EXHIBIT 2
ACQUISITION AGREEMENT
BETWEEN
Vintage Petroleum, Inc.
and
Genesis Exploration Ltd.
MARCH 27, 2001
TABLE OF CONTENTS
ARTICLE 1
THE OFFER
Page
1.1 The Offer.................................................. 1
1.2 Conditions Precedent to Making Offer....................... 2
1.3 Genesis Action............................................. 3
1.4 Offer Documents............................................ 4
1.5 Subsequent Acquisition Transaction......................... 5
1.6 Directors.................................................. 5
1.7 Solicitation of Acceptances of Offer....................... 5
1.8 Joint Press Release and Public Disclosure.................. 5
1.9 Outstanding Stock Options.................................. 5
ARTICLE 2
COVENANTS OF GENESIS
2.1 Ordinary Course of Business................................ 6
2.2 Non-Solicitation by Genesis................................ 9
2.3 Access to Information...................................... 11
2.4 Market Purchases........................................... 11
2.5 Structure of Transaction................................... 11
2.6 Share Deposit Agreements................................... 11
2.7 Transition................................................. 11
ARTICLE 3
FEES AND OTHER ARRANGEMENTS
3.1 Compensation Fee........................................... 12
3.2 Right of First Refusal and Property Option................. 13
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE OFFEROR
4.1 Organization and Qualification............................. 14
4.2 Authority Relative to this Agreement....................... 14
4.3 Funds Available............................................ 14
4.4 No Violations.............................................. 14
4.5 No Violations.............................................. 15
4.6 No Ownership............................................... 15
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF GENESIS
5.1 Organization and Qualification............................. 15
5.2 Authority Relative to this Agreement....................... 15
5.3 No Violations.............................................. 15
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TABLE OF CONTENTS
(Continued)
Page
5.4 Compliance with Law........................................ 16
5.5 Capitalization............................................. 17
5.6 Material Agreements........................................ 17
5.7 Filings.................................................... 17
5.8 Financial Statements....................................... 17
5.9 Transaction Fees........................................... 17
5.10 Absence of Changes......................................... 18
5.11 Employment Agreements...................................... 18
5.12 Employee Obligations....................................... 18
5.13 United States Relationship................................. 18
5.14 Employee Benefit Plans..................................... 19
5.15 Employee Arrangement Compliance............................ 19
5.16 Effect of Transaction...................................... 19
5.17 Books and Records.......................................... 20
5.18 Litigation, etc............................................ 20
5.19 Environmental.............................................. 20
5.20 Tax Matters................................................ 23
5.21 Reporting Issuer Status.................................... 24
5.22 Subsidiaries............................................... 24
5.23 Debt....................................................... 25
5.24 Shareholder Rights Plan.................................... 25
5.25 Share Deposit Agreements................................... 25
5.26 Accurate Information....................................... 25
5.27 No Manipulation............................................ 25
5.28 No Undisclosed Material Liabilities........................ 25
5.29 Subsequent Public Filings.................................. 26
5.30 Insurance.................................................. 26
5.31 Confidentiality Agreements................................. 26
5.32 Labor and Employee Relations............................... 26
5.33 Absence of Certain Business Practices...................... 27
5.34 Engineering Reports........................................ 27
5.35 Title...................................................... 27
5.36 Operational Matters........................................ 28
5.37 Flow-Through Shares........................................ 29
ii
TABLE OF CONTENTS
(Continued)
Page
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Other Filings.............................................. 29
6.2 Further Assurances......................................... 29
6.3 Fees and Expenses.......................................... 30
6.4 Employment Contracts....................................... 30
6.5 Officers' and Directors' Insurance......................... 30
6.6 Notice of Material Changes, Untruth and Non-Compliance..... 31
ARTICLE 7
TERM, TERMINATION, AMENDMENT AND WAIVER
7.1 Term....................................................... 31
7.2 Termination................................................ 31
7.3 Effect of Termination...................................... 32
ARTICLE 8
GENERAL PROVISIONS
8.1 Notices.................................................... 32
8.2 Interpretation............................................. 34
8.3 Miscellaneous.............................................. 34
8.4 Applicable Law Enforcement................................. 34
8.5 Publicity.................................................. 34
8.6 Assignment................................................. 35
8.7 Time is of the Essence..................................... 35
8.8 Currency................................................... 35
8.9 Severability............................................... 35
8.10 Amendment.................................................. 35
8.11 Waiver..................................................... 35
iii
TABLE OF CONTENTS
(Continued)
Page
SCHEDULES
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1.1(c) Conditions to the Offer
1.8 Joint Press Release*
2.2(c) Confidentiality Agreement*
2.6 Share Deposit Agreement*
5.6 Material Agreements*
5.10 Material Changes*
5.14 Employee Benefit Plans*
5.18 Litigation*
5.36 Operational Matters*
DISCLOSURE LETTER*
------------------
2.1 Ordinary Course of Business
2.1(c) Ordinary Course of Business
5.3(a) No violations
5.4 Compliance with Law
5.9 Transaction Fees
5.11 Genesis Employment Agreements
5.15 Employee Arrangement Compliance
5.16 Effect of Transaction
5.19 Environmental
5.20(e)&(f) Tax Matters
5.28 Hedging/Forward Sale Agreements
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* Omitted. The Registrant agrees to furnish supplementally a copy of any such
omitted schedules or the disclosure letter to the Securities and Exchange
Commission upon its request.
iv
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT (this "Agreement"), dated as of March 27, 2001,
---------
between Vintage Petroleum, Inc. ("Vintage" or the "Offeror") and Genesis
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Exploration Ltd. ("Genesis").
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BACKGROUND:
A. The Offeror and Genesis have had discussions respecting the
acquisition by Offeror of all of the outstanding common shares of Genesis.
B. The board of directors of Genesis (the "Genesis Board") is of the view
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that it is in the best interest of Genesis and its shareholders that Offeror
make an offer to the shareholders of Genesis to purchase all of the outstanding
common shares of Genesis.
C. The Offeror is prepared to make an offer to purchase all of the
outstanding common shares of Genesis, subject to the terms and conditions of
this Agreement.
D. Each of Genesis' directors and officers and all persons and companies
affiliated or associated with them (the "Agreeing Shareholders"), have agreed to
---------------------
enter into agreements (the "Share Deposit Agreements") with Offeror of even date
------------------------
herewith.
AGREEMENT:
In consideration of the covenants and agreements herein contained and
for other good and valuable consideration (the receipt and sufficiency of which
are hereby acknowledged), the parties covenant and agree as follows:
ARTICLE 1
THE OFFER
1.1 The Offer.
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(a) Subject to the terms and conditions of this Agreement, the Offeror
shall make, as soon as practicable after the date hereof, and in any
event not later than 11:59 p.m. (Calgary time) on March 30, 2001 (the
"Offer Date"), an offer to purchase all of the outstanding common
----------
shares of Genesis and all common shares of Genesis issued on the
exercise of presently outstanding options to purchase common shares of
Genesis (collectively the "Common Shares" or the "Genesis Shares") at
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a price of Cdn. $18.25 for each Common Share (as amended, varied or
extended, the "Offer"). Notwithstanding the foregoing, the Offer Date
-----
shall be extended as necessary in the Offeror's sole discretion, but
not later than April 20, 2001, to permit the preparation and filing of
all documents (including French language translations thereof)
required to be filed with regulatory authorities in connection
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with the Offer pursuant to all Canadian federal and provincial, United
States and other applicable securities laws ("Applicable Securities
---------------------
Laws").
----
(b) The parties agree that the Offeror may make the Offer itself, or
through one or more of its direct or indirect wholly-owned
subsidiaries, or any combination thereof (which, for the purposes
hereof, may include a partnership, all of the partners of which are
direct or indirect subsidiaries of the Offeror or any combination
thereof). In the event that any of such entities makes the Offer, the
terms "Offeror" and "Vintage" as used herein shall include all of such
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entities, other than in Article 4 where the terms "Offeror" and
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"Vintage" shall not include such entities, but the Offeror shall
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continue to be liable to Genesis for any default in performance by any
such party.
(c) The Offer shall be made in accordance with all applicable laws and
shall be subject to the conditions set forth in Schedule 1.1(c)
hereto. The Offer shall not expire, and the Offeror shall not take up
and pay for Common Shares, prior to 12:00 p.m. midnight (Vancouver
time) on the 21st day from the Offer Date; or if such day is not a
business day, the next business day, provided that the Offer may be
extended one or more times at the sole discretion of the Offeror, if
the conditions set forth in Schedule 1.1(c) are not satisfied or
waived at the date and time at which the Offer otherwise would expire
(the "Expiry Time") and further provided that if at the Expiry Time
-----------
condition (d) of Schedule 1.1(c) alone or together with one or more
other conditions is not satisfied, the Offeror shall extend the Offer
in one or more extensions and the Offer may not be terminated or
allowed to expire solely as a result of such non-satisfaction of
conditions in Schedule 1.1(c) prior to 12:00 p.m. (Vancouver time) on
the 45th day from the Offer Date. Subject to the satisfaction or
waiver of the conditions set forth in Schedule 1.1(c), the Offeror
shall, on or before the third day following the date that the
conditions set forth in Schedule 1.1(c) are satisfied and the Offeror
is duly authorized under applicable law, accept for payment and pay
for all Common Shares validly tendered (and not properly withdrawn)
pursuant to the Offer. The Offeror shall use reasonable commercial
efforts to consummate the Offer, subject only to the terms and
conditions thereof and this Agreement. The Offeror agrees not to vary
the Offer, except to increase the consideration payable thereunder,
waive the conditions or extend the Expiry Time, provided that the
Minimum Condition (as defined in Schedule 1.1(c)) may not be waived
without the prior written consent of Genesis, such consent not to be
unreasonably withheld.
1.2 Conditions Precedent to Making Offer.
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(a) The obligation of the Offeror to make the Offer shall be conditional
upon the following:
(i) no event shall have occurred or circumstance shall exist
which would make it impossible or impracticable to satisfy
one or more of the conditions of the Offer described in
Schedule 1.1(c);
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(ii) each of the representations and warranties of Genesis which
are set out herein shall be true and correct in all material
respects at the date that the Offer is made, and Genesis
shall have complied in all material respects with each of
its covenants and obligations set out herein;
(iii) the Offeror shall have obtained such orders or exemptive
relief from the appropriate securities commissions or other
regulatory authorities in Canada, the United States and, as
applicable, elsewhere (the "Regulatory Authorities") as are
----------------------
required in connection with the Offer and the transactions
contemplated by the Offer;
(iv) the Genesis Board shall not have withdrawn, modified or
changed any of the recommendations or determinations set
forth in Section 1.3(a); and
(v) the execution and delivery to the Offeror, concurrently with
the execution of this Agreement, of the Share Deposit
Agreements executed by each director and by each of Messrs.
Anderson, Bunn, Horner, Charles and Stobo and, prior to the
mailing of the Offer, the remaining Share Deposit Agreements
referred to in Sections 2.6 and 5.25.
(b) The foregoing conditions are for the exclusive benefit of the Offeror
and may be waived by the Offeror, in whole or in part, in its sole
discretion, at any time and from time to time, both before or after
the Expiry Time.
1.3 Genesis Action.
--------------
(a) Genesis represents and warrants to the Offeror that the Genesis Board
has received the oral fairness opinion of its financial advisors (to
be confirmed in writing prior to the mailing of the directors'
circular to be mailed in connection with the Offer (the "Directors'
----------
Circular")) that the Offer is fair from a financial point of view to
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the holders of the Common Shares (the "Shareholders") and that the
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Genesis Board, upon receipt of the oral fairness opinion and
consultation with its financial and legal advisors, has determined
unanimously, by those present at the meeting, that:
(i) the Offer is fair to the Shareholders and is in the best
interests of Genesis and the Shareholders;
(ii) the Genesis Board will recommend that Shareholders accept
the Offer; and
(iii) the entering into of this Agreement, which the Offeror has
expressly stated is a mandatory precondition to its
willingness to make the Offer, is in the best interests of
Genesis and the Shareholders.
(b) Genesis shall co-operate with the Offeror, take all reasonable action
to support the Offer and, shall provide the Offeror with a draft copy
of the Directors' Circular
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prior to the mailing thereof, on a confidential basis, and shall
provide the Offeror with a reasonable opportunity to review and
provide any comments thereon. Genesis shall use its reasonable
commercial efforts to mail the Directors' Circular on the same date
that the Offeror mails the Offer to the Shareholders (and no later
than 10 days from such mailing date). Genesis shall also file the
Directors' Circular on a timely basis with all applicable securities
commissions or other regulatory authorities in Canada, the United
States and elsewhere, as applicable (the "Regulatory Authorities").
----------------------
The Directors' Circular will set forth, among other things, the
determinations and recommendations of the Genesis Board as set forth
in Section 1.3(a).
(c) Genesis represents that all members of the Genesis Board have advised
it that at the date hereof they intend to tender their Common Shares
to the Offer and Genesis will so state in the Directors' Circular.
(d) The Directors' Circular, when filed with the Regulatory Authorities
and mailed to the Shareholders, shall contain all information which is
required to be included therein in accordance with all applicable
laws, including, all applicable corporate laws, including the Business
Corporations Act (Alberta) ("Applicable Corporate Laws") and all
-------------------------
Applicable Securities Laws and shall in all material respects comply
with the requirements of applicable law, including all Applicable
Corporate Laws and all Applicable Securities Laws.
1.4 Offer Documents.
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(a) The Offeror shall provide Genesis with a draft copy of the Offer, the
take-over bid circular and the related letter(s) of transmittal and
notice(s) of guaranteed delivery (collectively, the "Offer Documents")
---------------
to be mailed to Shareholders, prior to the mailing thereof, on a
confidential basis, and shall provide Genesis with a reasonable
opportunity to review and provide comments thereon. The Offeror shall
file the Offer Documents on a timely basis with the Regulatory
Authorities. The Offer Documents, when filed with the Regulatory
Authorities and mailed to the Shareholders, shall contain all
information which is required to be included therein in accordance
with any applicable law, including, all Applicable Corporate Laws and
all Applicable Securities Laws, and shall in all material respects
comply with the requirements of applicable law, including all
Applicable Corporate Laws and all Applicable Securities Laws. The
terms of the Offer shall be in accordance with the terms of this
Agreement. In making the Offer, Offeror shall comply in all material
respects with the provisions of applicable law, including all
Applicable Securities Laws.
(b) Genesis shall promptly provide the Offeror with (i) lists (in paper
and electronic forms as available) of the Shareholders and holders of
all options and other securities exercisable or convertible into
Common Shares ("Optionholders"), including the names, addresses and
-------------
numbers of Common Shares or other securities held, and shall provide,
or shall instruct its transfer agent to provide,
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updated lists as and when available; (ii) to the extent known or
obtainable by Genesis, lists of beneficial shareholders; (iii) such
assistance as the Offeror or its agents may reasonably request,
including communicating the Offer and any amendments and supplements
thereto to the registered and beneficial holders of Common Shares and
Optionholders (including participating with the Offeror in joint
investor presentations); and (iv) mailing labels for Shareholders and
Optionholders.
1.5 Subsequent Acquisition Transaction. If the Offeror takes up and pays for
----------------------------------
at least 662/3% of the Common Shares pursuant to the Offer, Genesis agrees
to use reasonable commercial efforts to assist and enable the Offeror to
acquire the balance of the Common Shares as soon as practicable after
completion of the Offer by way of compulsory acquisition, arrangement,
amalgamation, merger, reorganization, consolidation, recapitalization or
other type of acquisition transaction.
1.6 Directors. Genesis agrees with and represents to the Offeror that the
---------
Genesis Board has determined unanimously to use reasonable commercial
efforts to enable the Offeror to elect or appoint nominees of the Offeror
in their stead as soon as possible after the Offeror takes up and pays for
at least 66% of the Common Shares pursuant to the Offer and to cause the
appointment of the Offeror's nominees to fill the vacancies so created in
order to effect the foregoing without the necessity of a shareholder
meeting.
1.7 Solicitation of Acceptances of Offer. The Offeror will appoint a dealer
------------------------------------
manager in connection with the Offer and solicit acceptances of the Offer.
The dealer manager will be required to form a soliciting dealer group
comprised of members of the Investment Dealer Association of Canada and of
the stock exchanges in Canada and the United States to solicit acceptances
of the Offer.
1.8 Joint Press Release and Public Disclosure. The parties shall jointly issue
-----------------------------------------
a press release upon execution of this Agreement in the form set forth in
Schedule 1.8. The parties shall consult each other with respect to any
further public disclosures respecting this Agreement, the Offer, and any
matter related thereto.
1.9 Outstanding Stock Options. Genesis shall use reasonable commercial
-------------------------
efforts, having regard, without limitation, to its available bank lines, to
enter into agreements with all holders of options to the effect that in
lieu of such persons exercising their options, Genesis will pay to such
persons the difference between the exercise price of their options and the
purchase price for the Common Shares under the Offer immediately after the
Offeror first takes up any Common Shares pursuant to the Offer in exchange
for the termination of their options. To the extent that holders fail to
enter into such agreements, Genesis shall use all reasonable commercial
efforts to ensure that all options, whether issued pursuant to Genesis'
stock option plan and other compensation arrangements or otherwise, are no
later than immediately prior to the Expiry Time, either: (i) exercised and
all Common Shares issued in connection therewith are deposited to the
Offer; or (ii) terminated, surrendered or cancelled. Genesis further agrees
and represents that the Genesis Board has also resolved, and has authorized
and directed Genesis, subject to the
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receipt of any required regulatory approvals, (i) to the extent necessary,
to amend the terms of its stock option plan and other compensation
arrangements to permit and to cause the vesting of option entitlements
thereunder to accelerate prior to or concurrent with the mailing of the
Offer such that all outstanding options to acquire Common Shares shall be
exercisable and fully vested prior to the Expiry Time; (ii) to arrange for
all Common Shares that are fully paid thereunder to be distributed to those
persons entitled thereto so as to be able to be tendered to the Offer (iii)
to satisfy all other obligations of Genesis under such plans; and (iv)
effective upon receiving notice from the Offeror that the Minimum Condition
has been satisfied or waived, and immediately after the Offeror takes up
Common Shares pursuant to the Offer, to use reasonable commercial efforts
to cause all option entitlements under the stock option plan and any other
compensation arrangements to terminate upon the payment of an amount for
each outstanding option equal to the difference between the exercise price
thereof and the Offer price.
ARTICLE 2
COVENANTS OF GENESIS
2.1 Ordinary Course of Business. Genesis covenants and agrees that, prior to
---------------------------
the earlier of the termination of this Agreement and the appointment or
election to the Genesis Board of persons designated by the Offeror pursuant
to Section 1.6 or the third business day after the Offeror takes up Common
Shares under the Offer in the event the Offeror does not designate such
persons, unless the Offeror shall otherwise agree in writing or as
disclosed to the Offeror in writing in a disclosure letter received by the
Offeror prior to the execution of this Agreement (the "Disclosure Letter")
-----------------
or as otherwise expressly contemplated or permitted by this Agreement:
(a) Genesis shall, and shall cause each of its direct and indirect
subsidiaries and other entities, including any partnerships or joint-
ventures directly or indirectly controlled by Genesis (whether in fact
or law) (each, a "Subsidiary") to, conduct its and their respective
----------
businesses only in, and not take any action except in, the usual,
ordinary and regular course of business and consistent with past
practice, including increasing its investment in any other corporation
or partnership;
(b) Genesis shall not, directly or indirectly, do or permit to occur any
of the following:
(i) issue, sell, pledge, lease, dispose of, encumber or agree to
issue, sell, pledge, lease, dispose of or encumber:
(A) any additional shares of, or any options, warrants,
calls, conversion privileges or rights of any kind to
acquire any shares of or any stock appreciation rights
of Genesis (other than pursuant to the exercise of
stock options currently outstanding and disclosed in
writing to the Offeror); or
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(B) except in the usual, ordinary and regular course of
business and consistent with past practice, any assets
of Genesis;
(ii) amend or propose to amend its articles, by-laws or other
constating documents or those of any Subsidiary;
(iii) split, combine or reclassify any outstanding Common Shares,
or declare, set aside or pay any dividends or other
distributions payable in cash, stock, property or otherwise
with respect to the Common Shares, other than as
contemplated in Section 2.5;
(iv) other than as contemplated by Section 1.9 above, redeem,
purchase or offer to purchase any Common Shares or other
securities, including under any normal course issuer bid;
(v) reorganize, amalgamate, merge, consolidate or otherwise
combine with any other person, corporation, partnership or
other business organization whatsoever;
(vi) acquire or agree to acquire (by merger, amalgamation,
consolidation, acquisition of stock or assets or otherwise)
any person, corporation, partnership or other business
organization whatsoever (including any division) or acquire
or agree to acquire any material assets;
(vii) except in the usual, ordinary course of business and
consistent with past practice, satisfy any material claims
or liabilities except such as have been reserved against in
Genesis' financial statements delivered to the Offeror,
relinquish any material contractual rights or enter into any
interest rate, currency or commodity swaps, hedges or other
similar financial instruments; or
(viii) incur or commit to incur any indebtedness for borrowed money
or issue any debt securities, except for working capital in
the usual, ordinary course of business and consistent with
past practice and not to exceed, in the aggregate, Cdn.
$5,000,000, other than payments of not more than $36.5
million made in connection with the termination of options
to acquire Common Shares;
(c) except with the prior written consent of the Offeror, Genesis shall
not (other than as may be expressly permitted by this Agreement or
disclosed in the Disclosure Letter):
(i) enter into or modify any employment, severance, collective
bargaining or similar agreements, policies or arrangements
with, or grant any bonuses, salary increases, severance or
termination pay to, any officers or directors of Genesis
other than pursuant to agreements, policies or arrangements
in
-8-
effect (without amendment) on the date hereof and disclosed
to the Offeror; or
(ii) in the case of employees who are not officers or directors,
take any action other than in the ordinary, regular and
usual course of business and consistent with past practice
(none of which actions shall be unreasonable or unusual)
with respect to the entering into or modifying of any
employment, severance, collective bargaining or similar
agreements, policies or arrangements or with respect to the
grant of any bonuses, salary increases, stock options,
pension benefits, retirement allowances, deferred
compensation, severance or termination pay or any other form
of compensation or profit sharing or with respect to any
increase of benefits payable otherwise than pursuant to
agreements, policies or arrangements in effect (without
amendment) on the date hereof;
(d) Genesis shall cause its and their current insurance (or re-insurance)
policies not to be cancelled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies underwritten by insurance
and re-insurance companies of nationally recognized standing providing
coverage equal to or greater than the coverage under the cancelled,
terminated or lapsed policies for substantially similar premiums are
in full force and effect;
(e) Genesis shall:
(i) preserve intact its business organization and goodwill, to
keep available the services of its officers and employees as
a group and to maintain satisfactory relationships with
suppliers, agents, distributors, customers and others having
business relationships with it;
(ii) not take any action that would render, or could reasonably
be expected to render, any material representation or
warranty made by it in this Agreement untrue in any material
respect at any time prior to the Expiry Time;
(iii) use reasonable commercial efforts to enable the conditions
set forth in Section 1.2 and Schedule 1.1(c) to be
satisfied;
(iv) promptly notify the Offeror orally and in written form of
any material adverse change in its business, properties,
assets, financial condition or prospects and of any material
governmental or third party complaints, investigations or
hearings (or communications indicating that the same may be
contemplated);
(v) confer on a regular basis with the Offeror with respect to
material operational matters and promptly notify the Offeror
orally and in written
-9-
form of any material adverse change in the ordinary course
of its business or in the operation of its business or in
the operation of its or any of its properties, and of any
material governmental or third party complaints,
investigations or hearings (or communications indicating
that the same may be contemplated); and
(vi) not settle or compromise any claim brought by any present,
former or purported holder of any securities of Genesis in
connection with the transactions contemplated by this
Agreement or the Offer without the prior written consent of
the Offeror, not to be unreasonably withheld;
(f) Genesis shall not enter into or modify any contract, agreement,
commitment or arrangement if such entry into or modification would be
material with respect to any of the matters set forth in this Section
2.1 without the prior written consent of the Offeror, not to be
unreasonably withheld.
2.2 Non-Solicitation by Genesis.
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(a) Genesis shall not, directly or indirectly, through any officer,
director, promoter, employee, representative or agent of Genesis or
any Subsidiary or otherwise:
(i) solicit, initiate or knowingly encourage (including by way
of furnishing information or entering into any form of
agreement, arrangement or understanding) the initiation or
continuation of any inquiries, discussions, negotiations,
proposals or offers regarding any merger, amalgamation,
arrangement, take-over bid, sale of substantial assets, sale
of treasury shares or any similar transaction involving
Genesis or any Subsidiary (any of the foregoing inquiries or
proposals, other than from the Offeror or its nominees,
representatives or agents, being referred to herein as an
"Acquisition Proposal");
--------------------
(ii) continue or participate in any discussions or negotiations
relating to any such transactions with, or otherwise
cooperate with or assist or facilitate, encourage or
participate in any effort to take such action by, or provide
any information to, any corporation, person or other entity
or group; or
(iii) waive or otherwise forebear in the enforcement of, or enter
into or participate in any discussions, negotiations or
agreements to waive or otherwise forebear in respect of, any
rights or other benefits of Genesis under confidentiality or
other agreements, including any "standstill" provisions
therein;
provided, that nothing contained in this Section 2.2(a) shall prevent
the Genesis Board from responding to and recommending to the
Shareholders an unsolicited bona fide written Acquisition Proposal for
which adequate financial arrangements have been made which the Genesis
Board determines in good faith (after
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consultation with its financial advisors, and after receiving advice
of outside counsel that is reflected in the minutes of the Genesis
Board, to the effect that the Genesis Board is required to so
determine in order to discharge properly its fiduciary duties) would,
if consummated in accordance with its terms, result in a transaction
financially superior for the Shareholders than the transaction
contemplated by this Agreement (any such Acquisition Proposal being
referred to herein as a "Superior Proposal").
-----------------
(b) Genesis shall immediately notify the Offeror of any future Acquisition
Proposal or any request following the date hereof for non-public
information relating to Genesis in connection with an Acquisition
Proposal or for access to any of its properties, books or records by
any person or entity that informs Genesis that it is considering
making, or has made, an Acquisition Proposal. Such notice to the
Offeror shall be made, from time to time, orally and in writing and
shall indicate such details of the proposal, inquiry or contact known
to Genesis as the identity of the person making such proposal, inquiry
or contact, the consideration offered and such other details as the
Offeror may reasonably request.
(c) If Genesis receives a request for material non-public information from
a party who proposes to Genesis a bona fide Acquisition Proposal and
Genesis Board determines that such proposal is a Superior Proposal
pursuant to Section 2.2(a), then and only in such case, Genesis may,
subject to the execution of a confidentiality agreement substantially
similar to the confidentiality agreement between the Offeror and
Genesis dated February 26, 2001, a copy of which is attached hereto as
Schedule 2.2(c) (the "Confidentiality Agreement"), provide such party
--------------------------
with access to information regarding Genesis. Genesis shall provide to
the Offeror a true and complete copy of any such confidentiality
agreement forthwith following its execution and make available to the
Offeror all information provided to such party that has not been
previously provided to the Offeror concurrently with the provision of
any information to such party.
(d) Genesis shall ensure that the officers, directors and employees of
Genesis and of all Subsidiaries, the associates and affiliates of such
persons and any investment banker, other advisor and representative
retained by Genesis are aware of the provisions of this Section 2.2,
and Genesis shall be responsible for any breach of this Section 2.2 by
any of the foregoing.
(e) Genesis shall, and shall cause its Subsidiaries and its and their
directors, officers, promoters, employees, representatives and agents
to immediately cease and cause to be terminated all discussions and
negotiations, if any, with any parties (other than the Offeror) with
respect to any actual, future or potential Acquisition Proposal, and
Genesis shall immediately close any data rooms. Genesis agrees not to
release any third party from any confidentiality or standstill
agreement to which Genesis and such third party are parties. Genesis
shall immediately send a letter to each party who has had such
discussions or who has entered into a confidentiality agreement with
Genesis pertaining to the sale of Genesis or a
-11-
material portion of its assets requiring such party to return to
Genesis or its agents or advisors or destroy all information provided
to such party by Genesis or its agents or advisors or prepared by such
party in respect of Genesis and shall use all reasonable efforts to
ensure that such requests are honoured. Genesis shall immediately
advise the Offeror orally and in written form of any response or
action by any recipient of such information which Genesis reasonably
believes could adversely affect the completion of the Offer, or give
rise to an Acquisition Proposal.
2.3 Access to Information. Subject to the Confidentiality Agreement, Genesis
---------------------
shall afford the Offeror's officers, employees, counsel, investment
bankers, accountants and other authorized representatives and advisors
access, at all reasonable times, from the date hereof and until the
expiration of this Agreement, to its business, properties, books, contracts
and records as well as to its management personnel, and, during such
period, Genesis shall furnish promptly to the Offeror all information
concerning its business, properties and personnel as the Offeror may
reasonably request. All such requests for access or information shall be
through either the President or the Chairman and Senior Vice President of
Genesis.
2.4 Market Purchases. Genesis agrees that the Offeror, notwithstanding
----------------
anything to the contrary contained in the Confidentiality Agreement, during
the period the Offer is outstanding may purchase Common Shares through the
facilities of The Toronto Stock Exchange or such other method(s) which are
not prohibited by Applicable Securities Laws.
2.5 Structure of Transaction. Genesis shall cooperate with the Offeror in
------------------------
structuring the acquisition by the Offeror of Genesis pursuant to the Offer
in a tax efficient manner.
2.6 Share Deposit Agreements. Genesis shall deliver within the respective
------------------------
dates set out in Section 1.2(v), Share Deposit Agreements duly executed by
each of the Agreeing Shareholders, substantially in the form attached as
Schedule 2.6. The Directors' Circular shall reflect the execution and
delivery of such Share Deposit Agreements and the agreement of the Agreeing
Shareholders to tender their respective Common Shares to the Offer.
2.7 Transition. Genesis shall, on or before the date that the Offeror first
----------
takes up Common Shares under the Offer, furnish promptly to the Offeror all
information concerning the business, properties and personnel of Genesis as
the Offeror may reasonably request and review with the Offeror's authorized
personnel such of the records, systems and processes as would be necessary
to allow the Offeror's authorized personnel to assume the continuing
operations of Genesis.
-12-
ARTICLE 3
FEES AND OTHER ARRANGEMENTS
3.1 Compensation Fee. If at any time after the time of execution of this
----------------
Agreement:
(a) Genesis Board has withdrawn or, in any manner adverse to the Offeror,
redefined, modified or changed any of its recommendations, approvals,
resolutions or determinations referred to in Sections 1.3, 1.6 and 1.9
or has resolved to do so;
(b) Genesis Board has failed to reaffirm its recommendation of the Offer
to Shareholders by press release within five days after the public
announcement or commencement of any Acquisition Proposal made prior to
the Expiry Time and in a Directors' Circular within 10 days after the
mailing of any such Acquisition Proposal;
(c) Genesis Board has recommended that Shareholders deposit their Common
Shares under, vote in favour of, or otherwise accept, an Acquisition
Proposal;
(d) Genesis has entered into an agreement (other than a confidentiality
agreement substantially similar to the Confidentiality Agreement) with
any person with respect to an Acquisition Proposal to be made prior to
the Expiry Time;
(e) a Superior Proposal is publicly announced, proposed, offered or made
to the Shareholders or to Genesis and at the Expiry Time the Minimum
Condition (as defined in Schedule 1.1(c) to this Agreement) of the
Offer has not been satisfied; or
(f) Genesis breaches in any material respect representations, warranties
or covenants made by it in this Agreement,
then Genesis shall promptly pay to the Offeror an amount which is equal to
4% of the value (calculated based on the offer price per Common Share
multiplied by the number of Common Shares outstanding on a fully diluted
basis, plus all bank debt and all long term debt including the current
portion thereof, without duplication) of the Offer or, if a Superior
Proposal has been announced, proposed, offered or made, of the Superior
Proposal or Superior Proposals having the highest value from time to time
considered by Genesis, whether or not there is in fact a Superior Proposal,
to compensate the Offeror for facilitating a higher offer for Genesis.
Such payment shall be made in immediately available funds, within two
business days after the first to occur of the events described above. In
the event there is more than one Superior Proposal, or a Superior Proposal
is proposed to Genesis for the first time after a fee has been paid to the
Offeror pursuant to this Section 3.1, then the fee required to be paid
hereby shall be recalculated and any incremental fee shall be paid to the
Offeror within two business days after the event that gives rise to the
recalculation.
-13-
3.2 Right of First Refusal and Property Option. Genesis will not enter into
------------------------------------------
any agreement regarding a Superior Proposal (the "Proposed Agreement")
------------------
without providing Offeror with the full details of the Proposed Agreement
and with an opportunity of not less than 72 hours to amend this Agreement
to provide at least as favourable or more favourable terms to the
Shareholders than those to be included in the Proposed Agreement, including
a cash price per share for the outstanding Common Shares, on a fully
diluted basis, not less than the cash price per share in the Proposed
Agreement. In particular, Genesis covenants to provide the Offeror with a
true and complete copy of any Proposed Agreement at least 72 hours prior to
its proposed execution by Genesis and to immediately provide to the Offeror
a true and complete copy of any Proposed Agreement executed. In the event
the Offeror agrees to and does amend this Agreement as provided above
within such 72 hour period, Genesis covenants to not enter into the
Proposed Agreement. In the event, however, that either: (i) Genesis enters
into an agreement (other than a confidentiality agreement substantially
similar to the Confidentiality Agreement) with any person with respect to a
Superior Proposal to be made prior to the Expiry Time; or (ii) any person
(other that the Offeror) takes up and pays for any Genesis Shares pursuant
to an Acquisition Proposal announced prior to the Expiry Time; then, the
Offeror shall have the right, at its option, exercisable by written notice
given within 180 days of the occurrence of either such event, to purchase
for cash at a price in cash that the property would have brought at the
time of the exercise if then offered for sale in the open market by a
seller under no compulsion to sell (the "Fair Market Value") one or more
-----------------
of the following:
(a) All of the issued and outstanding shares of Genex NWT Ltd. ("Genex
-----
NWT") together with Genesis' interest in the Genesis Energy
---
partnership (the "Partnership") with Genex NWT, together with Genesis'
interest in the joint venture with Devlan Exploration Inc., including
all properties and other rights currently held or owned by or for the
benefit of Genex NWT or Genesis in connection with petroleum and
natural gas exploration, development, production, processing,
transportation and marketing of hydrocarbon resources on exploration
licenses #373, #374 and #386 covering 870,000 acres in the Grandview
Hills area of the Northwest Territories of Canada;
(b) All properties and other rights currently held or owned by or for the
benefit of Genesis in connection with petroleum and natural gas
exploration, development, production, processing, transportation and
marketing of hydrocarbon resources located in that portion of the
Province of Alberta, Canada lying north of township 67, south of
township 73, east of range 25 and west of range 20;
(c) All properties and other rights currently held or owned by or for the
benefit of Genesis in connection with petroleum and natural gas
exploration, development, production, processing, transportation and
marketing of hydrocarbon resources located in that portion of the
Province of Saskatchewan, Canada lying north of township 25, south of
township 30, east of range 12 and west of range 7;
-14-
Closing of the purchase and sale of any of the above will occur as soon as
reasonable possible after the Offeror and Genesis have reached agreement as
to applicable Fair Market Value. If agreement as to Fair Market Value has
not been reached within 30 days following exercise of the option, either
the Offeror or Genesis may submit the matter of the determination of Fair
Market Value to binding arbitration in Calgary, Alberta in accordance with
the Arbitration Act (Alberta).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE OFFEROR
The Offeror hereby represents and warrants to Genesis that:
4.1 Organization and Qualification. The Offeror is a corporation duly
------------------------------
incorporated, validly existing and in good standing under the laws of the
State of Delaware, U.S.A., and has the requisite corporate power and
authority to carry on its business as it is now being conducted.
4.2 Authority Relative to this Agreement. The Offeror has the requisite
------------------------------------
corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement and
the consummation by the Offeror of the transactions contemplated hereby and
by the Offer have been duly authorized by the Offeror, and no other
corporate proceedings on the part of the Offeror are or will be necessary
to authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Offeror and
constitutes a legal, valid and binding obligation of the Offeror
enforceable against the Offeror in accordance with its terms.
4.3 Funds Available. The Offeror has sufficient funds or financing available
---------------
to make the Offer on the terms as contemplated hereby and to purchase all
outstanding Common Shares deposited pursuant to the Offer and to pay all
related fees and expenses.
4.4 No Violations.
-------------
(a) Neither the execution nor the delivery of this Agreement by the
Offeror nor the consummation of the transactions contemplated hereby
and by the Offer, nor compliance by the Offeror with any of the
provisions hereof will, subject to compliance with the statutes and
regulations referred to in Section 4.4(b), violate any judgment,
statute, ordinance, law, rule or regulation applicable to the Offeror
which would have a material adverse effect on the ability of the
Offeror to consummate the transactions contemplated by this Agreement.
(b) Other than in connection with or in compliance with the provisions of
the Competition Act (Canada), the Investment Canada Act (Canada) and
the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976
if and to the extent applicable, there is no legal impediment to the
Offeror's consummation of the transactions contemplated by this
Agreement, except for such filings or
-15-
registrations which, if not made, or for such authorizations, consents
or approvals which, if not received, would not have a material adverse
effect on the ability of the Offeror to consummate the transactions
contemplated by this Agreement.
4.5 No Violations. The Offeror is not subject, directly or indirectly, to any
-------------
outstanding order, writ, injunction or decree that has had or is reasonably
likely to have a material adverse effect on the ability of the Offeror to
consummate the transactions contemplated by this Agreement.
4.6 No Ownership. The Offeror and, to its knowledge, its associates and
------------
affiliates, do not at the date hereof own or exercise control and direction
over any Common Shares.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF GENESIS
Genesis hereby represents and warrants to the Offeror, and covenants with
the Offeror, as follows:
5.1 Organization and Qualification. Genesis is a corporation duly organized,
------------------------------
validly existing and in good standing under the laws of Alberta, and has
the requisite corporate power and authority to carry on its business as it
is now being conducted. Genesis and its Subsidiaries are duly registered to
do business and each is in good standing in respect of the filing of annual
returns and other filings under Applicable Corporate Laws in each
jurisdiction in which the character of its properties, owned or leased, or
the nature of its activities makes such registration necessary, except
where the failure to be so registered or in good standing would not have a
material adverse effect on the business, affairs, operations, assets,
prospects or financial condition of Genesis or on the ability of Genesis to
consummate the transactions contemplated hereby. Copies of the constating
documents (including articles, by-laws and constating agreements) of
Genesis and its Subsidiaries, together with all amendments (collectively,
the "Genesis Governing Documents"), delivered or to be delivered to the
---------------------------
Offeror are accurate and complete and have not been amended or superseded.
5.2 Authority Relative to this Agreement. Genesis has the requisite corporate
------------------------------------
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by the Genesis Board, and no other corporate proceedings on the
part of Genesis are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Genesis and constitutes a legal, valid and binding obligation
of Genesis enforceable against Genesis in accordance with its terms.
5.3 No Violations.
-------------
(a) Except as disclosed in the Disclosure Letter, neither the execution
nor the delivery of this Agreement by Genesis, nor the consummation of
the transactions
-16-
contemplated hereby and by the Offer, nor compliance by Genesis with
any of the provisions hereof will: (i) violate, conflict with, or
result in a breach of any provision of, require any consent, approval
or notice under, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) or result
in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of Genesis under any of the terms,
conditions or provisions of (x) the respective Genesis Governing
Documents or (y) any material note, bond, mortgage, indenture, loan
agreement, deed of trust, agreement, lien, contract or other
instrument or obligation respecting Genesis or to which any of its
properties or assets may be subject, or by which Genesis is bound; or
(ii) subject to compliance with the statutes and regulations referred
to in Section 5.3(b), violate any judgment, ruling, order, writ,
injunction, determination, award, decree, statute, ordinance, law,
rule or regulation applicable to Genesis or its properties or assets
(except, in the case of each of clauses (i) and (ii) above, for such
violations, conflicts, breaches, defaults, terminations, accelerations
or creations of liens, security interests, charges or encumbrances
which, or any consents, approvals or notices which if not given or
received, would not have any material adverse effect on the business,
operations or financial condition of Genesis or on the ability of
Genesis to consummate the transactions contemplated hereby); or (iii)
cause the suspension or revocation of any authorization, consent,
approval or license currently in effect which would have a material
adverse effect on the business, operations or financial condition of
Genesis.
(b) Other than in connection with or in compliance with the provisions of
the Competition Act (Canada), the Investment Canada Act (Canada) and
the United States Hart-Scott-Rodino Antitrust Improvements Act of
1976, if and to the extent applicable, (i) there is no legal
impediment to Genesis' consummation of the transactions contemplated
by this Agreement; and (ii) no filing or registration with, or
authorization, consent or approval of, any domestic or foreign public
body or authority is required of Genesis in connection with the making
or the consummation of the Offer, except for the Directors' Circular
and such other filings and approvals as may be required under
Applicable Corporate Laws and Applicable Securities Laws as a result
of the Offer and such filings or registrations which, if not made, or
for such authorizations, consents or approvals which, if not received,
would not have a material adverse effect on the business, affairs,
operations, assets, prospects or financial condition of Genesis or on
the ability of Genesis to consummate the transactions contemplated
hereby.
5.4 Compliance with Law. Except as disclosed in the Disclosure Letter, Genesis
-------------------
has complied with and is in compliance with all laws and regulations
applicable to the operation of its business, except where such non-
compliance would not, considered individually or in the aggregate, have a
material adverse effect on its business, affairs, operations, assets,
prospects or financial condition or on the ability of Genesis to consummate
the transactions contemplated hereby.
-17-
5.5 Capitalization. As of the date hereof, the authorized share capital of
--------------
Genesis consists of an unlimited number of Common Shares and an unlimited
number of preferred shares, issuable in series, of which as of the date
hereof 38,596,701 Common Shares are issued and outstanding and there are no
other shares of any class or series outstanding. As of the date hereof
3,570,919 Common Shares are issuable upon exercise of outstanding stock
options at exercise prices ranging from $4.45 to $13.50 at a weighted
average price of $8.58 per Common Share. Except as set forth above, there
are no options, warrants or other rights, agreements or commitments of any
character whatsoever requiring the issuance, sale or transfer by Genesis of
any shares of Genesis (including the Common Shares) or any securities
convertible into, or exchangeable or exercisable for, or otherwise
evidencing a right to acquire, any shares of Genesis (including the Common
Shares). All outstanding Common Shares have been duly authorized and
validly issued, are fully paid and non-assessable and are not subject to,
nor were they issued in violation of, any pre-emptive rights, and all
Common Shares issuable upon the exercise of outstanding stock options, in
accordance with their terms, will be duly authorized and validly issued,
fully paid and non-assessable and will not be subject to any pre-emptive
rights.
5.6 Material Agreements. All agreements, permits, licenses, approvals,
-------------------
certificates and other rights and authorizations material to the direct and
indirect conduct of its business are listed in Schedule 5.6 and are valid
and subsisting and Genesis is not in material default under any such
agreements, permits, licenses, approvals, certificates or other rights or
authorizations. The Offeror has been provided with true and complete copies
of or access to all agreements material to Genesis or the conduct of
Genesis' and its business.
5.7 Filings. The documents and information filed under Applicable Securities
-------
Laws, since December 31, 1997 (the "Public Documents"), are, as of their
respective dates, in compliance in all material respects with all
applicable laws and at the time filed did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5.8 Financial Statements. The consolidated balance sheets and statements of
--------------------
earnings, retained earnings and changes in financial position as of and for
the fiscal years ended December 31, 2000, 1999 and 1998, and contained in
the Public Documents, were prepared in accordance with Applicable
Securities Laws and generally accepted accounting principles in Canada and
present fairly, in all material respects, the financial position of
Genesis, the results of its operations and the changes in its financial
position for such fiscal year. Except as expressly disclosed in such
financial statements, Genesis had no material liabilities (whether actual,
accrued or contingent, and whether direct or indirect) at such dates.
5.9 Transaction Fees. Genesis has not retained any financial adviser, broker
----------------
or agent finder, or paid or agreed to pay any financial advisor, broker,
agent or finder, on account of this Agreement or any transaction
contemplated hereby, except that TD Securities Inc. and
-18-
Yorkton Securities Inc. have been retained as Genesis' financial advisors
in connection with certain matters including the transactions contemplated
hereby. The fees payable by Genesis to its financial advisors are disclosed
in the Disclosure Letter and a true and complete copy of the engagement
letter with such financial advisors has been provided to, and will not be
amended without the prior written consent of, the Offeror, not to be
unreasonably withheld.
5.10 Absence of Changes. Since December 31, 2000, except as disclosed in
------------------
Schedule 5.10: (i) Genesis has conducted its business only in the usual,
ordinary and regular course and consistent with past practice, (ii) no
liability or obligation of any nature (whether absolute, accrued,
contingent or otherwise) material to Genesis has been incurred other than
in the usual, ordinary and regular course of business and consistent with
past practice, (iii) there has not been any material adverse change in its
financial condition, results of operations, prospects, business or
property, and (iv) no event has occurred which, if it had occurred after
the date hereof, would have been prohibited by Section 2.1 without the
consent of the Offeror.
5.11 Employment Agreements. Except as disclosed in the Disclosure Letter,
---------------------
Genesis is not a party to any employment agreement or to any written or
oral policy, agreement, obligation or understanding or any amendment
thereto which contains any specific agreement as to notice of termination
or severance pay in lieu thereof or which cannot be terminated without
cause upon giving reasonable notice as may be implied by law. True and
complete copies of all such written agreements, obligations, understandings
and amendments have been delivered to or made available to the Offeror
prior to the date hereof. Except as disclosed in the Disclosure Letter,
Genesis has not entered into, and, without the prior written consent of the
Offeror, will not enter into, any agreements or understandings (or amend
any presently effective agreements or undertakings) with any directors,
officers or employees of Genesis or a Subsidiary providing rights in
respect of loss or termination of office or employment in the event the
Offer is successful.
5.12 Employee Obligations. The direct and indirect aggregate obligations and
--------------------
liabilities of Genesis to pay any amounts to or on behalf of directors,
officers, employees and consultants do not and will not exceed an aggregate
of $4 million for severance (including pursuant to a change of control).
5.13 United States Relationship. Genesis and its Subsidiaries: (i) in the
--------------------------
aggregate, currently hold less than U.S. $15 million of assets (on a book-
value basis) located in the United States and had sales in or into the
United States of less than U.S. $25 million in Genesis' most recently
completed fiscal year; (ii) is a "foreign private issuer" as defined in
----------------------
Rule 3b-4 under the United States Securities Exchange Act of 1934, as
amended (the "1934 Act"); (iii) is not aware (after due inquiry) that the
level of ownership by U.S. holders of Common Shares equals or exceeds 40%
of the outstanding Common Shares; (iv) is not an investment company
registered or required to be registered under the United States Investment
Company Act of 1940, as amended; and (v) does not have a class of
securities registered under Section 12 of the 1934 Act.
-19-
"U.S. holder" means any person or entity whose address appears on the
-----------
records of Genesis, or any voting or other trustee, depository, share
transfer agent or other person or entity acting in a similar capacity on
behalf of Genesis, as being located in the United States.
5.14 Employee Benefit Plans. Except as disclosed in Schedule 5.14: (i) Genesis
----------------------
does not have any defined benefit plans or any other employee benefit plans
and has not made any promises with respect to increased benefits under such
plans and all contributions (including premiums) required by law or
contract to have been made or accrued, under or with respect to such plans,
have been paid or accrued, as the case may be; and (ii) Genesis has no
stock option plans or other compensation arrangements and is not otherwise
a party to any agreement to provide any Common Shares or other securities
(including any securities convertible into or exchangeable or exercisable
for, or otherwise evidencing a right to acquire, Common Shares) or to
provide any options to acquire Common Shares or any other securities
convertible into or exchangeable or exercisable for, or otherwise
evidencing a right to acquire, Common Shares. Genesis does not have any
plan to establish, modify or enter into any of the foregoing.
5.15 Employee Arrangement Compliance. Except in each case, as would not,
-------------------------------
individually or in the aggregate, result in a material liability to Genesis
or as set forth in the Disclosure Letter: (i) Genesis has performed in all
material respects all obligations required to be performed by it under, is
not in default or violation of, and has no knowledge of any default or
violation by any other party to, any plans, arrangements, agreements or
other matters contemplated by Sections 5.11, 5.12 or 5.14, ("Employee
--------
Arrangements") and each Employee Arrangement has been established and
------------
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and
regulations, (ii) there are no actions, suits or claims pending, or, to the
knowledge of Genesis, threatened or reasonably anticipated or (other than
routine claims for benefits) against any Employee Arrangement or against
the assets of any Employee Arrangement; (iii) subject to receipt of any
required consent from the other parties thereto, each Employee Arrangement
(other than currently outstanding stock options) can be amended, terminated
or otherwise discontinued after the Expiry Time in accordance with its
terms, without direct or indirect liability to the Offeror or Genesis
(other than pursuant to such terms and reasonable expenses typically
incurred in a termination event); and (iv) all direct or indirect
contributions due from Genesis with respect to any Employee Arrangements
have been accrued on the balance sheet of Genesis for the year ended
December 31, 2000.
5.16 Effect of Transaction. Except as disclosed in the Disclosure Letter, the
---------------------
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Employee
Arrangement, trust or loan that will or may result in any payment,
acceleration, forgiveness of indebtedness, vesting (other than full
vesting as a result of partial or full plan termination of a qualified
plan), distribution, increase in benefits or obligation to fund benefits
with respect to any direct or indirect employee of
-20-
Genesis. There is no contract, plan or arrangement (written or otherwise)
directly or indirectly covering any employee or former employee of Genesis
that, individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to the Income Tax Act
(Canada).
5.17 Books and Records. The corporate records and minute books of Genesis and
-----------------
each Subsidiary have been maintained in accordance with all applicable
statutory requirements and are complete and accurate in all material
respects.
5.18 Litigation, etc. Except as disclosed in Schedule 5.18, there are no
----------------
actions, suits or proceedings pending or, to the knowledge of Genesis,
threatened directly or indirectly affecting Genesis at law or in equity or
before or by any court or federal, provincial, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, which action, suit or proceeding involves a possibility of
any judgment against or liability of Genesis which, if successful, could
have a material adverse effect on the business, affairs, operations,
assets, prospects or financial condition of Genesis or on the ability of
Genesis or the Offeror to consummate the transactions contemplated by this
Agreement or the Offer. Genesis is not subject, directly or indirectly, to
any outstanding order, writ, injunction or decree that has had or is
reasonably likely to have a material adverse effect on Genesis or on the
ability of Genesis or the Offeror to consummate the transactions
contemplated by this Agreement or the Offer.
5.19 Environmental.
-------------
(a) Except as disclosed in the Disclosure Letter:
(i) Genesis is not (after due inquiry) aware of, or has received,
any order or directive which relates to environmental matters
and which requires any material work, repairs, construction, or
capital expenditures;
(ii) Genesis has not received any demand or notice with respect to
any existing, pending or threatened material violations of any
Environmental Law, applicable to Genesis or its business,
including any rules, policies or regulations respecting the
use, discharge, storage, treatment, transportation, or
disposition of environmental contaminants;
(iii) to Genesis' knowledge (after due inquiry), there are no claims,
investigations or inquiries existing, pending or threatened
directly or indirectly against Genesis (or directly or
indirectly naming Genesis as a potentially responsible party)
based on non-compliance with any Environmental Law at any of
the properties or facilities currently or formerly directly or
indirectly owned, leased or operated by Genesis;
(iv) Genesis has not directly or indirectly, nor to Genesis'
knowledge has any other person, with respect to Genesis'
business, filed any notice under any
-21-
Environmental Law reporting past or present treatment, storage
or disposal of a Hazardous Material or reporting a Release of a
Hazardous Material;
(v) to Genesis' knowledge (after due inquiry), no encumbrance for:
(a) any liability under Environmental Laws; or (b) damages
arising from or costs incurred in connection with a Release of
a Hazardous Material or other substance into the environment
has been filed or is attached to any direct or indirect
property or assets of Genesis;
(vi) Genesis does not have any direct or indirect material
contingent liabilities in connection with: (a) the Release or
threatened Release into the environment at, beneath or on any
property or facility now or previously directly or indirectly
owned, leased or operated by Genesis; or (b) the storage or
disposal of any Hazardous Material;
(vii) Genesis has not directly or indirectly received any claim,
complaint, notice, letter of violation, inquiry or request for
information involving any matter which remains unresolved as of
the date hereof with respect to any alleged violation of any
Environmental Law or regarding potential liability under any
Environmental Law relating to operations or conditions of any
facility or property (including off-site storage or disposal of
any Hazardous Material from such facility or property)
currently or formerly directly or indirectly owned, leased or
operated by Genesis;
(viii) to Genesis' knowledge (after due inquiry), no property now or
previously directly or indirectly owned, leased or operated by
Genesis is listed on any federal, provincial, territorial,
state, local, or foreign government or any agency or political
subdivision or any such government list as a site requiring
investigation or cleanup;
(ix) Genesis is not directly or indirectly transporting, has not
transported and is not arranging for the transportation of any
Hazardous Material to any location which is listed on any
federal, state or provincial list or which is the subject of
federal, provincial, territorial, state, local, or foreign
government or any agency or political subdivision or any such
government enforcement actions or other investigations that
would reasonably be expected to lead to material claims against
Genesis for removal or remedial work, contribution for removal
or remedial work, damage to natural resources or personal
injury;
(x) there are no sites, locations or operations at which Genesis is
directly or indirectly currently undertaking, or has completed,
any removal, remedial or response action relating to any such
disposal or Release, as required by Environmental Laws;
-22-
(xi) Genesis does not directly or indirectly own or operate any
underground storage tanks, treatment, storage or disposal
facilities or any solid waste disposal facilities; and
(xii) Genesis has provided the Offeror with all environmental audits,
tests, results of investigations and analyses that have been
performed with respect to any property or facility currently or
formerly directly or indirectly owned, leased or operated by
Genesis.
(b) Genesis has not directly or indirectly received notice of, and (after
due inquiry) is not aware of, any material environmental liabilities
related to its direct or indirect assets.
(c) All material environmental and health and safety permits, licenses,
approvals, consents, certificates and other authorizations of any kind
or nature necessary for the ownership, operation, development,
maintenance, or use of any of Genesis' assets or otherwise in
connection with the direct or indirect business or operations of
Genesis ("Environmental Permits") have been obtained and maintained in
---------------------
full force and effect. Genesis has complied in all material respects
with all Environmental Permits directly or indirectly applicable to
it, and there is no action, investigation or proceeding pending or to
the knowledge of Genesis, threatened regarding any Environmental
Permit.
(d) Genesis and its direct and indirect assets and the ownership,
operation, development, maintenance and use thereof are, in all
material respects, in compliance with all Environmental Laws and with
all terms and conditions of all Environmental Permits, and all
material prior instances of non-compliance have been fully and finally
resolved to the satisfaction of all federal, provincial, territorial,
state, local or foreign government or any agency or political
subdivision of any such government authorities with jurisdiction over
such matters.
(e) As used herein:
(i) "Environmental Law" means any requirement pursuant to law, policy
-----------------
or regulation or any order, judgment or decree relating to the
protection of human health, safety or the environment or to
emissions, discharges or Releases of pollutants, contaminants, or
chemicals, or industrial, toxic or hazardous substances or
wastes, into the environment (including structures, ambient air,
soil, surface water, ground water, wetlands, land or subsurface
strata), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes, including petroleum and
petroleum products and byproducts.
-23-
(ii) "Hazardous Material" means (a) any chemicals or other materials
------------------
or substances that are defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous
-------------------- ---------------- ---------
materials," "extremely hazardous wastes," "restricted hazardous
--------- -------------------------- --------------------
wastes," "toxic substances," "pollutants," "contaminants," or
------ ---------------- ---------- ------------
words of similar import under any Environmental Law, including
petroleum and petroleum products and byproducts and radioactive
materials (including naturally occurring radioactive
materials); and (b) any other chemical, material or substance,
the presence of or exposure to which is prohibited, limited or
regulated by any federal, provincial, territorial, state, local
or foreign government or any agency or political subdivision of
any such government authority under any Environmental Law.
(iii) "Release" means any actual or threatened release, spill,
-------
effluent, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the
environment or any structure.
5.20 Tax Matters.
-----------
(a) For purposes of this Agreement, the following definitions shall apply:
(i) "Taxes" shall mean all taxes, however denominated (including
-----
any interest, penalties or other additions that may become
payable in respect thereof) imposed by any federal, provincial,
territorial, state, local or foreign government or any agency
or political subdivision of any such government, which taxes
shall include all income or profits taxes (including federal,
provincial and state income taxes), payroll and employee
withholding taxes, employment insurance, social insurance
taxes, sales and use taxes, goods and services tax, ad valorem
taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal
property taxes, stamp taxes, environmental taxes, transfer
taxes, workers' compensation and other governmental charges,
and other obligations of the same or of a similar nature to any
of the foregoing, which Genesis is directly or indirectly
required to pay, withhold or collect.
(ii) "Returns" shall mean all reports, estimates, declarations of
estimated tax, information statements and returns relating to,
or required to be filed in connection with, any Taxes.
(b) All Returns required to be filed by or on behalf of Genesis have been
duly filed on a timely basis and such Returns are true, complete and
correct in all material respects. Except as disclosed in the
Disclosure Letter, all Taxes shown to be payable on the Returns or on
subsequent assessments with respect thereto have been paid in full on
a timely basis, and no other Taxes are directly or indirectly payable
by Genesis with respect to items or periods covered by such Returns.
-24-
(c) Genesis has paid or provided adequate accruals in its financial
statements for the year ended dated December 31, 2000, for Taxes,
including income taxes and related deferred taxes, in conformity with
generally accepted accounting principles applicable in Canada.
(d) For all periods ending on and after December 31, 1995, the Offeror has
been furnished by Genesis or had access to true and complete copies of
(i) relevant portions of income tax audit reports, statements of
deficiencies, closing or other agreements received by Genesis or on
behalf of Genesis relating to Taxes, and (ii) drafts of all federal,
provincial and state income and other tax returns of Genesis which are
prepared for filing prior to the Expiry Time.
(e) Except as disclosed in the Disclosure Letter: (i) no deficiencies
exist or have been asserted, directly or indirectly, against Genesis
with respect to Taxes; (ii) Genesis is not, directly or indirectly, a
party to any action or proceeding for assessment or collection of
Taxes, nor has any such event been directly or indirectly asserted or
threatened against Genesis or any of its assets; (iii) no waiver or
extension of any statute of limitations is in effect with respect to
Taxes or Returns of Genesis; and (iv) the Returns of Genesis have
never been audited by a government or taxing authority, nor is any
such audit in process, pending or threatened.
(f) Except as disclosed in the Disclosure Letter, Genesis has provided
adequate accruals in its financial statements for the years ended
December 31, 2000 and 1999 (or such amounts are fully funded), for all
pension or other employee benefit obligations of Genesis arising under
or relating to each of the pension or retirement income plans or other
employee benefit plans or agreements or policies maintained by or
directly or indirectly binding on Genesis.
5.21 Reporting Issuer Status. Genesis is a "reporting issuer" in material
---------------- ----------------
compliance with all Applicable Securities Laws of British Columbia,
Alberta, Saskatchewan, Manitoba, Ontario and Quebec. The Common Shares are
listed only on, and Genesis is in material compliance with the rules and
policies of, The Toronto Stock Exchange.
5.22 Subsidiaries. Genesis owns 100% of the securities of Genex NWT and 750794
------------
Alberta Ltd. ("750794") and Genesis and Genex NWT together own 100% of the
------
Partnership. Genex NWT, 750794 and the Partnership are Genesis' only
Subsidiaries. All of the securities of Genex NWT and 750794 are directly
owned by Genesis and all the interest in the Partnership is directly owned
by Genex NWT and Genesis, in each case with valid and marketable title
thereto, free and clear of any and all liens, charges, security interests,
adverse claims, encumbrances and demands of any nature or kind whatsoever,
except as disclosed in written form to the Offeror. No person has any
right, whether contractual or otherwise, to acquire any shares of Genex NWT
or 750794 or any interest in the Partnership or to acquire any of the
unissued shares, interests or other securities of Genex NWT, 750794 or the
Partnership. All outstanding shares in the capital of Genex NWT and 750794
and all outstanding interest in the Partnership have been duly authorized
and validly issued, are fully paid and non-assessable and are not subject
to, nor were they
-25-
issued in violation of, any pre-emptive rights. There are no outstanding
stock appreciation rights, phantom equity or similar rights, agreements,
arrangements or commitments based upon the book value, income or other
attribute of Genesis, Genex NWT, 750794 or the Partnership. Except for
Genex NWT, 750794 and the Partnership, Genesis does not directly or
indirectly own any interest in any person, corporation, partnership, joint
venture or other entity nor does it have any right or obligation to acquire
any such interest.
5.23 Debt. Genesis' consolidated long-term debt, including the current portion
----
of long-term debt, does not exceed Cdn. $147,000,000.
5.24 Shareholder Rights Plan. Genesis' Board has irrevocably resolved to waive
-----------------------
the application of Genesis' Shareholder Rights Plan Agreement dated March
30, 1998 between Genesis and Montreal Trust Company of Canada (the "Rights
------
Plan") to the Offer, such waiver to be effective no later than immediately
----
prior to the time of execution of this Agreement, such that all rights
thereunder and the Rights Plan shall cease to be exercisable with respect
to the Offer.
5.25 Share Deposit Agreements. Each of Genesis' directors and officers has
------------------------
advised Genesis that he intends to, and each has been advised by his
associates and affiliates that each of them intends to, tender his, her or
its Common Shares (including all Common Shares acquired between the date
hereof and the Expiry Time, whether pursuant to the exercise of options or
otherwise) to the Offer. Genesis will deliver the Share Deposit Agreements
in accordance with Section 2.6.
5.26 Accurate Information. All data and information provided by Genesis to the
--------------------
Offeror and its agents and representatives is true and correct in all
material respects and does not omit any data or information necessary to
make the data and information provided not misleading.
5.27 No Manipulation. Neither Genesis nor, to its knowledge, any of its
---------------
insiders has taken or will take, directly or indirectly, any action
designed to, or that might reasonably be expected to cause or result in,
stabilization or manipulation of the trading price or trading volume of the
Common Shares.
5.28 No Undisclosed Material Liabilities. Except: (a) as expressly disclosed
-----------------------------------
or reflected in the audited financial statements of Genesis as at December
31, 2000 previously delivered to the Offeror, and (b) for liabilities and
obligations (i) incurred in the ordinary course of business and consistent
with past practice, or (ii) pursuant to the terms of this Agreement,
Genesis has not incurred any material liabilities of any nature, whether
accrued, contingent or otherwise or which would be required by generally
accepted accounting principles applicable in Canada to be reflected on a
consolidated balance sheet of Genesis. Other than as disclosed in the
Disclosure Letter, Genesis has not entered into any financial hedging
arrangements or any forward sale agreements for the physical delivery of
commodities.
-26-
5.29 Subsequent Public Filings. Between the date hereof and the Expiry Time,
-------------------------
Genesis will deliver to the Offeror as soon as they become available true
and complete copies of any report or statement filed by it with Regulatory
Authorities subsequent to the date hereof. As of their respective dates,
such reports and statements (excluding any information therein provided
solely by the Offeror): (i) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and (ii) will
comply in all material respects with all applicable requirements of law
including Applicable Securities Laws. The financial statements of Genesis
issued by Genesis or to be included in such reports and statements will be
prepared in accordance with generally accepted accounting principles in
Canada and will present fairly the financial position, results of
operations and changes in financial position of Genesis as of the dates
thereof and for the periods indicated therein (subject, in the case of any
unaudited interim financial statements, to non-material, customary year-end
audit adjustments). Between the date hereof and the Expiry Time, Genesis
will also deliver to the Offeror as soon as they become available copies of
any press releases issued by Genesis.
5.30 Insurance. Policies of insurance in force as of the date hereof naming
---------
Genesis as an insured adequately cover all risks reasonably and prudently
foreseeable in the direct or indirect operation and conduct of the business
of Genesis which are insurable on reasonable economic terms and as would be
customary in respect of the business carried on by Genesis. All such
policies of insurance shall remain in force and effect and shall not be
cancelled or otherwise terminated as a result of the transactions
contemplated by this Agreement, including the Offer.
5.31 Confidentiality Agreements. True and complete copies of all agreements
--------------------------
entered into by Genesis with persons other than the Offeror regarding the
confidentiality of information provided to such persons or reviewed by such
persons have been provided to the Offeror.
5.32 Labor and Employee Relations.
----------------------------
(a) There exists no collective bargaining agreement or other labor union
contract applicable to any employees of Genesis and no such agreement
or contract has been directly or indirectly requested by any employee
or group of employees of Genesis, nor has there been any discussion
with respect thereto by management of Genesis with any of its
employees. Genesis has not received any written notification of any
unfair labor practice charges or complaints pending before any agency
having jurisdiction thereof nor are there any current union
representation claims involving any employees of Genesis and Genesis
is not aware of any such threatened charges or claims.
(b) Genesis is not aware of any union organizing activities or proceedings
involving, or any pending petitions for recognition of, a labor union
or association as the exclusive bargaining agent for, or where the
purpose is to organize, any group or
-27-
groups of its employees. There is not currently pending, with regard
to any of its facilities, any proceeding before the applicable
Canadian agency wherein any labor organization is seeking
representation of any employees of Genesis.
(c) Genesis is not aware of any strikes, work stoppages, work slowdowns or
lockouts nor of any threats thereof, by or with respect to any of its
employees.
5.33 Absence of Certain Business Practices. Neither Genesis nor to Genesis'
-------------------------------------
knowledge any of its officers, employees or agents, nor any other person
acting on their behalf, has, directly or indirectly, within the past five
years, given or agreed to give any gift or similar benefit to any customer,
supplier, government employee or other person who is or may be in a
position to help or hinder the business of Genesis (or to assist Genesis
with any actual or proposed transaction) which (i) might subject Genesis to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, might have had a material
adverse effect on the assets, business or operations of Genesis, or (iii)
if not continued in the future, might materially adversely affect the
assets, business operations or prospects of Genesis or which might subject
Genesis to suit or penalty in a private or governmental litigation or
proceeding.
5.34 Engineering Reports. Genesis has provided to Outtrim Szabo Associates
-------------------
Ltd., independent geological and petroleum engineering consultants (the
"Independent Engineer"), all material information concerning land
--------------------
descriptions and well data respecting at least 90% of the oil and gas
assets of Genesis at December 31, 2000 in respect of the evaluation reports
dated February 22, 2001 (collectively, the "Reserve Reports") and, in
---------------
particular, all material information respecting Genesis' interests in such
oil and gas assets and all rentals, royalties, overriding royalty
interests, production payments, net profits interest burdens and other
payments due or payable with respect thereto and Genesis is not aware
(after due inquiry) of any information not provided to the Independent
Engineer that would have a material adverse impact on the evaluation
report, taken as a whole.
5.35 Title.
-----
Genesis:
(a) or Genex NWT, 750794 or the Partnership has good and indefeasible
right, title and interest in and to all properties and assets directly
or indirectly reflected in the Reserve Reports and the Public
Documents (including, for greater certainty, its exploration interests
in Saskatchewan and the Northwest Territories) and no such property,
asset or interest is subject to any lien, mortgage, pledge, security,
interest, charge, claim or demand or encumbrance of any kind, whether
by law or by equity, except those that would not have a material
adverse effect on the business, affairs, operations, assets, prospects
or financial condition of Genesis or on the ability of Genesis to
consummate the transactions contemplated hereby; and
-28-
(b) enjoys peaceful and undisturbed possession under all agreements
material to the operation of its other properties, assets and
businesses and all such agreements are valid and subsisting and are in
full force and effect and there exists no default under any provision
of any agreement which would permit any of the other parties
thereunder to terminate any such agreement or to exercise any rights
under such agreement, except those that would not have a material
adverse effect on the business, affairs, operations, assets, prospects
or financial condition of Genesis, or on the ability of Genesis to
consummate the transactions contemplated hereby.
5.36 Operational Matters.
-------------------
(a) Genesis:
(i) is not in breach of or default, or with the lapse of time or
the giving of notice, or both, would not directly or indirectly
be in breach or default, with respect to any of its respective
obligations under any agreement to which any of its assets are
bound, to the extent that such breach or default would have a
materially adverse impact on the aggregate of its assets; or
(ii) has not given or threatened to give notice of any default
under, or made inquiry into any possible default under, or
action to alter, terminate, rescind or procure a judicial
reformation of, any such agreement;
(b) substantially all rentals, royalties, overriding royalty interests,
production payments, net profits, interest burdens and other payments
due or payable on or prior to the date hereof under or with respect to
the direct or indirect assets of Genesis, have been properly and
timely paid;
(c) substantially all rentals, payments, and obligations due and payable
or performable on or prior to the date hereof under or on account of
any of the direct or indirect assets of Genesis have been duly paid,
performed, or provided for prior to the date hereof;
(d) all (i) wells located in or on Genesis' lands, or lands pooled or
unitized therewith, which have been abandoned by Genesis, have been
abandoned in accordance with good oil and gas field practices and in
compliance with all applicable laws and regulations; and (ii) future
abandonment, remediation and reclamation obligations have been
accurately disclosed in written form to the Offeror;
(e) substantially all costs, expenses, and liabilities payable on or prior
to the date hereof under the terms of any contracts and agreements to
which Genesis is directly or indirectly bound have been properly and
timely paid, except for such expenses as are being currently paid
prior to delinquency in the ordinary course of business;
-29-
(f) except as disclosed in Schedule 5.36, there are no material pipeline
and production imbalances and penalties as of the date hereof arising
with respect to the assets and no purchaser is entitled to material
"make-up" or otherwise take or receive material deliveries of
-------
hydrocarbons attributable to Genesis' direct or indirect interest in
Genesis' assets without paying at the time of such deliveries the full
contract price therefor;
(g) no person is entitled to receive any material portion of hydrocarbons
or to receive material cash or other payments to "balance" any
-------
disproportionate allocation of hydrocarbons produced from Genesis'
assets under any operating agreement, gas balancing or storage
agreement, gas processing or dehydration agreement, gas transportation
agreement, gas purchase agreement, or other agreement, whether similar
or dissimilar; and
(h) no claim, notice, or order from any governmental authority has been
directly or indirectly received by Genesis due to hydrocarbon
production from Genesis' assets being in excess of allowables or
similar violations which could result in material curtailment of
hydrocarbon production from any of its assets after the date hereof.
5.37 Flow-Through Shares. Genesis has fulfilled its obligations to incur and
-------------------
renounce exploration and development expenses in the full amount of any
subscription funds received pursuant to any flow-through common share
subscription agreements.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Other Filings. The Offeror and Genesis have each filed, or as promptly as
-------------
practicable hereafter shall prepare and file, any filings required under
Applicable Corporate Laws, the Competition Act (Canada), the Investment
Canada Act (Canada), Applicable Securities Laws and the United States Hart-
Scott-Rodino Antitrust Improvements Act of 1976, to the extent applicable,
or any other applicable law relating to the Offer, the Directors' Circular
and the transactions contemplated hereby.
6.2 Further Assurances. Subject to the terms and conditions herein provided
------------------
and to fiduciary obligations under applicable law as advised by legal
counsel, each of the parties hereto agrees to use reasonable commercial
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, including the Offer, and to cooperate with each other in
connection with the foregoing, including using reasonable commercial
efforts to: (i) obtain all necessary consents, approvals and authorizations
as are required to be obtained under any federal, provincial or foreign law
or regulations; (ii) defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions
contemplated hereby, including the Offer; (iii) cause to be lifted or
rescinded any injunction or restraining order or other order adversely
affecting the ability of the parties to
-30-
consummate the transactions contemplated hereby, including the Offer; (iv)
effect all necessary registrations and other filings and submissions of
information requested by governmental authorities; (v) obtain all necessary
waivers, consents and approvals from other parties to material agreements,
leases and other contracts or agreements (including the agreement of any
persons as may be required pursuant to any agreement, arrangement or
understanding relating to Genesis' operations); and (vi) fulfill all
conditions and satisfy all provisions of this Agreement and the Offer.
For purposes of the foregoing, the obligation of Genesis and the Offeror to
use "reasonable commercial efforts" to obtain waivers, consents and
-----------------------------
approvals to loan agreements, leases and other contracts shall not include
any obligation to agree to an adverse modification of the terms of such
documents or to prepay or incur additional obligations to such other
parties.
6.3 Fees and Expenses. Except as otherwise specifically provided herein, each
-----------------
party shall pay its own fees and expenses in connection with the matters
contemplated in this Agreement.
6.4 Employment Contracts. The Offeror agrees that, if it takes up and pays for
--------------------
Common Shares under the Offer, it will cause Genesis to fulfill its
obligations pursuant to employment contracts between Genesis and those
employees of Genesis (true and correct copies of written employment
contracts have been provided to the Offeror prior to the date hereof) who
are meeting the terms of their employment; provided, that this Section 6.4
shall not restrict or prohibit the Offeror from dissolving Genesis,
reorganizing the capital of Genesis, transferring the assets of Genesis to
another entity, causing Genesis to assume the liabilities of another
entity, or otherwise reorganizing or restructuring Genesis or its
businesses if, as part of such transaction or reorganization, the Offeror
causes the obligations under this Section 6.4 to be assumed by the Offeror
or an entity controlled by the Offeror that has a net worth substantially
similar to or greater than the net worth of Genesis as at December 31,
2000.
6.5 Officers' and Directors' Insurance. The Offeror agrees to use reasonable
----------------------------------
efforts to secure directors' and officers' liability insurance coverage for
Genesis' current and former directors and officers on a three year
"trailing" or "run off" basis from and after the Expiry Time. If a trailing
-------- -------
policy is not available, then the Offeror agrees that, for the entire
period from the Expiry Time until three years after the Expiry Time, the
Offeror will cause Genesis or any successor to Genesis to maintain Genesis'
current directors' and officers' insurance policy (a true and correct copy
of which Genesis has provided to the Offeror prior to the date hereof) or
an equivalent policy. The terms and conditions of all policies referred to
in this Section 6.5 shall be no less advantageous to the directors and
officers of Genesis than those contained in the policy in effect on the
date hereof, for all present and former directors and officers of Genesis,
covering claims made prior to or within three years after the Expiry Time.
-31-
6.6 Notice of Material Changes, Untruth and Non-Compliance. From the date
------------------------------------------------------
hereof until the termination of this Agreement, Genesis shall immediately
notify the Offeror in written form of:
(a) any material change (actual, anticipated, contemplated or threatened,
financial or otherwise) in the business, affairs, operations, assets,
liabilities (contingent or otherwise) or capital of Genesis or any
Subsidiary;
(b) any material change in or untruth of any representation or warranty
given in this Agreement by Genesis or in the underlying basis thereof;
or
(c) any covenant or obligation of Genesis herein which has not or may not
be complied with in all material respects.
Genesis shall provide the Offeror with reasonable details of the material
change, untruth or non-compliance. Genesis shall in good faith discuss
with the Offeror any change in circumstances (actual, anticipated,
contemplated or threatened, financial or otherwise) which is of such a
nature that there may be a reasonable question as to whether notice needs
to be given to the Offeror pursuant to this Section 6.6.
ARTICLE 7
TERM, TERMINATION, AMENDMENT AND WAIVER
7.1 Term. This Agreement shall be effective from the date hereof until the
----
earliest of: (i) the termination of this Agreement pursuant to Section 7.2;
(ii) the appointment or election to Genesis' Board of persons designated by
the Offeror pursuant to Section 1.6 and (iii) the third business day after
the Offeror takes up Common Shares under the Offer, if the Offeror does not
designate such persons, provided that Sections 3.1, 6.3, 6.4 and 6.5 shall
survive the termination of this Agreement.
7.2 Termination. This Agreement, other than the provisions set forth in
-----------
Sections 3.1, 6.3, 6.4 and 6.5, may be terminated by written notice
promptly given to the other party hereto, at any time prior to the time the
Offeror first takes up and pays for the Common Shares:
(a) by the Offeror, if the conditions set forth in (i)
Section 1.2(a)(iii) -(v) have not been satisfied or waived by the
Offeror by April 20, 2001, or (ii) Schedule 1.1(c) have not been
satisfied or waived by the Offeror on or before the Expiry Time,
subject to the obligation to extend set out in Section 1.1(c);
(b) by the Offeror, if the Genesis Board shall withdraw, modify or change
any recommendation regarding the Offer in a manner adverse to the
Offeror, in accordance with Section 2.2(a), in which event the fee set
forth in Section 3.1 shall become due and payable by Genesis to the
Offeror;
-32-
(c) by Genesis, if the Offeror has not taken up and paid for the Common
Shares deposited under the Offer on or before that date which is 45
days following the date of mailing of the Offer;
(d) by either the Offeror or Genesis, if the Offer terminates or expires
at the Expiry Time without the Offeror taking up and paying for any of
the Common Shares as a result of the failure of any condition set
forth in Schedule 1.1(c) which has not been waived;
(e) by either the Offeror or Genesis, in the event that the other of them
shall not have complied with or performed, in all material respects,
its covenants and obligations under this Agreement to be complied with
or performed at or prior to the Expiry Time, or any of the
representations and warranties of the other of them under this
Agreement are not true and correct in all material respects at or
prior to the Expiry Time, in which event, if Genesis is the party in
breach, the fee set forth in Section 3.1 shall become due and payable
by Genesis to the Offeror;
(f) by either the Offeror or Genesis, in the event that the fee
contemplated in Section 3.1 shall have been paid by Genesis to the
Offeror in accordance with the terms thereof; or
(g) by mutual written consent of Genesis and the Offeror.
7.3 Effect of Termination. In the event of the termination of this Agreement
---------------------
as provided in Section 7.2, this Agreement shall forthwith become void and
there shall be no liability on the part of Offeror or Genesis hereunder,
except as set forth in Section 3.1, and this Section 7.3. Nothing contained
in this Section 7.3 shall relieve any party from liability for any breach
of any provision of this Agreement prior to the termination hereof and from
any obligation to pay the fee set forth in Section 3.1. No termination of
this Agreement shall affect the obligations of the parties pursuant to the
Confidentiality Agreement, except to the extent specified therein.
ARTICLE 8
GENERAL PROVISIONS
8.1 Notices. All notices and other communications given or made pursuant
-------
hereto shall be in writing and shall be deemed to have been duly given or
made as of (a) the date delivered, if delivered personally, (b) the day of
transmission or delivery by courier or facsimile transmission or (c) the
fifth day after being sent by regular air mail, postage prepaid, to the
parties at the following address (or at such other addresses as shall be
specified by either party by notice to the other):
-33-
(a) if to Offeror:
Vintage Petroleum, Inc.
110 West Seventh Street
Tulsa, Oklahoma
U.S.A. 74119
Attention: Robert W. Cox
Telephone: (918) 878-5730
Facsimile: (918) 878-5704
with a copy to:
Blake, Cassels & Graydon LLP
Barristers and Solicitors
Bankers Hall East
3500, 855 - 2nd Street S.W.
Calgary, Alberta Canada T2P 4J8
Attention: Pat Finnerty
Telephone: (403) 260-9608
Facsimile: (403) 260-9700
(b) if to Genesis:
Genesis Exploration Ltd.
Suite 300, 311 - 6th Avenue S.W.
Calgary, Alberta
Canada T2P 3H2
Attention: Donald J. Sabo
Telephone: (403) 266-6900
Facsimile: (403) 266-6988
-34-
with a copy to:
Borden Ladner Gervais LLP
1000, 400- 3rd Avenue S.W.
Calgary, Alberta
Canada T2P 4H2
Attention: William C. Guinan
Telephone: (403) 232-9458
Facsimile: (403) 266-1395
8.2 Interpretation. The headings contained in this Agreement are for reference
--------------
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement. Except as otherwise stated, references in this Agreement
to Articles, Sections and Schedules are references to Articles, Sections
and Schedules of or to this Agreement. The term "business day" herein means
------------
any day on which commercial banks are open for business in Calgary,
Alberta. Schedules referred to herein are attached to and made a part of
this Agreement.
8.3 Miscellaneous. This Agreement, together with the Confidentiality Agreement
-------------
and Disclosure Letter, constitutes the entire agreement and supersedes all
other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof: (i) shall be binding
upon and enure to the benefit of the parties and their respective
successors and permitted assigns and is not intended to confer upon any
other person any rights or remedies hereunder, and (ii) may be executed in
two or more counterparts which together shall constitute a single
agreement. In the event of any inconsistency between the terms of the
Confidentiality Agreement and the terms of this Agreement, the terms of
this Agreement shall prevail. The parties shall be entitled to rely upon
delivery of an executed facsimile copy of this Agreement, and such
facsimile copy shall be legally effective to create a valid and binding
agreement among the parties hereto.
8.4 Applicable Law Enforcement. This Agreement shall be governed, including as
--------------------------
to validity, interpretation and effect, by the laws of Alberta and the laws
of Canada applicable therein. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in
any court of Alberta having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
8.5 Publicity. So long as this Agreement is in effect and except as required
---------
by applicable laws and the rules, regulations and policies of any
applicable stock exchange, each of the Offeror and Genesis promptly shall
advise, consult and cooperate with the other prior to
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issuing, or permitting any of its subsidiaries, directors, officers,
employees or agents to issue, any press release or other statement to the
media or any third party with respect to this Agreement or the transactions
contemplated hereby.
8.6 Assignment. Except as expressly permitted by the terms hereof, neither
----------
this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by either of the parties without the prior written
consent of the other party. Notwithstanding the foregoing, the Offeror may
assign its rights under this Agreement to a wholly-owned subsidiary, in
which event the Offeror shall continue to be liable to Genesis for any
default in performance by such subsidiary.
8.7 Time is of the Essence. Time shall be of the essence of this Agreement.
----------------------
8.8 Currency. Except as expressly indicated otherwise, all sums of money
--------
referred to in this Agreement are expressed and shall be payable in
Canadian dollars. All payments shall be in immediately available funds.
8.9 Severability. Whenever possible, each provision of this Agreement shall be
------------
interpreted in such manner as to be effective and valid under applicable
law. 8.10 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the appropriate officers on behalf of each
of the parties hereto.
8.11 Waiver. The Offeror and Genesis may (i) extend the time for the
------
performance of any of the obligations or other acts of the other, (ii)
waive compliance with any of the other's agreements or the fulfillment of
any conditions to its own obligations contained herein, or (iii) waive
inaccuracies in any of the other's representations or warranties contained
herein or in any document delivered by the other party hereto; provided,
however, that any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party.
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EXECUTION:
The Offeror and Genesis have caused this Agreement to be executed as of the
date first written above by their respective officers thereunto duly authorized.
VINTAGE PETROLEUM, INC.
By: /s/ Robert W. Cox
---------------------------------------
Robert W. Cox
Vice President - General Counsel
GENESIS EXPLORATION LTD.
By: /s/ David J. Wilson
---------------------------------------
David J. Wilson
President and Chief Executive Officer
By: /s/ Donald J. Sabo
---------------------------------------
Donald J. Sabo
Chairman of the Board and Senior Vice President
SCHEDULE 1.1(c)
attached to and forming part of an Acquisition
Agreement (the "Acquisition Agreement") dated March 27, 2001, between
---------------------
Vintage Petroleum, Inc. and Genesis Exploration Ltd.
CONDITIONS TO THE OFFER
-----------------------
The capitalized terms used in this Schedule have the meanings set
forth in the Acquisition Agreement. In addition, "fully diluted" for the
-------------
purposes hereof shall mean all outstanding Common Shares plus any Common Shares
issuable upon the exercise of options or other securities convertible into or
exercisable for Common Shares or pursuant to entitlements pursuant to any stock
option, employee savings or similar plan.
Notwithstanding any other provision of the Offer, but subject to
Section 1.1(c) of the Acquisition Agreement, the Offeror shall not be required
to accept for payment, purchase or pay for any Common Shares tendered, and may
terminate the Offer or amend the Offer to postpone the acceptance for payment
of, and payment for, Common Shares tendered, unless all of the following
conditions are satisfied or waived prior to the Expiry Time:
(a) prior to the Expiry Time and at the time the Offeror first takes up
and pays for Common Shares under the Offer, there shall have been
validly deposited under the Offer and not withdrawn a number of Common
Shares which constitutes at least 66 2/3% of the outstanding Common
Shares (calculated on a fully diluted basis), other than Common Shares
owned at the date of the Offer by the Offeror, its associates and
affiliates or by persons whose Common Shares may not be included as
part of the minority approval of a subsequent acquisition transaction
(the "Minimum Condition");
(b) any applicable waiting periods under any competition, merger control
or similar law, regulation or other governmental authority having
direct or indirect jurisdiction over the Offeror, Genesis or the Offer
or any other transaction contemplated by the Offer with respect to any
such matters shall have expired or been terminated in respect of such
transactions;
(c) the Acquisition Agreement shall not have been terminated pursuant to
its terms;
(d) all other regulatory approvals, orders, rulings, exemptions, consents
and waiting periods (including, without limitation, under the
Competition Act (Canada), the Hart-Scott Rodino Antitrust Improvements
Act of 1976 (United States) (if applicable) and the Investment Canada
Act (Canada) and those of any stock exchanges or securities or other
regulatory authorities) which, in the sole judgment of the Offeror,
are necessary shall have been obtained on terms and conditions
satisfactory to Offeror in its sole discretion, acting reasonably, and
all applicable statutory or regulatory waiting periods shall have
expired or been terminated and the Offeror shall have determined in
its sole judgment, acting reasonably, that no unresolved material
objection or opposition shall have been filed, initiated or made
during any applicable statutory or regulatory period and no
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proceedings shall have been taken or threatened under the merger
provisions of Part VIII under the Competition Act (Canada) in respect
of the transaction contemplated by this Agreement, including, without
limitation, the Offer;
(e) no act, action, suit or proceeding shall have been threatened or taken
before or by any domestic or foreign court or tribunal or governmental
agency or other regulatory authority or administrative agency or
commission by any elected or appointed public official or by any
private person in Canada or elsewhere, whether or not having the force
of law, and no law, regulation or policy shall have been proposed,
enacted, promulgated or applied, whether or not having the force of
law:
(i) which, in the sole judgment of the Offeror, acting reasonably,
has the effect or may have the effect to cease trade, enjoin,
prohibit or impose material limitations, damages or conditions
on the purchase by, or the sale to, the Offeror, of the Common
Shares or the right of the Offeror to own or exercise full
rights of ownership of the Common Shares, or the ability of the
Offeror to complete a compulsory acquisition or any subsequent
acquisition transaction, or
(ii) which, in the sole judgment of the Offeror, acting reasonably,
has had or may have a material adverse effect on Genesis or the
Offeror or the Offeror's ability to effect a compulsory
acquisition or a subsequent acquisition transaction;
(f) the Offeror shall have determined in its sole judgment, acting
reasonably, that there does not exist any prohibition at law against
the Offeror making the Offer or taking up and paying for all of the
Common Shares under the Offer or completing any compulsory acquisition
or subsequent acquisition transaction;
(g) the Offeror shall have determined in its sole judgment, acting
reasonably, that Genesis has not, directly or indirectly, taken or
proposed to take any action, or publicly disclosed that it intends to
take any action, and the Offeror shall not have otherwise learned of
any previous action taken by Genesis, directly or indirectly, which
had not been publicly disclosed prior to the announcement of the
Offer, that would be materially adverse to the business of Genesis or
the value of the Common Shares to the Offeror or that would make it
inadvisable for the Offeror to proceed with the Offer or with taking
up and paying for Common Shares under the Offer or completing any
compulsory acquisition or subsequent acquisition transaction
including, without limiting the generality of the foregoing, any
action with respect to any agreement, proposal, offer or understanding
relating to any material sale, disposition or other dealing with any
of its direct or indirect assets (other than any such sale,
disposition or other dealing between Genesis and a Subsidiary), any
issue of shares, options or other securities of Genesis to any person
(other than a Subsidiary), or any material acquisition from a third
party of
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assets or securities by Genesis, or any material capital expenditure
by Genesis not in the ordinary course of business;
(h) there shall not have occurred (and there shall not have been publicly
disclosed, and the Offeror shall not have otherwise learned of, if
previously not publicly disclosed) any direct or indirect change (or
any condition, event or development involving a prospective change)
not publicly disclosed prior to the announcement of the Offer in the
business, operations, assets, capitalization, financial condition,
licences, permits, rights, liabilities, prospects or privileges,
whether contractual or otherwise, of Genesis (other than (A) arising
out of a matter which has been disclosed in a document filed on SEDAR
or in the Disclosure Letter or in the Acquisition Agreement; (B)
resulting from conditions affecting the oil and gas industry in the
jurisdictions in which Genesis holds its assets, taken as whole,
including, without limitation, changes, actual or prospective, in
commodity prices; or (C) resulting from general economic, financial,
currency exchange, securities or commodity market conditions in Canada
or elsewhere) which, in the sole judgment of the Offeror, acting
reasonably, is materially adverse to the business of Genesis or to the
value of the Common Shares to the Offeror;
(i) the Offeror shall have determined in its sole judgment, acting
reasonably, that: (i) no material right, franchise or licence of
Genesis has been or may be impaired (which impairment has not been
cured or waived) or otherwise adversely affected, whether as a result
of the making of the Offer, the taking up and paying for Common Shares
deposited under the Offer or otherwise which might make it inadvisable
for the Offeror to proceed with the Offer or with the taking up and
paying for the Common Shares under the Offer or completing a
compulsory acquisition or a subsequent acquisition transaction (other
than (A) arising out of a matter which has been disclosed in a
document filed on SEDAR or in the Disclosure Letter or in the
Acquisition Agreement; (B) resulting from conditions affecting the oil
and gas industry in the jurisdictions in which Genesis holds its
assets, taken as whole, including, without limitation, changes, actual
or prospective, in commodity prices; or (C) resulting from general
economic, financial, currency exchange, securities or commodity market
conditions in Canada or elsewhere); and (ii) no covenant, term or
condition of any instruments or agreements of Genesis exists which
might make it inadvisable for the Offeror to proceed with the Offer or
with the taking up and paying for the Common Shares under the Offer or
completing a compulsory acquisition or a subsequent acquisition
transaction (including, without limitation, any default, acceleration
or other adverse event that may ensue as a result of the Offeror
taking up and paying for the Common Shares under the Offer or
completing a compulsory acquisition or subsequent acquisition
transaction);
(j) there shall not have occurred any actual or threatened change
(including any proposal by the Minister of Finance (Canada) to amend
the Income Tax Act (Canada) or any announcement governmental or
regulatory initiative, condition,
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event or development involving a change or a prospective change) other
than the implementation of a change announced prior to March 26, 2001
that, in the sole judgment of the Offeror, acting reasonably, directly
or indirectly, has or may reasonably be expected to have material
adverse effect with respect to the current or anticipated business or
operations of any of the Offeror or Genesis and their respective
subsidiaries or entities in which either of them has a material
interest or with respect to the regulatory regime applicable to their
respective businesses and operations or with respect to completing any
compulsory acquisition or subsequent acquisition transaction or with
respect to any potential integration of Genesis with the Offeror or
any subsidiary, associate or affiliate of the Offeror or any
reorganization of the Offeror or Genesis in connection with any such
potential integration;
(k) there shall not have occurred any material breach by Genesis of any of
the terms of the Acquisition Agreement or any termination of the
Acquisition Agreement pursuant to the terms of the Acquisition
Agreement or any material breach by an Agreeing Shareholder of any of
the terms of the Share Deposit Agreement or any provision of this
Agreement or of the Share Deposit Agreement shall have been held by a
court, securities commission or other regulatory authority to be
invalid or unenforceable in accordance with its terms or any of the
representations and warranties of Genesis under the Agreement are not
true and correct in all material respects at the Expiry Time; and
(l) immediately prior to the Expiry Time, the Offeror shall have received
the written confirmation of Genesis that: (i) Genesis has not
breached, or failed to comply with, in any material respect, any of
its covenants under this Agreement; and (ii) the representations and
warranties of Genesis contained in this Agreement are true and correct
in all material respects at and as of the Expiry Time.
The foregoing conditions are for the exclusive benefit of the Offeror
and may be waived by the Offeror, in whole or in part, in its sole discretion,
at any time and from time to time, both before or after the Expiry Time,
provided that the Minimum Condition may not be waived without the prior written
consent of Genesis, such consent not be to unreasonably withheld.