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Exhibit 10.1
SHARE AND DEBT PURCHASE AGREEMENT
among
1143928 ALBERTA LTD.
as Purchaser
and
EXCO RESOURCES, INC.
and
TAURUS ACQUISITION, INC.
as Seller
January 12, 2005
TABLE OF CONTENTS
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ii
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SHARE AND DEBT PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 12 th day of January, 2005.
BETWEEN:
1143928 ALBERTA LTD. , a corporation duly organized and existing under the laws of the Province of Alberta (“ Purchaser ”)
- and -
EXCO RESOURCES, INC. , a corporation duly organized and existing under the laws of the State of Texas (“ EXCO ”)
- and -
TAURUS ACQUISITION, INC. , a corporation duly organized and validly existing under the laws of the State of Texas (“ Taurus ”)
(EXCO and Taurus are herein collectively referred to as “ Seller ”)
WHEREAS:
A. The Company Stock is currently owned by EXCO.
B. The Taurus Notes are currently owned by Taurus.
C. Purchaser desires to buy and Seller desires to sell the Company Stock and the Taurus Notes, upon the terms and subject to the conditions set forth in this Agreement.
D. Purchaser and Seller desire to make certain representations, warranties, covenants and agreements in connection with such purchase and sale of the Company Stock and the Taurus Notes provided for in this Agreement and also to prescribe various conditions to such purchase and sale of Company Stock and the Taurus Notes.
NOW THEREFORE, in consideration of the recitals and the mutual covenants and agreements set forth in this Agreement, the Parties hereby agree as follows:
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms
As used in this Agreement, each of the following terms has the meaning given in this Section 1.1 or in the Sections referred to below:
(a) “ Abandonment and Reclamation Obligations ” means all remediation and reclamation obligations of the Purchased Entities, including:
(i) the abandonment and reclamation of any Wells; and
(ii) the closure, decommissioning and dismantling of Tangibles, and the restoration of the surface in respect thereto;
all in accordance with good oil and gas field practices in the Province of Alberta, and in compliance with Applicable Law.
(b) “ Affected Assets ” has the meaning set forth in Section 6.1(b) .
(c) “ Affiliate ” means, with respect to any Person, each other Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with such Person and for the purposes of this definition, “ control ” means the possession, directly or indirectly, by such Person or group of Persons acting in concert, of the power to direct or cause the direction of the management or policies of the first mentioned Person, whether through the ownership of voting securities or otherwise; provided that prior to Closing but not thereafter, the Purchased Entities will be Affiliates of Seller and after Closing, but not prior thereto, the Purchased Entities will be Affiliates of Purchaser.
(d) “ Agreement ” means this Share and Debt Purchase Agreement, as amended, supplemented or modified from time to time.
(e) “ Applicable Law ” means, in relation to any Person, transaction or event, all applicable provisions of laws, statutes, rules, regulations, official directives and orders of all federal, provincial, territorial, municipal and local governmental bodies (whether administrative, legislative, executive or otherwise) and final, non-appealable judgments, orders and decrees of all courts, commissions or bodies exercising similar functions in actions or proceedings in which the Person in question is a party, by which it is bound or having application to the transaction or event in question.
(f) “ Arm’s Length ” has the meaning set forth in the Tax Act.
(g) “ Assessment ” has the meaning set forth in Section 9.6(c) .
(h) “ Audited Historical Statements ” means, collectively:
(i) the consolidated audited financial statements (including the statement of operations, balance sheet and cash flow statement) of the Company as of December 31, 2002 (and for the year then ended) and as of December 31, 2003 (and for the 209 day period from January 1, 2003 to July 28, 2003 and the 156 day period from July 29, 2003 to December 31, 2003);
(ii) the consolidated audited financial statements (including the statement of operations, balance sheet and cash flow statement) of the Company as of September 30, 2004 (and for the 9 month period then ended), provided that if the Purchaser provides EXCO with the notice referred to in Section 5.11(b) by the 7 th day following the date hereof, such statements shall be unaudited; and
(iii) if Closing occurs after March 31, 2005 but prior to May 15, 2005, the consolidated audited financial statements (including the statement of operations, balance sheet and cash flow statement) of the Company as of December 31, 2004 (and for the year then ended);
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and appropriate footnotes and schedules prepared in accordance with GAAP accompanied by a signed opinion of Ernst & Young LLP for the 2002 financial statements and PricewaterhouseCoopers, LLP for the 2003 and 2004 financial statements; provided however, that such financial statements shall not include any footnote in respect of the Company’s oil and gas reserves.
(i) “ Base Purchase Price ” has the meaning set forth in Section 2.2(a) .
(j) “ Benefits Plans ” has the meaning set forth in Section 3.2(r)(vii) .
(k) “ Business Day ” means any day on which commercial banks are open for business in each of Calgary, Alberta and Dallas, Texas, but does not in any event include a Saturday or Sunday or a statutory holiday under Applicable Law.
(l) “ Closing ” means the completion of the purchase and sale of the Company Stock and the Taurus Notes on the Closing Date and at the Place of Closing, as contemplated by this Agreement.
(m) “ Closing Date ” means 9:00 a.m. on the 30 th day following the date that the Audited Historical Statements are delivered (in accordance with the provisions of Section 11.4 ) by Seller to Purchaser, or such other date as the Parties may agree.
(n) “ Closing Statements ” has the meaning set forth in Section 6.3(c) .
(o) “ Company ” means Addison Energy Inc., an Alberta corporation.
(p) “ Company Certificate ” means, collectively, the certificates representing shares of the Company Stock.
(q) “ Company Contribution Agreement ” means a contribution agreement dated January 7, 2005 between the Company, the Partnership and Subco relating to the contribution of property by the Company to the Partnership.
(r) “ Company Stock ” means all of the issued and outstanding common stock of the Company.
(s) “ Competition Act ” means the Competition Act R.S.C. 1985, c. C-34.
(t) “ Competition Act Approval ” means that:
(i) the Commissioner of Competition (the “ Commissioner ”) appointed under the Competition Act has issued an advance ruling certificate pursuant to section 102 of the Competition Act in respect of the transactions contemplated herein on terms and conditions satisfactory to the Parties, acting reasonably; or
(ii) notification of the transactions contemplated herein pursuant to section 114 of the Competition Act has been given and either:
(A) the applicable waiting period under section 123 of the Competition Act has expired without the Commissioner having advised the Parties that he intends to apply to the Competition Tribunal established pursuant to
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subsection 3(1) of the Competition Tribunal Act (Canada) for an order under section 92 or section 100 of the Competition Act in respect of the transactions contemplated herein; or
(B) the Commissioner has advised Purchaser that the Commissioner does not intend to apply to the Competition Tribunal for an order under section 92 of the Competition Act in respect of the transactions contemplated herein.
(u) “ Confidentiality Agreement ” means the letter agreement dated the 15 th day of October, 2004 between the Company and NAL Resources.
(v) “ Credit Agreement ” means the Third Amended and Restated Credit Agreement, as amended, between the Company and Bank One, NA, Canada Branch, as Administrative Agent for itself and the lenders named therein, dated the 27 th day of January, 2004.
(w) “ Credit Facility ” means the credit facility provided pursuant to the Credit Agreement and all of the indebtedness (including accrued interest) of the Company thereunder.
(x) “ Debt ” means, for any Person, without duplication: (i) all obligations of such Person for borrowed money; (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all indebtedness of such Person on which interest charges are customarily paid or accrue; (iv) the unfunded or unreimbursed portion of all letters of credit issued for the account of such Person; (v) the present value of all obligations in respect of leases that are capitalized on the books and records of such Person; (vi) any obligation of such Person representing the deferred purchase price of property or services purchased by such Person other than trade payables incurred in the ordinary course of business and which are not more than 90 days past invoice date; (vii) any indebtedness, liability or obligation secured by a Lien on the assets of such Person whether or not such indebtedness, liability or obligation is otherwise non-recourse to such Person; and (viii) any other obligation or liability of such Person that is debt within the meaning of GAAP.
(y) “ Defect Adjustment Threshold ” means an amount equal to $7,500,000.
(z) “ Defect Notice Date ” means the date which is 10 Business Days prior to the Closing Date.
(aa) “ Defect Termination Threshold ” means an amount equal to $50,000,000.
(bb) “ Deposit ” has the meaning set forth in Section 2.2(b) .
(cc) “ Deposit Interest ” has the meaning set forth in Section 2.2(b)(iii) .
(dd) “ Disclosure Schedule ” means, collectively, those schedules attached hereto as Schedule A and expressly incorporated herein by reference pursuant to Section 1.4 .
(ee) “ Employee Disclosure Letter ” has the meaning set forth in 3.2(r)(i) .
(ff) “ Employees ” has the meaning set forth in Section 3.2(r)(i) .
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(gg) “ Encumbrance Discharge ” means, with respect to a Lien (which is not a Permitted Encumbrance) affecting all or a portion of the Oil and Gas Assets, Company Stock, Subco Stock or partnership interests of the Partnership, one or more registrable discharges executed by the holder of such Lien which results in a discharge of such Lien; provided that, to the extent of any Lien affecting all or a portion of the Oil and Gas Assets, Company Stock, Subco Stock or such partnership interests, but which is not specifically registered against or in respect of any such Oil and Gas Assets, Company Stock, Subco Stock or such partnership interests, a letter of no interest executed by the holder of the Lien wherein the holder acknowledges it has no interest in such Oil and Gas Assets, Company Stock, Subco Stock or such partnership interests shall be deemed to be an Encumbrance Discharge.
(hh) “ Engineering Report ” has the meaning set forth in Section 3.2(bb)(xii) .
(ii) “ Environmental Law ” means Applicable Law respecting the protection of, or the control, remediation or reclamation of contamination or pollution of, soil, air or water (including ground water).
(jj) “ Escrow Agreement (Deposit) ” means an agreement dated the date hereof and executed among Purchaser, Seller and Seller’s Solicitors in the form included at Part I of Schedule C .
(kk) “ Escrow Agreement (Withholding) ” means an agreement dated the Closing Date and executed among Purchaser, Seller and Seller’s Solicitors in the form included at Part II of Schedule C .
(ll) “ Exchange Rate ” means, for a particular day, the Bank of Canada Noon Day Rate, expressed in C$/US$ or US$/C$, as the case may be for such day, as set out on the Bank of Canada’s web site.
(mm) “ EXCO ” has the meaning set forth in the introductory paragraph of this Agreement.
(nn) “ Facilities ” means the major gas plants, oil batteries, compressors, gas gathering systems and pipelines in which the Purchased Entities have an interest, as described in Schedule 1.1(nn)
(oo) “ GAAP ” means generally accepted accounting principles, as recognized by the Canadian Institute of Chartered Accountants (or any generally recognized successor), and “ U.S. GAAP ” means generally accepted accounting principles, as recognized by the U.S. Financial Accounting Standards Board (or any generally recognized successor).
(pp) “ Governmental Authority ” means any federal, provincial, territorial, state, county, municipal or local government, domestic or foreign, any agency, board, bureau, commission, court, department or other instrumentality of any such government, or any arbitrator in any case that has jurisdiction over the Purchased Entities, Purchaser or Seller or any of their respective properties or assets.
(qq) “ Indemnity Agreement ” means an indemnity agreement dated January 7, 2005 between Purchaser, NAL, the Company and Seller.
(rr) “ Indemnity Issues ” has the meaning set forth in Section 9.4(e) .
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(ss) “ Indemnity Threshold ” means an amount equal to $7,500,000.
(tt) “ Inter-Company Agreement ” means an inter-company agreement dated effective August 1, 2004 between EXCO and the Company.
(uu) “ Interest Amount ” has the meaning set forth in Section 2.3(a)(ii) .
(vv) “ Lands ” means, collectively, all of the lands set forth in Schedule 1.1(tt) , and includes the Petroleum Substances within, upon or under such lands, together with the right to explore for and produce such Petroleum Substances.
(ww) “ Leases ” means, collectively, all of the leases, options for leases, subleases, licences and documents of title (and any replacements, renewals or extensions thereof or leases derived therefrom) covering the Lands, including those set forth in the Property Schedule, by virtue of which the holder thereof is granted certain rights with respect to Petroleum Substances within, upon or under the Lands or by virtue of which the holder thereof is deemed to be entitled to a share of Petroleum Substances removed from the Lands or any lands with which the Lands are pooled, unitized or otherwise combined.
(xx) “ Lien ” means any lien, mortgage, security interest, pledge, deposit, restriction, burden, encumbrance, right of conversion or reduction of interest, rights of a vendor under any title retention or conditional sale agreement, or lease or other arrangement substantially equivalent thereto, but does not include any production payment obligation.
(yy) “ Management Team ” means Steve Fagan, Dennis McIntyre, Terry Trudeau, Greg Robb and Terry Pidkowa.
(zz) “ Material ” or “ Material Adverse Effect ” means a result or consequence that would adversely affect the financial condition, results of operations or business of the Purchased Entities, taken as a whole, by more than: (i) for the purpose of Sections 7.2(a) , 7.2(b) , 7.2(c) and 8.1(c) , $30,000,000; and (ii) for all other purposes, $1,000,000.
(aaa) “ Material Agreement ” means:
(i) any Product and Other Hedging Contract by which a Purchased Entity is bound or to which a Purchased Entity is a party;
(ii) any contract for the processing, transportation, gathering, compressing, disposing or sale of Petroleum Substances by which a Purchased Entity is bound or to which a Purchased Entity is a party that is not cancellable by the Purchased Entity without penalty on notice of 60 days’ or less;
(iii) other than pursuant to the Title and Operating Documents and other than in the ordinary course of business, any agreement whereby a Purchased Entity guarantees, assumes or indemnifies (A) an obligation of Seller or any of its Affiliates other than such Purchased Entity, or (B) an obligation of a third party;
(iv) any construction, ownership and operation agreement for capital expenditures or the acquisition or construction of fixed assets related to the Oil and Gas Assets that requires future payments by a Purchased Entity in excess of $250,000;
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(v) any lease of office premises by which a Purchased Entity is bound or to which a Purchased Entity is a party; and
(vi) any agreement for the purchase or sale of any asset (other than sales of Petroleum Substances in the ordinary course of business and agreements for the sale of surplus or used equipment or supplies) requiring future purchase consideration.
(bbb) “ NAL ” means NAL Oil & Gas Trust, an Alberta trust.
(ccc) “ Notice of Claim ” means a notice by Seller or Purchaser, as applicable, of a claim for losses pursuant to Sections 9.1 or 9.2 , as applicable, together with detailed particulars as to the nature and amount of the claim, the basis upon which it is sought and the provisions of this Agreement applicable to such claim.
(ddd) “ 116 Certificate ” has the meaning set forth in Section 2.10(a)(i) .
(eee) “ Oil and Gas Assets ” means all of the working interests, royalty interests, gross overriding royalty interests, production payments, profit and net profit interests, reversionary interests and other interests of the Purchased Entities in the Leases, Lands and Tangibles, including those payments and interests attributed to “Addison” described in the Property Schedule, and the miscellaneous interests directly related to such interests or Tangibles.
(fff) “ Outside Date ” means the later of:
(i) March 15, 2005; or
(ii) 30 days following the date that the Audited Historical Statements are delivered (in accordance with the provisions of Section 11.4 ) by Seller to Purchaser, or such other date as the Parties may agree;
but, in any event, no later than May 15, 2005.
(ggg) “ Parties ” means Purchaser and Seller and “ Party ” means any one of them.
(hhh) “ Partnership ” means Addison Energy Limited Partnership, an Alberta limited partnership.
(iii) “ Partnership Agreement ” means the limited partnership agreement in respect of the formation of the Partnership made between the Company and Subco as of the same date as the Company Contribution Agreement.
(jjj) “ Payout Statement ” means the statement prepared by JPMorgan Chase Bank, National Association, Canada Branch (as successor by merger to Bank One, N.A., Canada Branch) detailing the outstanding indebtedness (including accrued interest) of the Company under the Credit Facility as of the Closing Date.
(kkk) “ Permitted Encumbrances ” means:
(i) Liens for Taxes, assessments or other governmental charges or levies if the same shall not at the particular time in question be due and delinquent;
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(ii) Liens of carriers, warehousemen, mechanics, labourers, materialmen, landlords, vendors, workmen and operators arising by operation of law in the ordinary course of business incident to the exploration, development, operation and maintenance of Petroleum Substances properties and related facilities and assets for sums not yet due or delinquent;
(iii) Liens incurred in the ordinary course of business in connection with worker’s compensation, unemployment insurance and other social security legislation for sums not yet due;
(iv) easements, rights-of-way and similar encumbrances not materially interfering with the ordinary conduct of the business of a Purchased Entity or rights to any of its assets;
(v) undetermined or inchoate liens (including processors’, operators’, mechanics, builders’, materialmen’s and similar liens) incurred or created as security in favour of the Person conducting the operation of any of the assets arising in the ordinary course of business for a Purchased Entity’s proportionate share of the costs and expenses of such operations except in respect of costs due or delinquent at the Closing Date;
(vi) all rights to consent by, required notices to, filings with, or other actions of Governmental Authorities to the extent customarily obtained subsequent to closing;
(vii) leases, farmout, carried working interest, joint operating, unitization, royalty, overriding royalty, sales and similar agreements relating to the exploration or development of, or production from, Petroleum Substances properties entered into in the ordinary course of business and not in violation of Section 5.1 and provided the effect thereof on the working interest and net revenue of the Purchased Entity has been properly reflected in the Property Schedule;
(viii) valid, subsisting and applicable laws, rules or orders of any Governmental Authority;
(ix) Liens or defects described in the Property Schedule or the Disclosure Schedule (including Schedule 1.1(kkk)(ix) );
(x) the rights reserved to or vested in any grantor or Governmental Authority by the terms of any Lease or by any Applicable Law, including any rights to terminate any Lease or require annual or other periodic payments as a condition of the continuance thereof;
(xi) rights reserved to or vested in any Governmental Authority to levy Taxes on minerals or the income therefrom or to limit, control or regulate any of the Purchased Entities’ assets in any manner;
(xii) the reservations, limitations, provisos and conditions in any original grants or transfers from the Crown of any of the Lands or interests therein and exceptions to title under any Applicable Law;
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(xiii) penalties which have arisen under operating procedures or similar agreements as a consequence of elections by a Purchased Entity prior to the date hereof not to participate in operations on the Lands to which the penalty applies and which are accurately reflected in the Property Schedule;
(xiv) Liens granted in the ordinary course of business to a public utility, municipality or Governmental Authority in connection with operations pertaining to the assets of a Purchased Entity;
(xv) terms and conditions of the Material Agreements listed in the Disclosure Schedule;
(xvi) Liens granted in connection with the Credit Facility in respect of which an Encumbrance Discharge or the release and undertaking set forth at Section 2.9(a)(xv) will be delivered at Closing;
(xvii) Liens granted in connection with the credit facility under the U.S. Credit Agreement in respect of which an Encumbrance Discharge or the release and undertaking set forth at Section 2.9(a)(xvi) will be delivered at Closing;
(xviii) pre-emptive or preferential rights of purchase, rights of first refusal or other restrictions on transfer arising under any agreements applicable to a Purchased Entity that are not triggered by this Agreement or the sale of the Company Stock or Taurus Notes pursuant hereto; and
(xix) the rights of third parties to purchase Petroleum Substances produced from the Lands, or any lands with which the Lands have been pooled or unitized, pursuant to the contracts for the sale of Petroleum Substances listed in Schedule 1.1(aaa) .
(lll) “ Person ” means any natural person, corporation, company, limited or general partnership, joint stock company, joint venture, association, limited liability company, trust, bank, trust company, land trust, business trust or other entity or organization, whether or not a Governmental Authority.
(mmm) “ Petroleum Substances ” means petroleum, natural gas and all related hydrocarbons (including all liquid hydrocarbons) and all other substances, whether liquids, gaseous or solids and whether hydrocarbons or not (except coal but including sulphur) produced or producible in association with such petroleum, natural gas or related hydrocarbons.
(nnn) “ Place of Closing ” means the offices of Seller’s Solicitors located at 3500, 855 - 2 nd Street S.W., Calgary, Alberta or such other place as may be agreed to by the Parties.
(ooo) “ Prime Rate ” means the rate of interest, expressed as a rate per annum, designated by the main branch in Calgary of the Canadian Imperial Bank of Commerce as the reference rate used by it to determine rates of interest charged by it on Canadian dollar commercial loans made in Canada and which is announced by such bank, from time to time, as its prime rate, provided that whenever such bank announces a change in such reference rate, the “Prime Rate” shall correspondingly change effective on the date the change in such reference rate is effective.
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(ppp) “ Principal Manulife and NAL Subsidiaries ” means:
(i) The Manufacturers Life Insurance Company (Canada), NAL Resources Management Limited, FNA Financial Inc. (Canada), The Manufacturers Investment Corporation (Michigan), Manulife Bank of Canada (Canada), Manulife (International) Limited (Bermuda), Manulife (Singapore) Pte. Ltd. (Singapore), Elliott & Page Limited (Ontario), John Hancock Life Insurance Company (U.S.A.), Manulife-Sinochem Life Insurance Co. Ltd. (China), P.T. Asuransi Jiwa Manulife Indonesia (Indonesia), The Manufacturers Life Insurance Company of New York (New York), The Manufacturers Life Insurance Co. (Phils.), Inc. (Philippines), Manulife (Vietnam) Limited (Vietnam), Manulife Life Insurance Company (Japan), John Hancock Financial Services, Inc. and Maritime Life Assurance Company; and
(ii) NAL Ventures Trust, NAL Ventures Inc., NAL Energy Holdings Ltd., NAL Petroleum Limited Partnership II, NAL Oil & Gas Ltd., NAL Petroleum Limited Partnership, NAL Petroleum Inc., 991631 Alberta Ltd., 857356 Alberta Ltd., NAL Properties Inc., NAL Energy Ltd. and 1143928 Alberta Ltd.
(qqq) “ Product and Other Hedging Contracts ” means any agreement providing for options, swaps, floors, caps, collars, forward sales or forward purchases involving commodities, commodity prices, indices, interest rates, foreign exchange or other derivatives.
(rrr) “ Prohibited Property ” means any property the fair market value of which is wholly or partly attributable to, or the fair market value of which is determined primarily by reference to, the fair market value of any of the property owned by a Purchased Entity on the Closing Date, or the proceeds of disposition therefrom, but does not include money.
(sss) “ Property Schedule ” means the property schedule attached hereto as Schedule B .
(ttt) “ Purchased Entities ” means the Company, Subco and the Partnership or any one or more of them as the context requires; and “ Purchased Entity ” means any one of them.
(uuu) “ Purchased Entity Representative ” means any director, officer, employee, agent, advisor (including legal, accounting and financial advisors) or other representative of a Purchased Entity.
(vvv) “ Purchase Price ” has the meaning set forth in Section 2.2(a) .
(www) “ Purchaser ” has the meaning set forth in the introductory paragraph of this Agreement.
(xxx) “ Purchaser Note ” means a demand promissory note dated as of the Closing Date issued by the Company in favour of Purchaser for a principal amount equal to the amount specified in the Payout Statement.
(yyy) “ Purchaser’s Group ” has the meaning set forth in Section 9.2 .
(zzz) “ Purchaser’s Losses ” has the meaning set forth in Section 9.2 .
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(aaaa) “ Purchaser Representative ” means any director, officer, employee, agent, advisor (including legal, accounting and financial advisors), Affiliate or other representative of Purchaser or its Subsidiaries.
(bbbb) “ Representatives ” has the meaning set forth in Section 5.8(a) .
(cccc) “ Retention Bonus Payments ” means the aggregate amount of all payments paid or payable by the Company after the Valuation Date pursuant to the Addison Energy Inc., Employee Bonus Retention Plan.
(dddd) “ Retention Period ” has the meaning set forth in Section 10.2 .
(eeee) “ Seller ” has the meaning set forth in the introductory paragraph of this Agreement.
(ffff) “ Seller’s Solicitors ” means Blake, Cassels & Graydon LLP, Barristers and Solicitors of Calgary, Alberta.
(gggg) “ Services Agreement ” means the Services Agreement made between the Company and the Partnership as of the same date as the Company Contribution Agreement.
(hhhh) “ Severance Adjustment ” has the meaning set forth in Section 10.4(b) .
(iiii) “ Severance Payment ” has the meaning set forth in Section 10.4(i) .
(jjjj) “ Share Purchase Price ” has the meaning set forth in Section 2.3(b) .
(kkkk) “ Specified Shareholder ” means, in respect of Seller:
(i) any Person who did not, at any time during the course of the series of transactions or events that includes the completion of the transactions contemplated by this Agreement, deal at Arm’s Length with Seller;
(ii) any corporation of which Seller or a Person described in (i) above, at any time during the course of the series of transactions or events that includes the completion of the transactions contemplated by this Agreement and after the acquisition of control of the Company by Purchaser, a “specified shareholder” (as that term applies to subparagraph 88(1)(c)(vi) of the Tax Act); or
(iii) any trust or partnership of which Seller or a Person described in (i) above would have been, at any time during the course of the series of transactions or events that includes the transactions contemplated by this Agreement and after the acquisition of control of the Company by Purchaser, a “specified shareholder” (as that term applies to subparagraph 88(1)(c)(vi) of the Tax Act) if the rules in subparagraph 88(1)(c.2)(ii) of the Tax Act were applied.
(llll) “ Statement ” has the meaning set forth in Section 9.6(c) .
(mmmm) “ Subco ” means 1144259 Alberta Ltd., an Alberta corporation.
(nnnn) “ Subco Stock ” means all of the issued and outstanding common stock of Subco.
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(oooo) “ Subco Subscription Agreement ” means a subscription agreement dated January 7, 2005 between Subco and the Partnership relating to the contribution of cash by Subco to the Partnership.
(pppp) “ Subsidiary(ies) ” means, as to a particular Person, an entity 100 percent owned, directly or indirectly, by such Person.
(qqqq) “ Survival Period ” means:
(i) for all representations and warranties of Seller or Purchaser set forth in this Agreement, other than those listed in Sections 1.1(qqqq)(ii) and (iii) , a period of 15 months following the Closing Date;
(ii) for EXCO’s representations and warranties in Sections 3.1(d) , 3.2(h) and 3.2(i) , 90 days following the limitation period under Applicable Law during which a claim may be made; and
(iii) for EXCO’s representations and warranties in Sections 3.2(t) and 3.2(u) , 90 days after the expiry of the reassessment period in respect of any taxation years, or similar reporting periods, of a Purchased Entity which end on or prior to the Closing Date without taking into account any extension to such periods resulting from any agreement, waiver, act or omission after Closing.
(rrrr) “ Tangibles ” means the Facilities and interests of the Purchased Entities in and to all tangible depreciable property and assets that are situate in, on or about the Lands or lands with which the Lands have been pooled or unitized, or used or intended for use in connection with production of Petroleum Substances from the Lands or lands with which the Lands have been pooled or unitized or for the gathering, compression, dehydration, scrubbing, injection, processing, transmission, treatment, separation, extracting, collecting, refining, measuring, transporting, shipping or storage of such Petroleum Substances including the Wells, casing, production tubing, wellheads, pipelines, flowlines, pipeline connections, gathering systems, batteries, compressors, plants, buildings, extraction facilities, meters, generators, refineries, communications and other equipment.
(ssss) “ Taurus ” has the meaning set forth in the introductory paragraph of this Agreement.
(tttt) “ Taurus Notes ” means: (i) the Promissory Note between the Company and Taurus in the amount of U.S. $98,800,167.66, dated April 13, 2004; and (ii) the Promissory Note between the Company and Taurus in the face amount of Cdn. $125,000,000, dated June 29, 2004; as amended and restated, together with all amounts of unpaid interest payable before the Closing Date and all amounts of interest accrued and not yet payable at the Closing Date.
(uuuu) “ Tax Act ” means the Income Tax Act R.S.C. 1985, c.1 (5 th Supplement), as amended.
(vvvv) “ Tax Returns ” has the meaning set forth in Section 3.2(t) .
(wwww) “ Taxes ” means taxes of any kind, levies or other like assessments, customs, duties, imposts, charges or fees, including income, goods and services, gross receipts, ad valorem, value added, excise, real or personal property, asset, sales, use, licence, payroll,
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transaction, capital, net worth and franchise taxes, estimated taxes, withholding, employment, social security, workers’ compensation, utility, severance, production, unemployment compensation, occupation, premium, windfall profits, transfer and gains taxes or other governmental taxes, or required installments thereof, imposed or payable to any federal, state, local, province, territory or foreign governmental subdivision or agency thereof, and in each instance such term shall include any interest, penalties or additions to tax attributable to any such Tax, including penalties related thereto.
(xxxx) “ Third-Party Consent ” means the consent or approval of any Person other than the Purchased Entities, Purchaser, Seller or any Governmental Authority.
(yyyy) “ Thirteenth Month Adjustment ” means a reconciliation payment made pursuant to an agreement which provides that during a period (usually a calendar year) revenues and/or expenses will be distributed to or paid by one or more parties to the agreement on the basis of estimates thereof and following the end of the period (usually the first calendar month after the end of the period), the actual amount of the revenues or costs will be determined and a reconciliation between the estimated amounts and the actual amounts will be made.
(zzzz) “ Title and Operating Documents ” means:
(i) petroleum and/or natural gas leases, permits and licenses (whether freehold or Crown) and similar instruments pertaining to the ownership, operation or development of the Oil and Gas Assets; and
(ii) agreements relating to the ownership, operation or development of the Oil and Gas Assets entered into in the normal course of the oil and gas business, including: operating procedures; unit agreements; unit operating agreements; agreements for the construction, ownership and operation of gas plants, pipelines, gas gathering systems and similar facilities; pooling agreements; royalty agreements; farmin and farmout agreements; participation and subparticipation agreements; trust declarations and agreements; purchase and sale agreements, asset exchange agreements, conveyance and transfer agreements and any other agreements relating to the ownership of the Oil and Gas Assets or the recognition of the Partnership’s interest therein; agreements providing for the gathering, measurement, processing, compression or transportation of Petroleum Substances; common steam agreements; well operating contracts and surface leases, pipeline easements, road use agreements and other contracts granting surface interests.
(aaaaa) “ Title Defect ” means:
(i) either:
(A) a defect or deficiency (other than a Permitted Encumbrance) in or affecting, or the absence of satisfactory evidence as to, the chain of title of a Purchased Entity to any particular property; or
(B) the existence of any encumbrance that is not a Permitted Encumbrance or any Permitted Encumbrance that exceeds in magnitude the description of that particular Permitted Encumbrance set forth in the Property Schedule;
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which is sufficiently material and adverse that it would not be acceptable to a knowledgeable and prudent purchaser of the property affected thereby but only where the reasonably anticipated negative impact to the value of such property to such Purchased Entity to account for such defect would exceed $75,000; or
(ii) a discrepancy between the Engineering Report and the Property Schedule which consists of:
(A) an interest evaluated in the Engineering Report not being listed in the Property Schedule or being larger than the interest listed in the Property Schedule; or
(B) an interest evaluated in the Engineering Report being shown in the Engineering Report as not being subject to a royalty listed in the Property Schedule or being shown in the Engineering Report as being subject to a royalty which is stated in the Property Schedule to be greater than as shown in the Engineering Report;
but only where the reasonably anticipated negative impact of such discrepancy on the value of the property affected thereby would exceed $75,000.
(bbbbb) “ Title Evaluator ” means an independent senior oil and gas solicitor as may be agreed to by the Parties.
(ccccc) “ Unaudited Financial Statements ” means, collectively:
(i) the unaudited consolidated financial statements (including the statement of operations, balance sheet and cash flow statement) of the Company as of December 31, 2002 (and for the year then ended) and as of December 31, 2003 (and for the 209 day period from January 1, 2003 to July 28, 2003 and the 156 day period from July 29, 2003 to December 31, 2003); and
(ii) the unaudited financial statements (including the statement of operations, balance sheet and cash flow statement) of the Company as of September 30, 2004 (and for the 9 months then ended);
as set forth in Schedule 1.1(ccccc) .
(ddddd) “ Uncured Title Defects ” has the meaning set forth in Section 6.2(a) .
(eeeee) “ U.S. Credit Agreement ” means the Third Amended and Restated Credit Agreement, as amended, between EXCO and Bank One, NA, as administrative agent for itself and the lenders named therein, dated the 27 th day of January, 2004.
(fffff) “ Valuation Date ” means February 1, 2005 unless Closing occurs in a calendar month other than February, 2005 (but no later than May 15, 2005) in which event the Valuation Date shall be the 1 st day of such calendar month; provided that if Seller does not deliver (in accordance with the provisions of Section 11.4 ) the Audited Historical Statements to Purchaser on or prior to January 28, 2005, the Valuation Date shall remain February 1, 2005 regardless of when Closing occurs.
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(ggggg) “ Wells ” means all wells, including producing, shut-in, suspended, abandoned, injection and disposal wells, located on the Lands or any lands with which the Lands have been pooled or unitized.
(hhhhh) “ Working Capital Balance ” has the meaning set forth in Section 6.3(b) .
1.2 References and Titles
All references in this Agreement to Exhibits, Schedules, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections and other subdivisions of or to this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any Articles, Sections, subsections or other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and shall be disregarded in construing the language hereof. The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The words “this Article,” “this Section” and “this subsection,” and words of similar import, refer only to the Article, Section or subsection hereof in which such words occur.
1.3 Interpretation
(a) The word “or” is not exclusive, and the word “including” (in its various forms) means including without limitation. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.
(b) If there is any conflict or inconsistency between the provisions of the body of this Agreement and those of a Schedule, the provisions of the body of this Agreement shall prevail.
(c) All documents executed and delivered pursuant to the provisions of this Agreement are subordinate to the provisions hereof and the provisions hereof shall govern and prevail in the event of a conflict.
(d) Any reference to a statute shall include and shall be deemed to be a reference to such statute and to the regulations made pursuant thereto, and all amendments made thereto and in force at the date hereof.
(e) Where in this Agreement or any document delivered pursuant hereto, any statement or representation or warranty is made on the basis of knowledge or awareness of Seller, such knowledge or awareness consists only of the actual knowledge of the current officers of Seller and the directors and officers of the Company designated in Schedule 2.9(a)(viii) after reasonable inquiry by such individuals. For those purposes, knowledge does not include knowledge of any other Person or constructive knowledge. Neither Seller, nor any of such officers or directors has any obligation to make inquiry of any field personnel (other than Del Denison and Wes Roberts) or any other employee of Seller or the Company (as the case may be) who is not primarily responsible for the matter in question in the course of their normal duties, nor any files and any records of any Governmental Authority in connection with any statement, representation or warranty that is made on the basis of knowledge or awareness of Seller.
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(f) All references to time shall mean Mountain Standard Time or Mountain Daylight Time, as applicable.
(g) Whenever any payment to be made or action to be taken under this Agreement is required to be made or taken on a day other than a Business Day, such payment shall be made or action taken on the next Business Day following.
(h) The Parties acknowledge that their respective legal counsel have reviewed and participated in settling the terms of this Agreement, and the Parties hereby agree that any rule of construction to the effect that any ambiguity is to be resolved against the drafting Party will not be applicable in the interpretation of this Agreement.
(i) Unless otherwise specifically indicated herein, all dollar and monetary amounts shall in be in Canadian dollars.
1.4 Schedules
The following schedules are attached to, form part of and are incorporated in the Agreement:
Schedule A - Disclosure Schedule Schedule 1.1(kkk)(ix) - Liens, Burdens or Defects to Title Schedule 1.1(aaa) and 3.2(o) - Material Agreements Schedule 1.1(ccccc) – Unaudited Financial Statements Schedule 2.9(a)(viii) - Directors and Officers of Company and Subco Schedule 2.9(a)(ix) - Releases Schedule 3.2(e) - Right of Termination / Loss of Benefit Schedule 3.2(p) - Purchased Entity Debt Schedule 3.2(q) – Purchased Entity/Affiliate Contracts Schedule 3.2(r) - Employment Matters Schedule 3.2(s) - Litigation, Arbitrations, Investigations or Other Proceedings Schedule 3.2(u) - Tax Matters Schedule 3.2(y) - Environmental Matters Schedule 3.2(bb)(iii) - Claims Adverse in Interest Schedule 3.2(bb)(iv) - Authorities for Expenditure Schedule 3.2(bb)(v) - Leased Tangibles Schedule 3.2(bb)(vii) – Production Penalties Schedule 3.2(bb)(ix) – AMI’s and Areas of Exclusion Schedule 3.2(bb)(x) – Rights of First Refusal Schedule 3.2(bb)(xi) - Offset Obligations Schedule 3.2(dd) - Dividends and Distributions Schedule 3.2(gg) – Change of Control Schedule 3.2(hh) – Bank Accounts Schedule 5.1 - Conduct of Business Schedule 5.10 - Insurance Schedule B - Property Schedule Schedule 1.1(mm) - Facilities Schedule 1.1(tt) - Lands Schedule C Part I - Escrow Agreement (Deposit) Part II - Escrow Agreement (Withholding) Schedule D - Privacy Legislation
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2.1 Agreement to Purchase and Sell
At the Closing:
(a) EXCO shall sell, assign and transfer to Purchaser, and Purchaser shall purchase from EXCO, the Company Stock; and
(b) Taurus shall sell, assign and transfer to Purchaser, and Purchaser shall purchase from Taurus, the Taurus Notes;
all upon the terms and subject to the conditions set forth in this Agreement. At Closing, Seller shall deliver to Purchaser the Company Certificate, free and clear of all Liens, which certificate shall be duly endorsed to Purchaser or accompanied by duly executed stock powers in form satisfactory to Purchaser.
2.2 Purchase Price and Manner of Payment
(a) Base Purchase Price . The purchase price for the Company Stock and the Taurus Notes shall be $550,000,000 (collectively, the “ Base Purchase Price ”) minus the payment in respect of the Credit Facility payable pursuant to Section 2.4 and plus or minus the adjustments determined pursuant to Article 6 (the Base Purchase Price as so adjusted is the “ Purchase Price ”).
(b) Deposit . Contemporaneous with the execution and delivery of this Agreement:
(i) Purchaser shall pay the amount of $50,000,000 (the “ Deposit ”) to Seller’s Solicitors; and
(ii) Purchaser, Seller and Seller’s Solicitors shall enter into the Escrow Agreement (Deposit) whereupon Seller’s Solicitors shall receive and hold the Deposit pursuant to the terms of the Escrow Agreement (Deposit) in an interest-bearing solicitor’s trust account.
The Deposit and interest earned thereon shall be applied in accordance with the following terms:
(iii) if Closing occurs, the Deposit together with the interest actually earned thereon while held by Seller’s Solicitors (the “ Deposit Interest ”) shall be paid by Seller’s Solicitors to Seller at the Closing in partial satisfaction of Purchaser’s obligation to pay the Purchase Price;
(iv) if Closing does not occur due to the exercise by Seller of a right to terminate this Agreement specified in Section 8.1(b) or 8.1(d)(i) where such right arises due to a breach of any representation or warranty or failure to perform any covenant or obligation under this Agreement by Purchaser, Seller shall be entitled to the Deposit and the Deposit Interest which Seller’s Solicitors shall pay to EXCO, on
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its behalf and on behalf of Taurus, not later than the second Business Day after this Agreement terminates. The Deposit and the Deposit Interest shall thereupon be forfeited by Purchaser to EXCO, on its behalf and on behalf of Taurus, on account of the damages suffered by Seller as a consequence of such breach. The Parties agree that such amount constitutes their genuine pre-estimate of the damages suffered by Seller by virtue of such breach. Seller agrees that forfeiture of the Deposit and the Deposit Interest will be its sole remedy as a result of Closing not occurring due to a breach of this Agreement by Purchaser; and
(v) if Closing does not occur for any reason or circumstance other than that described in Section 2.2(b)(iv) , Purchaser shall be entitled to the Deposit and Deposit Interest which Seller’s Solicitors shall pay to Purchaser not later than the second Business Day after this Agreement terminates.
(c) Payment at Closing . At the Closing, subject to Section 2.10 , Purchaser shall pay to EXCO, on its behalf and on behalf of Taurus, an amount equal to the Purchase Price minus the Deposit and the Deposit Interest by wire transfer of immediately available funds to the account set forth in Section 2.9(b)(i) or as otherwise instructed by Seller.
2.3 Allocation of Purchase Price
The Purchase Price shall be allocated, for all purposes, as follows:
(a) to Taurus for the Taurus Notes, as follows:
(i) as to principal, the sum of:
(A) $97,874,177.10; and
(B) that amount of Canadian dollars that would be required to purchase U.S. $98,800,167.66 using the Exchange Rate on the 5 th Business Day immediately preceding the Closing Date; and
(ii) as to interest, the amount of Canadian dollars that would be required to purchase the sum of:
(A) U.S. $5,710,512.47; and
(B) the product of U.S. $19,897.26 and that number of days falling between (and including) February 1, 2005 and (but excluding) the Closing Date;
using the Exchange Rate on the 5 th Business Day immediately preceding the Closing Date (the “ Interest Amount ”); and
(b) to EXCO for the Company Stock, the balance of the Purchase Price (the “ Share Purchase Price ”).
If the Receiver General (Canada) asserts at any time that the amount of the Purchase Price allocated to the Taurus Notes is other than the amount specified in Section 2.3(a) , Seller shall reimburse Purchaser for any additional amounts that the Receiver General (Canada) claims is due
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from Purchaser, and Purchaser shall remit to Seller any amounts the Receiver General (Canada) refunds to Purchaser or that Purchaser is not otherwise required to remit.
2.4 Payment of Credit Facility
(a) Concurrent with Closing, Purchaser shall loan to the Company a principal amount equal to the amount set forth in the Payout Statement by advancing such amount to JPMorgan Chase Bank, NA, Canada Branch (by wire transfer to the following account) to retire the Credit Facility:
Royal Bank of Canada (swift ROYCCAT2) Account No.: 071721000405 For account: JPMorgan Chase Bank, Canada Branch (swift CHASCATT) Reference: Addison Energy Inc. Attention: Loans Department
(b) Upon JPMorgan Chase Bank’s receipt of the amount referred to in Section 2.4(a) , Seller shall cause the Company to issue the Purchaser Note to Purchaser.
2.5 Joint and Several Liability
EXCO and Taurus shall be jointly and severally liable for all of their liabilities and obligations under this Agreement.
2.6 Parental Guarantee
Seller acknowledges receipt of a guarantee by NAL dated the date hereof, of the obligations of Purchaser pursuant to this Agreement and all other documents executed and delivered pursuant to this Agreement.
2.7 Closing
The Closing shall take place on the Closing Date at the Place of Closing.
2.8 Taking of Necessary Action; Further Action
Seller and Purchaser shall use all reasonable efforts to take all such actions as may be necessary or appropriate in order to effectuate the Closing as promptly as commercially practicable. If at any time after the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement, both Parties shall use all reasonable efforts to take all such lawful and necessary action.
2.9 Deliveries at Closing
(a) Deliveries of Seller at Closing . At Closing, Seller shall deliver or cause to be delivered to and in favour of Purchaser, against those deliveries required to be made by Purchaser, the following:
(i) the Company Certificate issued in the name of EXCO, duly endorsed for transfer or accompanied by a written instrument of transfer;
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(ii) the Taurus Notes, accompanied by an assignment thereof, in form and substance satisfactory to Purchaser, acting reasonably, duly executed by Taurus;
(iii) a release, signed by Taurus, of all liability of the Company under the Taurus Notes (including in respect of the payment of the principal amount thereof and interest accrued thereon) and of all Liens on the assets of the Company arising pursuant to the Taurus Notes, all satisfactory to Purchaser, acting reasonably.
(iv) the original minute books and corporate seals of the Company and Subco;
(v) the original minute book and all records of the Partnership;
(vi) certificates of status from appropriate authorities, dated as of or about the Closing Date, as to the legal existence of EXCO, Taurus, the Company and Subco and qualification of the Company and Subco to do business in the jurisdictions in which they operate;
(vii) evidence, dated as of or about the Closing Date, as to the legal existence of the Partnership, and its qualification to do business in the jurisdictions in which the Oil and Gas Assets are located;
(viii) resignations of those representatives of the Company and Subco listed in Schedule 2.9(a)(viii) , unless otherwise agreed to by Purchaser in writing;
(ix) a release and discharge, executed by each of the representatives listed in Schedule 2.9(a)(viii) , of the Company and Subco, and a release and discharge, executed by EXCO on its own behalf, and on behalf of its Affiliates, of the Company, in each case, in the appropriate form set forth in Parts I and II of Schedule 2.9(a)(ix) , respectively;
(x) a certified copy of a resolution of the board of directors of EXCO authorizing the execution and delivery of this Agreement and the completion of the sale of the Company Stock and all other transactions related thereto herein;
(xi) a certified copy of a resolution of the board of directors of Taurus authorizing the execution and delivery of this Agreement and the completion of the sale of the Taurus Notes and all other transactions related thereto herein;
(xii) a certified copy of a resolution of the EXCO as the sole shareholder of the Company authorizing the contribution of all of the Oil and Gas Assets to the Partnership in exchange for a partnership interest in the Partnership pursuant to the Company Contribution Agreement;
(xiii) original executed copies of the Services Agreement, the Company Contribution Agreement and Subco Subscription Agreement;
(xiv) signed copies of all agreements and resolutions entered into by the Company or its directors in connection with the declaration of dividends payable in cash, as disclosed in the Disclosure Schedule;
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(xv) a release and acknowledgement, signed by JPMorgan Chase Bank, NA, confirming repayment of all indebtedness of the Company under the Credit Facility and releasing all Liens granted in respect of a Purchased Entity pursuant to or in respect of the Credit Facility, and JPMorgan Chase Bank’s undertaking to discharge all such Liens, all satisfactory to Purchaser, acting reasonably;
(xvi) a release, signed by JPMorgan Chase Bank, NA, releasing all Liens granted by EXCO in respect of the Company Stock pursuant to or in respect of the U.S. Credit Agreement, and JPMorgan Chase Bank’s undertaking to discharge all such Liens, all satisfactory to Purchaser, acting reasonably;
(xvii) a release, signed by Wilmington Trust Company, of all Liens granted by EXCO in respect of the Company Stock, and Wilmington Trust Company’s undertaking to discharge all such Liens, satisfactory to Purchaser, acting reasonably;
(xviii) an officer’s certificate of Seller confirming the matters referred to in Article 3 ;
(xix) an assignment by EXCO and, if applicable, its Affiliates of all confidentiality and/or exclusion agreements entered into in contemplation of the sale of the Company or the Oil and Gas Assets;
(xx) a certified copy of a resolution of the board of directors of the Company authorizing the transfer of the Company Stock from EXCO to Purchaser as contemplated by this Agreement;
(xxi) a copy of any 116 Certificate obtained by Seller prior to Closing;
(xxii) the Escrow Agreement (Withholding) executed by Seller and Seller’s Solicitors, if required pursuant to Section 2.10 ;
(xxiii) an irrevocable direction to Seller’s Solicitors to release the Deposit and the Deposit Interest to EXCO, on its behalf and on behalf of Taurus, or as Seller otherwise directs as partial payment of the Purchase Price payable pursuant to Section 2.2 , except to the extent otherwise required pursuant to Section 2.10 ;
(xxiv) an agreement between each individual member of the Management Team and Purchaser, in form and substance satisfactory to the Parties, acting reasonably, executed by such member of the Management Team and Purchaser pursuant to which, for a period of 6 months following the Closing Date, each such member of the Management Team agrees to not make any employment offer or contract offer to any employee of Purchaser, any Affiliate of Purchaser or any manager of Purchaser who was an employee of any Purchased Entity on the date hereof, without prior written consent of Purchaser, unless such Person ceased to be an employee of Purchaser or any Affiliate of Purchaser or any manager of Purchaser after the Closing Date;
(xxv) the Purchaser Note, signed by the Company;
(xxvi) a termination agreement in respect of the Inter-Company Agreement, in form and substance satisfactory to the Parties, acting reasonably, executed by EXCO and the Company;
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(xxvii) evidence reasonably satisfactory to Purchaser that each Product and Other Hedging Contract has either been terminated prior to Closing or assumed by EXCO on a basis whereby the Purchased Entities have no liabilities thereunder after Closing; and
(xxviii) any and all other documents which are required to be delivered by Seller to Purchaser pursuant to this Agreement.
(b) Deliveries of Purchaser at Closing . At Closing, Purchaser shall deliver or cause to be delivered to and in favour of Seller, against those deliveries required to be made by Seller, the following:
(i) payment of the Purchase Price less the Deposit and the Deposit Interest, each as set forth in the Closing Statement, and, if applicable, less any amounts required to be withheld pursuant to Section 2.10 , payable in immediately available funds to EXCO, on its behalf and on behalf of Taurus, by wire transfer in Canadian dollars to the following account of EXCO in accordance with Seller’s instructions at Closing, together with such bank’s confirmations of receipt and deposit of such payments:
Royal Bank of Canada, Toronto (swift ROYCCAT2) Local Routing: 09591 Account Name: JPMorgan Chase Bank, Houston Branch Account No.: 095912461713 FFC: EXCO Resources, Inc. Account No.: 1586272658
or such other account as EXCO may direct no later than 5 Business Days prior to Closing;
(ii) payment of amounts required to be withheld pursuant to Section 2.10 to Seller’s Solicitors in accordance with the Escrow Agreement (Withholding);
(iii) payment of the Credit Facility, as set forth in the Payout Statement, payable in immediately available funds to JPMorgan Chase Bank, National Association, Canada Branch, by wire transfer in Canadian dollars to the account of JPMorgan Chase Bank set forth in Section 2.4 , together with such bank’s confirmation of receipt and deposit of such payment;
(iv) certificates of status from appropriate authorities, dated as of the date of the Closing Date, as to the legal existence of Purchaser;
(v) releases and discharges, executed by the Company and Subco and approved by Purchaser, of each of the representatives of the Company and Subco listed in Schedule 2.9(a)(viii) , in the appropriate form set forth in Part III of Schedule 2.9(a)(ix) ;
(vi) an officer’s certificate of Purchaser confirming the matters referred to in Article 4 ;
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(vii) the Escrow Agreement (Withholding), executed by Purchaser, if required pursuant to Section 2.10 ;
(viii) an irrevocable direction to Seller’s Solicitors to release the Deposit and the Deposit Interest to EXCO, on its behalf and on behalf of Taurus, or as Seller otherwise directs as partial payment of the Purchase Price payable pursuant to Section 2.2 ; and
(ix) any and all other documents which are required to be delivered by Purchaser to Seller pursuant hereto.
2.10 Withholding Tax
(a) Seller and Purchaser acknowledge that pursuant to section 116 of the Tax Act:
(i) Purchaser must withhold one quarter of the amount, if any, by which the Share Purchase Price exceeds the certificate limit on the certificate (the “ 116 Certificate ”) obtained for the purposes of section 116 of the Tax Act by Seller; and
(ii) Purchaser must remit amounts, as determined pursuant to Section 2.10(b) to the Receiver General (Canada) on the date determined pursuant to Section 2.10(b) .
(b) Purchaser shall, unless a 116 Certificate with a certificate limit of not less than the Share Purchase Price has been provided to Purchaser on or prior to Closing, withhold one quarter of the amount by which the Share Purchase Price exceeds the certificate limit of any 116 Certificate provided by Seller and shall deposit such amount in trust with Seller’s Solicitors pursuant to the Escrow Agreement (Withholding), who shall remit:
(i) to the Receiver General (Canada) on the third last Business Day of the month following the month in which Closing occurs (or on such later date as the Canada Revenue Agency shall confirm is acceptable, in a manner satisfactory to Purchaser, acting reasonably), the amount withheld, unless a 116 Certificate has been provided by Seller and delivered to Seller’s Solicitors and Purchaser after Closing and prior to that date;
(ii) to EXCO forthwith, upon delivery of a 116 Certificate having a certificate limit not less than the Share Purchase Price, the amount withheld; or
(iii) upon delivery of a 116 Certificate having a certificate limit less than the Share Purchase Price:
(A) to the Receiver General (Canada), on a timely basis, such amount as will satisfy Purchaser’s obligation under subsection 116(5) of the Tax Act); and
(B) to EXCO, the balance.
When the matters contemplated in this Section 2.10(b) are completed, Seller shall cause Seller’s Solicitors to provide Seller and Purchaser with proof that all amounts required to
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be remitted to the Receiver General (Canada) have been timely remitted and to account to Seller and Purchaser in respect of such matters.
(c) Interest earned on any amount withheld by Purchaser and deposited in trust with Seller’s Solicitors pursuant to Section 2.10(b) will be paid by Seller’s Solicitors as follows:
(i) as to 10% (or any greater or lesser percentage that may be required at the applicable time pursuant to the Tax Act or a tax treaty) of the interest, to the Receiver General (Canada); and
(ii) as to the balance remaining thereafter, to EXCO.
Seller will, by the end of the month following the month in which payment of interest to EXCO occurs, cause Seller’s Solicitors to provide Seller and Purchaser with proof that the amount in Section 2.10(c)(i) has been timely remitted.
(d) If, at any time prior to the date stipulated in Section 2.10(b)(i) , EXCO is required to make a payment on account for Canadian income tax pursuant to Section 116 of the Tax Act in order to obtain a 116 Certificate then, if requested to do so by EXCO, and only in accordance with any written direction received therefrom and provided Seller’s Solicitors have given Purchaser at least two Business Days’ notice of its intention to do so, Seller’s Solicitors shall promptly release and forward to the Receiver General (Canada), such portion of amounts withheld pursuant to Section 2.10(b) on the condition that such funds be used for the sole purpose of making the aforementioned payment on account of EXCO’s Canadian income tax liability.
(e) If, pursuant to Section 6.3(d) , Purchaser makes a further payment on account of the Share Purchase Price, the Parties hereby agree to adhere to the procedure set out in this Section 2.10 in respect of the withholding Tax thereon, all as more specifically provided in the Escrow Agreement (Withholding).
(f) Seller hereby covenants that it will provide Seller’s Solicitors with such funds as are required to permit Seller’s Solicitors to comply with its obligations as described under Section 2.10(b) and 2.10(c) hereof, the Escrow Agreement (Withholding) and Purchaser’s obligations under subsection 116(5) of the Tax Act within the time stipulated therein.
(g) Seller and Purchaser acknowledge that pursuant to Part XIII of the Tax Act, Purchaser must withhold 10% of the Interest Amount and remit same forthwith after Closing to the Receiver General (Canada).
(h) If the amount required by any Tax authority to be withheld by Purchaser in respect of the transactions contemplated by this Agreement exceeds the amounts withheld pursuant to the foregoing provisions of this Section 2.10 , Seller shall indemnify, defend and save harmless Purchaser’s Group from and against any and all loss, liability, damage, cost or expense suffered or incurred by any of them, as a direct or indirect result thereof. The provisions of Section 9.5 shall be applicable with respect to any claim made by any Tax authority which may reasonably be expected to give rise to a claim for indemnification of Purchaser’s Group under this Section 2.10(h) . Notwithstanding the provisions of Section 9.4 , Purchaser’s Group shall be entitled to make a claim under this Section 2.10(h) until 90 days after the expiry of the period within which a Tax authority is entitled to make a claim against Purchaser’s Group which gives rise to a claim for indemnification under
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this Section. None of the provisions of Section 9.4 shall be applicable to a claim by Purchaser’s Group under this Section 2.10(h) .
ARTICLE
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3.1 Seller’s Representations Regarding Seller
Seller hereby represents and warrants to Purchaser as follows:
(a) Authority and Enforceability . Seller has the requisite corporate power and authority to enter into and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Seller, if applicable, and no other corporate proceedings on the part of Seller are necessary to authorize the execution or delivery of this Agreement or the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and all other documents executed and delivered pursuant hereto will, when executed and delivered, be duly authorized, executed and delivered by Seller and this Agreement does, and such documents will when executed and delivered and (assuming that this Agreement constitute a valid and binding obligation of Purchaser) constitute a valid and binding obligation of Seller enforceable against Seller in accordance with its terms.
(b) No Conflict . The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby and compliance by Seller with the provisions hereof will not, conflict with, result in any violation of or default (with or without notice or lapse of time or both) under, give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under or result in the creation of any Lien on any of the properties or the assets of Seller under, any provision of:
(i) its articles of incorporation or bylaws;
(ii) upon receipt of the consent referred to in Sections 7.2(f) and 7.3(f) , any loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession or franchise, licence or other agreement or instrument applicable to Seller; or
(iii) assuming the consents, approvals, authorizations, permits, filings and notifications referred to in Section 3.1(c) are duly and timely obtained or made, any Applicable Law applicable to Seller or its respective properties or assets.
(c) Consents and Approvals . No consent, approval, order or authorization of, registration, declaration or filing with, or permit from, any Governmental Authority is required by or with respect to Seller or a Purchased Entity in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for the following: (i) any such consent, approval, order, authorization, registration, declaration, filing or permit which the failure to obtain or make would not, individually or in the aggregate, have a Material Adverse Effect, (ii) the Competition Act Approval, and (iii) the filing of a Current Report on Form 8-K as required to be made by EXCO
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with the United States Securities and Exchange Commission in accordance with the Securities Exchange Act of 1934 .
(d) Title to Shares . EXCO owns the Company Stock and will continue to own the Company Stock until the time of Closing. EXCO is (and at the Closing will be) the sole record and beneficial owner of the Company Stock, free and clear of all Liens, other than: (i) Liens for which the release and undertakings identified at Sections 2.9(a)(xv) , 2.9(a)(xvi) and 2.9(a)(xviii) or an Encumbrance Discharge will be delivered at Closing, or (ii) those that may arise by virtue of any actions taken by or on behalf of Purchaser or its Affiliates or by virtue of the by-laws and articles of the Company. Upon Closing, Purchaser will acquire good and marketable title to the Company Stock free and clear of all Liens, other than: (iii) those that may arise by virtue of any actions taken by or on behalf of Purchaser or its Affiliates or by virtue of the by-laws and articles of the Company.
(e) No Intention to Acquire . Seller does not own any of the following and does not have nor will it have at the Closing Date any intention or plan to acquire any of the following: (i) units of NAL; (ii) debt issued by NAL, Manulife Financial Corporation or any Principal Manulife and NAL Subsidiary; (iii) shares of Manulife Financial Corporation or any Principal Manulife and NAL Subsidiary; or (iv) property that may reasonably be expected to become Prohibited Property.
(f) Carrying on Business in Canada . Seller has never carried on business in Canada.
3.2 Seller’s Representations Regarding the Purchased Entities
Seller hereby represents and warrants to Purchaser as follows:
(a) Organization - Company . The Company:
(i) is a corporation duly organized, validly existing and in good standing under the laws of Alberta;
(ii) has the requisite corporate power and authority to own, lease and operate its properties and to conduct its business as it is presently being conducted;
(iii) is duly qualified to do business and is in good standing in each jurisdiction where the character of the properties owned or leased by it or the nature of its activities makes such qualification necessary; and
(iv) has no Subsidiaries, other than Subco and the Partnership.
(b) Organization – Subco . Subco:
(i) is a corporation duly organized, validly existing and in good standing under the laws of Alberta;
(ii) has the requisite corporate power and authority to own, lease and operate its properties and to conduct its business as it is presently being conducted;
(iii) is duly qualified to do business and is in good standing in the Province of Alberta and will, as of the Closing Date, be qualified to do business and be in good
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standing in all other jurisdictions where the character of the properties owned or leased by it or the nature of its activities makes such qualification necessary; and
(iv) has no Subsidiaries.
(c) Organization - Partnership . The Partnership:
(i) is a limited partnership duly organized, validly existing and in good standing under the laws of Alberta;
(ii) has the requisite power and authority to own, lease and operate its properties and to conduct its business as it is presently being conducted; and
(iii) is duly qualified to do business and is in good standing in the Province of Alberta and will as of the Closing Date, be qualified to do business and be in good standing in all other jurisdictions where the character of the properties owned or leased by it or the nature of its activities makes such qualification necessary; and
(iv) has no Subsidiaries.
(d) Authority and Enforceability . The execution and delivery of those agreements and documents required to be delivered by the Purchased Entities hereunder have been duly and validly authorized by all necessary corporate action on the part of the Purchased Entities, and no other corporate proceedings on the part of the Purchased Entities are necessary to authorize the execution or delivery of such agreements and documents.
(e) No Violations . Except as set forth in Schedule 3.2(e) , the execution and delivery of this Agreement do not conflict with, result in any violation of or default (with or without notice or lapse of time or both) under, give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien on any of the properties or assets of a Purchased Entity under, any provision of:
(i) its constating documents;
(ii) the Credit Agreement or other loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, licence or other agreement or instrument applicable to the Purchased Entity; or
(iii) assuming the consents, approvals, authorizations, permits, filings and notifications referred to in Section 3.1(c) are duly and timely obtained or made, any Applicable Law applicable to the Purchased Entity or its properties or assets.
(f) Unaudited Financial Statements . The Unaudited Financial Statements were prepared in accordance with U.S. GAAP applied on a consistent basis during the periods involved (except they are not accompanied by notes or other textual disclosure required by U.S. GAAP) and fairly present, in accordance with applicable requirements of U.S. GAAP (subject to normal, recurring adjustments), the financial position of the Company as of their respective dates and the results of operations and the cash flows of the Company for the periods presented therein. The Unaudited Financial Statements are consistent with the books and records of the Company. The Audited Historical Statements will be prepared in accordance with GAAP applied on a consistent basis during the periods
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involved and will fairly present the financial position of the Company as of their respective dates and the results of operations and the cash flows of the Company for the periods presented therein. Since September 30, 2004, except (i) as disclosed in the Unaudited Financial Statements or in any production information in respect of the Company provided to Purchaser or its Affiliates prior to the date hereof, (ii) as contemplated in this Agreement, the Company Contribution Agreement, the Partnership Agreement or the Services Agreement, or (iii) in respect of normal production declines, there have been no material adverse changes in the business, assets, operations or financial condition of the Company, taken as a whole, excluding, however, changes resulting from commodity price movements, Product and Other Hedging Contracts disclosed in the Disclosure Schedule, or resulting from legislation, regulatory action or general economic conditions that may impact the energy industry.
(g) Capital Structure of Company and Subco .
(i) The authorized capital stock of the Company consists of an unlimited number of shares of the Company Stock. The authorized capital stock of Subco consists of an unlimited number of shares of the Subco Stock.
(ii) There are, as of the execution date of this Agreement, issued and outstanding (A) 9,000 common shares of Company Stock, and (B) 10,000 common shares of Subco Stock.
(iii) Except as set forth in Section 3.2(g)(ii) , there are issued and outstanding: (A) no shares of capital stock or other voting securities of the Company or Subco; (B) no securities of the Company, Subco or any other Person convertible into or exchangeable or exercisable for shares of capital stock or other voting securities of the Company or Subco; and (C) no subscriptions, options, warrants, calls, rights (including pre-emptive rights), commitments, understandings or agreements to which the Company or Subco is a party or by which it is bound obligating the Company or Subco to issue, deliver, sell, purchase, redeem or acquire shares of capital stock or other voting securities of the Company or Subco (or securities convertible into or exchangeable or exercisable for shares of capital stock or other voting securities of the Company or Subco) or obligating the Company or Subco to grant, extend or enter into any such subscription, option, warrant, call, right, commitment, understanding or agreement.
(iv) All outstanding shares of Company Stock and Subco Stock are validly issued, fully paid and non-assessable and not subject to any pre-emptive right.
(v) There is not and there will not be at the time of Closing any stockholder agreement, voting trust or other agreement or understanding to which the Company or Subco is a party or by which it is bound relating to the voting of any shares of the capital stock of the Company or Subco.
(h) Title to Subco Shares . The Company is the registered and beneficial owner of the Subco Stock and will continue to own the Subco Stock until the time of Closing. The Subco Stock is owned by the Company, free and clear of all Liens, other than: (i) Liens for which the release and undertaking identified at Section 2.9(a)(xv) or an Encumbrance
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Discharge will be delivered at Closing, (ii) those that may arise by virtue of the by-laws and articles of Subco.
(i) Title to Partnership Interests .
(i) The Company is the registered and beneficial owner of 99.8% of the limited partnership interests in the Partnership, free and clear of all Liens, other than: (A) Liens for which the release and undertaking identified at Section 2.9(a)(xv) or an Encumbrance Discharge will be delivered at Closing, and (B) those that may arise by virtue of the Partnership Agreement.
(ii) Subco is the registered and beneficial owner of 0.2% of the limited partnership interests in the Partnership and is the general partner of the Partnership, free and clear of all Liens, other than: (A) Liens for which the release and undertaking identified at Section 2.9(a)(xv) or an Encumbrance Discharge will be delivered at Closing, and (B) those that may arise by virtue of the Partnership Agreement.
(j) Partnership Interests . Except as set forth in Section 3.2(i)(i) and (ii) , there are issued and outstanding (i) no partnership interests of the Partnership; (ii) no securities of the Partnership or any other Person convertible into or exchangeable or exercisable for partnership interests of the Partnership; and (iii) no subscriptions, options, warrants, calls, rights (including pre-emptive rights), commitments, understandings or agreements to which the Partnership is a p | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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