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EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
BETWEEN
DUKE ENERGY HYDROCARBONS, L.L.C.
- AND -
CANADIAN 88 ENERGY CORP.
MARCH 17, 2000
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SUBSCRIPTION AGREEMENT
TABLE OF CONTENTS
PAGE
ARTICLE 1 INTERPRETATION
1.1 DEFINITIONS..........................................................1
1.2 GENDER AND NUMBER....................................................3
1.3 HEADINGS.............................................................4
1.4 CALCULATION OF TIME PERIODS..........................................4
1.5 APPLICABLE LAW.......................................................4
1.6 SEVERABILITY.........................................................4
1.7 ENTIRE AGREEMENT.....................................................4
1.8 AMENDMENTS...........................................................4
1.9 WAIVER...............................................................5
1.10 TIME OF ESSENCE.....................................................5
1.11 SUCCESSORS AND ASSIGNS..............................................5
1.12 COUNTERPARTS........................................................5
1.13 FURTHER ACTS........................................................5
1.14 NO DEALER REPRESENTATIONS...........................................5
ARTICLE 2 SUBSCRIPTION
2.1 SUBSCRIPTION.........................................................5
2.2 U.S. $ SUBSCRIPTION..................................................6
ARTICLE 3 CLOSING
3.1 CLOSING..............................................................6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................6
4.2 REPRESENTATIONS AND WARRANTIES OF INVESTOR..........................15
ARTICLE 5 CONDITIONS TO CLOSING
5.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.........................17
5.2 CONDITIONS TO THE OBLIGATIONS OF INVESTOR...........................18
5.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY........................19
5.4 WAIVER OF CONDITIONS................................................20
ARTICLE 6 COMPANY'S COVENANTS
6.1 CONDUCT OF BUSINESS.................................................20
6.2 COOPERATION.........................................................20
6.3 CERTAIN ACTS........................................................21
6.4 ACCESS AND INFORMATION..............................................21
6.5 NO SHOPPING.........................................................21
ARTICLE 7 INVESTOR'S COVENANTS
7.1 COOPERATION.........................................................22
7.2 CERTAIN ACTS........................................................22
ARTICLE 8 DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
8.1 DIRECTORS' AND OFFICERS' LIABILITY INSURANCE........................22
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ARTICLE 9 MISCELLANEOUS
9.1 PUBLICITY...........................................................23
9.2 NOTICES.............................................................23
9.3 ASSIGNMENT BY INVESTOR..............................................24
9.4 TERMINATION OF LETTER OF INTENT.....................................24
9.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................24
9.6 SOLICITATIONS.......................................................24
9.7 EXPENSES............................................................25
9.8 EXHIBITS AND SCHEDULES..............................................25
Exhibit A - Preferential Rights Agreement
Exhibit B - Registration Rights Agreement
Exhibit C - Shareholder Agreement
Schedule 4.1(o)
Schedule 4.1(r)
Schedule 4.1(jj)
Schedule 4.1(kk)
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THIS SUBSCRIPTION AGREEMENT made the 17th day of March, 2000,
BETWEEN:
DUKE ENERGY HYDROCARBONS, L.L.C. a corporation incorporated
pursuant to the laws of Delaware (hereinafter referred to as
"INVESTOR")
OF THE FIRST PART
- and -
CANADIAN 88 ENERGY CORP., a corporation incorporated pursuant to
the laws of Canada (hereinafter referred to as the "COMPANY")
OF THE SECOND PART
WHEREAS the Company believes that it is in the best interests of its
shareholders to enter into an equity transaction with a strategic investor to
provide additional capital for the Company to allow it to continue to actively
develop its inventory of exploration and development prospects in western
Canada;
AND WHEREAS the parties hereto have executed a letter of intent dated
February 7, 2000 (the "LETTER OF INTENT") that contains certain of the terms
upon which Investor is prepared to subscribe for and purchase certain securities
of the Company from the treasury of the Company;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
mutual covenants and conditions herein contained, and other good and valuable
consideration (the receipt and sufficiency whereof is hereby acknowledged by
each party hereto), the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
As used in this Agreement, the following terms have the following
meanings:
"AFFILIATE" has the meaning set forth in the Securities Act (Alberta).
"AGREEMENT", "THIS AGREEMENT", "HERETO", "HEREIN", "HEREBY",
"HEREUNDER", "HEREOF" and similar expressions refer to this Agreement
in its entirety and not to any particular Article, Section, Subsection,
Clause, Subdivision or other portion hereof and include any and every
amending agreement and agreement supplemental hereto.
"APPLICABLE LAWS" means all applicable securities, corporate,
environmental and other laws, rules, regulations, notices and policies.
"BUSINESS DAY" means a day other than a Saturday or Sunday or a day
when banks in the City of Calgary are not generally open for business.
"CDN $" means Canadian Dollars.
"CLOSING" means the completion of the sale and purchase of the
Purchased Securities contemplated by this Agreement.
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"CLOSING DATE" means Friday, March 24, 2000.
"COMMON SHARES" means the shares designated as "common shares" in the
Company's articles.
"CONFIDENTIALITY AGREEMENT" means the confidentiality agreement dated
July 7, 1999 between Investor and the Company.
CORPORATE GOVERNANCE AND TRANSITION ARRANGEMENTS LETTER AGREEMENT"
means the letter agreement of even date herewith between the Company
and Investor, which letter agreement relates to certain corporate
governance and transition arrangements.
"EXCHANGES" means The Toronto Stock Exchange and the American Stock
Exchange.
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 4.1(aa).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4.1(s).
"GAAP" means generally accepted accounting principles as recognized
from time to time by the Canadian Institute of Chartered Accountants or
any applicable successor institute.
"GOVERNMENTAL AUTHORITY" means any government, any political
subdivision, any agency and any entity or person exercising executive,
legislative, judicial, regulatory or administrative functions of
government.
"INDEBTEDNESS" means: (a) obligations for borrowed money or
representing reimbursement obligations in respect of any letter of
credit (whether secured or unsecured); (b) the principal amount of
obligations representing the deferred purchase price of property other
than accounts payable arising in connection with purchases in the
ordinary course of business; (c) the present value of obligations in
respect of operating or capital leases, whether or not such obligations
would be required to be shown as a liability on a balance sheet under
GAAP; and (d) any guarantee, grant of security or contingent liability
in respect of any obligations of the type referred to in items (a), (b)
or (c) above or any agreement to purchase or repurchase any
indebtedness of another Person or any agreement contingently to supply
or advance funds.
"LIEN" means any mortgage, lien, security interest, lease or other
claim, charge or encumbrance.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any change
(or any condition, event or development involving a prospective change)
in, or effect on, the business, operations, results of operations,
assets, capitalization, financial condition, licences, permits,
concessions, rights, liabilities, prospects or privileges, whether
contractual or otherwise, of the Company or its Subsidiaries which is
materially adverse to the business of the Company and its Subsidiaries,
taken as a whole, or which would have a material adverse effect on the
ability of the Company to consummate the transactions contemplated
hereby.
"NOVAL" means Xxxxxxx X. Xxxxx, an individual residing in Xxxxxx
Valley, Alberta.
"NOVAL REPRESENTATION AGREEMENT" means the agreement dated of even date
herewith among the Company, Investor and Noval relating to certain
representations of Noval being provided in connection with the
transactions contemplated hereby.
"PERSON" includes an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or a stock exchange,
trustee in bankruptcy, receiver or any Governmental Authority.
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"PREFERENTIAL RIGHTS AGREEMENT" means the preferential rights agreement
among the Company, Canadian 88 Resources Corp. and Canadian 88 Energy
(U.S.A.) Inc. and Investor, in the form of Exhibit A hereto.
"PUBLIC RECORD" means all information filed with the securities
commissions, or similar regulatory authorities in Canada and the United
States, including without limitation, annual information forms,
information circulars, proxy statements, financial statements,
management's discussion and analysis of results of operations, periodic
reports, current and other reports, prospectuses, offering memoranda
and registration statements and any other information filed with any
securities commission or similar regulatory authorities in Canada and
the United States in compliance, or intended compliance, with any
Applicable Laws.
"PURCHASED SECURITIES" has the meaning set forth in Section 2.1 hereof.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement
between the Company and Investor, substantially in the form of Exhibit
B hereto.
"RETURNS" has the meaning set forth in Section 4.1(dd)(i)(B).
"SHAREHOLDER AGREEMENT" means the shareholder agreement among the
Company, Investor and Noval, in the form of Exhibit C hereto.
"SHAREHOLDER RIGHTS PLAN" means the shareholder rights plan of the
Company governed by the Shareholder Rights Plan Agreement dated
December 22, 1994 between the Company and Montreal Trust Company of
Canada.
"STOCK OPTION PLAN" means the stock option plan of the Company which
provides for the grant of options to purchase up to an aggregate of
10,606,611 Common Shares of the Company pursuant to which options to
purchase 8,248,340 Common Shares have been granted and remain
outstanding.
"SUBSIDIARY" has the meaning set forth in the Securities Act (Alberta),
and in the case of the Company, also includes The Canadian 88 1990 Oil
& Gas Exploration and Development Partnership, The Canadian 88 1990
Hydrocarbon Processing Gas Plant Joint Venture, Canadian 88 Diversified
Energy Fund 1991 Limited Partnership and Longview Resource Management
Corporation.
"TAXES" has the meaning set forth in Section 4.1(dd)(i).
"TRANSACTION DOCUMENTS" means, collectively, this Agreement, the
Registration Rights Agreement, the Shareholder Agreement, the
Preferential Rights Agreement, the Noval Representation Agreement and
the Corporate Governance and Transition Arrangements Letter Agreement
and the agreements referred to in the latter agreement.
"YEAR 2000 COMPLIANT" and "YEAR 2000 COMPLIANCE" has the meaning set
forth in Section 4.1(ff).
1.2 GENDER AND NUMBER
Words importing the singular number only shall include the plural, and
vice-versa and words importing the masculine gender shall include the feminine
gender and neuter gender.
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1.3 HEADINGS
The division of this Agreement into Articles and Sections and the
Article and Section headings are for convenience of reference only and shall not
affect the interpretation or construction of this Agreement.
1.4 CALCULATION OF TIME PERIODS
Unless otherwise specified herein, the period of time within which or
following which any act is to be done or step taken pursuant to this Agreement
shall be calculated by excluding the day on which the period commences and
including the day on which the period ends. If the last day of such period is
not a Business Day, the period in question shall end on the next Business Day.
1.5 APPLICABLE LAW
This Agreement shall be interpreted and governed in accordance with the
laws of the Province of Alberta (being the forum conveniens) and the parties
hereby submit to the jurisdiction of the courts of Alberta in connection with
any dispute concerning this Agreement or the subject matter thereof. Service of
any documents on the parties hereto in connection with any legal proceedings
shall be effective if the same are delivered by courier: (i) in the case of
Investor, to Duke Energy Hydrocarbons, L.L.C., Suite 650, 10777 Westheimer,
Xxxxxxx, Xxxxx, 00000, Attention: President; and (ii) in the case of the
Company, to Canadian 88 Energy Corp., 000, 000 Xxxxx Xxxxxx X.X., Xxxxxxx,
Xxxxxxx, X0X 0X0, Attention: Chief Financial Officer.
1.6 SEVERABILITY
If any provision of this Agreement or any application thereof shall be
declared or held to be invalid, illegal or unenforceable in whole or in part
whether generally or in any particular jurisdiction, such provision shall be
deemed to be amended to the extent necessary to cure such invalidity, illegality
or unenforceability, and the validity, legality or enforceability of the
remaining provisions of this Agreement, both generally and in every other
jurisdiction, shall not in any way be affected or impaired thereby.
1.7 ENTIRE AGREEMENT
(a) This Agreement, the other Transaction Documents and the other
agreements and instruments to be delivered at Closing in
connection with the transactions contemplated hereby and
thereby represent the entire agreement of the Company and
Investor with respect to the subject matter hereof, and there
are no promises, agreements, undertakings, representations or
warranties by the Company or Investor relative to the subject
matter hereof not expressly set forth or referred to herein or
therein.
(b) The Company agrees to waive the standstill provisions of
section C.11 of the Confidentiality Agreement to the extent
necessary in order to permit the consummation of the
transactions contemplated hereby and upon the Closing such
section C.11 shall terminate.
1.8 AMENDMENTS
No amendment or modification of this Agreement shall be binding unless
in writing and signed by all of the parties hereto.
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1.9 WAIVER
No waiver by any party hereto of any breach of any of the provisions of
this Agreement shall take effect or be binding upon the party unless in writing
and signed by such party. Unless otherwise provided therein, such waiver shall
not limit or affect the rights of such party with respect to any other breach.
1.10 TIME OF ESSENCE
Time shall be of the essence of this Agreement.
1.11 SUCCESSORS AND ASSIGNS
This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
1.12 COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
when so executed shall be deemed to be an original, and such counterparts
together shall constitute one and the same agreement.
1.13 FURTHER ACTS
The parties hereto agree to execute and deliver such further and other
documents and perform and cause to be performed such further and other acts and
things as may be reasonably necessary or desirable in order to give full effect
to this Agreement and every part thereof.
1.14 NO DEALER REPRESENTATIONS
No dealer or salesman has been authorized by the Company to give any
information or to make any representations in connection with the issue or sale
of the Purchased Securities and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company.
ARTICLE 2
SUBSCRIPTION
2.1 SUBSCRIPTION
Investor hereby agrees to subscribe for and purchase from the treasury
of the Company such number of Common Shares (the "PURCHASED SECURITIES") not to
exceed the lesser of:
(a) 25,000,000 Common Shares less the number of Common Shares, not
to exceed 2,500,000, which will be purchased, directly or
indirectly, by directors, officers and key employees of the
Company on a flow-through basis from the treasury of the
Company on the Closing Date and in respect of which written
notice has been provided to Investor at least two Business
Days prior to the Closing Date; and
(b) such number of Common Shares which when added to the 1,380,200
Common Shares currently owned by Investor and its Affiliates
would constitute 20% less one Common Share of the issued and
outstanding Common Shares of the Company as of the Closing
Date;
and the Company agrees to sell to Investor the Purchased Securities for a
consideration of CDN $2.00 per share, subject to the terms and conditions set
forth herein. Investor shall pay the purchase price for the Purchased Securities
at the Closing by certified cheque or bank draft or such other means that is
acceptable to
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Investor and the Company in U.S. $ or CDN $. The Company hereby accepts the
subscription by Investor, and agrees to issue to Investor the Purchased
Securities in accordance with the provisions of this Agreement.
2.2 U.S. $ SUBSCRIPTION
For the purposes hereof, the U.S. $ equivalent of the subscription
price in CDN $ shall be determined based upon the spot rate of exchange for such
conversion as quoted by the Bank of Canada at approximately 10:00 a.m. (Calgary
time) one day prior to the Closing Date.
ARTICLE 3
CLOSING
3.1 CLOSING
The Closing shall take place on the Closing Date at 11:00 a.m. at the
offices of XxXxxxxx Xxxxxxxx, or at such other place and at such other time
as the Company and Investor shall mutually agree in writing; PROVIDED HOWEVER,
where a condition to Closing cannot be satisfied on or before March 24, 2000,
the Closing Date may be extended, at the option of the party having the
condition in its favour, to a date no later than April 14, 2000 and during such
extension the other party shall be obliged to use all reasonable commercial
efforts to satisfy such condition to the extent the circumstances giving rise to
the unsatisfied condition are capable of being remedied or are within the
control of such party in order to satisfy the condition.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor as follows:
(a) each of the Company and its Subsidiaries:
(i) has been duly incorporated (or formed in the case of
Subsidiaries that are not corporations) and organized
and is validly subsisting under the laws of its
jurisdiction of incorporation;
(ii) is current with all filings required to be made under
the laws of Canada, the provinces of Canada, the
United States and all other jurisdictions in which it
is incorporated or carries on any business, except
where failure to do so would not in the aggregate
have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole;
(iii) has all requisite power and authority, and except
where failure to be so qualified would not in the
aggregate have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole, is
duly qualified, to carry on its business as it is now
conducted and as currently proposed to be conducted,
and to own, lease and operate its properties and
assets in each of the jurisdictions in which it
carries on its business or owns, leases or operates
its properties or assets;
(b) each of the Company and its Subsidiaries has conducted and is
conducting its business in compliance in all respects with all
Applicable Laws of each jurisdiction in which its business is
carried on and holds and maintains in good standing all
necessary licences, leases, permits, authorizations and other
approvals necessary to permit it to conduct its respective
business or
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to own, lease or operate its properties and assets (including
without limitation any rights or registrations relating to any
intellectual property rights) except where the failure to
conduct its business or to obtain any license, lease, permit,
authorization or other approval would not have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a
whole, and none of the Company or any of its Subsidiaries has
received any notice of proceedings relating to the revocation
or modification of any such licence, lease, permit,
authorization or other approval which may singly or in the
aggregate have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole;
(c) the Company has authorized the issuance and sale of the
Purchased Securities;
(d) subject to receipt by the Company of the consideration
referred to in Section 2.1, the Purchased Securities will be,
at the time of Closing, duly and validly created and issued
and outstanding as fully paid and non-assessable shares;
(e) all of the Subsidiaries of the Company are wholly owned,
either directly or indirectly, by the Company, except The
Canadian 88 1990 Oil & Gas Exploration and Development
Partnership, The Canadian 88 1990 Hydrocarbon Processing Gas
Plant Joint Venture, Canadian 88 Diversified Energy Fund 1991
Limited Partnership, RMX Exploration Ltd. and Longview
Resource Management Corporation;
(f) each of the Company and its Subsidiaries has the necessary
corporate power and authority to execute and deliver, as
applicable, this Agreement and the other Transaction Documents
to which it is a party, and to perform its obligations
hereunder and thereunder and to carry out the transactions
contemplated hereby and thereby, including the issuance of the
Purchased Securities, and this Agreement has been, and the
other Transaction Documents to which each respectively is a
party will as at the time of Closing be, duly authorized,
executed and delivered by the Company or the relevant
Subsidiary of the Company and constitute legal, valid and
binding obligations of the Company or the relevant Subsidiary
of the Company, enforceable in accordance with their
respective terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization and other laws and
equitable principles affecting creditors' rights generally,
the statutory and equitable powers of the courts to stay
proceedings before them and the execution of judgments and the
fact that specific performance and injunctive relief are
equitable remedies which may be ordered by a court in its
discretion and, accordingly, may not be available as a remedy
in an action to enforce a covenant;
(g) the execution and delivery of this Agreement and the other
Transaction Documents to which the Company or the relevant
Subsidiary of the Company is a party, the performance by the
Company or the relevant Subsidiary of the Company of their
respective obligations hereunder and thereunder, including the
sale and delivery of the Purchased Securities at the time of
Closing:
(i) do not and will not result in a breach of, and do not
and will not create a state of facts which, after
notice or lapse of time or both, will result in a
breach of, and do not and will not create a right of
termination or acceleration under, and do not and
will not conflict with:
(A) any Applicable Laws applicable to the
Company or the relevant Subsidiary;
(B) any terms, conditions or provisions of the
articles, by-laws, or resolutions of the
directors or shareholders, of the Company or
the relevant Subsidiary;
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(C) any terms, conditions or provisions of any
indenture, agreement or instrument to which
the Company or the relevant Subsidiary is a
party or by which it is contractually bound
as at the date hereof or the Closing Date;
or
(D) any judgment, decree or order of any court
or Governmental Authority having
jurisdiction over or binding any of the
Company or its Subsidiaries or their
properties or assets;
except, in the case of Sections 4.1(g)(i)(A), (C) and
(D) above, for such breaches, rights or conflicts
with that, alone or in the aggregate, would not have
a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole; and
(ii) will not result in the creation or imposition of any
Lien upon any properties or assets of the Company or
any of its Subsidiaries pursuant to any mortgage,
note, indenture, contract, agreement, instrument,
lease or other document to which the Company or any
of its Subsidiaries is a party or by which it is
bound or to which any of the property or assets of
the Company or any of its Subsidiaries is subject;
(h) the issued and outstanding Common Shares at the date hereof
are listed and posted for trading on the Exchanges;
(i) the authorized share capital of the Company consists of an
unlimited number of Common Shares, an unlimited number of
Class B non-voting common shares and an unlimited number of
six classes of preferred shares designated First through Sixth
Preferred Shares, issuable in series, of which only
106,706,640 Common Shares and no other shares are currently
issued and outstanding, each of which is validly issued, fully
paid and non-assessable;
(j) except for the approval of the Exchanges on customary
conditions (including the absence of any requirement for
shareholder approval) and the filing of reports and payment of
fees respecting exempt trades under the securities legislation
of the Province of Alberta, no consent, approval,
authorization or order of or filing, registration or
qualification with any court, Governmental Authority or any
other Person is required under Applicable Laws for the
execution, delivery and performance by the Company or the
relevant Subsidiaries of the Company of this Agreement or any
of the other Transaction Documents or the consummation by it
of the transactions contemplated herein or therein, unless
such consents, approvals, authorizations, orders, filings,
registrations or qualifications are specifically contemplated
by the other Transaction Documents to be sought or to occur
after the Closing Date;
(k) none of the Company or any of its Subsidiaries has received
notice from any court or Governmental Authority of any
jurisdiction in which it carries on part of its business or
owns or leases any property of any restriction on its ability
to or of a requirement for it to qualify (in addition to any
qualification already obtained) to, nor is the Company or any
of its Subsidiaries otherwise aware of any restriction on its
ability to or of a requirement for it to qualify (in addition
to any qualification already obtained) to, conduct its
business as it is now conducted and as currently proposed to
be conducted, and own, lease and operate its properties, other
than any such restriction or requirement that would not have a
Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole;
(l) none of the Company or any of its Subsidiaries is in violation
of its constating documents or by-laws, and other than in
respect of a default that would not have a Material Adverse
Effect on the Company or its Subsidiaries, taken as a whole,
none of the Company or any of its Subsidiaries is in default
in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note,
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lease or other instrument to which it is a party or by which
it may be bound or to which any of its property or assets is
subject;
(m) no person has any agreement, option, right or privilege with
or against the Company or any Subsidiary thereof, for the
purchase, subscription or issuance of shares, issued or
unissued, in the capital of the Company or any Subsidiary
thereof, except for the issuance of Common Shares pursuant to
this Agreement, the other Transaction Documents, certain
Resource Agreements dated December 31, 1999 to issue up to
1,363,636 flow-through Common Shares, the Company's Stock
Option Plan, the Company's Employee Share Savings Plan and the
Company's Shareholder Rights Plan;
(n) no event of default under any agreement or instrument pursuant
to which Indebtedness of the Company or any of its
Subsidiaries has been issued, and no event which with the
giving of notice or the passage of time, or both, would
constitute an event of default under any such agreement or
instrument, has occurred and is continuing, other than any
event of default or such other event that would not have a
Material Adverse Effect on the Company or its Subsidiaries,
taken as a whole;
(o) except as set forth in Schedule 4.1(o), there are no actions,
suits or proceedings, whether on behalf of or against the
Company or its Subsidiaries pending or, to the knowledge of
the Company or its Subsidiaries, threatened against or
affecting the Company or its Subsidiaries at law or in equity,
before or by any court or Governmental Authority, commission,
board, bureau, agency or instrumentality, domestic or foreign,
and which may in any way have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole;
(p) no order, ruling or determination having the effect of
ceasing, suspending or restricting trading in any securities
of the Company or the sale of the Purchased Securities has
been issued and remains in effect and no proceedings,
investigations or inquiry for such purpose are pending or, to
the knowledge of the Company, contemplated or threatened;
(q) there has been no Material Adverse Change (actual or proposed,
whether financial or otherwise) since September 30, 1999 in
the business, affairs, operations, assets, liabilities
(contingent or actual), capital or ownership of the Company
and its Subsidiaries, taken as a whole;
(r) except as set forth in Schedule 4.1(r), the Company has not
entered into or amended or modified any written or oral
contract that is currently in force for the employment or
services of any senior manager or officer of the Company or
its Subsidiaries, except for such contracts not in excess of
$25,000 individually or $100,000 in the aggregate;
(s) the Company has furnished to Investor true, complete and
accurate copies of the Company's audited consolidated
financial statements as of and for the fiscal period ended
December 31, 1998, and unaudited consolidated financial
statements as of and for the periods ended March 31, 1999,
June 30, 1999 and September 30, 1999, which statements
include, among other things, consolidated balance sheets of
the Company as of December 31, 1997 and 1998 and March 31,
1999, June 30, 1999 and September 30, 1999, the related
consolidated statements of earnings and retained earnings and
of statements of changes in financial position or cash flows
for the years or periods ended December 31, 1997 and 1998 and
March 31, 1999, June 30, 1999 and September 30, 1999
(hereinafter collectively referred to as the "FINANCIAL
STATEMENTS"). Each of the Financial Statements was prepared in
accordance with the books and records of the Company and the
Subsidiaries (other than The Canadian 88 1990 Oil & Gas
Exploration and Development Partnership, The Canadian 88 1990
Hydrocarbon Processing Gas Plant Joint Venture, Canadian 88
Diversified Energy Fund 1991 Limited Partnership, RMX
Exploration Ltd. and Longview Resource Management Corporation
which in accordance with GAAP, are not consolidated in the
statements of Canadian 88), and presents fairly in accordance
with GAAP the financial position and results of operations and
changes in financial position of the Company and its
Subsidiaries (other than The Canadian 88 1990 Oil & Gas
Exploration and Development Partnership, The Canadian 88 1990
Hydrocarbon Processing Gas Plant Joint Venture, Canadian 88
Diversified Energy Fund 1991 Limited Partnership, Canadian 88
Diversified Energy Fund 1991 Limited Partnership, RMX
Exploration Ltd. and Longview Resource Management Corporation
which,
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in accordance with GAAP, are not consolidated in the
statements of Canadian 88) as of the date thereof or for the
period which it purports to cover and includes the liabilities
of the Company and all of its Subsidiaries other than RMX
Exploration Ltd. and Longview Resource Management Corporation;
(t) the Company is a registrant and a "foreign private issuer"
under the U.S. Securities Exchange Act of 1934, as amended,
and is a "reporting issuer" under the securities laws of each
of those provinces of Canada that have the "reporting issuer"
concept in their securities legislation. The Company is not in
default or violation of any material requirement of any
securities laws or related rules, regulations, notices and
policies in Canada or the United States. The information and
statements set forth in the Public Record, when filed, were
true, correct, and complete in all material respects and did
not, when filed, contain an untrue statement of a material
fact or omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading and the information
and statements set forth in the Public Record, when filed,
complied in all material respects with all applicable
requirements of all Applicable Laws. The Company has complied
with all Applicable Laws with respect to making full, true and
timely disclosure of all material facts relating to the
Company (taken with its Subsidiaries as a whole), and their
business and operations, taken as a whole, and the Company has
not filed any confidential material change reports which
remain confidential. For purposes of this Section 4.1(t),
"material fact" shall have the meaning ascribed thereto under
applicable securities laws in Canada;
(u) since September 30, 1999, each of the Company and its
Subsidiaries has conducted its business in the ordinary course
consistent with prior practice, and has not changed materially
any aspect of their respective current businesses, including
without limitation, taking or permitting any action to (i)
declare or pay dividends or make distributions on the Common
Shares or purchase or issue any Common Shares or other
securities of the Company, other than purchasing 27,900 Common
Shares pursuant to the Company's normal course issuer bid,
agreeing to issue up to 1,363,636 flow-through Common Shares
pursuant to certain Resource Agreements dated December 31,
1999, distributing those common shares of Prize Energy Inc.
held by the Company to the holders of the Company's Common
Shares as a dividend in specie and issuances of Common Shares
pursuant to existing option agreements under the Company's
Stock Option Plan and its Employee Share Savings Plan; (ii)
affect or change the capital structure of the Company; (iii)
merge, amalgamate, consolidate or enter into any business
combination or other similar transaction with any other Person
or acquire any stock or equity interest in any other Person or
acquire substantially all the assets of any other Person; (iv)
amend the Company's charter or bylaws; or (v) agree or commit
to do any of the foregoing, except pursuant to this Agreement,
the other Transaction Documents or existing stock option
agreements and the Company's Employee Share Savings Plan;
(v) the data and information in respect of each of the Company and
its Subsidiaries and their respective assets, reserves,
liabilities, business and operations, taken as a whole,
provided by the Company or its advisors to Investor or its
advisors was and is accurate and correct in all material
respects as at the respective dates thereof and did not and
does not omit any data or information necessary to make any
data or information provided not misleading as at the
respective dates thereof;
14
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(w) except:
(i) as disclosed or reflected in the consolidated
unaudited financial statements of the Company as at
September 30, 1999, previously delivered to Investor;
and
(ii) for liabilities and obligations:
(A) incurred in the ordinary course of business
and consistent with past practice, or
(B) incurred pursuant to the terms of this
Agreement,
the Company and its Subsidiaries, taken as a
whole, have not incurred any material
liabilities of any nature, whether accrued,
contingent or otherwise or which would be
required by generally accepted accounting
principles applicable in Canada to be
reflected on a consolidated balance sheet of
the Company as of the date hereof;
(x) the Company has not retained nor will it retain any financial
advisor, broker, agent or finder or paid or agreed to pay any
financial advisor, broker, agent or finder on account of this
Agreement, any transaction contemplated hereby or any
transaction presently ongoing or contemplated. (Investor
acknowledges that it has been informed of a claim by Xxxxxxxxx
XxXxxxxx and Xxxxxx XxXxxxxx for possible entitlement to a
commission arising from the within transaction, which claim
has been denied by the Company. Such claim, even if it is
eventually determined to be valid, shall not be considered a
breach of the representations contained in this subclause
4.1(x));
(y) all material assets or properties of the Company and its
Subsidiaries, taken as a whole, which generate the revenues of
the Company and its Subsidiaries, taken as a whole (other than
that share of the revenues attributable to the minority
interests in the Company's Subsidiaries, the financial
statements of which are not consolidated with the Company),
are legally and beneficially owned by the Company or one of
its Subsidiaries or are leased or licensed on commercial terms
for the benefit of the Company or its Subsidiaries;
(z) the corporate records and minute books of the Company and each
of its Subsidiaries have been maintained in accordance with
all applicable statutory requirements and are complete and
accurate in all material respects;
(aa) to the best of the knowledge of the Company:
(i) neither the Company nor any of its Subsidiaries is
(or knowingly is, in respect of non-operated
properties) in material violation of any applicable
federal, provincial, municipal or local laws,
regulations, orders, government decrees or ordinances
with respect to environmental, health or safety
matters (collectively, the "ENVIRONMENTAL LAWS");
(ii) the Company and each of its Subsidiaries has operated
its business at all times and has received, handled,
used, stored, treated, shipped and disposed of all
contaminants without material violation of
Environmental Laws;
(iii) there have been no material spills, releases,
deposits or discharges of hazardous or toxic
substances, contaminants or wastes which have not
been rectified or are in the process of being
rectified on any of the real property owned or leased
by the Company or any of its Subsidiaries during the
period of its ownership or tenure or under its
control during the period in which it has had
control;
15
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(iv) there have been no releases, deposits or discharges,
in material violation of Environmental Laws, of any
hazardous or toxic substances, contaminants or wastes
into the earth, air or into any body of water or any
municipal or other sewer or drain water systems by
the Company or any of its Subsidiaries;
(v) no material orders, directions or notices have been
issued and remain outstanding pursuant to any
Environmental Laws relating to the business or assets
of the Company or any of its Subsidiaries other than
abandonment and similar notices issued in connection
with the Company's normal course of business taken as
a whole; and
(vi) the Company and each of its Subsidiaries holds all
material licences, permits and approvals required
under any Environmental Laws in connection with the
operation of its business and the ownership and use
of its assets and all such licences, permits and
approvals are in full force and effect;
(bb) neither the Company nor any of its Subsidiaries has received
notice of any proposed environmental policies or laws which
the Company reasonably believes would constitute a Material
Adverse Change in respect of any natural gas midstream
business or any oil and/or gas exploration, development or
production operations of the Company, taken as a whole, other
than those that apply to the industry generally;
(cc) policies of insurance in force as of the date hereof naming
the Company or any of its Subsidiaries, as the case may be, as
an insured adequately cover all risks reasonably and prudently
foreseeable in the operation and conduct of the business of
the Company, taken as a whole, including, without limitation,
directors' and officers' insurance, as would be customary in
respect of the businesses carried on by the Company, including
indirectly through its Subsidiaries. All such policies of
insurance shall remain in force and effect and shall not be
cancelled or otherwise terminated as a result of the
transactions contemplated hereby;
(dd) (i) for purposes of this Agreement, the following definitions
shall apply:
(A) the term "TAXES" shall mean all taxes,
however denominated, including any interest,
penalties or other additions that may become
payable in respect thereof, imposed by any
federal, provincial, territorial, state,
municipal, local or foreign government or
any agency or political subdivision of any
such government, which taxes shall include,
without limiting the generality of the
foregoing, all income or profits taxes
(including, but not limited to, federal
income taxes and provincial income taxes),
payroll and employee withholding taxes,
employment insurance, social insurance
taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross
receipts taxes, business license taxes,
occupation taxes, real and personal property
taxes, stamp taxes, environmental taxes,
transfer taxes, workers' compensation and
other governmental charges, and other
obligations of the same or of a similar
nature to any of the foregoing, which the
Company or any of its Subsidiaries is
required to pay, withhold or collect;
(B) the term "RETURNS" shall mean all reports,
estimates, declarations of estimated tax,
information statements and returns relating
to, or required to be filed in connection
with, any Taxes;
(ii) all Returns required to be filed by or on behalf of
the Company or any of its Subsidiaries have been duly
filed on a timely basis and such Returns are true,
complete and correct in all material respects. All
Taxes shown to be payable on the
16
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Returns or on subsequent assessments with respect
thereto have been paid in full on a timely basis or
have been accrued on the Company's financial
statements and no other Taxes are payable by the
Company or any of its Subsidiaries with respect to
items or periods covered by such Returns;
(iii) the Company and each of its Subsidiaries has paid or
provided adequate accruals in its unaudited financial
statements for the period ended September 30, 1999
for Taxes, including income taxes and related
deferred taxes, in conformity with generally accepted
accounting principles applicable in Canada;
(iv) for all periods ending on and after December 31,
1995, the Company has made available to Investor true
and complete copies of:
(A) relevant portions of income tax audit
reports, statements of deficiencies or other
agreements received or entered into by the
Company or any of its Subsidiaries or on
behalf of the Company or any of its
Subsidiaries relating to Taxes; and
(B) all separate federal and provincial income
or franchise tax returns for the Company or
any of its Subsidiaries;
(v) no material deficiencies exist or have been asserted
with respect to Taxes of the Company or any of its
Subsidiaries. Neither the Company nor any of its
Subsidiaries is a party to any action or proceeding
for assessment or collection of Taxes, nor has such
event been asserted or threatened against the Company
or any of its Subsidiaries or any of its assets. No
waiver or extension of any statute of limitations is
in effect with respect to Taxes or Returns of the
Company or any of its Subsidiaries. The Returns of
the Company or any of its Subsidiaries have never
been materially adversely audited by a government or
taxing authority and have not been audited for any
tax year after 1995, nor is any such audit in
process, pending or to the knowledge of the Company
threatened;
(ee) the Company and each of its Subsidiaries:
(i) have no defined benefit plans;
(ii) have provided adequate accruals in their audited
financial statements for the year ended December 31,
1998 and in their unaudited financial statements for
the period ended September 30, 1999 (or such amounts
are fully funded) for all pension or other employee
benefit obligations of the Company and each of its
Subsidiaries arising under or relating to each of the
pension or retirement income plans or other employee
benefit plans or agreements or policies maintained by
or binding on the Company and each of its
Subsidiaries as well as for any other payment
required to be made by the Company or any of its
Subsidiaries in connection with the termination of
employment or retirement of any employee of the
Company or any of its Subsidiaries in respect of the
fiscal period ended September 30, 1999; and
(iii) have no stock option or purchase plans or similar
arrangements other than the Company's Stock Option
Plan and its Employee Share Savings Plan;
(ff) the Company has taken as part of its Year 2000 Compliance
program all reasonable and prudent steps to ensure that its
computer systems and programs are Year 2000 Compliant. The
Company is not aware of any material issues relating to the
business and operations (including computer applications) of
the Company, taken as a whole, that are not Year 2000
17
-14-
Compliant, although no representation is made as to the Year
2000 Compliance of the Company's suppliers and customers. As
of the date hereof the Company has not experienced any
material Year 2000 Compliance problems or incidents. "YEAR
2000 COMPLIANT" means that all computer systems and programs
of the Company integral to the Company's business operations:
(i) have been designed to be used prior to, during and
after the calendar year 2000 A.D. without material
error relating to date data;
(ii) are capable of operating without material error
relating to the production of date data which
represents or refers to different centuries or more
than one century; and
(iii) are designed so that all data fields, date-related
user interfaces, and other interfaces include the
indication of century;
and "YEAR 2000 COMPLIANCE" has a similar meaning;
(gg) there is no default or breach, threatened pending or
otherwise, by the Company of its obligations under the 1996
Exploration Program Agreement, as amended, between the Company
and RMX Exploration Ltd., except as disclosed in writing on or
prior to March 17, 2000;
(hh) the Board of Directors of the Company has, upon prior written
notice delivered to Montreal Trust Company of Canada,
determined to waive the application of the Shareholder Rights
Plan to the acquisition by Investor of the Purchased
Securities and such waiver remains in full force and effect,
neither amended nor withdrawn.
(ii) the Company and all Persons controlled by the Company
(i) do not hold assets located in the United States
having an aggregate book value of U.S. $15 million or
more; and
(ii) have not made aggregate sales in or into the United
States of U.S. $25 million or more during the year
ended December 31, 1999;
(jj) Schedule 4.1(jj) represents the full and complete list of all
present Affiliates of the Company; and
(kk) as of the date of this Agreement and as of the Closing Date,
Schedule 4.1(kk) represents the full and complete list of all
existing agreements (other than Transaction Documents) between
the Company or any of its present Subsidiaries, on the one
hand, and Related Parties, on the other hand (whether as
direct, indirect or beneficial parties thereto), and any
existing agreements between the Company or its present
Affiliates and third parties, in any such case pursuant to
which Related Parties derive benefits or the Company or any of
its Affiliates assumes obligations in favor of such Related
Parties (provided that no Related Party shall be considered to
derive benefits by reason solely of being a shareholder of a
public company holding less than 2% of a class of the
outstanding issues of such company).
"Related Parties" in this Section 4.1(kk) shall include the
Company's present Affiliates, former Affiliates of the Company
or of the Company's present Affiliates, former or present
directors and officers of the Company or of its former or
present Affiliates, all legal Persons (including all legal
entities) which currently or formerly have shared office space
with the Company or its former or present Affiliates, or have
shared directors or officers with the Company or any of its
former or present Affiliates, or have had in common owners or
18
-15-
shareholders holding directly, indirectly or beneficially 10%
or more of the shares or ownership of such legal Persons as
well as 10% or more of the shares of the Company or its former
or present Affiliates at the time an existing agreement was
entered into;
4.2 REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company as follows:
(a) Investor is duly incorporated and validly subsisting under the laws of
its jurisdiction of incorporation;
(b) Investor has the necessary power and authority to execute and deliver
this Agreement and the other Transaction Documents to which it is a
party, and to perform its obligations hereunder and thereunder and to
carry out the transactions contemplated hereby and thereby and this
Agreement has been, and the other Transaction Documents to which it is
a party, will at the time of Closing be, duly authorized, executed and
delivered by Investor and are or will upon such execution and delivery
be legal, valid and binding obligations of Investor enforceable in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization and other laws and
equitable principles affecting creditors' rights generally, the
statutory and equitable powers of the courts to stay proceedings before
them and the execution of judgments and the fact that specific
performance and injunctive relief are equitable remedies which may be
ordered by a court in its discretion and, accordingly, may not be
available as a remedy in an action to enforce a covenant;
(c) the execution and delivery of this Agreement and the other Transaction
Documents to which it is a party, the performance by Investor of its
obligations hereunder and thereunder do not and will not result in a
breach of, and do not and will not create a state of facts which, after
notice or lapse of time or both, will result in a breach of, and do not
and will not create a right of termination or acceleration under, and
do not and will not conflict with:
(i) any Applicable Laws applicable to Investor;
(ii) any terms, conditions or provisions of the constating
documents, or resolutions of the directors or shareholders, of
Investor;
(iii) any terms, conditions or provisions of any indenture,
agreement or instrument to which Investor is a party or by
which it is contractually bound as at the date hereof or the
Closing Date; or
(iv) any judgment, decree or order of any court or Governmental
Authority having jurisdiction over or binding any of Investor
or their properties or assets;
except, in the case of Sections 4.2(c)(i), (iii) and (iv) above, for
such breaches, rights or conflicts with that, alone or in the
aggregate, would not have a Material Adverse Effect on Investor;
(d) Investor is purchasing the Purchased Securities for its own account for
investment purposes and not with a view to, or for resale in connection
with, any distribution thereof in violation of the United States
Securities Act of 1933, as amended (the "1933 ACT"). Investor
represents that it is experienced in evaluating and making investments
of the type contemplated by this Agreement and is financially able to
bear the risks of such investment. Investor acknowledges that the
Company is issuing and selling the Purchased Securities in reliance
upon the exemption from registration provided in Section 4(2) of the
1933 Act and is relying upon these representations, and agrees that the
Purchased Securities may be transferred only
19
-16-
if registered under the 1933 Act or pursuant to an exemption from such
registration requirements. Investor is an "accredited investor" as
defined in Regulation D under the 1933 Act. Investor acknowledges that
it has been provided with a copy of the Financial Statements and has
had access to such additional information, if any, concerning the
Company as it has considered necessary in connection with its
investment decision to acquire the Purchased Securities. Investor also
acknowledges that it has not purchased the Purchased Securities as a
result of any form of general solicitation or general advertising, as
such terms are defined in Rule 502(c) under the 1933 Act. Investor
understands that Rule 144 promulgated under the 1933 Act is not
presently available with respect to the Purchased Securities and that
absent registration of such securities under the 1933 Act, compliance
with an applicable exemption under the 1933 Act is required for a sale
or other disposition of such securities. Investor agrees that the
following legend may be placed on any certificates evidencing its
Purchased Securities:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE PLEDGED OR HYPOTHECATED, AND MAY NOT BE
RE-OFFERED, RESOLD OR OTHERWISE TRANSFERRED, EXCEPT (A) TO THE
COMPANY, (B) IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, (C) OUTSIDE OF THE UNITED STATES IN ACCORDANCE WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE)
OR (E) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION AFTER
PROVIDING A FAVOURABLE OPINION OF COUNSEL OR EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
OFFER, SALE OR OTHER TRANSFER IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS.
A NEW CERTIFICATE BEARING NO LEGEND MAY BE OBTAINED FROM THE
TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE AND A DULY
EXECUTED DECLARATION, IN FORM SATISFACTORY TO THE TRANSFER
AGENT AND THE COMPANY, TO THE EFFECT THAT THE SALE OF THE
SECURITIES REPRESENTED HEREBY IS MADE IN COMPLIANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT;
(e) Investor is not a resident of Alberta;
(f) Investor acknowledges that:
(i) no securities commission or similar regulatory
authority has reviewed or passed on the merits of the
Purchased Securities;
(ii) there is no government or other insurance covering
the Purchased Securities;
(iii) there are risks associated with the purchase of the
Purchased Securities;
20
-17-
(iv) there are restrictions on Investor's ability to
resell the Purchased Securities and it is Investor's
responsibility to find out what these restrictions
are and to comply with them before selling the
Purchased Securities; and
(v) the Company has advised Investor that the Company is
relying on an exemption from the requirements to
provide Investor with a prospectus and to sell
securities through a person or company registered to
sell securities under the Securities Act (Alberta)
and, as a consequence of acquiring the Purchased
Securities pursuant to such exemption, certain
protections, rights and remedies provided by the
Securities Act (Alberta), including statutory rights
of recission or damages, will not be available to
Investor.
Investor agrees that the following legend may be placed on any
certificates evidencing its Purchased Securities:
THE SECURITIES REPRESENTED HEREBY MAY NOT BE
RE-OFFERED, RESOLD OR OTHERWISE TRANSFERRED IN
ALBERTA ON OR BEFORE MARCH 24, 2001 EXCEPT (A) IN
COMPLIANCE WITH THE PROSPECTUS REQUIREMENTS OF THE
SECURITIES ACT (ALBERTA), OR (B) PURSUANT TO AN
EXEMPTION FROM THE PROSPECTUS REQUIREMENTS PROVIDED
BY APPLICABLE SECURITIES LEGISLATION AND PROVIDED
THAT (1) NO UNUSUAL EFFORT IS MADE TO PREPARE THE
MARKET OR TO CREATE A DEMAND FOR THE SECURITIES BEING
TRANSFERRED, (2) NO EXTRAORDINARY COMMISSION OR
CONSIDERATION IS PAID TO A PERSON OR COMPANY OTHER
THAN THE VENDOR OF THE SECURITIES IN RESPECT OF THE
TRADE, AND (3) THE FIRST TRADE IS NOT FROM THE
HOLDINGS OF A CONTROL PERSON, AS DEFINED IN THE
SECURITIES ACT (ALBERTA) UNLESS THE PROVISIONS OF
SECTION 112 OF THE SECURITIES ACT (ALBERTA) HAVE BEEN
COMPLIED WITH.
A NEW CERTIFICATE BEARING NO LEGEND MAY BE OBTAINED
FROM THE TRANSFER AGENT UPON DELIVERY OF THIS
CERTIFICATE AND A DULY EXECUTED DECLARATION OF THE
HOLDER AND AN OPINION OF COUNSEL, IN FORM
SATISFACTORY TO THE TRANSFER AGENT AND THE COMPANY,
TO THE EFFECT THAT THE SALE OF THE SECURITIES
REPRESENTED HEREBY IS MADE IN COMPLIANCE WITH
APPLICABLE SECURITIES LAW.
(g) Investor and its Affiliates currently own 1,380,200 Common
Shares of the Company.
ARTICLE 5
CONDITIONS TO CLOSING
5.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
The obligations of Investor and the Company to consummate the
transactions contemplated hereby that are to occur at or by Closing are subject
to the satisfaction of the following conditions:
(a) no condition or restriction of any court or Governmental
Authority shall be in effect, and there shall not be pending
or threatened any action or proceeding by or before any court
or Governmental Authority, which condition or restriction, or
pending or threatened action or proceeding, purports to, or
seeks or threatens, to restrain, prohibit or enjoin any of the
parties hereto from entering into, or performing any of the
transactions contemplated by this
21
-18-
Agreement or any of the Transaction Documents, or alters the
terms and conditions of the transactions contemplated herein;
and
(b) all filings with all Governmental Authorities of Canada and
the United States required to be made in connection with the
transactions contemplated by this Agreement or any of the
other Transaction Documents prior to the Closing Date shall
have been made, all waiting periods thereunder shall have
expired or terminated and all consents, orders, permits,
waivers, authorizations, exemptions, and approvals of such
entities required to be in effect on the Closing Date in
connection with the transactions contemplated by this
Agreement or any of the other Transaction Documents shall have
been issued; PROVIDED HOWEVER, that no provision of this
Agreement or any of the other Transaction Documents shall be
construed as requiring any party hereto to accept, in
connection with obtaining any requisite approval, any
condition that would alter the terms and conditions of the
transactions contemplated herein in a manner which is
materially adverse to any such party.
5.2 CONDITIONS TO THE OBLIGATIONS OF INVESTOR
The obligations of Investor under this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions, but
compliance with any such conditions may be waived in whole or in part by
Investor in writing:
(a) on the Closing Date, the representations and warranties of the
Company set forth in this Agreement shall be true and correct
with the same effect as though such representations and
warranties had been made at and as of such time except for
such changes or transactions as are contemplated herein;
(b) the Company shall have performed and complied with all
agreements, covenants, and conditions contained herein
required to be performed or complied with by it prior to or at
the Closing;
(c) Investor shall have received from XxXxxxxx Xxxxxxxx and
Carscallen Lockwood, counsel for the Company, one or more
written opinions satisfactory to Investor;
(d) the Company shall have delivered to Investor a certificate or
certificates representing the Purchased Securities registered
in the name of Investor containing the legends contemplated by
Sections 4.2(d) and 4.2(f);
(e) all consents, approvals or waivers from Persons, including
Governmental Authorities, if any, required prior to the
Closing Date in connection with the consummation of the
transactions contemplated hereby or by the other Transaction
Documents shall have been obtained upon terms and conditions
which are not materially adverse to Investor;
(f) contemporaneously with the execution hereof, Noval shall have
executed the Noval Representation Agreement, the Company shall
have executed and delivered the Corporate Governance and
Transition Arrangements Letter Agreement and the Company and
the other Persons referred to in the Corporate Governance and
Transition Arrangements Letter Agreement shall have executed
and delivered the agreements referred to therein;
(g) on the Closing Date, the Company and Noval shall have executed
and delivered the Shareholder Agreement, the Company shall
have executed and delivered the Registration Rights Agreement
and the Company and the relevant Subsidiaries shall have
executed the Preferential Rights Agreement;
22
-19-
(h) on the Closing Date all of the obligations of the parties set
out in the Corporate Governance and Transition Arrangements
Letter Agreement and the agreements referred to therein shall
have been fulfilled and all of the arrangements contemplated
therein shall have been implemented except for such
obligations or arrangements expressly contemplated therein to
be performed or implemented after Closing;
(i) the Company shall have delivered to Investor all of the
following:
(i) copies (certified by the Corporate Secretary of the
Company) of the resolutions duly adopted by the Board of Directors of
the Company authorizing the execution, delivery and performance of this
Agreement and the other Transaction Documents and all other agreements
referred to herein or therein as being executed at or prior to the
Closing;
(ii) evidence reasonably satisfactory to Investor that the
Company has obtained all necessary approvals or consents or satisfied
all applicable requirements of Governmental Authorities or other
Persons required to be obtained or satisfied at or prior to the Closing
for the transactions entered into, or to be entered into, by the
Company as contemplated in this Agreement and the other Transaction
Documents; and
(iii) evidence reasonably satisfactory to Investor that the
Company has obtained all required approvals of the Exchanges for the
transactions described in this Agreement and the other Transaction
Documents and that the Purchased Securities are, at the time of
Closing, listed and posted for trading on the Exchanges;
(j) all corporate and other proceedings taken or to be taken in
connection with the transactions contemplated by this
Agreement and the other Transaction Documents (including,
without limitation, those matters set forth in the Corporate
Governance and Transition Arrangements Letter Agreement) to be
consummated at the Closing shall have been consummated and all
documents incidental thereto shall be reasonably satisfactory
in form and substance to Investor.
5.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions, but
compliance with any such conditions may be waived in whole or in part by the
Company in writing:
(a) on the Closing Date, the representations and warranties of
Investor set forth in this Agreement shall be true and correct
with the same effect as though such representations and
warranties were made at and as of such time;
(b) Investor shall have performed and complied with all
agreements, covenants and conditions contained herein required
to be performed by or complied with by it prior to or at the
Closing;
(c) the Company shall have received a written opinion or opinions
from Canadian or U.S. counsel for Investor satisfactory to the
Company;
(d) Investor shall have delivered to the Company the aggregate
purchase price for the Purchased Securities being purchased
hereunder;
(e) all consents, approvals or waivers from Persons, including
Governmental Authorities, if any, required prior to the
Closing Date in connection with the consummation of the
transactions
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contemplated hereby or by the other Transaction Documents
shall have been obtained upon terms and conditions which are
not materially adverse to the Company; and
(f) contemporaneously with the execution hereof, Investor shall
have executed and delivered the Corporate Governance and
Transition Arrangements Letter Agreement and on the Closing
Date, Investor shall have executed the Shareholder Agreement,
the Registration Rights Agreement, and the Preferential Rights
Agreement.
5.4 WAIVER OF CONDITIONS
Any condition set forth herein in favour of a party may be waived in
whole or in part by that party.
ARTICLE 6
COMPANY'S COVENANTS
The Company covenants and agrees (the fulfillment of which covenants
and agreements shall be conditions to Investor's obligations hereunder) that,
between the date hereof and the Closing:
6.1 CONDUCT OF BUSINESS
Each of the Company and its Subsidiaries shall conduct its business in
the ordinary course consistent with prior practice, and shall promptly notify
Investor of any event or occurrence or emergency material to, or not in the
ordinary course consistent with prior practice of, the Company and its
Subsidiaries, taken as a whole; and shall not change materially any aspect of
their respective current businesses, including without limitation, taking or
permitting any action to:
(a) declare or pay dividends or make distributions on the Common
Shares or purchase or issue any Common Shares or other
securities of the Company, other than agreeing to issue up to
1,363,636 flow-through Common Shares pursuant to certain
Resource Agreements dated December 31, 1999 and issuances of
Common Shares pursuant to options presently outstanding under
the Company's Stock Option Plan and its Employee Share Savings
Plan;
(b) affect or change the capital structure of the Company or its
Subsidiaries;
(c) merge, amalgamate, consolidate or enter into any business
combination or other similar transaction with any other Person
or acquire any stock or equity interest in any other Person or
acquire substantially all the assets of any other Person;
(d) amend the Company's charter or bylaws;
(e) incur Indebtedness not in the ordinary course of business
consistent with past practice in excess of $2,000,000;
(f) enter into any material contracts outside of the ordinary
course of business; or
(g) agree or commit to do any of the foregoing.
6.2 COOPERATION
Without the prior written consent of Investor, the Company shall not
take any action that would cause the conditions to the obligations of the
parties to effect the transactions contemplated hereby not to be fulfilled
including, without limitation, taking or causing to be taken any action that
would cause the representations and warranties made by the Company herein not to
be true, correct and accurate as of the Closing Date; PROVIDED
24
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HOWEVER that, notwithstanding the foregoing, the Company shall be entitled to
exercise any right or remedy available to it under those of the Transaction
Documents entered into prior to the Closing Date, including, without limitation,
not consummating the transactions contemplated under the Transaction Documents
as a result of the failure by the Company to waive a condition in the Company's
favour in such agreements. The Company will use its reasonable efforts to
vigorously defend any lawsuits or other legal proceedings brought against the
Company, whether judicial or administrative, challenging this Agreement, the
other Transaction Documents or the consummation of the transactions contemplated
hereby or thereby, including seeking to have any stay or temporary restraining
order entered by any court or Governmental Authority vacated or reviewed.
6.3 CERTAIN ACTS
The Company shall use its reasonable efforts to cause to be fulfilled
the conditions precedent to Investor's obligations to consummate the
transactions contemplated hereby that are dependent upon the actions of the
Company or its Affiliates, including without limitation, diligently prosecuting
all requests to Governmental Authorities, the Exchanges or others for required
approvals, consents or waivers. Furthermore, the Company covenants and agrees to
execute or cause the execution of the Transaction Documents to which it or its
Affiliates is a party and perform its obligations thereunder and cause the
performance of the other parties' obligations thereunder and the Company agrees
not to waive any compliance therewith or its rights thereunder or consent to any
amendment thereto without the prior written consent of Investor; PROVIDED
HOWEVER that, notwithstanding the foregoing, the Company shall be entitled to
exercise any right or remedy under the Transaction Documents entered into prior
to the Closing Date, including, without limitation, not consummating the
transactions contemplated under the Transaction Documents as a result of the
failure to waive a condition in the Company's favour in such agreements.
6.4 ACCESS AND INFORMATION
Subject to the terms of the Confidentiality Agreement, prior to the
Closing the Company shall permit the authorized representatives of Investor to
have reasonable access to all facilities, equipment, employees, agents,
properties, books, records and documents related to the Company and its
Subsidiaries and shall furnish to Investor such information, financial records
and other documents with respect to the Company's and its Subsidiaries'
operations and businesses as Investor shall reasonably request in connection
with the transactions contemplated herein.
6.5 NO SHOPPING
The Company hereby agrees that, without the consent of Investor, it
shall not, nor shall it permit any of its officers, directors, employees,
Affiliates, agents, investment bankers, consultants, advisors or representatives
to, prior to the Closing, solicit, initiate, encourage, entertain or consider
any discussions, negotiations, inquiries or proposals (including by way of
furnishing information) with any third party concerning: (a) any sale of any
material portion of the business or assets of the Company or its Affiliates; (b)
any acquisition, disposition or issuance of shares or other securities of the
Company or its Affiliates; (c) any merger, amalgamation, consolidation, business
combination or other similar transaction involving the Company or its
Affiliates; or (d) any transaction inconsistent with the consummation of the
Transaction Documents; PROVIDED HOWEVER that, notwithstanding this Section 6.5,
the Company and its Board of Directors shall be entitled to comply with their
statutory duties in response to a take-over bid not arising as a result of a
breach of this Agreement and shall be entitled to respond as necessary in order
to properly discharge their fiduciary duties in respect of a bona fide written
proposal with respect to any of the transactions referred to in paragraphs (a) -
(d) of this Section 6.5. Nothing in this Section 6.5 shall permit the Company to
terminate or fail to perform its obligations hereunder or under the Transaction
Documents.
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ARTICLE 7
INVESTOR'S COVENANTS
Investor covenants and agrees (the fulfillment of which covenants and
agreements shall be conditions to the Company's obligations hereunder) that,
between the date hereof and the Closing:
7.1 COOPERATION
Without the prior written consent of the Company, Investor shall not
take any action that would cause the conditions to the obligations of such
parties to effect the transactions contemplated hereby not to be fulfilled
including, without limitation, taking or causing to be taken any action that
would cause the representations and warranties made by Investor herein not to be
true, correct and accurate as of the Closing Date; PROVIDED HOWEVER that,
notwithstanding the foregoing, Investor shall be entitled to exercise any right
or remedy under the Transaction Documents, including, without limitation, not
consummating the transactions contemplated under those of the Transaction
Documents entered into prior to the Closing Date as a result of the failure by
Investor to waive a condition in Investor's favour in such agreements. Investor
will use its reasonable efforts to vigorously defend any lawsuits or other legal
proceedings, whether judicial or administrative brought against Investor,
challenging this Agreement, the other Transaction Documents or the consummation
of the transactions contemplated hereby or thereby, including seeking to have
any stay or temporary restraining order entered by any court or Governmental
Authority vacated or reviewed.
7.2 CERTAIN ACTS
Investor shall use its reasonable efforts to cause to be fulfilled the
conditions precedent to the Company's obligations to consummate the transactions
contemplated hereby that are dependant upon the actions of Investor, including
without limitation, diligently prosecuting all requests to Governmental
Authorities or others for required approvals, consents or waivers. Furthermore,
Investor covenants and agrees to execute the Transaction Documents to which it
is a party; PROVIDED HOWEVER that, notwithstanding the foregoing, Investor shall
be entitled to exercise any right or remedy under those of the Transaction
Documents entered into prior to the Closing Date, including, without limitation,
not consummating the transactions contemplated under the Transaction Documents
as a result of the failure to waive a condition in Investor's favour in such
agreements.
ARTICLE 8
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
8.1 DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
Upon expiration of the officers' and directors' liability insurance
currently in place under the Company's insurance program for the directors and
officers of the Company and its Subsidiaries and until six years after the
Closing, the Company shall, provide or arrange for the provision of directors'
and officers' liability insurance covering the directors and officers of the
Company and its Subsidiaries who are now covered by directors' and officers'
liability insurance or will be so covered at the Closing with respect to actions
and omissions occurring prior to or on the Closing on terms no less favourable,
to the extent permitted by law, to such persons than such insurance currently
maintained in effect by the Company for the directors and officers of the
Company and its Subsidiaries on the date hereof in terms of coverage and amount.
The Company shall, indemnify to the extent currently provided for in the by-laws
of the Company such persons who are now or will be entitled on the Closing to
indemnification thereunder with respect to actions or omissions occurring prior
to or on the Closing. Notwithstanding the foregoing, the Company may, at its
option, purchase a run-off directors' and officers' liability insurance policy
on or prior to the Closing.
26
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ARTICLE 9
MISCELLANEOUS
9.1 PUBLICITY
The Company and Investor agree that neither they nor any of their
respective officers, directors, employees, Affiliates, agents, investment
bankers, consultants, advisors or representatives will disclose the existence of
this Agreement or the other Transaction Documents or any of the terms hereof or
thereof to any person, except as otherwise permitted hereunder or thereunder or
required by applicable Canadian or United States law, regulatory policies or
stock exchange requirements or policies. The Company and Investor shall be
entitled to make disclosure of this Agreement and the other Transaction
Documents to their respective financial advisors, lawyers and other professional
advisors and, in the case of Investor, to Affiliates of Investor. The Company
and Investor shall cooperate with each other in the development of all news
releases and other public disclosures relating to the transactions contemplated
by this Agreement and the other Transaction Documents. Each of the Company and
Investor shall not issue or make, or cause to have issued or made, any press
release or announcement concerning the transactions contemplated by this
Agreement and the other Transaction Documents without making reasonable efforts
to obtain the prior approval of the form and substance thereof by the other
party, acting reasonably, unless otherwise required by applicable Canadian or
United States law, regulatory policies or stock exchange requirements or
policies. The parties acknowledge that the Company must make public disclosure
of the transactions resulting from its execution of this Agreement.
9.2 NOTICES
All notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopier) and, unless
otherwise expressly provided herein, shall be delivered during normal business
hours by hand, by Federal Express, United Parcel Service or other reputable
overnight commercial delivery service, or by telecopier notice, confirmation of
receipt received, addressed as follows, or to such other address as may be
hereafter notified by the respective parties hereto:
COMPANY:
Canadian 88 Energy Corp.
000, 000 Xxxxx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxx X. Xxxxxxx, Chief Financial Officer
Fax No.: (000) 000-0000
with a copy to: and:
XxXxxxxx Xxxxxxxx Carscallen Lockwood
Barristers & Solicitors Barristers and Solicitors
Xxxxx 0000 Xxxxx 0000
000 - 0xx Xxxxxx XX 407 - 2nd Street S.W.
Calgary, Alberta Xxxxxxx, Xxxxxxx
X0X 0X0 X0X 0X0
Attention: Xx. Xxxxx X. Xxxxxxxx Attention: Xxxx Xxxxxxxxxx
Fax No.: (000) 000-0000 Fax No.: (000) 000-0000
27
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INVESTOR:
Duke Energy Hydrocarbons, L.L.C.
00000 Xxxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: President
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx
Barristers & Solicitors
0000 Xxxxxxx Xxxx Xxxx
000 - 0xx Xxxxxx XX
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx X. XxxXxxx and Xxxxxxxx X. Xxxxx
Fax No.: (000) 000-0000
Any notice, request or demand delivered personally or by telecopier shall be
deemed to have been given and received on the day it is so delivered if that day
is a Business Day or the next Business Day, as the case may be.
9.3 ASSIGNMENT BY INVESTOR
Investor may assign all or any part of its benefits under this
Agreement or under any agreement contemplated hereby, only to an Affiliate
unless consent to a third party assignment is obtained from the other parties
hereto.
9.4 TERMINATION OF LETTER OF INTENT
It is acknowledged that the Letter of Intent has expired and has no
further force and effect.
9.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties contained herein shall survive the
Closing until the date that is eighteen months after the Closing Date.
9.6 SOLICITATIONS
The Company represents and warrants to Investor that neither it, any
Affiliate nor any person acting on its or their behalf:
(a) will solicit offers to buy any securities under circumstances
that would require registration of the Purchased Securities
under the 1933 Act, except as otherwise required pursuant to
the Registration Rights Agreement;
(b) has engaged or will engage in any form of general solicitation
or general advertising (as those terms are defined in Rule
502(c) under the 1933 Act in connection with any offer or sale
of Purchased Securities; or
28
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(c) directly or indirectly, has sold or offered for sale any of
the Purchased Securities to, or solicited any offers to buy
any Purchased Securities from, or otherwise approached or
negotiated in respect of the Purchased Securities with, any
person or entity other than Investor.
9.7 EXPENSES
Each of the parties hereto shall, whether or not the transactions
contemplated hereby are consummated, bear its own solicitors', attorneys',
accountants' or other fees, costs and expenses incurred in connection with the
negotiation, execution and performance of this Agreement or any of the
transactions contemplated hereunder.
9.8 EXHIBITS AND SCHEDULES
All Exhibits and Schedules to this Agreement are incorporated herein
and made a part hereof for all purposes.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement
as of the date first written above.
DUKE ENERGY HYDROCARBONS, L.L.C.
Per: /s/ XXXXXX X. XXXXXXXXX, III
------------------------------------
Xxxxxx X. Xxxxxxxxx, III
Executive Vice President,
Exploration and Production
CANADIAN 88 ENERGY CORP.
Per: /s/ XXXXX X. XXXXXXX
------------------------------------
Xxxxx X. Xxxxxxx
Chairman
Per: /s/ XXXXXX X. XXXXXXX
------------------------------------
Xxxxxx X. Xxxxxxx
Chief Financial Officer
