SHARE SALE AGREEMENT
IN RESPECT OF
CGGS CANADIAN GAS GATHERING SYSTEMS INC.
BETWEEN:
THE SHAREHOLDERS OF
CGGS CANADIAN GAS GATHERING SYSTEMS INC.
- and -
CGGS CANADIAN GAS GATHERING SYSTEMS INC.
- and -
ABRAXAS PETROLEUM CORPORATION
- and -
CANADIAN ABRAXAS PETROLEUM LIMITED
DATED AS OF THE 29TH DAY OF OCTOBER, 1996
BENNETT JONES VERCHERE
4500 Bankers Hall East
855 - 2nd Street S.W.
Calgary, Alberta
T2P 4K7
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions 1
1.2 Certain Rules of Interpretation 13
1.3 Entire Agreement 14
1.4 Applicable Law and Jurisdiction 14
1.5 Accounting Terms 14
1.6 Knowledge 15
1.7 Liabilities 15
1.8 Joint Rights 15
1.9 Schedules 16
ARTICLE 2 PURCHASE AND SALE
2.1 Action by Vendors and Purchaser 17
2.2 Adjustments to Purchase Price 18
2.3 Closing and Post-Closing Adjustments 19
2.4 Place and Time of Closing 20
2.5 Tender 20
2.6 Section 116 Certificate 20
2.7 Deposit 20
2.8 Limitation 21
2.9 Representations and Warranties;
Material Adverse Damage 21
2.10 [Intentionally Deleted] 22
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE VENDORS AND THE
COMPANY
3.1 Incorporation and Registration 22
3.2 Subsidiaries 22
3.3 Capital 22
3.4 Absence of Conflicting Agreements 23
3.5 Financial Statements 23
3.6 Absence of Unusual Transactions 24
3.7 Absence of Guarantees 25
3.8 Restrictive Covenants 25
3.9 Tax Matters 25
3.10 Equipment Contracts 27
3.11 Real Property and Real Property Leases 27
3.12 Title to Assets 27
3.13 Quiet Enjoyment 27
3.14 Material Contracts 28
3.15 Litigation 28
3.16 Compliance with Terms 28
3.17 Title Documents and Production Sales Contracts 28
3.18 Production and Accounts Receivable 29
3.19 Employment Matters 29
3.20 Employees 29
3.21 Insurance 29
3.22 Copies of Agreements etc. 30
3.23 Bank Accounts, etc. 30
3.24 Corporate Records and Minute Books 30
3.25 Environmental Matters 30
3.26 No Production Penalties 31
3.27 No Excess Gas Deliveries 32
3.28 Prepaid Gas Obligations 32
3.29 Royalty Payments 32
3.30 Gas Balancing Agreements 32
3.31 Production Sale Contracts 32
3.32 Partnerships 32
3.33 Capacity 32
3.34 Capital Expenditures 33
3.35 Engineering Report 33
3.36 [Intentionally Omitted] 33
3.37 No Business in the United States 33
3.38 Due Authorization 33
3.39 Enforceability of Obligations 33
3.40 Consents, Approvals or Authorizations 34
3.41 Finders' Fees 34
3.42 Formation of the Vendors;
Title to the Purchased Shares 34
3.43 Due Authorization 35
3.44 Enforceability of Obligations 35
3.45 Consents, Approvals or Authorizations 35
3.46 Finders' Fees 35
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF ABRAXAS AND THE
PURCHASER
4.1 Incorporation 37
4.2 Due Authorization 37
4.3 Enforceability of Obligations 37
4.4 Absence of Conflicting Agreements 37
4.5 Consents, Approvals or Authorizations 38
4.6 Finders' Fees 38
4.7 Independent Evaluation 38
4.8 Eligibility 38
4.9 Securities Laws 38
ARTICLE 5 SURVIVAL
5.1 Nature and Survival 39
5.2 Reliance 39
ARTICLE 6 PURCHASER'S CONDITIONS PRECEDENT
6.1 Truth and Accuracy of Representations
of Company at the Closing Time 40
6.2 Performance of Obligations 40
6.3 Receipt of Closing Documentation 40
6.4 Consents, Authorizations and Registrations 40
6.5 [Intentionally Omitted] 41
6.6 Agreements Terminated 41
6.7 Closing Opinion 41
6.8 Title Opinion Update 41
6.9 Financing 41
6.10 Officers and Directors 41
6.11 Escrow Agreement 41
6.12 Sale of Excluded Assets 41
6.13 Termination Agreements and Transition Agreement 42
6.14 Material Adverse Damage 42
6.15 No Litigation 42
6.16 Bank Accounts 42
6.17 Debentures 42
ARTICLE 7 VENDORS' CONDITIONS PRECEDENT
7.1 Truth and Accuracy of Representations
of Purchaser at Closing Time 43
7.2 Performance of Obligations 43
7.3 Receipt of Closing Documentation 43
7.4 Consents, Authorizations and Registrations 43
7.5 Closing Opinion 44
7.6 Release of Directors and Officers 44
7.7 Escrow Agreement 44
7.8 Representations and Warranties 44
7.9 No Litigation 44
7.10 Termination Agreements and Transition Agreement 44
7.11 Material Adverse Damage 44
ARTICLE 8 INTERIM PERIOD
8.1 Conduct of Business Prior to Closing 45
8.2 Access for Investigation 48
8.3 Actions to Satisfy Closing Conditions 49
8.4 Waiver of Conditions in Nevis Agreement 49
8.5 Delivery of Debentures to the Representative 49
ARTICLE 9 POST-CLOSING MATTERS
9.1 Claims 49
9.2 Escrow Account 51
9.3 Joint Venture Audits 52
9.4 Stub Period Returns 53
9.5 Change of Name 53
9.6 Tax and Royalty Matters 53
9.7 Repayment of Debentures 55
ARTICLE 10 CONFIDENTIALITY
10.1 Confidential Information 55
10.2 Obligation 56
10.3 Disclosure 56
10.4 Remedies 56
ARTICLE 11 GENERAL
11.1 Covenant of the Vendors 56
11.2 Public Notices 57
11.3 Expenses 57
11.4 Notices 57
11.5 Parties in Interest 60
11.6 Time 60
11.7 Assignment, Successors and Assigns 60
11.8 Further Assurances 60
11.9 Counterparts 60
ARTICLE 12 TERMINATION
12.1 Termination 60
12.2 Effect of Termination 61
ARTICLE 13 ARBITRATION
13.1 Arbitration 61
SHARE SALE AGREEMENT
THIS AGREEMENT is made as of the 29th day of October, 1996
BETWEEN:
THE SHAREHOLDERS OF CGGS CANADIAN GAS GATHERING SYSTEMS INC.
(hereinafter called the "Vendors")
- - and -
CGGS CANADIAN GAS GATHERING SYSTEMS INC., a corporation incorporated under the
laws of Canada (hereinafter called the "Company")
- - and -
ABRAXAS PETROLEUM CORPORATION, a corporation incorporated under the laws of the
State of Nevada (hereinafter called "Abraxas") and CANADIAN ABRAXAS PETROLEUM
LIMITED, a corporation incorporated under the laws of Canada (hereinafter called
the "Purchaser")
RECITALS:
A. The Vendors beneficially own and control all of the
Purchased Shares and the Option.
B. The Vendors desire to sell, and the Purchaser desires to purchase, all of the
Purchased Shares and the Parties desire to terminate the Option, all upon and
subject to the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of premises and covenants
herein set forth, the receipt and sufficiency of which is hereby acknowledged by
the Parties, the Parties agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions
Whenever used in this Agreement, unless there is something inconsistent in the
subject matter or context, the following words and terms shall have the meanings
set out below:
"Abraxas" means Abraxas Petroleum Corporation, a corporation
incorporated under the laws of the State of Nevada;
"Accounting Firm" shall have the meaning ascribed thereto in
Section 2.3(c);
"Act" means the Income Tax Act (Canada) as amended;
"Adjustments" has the meaning ascribed thereto in Section 2.3(a);
"AEUB Approval" means an order of the Alberta Energy and Utilities Board that
section 99 of the Public Utilities Board Act (Alberta) does not apply to the
transactions contemplated herein;
"Affiliate" has the meaning given in the Business Corporations
Act (Alberta), as amended from time to time;
"Agreement" means this Share Sale Agreement, including all schedules, and all
instruments supplementing or amending or confirming this Agreement, and
references to "Article" or "Section" are to the specified Article or Section of
this Agreement;
"Alberta Crown Royalties" has the meaning ascribed thereto in
Section 5.1(b);
"Assets" means all of the assets of the Company including the Petroleum and
Natural Gas Rights, the Miscellaneous Interests and the Tangibles and all other
assets described, referred to, or included expressly or by implication in the
July 31 Balance
Sheet, other than the Excluded Assets;
"Assessment" has the meaning ascribed thereto in Section 9.6(a);
"Audit Notice" has the meaning ascribed thereto in Section
9.3(a);
"Audited Balance Sheet" has the meaning ascribed thereto in
Section 2.3(b);
"Auditors" has the meaning ascribed thereto in Section
2.3(b);
"BDP" means Burnet, Duckworth & Palmer, Barristers and
Solicitors, Calgary, Alberta, solicitors for the Purchaser;
"BJV" means Bennett Jones Verchere, Barristers and Solicitors,
Calgary, Alberta, the solicitors for the Vendors and the Company;
"Business Day" means a day, other than a Saturday, Sunday or statutory holiday,
on which the principal commercial banks located in Calgary, Alberta are open for
business during normal banking hours;
"Claim Notice" has the meaning ascribed thereto in Section
9.1(a);
"Claims" means any claim, demand, action, cause of action, damage, loss, cost,
liability or expense, including reasonable legal fees and all costs incurred in
investigating, defending or pursuing any of the foregoing or any proceeding
relating to any of the foregoing;
"Class A Shares" means Class A shares (without nominal or par
value) in the capital of the Company;
"Class B Shares" means Class B shares (without nominal or par
value) in the capital of the Company;
"Closing" means the completion of the sale and purchase of the
Purchased Shares under and as contemplated in this Agreement;
"Closing Date" means the date on which Closing is to occur (as provided in
Section 2.4) which shall be the Business Day on which all of the conditions
precedent set forth in Articles 6 and 7 have been satisfied or waived in
writing, provided however that in no event will Closing occur earlier than the
second Business Day after the Business Day on which the Section 116 Certificates
are received, or such other date as the Parties may agree as the date upon which
the Closing shall take place;
"Closing Purchase Price" has the meaning ascribed thereto in
Section 2.1;
"Closing Statement" has the meaning ascribed thereto in Section
2.3(a);
"Closing Time" means 10:00 o'clock a.m., local time at the Place of Closing, on
the Closing Date or at such other time as the Parties may agree;
"Company" means CGGS Canadian Gas Gathering Systems Inc., a
corporation incorporated under the laws of Canada;
"Contractual Claim" has the meaning ascribed thereto in
Section 9.1(a);
"Corporate Tax Act" has the meaning ascribed thereto in Section
3.9(h);
"Curtis Mallet" means Curtis, Mallet-Provost, Colt & Mosle,
Attorneys and Counsellors at Law, New York, New York, attorneys
for the Vendors;
"Damages" has the meaning ascribed thereto in Section 9.1(a);
"Debenture Prepayment Agreement" means an agreement between the
Company and the holders of the Old Debentures in the form of
Schedule 6.17;
"Debentures" means all of the debentures to be issued on the Business Day
immediately prior to Closing in payment for the Old Debentures, for an aggregate
principal amount in Canadian dollars equal to the Canadian dollar equivalent of
the aggregate principal amount of the Old Debentures set forth in Schedule
1.1(c) plus interest accrued but unpaid thereon, which Canadian dollar
equivalent shall be calculated based upon the noon rate of exchange for Canadian
interbank transactions established by the Bank of Canada for the Business Day
immediately prior to the Closing Date (or if such rate is for any reason
unavailable, at the spot rate quoted for wholesale transactions by the Company's
bank at approximately noon (Toronto time) on that date in accordance with its
normal practice), and which debentures shall otherwise be in substantially the
form attached as Exhibit "A" to the Debenture Prepayment Agreement;
"Deposit" has the meaning ascribed thereto in Section 2.7(a);
"Encumbrance" means a Royalty, pledge, lien, restriction, charge, security
agreement, lease, title retention agreement, mortgage, encumbrance, charge,
option, imperfection of title or other adverse claim, of any kind or character
whatsoever;
"Engineering Report" means the "Evaluation of the P. & N.G.
Reserves of CGGS Canadian Gas Gathering Systems Inc. (as of
September 1, 1996)" prepared by Sproule Associates Limited;
"Environment" means the components of the earth and includes:
(a) air, land, water, groundwater, soil and subsurface soil;
(b) all layers of the atmosphere;
(c) all organic and inorganic matter and living organisms;
(d) the environment in the workplace; and
(e) the interacting natural systems that include components referred to in
subparagraphsa(a), (b), (c) and (d) above.
"Environmental Approvals" means applicable permits, licences and approvals
required by Governmental Authorities pursuant to the Environmental Laws with
respect to the use of a property or operation of a business;
"Environmental Laws" means all applicable Canadian, Alberta and local laws,
by-laws, rules, regulations, orders, information letters, interim directives,
general bulletins and guidelines (collectively, in this definition, "laws")
relating to the protection of the environment and employee and public health and
safety, including those laws relating to the discovery, development, production,
gathering, use, storage, transmission, transportation, treatment and disposal of
Substances, employee and product safety, the emission, discharge, release or
threatened release of Substances into the air, water or land and clean-up,
remediation and contaminated sites;
"Equipment Contracts" means the motor vehicle leases, equipment leases,
conditional sales contracts, title retention agreements and other similar
agreements relating to equipment between the Company and third Persons;
"Escrow Account" means the account established with the Escrow
Agent in which the Escrow Amount is deposited;
"Escrow Agent" has the meaning ascribed thereto in Section
2.1(f)(i);
"Escrow Agreement" means the Escrow Agreement between Abraxas,
the Purchaser, the Vendors, Feshbach and the Escrow Agent in
substantially the form of Schedule 7.7;
"Escrow Amount" has the meaning ascribed thereto in Section
2.1(f)(i);
"Established Contractual Claim" has the meaning ascribed thereto
in Section 9.2(a);
"Excluded Assets" means the "Assets" as defined in the Nevis
Agreement which are to be purchased by Morrison pursuant to the
Nevis Agreement;
"Excluded Liabilities" means the "Assumed Liabilities" as defined in the Nevis
Agreement which are to be assumed by Morrison pursuant to the Nevis Agreement;
"Facilities Interests" means the undivided participating
interests of the Company in and to each of the Major Facilities
as set forth in Schedule 1.1(a);
"Feshbach" means Bernard Feshbach, an individual residing in Palo
Alto, California;
"Feshbach Consulting Agreement" means the Consulting Agreement made as of the
9th day of March, 1990 between the Company and Feshbach and any amendments
thereto;
"Financial Statements" means the balance sheet, income statement and statement
of changes in financial position of the Company for and in respect of its fiscal
year ending on October 31, 1995 which form part of Schedule 3.5;
"GE Consulting Agreement" means the Consulting Agreement made as of the 9th day
of March, 1990 between the Company and Gas Systems III Corporation and any
amendments thereto;
"GEPT" means Gas Systems I Corporation, a corporation;
"GEPT II" means Gas Systems II Corporation, a corporation;
"Governmental Authority" means each federal, provincial and municipal agency,
board, tribunal, ministry and department having jurisdiction over the Company,
the Assets or any of them;
"Interim Period" means the period from the date of this Agreement
until the Closing Date;
"Investors' Agreements" means collectively:
(a) the Unit Subscription Agreement and all amendments
thereto;
(b) the Shareholders Agreement dated March 9, 1990 between all
of the parties to the Unit Subscription Agreement and all
amendments thereto;
(c) three Class B Stock Subscription Agreements each dated March 9, 1990 between
the Company and GEPT, Morrison and Feshbach, respectively and all amendments
thereto;
"Jefferies" means Jefferies & Company Inc., a company organized
and existing under the laws of the State of Delaware;
"Jefferies Indemnification Letter" has the meaning ascribed
thereto in Section 3.7;
"Joint Venture Audit" has the meaning ascribed thereto in Section
9.3(a);
"July 31 Balance Sheet" means the unaudited balance sheet for the Company as at
the close of business on July 31, 1996 restated to exclude the Excluded Assets
(determined without regard to whether any of the Company's accounts receivable
were or were not collected after July 31, 1996) and the Excluded Liabilities
(determined without regard to whether any of the Company's liabilities were or
were not settled or paid after July 31, 1996), which forms part of Schedule 3.5;
"Lands" means collectively all of the lands owned by the Company other than
lands included in the Excluded Assets, and includes the lands referred to in the
Property Schedule and the Petroleum Substances within, upon or under such lands,
together with the right to explore for and produce such Petroleum Substances;
"Leases" means collectively all of the leases (including gas storage leases),
options for leases, subleases, licences (including exploratory licences of
occupation) and documents of title (or any replacements, renewals or extensions
thereof or leases derived therefrom) covering the Lands and owned by the
Company, including those described 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 or unitized but excluding
any included in the Excluded Assets;
"Major Facilities" means the gathering, compression and
transportation facilities described in Schedule 1.1(a);
"Management Agreements" means collectively:
(a) the Administration Agreement dated March 9, 1990 between the Company and
Morrison and the Management Agreement dated March 9, 1990 between the Company
and Morrison and all amendments to either of such agreements (herein
collectively the "Morrison Agreements"); and
(b) the GE Consulting Agreement; and
(c) the Feshbach Consulting Agreement.
"Material" means, when used with reference to any contract, transaction,
agreement, change, commitment or effect, that the economic or monetary value
thereof to the Company is $500,000 or more;
"Material Adverse Effect" means any adverse change in the financial condition,
results of operations, assets, liabilities, or business of the Company that is
or may reasonably be expected to be Material to the Company;
"Material Contract" means the Management Agreements, the Investors' Agreements
and any other contract or commitment whether oral or written, involving payment,
whether absolute, contingent or otherwise, to or by the Company in excess of
$500,000 over the term of the contract or commitment or any commitment;
"Miscellaneous Interests" means the entire right, title and interest of the
Company in and to all property, assets and rights (other than the Petroleum and
Natural Gas Rights or the Tangibles) pertaining to the Petroleum and Natural Gas
Rights or the Tangibles or any rights relating thereto and to which the Company
is entitled, including such interests in:
(a) all contracts, agreements, books, records, title opinions and reports, lease
and land files, compilations, surveys, regulatory filings and other documents
(including agreements for the construction, ownership and operation of the Major
Facilities) relating directly to the Petroleum and Natural Gas Rights and the
Tangibles and any rights in relation thereto;
(b) all subsisting rights to enter upon, use and occupy the surface of the
Lands, any lands with which the Lands have been pooled or unitized, any lands
upon which the Tangibles are located or any lands which are used to gain access
to any of the foregoing;
(c) all subsisting rights to carry out any operations relating to the Lands or
any lands with which the Lands have been pooled or unitized or lands upon which
the Tangibles are located including all well licences, rights of way, crossing
agreements and easements;
(d) all Wells, including the well bores of the Wells;
(e) all subsisting disposal and injection leases;
(f) all geological, engineering, geophysical, seismic and other
reports and data;
(g) all Petroleum Substances produced from the Lands (or any lands with which
the Lands have been pooled or unitized) which are placed into tanks or storage
after August 1, 1996;
(h) all intangible assets of any kind associated with any of the
foregoing;
but excluding any such interests relating to the Excluded Assets;
"Morrison" means Morrison Petroleums Ltd., a corporation
continued under the laws of Alberta;
"Nevis Agreement" means the agreement attached as Schedule 6.12;
"Nevis Proceeds" means the net cash proceeds received by the Company from the
sale of the Excluded Assets:
(a) plus the aggregate amount of cash receipts by the Company (other than the
said net cash proceeds from the sale of the Excluded Assets) during the period
from August 1, 1996 until the closing of the transactions contemplated by the
Nevis Agreement insofar as the said receipts relate to the "Business" as defined
in the Nevis Agreement, and minus the aggregate amount of cash payments by the
Company during the period from August 1, 1996 until the closing of the
transactions contemplated by the Nevis Agreement insofar as the said payments
relate to the "Business" as defined in the Nevis Agreement;
(b) minus the aggregate of:
(i) all legal, accounting, finders' and other fees and expenses
incurred or paid by the Company in connection with the sale of the Excluded
Assets and the within sale of the Purchased Shares; and
(ii) the amount by which the aggregate fees payable under the
Management Agreements in respect of the period commencing on August 1, 1996 and
ending on the day immediately before the Closing exceed $200,000 for each
complete calendar month (or a pro rata amount for a partial month);
"Notice" has the meaning ascribed thereto in Section 11.4;
"Notifying Party" has the meaning ascribed thereto in
Section 9.1(a);
"Offering Memorandum" means the Offering Memorandum of Abraxas
and the Purchaser related to the issuance and sale of
approximately U.S. $200 Million of senior notes;
"Old Debentures" means all of the debentures which are as of the date of this
Agreement uncancelled and which were issued pursuant to the Unit Subscription
Agreement or the Option Agreement, in the principal amounts set forth in
Schedule 1.1(c);
"Option" means the rights of GEPT II, Morrison and Feshbach pursuant to Section
1.1 of the Option Agreement and "Option Agreement" means that certain Option
Agreement dated March 9, 1990 between all of the parties to the Unit
Subscription Agreement (other than the Company) and GEPT II and all amendments
thereto;
"Parties" means the Company, the Vendors, Abraxas and the
Purchaser collectively;
"Party" means either the Company, the Vendors collectively or
Abraxas and the Purchaser collectively;
"Permitted Encumbrances" means:
(a) easements, rights of way, servitudes, restrictions or other similar rights
in land, including rights of way and servitudes for highways and other roads,
railways, sewers, drains, gas and oil pipelines, gas and water mains, electric
light, power, telephone, telegraph or cable television conduits, poles, towers,
wires and cables;
(b) the rights reserved to or vested in any grantor, government or other public
authority by the terms of any Lease or by any statutory provision, including any
rights to terminate any Lease or to require annual or other periodic payments as
a condition of the continuance thereof;
(c) liens imposed by statute securing the payment of Taxes other than in respect
of Taxes which are now due or hereafter become due in respect of a period ending
at or prior to the Closing Date;
(d) the Regulations and any rights reserved to or vested in any Governmental
Authority to control or regulate any of the Assets in any manner, including
legally binding requirements imposed by statutes or Governmental Authorities
concerning rates of production from operations on any of the Lands or otherwise
affecting recoverability of Petroleum Substances from the Lands;
(e) 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 production sales contracts or other contracts for the sale of
Petroleum Substances which are described in Schedule 3.31 or which are
terminable on not more than 60 days' notice;
(f) 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
Assets in any manner and all applicable laws, rules and orders of any
Governmental Authority;
(g) undetermined or inchoate liens (including, processors', operators',
mechanics', builders', materialmens' 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 the Company's proportionate share
of the costs and expenses of such operations except in respect of costs now due
or delinquent or which become due or delinquent and relate to a period ending at
or prior to the Closing Date;
(h) penalties which have arisen under operating procedures and similar
agreements as a consequence of elections by the Company prior to the Closing
Date not to participate in operations on the Lands to which the penalty applies,
and which are described in the Property Schedule;
(i) liens and security interests granted in the ordinary course of business to a
public utility, municipality or Governmental Authority in connection with
operations pertaining to the Assets;
(j) all Encumbrances (including lessor's royalties) described in
the Property Schedule;
(k) all Encumbrances, exceptions, deficiencies and
qualifications set forth in the Title Opinions; and
(l) other Encumbrances which are not, in the aggregate,
Material;
"Person" means any individual, sole proprietorship, partnership, unincorporated
association, unincorporated syndicate, unincorporated organization, trust, body
corporate, natural person in his capacity as director, trustee, executor,
administrator or other legal representative, including any shareholder of the
Company or any affiliate or employee of an officer or manager of the Company;
"Petroleum and Natural Gas Rights" means all of the Company's working interests,
royalty interests, production payments, profit and net profit interests,
reversionary interest and other in rem and contractual interests of the Company,
whether absolute or contingent, legal or beneficial, in the Leases and Lands,
including those described in the Property Schedule but excluding the Excluded
Assets;
"Petroleum Substances" means petroleum, natural gas and all related hydrocarbons
(including, without limitation, all liquid hydrocarbons) and all other
substances, whether liquids, gaseous or solids and whether hydrocarbons or not
(except coal but including sulphur) produced in association with such petroleum,
natural gas or related hydrocarbons;
"Place of Closing" means the offices of Cahill Gordon & Reindel at 80 Pine
Street, New York, New York, or such other place as may be mutually agreed to by
the Parties;
"Preferential Right" means an option or preferential right of purchase, right of
first refusal or similar pre-emptive rights to purchase the Assets or any of
them;
"Prime Rate" means the rate of interest established from time to time by the
Canadian Imperial Bank of Commerce at its main branch in Calgary, Alberta, as
its prime or reference lending rate for Canadian dollar commercial loans in
Canada;
"Property Schedule" means the schedule attached as Schedule
1.1(b);
"Purchase Price" means the cash consideration which will be paid by the
Purchaser to the Vendors, which shall be equal to the Unadjusted Purchase Price
net of the Adjustments as finally settled as contemplated in Section 2.3 and
minus the adjustments if any made as contemplated in Section 2.9;
"Purchased Shares" means 2,813,738 Class A Shares and
937,910.6663 Class B Shares;
"Purchaser" means Canadian Abraxas Petroleum Limited, a
corporation incorporated under the laws of Canada;
"Real Property" means the real property listed in Schedule
1.1(b);
"Real Property Leases" means the real property leases listed in
Schedule 1.1(b);
"Receiving Party" has the meaning ascribed thereto in
Section 9.1(a);
"Refund" has the meaning ascribed thereto in Section 9.6(e);
"Regulations" means all statutes, laws, rules, orders and regulations in effect
from time to time and made by Governmental Authorities having jurisdiction over
the Company or the Assets;
"Representative" has the meaning ascribed thereto in Section 1.8;
"Royalties" means all royalties, burdens, profits interests, production payments
and similar interests payable to the Crown, lessors and other Persons in respect
of or relating to the production or sale of Petroleum Substances;
"Schedule" has the meaning ascribed thereto in Section 1.9;
"Section 116 Certificate" means a certificate as contemplated in
Section 116 of the Act;
"Securities" means collectively the Purchased Shares, the Option,
the Old Debentures and the Debentures;
"Substance" means petroleum, natural gas, or other hydrocarbons, any
contaminant, pollutant, waste, hazardous waste, toxic substance, dangerous good
or hazardous substance that is likely to cause harm or degradation to the
environment or risk to human health or safety;
"Substantial" and "Substantially", when used in Sectionsa6.1 and 7.1 with
reference to the truth and correctness of a Party's representations and
warranties, mean that the aggregate adverse effect of the untruth or
incorrectness of all of the Party's representations and warranties does not
exceed $3 Million, measured by reference to the cost of making such
representations and warranties true and correct;
"Tangibles" means:
(a) the interests of the Company in and to all tangible depreciable property and
assets which 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, processing, transmission, or
treatment of such Petroleum Substances including production tubing, wellheads,
pipelines, flowlines, gathering systems, batteries, plants, and
other equipment, but excluding the Major Facilities and the
Excluded Assets; and
(b) the Facilities Interests;
"Tax Returns" means all returns, reports, declarations, elections, filings,
information returns and statements required to be filed in respect of Taxes;
"Taxes" includes all income, capital, goods and services, excise, property and
other taxes, duties, fees, premiums, assessments, imposts, levies and other
charges of any kind whatsoever imposed or exigible by or payable to any taxing
or other governmental authority or agency within or outside of Canada, together
with all interest, penalties or additional amounts imposed in respect thereof;
"Termination Agreements" means collectively:
(a) an agreement between the Company and Morrison to
terminate the Morrison Agreements, in the form of Schedule
6.13(a);
(b) an agreement between the Company and Feshbach to
terminate the Feshbach Consulting Agreement, in the form of
Schedule 6.13(b);
(c) an agreement between the Company and Gas Systems III Corporation to
terminate the GE Consulting Agreement, in the form of Schedule 6.13(c); and
(d) an agreement between the Company and the Vendors to
terminate the Investors' Agreements and the Option Agreement, in
the form of Schedule 6.13(d);
"Title Opinions" means collectively:
(i) the title opinion of BJV dated September 10, 1996 and entitled "Title
Opinion" in respect of certain Petroleum and Natural Gas Rights owned by CGGS
Canadian Gas Gathering Systems Inc. (herein the "BJV Title Opinion");
(ii) the title opinions of Code Hunter, Barristers and Solicitors, dated
July 25, December 16 and December 18, 1991 addressed to the Company, with
respect to certain of the Petroleum and Natural Gas Rights; and
(iii) the title opinion of Howard Mackie, Barristers and Solicitors, dated July
25, 1991 addressed to the Company and Novalta Resources Inc., with respect to
Petroleum and Natural Gas Rights in the Sundre area;
"Transition Agreement" means the Transitional Services Agreement to be entered
between Morrison and the Purchaser in the form of Schedule 6.13(e);
"Unadjusted Purchase Price" has the meaning ascribed thereto in
Section 2.1;
"Unit Subscription Agreement" means that certain Unit Subscription Agreement
dated March 9, 1990 between the Company and the Vendors (other than GEPT II) and
all amendments thereto;
"Vendors" means collectively the persons listed in Schedule
1.1(c);
"Wells" means all abandoned, producing, shut-in, suspended, injection, water
source and disposal wells located on the Lands or any lands with which the Lands
have been pooled or unitized, including the wells described in the Property
Schedule; and
"Working Capital" means the aggregate of:
(a) the difference between:
(i) the amount of the Company's current assets as set forth
on the July 31 Balance Sheet;
and
(ii) the aggregate of:
(A) the amount of the Company's current
liabilities as set forth in the July 31 Balance Sheet; and
(B) the sum of $200,000; and
(b) the interest income of the Company actually earned on an accrual basis
during the period from and including August 1, 1996 until but excluding the
Closing Date.
1.2 Certain Rules of Interpretation
(a) Unless otherwise specified, all references to money amounts
are to Canadian currency.
(b) The descriptive headings of Articles and Sections are inserted solely for
convenience of reference and are not intended as complete or accurate
descriptions of content and shall not be used to interpret the provisions of
this Agreement.
(c) The use of words in the singular or plural, or with a particular gender,
shall not limit the scope or exclude the application of any provision of this
Agreement or a Schedule to such Person or Persons or circumstances as the
context otherwise permits.
(d) Whenever a provision of this Agreement or a Schedule requires an approval or
consent by a party and notification of such approval or consent is not delivered
within the applicable time limit, then, unless otherwise specified, the party
whose consent or approval is required shall be conclusively deemed to have
withheld its consent or approval.
(e) Unless otherwise specified, 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.
(f) 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.
(g) The words "including" and "includes" shall be deemed to mean "including
without limitation" and "includes without limitation" respectively.
1.3 Entire Agreement
This Agreement, including the Schedules to this Agreement, together with the
agreements and other documents to be delivered pursuant to this Agreement,
constitute the entire agreement between the Parties pertaining to the subject
matter hereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties other than, subject to
Section 10.1, the Confidentiality Agreement dated May 28, 1996 between the
Purchaser and the Company (the "Confidentiality Agreement"). The Confidentiality
Agreement shall terminate if and when Closing occurs. There are no warranties,
representations or other agreements between the Parties in connection with the
subject matter hereof except as specifically set forth in this Agreement and in
any agreement or document delivered pursuant to this Agreement. No supplement,
modification, waiver, amendment or termination of this Agreement shall be
binding unless executed in writing by the Parties.
1.4 Applicable Law and Jurisdiction
This Agreement shall be construed in accordance with the laws of the Province of
Alberta and the laws of Canada applicable in the Province of Alberta (without
giving effect to its conflicts of law rules) and shall be treated, in all
respects, as an Alberta contract. Subject to Article 13, each of the Parties
irrevocably attorns and submits to the non-exclusive jurisdiction of any Alberta
court sitting in Calgary in any action or proceeding arising out of or related
to this Agreement and irrevocably agrees that all claims in respect of any such
action or proceeding shall be heard and determined in such Alberta court. Each
of the Parties irrevocably waives any "inconvenient forum" or similar defence to
the maintenance of such action or proceeding.
1.5 Accounting Terms
All accounting terms not otherwise defined in this Agreement have the meanings
assigned to them in accordance with Canadian generally accepted accounting
principles.
1.6 Knowledge
Where a representation or warranty is made in this Agreement on the basis of the
knowledge or awareness of the Company, such knowledge or awareness consists of
the knowledge that each and every current officer, manager and supervisor of the
Company (or of Morrison to the extent he or she has knowledge of the affairs of
the Company) has or ought to have after diligent inquiry (which shall not
include a physical inspection of the Assets specifically for the purpose of the
transaction), but does not include the knowledge of any other Person or Persons.
1.7 Liabilities
(a) The obligations and liabilities of each Vendor hereunder shall be separate,
and not joint, several or joint and several. Except where an obligation or
liability hereunder is the obligation or liability of a particular Vendor
because it arises out of, results from or is in any manner connected with (i) a
breach or incorrectness of a particular Vendor's representations and warranties
set forth in Sections 3.42 to 3.46 inclusive, (ii) the breach by a particular
Vendor of any of its covenants or agreements hereunder or (iii) a claim based on
the fraud of a particular Vendor, each Vendor shall be separately liable for a
percentage of the obligation or liability equal to the particular Vendor's share
of the Purchase Price set forth in Schedule 1.1(c).
(b) The obligations and liabilities of Abraxas and the Purchaser hereunder are
joint and several. Any of the Vendors, the Representative and the Company may
bring separate actions against either Abraxas or the Purchaser without first
having proceeded against the other, in respect of any such obligations or
liabilities, and shall not be required to exhaust their recourse against either
Abraxas or the Purchaser before being entitled to performance from the other.
1.8 Joint Rights
(a) The Vendors hereby, and pursuant to that certain Representation Agreement
dated as of the Closing Date between the Vendors and Feshbach, appoint Feshbach
as their representative (herein the "Representative") who shall have full power
and authority to make all decisions relating to adjustments provided in Article
2, to exercise elections and options and take all actions necessary or permitted
to be taken pursuant to Article 9, to undertake the defence or settlement of any
claims for which the Vendors may be required to indemnify the Purchaser, to
receive the payments and prepayments contemplated to be made to the Vendors
pursuant to the provisions of this Agreement, including Sections 2.1, 2.3, 2.7
and 9.7, to waive any or all of the conditions precedent set forth in Article 7
on behalf of the Vendors other than Morrison and to take all such other actions
provided herein or in the Escrow Agreement to be taken by the Representative
(and any other actions reasonably related or ancillary thereto), including the
power to execute and deliver the Escrow Agreement and such other documents as
may be necessary for the foregoing purposes, provided however that the
Representative shall not in any event have any authority to waive, on behalf of
Morrison, any or all of the conditions precedent set forth in Article 7. The
Vendors hereby authorize the Representative to deliver the Debentures to the
Company marked paid-in-full upon payment of the principal and all interest
accrued but unpaid thereon as contemplated in Section 9.7.
(b) All actions to be taken by the Vendors herein except as may be limited
by Section 1.8(a) may be taken by the Representative. The Vendors also
irrevocably authorize the Representative to be the recipient of any Notice
required to be given or made by the Purchaser to any of the Vendors hereunder,
and any Notice received by the Representative shall be deemed for all purposes
to be received by all of the Vendors.
(c) If the Representative resigns from such position, the Vendors shall
promptly select another person from among the Vendors (or their heirs,
executors, administrators, personal representatives, successors or assigns) to
fill such vacancy. All decisions and actions by the Representative, including
any agreement between the Representative and the Purchaser relating to any
negotiated adjustment of the Purchase Price, any defence or settlement of any
claims for which a Vendor or the Vendors may be required to indemnify the
Purchaser, any decision, action or agreement to be made or taken under the
Escrow Agreement, the Escrow Agreement or any other action provided herein to be
taken by Representative, shall be binding upon all of the Vendors, and no Vendor
shall have the right as between such Vendor and Purchaser to object, dissent,
protest or otherwise contest the same.
(d) The provisions of this Section 1.8 are independent and severable, are
irrevocable and are coupled with an interest running in favour of the Purchaser
and shall be enforceable notwithstanding any rights or remedies that any Vendor
may have in connection with the transactions contemplated by this Agreement.
Damages as the remedy for any breach of the provisions of this Section 1.8 would
be inadequate, with the result that the Purchaser shall be entitled to temporary
and permanent injunctive relief without the necessity of proving damages if the
Purchaser brings an action to enforce the provisions of this Section 1.8.
(e) The provisions of this Section 1.8 shall be binding upon the heirs,
executors, administrators, personal representatives, successors and assigns of
each Vendor. All fees and expenses of or incurred by the Representative shall be
paid by the Vendors from sources other than the Escrow Amount.
1.9 Schedules
The following schedules to this Agreement (herein collectively
the "Schedules"), as listed below, are incorporated in this Agreement:
Schedule Description
Schedule 1.1(a) Major Facilities
Schedule 1.1(b) Property Schedule and List of Wells
Schedule 1.1(c) Vendors and Securities
Schedule 3.5 Financial Statements
Schedule 3.6 Financial Commitments and AFEs
Schedule 3.9 Non-Restricted Resource Properties
Schedule 3.10 Equipment Contracts
Schedule 3.14 Material Contracts
Schedule 3.15 Litigation
Schedule 3.20 Employees
Schedule 3.21 Insurance
Schedule 3.23 Bank Accounts
Schedule 3.25 Environmental Matters
Schedule 3.31 Production Sale, Processing,
Transportation and Other Contracts
Schedule 6.7(a) BJV Opinion
Schedule 6.7(b) Vendors' Counsel's Opinion
Schedule 6.8 Title Opinion Update
Schedule 6.10 Release
Schedule 6.12 Nevis Sale Agreement
Schedule 6.13 Termination Agreements and Transition
Agreement
Schedule 6.17 Debenture Prepayment Agreement
Schedule 7.5(a) BDP Opinion
Schedule 7.5(b) Cox & Smith Opinion
Schedule 7.6 Release
Schedule 7.7 Escrow Agreement
ARTICLE 2
PURCHASE AND SALE
2.1 Action by Vendors and Purchaser
In accordance with this Agreement, the Vendors shall sell, transfer, assign,
convey and deliver to the Purchaser, and the Purchaser shall purchase from the
Vendors, the Purchased Shares, and the Vendors shall cause the Option to be
terminated, for an aggregate purchase price of $115 Million (the "Unadjusted
Purchase Price"), subject to:
(a) increases in respect of Working Capital, the Nevis Proceeds
and interest as provided in Section 2.2;
(b) decreases in respect of the principal amount of the Debentures plus interest
accrued but unpaid thereon as at the Closing Date as provided in Section 2.2;
(c) decreases, if any, as provided in Section 2.9; and
(d) a decrease equal to $4,047,088, being the aggregate amount of interest,
expressed in Canadian dollars, paid by the Company, on the Old Debentures on or
about October 1, 1996 in respect of the period commencing on August 1, 1996 and
ending on September 30, 1996;
(as so adjusted for Closing, the "Closing Purchase Price"). Each Vendor shall be
entitled to the percentage of the Purchase Price set forth opposite its name in
Schedule 1.1(c). At the Closing Time, upon and subject to the terms and
conditions of this Agreement:
(e) the Vendors shall transfer and deliver to the Purchaser the share
certificates representing all of the Purchased Shares duly endorsed in blank for
transfer, or accompanied by an irrevocable security transfer power of attorney
duly executed in blank, in either case by the holder of record thereof, and the
parties to the Option Agreement shall execute and deliver an agreement
terminating the Option, and shall take such steps as shall be necessary to cause
the Company to enter the Purchaser or its nominee(s) upon the books of the
Company as the holder of the Purchased Shares and to issue one or more share
certificates to the Purchaser or its nominee(s) representing the Purchased
Shares; and
(f) the Purchaser shall pay the Closing Purchase Price as
follows:
(i) $5.75 Million (herein the "Escrow Amount") shall be paid to Montreal
Trust Company of Canada, as the escrow agent (herein the "Escrow Agent"), to be
held and distributed pursuant to the Escrow Agreement; and
(ii) the remainder of the Closing Purchase Price shall be paid to the
order of the Representative by wire transfer in immediately available funds (to
an account at a financial institution to be designated by the Representative not
later than 2 Business Days prior to Closing) and forthwith thereafter paid by
the Representative to the order of each Vendor in the respective amounts set
forth in Schedule 1.1(c) by wire transfer in immediately available funds to the
account designated by each Vendor at least 2 Business Days prior to Closing.
2.2 Adjustments to Purchase Price
(a) The Unadjusted Purchase Price shall be increased by an
amount equal to the aggregate of:
(i) the Working Capital; and
(ii) the Nevis Proceeds.
(b) The Unadjusted Purchase Price shall be increased by an amount equal to
interest on the Unadjusted Purchase Price at the Prime Rate from and including
August 1, 1996 to but excluding the Closing Date, calculated monthly and not
compounded.
(c) The Unadjusted Purchase Price shall be reduced by an amount equal to the
principal amount of the Debentures plus interest accrued but unpaid thereon as
at the Closing Date.
(d) The unadjusted Purchase Price shall be decreased as set
forth in Section 2.1(d).
2.3 Closing and Post-Closing Adjustments
(a) The Company shall initially prepare and, not later than 5 Business Days
prior to the Closing Date, deliver a draft statement of Closing adjustments
(herein the "Closing Statement") as contemplated in Sections 2.1(a) and (b), to
the Purchaser for review. The Representative and the Purchaser shall cooperate
in settling and agreeing to the amounts to be set forth on the Closing Statement
to be used pursuant to the provisions of this Section 2.3. The Closing Statement
shall be utilized for the purpose of settling for Closing the adjustments to be
made pursuant to Sectiona2.2 (herein the "Adjustments") and shall also set forth
the adjustments, if any, to be made pursuant to Section 2.9.
(b) Forthwith after Closing, in order to settle the Adjustments finally and
thereby to settle the Purchase Price, the Purchaser and the Representative shall
cause the Adjustments, including the July 31 Balance Sheet insofar as it relates
to the Adjustments, to be audited jointly by their respective auditors (herein
the "Auditors"), in accordance with generally accepted Canadian auditing
standards. The Representative and the Purchaser shall cooperate fully with such
audit so as to cause the Auditors to complete such audit within 90 days after
the Closing Date. The Representative and the Purchaser shall have the
opportunity, at their own expense, to review the work papers of the Company and
the Auditors relating to such audit. If the Purchaser and the Representative
agree with all changes resulting from the said audit, the July 31 Balance Sheet
insofar as it relates to the Adjustments as so audited and changed (herein the
"Audited Balance Sheet") shall for the purposes of this Article 2 be deemed to
be the July 31 Balance Sheet as revised by virtue of such audit and the
Adjustments shall be recalculated to take all revisions resulting from the Audit
into account. If either or both of the Purchaser and the Representative do not
agree with any of the said changes resulting from the said audit, or their
respective Auditors do not agree as to any matter, either the Purchaser or the
Representative may, within 15 Business Days after receipt by it or them of the
Audited Balance Sheet and the statement of the recalculated Adjustments or
notice from one of the Auditors of any such disagreement, give written notice
(an "Audit Notice") of any such disagreement, with reasons, to the other Party.
If neither the Purchaser nor the Vendor notifies the other of any disagreement
within 15 Business Days after its receipt of the Audited Balance Sheet and the
recalculated Adjustments they shall be deemed to have accepted the Audited
Balance Sheet and the recalculated Adjustments as so changed. The Purchaser and
the Representative shall have reasonable access to the other's records and the
records of the Company in order to resolve any disagreements.
(c) If a disagreement is made the subject of an Audit Notice and the Purchaser
and the Representative fail to resolve such dispute within 10 Business Days
after the date on which the Purchaser or the Representative gave an Audit Notice
with respect to the proposed change, then the Calgary office of Price
Waterhouse, Chartered Accountants (herein the "Accounting Firm"), shall be
engaged forthwith to resolve any remaining disputes. The Accounting Firm shall
be required to render its decision within 25 Business Days after the dispute is
referred to it. The decision of the Accounting Firm shall be final and binding.
The fees and expenses of the Accounting Firm shall be shared equally by the
Vendor and the Purchaser.
(d) Payment of any amount arising by virtue of changes in the July 31 Balance
Sheet or the Adjustments pursuant to this Section 2.3 shall be subject to
Sectiona116 of the Act, shall be made within 10 Business Days after the disputed
portion has been agreed upon by the Parties or determined by the Accounting Firm
pursuant to this Section 2.3, and shall include in addition an amount equal to
interest at the Prime Rate calculated from the Closing Date to the date of
payment.
2.4 Place and Time of Closing
The Closing shall take place at the Place of Closing on the Closing Date.
2.5 Tender
Any tender of documents or money pursuant to this Agreement may be made upon the
Parties or their respective counsel and, subject to Section 2.1(e), money shall
be tendered by official bank draft drawn upon a Schedule 1 Canadian chartered
bank.
2.6 Section 116 Certificate
The Vendors shall, prior to Closing, make reasonable efforts to obtain Section
116 Certificates in respect of the Purchase Price.
2.7 Deposit
(a) The Parties acknowledge that the Purchaser has paid a deposit of $2 million
(herein the "Deposit"), which shall be held in an interest-bearing account by
the Representative and disposed of in accordance with this Section 2.7. The
Deposit shall be invested in an instrument selected by the Representative, of
which it gives timely written notice to the Purchaser and which shall be
available for investment or purchase at the branch of a Schedule 1 Canadian
chartered bank in Calgary.
(b) If Closing occurs, the Deposit, together with interest earned thereon by the
Purchaser while it is held in trust, shall be paid to the Representative at
Closing and applied against the Closing Purchase Price.
(c) If Closing does not occur, notwithstanding that the Vendors are ready,
willing and able to complete the sale of the Purchased Shares and to terminate
the Option as contemplated herein, the Section 116 Certificates have been
received and all of the conditions precedent set forth in Article 6 (other than
in Section 6.9, if it has not then been satisfied, complied with or waived in
writing by the Purchaser) have been satisfied, complied with or waived in
writing by the Purchaser or Abraxas, the Deposit together with interest earned
thereon shall be forfeited to the Vendors (in the proportions set forth in
Schedule 1.1(c)), in full and complete satisfaction of all claims which the
Vendors may have in connection with Purchaser's failure or refusal to perform
its obligations hereunder.
(d) If Closing does not occur for any reason other than as set forth in Section
2.7(c) or this Agreement terminates pursuant to Section 12.1(a)(ii), the Deposit
together with interest earned thereon shall be paid to the Purchaser.
2.8 Limitation
Notwithstanding any other provision of this Agreement or any rule of law or
equity, the maximum amount of damages and other compensation to which the
Purchaser shall be entitled if Closing does not occur solely or partially
because of the failure or refusal of the Company and the Vendors or either of
them to perform their obligations hereunder is $2 million, which shall be in
addition to the return of the Deposit plus interest thereon as contemplated in
Section 2.7(d).
2.9 Representations and Warranties; Material Adverse Damage
If any of the representations and warranties set forth in Article 3 are not true
and correct on the Closing Date, or physical damage occurs to any of the
Petroleum and Natural Gas Rights, Tangibles or Miscellaneous Interests and the
uninsured portions of the cost of repair is less than $3 Million, (or more than
$3 Million and the Parties agree to reduce the Purchase Price by such amount) as
the case may be, then, subject to Articles 6 and 7, the Unadjusted Purchase
Price shall be decreased at Closing by an amount equal to the cost, if any, of
making the representations and warranties true and correct on the Closing Date
and of the uninsured costs of repair, as the case may be, and the Parties shall
in good faith attempt to agree on the said amounts. If the Parties are unable to
agree on either or both of the said amount or amounts, the said amount or
amounts shall be settled by arbitration in accordance with Article 13 and the
Closing Date shall be extended in order for the arbitration proceedings to be
conducted and the arbitrator's decision to be rendered. The Parties shall use
their best efforts to cause the arbitration proceedings to be conducted and the
arbitrator's decision to be rendered within 20 Business Days. For the purposes
of a dispute as to the said amount under this Section 2.9, the notice period
contemplated in Section 13.1(b) shall be 1 Business Day.
2.10 [Intentionally Deleted]
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDORS AND THE COMPANY
The Company hereby makes the representations and warranties set forth in
Sections 3.1 to 3.41, inclusive, to the Purchaser.
3.1 Incorporation and Registration
The Company is a corporation duly incorporated, organized, validly existing and
in good standing under the laws of Canada and has all necessary corporate power,
authority and capacity to own its properties and assets and to carry on its
business as presently conducted. Neither the nature of its business nor the
location or character of the properties owned or leased by the Company requires
the Company to be registered, licensed or otherwise qualified as an extra
provincial or foreign corporation or to be in good standing in any jurisdiction
other than in the Province of Alberta. The Company is duly registered, licensed
and otherwise qualified and in good standing for such purpose in such province.
The Company has all governmental licences and permits (other than Environmental
Approvals, which are referred to in Section 3.25) necessary or appropriate to
own and operate (to the extent it is the operator thereof) the Assets and the
Excluded Assets and the Company is in Material compliance with all such licences
and permits.
3.2 Subsidiaries
The Company has no subsidiaries.
3.3 Capital
(a) The authorized share capital of the Company consists of an unlimited number
of Class A Shares and Class B Shares. The Purchased Shares constitute all of the
issued and outstanding shares in the Company and all of such shares have been
duly and validly issued and are outstanding as fully paid and non assessable
shares of the Company. There are no options, warrants, calls, rights, or
agreements to which the Company or any Vendor is a party or by which it is bound
obligating the Company or any Vendor to issue, deliver or sell, or cause to be
issued, delivered or sold, shares of capital stock or other securities of the
Company or obligating the Company or any Vendor to grant, extend or enter into
any such option, warrant, call, right or agreement, and no securities or
obligations convertible into or exchangeable for shares or other securities of
the Company have been authorized or agreed to be issued or are outstanding,
otherwise than pursuant to the Option Agreement.
(b) The Old Debentures constitute all of the issued and outstanding debentures
which were issued pursuant to the Unit Subscription Agreement and the Option
Agreement. Upon the issuance of the Debentures the Old Debentures will be
canceled and the Company will have no further obligation or duty with respect
thereto.
(c) The share and debenture registers will immediately prior to Closing reflect
the ownership of Purchased Shares and Debentures as set forth in Schedule
1.1(c).
3.4 Absence of Conflicting Agreements
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby and compliance with the provisions hereof
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit, or result in the creation of any lien, pledge, security
interest, adverse claim, charge, or other encumbrance upon any of the Assets or
the Excluded Assets (any such conflict, violation, default, right of
termination, cancellation or acceleration, loss or creation, a "Violation")
pursuant to, any provision of:
(a) the Articles of Incorporation, as amended, or By-laws, as amended, of
the Company (a true and complete copy of each of which as of the date hereof has
been delivered to the Purchaser);
(b) any contract, agreement, loan or credit agreement, note, bond,
debenture, mortgage, indenture, lease, employee benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, or license applicable to
the Company, the Assets or the Excluded Assets (a true and complete copy of each
of which as of the date hereof has been delivered to Purchaser); or
(c) any judgment, injunction, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or the Assets or the Excluded Assets.
3.5 Financial Statements
Except insofar as the July 31 Balance Sheet excludes the Excluded Assets
(determined without regard to whether any of the Company's accounts receivable
were or were not collected after July 31, 1996) and the Excluded Liabilities
(determined without regard to whether any of the Company's liabilities were or
were not settled or paid after July 31, 1996):
(a) the Financial Statements and the July 31 Balance Sheet and the books and
accounts of the Company have been prepared in accordance with Canadian generally
accepted accounting principles applied on a basis consistent with that of
preceding periods;
(b) the Financial Statements and the July 31 Balance Sheet present fairly all of
the assets and liabilities and the financial position of the Company as at the
respective dates thereof;
(c) the Financial Statements present fairly the results of
operations and statement of changes in financial position for the
periods then ended;
(d) except to the extent reflected or reserved against in the July 31 Balance
Sheet or as otherwise disclosed in Schedule 3.5, the Company has no outstanding
indebtedness, liabilities or obligations, whether contingent or absolute;
(e) the Financial Statements and the July 31 Balance Sheet have been prepared in
accordance with the books and accounts of the Company; and
(f) the statement of income included in the Financial Statements does not
include any items of special nonrecurring income or any other income not earned
in the ordinary course of business except as expressly specified therein.
3.6 Absence of Unusual Transactions
Except for the sale of the Excluded Assets and the assumption of the Excluded
Liabilities as contemplated by the Nevis Agreement, or as otherwise disclosed in
Schedule 3.6 or as permitted in Section 8.1, since July 31, 1996 the Company has
not:
(a) transferred, assigned, sold or otherwise disposed of any of
the Assets or canceled, waived or released any debts or claims;
(b) mortgaged, pledged, subjected to lien, granted a security interest or
otherwise encumbered any of its assets or property, whether tangible or
intangible, other than Permitted Encumbrances;
(c) authorized, incurred or assumed any capital expenditure or financial
commitment or other obligation or liability (fixed or contingent) except those
listed in the July 31 Balance Sheet and except unsecured obligations and
liabilities incurred in the ordinary and usual course of business and not
exceeding $500,000 in the aggregate;
(d) suffered an extraordinary loss, waived or omitted to take any action in
respect of any rights of substantial value, or entered into any commitment or
transaction not in the ordinary and usual course of business;
(e) issued or sold any shares in its capital or any warrants, bonds, debentures
or other corporate securities of the Company or issued, granted or delivered any
right, option or other commitment for the issuance of any such securities or any
other securities;
(f) amended or changed or taken any action to amend or change
its Articles of Incorporation or By-laws;
(g) authorized, agreed or otherwise become committed to do any
of the foregoing; or
(h) from August 1, 1996 to the date of this Agreement, breached any of the
provisions of Section 8.1 (which shall be read for the purposes of this Section
3.6(h) as if the Interim Period commenced on August 1, 1996 and ended on the
date of this Agreement).
3.7 Absence of Guarantees
Except for indemnities set forth in the By-Laws of the Company, in the
Management Agreements and in the indemnification letter agreement (herein the
"Jefferies Indemnification Letter") dated February 26, 1996 between the Company
and Jefferies described in Schedule 3.14, the Company has not given or agreed to
give, and is not a party to or bound by any guarantee or indemnity in respect of
indebtedness or other obligations, of any Person or any other commitment by
which the Company is or may be responsible or liable for such indebtedness or
other obligations, provided that if any claim is made by Jefferies against the
Company for indemnification pursuant to the said letter agreement, the amount
claimed by Jefferies shall be treated as Damages as defined in Section 9.1(a)
and all of the provisions of Article 9 with respect to Damages shall be
applicable.
3.8 Restrictive Covenants
Except for the Management Agreements, the Company is not a party to or bound or
affected by any commitment, agreement or document containing any covenant which
limits the freedom of the Company to compete in any line of business, or to
transfer or move any of its Assets or operations or which affects or may affect
the business practices, operations or conditions or the continued operation of
the business of the Company after the Closing on substantially the same basis as
such businesses are carried on at the date of this Agreement.
3.9 Tax Matters
(a) The Company has duly and timely filed its Tax Returns with the appropriate
taxing or other governmental authority or agency and its Tax Returns were
prepared in accordance with the books and accounts of the Company and the
information contained in such Tax Returns is true, complete and accurate in all
Material respects.
(b) The Company has duly and timely paid all Taxes, including all installments
on account of Taxes for the current year, that it reasonably believed were due
and payable by it and the July 31 Balance Sheet sets forth, as an amount
payable, an amount not less than the amount of all Taxes that are or will become
due and payable in respect of periods ending on or prior to August 1, 1996,
except amounts which may become payable after completion of the current Revenue
Canada income tax audit for the Company's 1993, 1994 and 1995 taxation years
which are not individually or in the aggregate Material.
(c) The Company has not entered into any agreement or other arrangement or
executed any waiver except with respect to its 1991 tax year providing for, any
extension of time within which (i) to file any Tax Return covering any Taxes for
which the Company is or may be liable, (ii) the Company is required to pay or
remit any Taxes or amounts on account of Taxes or (iii) any taxing authority may
assess or collect Taxes for which the Company is or may be liable.
(d) The Canadian federal and provincial income and capital tax liabilities of
the Company have been assessed by the relevant taxing authority and notices of
assessment have been issued to the Company by the relevant taxing authority for
all taxation years ending on or prior to October 31, 1995, provided however that
amended returns have been filed in respect of the Company's 1991, 1992, 1993 and
1994 tax years and no reassessments or confirmations of increases or losses has
been received in respect thereof.
(e) There are no actions, suits, proceedings, investigations, audits or claims
now pending or, to the knowledge of the Company, threatened, against the Company
in respect of any Taxes and there are no matters under discussion with any
taxing authority relating to Taxes, except as described in Section 3.9(b).
(f) The Company has duly and timely withheld from any amount paid or credited by
it to or for the account or benefit of any Person, including, without
limitation, any of its employees, officers and directors and any non-resident
Person, the amount of all Taxes and other deductions required by any applicable
law, rules or regulations to be withheld from any such amount and has duly and
timely remitted the same to the appropriate taxing or other governmental
authority or agency.
(g) The Company is not a section 1504(d) corporation for United
States tax purposes and has not filed consolidated United States tax returns.
(h) The Company is not an "above-limit corporation", "restricted corporation",
member of an "above-limit partnership" or "restricted partnership" or associated
with a "restricted corporation" as those phrases are defined and used in the
Alberta Corporate Tax Act, as amended (herein the "Corporate Tax Act"), and the
Company is not the subject of a direction by the Provincial Treasurer (Alberta)
pursuant to subsection 26.1(9) or (10) of the Corporate Tax Act, nor does the
Company nor the Vendors have any reason to believe that the provincial treasurer
is contemplating or likely to make any such direction. Each of the Assets is a
"restricted resource property" as defined in the Corporate Tax Act, except as
described in Schedule 3.9.
(i) Immediately before Closing, the following tax pools of the Company, will be
at least:
(i) Undepreciated capital cost $0
(as defined for the purposes of the Act)
(ii) Cumulative Canadian development expense $1.3
million
(as defined in Section 66.2(5) of the Act)
(iii) Cumulative Canadian oil and gas property
expense $25.5 million
(as defined in Section 66.4(5) of the Act)
(iv) Cumulative Canadian exploration expense $0
(as defined in Section 66.1(6) of the Act)
(v) Undeducted non-capital losses $4.2 million
(as defined in Section 111(8) of the Act)
3.10 Equipment Contracts
Schedule 3.10 sets forth a true and complete list of the Equipment Contracts and
the equipment and vehicles which are subject to Equipment Contracts. All of the
Equipment Contracts are in full force and effect and no default exists on the
part of the Company or, to the knowledge of the Company, on the part of any
other party thereto and the Company has not received notice of an intent to
terminate or amend such contracts by the other party thereto. Except for the
Excluded Assets, equipment and vehicles subject to the Equipment Contracts, and
the vehicles and other equipment described in Schedule 3.10, no Person other
than the Company owns any equipment, vehicles or other tangible assets or
property used in or necessary for the operation of the business of the Company.
3.11 Real Property and Real Property Leases
The Company owns no real property or interests therein, and is not a party to,
or bound by, any leases or subleases of any real property, other than its
interests in the Lands, the Leases and the Major Facilities.
3.12 Title to Assets
(a) The Assets are and will be at the Closing Time free and clear of all
Encumbrances created by, through or under the Company, except for Permitted
Encumbrances.
(b) The Company has not done or failed to do any act or thing whereby any of the
Petroleum and Natural Gas Rights or Tangibles may become liable or subject to
termination, surrender, forfeiture, cancellation or alienation.
3.13 Quiet Enjoyment
Except for interruptions which in the aggregate would not have a Material
Adverse Effect, subject to the rents, covenants, conditions and stipulations in
the Leases and on the lessee's or holder's part thereunder to be paid, performed
and observed and to the Permitted Encumbrances, the Company, after Closing, will
continue to hold and enjoy the Petroleum and Natural Gas Rights, the
Miscellaneous Interests and the Tangibles for the remainder of their respective
terms and all renewals or extensions thereof after Closing, without any
interruption of or by the Vendors or any other person (other than the Purchaser)
whomsoever claiming or to claim the same or any part thereof or any interest
therein by, through or under the Company or the Vendors.
3.14 Material Contracts
(a) Schedule 3.14 is an accurate and complete list of all Material Contracts,
other than those described in any other Schedule. All of the Material Contracts
are in full force and effect, unamended, and the Company is not in and has not
received notice of any Material default in respect of any such Material Contract
or commitment by it or any of the parties to any such Material Contract, which
default has not been rectified as of the date of this Agreement. None of the
other parties to any of the Material Contracts have given notice to the Company
of their intention to terminate or amend any of the Material Contracts, except
as specifically contemplated herein.
(b) Except as disclosed in Schedule 3.14, the Company is not a party to any oral
or written (i) confidentiality or standstill agreement, non-competition
agreement or other Material agreement or contract which, after giving effect to
the transactions contemplated by this Agreement, purports to restrict or bind
the Company or any of its affiliates or (ii) collective bargaining agreement.
Except as disclosed in the Property Schedule, the Company is not a party to any
contract or agreement granting a preferential right of purchase or similar right
to any Person with respect to any of the Assets.
3.15 Litigation
Except as disclosed in Schedule 3.15, there is no suit, action, litigation,
investigation, claim, complaint, grievance or proceeding, including appeals and
applications for review, in progress or pending or, to the knowledge of the
Company, threatened, by or against or relating to the Company or any of its
assets or businesses which, if determined adversely to the Company, would have a
Material Adverse Effect. Except as disclosed in Schedule 3.15, there is not
presently outstanding against the Company any judgment, decree, injunction, rule
or order of any court, governmental department, commission, board, bureau,
agency or arbitrator which could reasonably be expected to have a Material
Adverse Effect.
3.16 Compliance with Terms
The Company has complied with, performed, observed and satisfied all terms,
conditions, obligations and liabilities which have arisen prior to the Closing
Date and were the obligations of the Company under any of the provisions of any
law, statute, order, writ, injunction or decree of any Governmental Authority or
court and in respect of which there could occur a Material Adverse Effect if not
complied with, performed, observed or satisfied.
3.17 Title Documents and Production Sales Contracts
The Company has made available for inspection by the Purchaser or its
representatives:
(a) all documents, instruments, records and books relevant to
title to the Assets and the operation thereof; and
(b) all production sales contracts and other contracts within the possession or
control of the Company for the sale of Petroleum Substances produced from the
Lands or lands with which the Lands have been pooled or unitized.
3.18 Production and Accounts Receivable
Except for those non-payments which in the aggregate will not exceed $150,000:
(a) payments of production revenue and deliveries in kind in respect of
Petroleum Substances produced from the Lands are being paid or made, as the case
may be, to the Company consistent with the ordinary practice in the oil and gas
industry; and
(b) the amount of all accounts receivable, unbilled invoices and other debts due
or recorded in the records and books of account of the Company as reflected on
the July 31 Balance Sheet are valid, enforceable and collectible and none of the
accounts receivable reflected in the July 31 Balance Sheet are subject to any
counterclaim or set-off except to the extent reflected in the July 31 Balance
Sheet.
3.19 Employment Matters
The Company does not have any employees. The Company has not established any
severance, pension, retirement or other individual or group employment benefit
plans.
3.20 Employees
Schedule 3.20 is a true and complete list of all individuals who are currently
employees of Morrison and who are employed full-time by Morrison so that
Morrison can perform its services under the Morrison Agreements.
3.21 Insurance
Schedule 3.21 sets forth a true and complete list and brief summary of the terms
of all of the Company's insurance policies (in this Section 3.21, the "said
documents"). The Company maintains or causes to be maintained such policies of
insurance, issued by responsible insurers, as are appropriate to its operations,
property and assets, in such amounts and against such risks as are customarily
carried and insured against by owners of comparable operations, properties and
assets. All of the said policies are in full force and effect and the Company is
not in default, as to the payment of premium or otherwise, under the terms of
any such policy. None of the said policies contains a provision whereby the
insurer is entitled to terminate the said policy because of the sale of control
of the Company pursuant to this Agreement.
3.22 Copies of Agreements etc.
A current and complete copy of each of the contracts, commitments, mortgages,
leases, instruments and other documents identified in the Schedules (in this
Section 3.22, the "said documents"), including the Material Contracts and all
amendments thereto, has been made available for inspection by the Purchaser.
There are no negotiations presently occurring with respect to the renewal,
repudiation or amendment of any of the said documents or any of the Material
Contracts.
3.23 Bank Accounts, etc.
Schedule 3.23 sets forth:
(a) the name of each bank and other depository with which the Company
maintains any bank account, trust account or safety deposit box, the number of
each such account and the names of all Persons authorized to draw thereon or who
have access thereto; and
(b) the names of all Persons, if any, holding powers of
attorney from the Company and a summary statement of the terms
thereof.
3.24 Corporate Records and Minute Books
The corporate records and minute books of the Company have been made available
to the Purchaser at the offices of BJV or the Company and include complete and
accurate minutes of all meetings of the directors and shareholders of the
Company held to date and all consent resolutions passed by the directors and
shareholders, since the date of its incorporation. The share certificate book,
register of shareholders, register of transfers and register of directors
included therein of the Company, are complete and accurate. All of the corporate
records and minute books of the Company which have been furnished to the
Purchaser for it to review accurately record all Material transactions of the
Company in all respects and have been maintained consistently in accordance with
good business practices.
3.25 Environmental Matters
Except as disclosed in Schedule 3.25 or in any of the reports and other
documents described in Schedule 3.25:
(a) all Environmental Approvals in the possession of the
Company:
(i) which are material to the continued operation of Major
Facilities operated by the Company;
(ii) which relate to any abandonment, reclamation, work or
remediation obligation of the Company; or
(iii) which relate to any Major Facilities not operated
by the Company and which are in the possession of the Company
have been made available to the Purchaser at the Company's
Calgary office for inspection and review by the Purchaser;
(b) the Company and its operations and its Assets are (1) in substantial
compliance with all Environmental Laws, (2) are not the subject of any remedial,
preventative or control action, direction or order by any Governmental
Authorities, or any investigation or evaluation by any Governmental Authorities,
as to whether any remedial or preventative action is needed to respond to an
existing or potential Environmental concern and (3) there is no reasonable basis
for any Person to assert that the Company is liable to any Person as a result of
the release of any Substance into the Environment or into any facility or
structure;
(c) the Company has made available, for inspection and review by the Purchaser,
all audits, reports and assessments in respect of Environmental matters relating
to the Assets operated by the Company, and all audits, reports and assessments
relating to other Assets, to the extent that the audits, reports and assessments
are within the possession or control of the Vendors or the Company; and
(d) all Environmental Approvals, if any, required to be obtained, held, or filed
by the Company in connection with any aspect of the business of the Company
including those related to the treatment, storage, disposal or release of a
hazardous substance, which relate to any abandonment, reclamation, work or
remediation obligation of the Company, and which are material to the continued
operation of the Assets, have been duly obtained, held or filed and remain valid
and in effect and the Company is in substantial compliance with all terms and
conditions of all such Environmental Approvals;
Notwithstanding any other provision of this Agreement, this Section 3.25 is the
sole representation and warranty of the Company with respect to Environmental
matters and no other representations or warranties shall be interpreted so as to
apply to, contemplate or deal with any matter relating to the Environment. For
the purposes of this Section 3.25, "substantial compliance" means that the
aggregate direct cost of compliance with Environmental Laws and the
Environmental Approvals referred to in Section 3.25(d), other than those
disclosed in Schedule 3.25, would not exceed in the aggregate $1 million.
3.26 No Production Penalties
None of the Wells has been overproduced such that it is subject to a production
penalty or limitation which will result in it being shut in or have its
production curtailed, except for any such penalties which would not in the
aggregate have a Material Adverse Effect on the Company or which are of general
application to producing wells in Alberta and any such penalties and limitations
which have resulted from circumstances where good oil and gas field practices
have been followed (and penalties and limitations which result from prior
production in excess of allowables shall be deemed not to have arisen in such
circumstances).
3.27 No Excess Gas Deliveries
The Company has not received notice from a purchaser of natural gas produced
from the Petroleum and Natural Gas Rights asserting that the Company has
delivered to such purchaser an annual amount of natural gas in excess of the
amount which the Company was entitled to deliver to the particular purchaser
under the applicable gas purchase contract.
3.28 Prepaid Gas Obligations
The Company is not obligated by virtue of a prepayment or similar arrangement to
deliver Petroleum Substances without then or thereafter receiving full payment
therefor.
3.29 Royalty Payments
All Royalties have been properly and timely paid to the Crown, lessors and other
holders of the Royalties with respect to all production or sales of Petroleum
Substances from the Petroleum and Natural Gas Rights and all filings in respect
of such Royalties have been properly made in accordance with the applicable
legislation or agreements.
3.30 Gas Balancing Agreements
The Company is not party to any gas balancing agreements.
3.31 Production Sale Contracts
Except for those contracts described in Schedule 3.31 and contracts which are
terminable on not more than 60 days' notice, none of the Petroleum and Natural
Gas Rights are dedicated or otherwise subject to any contractual or other
arrangement for the sale, processing or transportation of Petroleum Substances
produced therefrom (or otherwise related to the marketing of such Petroleum
Substances) which would bind the Company or would otherwise restrict the rights
of the Company to take possession of and market such Petroleum Substances.
3.32 Partnerships
None of the Petroleum and Natural Gas Rights is subject to any tax or common law
partnership (other than any Permitted Encumbrances) except for any such
partnership created under a joint operating or similar agreement to which the
Company is party.
3.33 Capacity
Subject to contractual and regulatory restrictions, all Wells which are
currently producing natural gas in paying quantities (which for clarity is
agreed to exclude Wells which are abandoned, capped or shut in or which are
being produced for test purposes only) are connected to a gathering system of
sufficient capacity to permit the continuing delivery of Petroleum Substances in
accordance with the Company's contractual obligations to buyers of its
production for the reasonably foreseeable future.
3.34 Capital Expenditures
Except as disclosed in or permitted by Schedule 3.6 and subject to Section 8.1,
the Company has not made any oral or written commitments or agreement to acquire
any assets (including under circumstances where such acquisition would be
classified as a capital expenditure under Canadian generally accepted accounting
principles consistently applied) or make any capital expenditure or contribution
in any individual transaction or project
including the drilling, recompletion, reworking, plugging back or abandonment of
any Wells where the purchase price, capital expenditure or contribution required
of the Company, directly or indirectly, exceeds $250,000 or in transactions or
projects where the aggregate purchase price, capital expenditure or contribution
exceeds $2 million.
3.35 Engineering Report
In connection with the preparation of the Engineering Report, the Company has
provided to Sproule Associates Limited ("Sproule") all information requested by
Sproule which was in the possession of the Company and would be of Material
relevance to the preparation of the Engineering Report. All such information was
Materially true and complete and did not omit any information required to make
it Materially true and complete (except for information already in Sproule's
possession or publicly available to Sproule).
3.36 [Intentionally Omitted]
3.37 No Business in the United States
All of the Assets and the Excluded Assets are located outside the United States
and the Company has not made aggregate sales in or into the United States of
U.S. $25 million or more in the fiscal year ending October 31, 1995.
3.38 Due Authorization
The Company has all necessary power (corporate or otherwise), authority and
capacity to enter into this Agreement and to carry out its respective
obligations under this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated in this Agreement have
been duly authorized by all necessary action (corporate or otherwise) on its
part.
3.39 Enforceability of Obligations
This Agreement constitutes the Company's valid and binding obligation
enforceable against the Company in accordance with the terms of this
Agreement,asubject, however, to limitations with respect to enforcement imposed
by law in connection with bankruptcy or similar proceedings and to the extent
that equitable remedies such as specific performance and injunction are in the
discretion of the court from which they are sought.
3.40 Consents, Approvals or Authorizations
Except for the AEUB Approval or as otherwise obtained, no consent, approval,
order or authorization of, filing or registration with, or notification to, any
Governmental Authority or regulatory authority, or consent, approval, order or
authorization of any Person (except those that may not be unnecessarily
withheld), is required on its behalf in connection with the execution and
delivery of this Agreement by the Company or the completion of the transactions
contemplated by this Agreement.
3.41 Finders' Fees
Except for finders' fees which are to be deducted in calculating the Nevis
Proceeds, the Company has not incurred any liability, contingent or otherwise,
for brokers' or finders' fees in respect of the transactions contemplated herein
for which the Company or the Purchaser shall have any responsibility.
Each of the Vendors, separately as to itself, makes the representations and
warranties set forth in section 3.42 to 3.46 inclusive to the Purchaser.
3.42 Formation of the Vendors; Title to the Purchased Shares
Other than Feshbach and Lynch, each of whom is an individual, it is a
corporation, partnership or trust duly incorporated or otherwise formed, validly
existing and in good standing under the laws of the jurisdiction of its
formation. It or he is the beneficial owner, and will at Closing be the
beneficial and registered owner, of the number of Purchased Shares set forth
opposite its name in Schedule 1.1(c) free and clear of all Encumbrances (other
than the rights of the Purchaser under this Agreement). As at the date of this
Agreement, it or he is the beneficial owner of the principal amount of the Old
Debentures set forth opposite its name in Schedule 1.1(c). It or he will at
Closing be the beneficial and registered owner of the principal amount of the
Debentures in Canadian dollars equivalent to the amount set forth opposite its
or his name in Schedule 1.1(c) plus interest accrued but unpaid thereon as
contemplated in the definition of "Debentures", free and clear of all
Encumbrances (other than the rights of the Purchaser under this Agreement) and
the Old Debentures held by it or him will have been canceled and the Company
will have no liability, obligation or duty with respect thereto. It or he will
deliver to the Purchaser on Closing good, valid and marketable title to all of
such Purchased Shares free and clear of all Encumbrances and has the exclusive
right to dispose of such Purchased Shares provided in this Agreement. Such
disposition will not violate, contravene, breach or offend against or result in
any default under any indenture, mortgage, lease, agreement, obligation,
instrument, charter or by-law provision, statute, regulation, order, judgment,
decree, licence, permit or law to which it or he is party or subject or by which
it is bound or affected (other than any such violation, contravention, breach,
offence or default which will not have a Material Adverse Effect).
3.43 Due Authorization
It or he has all necessary power (corporate or otherwise), authority and
capacity to enter into this Agreement and to carry out its obligations under
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated in this Agreement have been duly
authorized by all necessary action (corporate or otherwise) on its or his part.
3.44 Enforceability of Obligations
This Agreement constitutes its or his valid and binding obligation enforceable
against it in accordance with the terms of this Agreement,asubject, however, to
limitations with respect to enforcement imposed by law in connection with
bankruptcy or similar proceedings and to the extent that equitable remedies such
as specific performance and injunction are in the discretion of the court from
which they are sought.
3.45 Consents, Approvals or Authorizations
Except for the AEUB Approval or as otherwise obtained, no consent, approval,
order or authorization of, filing or registration with, or notification to, any
Governmental Authority or regulatory authority, or consent, approval, order or
authorization of any Person (except those that may not be unnecessarily
withheld), is required on its or his behalf in connection with the execution and
delivery of this Agreement by it or the completion of the transactions
contemplated by this Agreement.
3.46 Finders' Fees
Except for finder's fees which are to be deducted in calculating the Nevis
Proceeds, it has not incurred any liability, contingent or otherwise, for
brokers' or finders' fees in respect of the transactions contemplated herein for
which the Company or the Purchaser shall have any responsibility.
Without limiting Section 1.3:
(a) except only to the extent of the representations and
warranties set forth in this Agreement:
(i) the Company and the Vendors negate and disclaim representations and
warranties at any time or times made orally or in writing and directly or
indirectly concerning the transactions provided for in this Agreement, including
those in any information or advice provided to the Purchaser by any officer,
shareholder, director, employee, agent, consultant or representative of the
Company or the Vendors (including Jefferies); and
(ii) the Company and the Vendors make no representation or warranty, and shall
have no liability, directly or indirectly in respect of the Company's title in
or to or Encumbrances against any Petroleum and Natural Gas Rights or as to the
Environmental condition of the Assets, the Environment, Environmental matters,
the effect of any of the Assets on the Environment, Environmental Approvals or
Environmental Laws; and
(b) notwithstanding anything to the contrary in Article 3 or elsewhere in this
Agreement, the Vendors make no representations or warranties whatsoever other
than those expressly set forth in Sections 3.42 to 3.46 inclusive, and the
Vendors and the Company make no representations or warranties and shall have no
liability directly or indirectly in respect of or which contemplate or relate
to:
(i) the quantity, quality, recoverability or deliverability
of reserves of Petroleum Substances attributable to the Petroleum
and Natural Gas Rights;
(ii) any geological or other interpretations or economic
evaluations of any Petroleum and Natural Gas Rights;
(iii) the condition, fitness or merchantability of any
of the Assets;
(iv) the value of any Petroleum and Natural Gas Rights, estimates of
prices or future cash flows arising from the sale of Petroleum Substances
attributable to any Petroleum and Natural Gas Rights, estimates of other
revenues attributable to the Petroleum and Natural Gas Rights or the
availability or continued availability of transportation to sell such Petroleum
Substances.
The Purchaser acknowledges and confirms, without diminishing the force and
effect of the express representations and warranties herein and in the
Schedules, that:
(c) it has inspected, or has been given a reasonable and adequate opportunity to
inspect, the Assets and their physical and Environmental condition and performed
its own due diligence and has not relied directly or indirectly on any data,
information or advice from or on behalf of the Company or the Vendors in that
regard in connection with the transactions provided for in this Agreement; and
(d) in agreeing to enter into and complete the transactions provided for in this
Agreement, and in completing such transactions, it has relied solely upon its
own engineering and other evaluations, assessments, inspections and projections,
without any direct or indirect involvement of or on behalf of the Company or the
Vendors.
UCC DISCLAIMER: EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES PROVIDED IN
ARTICLE 3, THE COMPANY AND THE VENDORS MAKE NO WARRANTY OR REPRESENTATION,
EXPRESS, STATUTORY OR IMPLIED, AS TO (I) THE ACCURACY, COMPLETENESS, OR
MATERIALITY OF ANY DATA, INFORMATION OR RECORDS FURNISHED TO THE PURCHASER IN
CONNECTION WITH THE ASSETS; (II) THE QUANTITY, QUALITY, RECOVERABILITY OR
DELIVERABILITY OF RESERVES OF PETROLEUM SUBSTANCES ATTRIBUTABLE TO THE PETROLEUM
AND NATURAL GAS RIGHTS; (III) THE ABILITY OF THE ASSETS TO PRODUCE HYDROCARBONS,
INCLUDING WITHOUT LIMITATION PRODUCTION RATES, DECLINE RATES AND RECOMPLETION
OPPORTUNITIES; (IV) GAS BALANCING INFORMATION, ALLOWABLES OR OTHER REGULATORY
MATTERS, (V) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OF
PROFITS, IF ANY, TO BE DERIVED FROM THE ASSETS, OR (VI) THE ENVIRONMENTAL
CONDITION OF THE ASSETS. ANY AND ALL DATA, INFORMATION OR OTHER RECORDS
FURNISHED BY THE COMPANY OR THE VENDORS ARE PROVIDED TO THE PURCHASER AS A
CONVENIENCE AND THE PURCHASER'S RELIANCE ON OR USE OF THE SAME IS AT THE
PURCHASER'S SOLE RISK.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ABRAXAS AND THE PURCHASER
Abraxas and the Purchaser hereby make the following representations and
warranties to the Company and the Vendors.
4.1 Incorporation
Abraxas and the Purchaser are corporations duly incorporated, organized, validly
existing and in good standing under the laws of the State of Nevada and Canada,
respectively.
4.2 Due Authorization
Abraxas and the Purchaser have all necessary corporate power, authority and
capacity to enter into this Agreement and to carry out their obligations under
this respective Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated in this Agreement have been duly
authorized by all necessary corporate action on the part of Abraxas and the
Purchaser.
4.3 Enforceability of Obligations
This Agreement constitutes a valid and binding obligation of Abraxas and the
Purchaser enforceable against Abraxas and the Purchaser in accordance with the
terms of this Agreement, subject, however, to limitations with respect to
enforcement imposed by law in connection with bankruptcy or similar proceedings
and to the extent that equitable remedies such as specific performance and
injunction are in the discretion of the court from which they are sought.
4.4 Absence of Conflicting Agreements
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby and compliance with the provisions hereof
will not constitute a Violation by Abraxas or the Purchaser under or pursuant to
any provision of:
(a) the Articles of Incorporation, as amended, or By-laws, as amended, of
Abraxas or the Purchaser (a true and complete copy of each of which as of the
date hereof has been delivered to the Representative);
(b) any contract, agreement, loan or credit agreement, note, bond, debenture,
mortgage, indenture, lease, employee benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, or license applicable to
Abraxas or the Purchaser (a true and complete copy of each of which as of the
date hereof has been delivered to the Representative); or
(c) any judgment, injunction, order, decree, statute, law, ordinance, rule or
regulation applicable to Abraxas or the Purchaser or their respective property
or assets.
4.5 Consents, Approvals or Authorizations
Except in connection with the AEUB Approval, no consent, approval or
authorization of, filing or registration with, or notification to, any
governmental or regulatory authority or consent, approval or authorization of
any Person, is required on behalf of Abraxas or the Purchaser in connection with
the execution and delivery of this Agreement by it or the consummation of the
transactions contemplated by this Agreement.
4.6 Finders' Fees
Neither Abraxas nor the Purchaser has incurred any liability, contingent or
otherwise, for brokers' or finders' fees in respect of the transactions
contemplated herein for which the Company or the Vendors shall have any
responsibility.
4.7 Independent Evaluation
Abraxas and the Purchaser are experienced and knowledgeable investors in the oil
and gas business. Abraxas and the Purchaser have been advised by and have relied
solely on their own expertise and legal, tax, reservoir engineering and other
professional counsel concerning this transaction, the Securities and the Assets
and the value thereof, as determined by their examination of the Company's
records and inspection of the Company, the Securities and the Assets, and the
representations, warranties and covenants made by the Company and the Vendors in
this Agreement.
4.8 Eligibility
The Purchaser is eligible under the Regulations to own the Purchased Shares.
4.9 Securities Laws
The Purchaser is acquiring the Purchased Shares as principal for its own account
for the purpose of investment and not with a view to or for sale in connection
with any distribution thereof
ARTICLE 5
SURVIVAL
5.1 Nature and Survival
(a) Subject to the limitations set forth in Section 5.1(b), the representations,
warranties, indemnities and covenants contained in Sections 2.3, 8.1 and 8.4 and
Articles 1, 3, 4, 9, 10, 11 and 13 of this Agreement shall survive the Closing,
the execution and delivery of any transfer instruments and other documents of
title to the Purchased Shares and any other agreements, certificates and
indemnities under this Agreement and the payment of the Purchase Price.
(b) The representations and warranties concerning tax matters set out in Section
3.9, the representation and warranty set forth in Section 3.29, insofar as it
concerns Royalties (herein "Alberta Crown Royalties") payable to Her Majesty the
Queen in right of the Province of Alberta, and the provisions of Section 9.6,
the covenants, agreements and indemnities related thereto and the covenants set
forth in Article 10 shall survive for a period of 1 year from the Closing Date.
All other representations, warranties, indemnities and covenants shall survive
for a period of 6 months from the Closing Date. If no Contractual Claim has been
made under this Agreement in accordance with the applicable provision in Section
9.1, prior to the expiry of the applicable survival period provided for, against
a Party for any incorrectness or breach of any representation or warranty made
in, or breach of any covenant, agreement or indemnity in, this Agreement by such
Party, such Party shall have no further liability under this Agreement or
otherwise with respect to such representation or warranty. If Closing occurs,
none of the Parties shall have any claim or remedy in respect of any of the
representations, warranties, covenants and indemnities set forth herein or any
agreement, certificate or document delivered pursuant hereto except as provided
in Article 9.
(c) The provisions of Sections 9.1, 9.2, 9.3 and 9.6 shall survive Closing for
so long as any Contractual Claims made prior to the expiry of the applicable
survival period remain unresolved.
5.2 Reliance
No Party shall be entitled to maintain an action after Closing against another
Party in respect of any incorrectness or breach by the other Party of a
representation or warranty in Articlea3 or 4, as the case may be, if the Party
asserting the claim was actually aware of the incorrectness or breach at or
prior to Closing or if a Purchase Price adjustment was made pursuant to Section
2.9 in respect of the particular incorrectness or breach of a representation or
warranty.
ARTICLE 6
PURCHASER'S CONDITIONS PRECEDENT
The obligation of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction of, or compliance with, or
waiver in writing by the Purchaser of, on or prior to the Closing Time, each of
the following conditions precedent (each of which is acknowledged to be inserted
for the exclusive benefit of the Purchaser and may be waived by it in whole or
in part in writing).
6.1 Truth and Accuracy of Representations of Company at the
Closing Time
The representations and warranties of the Vendors and the Company made in or
pursuant to this Agreement shall be Substantially true and correct as of the
Closing Time and with the same force and effect as if made at and as of the
Closing Time (except as such representations and warranties may be affected by
the occurrence of events or transactions expressly contemplated and permitted by
this Agreement or as consented to in writing by the Purchaser) and the Purchaser
shall have received a certificate of the Company to the effect that its
representations and warranties are true and correct as of the Closing Time
except as aforesaid in this Section 6.1 and except to the extent that a Purchase
Price adjustment has been made as contemplated in Section 2.9.
6.2 Performance of Obligations
The Vendors and the Company shall have performed or complied with all of their
obligations, covenants and agreements under this Agreement. The Purchaser shall
have received a certificate of the Company to the effect that it has performed
or complied with all of its obligations, covenants and agreements under this
Agreement.
6.3 Receipt of Closing Documentation
All documentation relating to the due authorization and completion of the sale
and purchase of the Purchased Shares and the termination of the Option under
this Agreement and all actions and proceedings taken on or prior to the Closing
in connection with the performance by the Company and the Vendors of their
respective obligations under this Agreement shall be satisfactory to the
Purchaser (acting reasonably) and the Purchaser shall have received copies of
all such documentation or other evidence as it may reasonably request in order
to establish the consummation of the transactions contemplated by this Agreement
and the taking of all corporate proceedings in connection therewith in
compliance with these conditions, in form (as to certification and otherwise)
and substance satisfactory to the Purchaser acting reasonably.
6.4 Consents, Authorizations and Registrations
All material consents, approvals, orders, authorizations and confirmations of
any Persons and Governmental Authorities including without limitation the AEUB
Approval (or registrations, declarations, filings or recordings with any such
authorities) which are reasonably required in connection with the completion of
the transactions contemplated by this Agreement or the execution of this
Agreement shall have been obtained on or before the Closing Time.
6.5 [Intentionally Omitted]
6.6 Agreements Terminated
The Option Agreement, the Investors' Agreements and the Management Agreements
shall have been terminated and all sums due and owing under the Investors'
Agreements and the Management Agreements shall have been paid in full.
6.7 Closing Opinion
The Purchaser shall have received an opinion from BJV and an opinion from legal
counsel for each of the Vendors who is not an individual, each dated the Closing
Date, substantially in the forms attached as Schedule 6.7 (a) and (b)
respectively.
6.8 Title Opinion Update
The Purchaser shall have received from BJV an opinion updating the BJV Title
Opinion in the form of Schedule 6.8.
6.9 Financing
The Purchaser shall have obtained financing on terms and conditions satisfactory
to the Purchaser, in the Purchaser's sole discretion, to consummate the purchase
and sale of the Purchased Shares and termination of the Option as contemplated
hereby.
6.10 Officers and Directors
All of the officers and directors of the Company shall have resigned effective
as of the Closing Date and shall have delivered releases to the Company in the
form of Schedule 6.10.
6.11 Escrow Agreement
The Vendors, the Representative and the Escrow Agent shall have executed and
delivered the Escrow Agreement.
6.12 Sale of Excluded Assets
The sale of the Excluded Assets to Morrison and the assumption of the Excluded
Liabilities by Morrison shall have been completed pursuant to the Nevis
Agreement.
6.13 Termination Agreements and Transition Agreement
The Termination Agreements and all of the releases provided for therein and the
Transition Agreement shall have been executed and delivered.
6.14 Material Adverse Damage
From August 1, 1996 until the Closing Date, there shall not have been any
physical damage to any of the Petroleum and Natural Gas Rights or the Tangibles:
(a) the uninsured portions of the costs of repair of which will
exceed $3 Million; or
(b) which is insured and not substantially repaired prior to the Closing Date
but the cost of repair of which will exceed $3 Million.
6.15 No Litigation
No action or proceeding shall have been instituted or, to the best knowledge of
the Company, threatened before a court or other government body or by any public
authority to restrain or prohibit, or otherwise affect, any of the transactions
contemplated hereby, and the Company shall have delivered to the Purchaser a
certificate dated as of the Closing Date to that effect.
6.16 Bank Accounts
The Company shall have executed and delivered to the Purchaser documents
evidencing the change of signing authorities, in respect of the bank accounts
listed in Schedule 3.23 to individuals identified by the Purchaser to the
Representative not later than three Business Days prior to Closing.
6.17
Debentures
The Debentures will have been validly issued in full and complete satisfaction
of all of the issued and outstanding Old Debentures pursuant to the Debenture
Prepayment Agreement and the Debentures shall have been delivered to the
Representative in accordance with Section 8.5. If any of the foregoing
conditions in this Article, which are for the sole benefit of the Purchaser,
have not been fulfilled and performed by Closing, the Purchaser may terminate
this Agreement by notice in writing to the Company and the Vendors. However, the
Purchaser may in writing waive compliance with any condition, in whole or in
part, if it sees fit to do so, without prejudice to its rights of termination in
the event of nonfulfillment of any other condition, in whole or in part, or to
its rights to recover damages for the breach of any representation, warranty,
covenant or condition contained in this Agreement, whether or not it terminates
this Agreement.
ARTICLE 7
VENDORS' CONDITIONS PRECEDENT
The obligation of the Vendors to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction of or compliance with, or
waiver in writing by all of the Vendors of, on or prior to the Closing Time,
each of the following conditions precedent (each of which is acknowledged to be
inserted for the exclusive benefit of the Vendors and may be waived by them in
whole or in part).
7.1 Truth and Accuracy of Representations of Purchaser at
Closing Time
The representations and warranties of Abraxas and the Purchaser made in or
pursuant to this Agreement shall be Substantially true and correct as of the
Closing Time and with the same force and effect is if made at and as of the
Closing Time (except as such representations and warranties may be affected by
the occurrence of events or transactions expressly contemplated and permitted by
this Agreement or as consented to in writing by the Vendors) and the Vendors
shall have received a certificate of Abraxas and the Purchaser to that effect.
7.2 Performance of Obligations
Abraxas and the Purchaser shall have performed or complied with all of their
obligations, covenants and agreements under this Agreement. The Vendors and the
Company shall have received a certificate of Abraxas and the Purchaser to that
effect.
7.3 Receipt of Closing Documentation
All documentation relating to the due authorization and completion of the sale
and purchase of the Purchased Shares and the termination of the Option under
this Agreement and all actions and proceedings taken on or prior to the Closing
in connection with the performance by the Purchaser of its obligations under
this Agreement shall be satisfactory to the Vendor (acting reasonably) and the
Vendor shall have received copies of all such documentation or other evidence as
it may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement and the taking of all corporate
proceedings in connection therewith in compliance with these conditions, in form
(as to certification and otherwise) and substance satisfactory to the Vendors,
acting reasonably.
7.4 Consents, Authorizations and Registrations
All material consents, approvals, orders, authorizations and confirmations of
any Persons and Governmental Authorities including the AEUB Approval (or
registrations, declarations, filing or recordings with any such authorities)
which are reasonably required in connection with the completion of the
transactions contemplated by this Agreement or the execution of this Agreement,
shall have been obtained on or before the Closing Time.
7.5 Closing Opinion
The Vendors shall have received an opinion from BDP and an opinion from Cox &
Smith, Incorporated, each dated the Closing Date, substantially in the forms
attached as Schedule 7.5(a) and (b) respectively.
7.6 Release of Directors and Officers
The Purchaser and the Company shall have delivered releases in the form of
Schedule 7.6 to and in respect of each of the Company's current officers and
directors.
7.7 Escrow Agreement
The Escrow Agent and the Purchaser shall have executed and delivered the Escrow
Agreement.
7.8 Representations and Warranties
The representations and warranties of the Vendors and the Company made in or
pursuant to this Agreement shall be Substantially true and correct as of the
Closing Time and with the same force and effect as if made as of the Closing
Time (except as such representations and warranties may be affected by the
occurrence of events or transactions expressly contemplated and permitted by
this Agreement or as consented to in writing by the Purchaser).
7.9 No Litigation
No action or proceeding shall have been instituted or, to the best knowledge of
the Company, threatened before a court or other government body or by any public
authority to restrain or prohibit any of the transactions contemplated hereby.
7.10 Termination Agreements and Transition Agreement
The Termination Agreements and the releases provided for therein and the
Transition Agreement shall have been executed and delivered.
7.11 Material Adverse Damage
From August 1, 1996 until the Closing Date, there shall not have been any
physical damage to any of the Petroleum and Natural Gas Rights or the Tangibles,
the uninsured portions of the cost of repair of which will exceed $3 Million.
If any of the foregoing conditions in this Article, which are for the sole
benefit of the Vendors, have not been fulfilled or performed by Closing, the
Vendors may terminate this Agreement by notice in writing to the Purchaser.
However, the Vendors may in writing waive compliance with any condition, in
whole or in part, if they see fit to do so, without prejudice to its rights of
termination in the event of nonfulfillment of any other condition in whole or in
part or to its rights to recover damages for the breach of any representation,
warranty, covenant or condition contained in this Agreement, whether or not it
terminates this Agreement.
ARTICLE 8
INTERIM PERIOD
8.1 Conduct of Business Prior to Closing
(a) During the Interim Period, the Company shall:
(i) except as otherwise expressly permitted by this Agreement, conduct the
Company's businesses in the ordinary and usual course and in accordance with
good industry practice, and shall not:
(A) without the prior written consent of the Purchaser, make
or commit to any single expenditure in excess of $250,000 (except in the event
of a catastrophe or other event endangering life or property); or
(B) enter into any transaction which if effected before the
date of this Agreement would constitute or result in a breach of the
representations, warranties or agreements contained in this Agreement;
(ii) continue in full force and effect all existing policies
or insurance presently maintained or caused to be maintained by
the Company; and
(iii) comply with all laws affecting the operation of
its business and pay all required Taxes and installments of
Taxes;
(iv) to the extent that the nature of its interests in the Assets permits,
maintain and keep the Assets in good condition and working order, preserving the
Assets in full force and effect and performing all covenants and conditions
imposed upon the Company including, but not limited to, payment of royalties,
delay rentals, shut-in gas royalties and any and all other required payments
(except those held in suspense in good faith by the Company for a justifiable
purpose);
(v) to the extent that the nature of its interests in the Assets permits,
operate or cause to be operated the Wells or any unit of which any of the Assets
are a part in a good and workmanlike manner in accordance with the terms of the
respective applicable operating agreements and good industry practices;
(vi) timely perform all of its obligations under the
Material Contracts;
(vii) exercise due diligence in safeguarding and maintaining secure and
confidential all geological and geophysical maps, confidential reports and all
other confidential data in its possession relating in any way to the Assets;
(viii) maintain the Company's Articles of Incorporation
and By-Laws in their form on the date of this Agreement,
(ix) maintain the compensation payable or to become payable by the Company
to any officer, employee or agent at their levels on the date of this Agreement,
(x) except for the sale of the Excluded Assets, preserve the business
organization of the Company, keep available to Purchaser the Company's officers
and agents and preserve its present business relations with suppliers, customers
and others and shall not commit any act or any way assist others to commit any
act which will injure the Company or the business of the Company.
and except as otherwise provided or disclosed in this Agreement the Company will
not, without the Purchaser's prior written consent, which shall not be
unreasonably withheld or delayed:
(xi) surrender or abandon any of the Assets or amend any
agreement or contract relating to the Assets; or
(xii) sell, transfer or dispose of, or grant a security interest in or in
respect of, all or any part of or any interest in the Assets, except for the
sale (in the ordinary course of business pursuant to contract, terminable on
notice of not more than (60 days) of Petroleum Substances produced from the
Lands.
(xiii) make any bonus, pension, retirement or insurance payment or arrangement
to or with any such persons except those that may have already been accrued, and
bonus and insurance payments in the ordinary course of business and consistent
with the past practice of the Company;
(xiv) issue, sell or otherwise dispose of its capital
stock or any right or option to acquire any shares of its capital
stock;
(xv) declare or pay any dividend or make any other distribution or payment
in respect of its capital stock or redeeming, purchasing or otherwise acquiring
or agreeing to redeem, purchase or acquire any of its capital stock;
(xvi) create, incur, or assume any long-term or
short-term debt whether for money borrowed or otherwise;
(xvii) assume, guarantee, endorse or otherwise become
liable or responsible for the obligation of any other Person;
(xviii) make any loans, advances or capital contributions to, or
investments in, any other Person, prepay any interest payable under the Old
Debentures or the Debentures (other than to the extent that the issuance of the
Debentures constitutes a prepayment of interest under the Old Debentures) or
distribute any insurance proceeds or the Nevis Proceeds to any shareholders;
(xix) make any change affecting any bank, safe deposit
or power of attorney arrangements of the Company;
(xx) waive, compromise or settle any material right or claim
of the Company;
(xxi) enter into any forward, future, swap or hedging
contract that burdens the Assets or production therefrom; or
(xxii) amend or modify any of the Material Contracts, the
Option Agreement, the Nevis Agreement, the Old Debentures, the
Debentures or the Termination Agreements;
The Purchaser will respond to all written requests for consent under this
Section 8.1(a) with reasonable promptness, and within such reasonable time
period as the Company or the Vendors may specify to enable a timely reply to be
given to any third party. If the Purchaser does not respond within any such time
period specified by the Company or Vendors, the Company and the Vendors shall be
entitled to carry out the action described in the request, so long as the action
is consistent with proper business practices.
(b) The Purchaser acknowledges that an operation may be proposed pursuant to a
facilities, unit, unit operating or other agreement and may proceed if a
majority, but not all, of the owners of the particular facility, unit or
property vote in favour thereof, and that the owners voting against the
operation will nevertheless be obliged to pay for their respective proportionate
shares of the costs of the operation. When the Company is required by this
Section to obtain the written consent of the Purchaser in respect of any capital
expenditure which is subject to such a vote, the Company will vote in favour of
the particular expenditure unless the Purchaser instructs the Company to vote
against it. If the particular expenditure is approved of and proceeded with in
accordance with the applicable agreement notwithstanding that the Company may
have voted against the particular expenditure, the Purchaser shall,
notwithstanding its refusal to consent to the expenditure, be deemed to have
consented to it.
(c) If, having been given a written request for consent as contemplated in the
last paragraph of Section 8.1(a) and a reasonable time period to respond to the
said request having regard to the time period within which a reply is to be
given to the relevant third party, the Purchaser fails or refuses to consent
pursuant to this Section 8.1 to an expenditure necessary to preserve the
existence of any of the Leases and, as a consequence, any of the Leases or the
interest of the Company therein is terminated or surrendered or deemed to have
been terminated or surrendered, the Purchase Price shall not be reduced on
account of the termination or surrender nor shall the termination or surrender,
without more, constitute a breach or failure of the representations and
warranties of the Company relating thereto or of the Company's title thereto.
(d) The Company shall give prompt written notice to the Purchaser of any notice
or claim, written or oral, of default or breach by the Company, or of any
termination or cancellation (or threat of any of the same, whether disputed or
denied by the Company) received or given by the Vendors or the Company prior to
Closing under any instrument or agreement affecting the Assets to which the
Company is a party or by which it or any of the Assets is bound.
(e) Except with respect to the transactions contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, the
Vendors shall not take, and shall cause the Company to refrain from taking, any
action to, directly or indirectly, encourage, initiate or engage in discussions
or negotiations with, or provide any information to, any Person, other than
Purchaser, concerning any purchase of the Securities, or any part thereof, or
any merger, sale of all or substantially all of the assets of the Company or
similar transaction involving the Company.
(f) Except with respect to the transaction contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, the
Vendors shall not sell, transfer, dispose of, or grant a security interest in or
in respect of, all or any part of the Purchased Shares, the Option, the Old
Debentures or the Debentures.
8.2 Access for Investigation
(a) For the purpose of permitting the Purchaser to investigate the business,
properties and assets of the Company, but subject to confidentiality obligations
of the Company or the Vendors to other Persons, the Company shall permit the
Purchaser and its representatives, during the Interim Period, without
interference to the ordinary conduct of the business of the Company, to have
reasonable access during normal business hours and on reasonable notice to the
premises and to all the books, accounts, records and other data of the Company
within the possession or control of the Company. The Company shall furnish to
the Purchaser such financial and operating data and other information with
respect to the business, properties and assets of the Company as the Purchaser
shall from time to time reasonably request. The right of the Purchaser to have
access to the Assets shall be subject to any contractual restrictions thereon.
The Company shall cooperate with the Purchaser in attempting to secure such
access from other Persons. The Purchaser shall repair any damage to the Assets
resulting from its inspection thereof and shall indemnify and save harmless the
Company and the Vendors from and against any Claims arising as the result of the
Purchaser conducting such inspection.
(b) In particular, without limiting the generality of Section 8.2(a), the
Company shall make the Material Contracts, the Leases and all agreements and
other documents and correspondence, including title opinions previously
prepared, relating to title to the Assets, and all financial, tax, accounting,
well, production and operating data and records of the Company, available to the
Purchaser and its representatives at the offices of the Company for such
inspection and review as the Purchaser reasonably requires.
8.3 Actions to Satisfy Closing Conditions
Each of the Parties agrees to take all such actions as are within its power or
control, and to use its best efforts, to cause other actions to be taken which
are not within its power or control, so as to ensure compliance with each of the
conditions and covenants set forth in Articles 6, 7 and 8 which are for the
benefit of any other Party.
8.4 Waiver of Conditions in Nevis Agreement
The Company shall not waive any of the conditions precedent of the Company to
closing set forth in Article 7 of the Nevis Agreement.
8.5 Delivery of Debentures to the Representative
Prior to the Closing, the Vendors shall deliver the Debentures to the
Representative, to be held in trust until payment of the principal and accrued
but unpaid interest has been made in accordance with section 9.7. The Vendors
and the Representative shall not demand payment of the Debentures earlier than
the Business Day immediately following the Closing Date.
ARTICLE 9
POST-CLOSING MATTERS
9.1 Claims
(a) If, at any time, a Party or Parties (herein, whether one or more, a
"Notifying Party") believes that it has incurred or suffered or that it will
incur or suffer liabilities, losses or costs (herein collectively "Damages")
because of the incorrectness or breach of a representation or warranty in
Article 3 or 4 (whether as of the date hereof or at the Closing Time) or the
certificates delivered by the Company pursuant to Section 6.1 and 6.2 hereof, or
the breach of any covenant set forth in Section 2.3(d), 8.1, 8.4, 8.5, 9.3 or
9.6 or this Section 9.1 or Articles 10, 11 or 13, or any amount of Taxes or
Alberta Crown Royalties finally established by a Court of competent
jurisdiction, or agreed by the Representative to be payable by the Company as
the result of an Assessment as contemplated in Section 9.6, or any such amount
paid in good faith by the Company or the Purchaser (without the consent of the
Representative) with respect to an Assessment as contemplated in Sections 9.6(b)
and (d), or any claim by Jefferies for indemnification pursuant to the Jefferies
Indemnification Letter as the case may be, or the fraud of the Company or any of
the Vendors, as the result of which it has an actual or potential claim for
Damages or amounts or that for any other reason it has any claim hereunder (each
such claim being referred to as a "Contractual Claim"), the Notifying Party
shall forthwith give written notice (herein the "Claim Notice") to the other
Parties (herein, whether one or more, the "Receiving Party") and to the Escrow
Agent of the matter giving rise to the Contractual Claim. The notification shall
specify in reasonable detail the subject matter of the Contractual Claim, to the
extent then known to the Notifying Party. The Parties agree to deal in good
faith in the settlement or resolution of any Contractual Claim.
(b) Upon notice to the Notifying Party within 10 Business Days after receipt of
a Claim Notice, the Receiving Party shall have the right, in good faith, at its
own expense (not to be paid from the Escrow Account) and employing counsel of
its own choice, to contest and assume the defence of any Contractual Claim which
may result from a Claim made by a third party. In such event, the Notifying
Party shall have the right to retain its own counsel but the fees and expenses
of such counsel shall be at the expense of the Notifying Party. The failure to
give such notice of intent to defend a Contractual Claim shall constitute a
waiver of the Receiving Party's right to defend such Contractual Claim under
this Section 9.1(b) and shall preclude the Receiving Party from disputing the
manner in which the Notifying Party may in good faith conduct the defence of
such Contractual Claim or the reasonableness of any amount paid in good faith by
the Notifying Party in satisfaction of such Contractual Claim. The Receiving
Party shall not compromise or settle any Contractual Claim without the consent
of the Notifying Party, not to be unreasonably withheld.
(c) The failure by a Party to give a Claim Notice to the other Parties with
respect to any Contractual Claim shall relieve the other Parties of their
obligations with respect to the particular Contractual Claim, but only if and to
the extent that the other Parties are prejudiced by such failure. The failure by
a Party to give the other Parties a Claim Notice with respect to any actual or
potential Contractual Claim within the period applicable by virtue of Section
5.1(b) shall relieve the Parties against whom the particular Contractual Claim
is or may be made of any liability with respect to such Contractual Claim.
(d) The Parties will cooperate with each other in providing access to their
respective records in connection with Contractual Claims. The Purchaser shall
preserve such data and other information as may reasonably be required in
connection with a Contractual Claim until the end of the limitation period
applicable by virtue of Section 5.1(b). The Notifying Party will use reasonable
efforts to make available to the Receiving Party:
(i) those Persons who are then employees of the Notifying Party or the
Vendors whose assistance, testimony or presence is necessary or advisable to
assist the Receiving Party to evaluate and defend the subject matter of a
Contractual Claim; and
(ii) all documents, records and other materials in the possession or
control of the Notifying Party and reasonably required by the Receiving Party to
evaluate and defend the subject matter of a Contractual Claim,
and, subject to the other provisions of this Agreement, shall otherwise
cooperate in all reasonable respects with the Receiving Party in evaluating and
defending the subject matter of Contractual Claims. The Purchaser shall preserve
all documents, records and other material as may reasonably be required in
connection with the subject matter of a Contractual Claim, for so long as the
obligation to indemnify continues in effect.
(e) Notwithstanding any other provision of this Agreement to the contrary, the
representation and warranty set forth in Section 3.9(i) shall be breached,
untrue or incorrect only if and to the extent that the aggregate of the tax pool
amounts referred to by category in Section 3.9(i)(i) to (vi) inclusive as
finally determined is less than $31 million, and the Damages incurred or
suffered by the Purchaser shall be deemed to be equal to $0.30 for each $1.00 by
which the aggregate of the said tax pool amounts is less than $31 million.
9.2 Escrow Account
(a) Subject to Article 5, the Purchaser shall be entitled to recover from the
Escrow Account the Damages to which it establishes itself entitled pursuant to
the terms of the Escrow Agreement, in respect of a Contractual Claim for the
incorrectness or breach of a representation or warranty set forth in Article 3
(whether as of the date hereof or as of the Closing Date), or the certificates
of the Company delivered pursuant to Sections 6.1 and 6.2 hereof or any other
covenant or agreement set forth herein or any amount of Taxes or Alberta Crown
Royalties finally established by a Court of competent jurisdiction, or agreed by
the Representative to be payable by the Company as the result of an Assessment
as contemplated in Section 9.6, or any such amount paid in good faith by the
Company or the Purchaser (without the consent of the Representative) with
respect to an Assessment as contemplated in Sections 9.6(b) and (d), or any
claim by Jefferies for indemnification pursuant to the Jefferies Indemnification
Letter, the fraud of the Company or any of the Vendors, or any other amount to
which it, Abraxas or the Company establishes itself to be entitled pursuant to
the Escrow Agreement (herein an "Established Contractual Claim") as if all such
representations, warranties, covenants and agreements were made jointly and
severally by the Vendors. If the Closing occurs, the Vendors shall have no
claims or rights of indemnification or contribution against the Company with
respect to any Established Contractual Claim whatsoever hereunder including
amounts recovered by the Purchaser from the Escrow Account.
(b) Subject to the last sentence of this Section 9.2(b), the Purchaser shall be
limited to recovery from the Escrow Account for recovery in respect of any and
all Established Contractual Claims whatsoever hereunder, other than pursuant to
Section 2.3(d) or Article 10. Subject to the last sentence of this Section
9.2(b), in no event will the Purchaser have any claim whatsoever under this
Agreement against the Representative, the Vendors or the current or former
employees, officers or directors of the Company or any of them personally, nor
will the Purchaser be entitled to recover separately or in the aggregate, in
respect of all Established Contractual Claims and each of them, an amount in
excess of the Escrow Amount. In no event will the limitations in this Section
9.2(b) apply to:
(i) any Established Contractual Claim based upon:
(A) the fraud of the Company or any of the
Vendors; or
(B) the incorrectness or breach of any of the representations
and warranties set forth in Sections 3.42 to 3.46 inclusive or the breach of any
covenants or agreements set forth in Section 2.3(d), 8.1(f), 8.5 or Article 10;
or
(ii) any claim, right, demand or cause of action relating to or arising
out of the incorrectness or breach of any covenant, representation or warranty
in any agreement or document entered into or executed by any of the Parties
pursuant to the terms hereof or as contemplated hereby;
with respect to which the Purchaser or the Vendors, as the case may
be, shall be entitled to indemnification as provided herein directly from the
other and to such other remedies as may be available at law or in equity.
9.3 Joint Venture Audits
(a) Each notice or enquiry received or sent by the Company, or hereafter
received or sent by the Company as a result of any joint venture or similar
audit (herein a "Joint Venture Audit") conducted before or after August 1, 1996
as to expenses incurred or revenues received in respect of any of the Assets
prior to August 1, 1996 pursuant to an operating agreement is referred to herein
as an "Audit Notice". If an Audit Notice is received or given after Closing, the
Purchaser shall within 30 days of the receipt or giving of the Audit Notice
forward a copy of the Audit Notice to the Representative.
(b) If any Audit Notice is to the effect that a payment in excess of $100,000
should be made by or to the Company to or by another Person, the Vendors shall
be entitled to have reasonable access during normal business hours to review the
records of the Company pertaining to the matter, in order to evaluate the
matters disclosed in the Audit Notice. Neither the Purchaser nor the Company
shall make a payment by way of an adjustment resulting from any such Joint
Venture Audit, of expenses or revenues pertaining to any period ending on or
prior to August 1, 1996, without the consent of the Representative acting
reasonably, except pursuant to the award of a Court or arbitrator. Subject to
Sections 5.1, 9.1 and 9.2, if the amount of the payment to be made or received
by the Company, as the case may be, exceeds $100,000, the Vendors shall
forthwith reimburse the Company for, or the Purchaser shall cause the Company to
pay to the Representative (for immediate disbursement to the Vendors as their
interests appear), as the case may be, the amount by which the said payment
exceeds $100,000.
(c) The Vendors shall have the right at their own expense (not to be paid out of
the Escrow Account) and employing counsel of their own choice to contest any
Audit Notice to the effect that a payment in excess of $100,000 should be made
by the Company to another Person. In that event, the Purchaser shall have the
right to retain its own counsel but the fees and expenses of such counsel shall
be at the expense of the Purchaser.
9.4 Stub Period Returns
(a) The Company shall cause to be prepared and filed on a timely basis all Tax
Returns for the Company for the fiscal period which ends immediately prior to
Closing. The Representative will have a reasonable opportunity to review such
Tax Return prior to the filing thereof.
(b) The Parties shall cooperate fully with each other and make available to each
other in a timely fashion such data and other information as may reasonably be
required for the preparation of the Tax Return referred to in Section 9.4(a) and
shall preserve such data and other information until the expiration of any
applicable limitation period under any applicable law with respect to Taxes.
9.5 Change of Name
The Purchaser will not use, in the name of the Company or its successors, the
term "CGGS" or "CGGS Canadian Gas Gathering Systems Inc." or any other term
which is confusingly similar to such term.
9.6 Tax and Royalty Mattersa
(a) Notwithstanding any other provision set forth in this Agreement to the
contrary, if, at any time, the Purchaser or the Company receives an assessment,
a reassessment, an indication in writing that an assessment is being considered
or proposed, or any other notice in writing relating to an amount (the
"Assessment") of Taxes or Alberta Crown Royalties paid or payable in respect of
any period ending on or prior to July 31, 1996, the Purchaser or the Company
shall deliver to the Representative within 30 days of receiving the Assessment,
a copy of the Assessment, together with a statement setting out the obligations
of the Vendors pursuant to this Section 9.6 and the Escrow Agreement, on the
assumption that the Assessment is valid and binding.
(b) Upon notice given by the Representative to the Purchaser within 15 Business
Days after receipt by the Representative from the Purchaser or the Company of a
notice of an Assessment, the Representative on behalf of the Vendors shall have
the right at its own expense (not to be paid out of the Escrow Account) and
employing counsel of its own choice to contest, in good faith, any Assessment.
In such event, the Purchaser shall have the right to retain its own counsel but
the fees and expenses of such counsel shall be at the expense of the Purchaser.
The failure to give such notice of intent to contest an Assessment shall
constitute a waiver of the Vendors' right to contest such Assessment under this
Section 9.6(b) and shall preclude the Vendors from disputing the manner in which
the Purchaser or the Company may in good faith contest such Assessment or the
reasonableness of any amount paid in good faith by the Company in satisfaction
of such Assessment. The Representative shall not compromise or settle any
Assessment without the consent of the Purchaser, which shall not be unreasonably
withheld.
(c) The Purchaser will cooperate with the Representative, including providing
access to its employees and to financial and other records of the Company and
the Purchaser, in order to facilitate the filing of Tax Returns or returns
relating to Alberta Crown Royalties, as the case may be, in respect of periods
of time prior to the Closing and the conduct of any disputes relating thereto.
The Purchaser shall cause the Company to preserve such data and other
information as may reasonably be required in connection with a Tax Return or
returns relating to Alberta Crown Royalties, as the case may be, of the Company
for any taxation year or fiscal period ending on or prior to Closing, until the
end of any applicable limitation period under any applicable law with respect to
Taxes or Alberta Crown Royalties, as the case may be.
(d) Except with the consent of the Representative, which consent shall not be
unreasonably withheld, the Purchaser shall not, and shall not permit the
Company, to agree to any compromise or settlement with respect to any
Assessment; provided, however, that notwithstanding the foregoing, if the
Purchaser or the Company determines in good faith that the failure to pay,
compromise or settle an Assessment could adversely affect the Company or its
business, the Purchaser or Company may pay, compromise or settle such Assessment
and such action shall not impair or adversely affect the Purchaser's or
Company's right to make such payment the subject of a claim in accordance with
Sections 9.1, 9.2 and 9.6 hereof.
(e) If a refund of Taxes or Alberta Crown Royalties, as the case may be (to the
extent not reflected in the July 31 Balance Sheet) (the "Refund") is received
by, or credited to, the account of the Company, in respect of any fiscal period
ending on or prior to July 31, 1996, such recipient shall pay the amount of the
Refund to the Representative, after deduction of an amount equal to the amount
of Taxes, if any, to which the recipient would be subject as a result of the
receipt or crediting of such Refund. The Representative shall forthwith upon
receipt of any such Refund distribute same to the Vendors as their respective
interests appear.
(f) The Purchaser undertakes to inform and to cause the Company to inform the
Representative of all written audit inquiries received with respect to the
representations and warranties in Section 3.9 within 30 days of receipt thereof
and to provide the Representative with the right to make any representations
prior to an Assessment.
(g) References to the "Company" in this Section 9.6 shall include and be deemed
to include successors to such corporations by way of amalgamation, winding-up or
other reorganization of any nature whatsoever.
(h) The failure by the Purchaser to give to the Representative the notice
required by Section 9.6(a) with, respect to any Claim relating to Tax or Alberta
Crown Royalty matters shall relieve the Vendors of their obligations with
respect to such Claim only in the event the Vendors are prejudiced by such
failure.
(i) Notwithstanding any of the provisions of this Agreement, the Purchaser shall
not be entitled to recover twice for the same Damages or Claim under Section 9.2
in respect of the breach or incorrectness of any of the representations and
warranties set forth in Article 3 or in respect of any amount of Taxes or
Alberta Crown Royalties.
9.7 Repayment of Debentures
On the same Business Day as the Representative makes written demand of the
Company, which shall not be made earlier than the Business Day immediately after
Closing, the Purchaser shall cause the Company to repay in full the principal
amount of the Debentures, plus the interest accrued but unpaid thereon, to the
Vendors, as their respective interests appear. The principal amount of
Debentures to be held by each of the Vendors shall be the Canadian dollar
equivalent of the U.S. dollar amounts set forth in the column "Old Debenture
Principal (US$)" in Schedule 1.1(c), plus certain accrued but unpaid interest
thereon, all as contemplated in Section 2.1 of the Debenture Prepayment
Agreement. At the time of such repayment, the Representative shall deliver all
of the Debentures to the Company, free and clear of all Encumbrances, for
cancellation. The repayment required under this Section 9.7 shall be made to the
Representative for immediate disbursement to the Vendors in the proportions
appearing in column "Percentage of Old Debenture Principal" in Schedule 1.1(c).
ARTICLE 10
CONFIDENTIALITY
10.1 Confidential Information
As used herein, "Confidential Material" means, with respect to the Company, all
information, whether oral, written or otherwise, and all reports or analyses,
compilations, studies and other materials prepared, either prior to the Closing
Date or after the Closing Date in respect of any matter arising hereunder, by
the Company or any officer, director, employee, agent or representative of the
Company, (in whatever form maintained, whether documentary, computer storage or
otherwise) containing, reflecting or based upon, in whole or in part, any
information of the Company. The term "Confidential Material" does not include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by any of the Vendors or any officers, directors,
employees, agents or representatives of the Vendors (collectively, in this
Article 10, "Representatives") or anyone to whom the Vendors or any of their
Representatives transmit any Confidential Material in violation of this
Agreement, (ii) is or becomes known or available to the Vendors or their
Representatives on a non-confidential basis from a source (other than the
Company) who is not, to the knowledge of the Vendors or their Representatives
after reasonable inquiry, prohibited from transmitting the information to the
Vendors or their Representatives by a contractual, legal, fiduciary or other
obligation or (iii) is contained in the Offering Memorandum.
10.2 Obligation
Subject to Section 10.3 or except as required by law, the Confidential Material
will be kept confidential by the Vendors and the Representatives and will not,
without the prior written consent of the Company, the Purchaser and Abraxas, be
disclosed by the Vendors or their Representatives, in whole or in part, and will
not be used by the Vendors or their Representatives, directly or indirectly, for
any purpose other than in connection with this Agreement.
10.3 Disclosure
In the event that any of the Vendors or their Representatives or anyone to whom
any of the Vendors or their Representatives supply the Confidential Material,
are requested or required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand, any government
or governmental agency or authority or otherwise in connection with legal
processes) to disclose any Confidential Material, such Vendor agrees (i) to
immediately notify the Company, the Purchaser and Abraxas of the existence,
terms and circumstances surrounding such a request (ii) to consult with the
Company, the Purchaser and Abraxas on the advisability of taking legally
available steps to resist or narrow such request and (iii) if disclosure of such
information is required, to furnish only that portion of the Confidential
Material which, in the opinion of such Vendor's counsel, such Vendor is legally
compelled to disclose and to cooperate with any action by the Company, the
Purchaser and Abraxas to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Confidential
Material (it being agreed that the Company, the Purchaser and Abraxas shall
reimburse the Vendor for all reasonable out-of-pocket expenses incurred by the
Vendor in connection with such cooperation).
10.4 Remedies
The Vendors acknowledge and agree that any breach or threatened breach of this
Article 10 may cause irreparable injury to the Company, the Purchaser and
Abraxas and that money damages would in that event not provide an adequate
remedy to the Company, Purchaser and Abraxas and that the Company, the Purchaser
and Abraxas shall have the right, without limiting any other remedies available
to them hereunder, to have the provisions of this Section 10 specifically
enforced by any court having equity jurisdiction.
ARTICLE 11
GENERAL
11.1 Covenant of the Vendors
The Vendors hereby engage Feshbach & Sons (the "Adviser") to act as adviser to
the Vendors with respect to the transactions contemplated by the Nevis Agreement
and this Agreement. As payment for such advisory services, the Vendors shall pay
pro rata to the Adviser a success fee (the "Success Fee") equal to 1.75% of the
aggregate amount of consideration received by the Vendors from the proceeds of
sale in respect of the Nevis Agreement and this Agreement, including any
escrowed or contingent amounts of such consideration, and any additional
consideration payable pursuant to any post-closing adjustment under the Nevis
Agreement and this Agreement. The Adviser will reallow 3/7ths of the Success Fee
to certain officers or directors of the Company or Morrison. The foregoing
arrangement has been approved by representatives of the largest shareholder, Gas
Systems I Corporation (on behalf of the trustees of General Electric Pension
Trust).
11.2 Public Notices
Each of the Parties shall be entitled to communicate the details of the within
transaction to its shareholders and employees and to investment analysts and to
issue press releases, notwithstanding the Confidentiality Agreement. A Party
making any such communication shall advise the other Party of the occurrence and
nature of each such disclosure and shall deliver a copy of each press release to
the other Party so that the other Party will have the opportunity to review the
press release in advance of its dissemination. All other public notices to third
parties and all other publicity concerning the transactions contemplated by this
Agreement shall be jointly planned and coordinated by the Parties and no Party
shall act unilaterally in this regard without the prior approval of the other
Party, such approval not to be unreasonably withheld, except:
(a) in the case of the Vendors for communications made in
confidence to the Company's employees affected by such
transactions; or
(b) where required to do so by law or by the applicable regulations or policies
of any provincial or Canadian or other regulatory agency of competent
jurisdiction or any stock exchange in circumstances where prior consultation
with the other Party is not practicable.
11.3 Expenses
All costs and expenses (including the fees and disbursements of legal counsel)
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Party incurring such expenses; provided, however,
the Company shall not bear any of the costs and expenses incurred in whole or in
part by the Vendors in connection with this Agreement and the Nevis Agreement
and the transactions contemplated hereby and thereby.
11.4 Notices
Any notice or other writing required or permitted to be given under this
Agreement or for the purposes of this Agreement (referred to in this Section as
a "Notice") shall be sufficiently given if delivered or if transmitted by
facsimile or other form of recorded communication to such Party:
(a) to the Representative, for and on behalf of all of the
Vendors in the case of a Notice to the Vendors at:
Bernard Feshbach
#404, 1510 Oak Creek Drive
Palo Alto, California
94304-2032
Fax: (415) 321-5627
with a copy to:
Bennett Jones Verchere
4500 Bankers Hall East
855 - 2nd Street S.W.
Calgary, AB T2P 4K7
Attention: Donald E. Greenfield
Fax: (403) 265-7219
and to:
Curtis, Mallet-Provost, Colt & Mosle
101 Park Avenue
New York, New York
10178-0061
Attention: Albert Francke
Carl Ruggiero
Fax: (212) 697-1559
(b) prior to the Closing, in the case of a Notice to the Company
at:
CGGS CANADIAN GAS GATHERING SYSTEMS INC.
#3000, 400 - 3rd Avenue S.W.
Calgary, Alberta
T2P 4H2
Attention: Ken Woolner
Fax: (415) 750-3186
with a copy to:
Bennett Jones Verchere
4500 Bankers Hall East
855 - 2nd Street S.W.
Calgary, AB T2P 4K7
Attention: Donald E. Greenfield
Fax: (403) 265-7219
and to:
Curtis, Mallet-Provost, Colt & Mosle
101 Park Avenue
New York, New York
10178-0061
Attention: Albert Francke
Carl Ruggiero
Fax: (212) 697-1559
(c) in the case of a notice to the Purchaser or to the Company
subsequent to Closing:
Abraxas Petroleum Corporation
500 North Loop 1604 East, Suite 100
San Antonio, Texas
U.S.A. 78232
Attention: Robert L. G. Watson
Fax: (210) 490-8816
with a copy to:
Cox & Smith Incorporated
112 E. Pecan Street, Suite 1800
San Antonio, Texas
U.S.A. 78205
Attention: Steven R. Jacobs
Fax: (210) 226-8395
or at such other address as the Party to whom such Notice is to be given shall
have last notified the Party giving the same, in the manner provided in this
Section. Any Notice delivered to the Party to whom it is addressed as provided
in this Section shall be deemed to have been given and received on the day it is
so delivered at such address, provided that if such day is not a Business Day
then the Notice shall be deemed to have been given and received on the Business
Day next following such day. Any Notice sent by prepaid registered mailed shall
be deemed to have been given and received on the fifth Business Day next
following the date of its mailing. Any notice transmitted by facsimile or other
form of recorded communication shall be deemed given and received on the first
Business Day after its transmission.
11.5 Parties in Interest
This Agreement is binding upon and is for the benefit of the Parties and their
respective successors and permitted assigns. This Agreement is not made for the
benefit of any person not a party to this Agreement, and no Person other than
the Parties or their respective successors and permitted assigns shall acquire
or have any right, remedy or claim under or by virtue of this Agreement.
11.6 Time
Time shall be of the essence of this Agreement.
11.7 Assignment, Successors and Assigns
Neither any Vendor nor the Purchaser shall assign all or any part of this
Agreement nor any of its rights or obligations under this Agreement to any
Person, without the prior written consent of the other. Subject to the
foregoing, this Agreement shall enure to the benefit of and be binding upon the
Parties and their respective successors (including any successor by reason of
amalgamation of any Party) and permitted assigns.
11.8 Further Assurances
The Parties shall with reasonable diligence do all such things and provide all
such reasonable assurances as may be required to consummate the transactions
contemplated by this Agreement, and each Party shall provide such further
documents or instruments required by the other Party as may be reasonably
necessary or desirable to effect the purpose of this Agreement and carry out its
provisions, whether before or after the Closing.
11.9 Counterparts
This Agreement may be executed by the Parties in separate counterparts each of
which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.
ARTICLE 12
TERMINATION
12.1 Termination
In addition to termination as provided elsewhere herein, this
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing:
(a) automatically if:
(i) Closing has not occurred on or before December 31,
1996;
(ii) there shall be any statute, rule, or regulation that makes
consummation of the transactions contemplated hereby illegal or otherwise
prohibited or a Governmental Authority shall have issued an order, decree, or
ruling or taken any other action permanently restraining, enjoining, or
otherwise prohibiting the consummation of the transactions contemplated hereby,
and such order, decree, ruling, or other action shall have become final and
nonappealable;
(b) by mutual written agreement of the Parties;
(c) by the Vendors with notice to the Purchaser if one or more
of the conditions set forth in Article 7 are not satisfied as of
the Closing Date;
(d) by the Purchaser with notice to the Vendors if one or more
of the conditions set forth in Article 6 are not satisfied as of
the Closing Date;
(e) by the Vendors pursuant to Section 2.6.
12.2 Effect of Termination
In the event of the termination of this Agreement by a Party pursuant to Section
12.1 or otherwise, written notice thereof shall forthwith be given to the other
Parties specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall become void and have no effect, and there shall
be no liability hereunder on the part of any of the Parties (or any of their
respective directors, officers, employees, shareholders, or representatives),
except such liabilities or damages as are provided for in Section 2.7(c) in
respect of the Purchaser and in Section 2.8 in respect of the Vendors. The
provisions contained in this Section and in Section 3.41, 3.46, 4.6, 11.1, 11.2
and 11.3 and Article 13 shall survive the termination hereof.
ARTICLE 13
ARBITRATION
13.1 Arbitration
(a) Any dispute arising in connection with the Agreement shall be finally
settled under the Rules of Conciliation and Arbitration of the International
Chamber of Commerce:
(i) by one arbitrator nominated by the Parties;
(ii) in Calgary, Alberta;
(iii) in the English language; and
(iv) the laws of Alberta shall govern.
(b) Subject to Section 2.9, a Party wishing to have recourse to arbitration by
the International Chamber of Commerce shall, in addition to the requirements of
the Rules of Conciliation and Arbitration of the International Chamber of
Commerce, advise the other Party of its intention to do so by giving at least 10
days notice as herein provided specifying the subject of dispute, the contract
number and date and that Party's choice of arbitrator.
(c) For purposes of this Agreement, a dispute shall include a difference between
the Parties as to the interpretation, application or administration of this
Agreement, any failure to agree where agreement between the Parties is called
for and any dispute which this Agreement specifically provides shall be
arbitrated where the Parties are unable to resolve a dispute.
IN WITNESS WHEREOF the Parties have hereunto duly executed this Agreement.
CANADIAN ABRAXAS PETROLEUM LIMITED
By:
Name:
Title:
By:
Name:
Title:
CGGS CANADIAN GAS GATHERING SYSTEMS INC.
By:
Name:
Title:
By:
Name:
Title:
GAS SYSTEMS I CORPORATION
By:
Name:
Title:
By:
Name:
Title:
WITNESS
WITNESS
FLEET NATIONAL BANK, as Trustee of Echlin Pension Master Trust
By:
Name:
Title:
By:
Name:
Title:
MELLON BANK, N.A., as Trustee for the Alcoa Master Trust
By:
Name:
Title:
By:
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, as Trustee of the GMI/DRI
Investment Trust
By:
Name:
Title:
By:
Name:
Title:
ROYAL TRUST CORPORATION OF CANADA, in trust for the Kodak Canada
Inc. Retirement Income Plan
By:
Name:
Title:
By:
Name:
Title:
GENERAL REINSURANCE CORPORATION
By:
Name:
Title:
By:
Name:
Title:
ABRAXAS PETROLEUM CORPORATION
By:
Name:
Title:
By:
Name:
Title:
MORRISON PETROLEUMS LTD.
By:
Name:
Title:
By:
Name:
Title:
GAS SYSTEMS II CORPORATION
By:
Name:
Title
By:
Name:
Title:
BERNARD FESHBACH
DENNIS P. LYNCH
MARCUS SCHLOSS & CO., INC.
By:
Name:
Title:
By:
Name:
Title:
MORGAN GUARANTY TRUST CO. OF N.Y. as Trustee
By:
Name:
Title:
By:
Name:
Title:
BOSTON SAFE DEPOSIT AND TRUST COMPANY, as Trustee of Kodak
Retirement Income Plan
By:
Name:
Title:
By:
Name:
Title:
HOWARD HUGHES MEDICAL INSTITUTE
By:
Name:
Title:
By:
Name:
Title:
BEINECKE INVESTMENT FUND, L.P., by Ashford Capital Management,
Inc. as general partner
By:
Name:
Title:
By:
Name:
Title: