnCana
Corporation and the Purchaser at Closing in relation to expatriate employees of
EnCana Corporation whose secondment has been requested by the Purchaser;
SECRETARY means the Secretary of State for Trade and Industry or her successor
in office any other person for the time being responsible for carrying out the
function at present carried out by such persons in respect of the Licences;
SELLER GROUP means the Seller and its Affiliates from time to time but excluding
the Target Companies;
SELLER GROUP INSURANCE POLICY has the meaning given in Clause 14.2;
SELLER PARENT COMPANY GUARANTEE means the guarantee in the Agreed Form from
EnCana Corporation to Nexen Inc.; SELLER OBLIGATION means any representations,
warranty or undertaking to indemnify (including any covenant to pay pursuant to
the Tax Covenant and any payment under Clause 7) given by the Seller to the
Purchaser under this Agreement;
SELLER'S ACCOUNTANTS means PriceWaterhouse Coopers;
Page 105
SELLER'S BANK ACCOUNT means the Seller's bank account at Royal Bank of Canada,
Main Branch, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇; account name: EnCana
(U.K.) Holdings Limited; account number: ▇▇▇-▇▇▇-▇; transit number 00009 Bank
number 003; or such other bank account as the Seller shall notify to the
Purchaser in writing not less than 2 Business Days prior to the date on which
the relevant payment is due;
SELLER'S SOLICITORS means Freshfields Bruckhaus ▇▇▇▇▇▇▇▇ of ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇;
SEPTEMBER 2004 MANAGEMENT ACCOUNTS means the document entitled the dual currency
trial balance organisation 612 in the Agreed Form.
SHARE CONSIDERATION has the meaning given in Clause 2.1(a);
SHARES means the shares comprising the entire issued share capital of the
Company;
SUBSIDIARIES means the companies details of which are set out in Part B of
Schedule 1, and SUBSIDIARY means any one of them;
SUBSIDIARY and SUBSIDIARIES means any company in relation to which another
company is its holding company;
SURVIVING PROVISIONS means Clauses 13.2 to 13.10 inclusive (Tax), 17
(Announcements), 20 (Confidentiality), 21 (Assignment), 23 (Costs), 24
(Notices), 25 (Conflict with other Agreements), 26 (Entire Agreement), 27
(Waiver, Rights and Remedies), 28 (Contract (Rights of Third Parties) Act 1999),
29.2 and 29.5, 30 (Interpretation), 31 (Governing Law, Jurisdiction and Service
of Process) and Schedule 10 (Interpretation);
TARGET COMPANIES means the Company and the Subsidiaries and TARGET COMPANY means
any of them;
TAX and TAXATION means Tax as defined in the Tax Covenant;
TAX AUTHORITY has the meaning given in the Tax Covenant;
TAX COVENANT means the covenant relating to tax set out in Schedule 8;
TAX DEMAND means a claim for a breach of any of the Tax Warranties or a claim
under the Tax Covenant;
TAXES ACT means Taxes Act as defined in the Tax Covenant;
TAX MATTERS has the meaning given in Paragraph 5(c) of Schedule 3;
TAX WARRANTIES means the warranties set out in Part D of Schedule 2;
TELFORD FIELD means the Telford Field located in Block 15/22 of UKCS Licences
P.185 and P.218;
Page 106
THIRD PARTY CLAIM has the meaning given in Clause 10.1;
TITLE WARRANTIES means those warranties under Paragraphs 1.2(b), 1.2(c),
1.2(d),1.2(e) and 9.1 of Part A of Schedule 2;
TRANSACTION DOCUMENTS means this Agreement, the Disclosure Letter, and any other
Agreed Form Documents;
TRANSITIONAL SERVICES AGREEMENT means the agreement to be signed by the Parties
at Closing in relation to certain services to be provided by the Seller to the
Purchaser for a period of time after Closing;
UK BUSINESS means the oil and gas exploration, production and development
business of the Target Companies;
UK GAAP means the generally accepted accounting principles which are the
accounting principles and practices generally accepted in the United Kingdom,
approved by the Accounting Standards Board, and which implement the requirements
of the Companies ▇▇▇ ▇▇▇▇ (as amended by the Companies Act 1989) and of any
other legislation or regulation compliance with which is required by law in
connection with the preparation of accounts by companies incorporated with
limited liability or compliance with which is generally adopted and practised by
such companies in the United Kingdom;
UNAFFECTED PARTY has the meaning given in Paragraph 7 of Schedule 6;
UNDERTAKING means a body corporate or partnership or unincorporated association
carrying on trade or business with or without a view to profit; in relation to
an undertaking which is not a company, expressions in this Agreement appropriate
to companies are to be construed as references to the corresponding persons,
officers, documents or agents (as the case may be) appropriate to undertakings
of that description;
VAT means value added tax and any similar sales or turnover tax;
WARRANTIES means the warranties given pursuant to Clause 7 and set out in
Schedule 2 and WARRANTY shall be construed accordingly;
▇▇▇▇▇ means the ▇▇▇▇▇ commonly named 15/21a-A1, 15/22-C1, 15/22-D1, 15/21a-E3,
15/21a-20, 15/21b-49, 15/21b-56, 15/21a-55, 15/22-4, 15/22-5, 15/22-6z, 15/22-7,
15/22-8, 15/22-9z, 15/22-12z, 15/22-13,15/22-16, 21/15a-7, 20/2-4 and 20/2-7z;
and
WORKING CAPITAL means the consolidated working capital of the Target Companies
(without duplication and expressed in Dollars) which shall be calculated in
accordance with Schedule 9; and
2. In this Agreement, unless the context otherwise requires:
(a) references to a PERSON shall be construed so as to include any
individual, firm, body corporate (wherever incorporated), government,
state or agency of a state
Page 107
or any joint venture, association, partnership, works council or employee
representative body (whether or not having separate legal personality);
(b) the headings are inserted for convenience only and shall not affect the
construction of this Agreement;
(c) the singular shall include the plural and vice versa;
(d) references to one gender include all genders;
(e) references to times of the day are to local time in the relevant
jurisdiction unless otherwise stated;
(f) references to any English legal term for any action, remedy, method or
judicial proceeding, legal document, legal status, court, official or any
legal concept or thing shall, in respect of any jurisdiction other than
England, be deemed to include that which most nearly approximates in that
jurisdiction to the English legal term;
(g) references to sterling or pounds sterling or (pound) are references to
the lawful currency from time to time of England;
(h) subject to Paragraph (i) below and unless otherwise specifically provided
in this Agreement, references to any monetary sum expressed in a Dollar
amount shall, where such sum is referable in whole or part to a
particular jurisdiction, be deemed to be a reference to an equivalent
amount in the local currency of that jurisdiction translated at the
Exchange Rate at the relevant date specified in this Agreement;
(i) where it is necessary to determine whether a monetary limit or threshold
set out in Schedule 3 has been reached or exceeded (as the case may be)
and the value of any of the relevant claims is expressed in a currency
other than Dollars, the value of each such claim shall be translated into
Dollars at the Exchange Rate on the date of receipt of written
notification of the existence of such claim in accordance with Schedule
3;
(j) where any number or amount is expressed as a negative number or amount
and/or is preceded by the minus sign or a calculation results in a
negative number or amount and such negative number or amount is to be
subtracted from another number or amount (whether positive or negative),
then, applying the general rule of arithmetic, the equivalent positive
number or amount shall be added to that other number or amount (for
example, 3--10=(3+10)=13);
(k) for the avoidance of doubt:
(i) where any two amounts are being compared for the purpose of
determining which is greater or less, a positive amount is greater
than a negative amount and, of two negative amounts, the amount
closer to zero is the greater amount; and
Page 108
(ii) where the amount of the difference between two amounts is to be
calculated, the amount of that difference is always a positive
amount regardless of whether either or both of the relevant
amounts are themselves negative amounts;
(l) any statement in this Agreement qualified by the expression TO THE BEST
OF THE SELLER'S KNOWLEDGE or SO FAR AS THE SELLER IS AWARE or any
similar expression shall mean that it has been made after due and
careful inquiry of (but only of) the directors and officers of the
Company;
(m) an undertaking is a SUBSIDIARY UNDERTAKING of another undertaking (its
PARENT UNDERTAKING) if that other undertaking, directly or indirectly,
through one or more subsidiary undertakings:
(i) holds a majority of the voting rights in it; or
(ii) is a member or shareholder of it and has the right to appoint or
remove a majority of its board of directors or other equivalent
managing body; or
(iii) has a right to exercise a dominant influence over it:
(A) by virtue of provisions contained in its memorandum or
articles or equivalent constitutional documents; or
(B) by virtue of a contract with that undertaking or other
members or shareholders of that undertaking; or
(iv) is a member or shareholder of it and controls alone, pursuant to
an agreement with other shareholders or members, a majority of the
voting rights in it; and
(n) any phrase introduced by the terms INCLUDING, INCLUDE, IN PARTICULAR or
any similar expression shall be construed as illustrative and shall not
limit the sense of the words preceding those terms.
3. Except as otherwise expressly provided in this Agreement, any express
reference to an enactment (which includes any legislation in any jurisdiction)
includes references to:
(a) that enactment as amended, consolidated or re-enacted by or under any
other enactment before or after the date of this Agreement;
(b) any enactment which that enactment re-enacts (with or without
modification); and
(c) any subordinate legislation (including regulations) made (before or after
the date of this Agreement) under that enactment, as amended,
consolidated or re-enacted as described in sub-Paragraph (a) or (b)
above,
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except to the extent that any of the matters referred to in Paragraphs (a) to
(c) occurs after the date of this Agreement and increases or alters the
liability of any party under this Agreement.
4. Where there is any inconsistency between the definitions set out in this
Schedule and the definitions set out in any Clause or any other Schedule, then,
for the purposes of construing such Clause or Schedule, the definitions set out
in such Clause or Schedule shall prevail.
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ANNEX 1
LICENSED INTEREST DOCUMENTS
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SIGNED by ▇▇▇▇ ▇▇▇▇▇ )
for and on behalf of )
ENCANA (U.K.) HOLDINGS LIMITED )
SIGNED by )
and )
for and on behalf of )
NEXEN ENERGY HOLDINGS )
INTERNATIONAL LIMITED )
