December 2, 2007 Focus Energy Trust FET Resources Ltd. 3300, 205 5th Avenue S.W. Calgary, Alberta T2P 2V7 Attention: Derek W. Evans President and Chief Executive Officer Dear Sir: Re: Proposed Business Combination
Exhibit
99.2
December
2, 2007
Focus
Energy Trust
FET
Resources Ltd.
0000,
000 0xx Xxxxxx X.X.
Calgary,
Alberta T2P 2V7
Attention: Xxxxx
X.
Xxxxx
President
and Chief Executive Officer
Dear
Sir:
Re: Proposed
Business Combination
This
letter sets forth the agreement between Enerplus Resources Fund
("Enerplus"), EnerMark Inc. ("EnerMark"),
Focus Energy Trust ("Focus") and FET Resources Ltd.
("FET Resources") with respect to a proposed transaction (the
"Transaction") to combine Enerplus and Focus.
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1.
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Structure
of the Transaction and Exchange
Ratio
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Pursuant
to the Transaction, holders of trust units ("Focus Units") of
Focus will receive, for each Focus Unit, 0.425 of a trust unit
("Enerplus Unit") of Enerplus. Holders of Class B
limited partnership units ("Focus Exchangeable LP Units") of
Focus Limited Partnership ("Focus LP") will not exchange such
securities for Enerplus Units pursuant to the Transaction, but pursuant to
the
Transaction the Focus Exchangeable LP Units will be exchangeable for Enerplus
Units, with the exchange ratio of the Focus Exchangeable LP Units adjusted
for
the 0.425 exchange ratio contemplated in the Transaction in accordance with
the
terms of the constating documents governing the Focus Exchangeable LP
Units.
Subject
to the terms and conditions set forth below, the Transaction will be carried
out
pursuant to a plan of arrangement under the Business Corporations Act
(Alberta) (the "ABCA").
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2.
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Transaction
Agreement
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Enerplus
and Focus, acting reasonably and in good faith, shall negotiate and enter
into
an agreement ("Transaction Agreement") as soon as reasonably
practicable and in any event by January 10, 2008 to implement the Transaction
to
provide for the merger of Enerplus and Focus and the issue and distribution
of
Enerplus Units to holders of Focus Units ("Focus Unitholders")
on the basis described in Section 1. Enerplus and Focus will work
together to achieve mutually agreeable structuring of the Transaction before
the
execution of the Transaction Agreement, having regard to relevant securities,
corporate and trust laws and regulatory, stock exchange, tax and economic
considerations. It is intended that the Transaction will be
structured to allow Focus Unitholders to receive Enerplus Units on a
tax-deferred basis for Canadian and United States income tax purposes, provided
that Enerplus and Focus shall in good faith review the inclusion in the
structure of the Transaction provisions that would allow Focus Unitholders
to
alternatively elect to exchange such Focus Units for Enerplus Units on a
taxable
basis, provided that Enerplus and EnerMark shall not be obligated to consent
or
agree to any structuring that could have an adverse effect on its mutual
fund
trust status or level of its ownership of property that is "taxable Canadian
property" ("TCP") for the purposes of paragraph 132(7)(a) of
the Income Tax Act (Canada). It is also intended, to the
extent possible and subject to the terms and conditions below, that the
Transaction will be structured to qualify for the exemption from registration
provided by Section 3(a)(10) of the U.S. Securities Act of 1933, as
amended.
The
Transaction Agreement shall contain, in addition to the representations,
warranties, covenants, conditions and other terms specified herein, customary
representations and warranties by each of Enerplus and Focus in favour of
the
other, and such other customary terms, covenants and conditions as would
be
normal for a transaction of this nature on the terms generally proposed
herein.
If
the parties fail to execute the Transaction Agreement on or before January
10,
2008, each of Enerplus and Focus shall, subject to applicable law, be entitled,
but not obligated, to proceed and require the other party to this agreement
to
proceed with the Transaction pursuant to the terms and conditions of this
agreement.
The
parties acknowledge and agree that the execution and delivery by Enerplus
and
EnerMark of this agreement is conditional upon each of the directors and
executive officers of FET Resources concurrently having executed and delivered
to Focus and Enerplus, or having agreed to execute and deliver to Focus and
Enerplus as soon as reasonably practicable after the date hereof, lock-up
agreements representing not less than 9.5% of the Focus Units, 58% of the
Focus
Exchangeable LP Units and 15% of the aggregate voting securities of
Focus.
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3.
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Governance
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On
the Effective Date, the board of directors of EnerMark will add 2 current
directors of FET Resources to the board of directors of EnerMark, who will
be
Xxxxxxx X. Xxxxxx and Xxxxx X. X'Xxxxx.
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4.
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Employees
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EnerMark
will, not less than one week prior to the Effective Date, determine the
employees of Focus and its subsidiaries ("Focus Employees") who
will either be offered employment with EnerMark or be provided with
confirmations of employment, as the case may be, (such Focus employees being
the
"Continuing Employees"). The Continuing Employees,
unless their employment is terminated, shall continue their employment on
the
terms and conditions comparable, in the aggregate, to the terms and conditions
on which they are currently employed. In the event that the
employment of any Focus Employee is not continued as a Continuing Employee
for
reason other than voluntary resignation, such employee shall be entitled
to the
payment of a severance payment in an amount to be agreed by the Parties,
acting
reasonably.
Enerplus
and Focus acknowledge that the Transaction will result in a "change of control"
for purposes of the unit award incentive plan ("UAIP"), the
trust unit rights incentive plan ("TURIP") (the UAIP and the
TURIP are collectively referred to as the "Focus Incentive
Plans") and the Focus executive employment agreements.
The
parties agree that upon approval of the Transaction by Focus Unitholders,
and
prior to the effective date of the Transaction, all outstanding unit and
right
entitlements under such plans may be amended, to the extent necessary, to
allow
the payment of all entitlements in cash. In calculating the cash
entitlement under the UAIP, Focus shall used the five day volume weighted
average trading price of the Focus Units during the five trading days ending
on
the second business day immediately prior to the effective date of the
Transaction (the "VWAP") and, in calculating the cash
entitlement under the TURIP, Focus shall use the VWAP less the
exercise
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price
(adjusted for the January distribution). In addition, Focus may
purchase and cancel all of the "out-of-the-money" rights under the TURIP
at an
amount of not more that $0.01 per right. To the extent that the
holders do not elect to receive cash under the UAIP, as amended, such unit
shall
be paid in Focus Units. To the extent that all of the holders of
rights under the TURIP do not exercise such rights, elect to receive cash
or
sell to Focus the "out-of-the-money" rights, the TURIP plan shall be amended
such that holders of rights shall only be entitled receive Enerplus Units
in
accordance with the ratio set forth in Section 1.
The
accompanying disclosure letter dated the date hereof and executed by the
parties
(the "Disclosure Letter") includes a bona fide, good
faith estimate by Focus as of December 2, 2007, having regard to the assumptions
set forth in the Disclosure Letter, of all obligations of Focus pursuant
to all
employment or consulting services agreements, termination, severance and
retention plans or policies for severance, termination or bonus payments
or any
other payments related to any Focus incentive plan (including the Focus
Incentive Plans), arising out of or in connection with the Transaction
(collectively, the "Focus Change of Control
Payments").
The
Focus Change of Control Payments shall be paid in accordance with their terms
and in any event as soon as is reasonably practicable following the Effective
Date.
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5.
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Focus
Unitholder Approval
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Focus
will call and hold a meeting ("Focus Meeting") of Focus
Unitholders and the holders of Focus Exchangeable LP Units ("Focus
Exchangeable LP Holders", and together with the Focus Unitholders, the
"Focus Securityholders") to consider and approve the
Transaction. Focus will, with the co-operation of Enerplus, prepare an
information circular and proxy statement ("Information
Circular") to be mailed to the Focus Securityholders for the purpose of
the Focus Meeting. At the Focus Meeting, the Focus Unitholders and
Focus Exchangeable LP Holders shall vote together as a single class, and
the
approval of the Transaction will be subject to any other applicable "minority
approval" or other requirements under applicable laws. Each of the
parties shall provide the other with all information with respect to itself
as
may be required for inclusion in the Information Circular and shall indemnify
the other for any misrepresentation contained in such information.
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6.
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Cooperation
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Each
of Enerplus and Focus covenants and agrees to do all acts and things and
take
all steps required to complete the Transaction. Without limiting the generality
of the foregoing, each of Enerplus and Focus covenants and agrees to use
its
commercially reasonable efforts to ensure that the aggregate value of the
TCP of
Enerplus following completion of the Transaction is not greater than 7% of
the
aggregate fair market value of the issued and outstanding Enerplus Units
and to
otherwise cause to be fulfilled the conditions precedent to the other party’s
obligations to complete the Transaction and to not take any action that would
cause such conditions not to be fulfilled. Further, and without
restricting the generality of the foregoing: (i) each party shall reasonably
cooperate with the other party and its tax advisors in structuring the
Transaction in a tax effective manner (as contemplated in Section 2), and
assist
the other party and its tax advisors in making such investigations and inquiries
with respect to such party in that regard, as the other party and its tax
advisors shall consider necessary, acting reasonably, provided that Focus
and
FET Resources shall not be obligated to consent or agree to any structuring
that
has the effect of reducing the consideration to be received under the
Transaction by any of its securityholders and Enerplus and EnerMark shall
not be
obligated to consent or agree to any structuring that has the effect of
increasing the consideration to be paid under the Transaction or that would
reduce, for
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the
purposes of the Income Tax Act (Canada), the aggregate cost amount of
assets held directly by Focus to less than $1.1 billion; and (ii) if the
parties
are unable to implement the Transaction by way of plan of arrangement, the
parties shall cooperate with each other to implement the Transaction by way
of a
merger whereby Enerplus would effectively acquire all or substantially all
of
the assets of Focus within approximately the same time periods and on economic
terms (including trust unit exchange ratio and tax treatment contemplated
in
Section 2) having consequences to the Focus Unitholders that are economically
equivalent to those contemplated by this agreement (an "Alternative
Transaction"), and the parties agree to support the completion of such
Alternative Transaction in the same manner as the Transaction and shall
otherwise fulfill their respective covenants contained in this agreement
in
respect of such Alternative Transaction.
Enerplus
and Focus shall use their reasonable commercial efforts to cause the Effective
Date to occur on or about February 12, 2008 or as soon thereafter as reasonably
practicable, provided that the Effective Date shall not occur during the
period
from January 31, 2008 to February 10, 2008 inclusive, and to cause the mailing
of the Information Circular to the Focus Unitholders (the "Mailing
Date") to occur as soon as reasonably practicable and in any event by
January 22, 2008.
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7.
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Board
Authorizations
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(a)
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The
board of directors of EnerMark (the "Enerplus Board") has
unanimously endorsed the Transaction and approved this agreement,
has
unanimously determined that the Transaction and this agreement
are in the
best interests of Enerplus and the Enerplus
Unitholders.
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(b)
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The
board of directors of FET Resources (the "Focus Board")
has unanimously endorsed the Transaction and approved this agreement,
has
unanimously determined that the Transaction and this agreement
are in the
best interests of Focus and the Focus Securityholders, and has,
based on
the opinion of its financial advisor, unanimously determined that
the
Transaction is fair, from a financial point of view, to Focus
Securityholders and has resolved unanimously to recommend approval
of the
Transaction by Focus
Securityholders.
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8.
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Enerplus
Conditions
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Enerplus'
obligation to proceed with the Transaction is subject to the following
conditions:
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(a)
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No
Material Adverse Change: No Material Adverse Change
(as defined below) shall occur with respect to Focus from and after
the
date hereof and prior to the Effective Date, and no Material Adverse
Change in the financial condition of Focus shall have occurred
prior to
the date hereof or shall occur from and after the date hereof and
prior to
the Effective Date from that reflected in the audited consolidated
financial statements of Focus for the fiscal year ending December
31, 2006
or in the unaudited financial statements of Focus for the fiscal
period
ending September 30, 2007.
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For
the purposes of this agreement, "Material Adverse Change" or
"Material Adverse Effect" means, with respect to any person,
any matter or action that has an effect or change that is, or would reasonably
be expected to be, material and adverse to the business, operations, assets,
capitalization, financial condition or prospects of such person and its
subsidiaries, taken as a whole, other than any matter, action, effect or
change
relating to or resulting from: (i) general economic, financial, currency
exchange, securities or commodity prices in Canada or elsewhere,
(ii) conditions affecting the oil
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and
gas exploration, exploitation, development and production industry as a whole
and not specifically relating to any person and/or its subsidiaries, including
changes in laws (including tax laws) and royalties, (iii) any decline in
crude oil or natural gas prices on a current or forward basis, (iv) any
matter which has been publicly disclosed or has been communicated in writing
to
the other party as of the date hereof (including in the Disclosure Letter),
or
(v) any changes or effects arising from matters permitted or contemplated
by this Agreement or consented to or approved in writing by the other
party.
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(b)
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No
Actions: No act, action, suit, proceeding, objection
or opposition shall have been threatened or taken before or by
any
domestic or foreign court, tribunal or governmental agency or other
regulatory or administrative agency or commission by any elected
or
appointed public official or private person in Canada or elsewhere,
whether or not having the force of law, and no law, regulation,
policy,
judgment, decision, order, ruling or directive (whether or not
having the
force of law) shall have been proposed, enacted, promulgated, amended
or
applied, which in the sole judgment of Enerplus, acting reasonably,
in
either case has had or, if the Transaction was consummated, would
result
in, a Material Adverse Change with respect to Focus or Enerplus,
respectively, or would have a Material Adverse Effect on the ability
of
the parties to complete the
Transaction.
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(c)
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No
Material Breach: Focus shall not be in material breach
of its obligations under this agreement or under the terms of the
Transaction Agreement, which breach, individually or in the aggregate,
would or would reasonably be expected to cause a Material Adverse
Change
with respect to Focus or would, or would reasonably be expected
to,
materially impede completion of the
Transaction.
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(d)
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Mailing
Date: The Mailing Date shall occur not later than January
22,
2008.
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(e)
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Approvals:
Enerplus and Focus shall obtain all necessary consents, waivers,
permissions and approvals by or from relevant third parties, on
terms and
conditions satisfactory to Enerplus, acting reasonably, including
without
limitation:
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(i)
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the
approval of the Focus Securityholders required for the Transaction
pursuant to the constating documents of Focus and its subsidiaries,
as
applicable, and, if the Transaction is carried out as a plan of
arrangement, as required by the Court of Queen's Bench of Alberta
(the
"Court"); and
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(ii)
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all
applicable regulatory approvals, orders, notices and consents (including,
without limitation, under the Competition Act (Canada), the
Investment Canada Act (Canada) and those of the Toronto Stock
Exchange and New York Stock Exchange (in respect of the listing
of the
Enerplus Units, including those to be issued pursuant to the Transaction
and, if applicable, with respect to any securityholder approvals)
or other
securities regulatory authorities), and all applicable statutory
or
regulatory waiting periods shall have expired or been
terminated,
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(collectively,
the "Third Party Approvals").
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(f)
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Dissents: If
dissent rights are granted to Focus Unitholders by the Court in
connection
with the Transaction, holders of not more than 5% of the aggregate
of the
issued and outstanding Focus Units and Focus Exchangeable LP Units
shall
have validly exercised rights of dissent in relation to the
Transaction.
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(g)
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Debt: As
at December 2, 2007, Focus' Debt shall not exceed $310
million. "Focus' Debt" means total
indebtedness, including long-term debt, bank debt and working capital
deficiency, but excluding hedging
obligations.
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(h)
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Status
of Parties: Focus and Enerplus shall each be satisfied, acting
reasonably, that each will be a "mutual fund trust" within the
meaning of
the Income Tax Act (Canada) (the "Tax Act")
immediately prior to the time of completion of the Transaction,
and the
completion of the Transaction shall not cause Enerplus to cease
to be a
"mutual fund trust" within the meaning of the Tax Act, cause the
value of
the TCP of Enerplus to exceed 7% of the aggregate fair market value
of the
issued and outstanding Enerplus Units or cause the tax measures
announced
by the Minister of Finance (Canada) on October 31, 2006 and contained
in
Bill C-52 which received royal assent on June 22, 2007 to apply
to
Enerplus or to any direct or indirect subsidiary trust or partnership
of
Focus before 2011 or to Focus for any period prior to the completion
of
the Transaction.
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(i)
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Closing:
The Effective Date shall have occurred not later than February
28, 2008
(the "Outside
Date").
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(j)
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Representations
and Warranties: The representations and warranties
made by Focus in this agreement shall be true and correct as of
the
Effective Date as if made on and as of such date (except to the
extent
such representations and warranties speak as of an earlier date
or except
as affected by transactions contemplated or permitted by this agreement
or
the Transaction Agreement), except where the failure of such
representations and warranties to be true and correct, individually
or in
the aggregate, would not result or would not reasonably be expected
to
result in a Material Adverse Change with respect to Focus, or would
not,
or would not reasonably be expected to, materially impede completion
of
the Transaction, and Focus shall have provided to Enerplus a certificate
of two senior officers certifying such accuracy on the Effective
Date;
provided that Focus shall be entitled to cure any breach of a
representation and warranty within five business days after receipt
of
written notice thereof from Enerplus (except that no cure period
shall be
provided for a breach which by its nature cannot be cured and,
in no
event, shall any cure period extend beyond the Outside
Date).
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(k)
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Covenants:
Focus shall have complied in all material respects with its covenants
herein, except where the failure to comply in all material respects
with
its covenants, individually or in the aggregate, would not result
or would
not reasonably be expected to result in a Material Adverse Change
with
respect to Focus or would not, or would not reasonably be expected
to,
materially impede completion of the Transaction, and Focus shall
have
provided to Enerplus a certificate of two senior officers certifying
compliance with such covenants; provided that Focus shall be entitled
to
cure any breach of a covenant within five business days after receipt
of
written notice thereof from Enerplus (except that no cure period
shall be
provided for a breach which by its nature cannot be cured and,
in no
event, shall any cure period extend beyond the Outside
Date).
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(l)
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Cost
Amount: The aggregate cost amount of assets held
directly by Focus, for the purposes of the Income Tax Act
(Canada), shall not be less than $1.1
billion.
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Enerplus
may waive, in whole or in part, any of the foregoing conditions at any time
on
written notice to Focus. If any of the foregoing conditions are not satisfied
or
waived, this agreement shall terminate on the earlier of the date the condition
was to have been satisfied and the Outside Date save and except for Sections
15,
17 and 18 hereof which shall survive such termination and remain in full
force
and effect.
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9.
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Focus
Conditions
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Focus'
obligation to proceed with the Transaction is subject to the following
conditions:
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(a)
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No
Material Adverse Change: No Material Adverse Change
shall occur with respect to Enerplus from and after the date hereof
and
prior to the Effective Date, and no Material Adverse Change in
the
financial condition of Enerplus shall have occurred prior to the
date
hereof or shall occur from and after the date hereof and prior
to the
Effective Date from that reflected in the audited consolidated
financial
statements of Enerplus for the fiscal year ending December 31, 2006,
or in the unaudited consolidated financial statements of Enerplus
for the
fiscal period ending September 30,
2007.
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(b)
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No
Actions: No act, action, suit, proceeding, objection
or opposition shall have been threatened or taken before or by
any
domestic or foreign court, tribunal or governmental agency or other
regulatory or administrative agency or commission by any elected
or
appointed public official or private person in Canada or elsewhere,
whether or not having the force of law, and no law, regulation,
policy,
judgment, decision, order, ruling or directive (whether or not
having the
force of law) shall have been proposed, enacted, promulgated, amended
or
applied, which in the sole judgment of Focus, acting reasonably,
in either
case has had or, if the Transaction was consummated, would result
in, a
Material Adverse Change with respect to Focus or Enerplus, respectively,
or would have a Material Adverse Effect on the ability of the parties
to
complete the Transaction.
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(c)
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No
Material Breach: Enerplus shall not be in material
breach of its obligations under this agreement or under the terms
of the
Transaction Agreement, which breach, individually or in the aggregate,
would or would reasonably be expected to cause a Material Adverse
Change
with respect to Enerplus or would, or would reasonably be expected
to,
materially impede completion of the
Transaction.
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(d)
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Approvals:
Enerplus and Focus shall obtain all Third Party Approvals on terms
and
conditions satisfactory to Focus, acting
reasonably.
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(e)
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Dissents: If
dissent rights are granted to Focus Unitholders by the Court in
connection
with the Transaction, holders of not more than 5% of the aggregate
of the
issued and outstanding Focus Units and Focus Exchangeable LP Units
shall
have validly exercised rights of dissent in relation to the
Transaction.
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(f)
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Status
of the Parties: Focus and Enerplus shall each be
satisfied, acting reasonably, that each will be a "mutual fund
trust"
within the meaning of the Tax Act immediately prior to the time
of
completion of the Transaction, and the completion of the Transaction
shall
not cause Enerplus to cease to be a "mutual fund trust" within
the meaning
of the Tax Act, cause the value of the TCP of Enerplus to exceed
7% of the
aggregate fair market value of the issued and outstanding Enerplus
Units
or cause the tax measures announced by the Minister of Finance
(Canada) on
October 31, 2006 and contained in Bill C-52 which received royal
assent on
June 22, 2007 to apply to Enerplus before
2011.
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(g)
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Tax-Deferred
Transaction: The Transaction shall be completed in a
manner which will result in a tax-deferred exchange of Focus Units
for
Enerplus Units for Canadian and United States income tax purposes
for all
Focus Unitholders other than Focus Unitholders who validly exercise
rights
of dissent in relation to the Transaction and those Canadian Focus
Unitholders who elect to participate in the Transaction on a taxable
basis
for Canadian income tax purposes.
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(h)
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Closing:
The Effective Date shall have occurred not later than the Outside
Date.
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(i)
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Representations
and Warranties: The representations and warranties
made by Enerplus in this agreement shall be true and correct as
of the
Effective Date as if made on and as of such date (except to the
extent
such representations and warranties speak as of an earlier date
or except
as affected by transactions contemplated or permitted by this agreement
or
the Transaction Agreement), except where the failure of such
representations and warranties to be true and correct, individually
or in
the aggregate, would not result or would not reasonably be expected
to
result in a Material Adverse Change with respect to Enerplus or
would not,
or would not reasonably be expected to, materially impede completion
of
the Transaction, and Enerplus shall have provided to Focus a certificate
of two senior officers certifying such accuracy on the Effective
Date;
provided that Enerplus shall be entitled to cure any breach of
a
representation and warranty within five business days after receipt
of
written notice thereof from Focus (except that no cure period shall
be
provided for a breach which by its nature cannot be cured and,
in no
event, shall any cure period extend beyond the Outside
Date).
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(j)
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Covenants:
Enerplus shall have complied in all material respects with its
covenants
herein, except where the failure to comply in all material respects
with
its covenants, individually or in the aggregate, would not result
or would
not reasonably be expected to result in a Material Adverse Change
with
respect to Enerplus or would not, or would not reasonably be expected
to,
materially impede completion of the Transaction, and Enerplus shall
have
provided to Focus a certificate of two senior officers certifying
compliance with such covenants; provided that Enerplus shall be
entitled
to cure any breach of a covenant within five business days after
receipt
of written notice thereof from Focus (except that no cure period
shall be
provided for a breach which by its nature cannot be cured and,
in no
event, shall any cure period extend beyond the Outside
Date).
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Focus
may waive, in whole or in part, any of the foregoing conditions at any time
on
written notice to Enerplus. If any of the foregoing conditions are not satisfied
or waived, this agreement shall terminate on the earlier of the date the
condition was to have been satisfied and the Outside Date save and except
for
Sections 15, 17 and 18 hereof which shall survive such termination and
remain in full force and effect.
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10.
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Representations
and Warranties
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Enerplus
represents and warrants to and in favour of Focus and acknowledges that Focus
is
relying upon such representations and warranties in connection with the matters
contemplated by this agreement:
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(a)
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This
agreement has been duly executed and delivered by each of Enerplus
and
EnerMark and constitutes a legal, valid and binding obligation
of each of
Enerplus and EnerMark enforceable against it in accordance with
its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws relating to or affecting creditors' rights
generally, and to general principles of
equity.
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(b)
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There
are not more than 130 million Enerplus Units issued and outstanding
plus
not more than 3.5 million Enerplus Units issuable pursuant to rights
granted under Enerplus' trust unit rights incentive plan as of
December 2,
2007.
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(c)
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The
data and information in respect of Enerplus and its assets, reserves,
liabilities, business and operations provided by Enerplus or its
advisors
to Focus or its advisors was and is accurate and correct in all
material
respects as at the respective dates thereof and, in respect of
any
information provided or requested, did not knowingly omit any material
data or information necessary to make any data or information provided
not
misleading in any material respect as at the respective dates
thereof. Enerplus has no knowledge of any Material Adverse
Change to the oil and gas reserves of Enerplus from that disclosed
in such
data and information.
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(d)
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The
information and statements set forth in the information filed by
Enerplus
after December 31, 2006 with any securities commission or similar
regulatory authority in compliance, or intended compliance, with
applicable securities laws (the "Enerplus Public Record")
as at the date hereof, as relates to Enerplus, are true, correct,
and
complete and did not contain any misrepresentation, as of the respective
dates of such information or statements, and no material change
has
occurred in relation to Enerplus which is not disclosed in the
Enerplus
Public Record, and Enerplus has not filed any confidential material
change
reports which continue to be
confidential.
|
|
|
(e)
|
Enerplus'
consolidated audited financial statements as at and for the fiscal
year
ended December 31, 2006 and Enerplus' consolidated unaudited financial
statements as at and for the nine months ended September 30, 2007
(collectively the "Enerplus Financial Statements") were
prepared in accordance with Canadian generally accepted accounting
principles ("GAAP") and present fairly in accordance with
GAAP the consolidated financial position, results of operations
and
changes in financial position of Enerplus as of the dates thereof
and for
the periods indicated therein (subject, in the case of any unaudited
interim financial statements, to normal year-end audit adjustments)
and
reflect appropriate and adequate reserves in respect of contingent
liabilities, if any, of Enerplus on a consolidated basis. There
has been no material change in Enerplus' accounting policies, except
as
described in the notes to the Enerplus Financial Statements, since
January
1, 2007.
|
|
|
(f)
|
None
of Enerplus or its subsidiaries has any material liabilities of
any nature
(matured or unmatured, fixed or contingent), other
than:
|
|
|
(i)
|
those
set forth or adequately provided for in the most recent balance
sheet and
associated notes thereto included in the Enerplus Financial Statements
(the "Enerplus Balance
Sheet");
|
|
|
(ii)
|
those
incurred in the ordinary course of business and not required to
be set
forth in the Enerplus Balance Sheet under
GAAP;
|
|
|
(iii)
|
those
incurred in the ordinary course of business since the date of the
Enerplus
Balance Sheet and consistent with past practice;
and
|
9
|
|
(iv)
|
those
incurred in connection with the execution of this
agreement.
|
|
|
(g)
|
Other
than has been publicly disclosed or disclosed to Focus in writing,
there
has not occurred any material spills, emissions or pollution on
any
property of Enerplus or any of its subsidiaries (collectively the
"Enerplus Parties"), nor have any of the Enerplus Parties
been subject to any stop orders, control orders, clean-up orders
or
reclamation orders under applicable laws or regulations applicable
to the
protection of the environment, hazardous substances or public and
occupational health and safety (collectively, "Environmental
Laws"), any of which might reasonably be expected to cause
a
Enerplus Material Adverse Change. All operations of the Enerplus
Parties
have been and are now being conducted in compliance with all applicable
Environmental Laws, except where the failure to be in compliance
would not
reasonably be expected to cause a Material Adverse Change with
respect to
Enerplus. None of the Enerplus Parties is subject to or aware
of:
|
|
|
(i)
|
any
proceeding, application, order or directive which relates to
environmental, health or safety matters, and which may require
any
material work, repairs, construction, or expenditures;
or
|
|
|
(ii)
|
any
demand or notice with respect to the breach of any Environmental
Laws
applicable to the Enerplus Parties, including, without limitation,
any
regulations respecting the use, storage, treatment, transportation,
or
disposition of any hazardous
substances,
|
which
would reasonably be expected to cause a Material Adverse Change with respect
to
Enerplus.
|
|
(h)
|
There
are no actions, suits or proceedings in existence or pending or,
to the
knowledge of Enerplus or EnerMark, threatened or for which there
is a
reasonable basis, affecting or that would reasonably be expected
to affect
the Enerplus Parties or affecting or that would reasonably be expected
to
affect any of their property or assets at law or equity or before
or by
any Governmental Authority which action, suit or proceeding involves
a
possibility of any judgment against or liability of the Enerplus
Parties
which, if successful, would reasonably be expected to cause a Material
Adverse Change with respect to Enerplus, or would significantly
impede the
ability of the Enerplus Parties to consummate the
Transaction.
|
|
|
(i)
|
Enerplus
is a "mutual fund trust" within the meaning of the Tax Act and
is a
"foreign private issuer" for the purposes of U.S. securities
laws.
|
|
|
(j)
|
Enerplus
is not registered and, to the best of its knowledge, is not required
to be
registered as an investment company pursuant to the United States
Investment Company Act of 1940, as amended, and Enerplus was not,
in 2006 and prior years, and does not expect to be, in 2007, a
"passive
foreign investment company" for the purposes of United States tax
laws.
|
|
|
(k)
|
To
the knowledge of Enerplus, Enerplus has not withheld from Focus
any
material information or documents concerning Enerplus or any of
its
subsidiaries or their respective assets or liabilities during the
course
of Focus' review of Enerplus and its assets. No representation
or warranty
contained herein and no statement contained in any schedule or
other
disclosure document provided or to be provided to Focus by Enerplus
pursuant hereto contains or will contain an untrue statement of
a material
fact which is necessary to make the statements herein or therein
not
misleading.
|
10
Focus
represents and warrants to and in favour of Enerplus and acknowledges that
Enerplus is relying upon such representations and warranties in connection
with
the matters contemplated by this agreement:
|
|
(a)
|
This
agreement has been duly executed and delivered by each of Focus
and FET
Resources and constitutes a legal, valid and binding obligation
of each of
Focus and FET Resources enforceable against it in accordance with
its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws relating to or affecting
creditors' rights generally, and to general principles of
equity.
|
|
|
(b)
|
As
of December 2, 2007, there are not more than (i) 70.6 million Focus
Units
issued and outstanding, (ii) 9.2 million Focus Units issuable pursuant
to
the exchange of Focus Exchangeable LP Units, and (iii) the number
of Focus
Units issuable pursuant to rights and awards granted under the
TURIP and
the UAIP, (iv) 9.2 million Focus Exchangeable LP Units issued and
outstanding, (v) 2.02 million rights granted under the TURIP, (vi)
330,000
restricted awards granted under the UAIP, and (vii) 630,000 performance
awards granted under the UAIP.
|
|
|
(c)
|
The
data and information in respect of Focus and its assets, reserves,
liabilities, business and operations provided by Focus or its advisors
to
Enerplus or its advisors was and is accurate and correct in all
material
respects as at the respective dates thereof and, in respect of
any
information provided or requested, did not knowingly omit any material
data or information necessary to make any data or information provided
not
misleading in any material respect as at the respective dates
thereof. Focus has no knowledge of any Material Adverse Change
to the oil
and gas reserves of Focus from that disclosed in such data and
information.
|
|
|
(d)
|
The
information and statements set forth in the information filed by
Focus
after December 31, 2006 with any securities commission or similar
regulatory authority in compliance, or intended compliance, with
applicable securities laws (the "Focus Public Record") as
at the date hereof, as relates to Focus, are true, correct, and
complete
and did not contain any misrepresentation, as of the respective
dates of
such information or statements, and no material change has occurred
in
relation to Focus which is not disclosed in the Focus Public Record,
and
Focus has not filed any confidential material change reports which
continue to be confidential.
|
|
|
(e)
|
Focus'
consolidated audited financial statements as at and for the fiscal
year
ended December 31, 2006 and Focus' consolidated unaudited financial
statements as at and for the nine months ended September 30, 2007
(collectively the "Focus Financial Statements") were
prepared in accordance with GAAP and fairly present in accordance
with
GAAP the consolidated financial position, results of operations
and
changes in financial position of Focus as of the dates thereof
and for the
periods indicated therein (subject, in the case of any unaudited
interim
financial statements, to normal year-end audit adjustments) and
reflect
appropriate and adequate reserves in respect of contingent liabilities,
if
any, of Focus on a consolidated basis. There has been no
material change in Focus' accounting policies, except as described
in the
notes to the Focus Financial Statements, since January 1,
2007.
|
11
|
|
(f)
|
None
of Focus or its subsidiaries has any material liabilities of any
nature
(matured or unmatured, fixed or contingent), other
than:
|
|
|
(i)
|
those
set forth or adequately provided for in the most recent balance
sheet and
associated notes thereto included in the Focus Financial Statements
(the
"Focus Balance
Sheet");
|
|
|
(ii)
|
those
incurred in the ordinary course of business and not required to
be set
forth in the Focus Balance Sheet under
GAAP;
|
|
|
(iii)
|
those
incurred in the ordinary course of business since the date of the
Focus
Balance Sheet and consistent with past practice;
and
|
|
|
(iv)
|
those
incurred in connection with the execution of this
agreement.
|
|
|
(g)
|
Other
than has been publicly disclosed, there have not occurred any material
spills, emissions or pollution on any property of Focus or any
of its
subsidiaries (collectively the "Focus Parties"), nor have
any of the Focus Parties been subject to any stop orders, control
orders,
clean-up orders or reclamation orders under applicable Environmental
Laws,
any of which might reasonably be expected to cause a Material Adverse
Change with respect to Focus. All operations of the Focus Parties
have
been and are now being conducted in compliance with all applicable
Environmental Laws, except where the failure to be in compliance
would not
reasonably be expected to cause a Material Adverse Change with
respect to
Focus. None of the Focus Parties is subject to or aware
of:
|
|
|
(i)
|
any
proceeding, application, order or directive which relates to
environmental, health or safety matters, and which may require
any
material work, repairs, construction, or expenditures;
or
|
|
|
(ii)
|
any
demand or notice with respect to the breach of any Environmental
Laws
applicable to the Focus Parties, including, without limitation,
any
regulations respecting the use, storage, treatment, transportation,
or
disposition of any hazardous
substances,
|
which
would reasonably be expected to cause a Material Adverse Change with respect
to
Focus.
|
|
(h)
|
There
are no actions, suits or proceedings in existence or pending or,
to the
knowledge of Focus or FET Resources, threatened or for which there
is a
reasonable basis, affecting or that would reasonably be expected
to affect
the Focus Parties or affecting or that would reasonably be expected
to
affect any of their property or assets at law or equity or before
or by
any Governmental Authority which action, suit or proceeding involves
a
possibility of any judgment against or liability of the Focus Parties
which, if successful, would reasonably be expected to cause a Material
Adverse Change with respect to Focus, or would significantly impede
the
ability of the Focus Parties to consummate the
Transaction.
|
|
|
(i)
|
Focus
is a "mutual fund trust" within the meaning of the Tax Act and
is a
"foreign private issuer" for the purposes of U.S. securities
laws.
|
12
|
|
(j)
|
Focus
is not registered and, to the best of its knowledge, is not required
to be
registered as an investment company pursuant to the United States
Investment Company Act of 1940, as amended, and Focus was not, in
2006 and prior years, and does not expect to be, in 2007, a "passive
foreign investment company" for the purposes of United States tax
laws.
|
|
|
(k)
|
All
agreements entered into by Focus with persons other than Enerplus
regarding the confidentiality of information provided to such persons
or
reviewed by such persons with respect to the sale of Focus or a
substantial portion of its assets or any other business combination
or
similar transaction with another party are in substantially the
form of
the Confidentiality Agreement and Focus has not waived the standstill
or
other provisions of any of such
agreements.
|
|
|
(l)
|
Except
as set forth in the Disclosure Letter, there is no non-competition,
exclusivity or other similar agreement, commitment or understanding
in
place to which Focus is a party or by which it is otherwise bound
that
would now or hereafter in any way limit the business or operations
of
Focus in a particular manner or to a particular locality or geographic
region or for a limited period of time and the execution, delivery
and
performance of this agreement does not and will not result in the
restriction of Focus from engaging in this business or from competing
with
any person or in any geographic
area.
|
|
|
(m)
|
Focus
and its subsidiaries, taken as a whole, currently hold less than
U.S.$59.8
million of assets (on a fair market value basis) located in the
United
States and had sales in or into the United States of less than
U.S.$59.8
million in its most recently completed fiscal
year.
|
|
|
(n)
|
To
the knowledge of Focus, Focus has not withheld from Enerplus any
material
information or documents concerning Focus or any of its subsidiaries
or
their respective assets or liabilities during the course of Enerplus'
review of Focus and its assets. No representation or warranty contained
herein and no statement contained in any schedule or other disclosure
document provided or to be provided to Enerplus by Focus pursuant
hereto
contains or will contain any untrue statement or a material fact
which is
necessary in order to make the statements herein or therein not
misleading.
|
|
11.
|
Material
Changes
|
From
and after the date of execution of this agreement and ending on the earlier
of
the Effective Date or the termination of this agreement, each of Enerplus
and
Focus shall promptly notify the other in writing of any material change (actual,
anticipated, contemplated or threatened, financial or otherwise) in its
business, operations, affairs, assets, capitalization, financial condition,
prospects, licenses, permits, rights, privileges or liabilities, whether
contractual or otherwise.
|
12.
|
Focus
Covenants Regarding
Non-Solicitation
|
|
|
(a)
|
Focus
and FET Resources shall immediately cease and cause to be terminated
all
existing discussions and negotiations (including, without limitation,
through any advisors or other parties on its behalf), if any, with
any
parties conducted before the date of this agreement with respect
to any
Acquisition Proposal (as defined herein) and shall immediately
request the
return or destruction of all information provided to any third
parties who
have entered into a confidentiality agreement with Focus or FET
Resources
relating to an Acquisition Proposal and shall use all reasonable
commercial efforts to ensure that such requests are
honoured.
|
13
|
|
(b)
|
Neither
Focus nor FET Resources shall, directly or indirectly, do or authorize
or
permit any of its officers, directors or employees or any financial
advisor, expert or other representative retained by it to do, any
of the
following:
|
|
|
(i)
|
solicit,
knowingly facilitate, initiate or encourage any Acquisition
Proposal;
|
|
|
(ii)
|
enter
into or participate in any discussions or negotiations regarding
an
Acquisition Proposal, or furnish to any other person any information
with
respect to its businesses, properties, operations, prospects or
conditions
(financial or otherwise) in connection with an Acquisition Proposal
or
otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt of any other person
to do
or seek to do any of the foregoing;
|
|
|
(iii)
|
waive,
or otherwise forbear in the enforcement of, or enter into or participate
in any discussions, negotiations or agreements to waive or otherwise
forbear in respect of, any rights or other benefits under confidential
information agreements, including, without limitation, any "standstill
provisions" thereunder; or
|
|
|
(iv)
|
accept,
recommend, approve or enter into an agreement to implement an Acquisition
Proposal;
|
provided,
however, that notwithstanding any other provision hereof, Focus and FET
Resources and their officers, directors and advisers may:
|
|
(v)
|
enter
into or participate in any discussions or negotiations with a third
party
who (without any solicitation, initiation or encouragement, directly
or
indirectly, after the date of this agreement, by Focus or FET Resources
or
any of their officers, directors or employees or any financial
advisor,
expert or other representative retained by them) seeks to initiate
such
discussions or negotiations and, subject to execution of a confidentiality
and standstill agreement in favour of Focus substantially similar
to the
confidentiality and standstill agreement dated November 7, 2007
(the
"Confidentiality Agreement") entered into between
Enerplus and Focus (provided that such confidentiality agreement
shall
provide for disclosure thereof (along with all information provided
thereunder) to Enerplus as set out below), may furnish to such
third party
information concerning Focus and its business, properties and assets,
in
each case if, and only to the extent
that:
|
|
|
(A)
|
the
third party has first made a written bona fide Acquisition
Proposal which the Focus Board determines in good faith: (1) that
funds or
other consideration necessary for the Acquisition Proposal are
or are
likely to be available; (2) (after consultation with its financial
advisor) would, if consummated in accordance with its terms, result
in a
transaction financially superior for Focus Unitholders than the
transaction contemplated by this agreement; and (3) after receiving
the
advice of outside counsel as reflected in minutes of the Focus
Board, that
the taking of such action is necessary for the Focus Board in discharge
of
its fiduciary duties under applicable laws (a "Superior
Proposal"); and
|
14
|
|
(B)
|
prior
to furnishing such information to or entering into or participating
in any
such discussions or negotiations with such third party, Focus and
FET
Resources provide prompt notice to Enerplus to the effect that
it is
furnishing information to or entering into or participating in
discussions
or negotiations with such person or entity together with a copy
of the
confidentiality agreement referenced above and if not previously
provided
to Enerplus, copies of all information provided to such third party
concurrently with the provision of such information to such third
party,
and provided further that Focus and FET Resources shall notify
Enerplus
orally and in writing of any inquiries, offers or proposals with
respect
to a Superior Proposal (which written notice shall include, without
limitation, a copy of any such proposal (and any amendments or
supplements
thereto), the identity of the person making it, if not previously
provided
to Enerplus, copies of all information provided to such party and
all
other information reasonably requested by Enerplus), within 24
hours of
the receipt thereof, shall keep Enerplus informed of the status
and
details of any such inquiry, offer or proposal and answer Enerplus'
questions with respect thereto; and
|
|
|
(vi)
|
comply
with Section 172 of the Securities Act (Alberta)
and similar provisions under applicable Canadian securities laws
relating
to the provision of directors' circulars and make appropriate disclosure
with respect thereto to its securityholders;
and
|
|
|
(vii)
|
accept,
recommend, approve or enter into an agreement to implement a Superior
Proposal from a third party, but only if prior to such acceptance,
recommendation, approval or implementation, the Focus Board shall
have
concluded in good faith, after considering all proposals to adjust
the
terms and conditions of this agreement as contemplated by Section
12(c)
and after receiving the advice of outside counsel as reflected
in minutes
of the Focus Board, that the taking of such action is necessary
for the
Focus Board in discharge of its fiduciary duties under applicable
laws and
Focus and FET Resources comply with their obligations set forth
in Section
12(c) and terminate this agreement in accordance with Section
16(d) and concurrently therewith pays the amount
required by Section 15 to Enerplus.
|
|
|
(c)
|
Following
receipt of a Superior Proposal, Focus and FET Resources shall give
Enerplus, orally and in writing, at least 72 hours advance notice
of any
decision by the Focus Board to accept, recommend, approve or enter
into an
agreement to implement a Superior Proposal, which notice shall
confirm
that the Focus Board has determined that such Acquisition Proposal
constitutes a Superior Proposal, shall identify the third party
making the
Superior Proposal and shall provide a true and complete copy thereof
and
any amendments thereto. During such 72 hour period, Focus and FET
Resources agree not to accept, recommend, approve or enter into
any
agreement to implement such Superior Proposal and not to release
the party
making the Superior Proposal from any standstill provisions and
shall not
withdraw, redefine, modify or change its recommendation in respect
of the
Transaction. In addition, during such 72 hour period Focus and
FET
Resources shall, and shall cause their financial and legal advisors
to,
negotiate in good
|
15
|
|
faith
with Enerplus and its financial and legal advisors to make such
adjustments in the terms and conditions of this agreement and the
Transaction as would enable Focus and FET Resources to proceed
with the
Transaction as amended rather than the Superior Proposal. In the
event
Focus and FET Resources propose to amend this agreement and the
Transaction to provide the Focus Unitholders with a value per Focus
Unit
equal to or having a value greater than the value per Focus Unit
provided
in the Superior Proposal and so advises the Focus Board prior to
the
expiry of such 72 hour period, the Focus Board shall not accept,
recommend, approve or enter into any agreement to implement such
Superior
Proposal and shall not release the party making the Superior Proposal
from
any standstill provisions and shall not withdraw, redefine, modify
or
change its recommendation in respect of the
Transaction.
|
|
|
(d)
|
Enerplus
and EnerMark agree that all information that may be provided to
them by
Focus or FET Resources with respect to any Superior Proposal pursuant
to
this Section 12 shall be treated as if it were "Evaluation Material"
as that term is defined in the Confidentiality Agreements and shall
not be
disclosed or used except in accordance with the provisions of the
Confidentiality Agreements or in order to enforce their rights
under this
agreement in legal proceedings.
|
|
|
(e)
|
Each
party shall ensure that its officers, directors and employees and
any
investment bankers or other advisers or representatives retained
by it are
aware of the provisions of this Section 12 applicable to such party.
Each party shall be responsible for any breach of this Section 12 by
such party's officers, directors, employees, investment bankers,
advisers
or representatives.
|
|
|
(f)
|
"Acquisition
Proposal" means any inquiry or the making of any proposal to
Focus or FET Resources or the Focus Unitholders and/or Focus Exchangeable
LP Holders from any person which constitutes, or may reasonably
be
expected to lead to (in either case whether in one transaction
or a series
of transactions): (i) an acquisition from Focus or its Focus
Securityholders of 20% or more of the voting securities of Focus
or its
subsidiaries; (ii) any acquisition of a substantial amount of assets
of
Focus or its subsidiaries; (iii) an amalgamation, arrangement,
merger, or
consolidation involving Focus or its subsidiaries; or (iv) any
take-over
bid, issuer bid, exchange offer, recapitalization, liquidation,
dissolution, reorganization or similar transaction involving Focus
or its
subsidiaries; or (v) any other transaction, the consummation of
which
would or could reasonably be expected to impede, interfere with,
prevent
or delay the transactions contemplated by this agreement or the
Transaction or which would or could reasonably be expected to materially
reduce the benefits to Enerplus and EnerMark under this agreement
or the
Transaction; except that for the purpose of the definition of "Superior
Proposal" in Section 12(b)(v)(A) above, the references in the definition
of "Acquisition Proposal" to "20% or more of the voting securities"
shall
be deemed to be references to "50% or more of the voting securities",
and
the references to "a substantial amount of assets" shall be deemed
to be
references to "all or substantially all of the
assets".
|
|
13.
|
Business
Activities
|
Focus
agrees that during the period from the date of execution of this agreement
and
ending on the earlier of the Effective Date or the termination of this
agreement, except with the written consent of Enerplus or EnerMark, as required
by law or as otherwise expressly permitted or specifically contemplated by
this
agreement:
16
|
|
(a)
|
Focus'
affairs and the business of FET Resources and each of Focus' other
subsidiaries shall be conducted only in the usual and ordinary
course
consistent with past practices (for greater certainty, where it
is an
operator of any property, it shall operate and maintain such property
in a
proper and prudent manner in accordance with good industry practice
and
the agreements governing the ownership and operation of such property)
and
it shall use all commercially reasonable efforts to maintain and
preserve
its business, assets and advantageous business relationships, provided
that it shall be entitled and authorized to comply with all pre-emptive
rights, first purchase rights or rights of first refusal that are
applicable to its assets and that become operative by virtue of
this
agreement or any of the transactions contemplated by this
agreement;
|
|
|
(b)
|
Focus
shall not, and shall not permit any of its subsidiaries to, directly
or
indirectly, do or permit to occur any of the following: (i) amend its
constating documents; (ii) declare, set aside or pay any dividend or
distribution or make any other payment (whether in cash, trust
units,
shares or property) in respect of its outstanding securities other
than
regular monthly cash distributions of an amount equal to $0.14
per Focus
Unit; (iii) make any change to the days upon which it normally
declares
distribution record dates and distribution payment dates in respect
of
monthly cash distributions (for certainty, the only distribution
record
dates occurring from the date hereof to the Outside Date inclusive
are
December 31, 2007 and January 31, 2008); (iv) issue or agree to
issue,
grant, sell or pledge or agree to issue, grant, sell or pledge
any trust
units or other securities of Focus or any of its subsidiaries (other
than
to Focus or any of its subsidiaries), including, without limitation
securities convertible into or exchangeable or exercisable for
trust
units, or otherwise evidencing a right to acquire trust units,
other than
the issuance of trust units pursuant to the exercise of currently
outstanding rights or grants to acquire trust units on the terms
previously publicly announced; (v) redeem, purchase or otherwise
acquire any of its outstanding trust units or other securities
(other than
redemptions required pursuant to Focus' trust indenture); (vi) split,
combine or reclassify any of its trust units; (vii) adopt a plan of
liquidation or resolutions providing for its liquidation, dissolution,
merger, consolidation or reorganization; or (viii) enter into or
modify any contract, agreement, commitment or arrangement with
respect to
any of the foregoing;
|
|
|
(c)
|
Focus
will not, and will not permit any of its subsidiaries to, directly
or
indirectly, do or permit to occur any of the following (except
as
previously disclosed on the Focus Public Record): (i) sell, pledge,
dispose of or encumber any assets having an individual value in
excess of
$3 million or $10 million in the aggregate, other than production
in
the ordinary course of business; (ii) expend or commit to expend more
than $3 million individually or $10 million in the aggregate
with respect to any capital expenditures except to the extent that
such
expenditures are set forth in the capital budgets disclosed to
Enerplus or
EnerMark prior to the date hereof; (iii) expend or commit to expend
any amounts with respect to any operating expenses other than in
the
ordinary course of business or pursuant to the Transaction;
(iv) reorganize, amalgamate, merge or otherwise combine Focus or any
of its subsidiaries with any other person; (v) acquire (by merger,
amalgamation, consolidation or acquisition of shares or assets)
any
corporation, trust, partnership or other business organization
or division
thereof which is not a subsidiary or affiliate of Focus as of the
date
hereof, or make any investment therein either by purchase of shares
or
securities, contributions of capital or property transfer;
(vi) acquire any assets with an acquisition cost in excess of
$3 million individually or $10 million in the aggregate; (vii)
incur any indebtedness for borrowed money in excess of existing
credit
facilities, or any other material liability or obligation or issue
any
debt securities or assume, guarantee, endorse or otherwise become
responsible for, the obligations of
any
|
17
|
|
other
individual or entity, or make any loans or advances, other than
in respect
of fees payable to legal, financial and other advisors in the ordinary
course of business or in respect of the Transaction;
(viii) authorize, recommend or propose any release or relinquishment
of any material contract right; (ix) waive, release, grant or
transfer any material rights of value or modify or change in any
material
respect any existing material license, lease, contract, production
sharing
agreement, government land concession or other material document;
(x) pay,
discharge or satisfy any material claims, liabilities or obligations
other
than as reflected or reserved against in the Focus Financial Statements
or
otherwise in the ordinary course of business; (xi) enter into or
terminate any xxxxxx, swaps or other financial instruments or like
transactions; (xii) enter into any agreements for the sale of production
having a term of more than thirty (30) days; (xiii) enter into any
material consulting or contract operating agreement that cannot
be
terminated on thirty (30) days or less notice without penalty;
or
(xiv) authorize or propose any of the foregoing, or enter into or
modify any contract, agreement, commitment or arrangement to do
any of the
foregoing;
|
|
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(d)
|
except
so as to permit the acceleration of the vesting and payment pursuant
to
the Focus Incentive Plans and executive employment agreements as
contemplated in Section 4, neither Focus nor any of its subsidiaries
shall
adopt or amend or make any contribution to any bonus, employee
benefit
plan, profit sharing, trust unit, option, pension, retirement,
deferred
compensation, insurance, incentive compensation, other compensation
or
other similar plan, agreement, trust unit incentive or purchase
plan, fund
or arrangements for the benefit of employees, except as is necessary
to
comply with applicable laws or with respect to existing provisions
of any
such plans, programs, arrangements or
agreements
|
|
|
(e)
|
except
as contemplated in Section 4, Focus shall not, and shall cause
each of its
subsidiaries to not, make any payment to any employee, officer
or director
outside of their ordinary and usual compensation for services provided,
except to the extent that any such entitlement to payment to a
former
employee or officer has accrued prior to the date
hereof;
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|
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(f)
|
except
as contemplated in Section 4, Focus shall not, and shall cause
each of its
subsidiaries to not: (i) grant any officer, director, employee or
consultant an increase in compensation in any form; (ii) grant any
general salary increase; (iii) take any action with respect to the
amendment or grant of any "change of control", severance or termination
pay policies or arrangements for any directors, officers, employees
or
consultants; (iv) adopt or amend or make any contribution to any
bonus, profit-sharing, option, pension, retirement, deferred compensation,
insurance, incentive compensation or other compensation or other
similar
plan (or amend any outstanding rights thereunder), or form a trust
fund or
arrangement for the benefit of directors, officers, employees or
consultants, except as is necessary to comply with applicable laws
or with
the existing provisions of any such plans, programs, arrangements
or
agreements (including the Focus Incentive Plans); or (v) advance any
loan to any officer, director or any other party not at arm's length
to
Focus and its subsidiaries;
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|
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(g)
|
Focus
shall use its reasonable commercial efforts to cause its current
insurance
(or re-insurance) policies not to be cancelled or terminated or
any of the
coverage thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies underwritten by insurance
or
re-insurance companies of nationally recognized standing providing
coverage equal to or greater than the coverage under the cancelled,
terminated or lapsed policies for substantially similar premiums
are in
full force and effect, and Focus will pay all premiums in respect
of such
insurance policies that become due after the date
hereof;
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18
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(h)
|
each
of Focus and FET Resources shall use its commercially reasonable
efforts
to ensure that all outstanding rights or awards outstanding under
the
Focus Incentive Plans (the "Focus Incentive Rights") are
either paid, issued, terminated, expired or surrendered prior to
the
Effective Date, provided that other than as contemplated by Section
4,
Focus and FET Resources shall not pay the holders any amount of
consideration therefor nor shall they make any amendment to outstanding
Focus Rights, except to permit the accelerated vesting and payment
of
Focus Incentive Rights (if required) and to cause the payment,
issue,
cancellation, termination, expiry or surrender of the Focus Incentive
Rights prior to the Effective Date without payment therefor;
and
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|
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(i)
|
Focus
and FET Resources shall not take any action, refrain from taking
any
action, permit any action to be taken or not taken, inconsistent
with this
agreement, which might directly or indirectly interfere or affect
the
consummation of the Transaction, or that would render, or may reasonably
be expected to render, any representation or warranty made by it
in this
agreement untrue in any material respect at any time prior to completion
of the Transaction or termination of this agreement, whichever
first
occurs.
|
Enerplus
agrees that during the period from the date of execution of this agreement
and
ending on the earlier of the Effective Date or the termination of this
agreement, except with the written consent of Focus or FET Resources, as
required by law or as otherwise expressly permitted or specifically contemplated
by this agreement:
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(a)
|
Enerplus'
affairs and the business of EnerMark and each of Enerplus' other
subsidiaries shall be conducted only in the usual and ordinary
course
consistent with past practices (for greater certainty, where it
is an
operator of any property, it shall operate and maintain such property
in a
proper and prudent manner in accordance with good industry practice
and
the agreements governing the ownership and operation of such property)
and
it shall use all commercially reasonable efforts to maintain and
preserve
its business, assets and advantageous business relationships, provided
that it shall be entitled and authorized to comply with all pre-emptive
rights, first purchase rights or rights of first refusal that are
applicable to its assets and that become operative by virtue of
this
agreement or any of the transactions contemplated by this agreement,
and
further provided that this paragraph shall not restrict Enerplus
or any
subsidiary of Enerplus from resolving to, or entering into or performing
any contract, agreement, commitment or arrangement with respect
to, the
acquisition or disposition of any oil and gas assets or properties
or of
the security interests in any person engaged in the oil and gas
business
in any manner, including other than in the usual and ordinary course
consistent with past practices, and provided that the doing of
any such
thing does not have a Material Adverse Effect on
Enerplus;
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|
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(b)
|
Enerplus
shall not, and shall not permit any of its subsidiaries to, directly
or
indirectly, do or permit to occur any of the following: (i) amend its
constating documents (except to increase the maximum number of
directors
who may be appointed to the Enerplus Board to 15 and as is required
to
comply with the U.S. "direct registration requirements" prior to
January
1, 2008); (ii) declare, set aside or pay any dividend or distribution
or make any other payment (whether in cash, trust units, shares
or
property) in respect of its outstanding securities other than regular
monthly cash distributions of an amount not to exceed $0.42 per
Enerplus
Unit (it being understood that Enerplus has no current intention
to change
its distribution policy); (iii) make any change to the days upon
which
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19
it
normally declares distribution record dates and distribution payment dates
in
respect of monthly cash distributions; (iv) redeem, purchase or otherwise
acquire any of its outstanding trust units or other securities (other than
redemptions required pursuant to Enerplus' trust indenture); (v) split,
combine or reclassify any of its trust units; (vi) adopt a plan of
liquidation or resolutions providing for its liquidation, dissolution, merger,
consolidation or reorganization; or (vii) enter into or modify any
contract, agreement, commitment or arrangement with respect to any of the
foregoing; provided that this paragraph shall not restrict Enerplus or any
of
Enerplus' subsidiaries from resolving to, or entering into or performing
any
contract, agreement, commitment or arrangement with respect to the acquisition
or disposition of any oil and gas assets or properties or of the security
interests in any Person engaged in the oil and gas business in any manner,
including by doing any of the things specifically enumerated herein and provided
that the doing of any such thing does not have a Material Adverse Effect
on
Enerplus; and
|
|
(c)
|
Enerplus
and EnerMark shall not take any action, refrain from taking any
action,
permit any action to be taken or not taken, inconsistent with this
agreement, which might directly or indirectly interfere or affect
the
consummation of the Transaction, or that would render, or may reasonably
be expected to render, any representation or warranty made by it
in this
agreement untrue in any material respect at any time prior to completion
of the Transaction or termination of this agreement, whichever
first
occurs.
|
|
14.
|
Provision
of Information; Access
|
From
and after the date hereof, Focus and FET Resources shall provide the Enerplus
and EnerMark and their representatives access, during normal business hours
and
at such other time or times as Enerplus or EnerMark may reasonably request,
to
their premises (including field offices and sites), books, contracts, records,
computer systems, properties, employees and management personnel and shall
furnish promptly to Enerplus and EnerMark all information concerning their
businesses, properties and personnel as Enerplus or EnerMark may reasonably
request, which information shall remain subject to the Confidentiality
Agreement, in order to permit Enerplus and EnerMark to be in a position to
expeditiously and efficiently integrate the businesses and operations of
Focus
and Enerplus immediately upon but not prior to the Effective
Date. Without limitation, representatives of Enerplus and EnerMark
will be permitted to attend FET Resources' weekly operations
meetings. Focus and FET Resources agree to keep Enerplus and EnerMark
fully appraised in a timely manner of every circumstance, action, occurrence
or
event occurring or arising after the date hereof that would be relevant and
material to a prudent operator of the business and operations of Focus and
FET
Resources. Focus and FET Resources shall confer with and obtain
Enerplus' approval (not to be unreasonably withheld or delayed), prior to
taking
action (other than in emergency situations) with respect to any material
operational matters involved in its business.
|
15.
|
Damages
|
If
at any time after the execution of this agreement:
|
|
(a)
|
the
Focus Board has withdrawn or changed any of its recommendations or
determinations referred to in Section 7(b) in a manner adverse
to Enerplus
or shall have resolved to do so prior to the Effective
Date;
|
20
|
|
(b)
|
a
bona fide Acquisition Proposal is publicly announced, proposed,
offered or made to the Focus Unitholders or to Focus and the Focus
Unitholders do not approve the Transaction or the Transaction is
not
submitted for their approval, and such Acquisition Proposal, an
amended
version thereof or any other Acquisition Proposal relating to Focus
is
consummated within twelve months of the date the first Acquisition
Proposal is publicly announced, proposed, offered or
made;
|
|
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(c)
|
Focus
accepts, recommends, approves or enters into an agreement to implement
a
Superior Proposal;
|
|
|
(d)
|
Focus
is in breach of any of its covenants made in this agreement which
breach
individually or in the aggregate causes or would reasonably be
expected to
cause a Material Adverse Change with respect to Focus or materially
impedes the completion of the Transaction, and Focus fails to cure
such
breach within five business days after receipt of written notice
thereof
from Enerplus (except that no cure period shall be provided for
a breach
which by its nature cannot be cured and, in no event, shall any
cure
period extend beyond the Outside Date);
or
|
|
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(e)
|
Focus
is in breach of any of its representations or warranties made in
this
agreement (without giving effect to any materiality qualifiers
contained
therein) which breach individually or in the aggregate causes or
would
reasonably be expected to cause a Material Adverse Change with
respect to
Focus or materially impedes the completion of the Transaction,
and Focus
fails to cure such breach within five business days after receipt
of
written notice thereof from Enerplus (except that no cure period
shall be
provided for a breach which by its nature cannot be cured and,
in no
event, shall any cure period extend beyond the Outside
Date),
|
(each
of the above being a "Enerplus Damages Event"), then in the
event of the termination of this agreement pursuant to Section 16, Focus
shall pay to Enerplus $48 million as liquidated damages in immediately
available funds to an account designated by Enerplus within one business
day
after the first to occur of the events described above, and after such event
but
prior to payment of such amount, Focus shall be deemed to hold such funds
in
trust for Enerplus. Focus shall only be obligated to pay a maximum of
$48 million pursuant to this Section 15. In the event that a
bona fide Acquisition Proposal is publicly announced, proposed, offered
or made to the Focus Unitholders or to Focus and the Focus Unitholders do
not
approve the Transaction and such Acquisition Proposal, an amended version
thereof or any other Acquisition Proposal relating to Focus is not consummated
within twelve months of the date the first Acquisition Proposal is publicly
announced, proposed, offered or made; then Focus shall pay to Enerplus $5
million, in full satisfaction of, and as a fixed amount for reimbursement
of,
all expenses, including all third party expenses and costs, of Enerplus in
relation to the Transaction.
Each
party acknowledges that all of the payment amounts set out in this Section
15
are payments of liquidated damages which are a genuine pre-estimate of the
damages which Enerplus will suffer or incur as a result of the event giving
rise
to such damages and resultant termination of this agreement and are not
penalties. Each of Focus and FET Resources irrevocably waives any right it
may
have to raise as a defence that any such liquidated damages are excessive
or
punitive. For greater certainty, the parties agree that the payment of the
amount pursuant to this Section 15 is the sole monetary remedy of Enerplus
and
EnerMark provided, however, that this limitation shall not apply in the event
of
fraud or willful breach of this Agreement by Focus and/or FET
Resources. Nothing herein shall preclude a party from seeking
injunctive relief to restrain any breach or threatened breach of the covenants
or agreements set forth in this agreement or the Confidentiality Agreements
or
otherwise to obtain specific performance of any of such act, covenants or
agreements, without the necessity of posting bond or security in connection
therewith.
21
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16.
|
Termination
|
This
agreement may be terminated at any time prior to the Effective
Date:
|
|
(a)
|
by
mutual written consent of Enerplus and
Focus;
|
|
|
(b)
|
as
provided in Sections 8 and 9;
|
|
|
(c)
|
by
Enerplus upon the occurrence of a Enerplus Damages Event as provided
in
Section 15; or
|
|
|
(d)
|
by
Focus upon the occurrence of a Enerplus Damages Event as provided
in
Section 15(c) (in accordance with Section 12(b)(vii) and provided
Focus
has complied with its obligations set forth in Section 12(c)) and
the
payment by Focus to Enerplus of the amount required by Section
15.
|
In
the event of the termination of this agreement in the circumstances set out
in
subsections (a) through (d) of this Section 16, this agreement shall
forthwith become void and neither party shall have any liability or further
obligation to the other party hereunder except with respect to the obligations
set forth in Section 15 and each party's obligations in the Confidentiality
Agreements, which shall survive such termination.
|
17.
|
Confidentiality
|
It
is the agreed intention of the parties to issue joint or separate press releases
disclosing the Transaction contemplated hereby immediately following execution
of this agreement and after consultation with each other as to the timing
and
content of such release(s). Neither party will otherwise make any disclosure
of
this agreement or its contents to any third parties without the prior written
consent of the other party provided however that such disclosure may be made,
after consultation with the other party, in response to requirements of
applicable law or the policies, rules or requirements of securities regulatory
authorities or stock exchanges.
|
18.
|
Privacy
Matters
|
The
parties acknowledge that they are responsible for compliance at all times
with
applicable privacy laws which govern the collection, use and disclosure of
personal information acquired by or disclosed to the parties pursuant to
or in
connection with this agreement (the "Disclosed Personal
Information"). None of the parties shall use the Disclosed
Personal Information for any purposes other than those relating to the
performance of this agreement and the completion of the
Transaction.
|
19.
|
Assignment
|
Neither
this agreement nor any of the rights, interests or obligations hereunder
shall
be assigned by any of the parties hereto without the prior written consent
of
the other party.
22
|
20.
|
No
Finder’s Fee, Etc.
|
Focus
and FET Resources represent and warrant to Enerplus and EnerMark that neither
Focus nor FET Resources has entered into any arrangement whereby any of
Enerplus, EnerMark, Focus or FET Resources will have any liability for financial
or strategic advisor's, broker's or finder's fees (including without
limitation any disbursements, expenses or fairness opinion) in respect of
this
transaction, except for Focus' fees to its financial and strategic
advisors. Focus has provided to Enerplus true and correct copies of
its agreements with each of its financial advisors.
|
21.
|
Insurance
|
Enerplus
and Focus shall cooperate to secure director and officer insurance coverage
for
the current directors and officers of Focus in a per occurrence coverage
amount
to be agreed by the parties, acting reasonably, on a trailing liability basis
and for a period of six years.
|
22.
|
Costs
|
Except
as set forth in Section 15, all fees, costs and expenses incurred in connection
with this agreement and the transactions contemplated hereby shall be paid
by
the party incurring such cost or expense, whether or not the Transaction
is
completed.
|
23.
|
Obligations
|
The
obligations of Enerplus hereunder are not personally binding upon any trustee
or
holder of trust units of Enerplus and resort shall not be had to, nor shall
recourse or satisfaction be sought from, any of the foregoing or the private
property of any of the foregoing, but the property of Enerplus only shall
be
bound by such obligations.
The
obligations of Focus hereunder are not personally binding upon any trustee
or
holder of trust units of Focus and resort shall not be had to, nor shall
recourse or satisfaction be sought from, any of the foregoing or the private
property of any of the foregoing, but the property of Focus only shall be
bound
by such obligations.
23
If
the terms of this agreement are acceptable to Focus, please sign below on
the
enclosed duplicate copy of this letter and return the same to
Focus.
Yours
truly,
AGREED
TO this
2nd
day of December, 2007
|
by
EnerMark Inc.
|
FOCUS
ENERGY TRUST, by
FET
Resources Ltd.
|
|||
|
Per:
|
"Xxxxxx
X. Xxxx"
|
Per:
|
"Xxxxx
X. Xxxxx"
|
|
|
Xxxxxx
X. Xxxx
President
and Chief Executive Officer
|
Xxxxx
X. Xxxxx
President
and Chief Executive Officer
|
|||
|
Per:
|
"Xxx
X. Xxxxxx"
|
Per:
|
"Xxxxxxx
X. Xxxxxxx"
|
|
|
Xxx
X. Xxxxxx
Senior
Vice President, Business Development
|
Xxxxxxx
X. Xxxxxxx
Senior
Vice-President and Chief Financial Officer
|
|||
|
ENERMARK
INC.
|
FET
RESOURCES LTD.
|
|||
|
Per:
|
"Xxxxxx
X. Xxxx"
|
Per:
|
"Xxxxx
X. Xxxxx"
|
|
|
Xxxxxx
X. Xxxx
President
and Chief Executive Officer
|
Xxxxx
X. Xxxxx
President
and Chief Executive Officer
|
|||
|
Per:
|
"Xxx
X. Xxxxxx"
|
Per:
|
"Xxxxxxx
X. Xxxxxxx"
|
|
|
Xxx
X. Xxxxxx
Senior
Vice President, Business Development
|
Xxxxxxx
X. Xxxxxxx
Senior
Vice-President and Chief Financial
Officer
|
|||
24
