Exhibit 10.1
UNOCAL CANADA
LIMITED
UNOCAL CANADA ALBERTA HUB
LIMITED
UNOCAL CORPORATION
and
POGO CANADA, ULC
POGO PRODUCING
COMPANY
SHARE PURCHASE
AGREEMENT
July 8, 2005
SHARE PURCHASE
AGREEMENT
TABLE OF CONTENTS
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4.17
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Litigation
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4.18
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Intellectual
Property
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4.19
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Taxes
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4.20
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Absence of Certain
Changes
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4.21
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Certain Contracts, Agreements, Plans and Commitments
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4.22
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Resource Pools and Undepreciated Capital Cost
Balances
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4.23
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Operation of
Assets
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4.24
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Minute Books
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4.25
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Corporate
Registers
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4.26
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Books
and Records and Internal Controls
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4.27
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SMOG Run
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4.28
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Hart Scott
Rodino Information
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
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5.1
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Incorporation
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5.2
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Due
Authorization
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5.3
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Enforceability of
Obligations
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5.4
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Investment
Canada
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5.5
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Authorizations
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5.6
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Financing
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5.7
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Brokers
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5.8
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Purchaser as
Principal
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ARTICLE 6
REGARDING REPRESENTATIONS, WARRANTIES
AND COVENANTS
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6.1
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Materiality
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6.2
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Nature of Survival of Vendor’s Representations, Warranties,
Covenants and Indemnities and Limitations on Claims
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6.3
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Nature of Survival of Purchaser’s Representations,
Warranties, Covenants and Indemnities
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6.4
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No Consequential
Damages
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6.5
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No Other Representations, Warranties or Covenants of
Vendor
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6.6
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No Other Representation, Warranties or Covenants of
Purchaser
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6.7
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Restrictions
on Claims and Actions
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ARTICLE 7
PURCHASER’S CONDITIONS
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7.1
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Correctness and Accuracy of Representations and
Warranties
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7.2
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Performance of
Obligations
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7.3
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Governmental Approvals, Consents, and Authorizations
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7.4
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Other Consents and
Approvals
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7.5
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No Injunctions or
Restraints
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7.6
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Vendor’s
Closing Deliveries
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ARTICLE 8
VENDOR’S CONDITIONS
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8.1
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Correctness and Accuracy of Representations and
Warranties
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8.2
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Performance of
Obligations
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ii
iii
iv
SCHEDULES
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Schedule 1.1(a)
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Escrow Agreement
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Schedule 1.1(b)
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SMOG Run
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Schedule 1.1(c)
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Unaudited Financial Statements
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Schedule 1.3
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Vendor Knowledge Individuals
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Schedule 4.4(c)
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Subsidiaries
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Part 1
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Corporate Subsidiaries (Alberta)
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Part 2
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Corporate Subsidiary (Nova Scotia)
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Part 3
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Partnership Subsidiaries
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Schedule 4.5(c)
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Defaults Due to this Agreement
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Schedule 4.5(e)
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Change of Control Provisions
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Schedule 4.9
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Material Government Authorizations –
Vendor and Unocal
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Schedule 4.10
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Benefit Plans
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Schedule 4.14
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Environmental Matters
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Schedule 4.15(a)
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Permitted Encumbrances
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Schedule 4.15(c)
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Notices of Defaults
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Schedule 4.15(d)
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Government Proceedings
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Schedule 4.15(e)
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Authorizations for Expenditure
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Schedule 4.15(g)
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Marketing and Transportation
Agreements
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Schedule 4.16
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Material Contracts and Liabilities
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Schedule 4.17
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Open Litigation Claims
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Schedule 4.18
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Intellectual Property
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Schedule 4.19(a)
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Tax Matters
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Schedule 4.19(h)
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Tax Elections
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Schedule 4.19(i)
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Subpart F Income
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Schedule 4.19(j)
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United States Property
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Schedule 4.22
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Estimated Resource Pools
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Schedule 4.23
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Areas of Mutual Interest
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Schedule 5.5
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Material Government Authorizations –
Purchaser and Pogo
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Schedule 7.6(e)
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Vendor’s Opinions
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Schedule 8.6(e)
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Purchaser’s Opinions
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v
SHARE PURCHASE
AGREEMENT
THIS AGREEMENT
is made as of July 8, 2005
among:
UNOCAL CANADA
LIMITED
a corporation continued under the laws of
Alberta
- and –
UNOCAL CANADA ALBERTA HUB
LIMITED
a corporation incorporated under the laws of
Alberta
(Unocal Canada Limited and Unocal Canada Alberta
Hub Limited are hereinafter
collectively called “ Vendor ”)
- and –
UNOCAL CORPORATION
a corporation incorporated under the
laws of Delaware
(hereinafter called “ Unocal ”)
- and –
POGO CANADA, ULC
an Alberta unlimited liability corporation
(hereinafter called “ Purchaser ”)
- and –
POGO PRODUCING
COMPANY
a corporation
incorporated under the laws of Delaware
(hereinafter called “ Pogo ”)
RECITALS:
A.
Vendor is the legal and beneficial
owner of all of the Purchased Shares.
B.
Vendor has agreed to sell to
Purchaser, and Purchaser has agreed to purchase from Vendor, all of
the Purchased Shares, on the terms and conditions of this
Agreement.
IN CONSIDERATION
of the covenants, agreements,
representations, warranties and payments herein set forth, the
Parties, together with Unocal and Pogo, covenant and agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1
Definitions
Whenever used in this Agreement or
the Schedules to this Agreement, the following words and terms
shall have the meanings set out below:
“ Abandonment and
Reclamation Obligations ” means all past, present and
future obligations under Contracts, Applicable Laws, equity or
common law to:
(a)
abandon
wells;
(b)
close,
decommission, dismantle and remove tangible equipment and
facilities that were or that are being used in connection with the
Assets;
(c)
restore,
remediate and reclaim the surface or subsurface of the lands used
in connection with the wells, tangible equipment and facilities
that were or that are being used in connection with the Assets,
including lands in or on which they are or were located and lands
which are or were used to gain access to them; and
(d)
restore,
remediate and reclaim the surface or subsurface of lands affected
by seismic or other geological or geophysical exploration
activities conducted by or on behalf of the Corporation or any of
the Subsidiaries;
including such obligations relating
to wells, facilities and tangibles which were abandoned or
decommissioned, dismantled or removed prior to the Closing Date
(whether or not included in the Assets).
“ ABCA ” means
the Business Corporations Act (Alberta).
“ Accounting Firm
” means a mutually agreed on, nationally recognized
accounting firm.
“ Affiliate ”
means, as to a Person, any other Person controlling, controlled by
or under common control with that Person where
“control”, “controlling” or
“controlled” means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of another Person, whether through the ownership of voting
securities or by contract, partnership agreement, trust arrangement
or other means, either directly or indirectly, that results in
control in fact; provided that direct or indirect ownership of
shares of a corporation carrying more than 50% of the voting rights
shall constitute control of that corporation; and further provided
that:
(a)
the Corporation
and each of the Subsidiaries shall be conclusively deemed to be
Affiliates of Vendor as to any matter or thing relating to the
period before the Closing; and
(b)
the Corporation
and each of the Subsidiaries shall be conclusively deemed to be
Affiliates of Purchaser as to any matter or thing relating to the
period from and after the Closing.
“ Agreement ”
means this Share Purchase Agreement, including the recitals and all
Schedules hereto, and includes all written instruments
supplementing, amending or confirming this Share Purchase Agreement
agreed to by the Parties after the date hereof.
“ Applicable Laws
” means all laws (including Environmental Laws and Privacy
Laws), statutes, rules, regulations, official directives and orders
of Government Authorities (whether
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administrative, regulatory,
legislative, executive or otherwise) including judgments, orders
and decrees of courts, commissions or bodies exercising similar
functions.
“ Asset Acquisition
Statement ” has the meaning given to that term in
Section 11.4(b).
“ Assets ” means
all of the tangible and intangible property (whether real, personal
or mixed), rights, benefits, privileges and other assets owned or
leased by the Corporation and the Subsidiaries, including all oil
and gas properties and the tangible equipment and miscellaneous
interests owned or held by the Corporation and the Subsidiaries in
connection therewith and any such assets in respect of which the
Corporation or any of the Subsidiaries share ownership with third
parties, or have a right to use.
“ Audited Financial
Statements ” means the audited consolidated financial
statements of the Corporation and the Subsidiaries for the fiscal
years ended December 31, 2004 and 2003, in each case
consisting of a consolidated balance sheet, a consolidated
statement of earnings and retained earnings and a consolidated
statement of cash flows, and the audited consolidated statement of
earnings and retained earnings and a consolidated statement of cash
flows for the fiscal year ended December 31, 2002, in each
case prepared in accordance with generally accepted accounting
principles.
“ Authorizations
” means all permits, licenses, exemptions, orders, variances,
approvals, consents, authorizations, registrations, qualifications
and filings with or under any Applicable Laws and having the force
of law.
“ Banking Facilities
” means, collectively, the credit facilities available to the
Corporation under the Syndicated Credit Agreement and the Demand
Credit Agreement.
“ Base Price ”
has the meaning given to that term in
Section 3.1(a).
“ Benefit Plans ”
means all plans and arrangements to which the Corporation or any of
the Subsidiaries is a party or by which the Corporation or any of
the Subsidiaries is bound or under which the Corporation or any of
the Subsidiaries has, or will have, any liability or contingent
liability, relating to:
(a)
Pension
Plans;
(b)
Insurance Plans;
or
(c)
Compensation
Plans;
with respect to any of its Employees
or former Employees (or any dependants or beneficiaries of any such
Employees or former Employees), other than statutory plans with
which the Corporation or any of the Subsidiaries are required to
comply, including the Canada Pension Plan and the Canada Employment
Insurance Plan, and plans administered pursuant to applicable
provincial health and workers’ compensation
legislation.
“ Books and Records
” means all books and records of the Corporation and the
Subsidiaries, including financial, corporate, operations and sales
books, inventory and other asset records, books of account, sales
and purchase records, the Title and Operating Documents, customer
files, production data, equipment maintenance data, accounting
records, sales and promotional data, advertising materials, cost
and pricing information, supplier lists, customer lists, business
reports, plans and projections and all other similar documents,
surveys, plans, files, records,
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correspondence, and other data and
information, financial or otherwise, including all data and
information stored on computer-related or other electronic media
but excepting therefrom all Proprietary Information.
“ Business ”
means the business of the Corporation and the
Subsidiaries.
“ Business Day ”
means a day, other than a Saturday or Sunday, on which the
principal commercial banks located at the cities of Calgary,
Alberta and Houston, Texas are open for business during normal
banking hours.
“ Claim ” means
any action, claim, demand, lawsuit, audit, proceeding, arbitration
or any proceeding or investigation by a Government Authority
including a Tax Claim.
“ Closing ” means
the completion of the Purchase pursuant to the terms and conditions
of this Agreement.
“ Closing Date ”
means:
(a)
the fifth
Business Day following the day on which all of the Conditions set
forth in Sections 7.3(a), 7.3(b), 7.4, 8.3(a), 8.3(b), and
8.4 have been satisfied or duly waived by the Party entitled
to waive the same and notice of satisfaction or waiver has been
given by the applicable Party to the other Party which notice each
Party agrees to give promptly to the other; provided that, unless
the Parties determine otherwise, the Closing Date shall not in any
event be before the earlier of:
(i)
the fifth Business Day after
Purchaser receives the Audited Financial Statements and unaudited
financial statements referred to in Section 9.14 and the
Reserves Report (US); and
(ii)
the 90 th day after the
date of this Agreement; or
(b)
such other date
as the Parties may agree in writing as the date on which the
Closing shall take place.
“ Closing Time ”
means 9:00 a.m. on the Closing Date, or such other time on such
date as the Parties may agree in writing as the time at which the
Closing shall take place.
“ Code ” means
the United States Internal Revenue Code of 1986.
“ Commissioner ”
means the Commissioner of Competition appointed pursuant to the
Competition Act.
“ Compensation Plans
” means any and all employment benefits and plans relating to
bonuses, incentive pay or compensation, performance compensation,
deferred compensation, profit sharing or deferred profit sharing,
share purchase, share option, stock appreciation, phantom stock,
vacation or vacation pay, sick pay, severance or termination pay,
employee loans or separation from service benefits, and any other
type of arrangement providing for compensation additional to base
pay or salary.
“ Competition Act
” means the Competition Act (Canada).
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“ Competition Act
Approval ” means, in respect of the Purchase,
that:
(a)
an advance ruling
certificate (an “ ARC ”) pursuant to Section
102 of the Competition Act shall have been issued by the
Commissioner; or
(b)
a “no
action letter” has been received from the Commissioner
indicating that the Commissioner has determined that she does not
at that time intend to make an application for an order under
Section 92 of the Competition Act in respect of the Purchase;
or
(c)
in the event that
neither an ARC nor a “no action letter” is issued or
received, the relevant waiting period under Section 123 of the
Competition Act shall have expired and there shall be no threatened
or actual application by the Commissioner for an order under
Sections 92 or 100 of the Competition Act.
“ Conditions ”
means, either or both of Vendor’s Conditions and
Purchaser’s Conditions, as applicable.
“ Confidentiality
Agreement ” means the Confidentiality Agreement dated
June 7, 2005 between Unocal, on behalf of itself and its
Affiliates, and Pogo.
“ constating document
” means the articles of incorporation, bylaws, memorandum of
association, partnership agreement or similar constituting
documents of a Person.
“ Contracts ”
means, with respect to any Person, any contracts, licences, leases,
arrangements, agreements and commitments of that Person, and
includes all quotations, orders or tenders for contracts which
remain open for acceptance and all manufacturers’ or
suppliers’ warranties, guarantees or commitments (express or
implied), but excludes any oral contract, arrangement, agreement or
commitment relating to goods or services (including the sale of
Petroleum Substances) entered into in the Ordinary Course of the
Business.
“ Corporate
Subsidiaries ” means the Subsidiaries described in
Part 1 and Part 2 of Schedule 4.4(c).
“ Corporation ”
means Northrock Resources Ltd., a corporation incorporated under
the laws of Alberta.
“ Corporation
Trade-marks ” means any and all trade-marks owned by the
Corporation or the Subsidiaries.
“ Damage or Destruction
Event ” means damage, destruction or other casualty
losses with respect to the Assets or any part or parts of the
Assets.
“ Demand Credit
Agreement ” means the agreement dated May 21, 2002
among Unocal Canada Limited and the Corporation, as borrowers,
Unocal, Union Oil Company of California and the Corporation, as
guarantors, and The Toronto-Dominion Bank, as lender.
“ Deposit ” has
the meaning given to that term in Section 3.2(a).
“ Disclosed Environmental
Liabilities ” means any and all Environmental Liabilities
(whether presently realized or projected) caused by, arising from,
incurred in connection with or otherwise relating in any way to the
matters in the Environmental Documentation and any of the
health,
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safety and environmental records or
reports of the Corporation and the Subsidiaries made available to
Purchaser or its Representatives for review before the date of this
Agreement.
“ Disclosed Personal
Information ” has the meaning given to that term in
Section 9.17(a).
“ Distributions ”
means the aggregate amount of the dividends, returns of capital or
other distributions, of cash or other property, that may be made by
the Corporation and the Subsidiaries to any of Vendor and
Vendor’s Affiliates (other than the Corporation and the
Subsidiaries); but shall not include any payment pursuant to
Section 9.4 including any amounts paid or property distributed
to Unocal Canada Limited on the redemption of the Preferred Shares
referred to in Section 9.4(b).
“ Employees ”
means all individuals employed by the Corporation or any of the
Subsidiaries including those employees on long term disability
leave or other absence.
“ Encumbrances ”
means any lien, charge, Security Interest or other encumbrance of
any kind or character whatsoever.
“Environment”
means the atmosphere, the surface
and sub-surface of the earth, groundwater and surface waters and
plants and animals; and “ Environmental ” means
relating to or in respect of the Environment.
“ Environmental
Approvals ” means all Government Authorizations issued or
required pursuant to Environmental Laws with respect to the Assets
or the operation of the Business.
“ Environmental
Documentation ” means all environmental site assessments,
environmental audits, environmental reports and other reports
relating to the application of Environmental Laws to the
Corporation, the Subsidiaries, the Assets or the
Business.
“ Environmental Laws
” means all Applicable Laws relating in whole or in part to
the protection of the Environment, and includes those Applicable
Laws relating to the storage, generation, use, handling,
manufacture, processing, transportation, treatment, release and
disposal of Hazardous Substances.
“ Environmental
Liabilities ” means all past, present and future
Liabilities associated with or arising from any of the following
and all costs associated therewith:
(a)
the manufacture,
construction, processing, distribution, use, holding, collection,
accumulation, generation, treatment, stabilization, storage,
disposal, handling or transportation of Hazardous Substances,
Petroleum Substances, oilfield wastes or produced
water;
(b)
compliance with
present and future Environmental Laws and Applicable Laws related
to employee and public health and safety matters including the
protection, reclamation, remediation or restoration of the
Environment;
(c)
Abandonment and
Reclamation Obligations;
(d)
Releases of
Hazardous Substances, Petroleum Substances, oilfield wastes,
produced water or other substances; and
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(e)
the removal,
assessment, monitoring, sampling, response, abatement, clean-up,
investigation and reporting of contamination or pollution of or
other adverse effects on the Environment, including compensation of
third parties for Losses suffered by them in respect
thereof;
that relate to the Assets or any
previously owned assets or that have arisen or hereafter arise from
or in respect of any past, present or future operations and
activities related to the Assets, or any other activities
(including activities related to the previously owned assets and
any seismic programs) conducted by or on behalf of the Corporation
or any of the Subsidiaries.
“ Environmental Matters
” means any activity, event or circumstance in respect of any
of the Assets or the conduct of the Business pertaining to the
storage, use, holding, collection, accumulation, assessment,
generation, manufacture, processing, treatment, stabilization,
disposition, handling, transportation or release of Hazardous
Substances or Petroleum Substances on, at or into the
Environment;
“ Environmental Order
” means any environmental protection order, enforcement
order, control order, stop order, remedial order, or other
administrative complaint, direction, order or sanction issued,
filed or imposed by a Government Authority pursuant to
Environmental Laws and having the force of law.
“ Escrow Agent ”
means CIBC Mellon Trust Company, a corporation existing under the
federal laws of Canada.
“ Escrow Agreement
” means an agreement among Vendor, Purchaser and the Escrow
Agent in the form provided in Schedule 1.1(a).
“ Exchange Act ”
means the United States Securities Exchange Act of 1934.
“ Final Working
Capital Statement ” has the meaning given to that term in
Section 3.3(b).
“ Futures Transaction
” means any derivatives transaction (including an agreement
with respect thereto) which is commonly referred to as a hedge
transaction, rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest
rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other
similar transactions (including any option with respect to any of
these transaction) or any combination of these
transactions.
“ Goldman Sachs
Commitment ” has the meaning given to that term in
Section 5.6.
“ Government
Authority ” means any government, regulatory or
administrative authority, government department, agency,
commission, board or tribunal or court having jurisdiction on
behalf of any nation, province or state or subdivision thereof or
any municipality, district or subdivision thereof.
“ Government
Authorization ” means all Authorizations, including any
Environmental Approvals, issued to, or required by, the Corporation
or any of the Subsidiaries by or from, any Government
Authorities.
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“ Hazardous Substance
” means any pollutant, contaminant, hazardous substance,
hazardous material, toxic substance, dangerous substance or
dangerous good as defined, judicially interpreted or identified in
any Environmental Law.
“ Indemnification
Notice ” has the meaning given to that term in
Section 10.2.
“ Indemnified
Environmental Liabilities ” has the meaning given to that
term in Section 10.1(b)(i).
“ Indemnified Environmental
Matters ” has the meaning given to that term in
Section 10.1(b)(i).
“ Indemnified Party
” has the meaning given to that term in
Section 10.1(a).
“ Indemnified Person
” means a Vendor Indemnified Person or a Purchaser
Indemnified Person, as applicable.
“ Indemnifying Party
” has the meaning given to that term in
Section 10.1(a).
“ Information
Memorandum ” means the document entitled
“Information Memorandum” issued by CIBC World Markets
Inc. and Waterous & Co. dated June 2005, as amended and
supplemented from time to time before the date of this
Agreement.
“ Insurance Plans
” means any and all employment benefits and plans relating to
disability or wage continuation during periods of absence from work
(including short term disability and long term disability),
hospitalization, health, medical or dental treatments or expenses,
life insurance, death or survivor’s benefits and
supplementary employment insurance, in each case regardless of
whether or not those benefits are insured or
self-insured.
“ Intellectual Property
” means all registered patents, copyrights, trade-marks
(including the Corporation Trade-marks), trade-names, service
marks, logos, commercial symbols and industrial designs, (including
applications for all of the foregoing, and renewals, divisions,
extensions and reissues, where applicable, relating thereto) owned
by or licensed to the Corporation or any of the
Subsidiaries.
“ Interim Period
” means the period from the Working Capital Date to and
including the Closing Date.
“ Investment Canada Act
” means the Investment Canada Act (Canada).
“ Investment Canada
Approval ” means the approval (or deemed approval) by the
responsible Minister designated pursuant to the Investment Canada
Act, of the completion of the Purchase under this
Agreement.
“ Liabilities ”
means any and all liabilities and obligations, whether under common
law, in equity, under Applicable Law or otherwise, whether
tortious, contractual, vicarious, statutory or otherwise, whether
absolute or contingent, and whether based on fault, strict
liability or otherwise.
“ Losses ” means,
in respect of a Person and in relation to a matter, any and all
losses, damages, costs, expenses, charges (including all penalties,
assessments and fines) which that Person suffers, sustains, pays or
incurs in connection with that matter and includes reasonable costs
of legal counsel (on a solicitor and client basis) and other
professional advisors and consultants and
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reasonable costs of investigating
and defending Claims arising from the matter, regardless of whether
those Claims are sustained; and also includes Taxes on a settlement
payment or damage award in respect of that matter, but does not
include consequential or indirect losses or loss of
profits.
“ Marketing Agreement
” means the Marketing Agreement dated effective
September 1, 2000 between the Corporation and Unocal Canada
Limited.
“ Material ” or
“ Materially ” means material in relation to the
Assets taken as a whole.
“ Material Adverse
Effect ” means any adverse effect or change that results
or could reasonably be expected to result in a reduction in the
fair market value of the Purchased Shares in excess of $30,000,000,
whether that reduction arises from:
(a)
a diminution in the fair market
value of the Assets (including as a result of the loss of any
Assets, the impairment or loss of interests in any Assets or the
forfeiture or non-existence of any Assets);
(b)
an increase in the amount of
Liabilities of the Corporation and the Subsidiaries (on a
consolidated basis);
(c)
the Corporation and the Subsidiaries
(on a consolidated basis) being unable to operate the Business
after the Closing Date on substantially the same basis as the
Corporation and the Subsidiaries (on a consolidated basis) operated
the Business before the Closing Date; or
(d)
(without duplication) a combination
of the foregoing;
but does not include any adverse
effect or change caused by general economic conditions or fiscal or
monetary policies of Government Authorities, or resulting from any
changes in the price of Petroleum Substances or any changes in the
oil and gas business generally (including any change or effect
resulting from any regulatory action or intervention of general
application, including that resulting from changes to Applicable
Law), or resulting from changes in interest rates, currency
exchange rates and stock markets generally, or resulting from
changes in Applicable Laws.
“ Material Claim
” has the meaning given to that term in
Section 6.1(a).
“ Material Contract
” means any Contract of any of the following
types:
(a)
a Contract
involving payments in excess of $5,000,000 by or to the Corporation
or any Subsidiary in any consecutive twelve month period
(excluding any payment by way of penalty or liquidated damages),
which cannot be terminated by the Corporation without penalty on
three months’ notice or less;
(b)
a Contract
evidencing indebtedness or guarantees for borrowed money or the
deferred purchase price of property, excepting any guarantees by
the Corporation of any obligations of any of the Subsidiaries and
any guarantees by any of the Subsidiaries of any obligations of any
of the other Subsidiaries or of the Corporation; or
(c)
any of the
agreements governing the Partnership Subsidiaries;
9
but does not include:
(i)
Title and Operating
Documents;
(ii)
Benefit Plans; or
(iii)
Contracts exclusively between
Subsidiaries or between the Corporation and one or more
Subsidiaries.
“ Net Working Capital
Amount ” means an amount calculated as of the Working
Capital Date for the Corporation and the Subsidiaries equal to the
aggregate of all of their:
(a)
cash on hand or
on deposit with banks or other depositories;
(b)
accounts
receivable and accrued receivables less the allowance for doubtful
accounts;
(c)
prepaid expenses
including prepaid Taxes; and
(d)
other current
assets not described above;
minus :
(e)
accounts payable
and accrued current liabilities;
(f)
Taxes payable by
them relating to any period on or before the Working Capital Date,
whether or not the same have become due, and calculated on the
assumption that the Corporation and each of the Subsidiaries had a
fiscal year for purposes of the Tax Act ending on the Working
Capital Date; and
(g)
other current
liabilities not described above, but specifically excluding long
term asset retirement obligations (including as part of that
exclusion provisions for future lease reclamation).
Deferred income taxes shall not be
treated as a current asset or a current liability and will not
affect the calculation of the Net Working Capital
Amount.
For the purposes of this definition
of Net Working Capital Amount:
(i)
all of those amounts included in
the definition shall be calculated on a consolidated basis for the
Corporation and the Subsidiaries in accordance with generally
accepted accounting principles; and
(ii)
the note receivable owed by Unocal
Canada Limited to the Corporation that is referred to in Section
9.4(b) shall be excluded.
“ Notice ” has
the meaning given to that term in Section 13.3.
“ Office Lease ”
means the Lease of Office Space dated as of November 1, 2001
between Scotia Centre Limited, as landlord, and the Corporation, as
tenant.
“ Ordinary Course
” means, with respect to an action or actions taken by a
Person, that such action or actions is or are consistent with
prudent industry practice and the past practices of the
10
Person and is or are taken in the
ordinary course of normal day-to-day operations of that Person; and
when used with reference to the Corporation and the Subsidiaries
specifically includes any transfers of any of the Assets between or
among the Corporation and the Subsidiaries or any of the
Subsidiaries, and any arrangements or agreements between or among
the Corporation and the Subsidiaries or between or among any of the
Subsidiaries.
“ Outside Date ”
means December 31, 2005.
“ Parties ” means
Vendor and Purchaser collectively; and “ Party ”
means the applicable one of them.
“ Partnership
Subsidiaries ” means the Subsidiaries described in
Part 3 of Schedule 4.4(c).
“ Pension Plans ”
means arrangements relating to retirement savings or pensions,
including pension plans, pensions or supplemental pensions whether
registered or unregistered, funded or unfunded, “registered
retirement savings plans” (as defined in the Tax Act),
“registered pension plans” (as defined in the Tax Act)
and “retirement compensation arrangements” (as defined
in the Tax Act).
“ Permitted Contest
” means action taken by the Corporation or any Subsidiary in
good faith by appropriate proceedings diligently pursued to contest
any Taxes, Claim or Encumbrance, provided that proceeding with that
action will not create a material risk of the forfeiture or loss
of, or interference with the use of operation of, a Material part
of the Assets.
“ Permitted Encumbrance
” has the meaning given to that term in
Schedule 4.15(a).
“ Person ” means
any individual, sole proprietorship, partnership, limited
partnership, corporation, limited or unlimited liability company,
unincorporated association, unincorporated syndicate,
unincorporated organization, trust, body corporate, Government
Authority, or any other entity, and a natural person in such
person’s capacity as trustee, executor, administrator or
other legal representative.
“ Personal Information
” means information about an Employee, but does not include
an individual’s name, position name or title, business
telephone number, business address, business email or business fax
number.
“ Petroleum Substances
” means petroleum, natural gas and all related hydrocarbons
(including liquid hydrocarbons) and all other mineral substances,
whether solid or gaseous and whether hydrocarbon or not (including
sulphur and hydrogen sulphide) produced in association with
petroleum, natural gas or related hydrocarbons.
“ Pogo ” means
Pogo Producing Company, a corporation incorporated under the laws
of Delaware.
“ Preferred Shares
” means the unlimited number of Class A preferred shares
that may be issued by the Corporation.
“ Preliminary Net Working
Capital Amount ” has the meaning given to that term in
Section 3.3(a).
11
“ Prime Rate ”
means the annual rate of interest announced from time to time by
The Bank of Nova Scotia as its reference rate then in effect for
determining interest rates it will charge on Canadian dollar
commercial loans made by it in Canada.
“ Privacy Laws ”
means any and all Applicable Laws relating to privacy and the
collection, use and disclosure of Personal Information in all
applicable jurisdictions, including the Personal Information
Protection and Electronic Documents Act (Canada) and/or any
comparable provincial law (including the Personal Information
Protection Act (Alberta)).
“ Prohibited Name and
Marks ” has the meaning given to that term in
Section 13.14.
“ Proprietary
Information ” means all Books And Records in respect of
or in connection with:
(a)
the valuation of
the Corporation, the Subsidiaries, the Assets or the
Business;
(b)
any advice from
Vendor’s Counsel, Vendor’s Investment Bankers and any
other consultant or advisor of Vendor, the Corporation or the
Subsidiaries with respect to the divestiture of the Corporation,
the Subsidiaries or their respective Assets or parts of the
Business; and
(c)
the process and
proceedings with respect to any such proposed
divestiture.
“ Purchase ”
means the purchase by Purchaser of the Purchased Shares from Vendor
in accordance with the provisions of this Agreement.
“ Purchase Money
Obligation ” means any secured debt of the Corporation or
any Subsidiary created or assumed to finance any part of the
purchase price of real or tangible personal property, including any
extensions, renewals or refunding of any of that debt.
“ Purchase Price
” has the meaning given to that term in
Section 3.1.
“ Purchased Shares
” means all of the issued and outstanding shares in the
capital of the Corporation; and for certainty “Purchased
Shares” shall not include any Preferred Shares that are
redeemed pursuant to Section 9.4.
“ Purchaser ”
means Pogo Canada, ULC, an Alberta unlimited liability
corporation.
“ Purchaser Indemnified
Persons ” has the meaning given to that term in
Section 10.1(a)
“ Purchaser’s
Conditions ” has the meaning given to that term in
Article 7.
“ Purchaser’s
Objection ” has the meaning given to that term in
Section 3.3(c).
“ Purchaser’s Process
Agent ” has the meaning given to that term in
Section 9.13.
“ PWC ” means
PricewaterhouseCoopers LLP, Chartered Accountants.
“ Related Party ”
means, in reference to a Party:
(a)
its Affiliates,
successors and assigns;
(b)
its directors,
officers and employees;
12
(c)
its
Affiliates’ directors, officers and employees;
and
(d)
its
Representatives.
“ Releases ”
means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of a
Hazardous Substance, oilfield wastes or produced water into or
through the Environment.
“ Representatives
” means, in reference to a Party, its and its
Affiliates’ representatives, agents, legal counsel,
consultants and advisors; and with regard to Vendor includes
Vendor’s Counsel and Vendor’s Investment
Bankers.
“ Required Approvals
” means the Competition Act Approval and the Investment
Canada Approval.
“ Reserves Report (Can)
” means a report (National Instrument 51-101 compliant)
containing estimates of the proved reserves of Petroleum Substances
attributable to the Assets to be prepared by Ryder Scott using
escalating and constant pricing, including a Form 51-101F2 - Report
on Reserves Data by Independent Qualified Reserves Evaluator or
Auditor and a Form 51-101F3 — Report of Management and
Directors on Oil and Gas Disclosure of the Corporation.
“ Reserves Report (US)
” means a report containing estimates of the proved reserves
of Petroleum Substances attributable to the Assets to be prepared
by Ryder Scott.
“ Resource Pools
” means
(a)
cumulative
Canadian exploration expenses;
(b)
cumulative
Canadian development expenses;
(c)
cumulative
Canadian oil and gas property expenses;
(d)
Undepreciated
Capital Cost; and
(e)
non-capital loss
carry forwards;
as those terms are defined in the
Tax Act .
“ Ryder Scott ”
means Ryder Scott Company Petroleum Engineers.
“ SEC ” means the
United States Securities and Exchange Commission.
“ section 338
election ” has the meaning given to that term in
Section 11.4(a).
“ Securities Act of
1933 ” means the United States Securities Act of
1933.
“ Security Interest
” has the meaning given to that term under the Personal
Property Security Act (Alberta).
“ Senior Officers
” means with respect to:
(a)
Vendor, president
and chairman and the vice-presidents;
13
(b)
the Corporation
or any Subsidiary, the president, the senior vice-president and
chief financial officer and the vice-president corporate
development; and
(c)
Purchaser, the
chief executive officer, the president and the vice-president
finance.
“ SMOG Run ”
means the Northrock Standard Measure of Oil and Gas Reserves
Year-End Data Input in respect of the Assets prepared by Unocal for
its 2004 annual report year, a copy of which document is attached
as Schedule 1.1(b).
“ Straddle Period
” means, in the case of the Corporation or any Corporate
Subsidiary, any taxation year and, in the case of any Partnership
Subsidiary, any fiscal year, in any case beginning on or before and
ending after the Working Capital Date.
“ Subsidiaries ”
means the entities listed in Part 1, Part 2 and Part 3 of
Schedule 4.4(c).
“ Syndicated Credit
Agreement ” means the Amended and Restated Credit and
Guarantee Agreement dated as of November 24, 2004 among Unocal
Canada Limited and the Corporation, as borrowers, Unocal, Union Oil
Company of California, Unocal Canada Limited and the Corporation,
as guarantors, the Lenders party thereto, BNP Paribas (Canada), as
Administrative Agent, and The Bank of Nova Scotia, as Syndication
Agent.
“ Tax Act ” means
the Income Tax Act (Canada).
“ Tax Benefit ”
has the meaning given to that term in
Section 10.5(b).
“ Tax Claim ” has
the meaning given to that term in Section 11.5(a).
“ Tax Rate ” has
the meaning given to that term in Section 10.5(b).
“ Tax Returns ”
includes all returns, reports, declarations, elections, notices,
filings, forms, information returns and statements filed or
required to be filed in respect of Taxes.
“ Taxes ” means
all taxes, duties, fees, premiums, assessments, imposts, levies and
other charges of any kind whatsoever imposed by any Government
Authority, together with all interest, penalties, fines, additions
to tax or other additional amounts imposed in respect thereof,
including those levied on, or measured by, or referred to as,
income, gross receipts, profits, capital, transfer, land transfer,
sales, goods and services, harmonized sales, use, value-added,
excise, stamp, withholding, business, franchising, property,
employer health, payroll, employment, health, social services,
education and social security taxes, all surtaxes, all customs
duties and import and export taxes, all license and registration
fees and all employment insurance, health insurance and Canada and
other Government Authority pension plan premiums or
contributions.
“ Title and Operating
Documents” means documents of title including:
(a)
petroleum and/or
natural gas leases, permits and licenses (whether freehold or
Crown) and similar instruments; and
(b)
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
14
agreements;
agreements providing for the gathering, measurement, processing,
compression or transportation of Petroleum Substances; well
operating contracts and surface leases, pipeline easements, road
use agreements and other contracts granting surface
interests;
by virtue of
which the Assets are held or which pertain to the ownership,
development or operation of the Assets.
“ Unaudited Financial
Statements ” means the unaudited consolidated financial
statements of the Corporation and the Subsidiaries for the fiscal
years ended December 31, 2003 and 2004, and the unaudited
consolidated financial statements of the Corporation and the
Subsidiaries for the three month period ended March 31,
2005, in each case consisting of a consolidated balance sheet and a
consolidated statement of earnings prepared in accordance with
generally accepted accounting principles, which financial
statements are attached as Schedule 1.1(c).
“ Undepreciated Capital
Cost ” means “undepreciated capital cost”, as
defined in and for the purposes of the Tax Act.
“ Unocal ” means
Unocal Corporation, a corporation incorporated under the laws of
Delaware.
“ Unused Tax Credits
” has the meaning given to that term in
Section 11.4(e).
“ US$ ” or
“ US Dollars ” means lawful currency of the
United States.
“ Vendor ” means,
collectively, Unocal Canada Limited, a corporation continued under
the laws of Alberta, and Unocal Canada Alberta Hub Limited, a
corporation incorporated under the laws of Alberta.
“ Vendor Indemnified
Persons ” has the meaning given to that term in
Section 10.1(a).
“ Vendor’s
Conditions ” has the meaning given to that term in
Article 8.
“ Vendor’s
Counsel ” means Stikeman Elliott LLP.
“ Vendor’s
Insurance ” has the meaning given to that term in
Section 9.11(a).
“ Vendor’s Interest
Rate ” means the rate per annum for three month
Government of Canada Treasury Bills from time to time, as posted on
Bloomberg screen GGR, plus 0.025% per annum.
“ Vendor’s Investment
Bankers ” means, collectively, CIBC World Markets Inc.
and Waterous & Co.
“ Vendor’s Process
Agent ” has the meaning given to that term in
Section 9.13.
“ Vendor’s Review
Period ” has the meaning given to that term in
Section 3.3(d).
“ Working Capital Date
” means June 30, 2005.
1.2
Certain Rules of
Interpretation
In this Agreement (including the
Schedules):
(a)
all references to
a time are references to local time in Calgary,
Alberta;
15
(b)
except for
references to money amounts in Article 3, and in
Section 6.2(c)(ii) which references shall be to US Dollars, or
as otherwise expressly specified in this Agreement, all references
to money amounts are to Canadian currency;
(c)
references to
Article or Section mean and refer to the specified Article or
Section of this Agreement;
(d)
descriptive
headings or titles of Articles and Sections have been inserted
solely for convenience of reference and are not intended as
complete or accurate descriptions of the content of those Articles
or Sections, and shall not be used in interpreting those Articles
or Sections;
(e)
use of words in
the singular or plural, or with a particular gender, shall include
the other and shall not limit the scope or exclude the application
of any provision of this Agreement, to any Person or Persons or
circumstances as the context otherwise permits;
(f)
whenever a
provision of this Agreement requires an approval or consent by a
Party to this Agreement:
(i)
unless otherwise provided herein,
that approval or consent may not be unreasonably withheld or
delayed; and
(ii)
if notification of that approval
or consent (or the refusal of that approval or consent) is not
delivered within the applicable time limit, then, unless otherwise
expressly specified herein, the Party whose consent or approval is
required shall be conclusively deemed not to have provided its
approval or consent;
(g)
unless otherwise
expressly specified herein, time periods within or following which
any payment is to be made or act is to be done shall be calculated
by excluding the day on which the period commences and including
the day on which the period ends, and by extending the period to
the next Business Day following, if the last day of the period is
not a Business Day;
(h)
whenever any
payment is 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,
that payment shall be made or action taken on the next Business Day
following that day;
(i)
where the words
“including” or “includes” appear in this
Agreement, including the Schedules, those words mean
“including (or includes) without
limitation”;
(j)
any references
herein to an agreement, instrument or writing shall be a reference
to that agreement, instrument or writing, as amended from time to
time prior to the date hereof;
(k)
any reference
herein to a law, statute, regulation or other enactment shall be a
reference to that law, statute, regulation or enactment as amended,
replaced or superseded from time to time;
(l)
all references in
this Agreement to the words “herein”,
“hereby”, “hereof”, “hereto”,
and words of similar import refer to this Agreement as a whole and
not to any particular Article, Section or Schedule unless otherwise
expressly stated; and
16
(m)
where any
conversion of Canadian currency or US Dollars from one to the other
is required, the Parties shall use the average of the Bank of
Canada posted noon spot exchange rates on the Business Day prior to
the Business Day on which the conversion takes place.
1.3
Knowledge
Any reference in this Agreement
(including in the Schedules) to “the knowledge” or
“to the best of the knowledge” of Vendor, the
Corporation or a Subsidiary or of which Vendor, the Corporation or
any Subsidiary is “aware” will be deemed to mean a
reference to the actual knowledge of the applicable individuals set
forth in Part 1 of Schedule 1.3 without any obligation on
those individuals to make investigation or inquiry.
1.4
Entire Agreement
This Agreement, including the
Schedules, constitutes the entire agreement among the Parties
pertaining to the subject matter of this Agreement and supersedes
all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. The Confidentiality
Agreement shall terminate on Closing.
1.5
Applicable Law
This Agreement shall be governed by
and interpreted in accordance with the laws of Alberta and the laws
of Canada applicable therein, and shall be treated in all respects
as an Alberta contract.
1.6
Accounting Principles
Except as otherwise provided
herein:
(a)
references to
generally accepted accounting principles herein means a reference
to principles recommended from time to time; and
(b)
all accounting
terms not otherwise defined in this Agreement have the meanings
assigned to them;
in accordance with generally accepted accounting
principles in the United States.
1.7
Disclosure
Reference to any matter on any
Schedule shall not be deemed to be an acknowledgement by Vendor, or
to otherwise imply, that the matter meets or exceeds any applicable
threshold of materiality or any other relevant
threshold.
1.8
Schedules
The Schedules to this Agreement, as
listed below, are attached to and are an integral part of this
Agreement:
|
Schedule 1.1(a)
|
|
Escrow Agreement
|
|
|
Schedule 1.1(b)
|
|
SMOG Run
|
|
|
Schedule 1.1(c)
|
|
Unaudited Financial Statements
|
|
|
Schedule 1.3
|
|
Vendor Knowledge Individuals
|
|
|
Schedule 4.4(c)
|
|
Subsidiaries
|
|
|
|
|
Part 1
|
Corporate Subsidiaries (Alberta)
|
|
|
|
Part 2
|
Corporate Subsidiary (Nova Scotia)
|
|
|
|
Part 3
|
Partnership Subsidiaries
|
|
|
|
|
|
|
17
|
Schedule 4.5(c)
|
|
Defaults Due to this Agreement
|
|
|
Schedule 4.5(e)
|
|
Change of Control Provisions
|
|
|
Schedule 4.9
|
|
Material Government Authorizations –
Vendor and Unocal
|
|
|
Schedule 4.10
|
|
Benefit Plans
|
|
|
Schedule 4.14
|
|
Environmental Matters
|
|
|
Schedule 4.15(a)
|
|
Permitted Encumbrances
|
|
|
Schedule 4.15(c)
|
|
Notices of Defaults
|
|
|
Schedule 4.15(d)
|
|
Government Proceedings
|
|
|
Schedule 4.15(e)
|
|
Authorizations for Expenditure
|
|
|
Schedule 4.15(g)
|
|
Marketing and Transportation
Agreements
|
|
|
Schedule 4.16
|
|
Material Contracts and Liabilities
|
|
|
Schedule 4.17
|
|
Open Litigation Claims
|
|
|
Schedule 4.18
|
|
Intellectual Property
|
|
|
Schedule 4.19(a)
|
|
Tax Matters
|
|
|
Schedule 4.19(h)
|
|
Tax Elections
|
|
|
Schedule 4.19(i)
|
|
Subpart F Income
|
|
|
Schedule 4.19(j)
|
|
United States Property
|
|
|
Schedule 4.22
|
|
Estimated Resource Pools
|
|
|
Schedule 4.23
|
|
Areas of Mutual Interest
|
|
|
Schedule 5.5
|
|
Material Government Authorizations –
Purchaser and Pogo
|
|
|
Schedule 7.6(e)
|
|
Vendor’s Opinions
|
|
|
Schedule 8.6(e)
|
|
Purchaser’s Opinions
|
|
1.9
Joint and Several
Liability
Unocal Canada Limited and Unocal
Canada Alberta Hub Limited shall be jointly and severally liable
for all of their covenants, liabilities and obligations under this
Agreement.
1.10
Interpretation If Closing Does Not
Occur
If Closing does not occur, each
provision of this Agreement which presumes that Purchaser has
acquired the Purchased Shares shall be construed as having been
contingent on Closing having occurred.
1.11
Conflicts
Except as specifically provided
herein, if there is any conflict or inconsistency between a
provision of the body of this Agreement and that of a Schedule or a
conveyance document, the provision of the body of this Agreement
shall prevail.
1.12
Guarantees
(a)
Unocal hereby
guarantees the performance by Unocal Canada Limited and Unocal
Canada Alberta Hub Limited of all of their covenants, obligations
and liabilities under this Agreement and covenants with Purchaser
that Unocal is and that it shall be directly liable as principal
obligor for the performance of any of those covenants, obligations
and liabilities without necessity or requirement for Purchaser to
pursue or exhaust its remedies or recourse against Unocal Canada
Limited or Unocal Canada Alberta Hub Limited.
(b)
Pogo hereby
guarantees the performance by Purchaser of all of Purchaser’s
covenants, obligations and liabilities under this Agreement and
covenants with Vendor that Pogo is and that it shall be directly
liable as principal obligor for the performance of any of those
covenants, obligations and liabilities without necessity or
requirement for Vendor to pursue or exhaust its remedies or
recourse against Purchaser.
18
2.1
Actions by Vendor and Purchaser
Regarding Purchase
Subject to the terms and conditions
of this Agreement, at the Closing Time:
(a)
Vendor shall
sell, transfer and deliver to Purchaser, and Purchaser shall
purchase and receive from Vendor, the Purchased Shares in
consideration for the payment by Purchaser to Vendor of the
Purchase Price, as adjusted and payable as provided for in this
Agreement; and
(b)
each Party shall
deliver to the other Party all documents required to be delivered
by it at the Closing Time pursuant to Article 7 and
Article 8.
2.2
Place of Closing
The Closing shall take place at the
Closing Time at the offices of Vendor’s Counsel located at
Suite 4300, Bankers Hall West, 888 – 3 rd Street
SW, Calgary, Alberta, or at such other place as may be agreed on in
writing by Vendor and Purchaser.
2.3
Tender
Any tender of documents or money
under this Agreement may be made on the Parties or their respective
counsel and, subject to any express provisions of this Agreement to
the contrary, money shall be tendered by wire transfer of
immediately available funds in the applicable currency specified
herein to the account specified by the Party to which payment is
being made.
3.1
Purchase Price
The amount payable by Purchaser to
Vendor for the Purchased Shares (the “ Purchase Price
”) shall be an aggregate amount equal to:
(a)
US$1,800,000,000
(the “ Base
Price ”);
(b)
plus the Net
Working Capital Amount (if positive); or minus the Net Working
Capital Amount (if negative); minus
(c)
any Distributions
made during the Interim Period.
The Purchase Price shall be subject to
adjustment in accordance with Section 3.3.
3.2
Payment of Purchase
Price
The Purchase Price shall be paid by
Purchaser to Vendor as follows:
(a)
on execution and
delivery of this Agreement, Purchaser shall pay to the Escrow Agent
to be held by the Escrow Agent pursuant to the Escrow Agreement an
amount equal to US$180,000,000 (the “ Deposit ”) as a deposit against
the payment of the Purchase Price; and
(b)
at the Closing
Time, subject to Article 12, Purchaser shall pay to Vendor, an
aggregate amount equal to:
19
(i)
the sum of the Base Price and the
Preliminary Net Working Capital Amount (if positive);
minus
(ii)
the sum of the Deposit (including
interest thereon, less applicable withholding Taxes), the
Preliminary Net Working Capital Amount (if negative) and any
Distributions made during the Interim Period.
The Deposit shall be paid by the
Escrow Agent to Vendor as part of the Purchase Price. Subject
to this Agreement and the Escrow Agreement, the Parties shall cause
the Escrow Agent to deliver the Deposit to Vendor at the Closing
Time.
3.3
Post Closing Adjustment to the Net
Working Capital Amount
(a)
Vendor shall, not
later than three Business Days before the Closing Date, provide to
Purchaser a statement setting forth Vendor’s good faith
estimate (the “ Preliminary Net Working Capital Amount
”) of the
Net Working Capital Amount and the actual amount of the
Distributions made or to be made during the Interim Period.
The amount of those Distributions shall be converted from Canadian
currency into US Dollars as of the date of that statement.
The Preliminary Net Working Capital Amount and the amount of the
Distributions made during the Interim Period provided in that
statement shall be included in calculating the amounts payable by
Purchaser to Vendor at the Closing Time pursuant to
Section 3.2(b)(i) or Section 3.2(b)(ii), as
applicable.
(b)
Vendor, with the
assistance of the Corporation and the Subsidiaries, shall prepare
and deliver to Purchaser, within 30 days after the Closing Date, a
statement setting forth Vendor’s determination of the Net
Working Capital Amount (the “ Final Working Capital Statement
”) based
on:
(i)
the actual information available
from accounting systems of Vendor and the records of the
Corporation and the Subsidiaries; and
(ii)
a conversion of the Net Working
Capital Amount from Canadian currency to US Dollars as of the
effective date of the Final Working Capital Statement.
(c)
Purchaser shall,
within 30 days after Vendor’s delivery of the Final Working
Capital Statement, complete its review of the Final Working Capital
Statement. If Purchaser disputes Vendor’s determination
of any of the Net Working Capital Amount as set forth in the Final
Working Capital Statement, Purchaser will so notify
Vendor, on or before the last Business Day of that 30 day period,
in writing (the “ Purchaser’s Objection ”). That notice
will set forth a specific description of the basis of
Purchaser’s Objection and the adjustments to the Final
Working Capital Statement that Purchaser believes should be
made. If Purchaser does not deliver a Purchaser’s
Objection within that period, the Final Working Capital Statement
shall be conclusive and binding on the Parties.
(d)
Vendor will have
30 days (“ Vendor’s Review Period ”) from its receipt of
Purchaser’s Objection to review and respond to it, and the
Parties will thereafter attempt in good faith to reach an agreement
with respect to any matters in dispute. If Vendor and
Purchaser are unable to resolve their disagreement
within 15 days
following Vendor’s Review Period, they will refer that
disagreement to the Accounting Firm, who will, acting as experts
and not as arbitrators, determine, only with respect to the
remaining differences so submitted, whether and to what extent, if
any, any of the Final Working Capital Statement requires
adjustment.
20
Vendor and Purchaser will direct the
Accounting Firm to use its best efforts to render its determination
within 20 Business Days. The Accounting Firm’s determination
will be conclusive and binding on Vendor and Purchaser. In
resolving any disputed item, the Accounting Firm must not assign a
value to that item greater than the greatest value for that item
claimed by either Vendor or Purchaser or less than the smallest
value for that item claimed by either Vendor or Purchaser.
Vendor and Purchaser will each pay one half of the fees and
disbursements incurred by the Accounting Firm.
(e)
The Net Working
Capital Amount as set forth in the Final Working Capital Statement,
shall be revised to reflect any revisions agreed to by the Parties
or determined by the Accounting Firm. If the Net Working
Capital Amount (including any revisions required to be made to the
Final Working Capital Statement) is:
(i)
greater than the Preliminary Net
Working Capital Amount then Purchaser shall pay Vendor an amount
equal to that difference; or
(ii)
less than the Preliminary Net
Working Capital Amount then Vendor shall pay Purchaser an amount
equal to that difference.
Notwithstanding the foregoing, if
there is a disagreement between Vendor and Purchaser as to any
items in the Final Working Capital Statement which disagreement is
required to be resolved by the Accounting Firm in accordance with
the procedures provided in Section 3.3(d) then no payment
pursuant to paragraph (i) or paragraph (ii) above, as
applicable, shall be required to be made by the applicable Party
unless the difference between the Preliminary Net Working Capital
Amount and the Net Working Capital Amount incorporating the
Accounting Firm’s determinations is greater than
US $1,500,000.
Any payment required pursuant to
this Section 3.3(e) is to be made within five Business Days
following the final determination of the Net Working Capital Amount
rendered by the Accounting Firm or as agreed to by the
Parties. Any payments required pursuant to the foregoing
shall be made together with interest thereon at a rate per annum
equal to the Prime Rate calculated for the period from the Working
Capital Date to but excluding the date of payment. No further
adjustments shall be made to the Purchase Price with respect to the
Net Working Capital Amount. Any such payment (excluding the
part thereof that is interest) shall be treated by Vendor and
Purchaser as an adjustment to the Purchase Price.
(f)
Vendor and
Purchaser shall cooperate and Purchaser shall cause the Corporation
and the Subsidiaries to cooperate to facilitate the preparation and
delivery of the Final Working Capital Statement in accordance with
this Section 3.3. During the period of time from and after the
Closing Date through to the time of delivery of the Final Working
Capital Statement, and, if applicable, the Accounting Firm’s
determinations, Purchaser shall afford, and shall cause the
Corporation and the Subsidiaries to afford, to the Accounting Firm,
Vendor, counsel or financial advisors retained by Vendor in
connection with any adjustment to the Preliminary Net Working
Capital Amount contemplated by this Section 3.3, reasonable
access during normal business hours to all the properties,
Contracts, personnel and Books and Records of the Corporation and
the Subsidiaries and work papers relevant to the adjustment
contemplated by this Section 3.3.
21
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF VENDOR
Vendor represents and warrants to
Purchaser the matters set out below:
4.1
Incorporation and
Registration
(a)
Unocal Canada
Limited is a corporation continued and existing under the ABCA and
Unocal Canada Alberta Hub Limited is a corporation incorporated and
existing under the ABCA. Each of Unocal Canada Limited and
Unocal Canada Alberta Hub Limited is current in the filing of all
necessary corporate returns under the ABCA.
(b)
The Corporation
and each of the Corporate Subsidiaries set forth in Part 1 of
Schedule 4.4(c) is a corporation incorporated and existing
under the ABCA, is current in the filing of all necessary corporate
returns under the ABCA and has all necessary corporate power and
capacity to own and lease the Assets owned and leased by it and to
carry on its Business as presently conducted.
(c)
The Corporate
Subsidiary set forth in Part 2 of Schedule 4.4(c) is an
unlimited liability company existing under the laws of Nova Scotia,
is current in the filing of all necessary company returns and has
all necessary corporate power and capacity to own and lease the
Assets owned and leased by it and to carry on its Business as now
conducted.
(d)
Each of the
Partnership Subsidiaries other than Bennett Energy and Tethys
Energy Partnership (which are formed pursuant to the laws of Utah
and Bermuda, respectively) is a general partnership formed pursuant
to the Partnership Act (Alberta), each of the Partnership
Subsidiaries is validly existing under the laws of its jurisdiction
of formation and each of the Partnership Subsidiaries is duly
organized and has all necessary partnership power and authority to
own and lease the Assets owned and leased by it and to carry on its
Business as presently conducted.
(e)
Neither the
nature of the Business nor the locations or character of the Assets
owned or leased by the Corporation or any of the Subsidiaries
requires the Corporation or any of the Subsidiaries to be
registered, licensed or otherwise qualified as an extra-provincial
or foreign corporation in any jurisdiction where they are not so
registered, licensed or qualified except for any registration,
licence or qualification in any jurisdiction where the sole reason
for that registration, licence or qualification is the ownership by
the Corporation or a Corporate Subsidiary of its interest in the
Partnership Subsidiary that is carrying on business in that
jurisdiction.
(f)
The Corporation
and each of the Subsidiaries is a “private issuer” as
defined in Multilateral Instrument 45-103 “ Capital
Raising Exemptions ” adopted by, among others, the
Alberta Securities Commission.
4.2
Right to Sell
(a)
Vendor is the
sole registered and beneficial owner of the Purchased Shares with
good legal and beneficial title thereto, free and clear of all
Encumbrances and adverse claims other than restrictions on
transfers and permitted number of beneficial owners set out in the
articles of incorporation of the Corporation and any Encumbrances
arising out of any action taken by, or in favour of,
Purchaser.
22
(b)
Vendor has the
exclusive right to sell, assign and transfer the Purchased Shares
as provided in this Agreement.
(c)
At the Closing
Time any restrictions on transfers of the Purchased Shares that are
set out in the articles of incorporation of the Corporation will
have been complied with so as to permit the transfer of the
Purchased Shares to Purchaser.
(d)
On the completion
of the Purchase, Purchaser shall acquire from Vendor good legal and
beneficial title to the Purchased Shares, free and clear of any
Encumbrances and adverse claims, except restrictions on transfers
and permitted number of beneficial owners set out in the articles
of incorporation of the Corporation and any Encumbrances arising
out of any action taken by, or in favour of, Purchaser.
(e)
There is no
contract, option or other right binding on Vendor or which may
become binding on Vendor to sell, assign or transfer the Purchased
Shares or the shares, partnership units or other equity interests
of the Subsidiaries, other than pursuant to this
Agreement.
4.3
Capitalization
(a)
The authorized
capital of the Corporation consists of an unlimited number of
Class A Common Shares, an unlimited number of Class B
Common Shares and an unlimited number of Class A Preferred Shares
of which the following are issued and outstanding:
|
Shareholder
|
|
Class A Common
|
|
Class B Common
|
|
Class A Preferred
|
|
Unocal Canada Limited
|
|
731,659
|
|
62,886,476
|
|
5,000, less the number of Preferred
Shares to be redeemed pursuant to Section 9.4(b) on or before
the Closing Date
|
|
Unocal Canada Alberta Hub
Limited
|
|
29,588
|
|
|
|
|
(b)
The authorized
capital of Northrock Energy Ltd. consists of an unlimited number of
common shares and the authorized capital of 832507 Alberta Ltd.
consists of an unlimited number of Class “A”,
“B”, “C”, “D”, “E”,
“F”, “G”, “H” and
“I” shares.
4.4
Corporation and
Subsidiaries
(a)
The only Persons
in which the Corporation holds shares, units, partnership interests
or other securities are the Subsidiaries.
(b)
The Corporation
is the sole registered and beneficial owner of all of the issued
and outstanding shares of the Corporate Subsidiaries set forth in
Part 1 of Schedule 4.4(c) and the Corporation and/or one
or more of the Subsidiaries are the sole owners of the shares of
each of the Corporate Subsidiaries set forth in Part 2 of
Schedule 4.4(c) and the units of or partnership interests in
each of the Partnership Subsidiaries set forth in Part 3 of
Schedule 4.4(c).
23
(c)
The ownership of
the Subsidiaries is set forth in Schedule 4.4(c).
(d)
Each of the
shares, units and partnership interests referred to in
Section 4.4(b) are free and clear of all Encumbrances other
than restrictions on transfers and permitted number of beneficial
owners set out in the articles of incorporation of the Corporate
Subsidiaries or in the applicable partnership agreement in respect
of a Partnership Subsidiary and any Encumbrances arising out of any
action taken by, or in favour of, Purchaser.
(e)
All of the
Purchased Shares and all of the issued and outstanding shares of
the Corporate Subsidiaries and the units of or the partnership
interests in the Partnership Subsidiaries, as applicable, have been
duly and validly issued and are outstanding as fully paid and
non-assessable shares, units or partnership interests, as
applicable.
(f)
No options,
warrants, pre-emptive rights, commitments, subscriptions or other
rights to purchase issued or unissued shares or other securities of
the Corporation or any of the Corporate Subsidiaries or units of or
partnership interests in any of the Partnership Subsidiaries, or
create any additional class of shares, and no securities or
obligations convertible into or exchangeable for shares or other
securities of or units of or partnership interests in any of the
Corporation or any of the Subsidiaries, have been issued, granted,
authorized, allotted or agreed to be issued or are outstanding
other than:
(i)
in the case of the Purchased
Shares, rights in favour of Purchaser pursuant to this Agreement;
and
(ii)
options to purchase the
Corporation’s Class B Common Shares pursuant to the Northrock
Resources Ltd. Amended and Restated June 2000 Stock Option Plan,
which options will expire and be of no further force or effect on
the Closing.
4.5
Due Authorization
(a)
Vendor has all
necessary corporate power, authority and capacity to enter into
this Agreement and to perform its obligations under this
Agreement.
(b)
The execution and
delivery of this Agreement, the completion of the Purchase and the
performance of Vendor’s obligations under this Agreement have
been duly authorized by all necessary corporate action on the part
of Vendor.
(c)
Except as
provided in Schedule 4.5(c), the execution and delivery of this
Agreement, the completion of the Purchase and the performance of
Vendor’s obligations under this Agreement will not conflict
with or result in the violation or breach of, or render Vendor in
default of, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance
required by or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions
of:
(i)
any provision of Vendor’s
constating documents;
(ii)
any Contract to which Vendor is a
party or by which Vendor is bound that is Material; or
(iii)
any Applicable Laws or licences
applicable to Vendor.
(d)
No Encumbrances,
rights of first refusal or preferential rights to purchase will be
created or triggered by, and no material consent or approval of any
third party will be required
24
in conjunction
with the execution, delivery or performance of obligations under
this Agreement by Vendor except in favour of Purchaser and except
for the Required Approvals.
(e)
Except as
provided in Schedule 4.5(e), the execution and delivery of this
Agreement, the completion of the Purchase and the performance of
Vendor’s obligations under this Agreement will not result in
any “change of control” or similar event or
circumstance under the terms of any Contract to which the
Corporation or any Subsidiary is a party that is
Material.
4.6
Residence of Vendor
Vendor is not a non-resident of
Canada for the purposes of the Tax Act.
4.7
Enforceability of
Obligations
This Agreement constitutes a legal,
valid and binding obligation of Vendor, enforceable against Vendor
in accordance with its terms, subject to bankruptcy, winding-up,
insolvency, moratorium, arrangement, reorganization and other
similar laws affecting creditors’ rights generally, and to
general principles of equity.
4.8
No Advisors or
Consultants
Neither the Corporation nor any
Subsidiary has employed, or is subject to the valid Claim of, any
advisor, finder, consultant or other similar intermediary in
connection with the Purchase who will be entitled to a fee,
commission or other similar payment contingent on the completion of
the Purchase. Vendor is solely responsible for any fee,
commission or other payment that may be due to Vendor’s
Investment Bankers and other advisors in connection with the
Purchase.
4.9
Government
Authorizations
No material Government
Authorizations are required on the part of Vendor or Unocal in
connection with the Purchase or the performance of its other
obligations under this Agreement except for those set forth in
Schedule 4.9.
4.10
Benefit Plans and Labour
Matters
(a)
Except as
disclosed in Schedule 4.10, neither the Corporation nor any of the
Subsidiaries:
(i)
is a party to or bound by or
subject to any agreement or arrangement with respect to Benefit
Plans;
(ii)
is in arrears for any payment,
contribution or assessment required to be made by it pursuant to
any Benefit Plans set out in Schedule 4.10;
(iii)
is a party to or bound by or
subject to any collective bargaining agreement or arrangement with
any labour union or employee association; or
(iv)
is a party to or bound by or
subject to any written employment agreement, written or oral,
consulting or service agreement with or respecting its
Employees.
(b)
No collective
bargaining agreement is currently being negotiated by the
Corporation or any of its Subsidiaries with respect to any
Employee. There are no certification proceedings outstanding
in respect of the Employees and, to the knowledge of Vendor, there
are no attempts to organize or certify any of the Employees.
There is no current or pending labour strike, dispute, work
slowdown or work stoppage against the
25
Corporation or
any of its Subsidiaries or, to the knowledge of Vendor, threatened
against the Corporation or any of its Subsidiaries. To the
knowledge of Vendor, no trade union or employee association has
applied to have the Corporation or any of its Subsidiaries declared
a related or successor employer pursuant to any Applicable
Law.
(c)
To the knowledge
of Vendor, neither the Corporation nor any of its Subsidiaries has
committed any unfair labour practices. No unfair labour
practice complaint, grievance or arbitration proceeding is pending
or, to the knowledge of Vendor, threatened against the Corporation
or any of its Subsidiaries.
(d)
All Benefit Plans
have been administered by the Corporation or any of its
Subsidiaries in material compliance with Applicable Laws and their
respective terms. No promises have been made in respect of
changes to any of the Benefit Plans, other than those that are set
out in the current texts of the Benefit Plans. No Pension
Plan is a multi-employer pension plan as that term is defined in
pension benefits legislation. Neither the Corporation nor any
of its Subsidiaries has ever sponsored or participated in a Pension
Plan that is a registered pension plan.
4.11
Financial Statements
The Unaudited Financial Statements
are, and the Audited Financial Statements delivered pursuant to
Section 9.14 will be:
(a)
complete and
accurate in all material respects;
(b)
in accordance
with the Books and Records; and
(c)
prepared in
accordance with generally accepted accounting principles
consistently applied during the periods involved;
and fairly present or, with respect to the
Audited Financial Statements, will fairly present in all material
respects the consolidated financial position of the Corporation and
the Subsidiaries as of the dates thereof and the consolidated
results of their operations and their cash flows for the periods
then ended.
4.12
Distributions
No Distributions have been made from
or after the Working Capital Date, except for cash Distributions as
may be set forth in the statement to be provided pursuant to
Section 3.3(a).
4.13
Business Carried on in the Ordinary
Course
Since December 31,
2004:
(a)
the Business has
been carried on in the Ordinary Course except with respect to the
sale process commenced by the Corporation as set out in the
Information Memorandum; and
(b)
other than as set
forth in Schedule 4.17, the Business has been conducted in material
compliance with all Applicable Laws.
4.14
Environmental Matters
(a)
On or before the
Closing Time, Vendor shall provide or cause to be provided or made
available to Purchaser all Environmental Documentation in the
possession or control of Vendor or the Corporation or any of the
Subsidiaries in respect of the Business or the Assets produced for
or received by Vendor, the Corporation or the Subsidiaries
since
26
June 1,
2000. To Vendor’s knowledge, except as described in
Schedule 4.14, there are no Material Environmental Liabilities
that have occurred since June 1, 2000 that have not been
remedied.
(b)
Except as set out
in Schedule 4.14, neither the Corporation nor any Subsidiary
has received:
(i)
any Environmental Order which
relates to Environmental Liabilities and which requires any work,
repairs, construction or capital expenditures which is outstanding,
where that Environmental Order has not been complied with in all
material respects; or
(ii)
any demand or notice issued with
respect to the breach of Environmental Laws, which demand or notice
remains outstanding.
(c)
Without
limitation of any other provisions of this Agreement, except as
specifically set forth in this Section 4.14, Vendor makes no
representations or warranties with respect to the extent of any
existing or future liability relating to any Environmental Matter,
Environmental Liability or the application of any Environmental
Laws, including in respect of or relating to Hazardous
Substances.
(a)
Vendor does not
warrant title to the Assets, but does warrant that, to
Vendor’s knowledge, the interests of the Corporation and the
Subsidiaries in and to the Assets are now, and will be at Closing
Date, free and clear of all Encumbrances created by, through or
under Vendor, the Corporation or the Subsidiaries or of which
Vendor is aware other than:
(i)
Permitted Encumbrances;
and
(ii)
other restrictions on transfers
and permitted number of beneficial owners set out in the constating
documents of the Corporation and the Subsidiaries.
(b)
Neither the
Corporation nor any of the Subsidiaries:
(i)
is in default or will be in
default on the completion of the Purchase under any Material
Contract or, to Vendor’s knowledge, any Title and Operating
Document; or
(ii)
has failed to comply with,
perform, observe or satisfy, in any material respect, any term,
condition, obligation or liability which has heretofore arisen
under the provisions of any Material Contract or any Title and
Operating Document;
which defaults or failures could
reasonably be expected to have a Material Adverse
Effect.
(c)
Except as
described in Schedule 4.15(c), neither the Corporation nor any
Subsidiary has received notice of default under, and none of them
is to Vendor’s knowledge in default under, any obligation,
agreement or document or under any order, writ, injunction or
decree of any Government Authority, nor is the Corporation or any
Subsidiary to Vendor’s knowledge in breach of any Applicable
Laws which could reasonably be expected to have a Material Adverse
Effect.
27
(d)
Except as
described in Schedule 4.15(d) or relating to Environmental
Matters disclosed in accordance with Section 4.14 prior to the
date hereof, no action before any Government Authority has been
commenced or, to Vendor’s knowledge, is threatened, against
the Corporation or any Subsidiary which could reasonably be
expected to have a Material Adverse Effect.
(e)
Except as set
forth in Schedule 4.15(e) and except for operating costs
incurred in the Ordinary Course of the Business, there are no
outstanding authorizations for expenditure or other financial
commitments respecting the Assets which are due as at the date
hereof pursuant to which individual expenditures of greater than
$100,000 may be required by the Corporation or any Subsidiary after
the Closing Date.
(f)
To Vendor’s
knowledge, all ad valorem, property, royalties, production,
severance and similar Taxes based on or measured by the ownership
of the Assets, the production of Petroleum Substances from the
Assets or the receipt of proceeds therefrom have been paid and
discharged.
(g)
Without limiting
the generality of the foregoing provisions of this
Section 4.15, except for agreements that can be terminated
without penalty on notice of 90 days or less or as set out in
Schedule 4.15(g), neither the Corporation nor any of the
Subsidiaries is a party to or bound by any Material:
(i)
contracts for the sale of
Petroleum Substances;
(ii)
gas balancing or similar
agreements pertaining to Petroleum Substances;
(iii)
agreements for the transportation,
processing or disposal of Petroleum Substances other than Title and
Operating Documents; or
(iv)
take or pay
arrangements;
relating to the Assets.
(h)
The Corporation
and the Subsidiaries are not party to any Futures Transactions,
either as principal or surety.
(i)
After Closing
there are no support agreements or other services, personnel,
assets or facilities that need to be provided by Vendor or any of
its Affiliates in order for the Corporation and the Subsidiaries to
be able to conduct the Business substantially in the manner as
presently conducted; and no such agreements will exist, it being
acknowledged by Purchaser that Vendor’s Insurance and the
Marketing Agreement, will both terminate on Closing.
4.16
Material Obligations
(a)
Neither the
Corporation nor any Subsidiary is a party to or bound by any
agreement of any nature to acquire any shares or other securities
of any corporation, partnership interests in any partnerships or
any other equity interests or to merge or consolidate with any
other entity, to sell or acquire any assets having a fair market
value in excess of $10,000,000 or to acquire, capitalize or invest
in any business.
28
(b)
Neither the
Corporation nor any Subsidiary has currently guaranteed, endorsed,
assumed or indemnified, contingently or otherwise, the obligations
or indebtedness of any Person except:
(i)
in the Ordinary Course of the
Business;
(ii)
pursuant to the Title and
Operating Documents; and
(iii)
pursuant to the Banking Facilities
to be cancelled or from which the Corporation and any Subsidiary
will be released on or before Closing.
(c)
There exists no
shareholder or other agreement which affects the transferability of
the Purchased Shares and none of the Corporation, any Subsidiary or
Vendor is a party to any voting trust agreement, unanimous
shareholder agreement, share pooling agreement, or other Contract,
commitment, plan, or understanding restricting or otherwise
relating to voting or dividend rights with respect to the Purchased
Shares.
(d)
Neither the
Corporation nor any of the Subsidiaries will have any indebtedness
for borrowed money at the Closing Time.
(e)
Neither the
Corporation nor any of the Subsidiaries will have any Liabilities
at the Closing Time that are Material, whether those Liabilities
are absolute or contingent, other than:
(i)
Environmental
Liabilities;
(ii)
Liabilities under the Title and
Operating Documents and under the Material Contracts listed in
Schedule 4.16;
(iii)
Liabilities incurred or arising in
the Ordinary Course of the Business (including Liabilities arising
in the Ordinary Course of the Business for Taxes);
(iv)
Liabilities described or referred
to in the Unaudited Financial Statements; and
(v)
Liabilities described or referred
to in Schedule 4.16 and in the other Schedules to this
Agreement including the commitments described in
Schedule 4.15(e);
and at the Closing Time no Person
will hold any power of attorney from the Corporation or a
Subsidiary other than powers of attorney granted by a Subsidiary to
the Corporation or another Subsidiary or as may have been provided
under the Title and Operating Documents in the Ordinary Course of
the Business.
4.17
Litigation
(a)
Schedule 4.17 sets forth
a list of open litigation Claims (including those which are the
subject of arbitration and, to Vendor’s knowledge, any
threatened Claims) which, as of the date of this Agreement, have
been duly served on the Corporation or any of the Subsidiaries
where the amounts claimed exceeds or could reasonably be expected
to exceed $500,000. Vendor makes no representations or
warranties with respect to validity or effect of any of those
Claims.
29
(b)
Except as set
forth in Schedule 4.17, there are no unsatisfied judgments
against the Corporation or any Subsidiary or any consent decrees or
injunctions to which the Corporation or Subsidiary is
subject.
4.18
Intellectual Property
As of the date of this Agreement,
Schedule 4.18 sets forth and describes all material
Intellectual Property used in whole or part in the Business and
specifies, for each item, whether the Intellectual Property is
owned by the Corporation or a Subsidiary, or whether the
Intellectual Property is used by the Corporation or a Subsidiary
under a license agreement or other arrangement with another
Person.
(a)
Vendor has caused
the Corporation and the Subsidiaries to duly and
timely:
(i)
file all Tax Returns required to
be filed by them prior to the date here
