GOLDSTRIKE INC.
(the "Purchaser")
and
GRAN TIERRA ENERGY INC.
(the "Corporation")
and
The Parties set out in Schedule "A"
(collectively, the "Vendors")
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SHARE PURCHASE AGREEMENT
November 10, 2005
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Execution Copy
TABLE OF CONTENTS
ARTICLE 1
INTERPRETATION
Section 1.1 Defined Terms...................................................1
Section 1.2 Gender and Number...............................................8
Section 1.3 Headings, etc...................................................8
Section 1.4 Currency........................................................8
Section 1.5 Certain Phrases, etc............................................8
Section 1.6 Knowledge.......................................................9
Section 1.7 Accounting Terms................................................9
Section 1.8 Incorporation of Schedules......................................9
ARTICLE 2
PURCHASED SHARES AND PURCHASE PRICE
Section 2.1 Purchase and Sale...............................................9
Section 2.2 Purchase Price..................................................9
Section 2.3 Partial Purchase...............................................10
Section 2.4 Payment of the Purchase Price..................................10
Section 2.5 Adjustment of Purchase Price...................................11
Section 2.6 Withholding Where Vendor is Non-Resident.......................12
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDORS
Section 3.1 Representations and Warranties of the Vendors..................13
Section 3.2 Representations and Warranties of the Corporation..............14
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 4.1 Representations and Warranties of the Purchaser................25
ARTICLE 5
PRE-CLOSING COVENANTS OF THE PARTIES
Section 5.1 Conduct of Business Prior to Closing...........................40
Section 5.2 Access for Due Diligence.......................................42
Section 5.3 Actions to Satisfy Closing Conditions..........................43
Section 5.4 Transfer of the Purchased Shares...............................43
Section 5.5 Request for Consents...........................................44
Section 5.6 Filings and Authorizations.....................................44
Section 5.7 Notice of Untrue Representation or Warranty....................44
Section 5.8 Exclusive Dealing..............................................44
ARTICLE 6
CONDITIONS OF CLOSING
Section 6.1 Conditions for the Benefit of the Purchaser....................45
Section 6.2 Conditions for the Benefit of the Vendors and the Corporation..47
Section 6.3 Conditions Precedent...........................................49
ARTICLE 7
CLOSING
Section 7.1 Date, Time and Place of Closing................................49
Section 7.2 Closing Procedures.............................................49
ARTICLE 8
TERMINATION
Section 8.1 Termination by Purchaser.......................................49
Section 8.2 Termination by Vendors.........................................50
Section 8.3 Other Termination Rights.......................................50
Section 8.4 Effect of Termination..........................................50
ARTICLE 9
INDEMNIFICATION
Section 9.1 Indemnification in Favour of the Purchaser.....................51
Section 9.2 Indemnification in Favour of the Vendor........................52
Section 9.3 Time Limitations...............................................52
Section 9.4 Limitations on Amount..........................................52
Section 9.5 Procedure for Indemnification--Third Party Claims..............52
Section 9.6 Procedure for Indemnification--Other Claims....................54
ARTICLE 10
POST-CLOSING COVENANTS
Section 10.1 Further Assurances.............................................54
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices........................................................55
Section 11.2 Brokers........................................................57
Section 11.3 Announcements..................................................57
Section 11.4 Third Party Beneficiaries......................................58
Section 11.5 Expenses.......................................................58
Section 11.6 Amendments.....................................................58
Section 11.7 Waiver.........................................................58
Section 11.8 Non-Merger.....................................................58
Section 11.9 Entire Agreement...............................................59
Section 11.10 Successors and Assigns.........................................59
Section 11.11 Severability...................................................59
Section 11.12 Tax Election...................................................60
Section 11.13 Governing Law..................................................60
Section 11.14 Counterparts...................................................60
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SHARE PURCHASE AGREEMENT
Share Purchase Agreement dated as of November 10, 2005 among Goldstrike
Inc. (the "Purchaser"), Gran Tierra Energy Inc. (the "Corporation") and the
Parties set out in Schedule "A" (the "Vendors"), pursuant to which the Purchaser
will acquire all issued and outstanding shares in the capital of Gran Tierra
Energy Inc. in exchange for common shares of Goldstrike and Exchangeable Shares
(as defined herein).
WHEREAS the Purchaser and Gran Tierra have agreed upon the terms and
conditions of a share purchase (the "Share Purchase") and related transactions
(collectively the "Transactions"), pursuant to which, among other things, the
Purchaser will acquire all of the issued and outstanding share capital of Gran
Tierra, and Gran Tierra will become a wholly-owned subsidiary of the Purchaser,
as contemplated in a term sheet dated August 22, 2005 (the "Term Sheet"); and
WHEREAS simultaneously with the closing of the Transaction, the Purchaser
intends to split-off its wholly-owned subsidiary, Goldstrike Leaseco Inc., a
Nevada corporation ("Leaseco"), through the sale of all of the outstanding
capital stock of Leaseco (the "Split-off") upon the terms and conditions of a
split-off agreement by and among the Purchaser, Dr. Ken Cai and Dr. Yanyou Zheng
(collectively "Buyer") substantially in the form of Exhibit B attached hereto
(the "Split-Off Agreement")
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
ARTICLE 1
INTERPRETATION
Section 1.1 Defined Terms
As used in this Agreement, the following terms have the following
meanings:
"Accounts Receivable" means all accounts receivable, notes receivable and
other debts due or accruing due to the Corporation.
"Acquired Properties" means the oil and gas leasehold working interests
acquired by the Corporation in connection with the Argentine Acquisition.
"Affiliate" has the meaning specified in Section 4.1(p)(iii).
"Agreement" means this share purchase agreement and all schedules and
instruments in amendment or confirmation of it; and the expressions
"Article" and "Section" followed by a number mean and refer to the
specified Article or Section of this Agreement.
"Ancillary Agreements" means all agreements, certificates and other
instruments delivered or given pursuant to this Agreement.
"Argentine Acquisition" means the transactions, consummated on September
1, 2005, pursuant to which the Corporation acquired certain Argentine oil
and gas working interests.
"Assets" means all property and assets of the Corporation of every nature
and kind and wheresoever situate including (i) the Owned Properties and
the Buildings and Fixtures located thereon, (ii) all machinery, equipment,
furniture, accessories and supplies of all kinds, (iii) all inventories,
(iv) all Accounts Receivable and the full benefit of all security for the
Accounts Receivable, (v) all prepaid expenses, (vi) the leasehold interest
of the Corporation in and to the Leased Properties, (vii) the Intellectual
Property, (viii) the Contracts and the Leases, and (ix) the Books and
Records and the Corporate Records.
"Authorization" means, with respect to any Person, any order, permit,
approval, waiver, licence or similar authorization of any Governmental
Entity having jurisdiction over the Person.
"Books and Records" means all books of account, tax records, sales and
purchase records, customer and supplier lists, computer software,
formulae, business reports, plans and projections and all other documents,
files, correspondence and other information of the Corporation (whether in
written, printed, electronic or computer printout form).
"Bridge Loan" means the loan by the Purchaser to the Corporation for the
purpose of financing the Argentine Acquisition.
"Bridge Loan Agreement" means the bridge loan and control share pledge
agreement made September 1, 2005 between the Purchaser and the Corporation
pursuant to which the Purchaser made the Bridge Loan.
"Buildings and Fixtures" means all plant, buildings, structures,
erections, improvements, appurtenances and fixtures (including fixed
machinery and fixed equipment) situate on any of the Subject Properties.
"Business" means the business of the Corporation and any subsidiary of the
Corporation, being the exploration for and development of international
oil and gas opportunities initially in Argentina.
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"Business Day" means any day of the year, other than a Saturday, Sunday or
any day on which banks are required or authorized to close in Calgary,
Alberta.
"CallCo" means a corporation to be incorporated under the laws of Alberta
which will be wholly-owned, directly or indirectly, by Purchaser.
"Claims" has the meaning specified in Section 2.5.
"Closing" means the completion of the transaction of purchase and sale
contemplated in this Agreement.
"Closing Date" means on or about November 10, 2005 or such other date as
the Purchaser and the Corporation may agree provided that the Closing Date
shall not be later than December 31, 2005.
"Consideration Shares" has the meaning specified in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collective Agreements" means the collective agreements binding the
Corporation and all related documents including letters of understanding,
letters of intent and other written communications with bargaining agents
for employees of the Corporation, which impose any obligations upon the
Corporation.
"Consent" means the consent of a contracting party to a change in control
of the Corporation if required by the terms of any Contract.
"Contracts" means all agreements to which the Corporation is a party
including all contracts, leases of personal property and commitments of
any nature, written or oral, including (i) unfilled purchase orders
received by the Corporation, (ii) forward commitments by the Corporation
for supplies or materials entered into the Ordinary Course, (iii)
restrictive agreements and negative covenant agreements which the
Corporation has with its employees, past or present, and (iv) the Material
Contracts.
"Corporation" means Gran Tierra Energy Inc. and its subsidiaries.
"Corporate Records" means the corporate records of the Corporation,
including (i) all constating documents and by-laws, (ii) all minutes of
meetings and resolutions of shareholders and directors (and any
committees), and (iii) the share certificate books, securities register,
register of transfers and register of directors.
"Damages" has the meaning specified in Section 9.1.
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"Employee Benefit Plan" has the meaning specified in Section
4.1(bb)(i)(A).
"Employee Plans" means all the employee benefit, fringe benefit,
supplemental unemployment benefit, bonus, incentive, profit sharing,
termination, change of control, pension, retirement, stock option, stock
purchase, stock appreciation, health, welfare, medical, dental,
disability, life insurance and similar plans, programmes, arrangements or
practices relating to the current or former employees, officers or
directors of the Corporation maintained, sponsored or funded by the
Corporation, whether written or oral, funded or unfunded, insured or
self-insured, registered or unregistered.
"Environmental Laws" means all applicable Laws and agreements with
Governmental Entities and all other statutory requirements relating to
public health or the protection of the environment and all Authorizations
issued pursuant to such Laws, agreements or statutory requirements.
"ERISA" has the meaning specified in Section 4.1(bb)(i)(B).
"ERISA Affiliate" has the meaning specified in Section 4.1(bb)(i)(C).
"Exchangeable Shares" means the exchangeable shares to be created in the
capital of ExchangeCo, having substantially the rights, privileges,
restrictions and conditions set out in Schedule "D" annexed hereto.
"Exchange Act" means the Securities Exchange Act of 1934.
"ExchangeCo" means a corporation to be incorporated by CallCo under the
laws of Alberta which will be an indirectly, wholly-owned subsidiary of
the Purchaser and which will issue the Exchangeable Shares.
"from" has the meaning specified in Section 1.5.
"GAAP" means, at any time, accounting principles generally accepted in the
United States as established by the Financial Accounting Standards Board
at the relevant time applied on a consistent basis.
"Goldstrike Shares" means shares of common stock, $0.001 par value per
share of the Purchaser.
"Governmental Entity" means any (i) multinational, federal, provincial,
state, municipal, local or other governmental or public department,
central bank, court, commission, board, bureau, agency or instrumentality,
domestic or foreign, (ii) any subdivision or authority of any of the
foregoing, or (iii) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of
any of the above.
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"including" has the meaning specified in Section 1.5.
"includes" has the meaning specified in Section 1.5.
"Indemnified Party" has the meaning specified in Section 9.5(1).
"Indemnifying Party" has the meaning specified in Section 9.5(1).
"Intellectual Property" means (i) any trade marks, trade names, business
names, brand names, service marks, computer software, computer programs,
pharmaceutical treatments or drug therapies, copyrights, including any
author or moral rights, designs, inventions, patents, franchises,
formulae, processes, know-how, technology and related goodwill, (ii) any
applications, registrations, issued patents, continuations in part,
divisional applications or analogous rights or licence rights therefor,
and (iii) other intellectual, industrial or proprietary property, owned or
used by the Corporation.
"Interim Balance Sheet Date" means June 30, 2005.
"Interim Financial Statements" means the unaudited balance sheet of the
Corporation as at the Interim Balance Sheet Date and the accompanying
unaudited statement of income of the Corporation and the Acquired
Properties for the six-month period then ended and all notes in respect
thereof. The Interim Financial Statements shall be audited, in the case of
the Corporation, and unaudited, in the case of the Acquired Properties.
"Interim Period" means the period between the close of business on this
date and the Closing.
"Issued Shares" has the meaning specified in Section 2.2.
"Laws" means any and all applicable laws including all statutes, codes,
ordinances, decrees, rules, regulations, municipal by-laws, judicial or
arbitral or administrative or ministerial or departmental or regulatory
judgments, orders, decisions, rulings or awards, and general principles of
common and civil law and equity, binding on or affecting the Person
referred to in the context in which the word is used.
"Leaseco" has the meaning specified in the introduction to this Agreement.
"Leased Properties" means the lands and premises listed and described in
Schedule 3.2(r) attached hereto by reference to their proper municipal
address and legal description.
"Leases" means the leases of the Leased Properties described in Schedule
3.2(r) attached hereto.
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"Legal Proceeding" has the meaning specified in Section 3.2(gg).
"Lien" means any mortgage, charge, pledge, hypothecation, security
interest, assignment, lien (statutory or otherwise), charge, title
retention agreement or arrangement, restrictive covenant or other
encumbrance of any nature or any other arrangement or condition which, in
substance, secures payment or performance of an obligation.
"Loss" has the meaning specified in Section 2.5.
"Material Authorizations" has the meaning specified in Section 3.2(l).
"Material Contracts" has the meaning specified in Section 3.2(s).
"Option Plan" has the meaning specified in Section 3.2(ee).
"Ordinary Course" means, with respect to an action taken by a Person, that
such action is consistent with the past practices of the Person and is
taken in the ordinary course of the normal day-to-day operations of the
Person.
"Owned Properties" means any land and premises owned, legally or
beneficially, by the Corporation.
"Parties" means the Vendors, the Purchaser and Gran Tierra and any other
Person who may become a party to this Agreement.
"Permitted Liens" means (i) Liens for taxes, assessments or governmental
charges or levies on property not yet due and delinquent, (ii) easements,
encroachments and other minor imperfections of title which do not,
individually or in the aggregate, materially detract from the value of or
impair the use or marketability of any real property, (iii) Liens in
favour of the Purchaser incurred in connection with the Bridge Loan and
(iv) Liens listed and described in Schedule "C" but only to the extent
such Liens conform to their description in Schedule "C".
"Person" means a natural person, partnership, limited liability
partnership, corporation, joint stock company, trust, unincorporated
association, joint venture or other entity or Governmental Entity, and
pronouns have a similarly extended meaning.
"PPO" means the private placement offering of units of securities
conducted by the Purchaser in August and September of 2005, the proceeds
of which were utilized to fund the Bridge Loan and the Argentine
Acquisition.
"Proceeding" has the meaning specified in Section 9.5(2).
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"Public Statement" has the meaning specified in Section 11.3.
"Purchase Price" has the meaning specified in Section 2.2.
"Purchased Shares" has the meaning specified in Section 2.1.
"Purchaser" means Goldstrike Inc., and its subsidiaries.
"Purchaser Financial Statements" has the meaning specified in Section
4.1(q).
"Purchaser's Indemnified Persons" has the meaning specified in Section
9.1.
"Purchaser Interim Balance Sheet" has the meaning specified in Section
4.1(q).
"Purchaser Interim Balance Sheet Date" has the meaning specified in
Section 4.1(q).
"Purchaser Liabilities" has the meaning specified in Section 2.5.
"Purchaser Material Adverse Effect" has the meaning specified in Section
4.1(p)(i).
"Purchaser Reports" has the meaning specified in Section 4.1(o).
"Required Consents" means those Consents and Authorizations listed and
described in Schedule 6.1(c) attached hereto.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means Securities Act of 1933, as amended.
"Split-off" has the meaning specified in the introduction to this
Agreement.
"Subject Properties" means the Owned Properties and the Leased Properties.
"Subsidiary" has the meaning specified in the Business Corporations Act
(Alberta) as amended.
"Taxes" has the meaning specified in Section 4.1(t)(i)(A).
"Tax Returns" has the meaning specified in Section 4.1(t)(i)(B).
"Term Sheet" has the meaning specified in the introduction to this
Agreement.
"the aggregate of" has the meaning specified in Section 1.5.
"the sum of" has the meaning specified in Section 1.5.
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"the total of" has the meaning specified in Section 1.5.
"to" has the meaning specified in Section 1.5.
"Transactions" has the meaning specified in the introduction to this
Agreement.
"Trustee" means Olympia Trust Company or such other person as may be
acceptable to the parties hereto.
"until" has the meaning specified in Section 1.5.
"Value of one Goldstrike Share" means $0.80.
"Vendors" means the parties set out in Schedule "A" attached hereto and
"Vendor" means any one of such parties.
"Vendor's Indemnified Persons" has the meaning specified in Section 9.2.
"Voting Exchange and Support Agreement" means an agreement to be made by
the Purchaser, the Corporation and the Trustee, substantially in the form
and content of Schedule "F" annexed hereto, with such changes as the
parties may agree.
"Year-End Financial Statements" has the meaning specified in Section
3.2(z).
Section 1.2 Gender and Number
Any reference in this Agreement or any Ancillary Agreement to gender
includes all genders and words importing the singular number only shall include
the plural and vice versa.
Section 1.3 Headings, etc.
The provision of a Table of Contents, the division of this Agreement into
Articles and Sections and the insertion of headings are for convenient reference
only and are not to affect its interpretation.
Section 1.4 Currency
All references in this Agreement or any Ancillary Agreement to dollars,
unless otherwise specifically indicated, are expressed in U.S. currency.
Section 1.5 Certain Phrases, etc.
In this Agreement and any Ancillary Agreement (i) (y) the words
"including" and "includes" mean "including (or includes) without limitation",
and (z) the phrase "the aggregate of", "the total of", "the sum of", or a phrase
of similar meaning means "the aggregate (or total or sum), without duplication,
of", and (ii) in the computation of periods of time from a specified date to a
later specified date, unless otherwise expressly stated, the word "from" means
"from and including" and the words "to" and "until" each mean "to but
excluding".
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Section 1.6 Knowledge
Where any representation or warranty contained in this Agreement or any
Ancillary Agreement is expressly qualified by reference to the knowledge of the
Corporation, it shall be deemed to refer to the knowledge of the responsible
officers of the Corporation having made due enquiry as necessary as to the
matters that are the subject of the representations and warranties.
Section 1.7 Accounting Terms
All accounting terms not specifically defined in this Agreement shall be
interpreted in accordance with GAAP.
Section 1.8 Incorporation of Schedules
The schedules attached to this Agreement shall, for all purposes of this
Agreement, form an integral part of it.
ARTICLE 2
PURCHASED SHARES AND PURCHASE PRICE
Section 2.1 Purchase and Sale
Subject to the terms and conditions of this Agreement, each Vendor agrees
to sell, assign and transfer to the Purchaser and the Purchaser agrees to
purchase on the Closing Date, all (but not less than all) of that number of
common shares in the capital of the Corporation as is set out opposite that
Vendor's name in Schedule "A" attached hereto (collectively, the "Purchased
Shares").
Section 2.2 Purchase Price
The purchase price (the "Purchase Price") payable by the Purchaser to the
Vendors for each Purchased Share shall be payable at Closing at the election of
each Vendor as follows:
(a) the issuance of 1.5873016 Goldstrike Shares (the
"Consideration Shares"); or
(b) the issuance of 1.5873016 Exchangeable Shares (together with
the Consideration Shares the "Issued Shares").
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The Purchase Price shall be paid to the Vendors in the amounts set
opposite their respective names on Schedule "A" attached hereto.
Section 2.3 Partial Purchase
The Purchaser shall not be obligated to complete the purchase of any of
the Purchased Shares unless the purchase of not less than 90% of the Purchased
Shares is completed simultaneously and the Purchaser or its Subsidiary has the
right to acquire all remaining Purchased Shares under the Business Corporations
Act (Alberta).
Section 2.4 Payment of the Purchase Price
(a) At the Closing, the Purchaser shall pay the Purchase Price before
any adjustments to the Vendors according to the amounts set out on
Schedule "A" attached hereto provided that Exchangeable Shares shall
be issued to those Vendors who have elected to receive Exchangeable
Shares and Consideration Shares shall be issued to those Vendors who
have elected to receive Goldstrike Shares and where no election has
been made, shareholders resident in Canada shall be deemed to have
elected to receive Exchangeable Shares and shareholders resident in
a jurisdiction other than Canada shall be deemed to have elected to
receive Goldstrike Shares;
(b) The Vendors agree that the Issued Shares shall be legended with
restrictions on resale as set forth in accordance with the following
legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES
LAWS (THE "STATE ACTS"), HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
UNITED STATES EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND QUALIFICATION UNDER THE STATE ACTS OR EXEMPTIONS
FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS (INCLUDING, IN
THE CASE OF THE SECURITIES ACT, THE EXEMPTIONS AFFORDED BY SECTION
4(1) OF THE SECURITIES ACT AND RULE 144 THEREUNDER). AS A
PRECONDITION TO ANY SUCH TRANSFER, THE ISSUER OF THESE SECURITIES
SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO THE
AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION
AND/OR SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY THERETO THAT ANY
SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES LAWS."
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and each of the Vendors hereby undertakes to trade in the Issued Shares
only in compliance with the foregoing legend and the various dates
specified therein except in the circumstance of a Goldstrike Control
Transaction as defined in Schedule "D" of this Agreement.
Section 2.5 Adjustment of Purchase Price
(1) In the event that, during the period commencing from the Closing Date and
ending on the second anniversary of the Closing Date:
(a) the Purchaser incurs any Loss with respect to, in connection with,
or arising from any Purchaser Liabilities, then promptly following
the filing by the Purchaser with the Securities and Exchange
Commission (the "SEC") of a quarterly report relating to the most
recent completed quarter for which such determination has been made,
the Purchaser shall issue to the Vendors and/or their designees such
number of Goldstrike Shares and Exchangeable Shares as would result
from dividing (x) the whole dollar amount representing such Loss by
(y) the Value of one Goldstike Share. The limit on the aggregate
number of Issued Shares issuable under this section shall be
2,000,000 shares;
(b) the Purchaser incurs any Loss with respect to, in connection with,
or arising from any Corporation Liabilities, then promptly following
the filing by the Purchaser with the SEC of a quarterly report
relating to the most recently completed quarter for which such
determination has been made, the Purchaser shall issue to the
shareholders of the Purchaser other than shareholders who are
Vendors or shareholders who acquired Goldstrike Shares from Vendors,
such number of Goldstrike Shares as would result from dividing (q)
the whole dollar amount representing such Loss by (r) the Value of
one Goldstike Share. The limit on the aggregate number of Goldstrike
Shares issuable under this section shall be 1,500,000 shares. In no
event will shares be issued to holders of Exchangeable Shares.
As used in this section:
(a) "Loss" shall mean any and all costs and expenses, including
reasonable attorneys' fees, court costs, reasonable accountants'
fees, and damages and losses, net of any insurance proceeds actually
received by the party suffering the Loss with respect thereto;
(b) "Claims" shall include, but are not limited to, any claim, notice,
suit, action, investigation, other proceedings (whether actual or
threatened);
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(c) "Purchaser Liabilities" shall mean all Claims against and
liabilities, obligations or indebtedness of any nature whatsoever of
Leasco, whenever accruing, and the Purchaser accruing on or before
the Closing Date (whether primary, secondary, direct, indirect,
liquidated, unliquidated or contingent, matured or unmatured),
including (i) any breach by the Purchaser or its subsidiaries of any
of their respective representations or warranties set forth in
Article 4 herein, (ii) any litigation threatened, pending or for
which a basis exists that has resulted or may result in the entry of
judgment in damages or otherwise against the Purchaser or its
subsidiary; (iii) any and all outstanding debts owed by the
Purchaser or its subsidiary; (iv) any and all internal or employee
related disputes, arbitrations or administrative proceedings
threatened, pending or otherwise outstanding, (v) any and all liens,
foreclosures, settlements, or other threatened, pending or otherwise
outstanding financial, legal or similar obligations of the Purchaser
or its subsidiaries, as such Liabilities are determined by the
Purchaser's independent auditors, on a quarterly basis, including
all Liabilities for any taxes incurred by the Purchaser attributable
to the Split-Off, and (vi) all fees and expenses incurred in
connection with effecting the adjustments contemplated by this
section.
(d) "Corporation Liabilities" shall mean all Claims against and
liabilities, obligations or indebtedness of any nature of the
Corporation accruing on or before the Closing Date (whether primary,
secondary, direct, indirect, liquidated, unliquidated or contingent,
matured or unmatured), arising from any breach by the Corporation or
its subsidiaries of any of their respective representations or
warranties set forth in Article 3 herein.
The Goldstrike Shares and Exchangeable Shares issued pursuant to Section
2.5(1)(a) shall be issued to each Vendor in the same proportion as to
Goldstrike Shares and Exchangeable Shares originally issued to such
Vendor.
Section 2.6 Withholding Where Vendor is Non-Resident
Where a Vendor is a non-resident person for purposes of Section 116 of the
Income Tax Act (Canada), if (i) a certificate pursuant to Section 116(2) of the
Income Tax Act (Canada) with a certificate limit not less than the Purchase
Price or (ii) a certificate pursuant to Section 116(4) of the Income Tax Act
(Canada) is not delivered to the Purchaser at or before the Closing, the
Purchaser shall be entitled to withhold from such Vendor 25% of the Issued
Shares set opposite the Vendor's name on Schedule "A" until such time as a
certificate is delivered or such Vendor delivers sufficient cash to the
Purchaser to enable the Purchaser to pay the applicable withholding amount.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDORS
Section 3.1 Representations and Warranties of the Vendors
The Vendors hereby severally and not jointly represent and warrant as
follows to the Purchaser and acknowledge and confirm that the Purchaser is
relying upon the representations and warranties in connection with the purchase
by the Purchaser of the Purchased Shares:
(a) Incorporation and Qualification. Where a vendor is a body corporate,
such Vendor is a corporation incorporated, organized and existing
under the laws of its jurisdiction of formation and has the
corporate power to perform its obligations under this Agreement and
each of the Ancillary Agreements to which it is a party;
(b) Execution and Binding Obligation. This Agreement has been duly
executed and delivered by such Vendor and constitutes a legal, valid
and binding obligations of such Vendor, enforceable against such
Person in accordance with its terms subject only to any limitation
under applicable laws relating to (i) bankruptcy, winding-up,
insolvency, arrangement and other laws of general application
affecting the enforcement of creditors' rights, and (ii) the
discretion that a court may exercise in the granting of equitable
remedies such as specific performance and injunction;
(c) No Other Agreements to Purchase. Except for the Purchaser's right
under this Agreement, no Person has any written or oral agreement,
option or warrant or any right or privilege (whether by Law,
pre-emptive or contractual) capable of becoming such for the
purchase or acquisition from such Vendor of any of the Purchased
Shares;
(d) Title to Purchased Shares. Such Vendor owns the Purchased Shares as
disclosed in Schedule "A" attached hereto as the registered and
beneficial owner (except as set out on Schedule "A" attached hereto
where such Vendor has beneficial title only) with a good title, free
and clear of all Liens other than those restrictions on transfer, if
any, contained in the articles of the Corporation. Upon completion
of the transaction contemplated by this Agreement, the Purchaser
will have good and valid title to the Purchased Shares, free and
clear of all Liens other than (i) those restrictions on transfer, if
any, contained in the articles of the Corporation, and (ii) Liens
granted by the Purchaser;
(e) Residence of the Vendor. The Vendor is a resident of the
jurisdiction set out in Schedule A within the meaning of the Income
Tax Act (Canada).
-13-
Section 3.2 Representations and Warranties of the Corporation
The Corporation hereby represents and warrants as follows to the Purchaser
and acknowledges and confirms that the Purchaser is relying upon the
representations and warranties in connection with the purchase by the Purchaser
of the Purchased Shares.
Corporate Matters
(a) Incorporation and Qualification. The Corporation is a corporation
incorporated, organized and existing under the laws of Alberta and
has the corporate power to perform its obligations under this
Agreement and each of the Ancillary Agreements to which it is a
party. The Corporation has the corporate power to own and operate
its property, carry on its business and perform its obligation under
each of the Ancillary Agreements and is duly qualified, licensed or
registered to carry on business in the jurisdictions listed in
Schedule 3.2(a) attached hereto. The jurisdictions listed in
Schedule 3.2(a) attached hereto include all jurisdictions in which
the nature of the Assets or the Business makes such qualification
necessary or where the Corporation owns or leases any material
Assets or conducts any material business;
(b) Validity of Agreement. The execution, delivery and performance by
the Corporation of this Agreement and each of the Ancillary
Agreements:
(i) have been duly authorized by all necessary corporate action on
the part of the Corporation;
(ii) do not (or would not with the giving of notice, the lapse of
time or the happening of any other event or condition) result
in a breach or a violation of, or conflict with, or allow any
other Person to exercise any rights under, any of the terms or
provisions of its constating documents or by-laws or any
contracts or instruments to which it is a party or pursuant to
which any of its assets or property may be materially
adversely affected;
(iii) will not result in a breach of, or cause the termination or
revocation of, any Authorization held by the Corporation or
necessary to the ownership of the Purchased Shares or the
operation of the Business; and (iv) will not result in the
violation of any Law;
(c) Required Authorizations. There is no requirement to make any filing
with, give any notice to, or obtain any Authorization of, any
Governmental Entity as a condition to the lawful completion of the
transactions contemplated by this Agreement, except for the filings,
notifications and Authorizations described in Schedule 3.2(c)
attached hereto or that relate solely to the identity of the
Purchaser or the nature of the business carried on by the Purchaser;
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(d) Execution and Binding Obligation. This Agreement and each of the
Ancillary Agreements to which the Corporation is a party have been
duly executed and delivered by the Corporation and constitute legal,
valid and binding obligations of the Corporation enforceable against
it in accordance with their respective terms subject only to any
limitation under applicable laws relating to (i) bankruptcy,
winding-up, insolvency, arrangement and other laws of general
application affecting the enforcement of creditors' rights, and (ii)
the discretion that a court may exercise in the granting of
equitable remedies such as specific performance and injunction;
(e) Authorized and Issued Capital. The authorized capital of the
Corporation consists of an unlimited number of preference shares and
an unlimited number of common shares, of which (i) at this date, no
preference shares and 12,600,000 common shares without giving effect
to the common shares held as collateral as security for the Bridge
Loan have been duly issued and are outstanding as fully paid and
non-assessable common shares and no options to acquire common shares
of the Corporation have been issued; and (ii) at the Closing Date,
no preference shares and 12,600,000 common shares (and no more), and
without giving effect to the common shares held as collateral as
security for the Bridge Loan) shall have been duly issued and shall
be outstanding as fully paid and non-assessable and no other
securities shall be outstanding. All of the Purchased Shares have
been issued in compliance with all applicable Laws including,
without limitation, applicable securities laws;
(f) No Other Agreements to Purchase. To the Corporation's knowledge,
except for the Purchaser's right under this Agreement, no Person has
any written or oral agreement, option or warrant or any right or
privilege (whether by Law, pre-emptive or contractual) capable of
becoming such for (i) the purchase or acquisition from any of the
Vendors of any of the Purchased Shares, or (ii) the purchase,
subscription, allotment or issuance of any of the unissued shares or
other securities of the Corporation.
(g) Dividends and Distributions. The Corporation has not, directly or
indirectly, declared or paid any dividends or declared or made any
other distribution on any of its shares of any class and has not,
directly or indirectly, redeemed, purchased or otherwise acquired
any of its shares of any class or agreed to do so;
-15-
(h) Corporate Records. The Corporate Records are complete and accurate
in all material respects and all necessary corporate proceedings and
actions reflected in the Corporate Records have been conducted or
taken in compliance with all applicable Laws and with the articles
and by-laws of the Corporation. Without limiting the generality of
the foregoing (i) the minute books contain all material minutes of
all meetings of the directors and shareholders held since
incorporation and all such meetings were properly called and held,
(ii) the minute books contain all material resolutions passed by the
directors and shareholders (and committees, if any) and all such
resolutions were properly passed, (iii) the share certificate books,
register of shareholders and register of transfers are complete and
accurate, all transfers have been properly completed and approved
and any tax payable by the Corporation in connection with the
transfer of any securities has been paid, and (iv) the registers of
directors and officers are complete and accurate and all former and
present directors and officers were properly elected or appointed,
as the case may be. The Corporation is not currently subject to, or
affected by, any unanimous shareholders agreement;
General Matters Relating to the Business
(i) Conduct of Business in Ordinary Course. Except as disclosed in
Schedule 3.2(i) attached hereto, since the Interim Balance Sheet
Date, the Business has been carried on in the Ordinary Course.
Without limiting the generality of the foregoing, since the Interim
Balance Sheet Date the Corporation has not:
(i) sold, transferred or otherwise disposed of any Assets;
(ii) made any capital expenditure or commitment therefor which
individually or in the aggregate exceeded $100,000, except in
connection with the Argentine Acquisition;
(iii) discharged any secured or unsecured obligation or liability
(whether accrued, absolute, contingent or otherwise) which
individually or in the aggregate exceeded $100,000;
(iv) increased its indebtedness for borrowed money or made any loan
or advance, or assumed, guaranteed or otherwise became liable
with respect to the liabilities or obligation of any Person
other than indebtedness incurred pursuant to the Bridge Loan;
(v) made any bonus or profit sharing distribution or similar
payment of any kind except as may be required by the terms of
a Material Contract or Collective Agreement;
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(vi) removed any auditor or director or terminated any officer or
other senior employee;
(vii) written off as uncollectible any Accounts Receivable which
individually or in the aggregate is material to the
Corporation or is in excess of $100,000;
(viii) granted any general increase in the rate of wages, salaries,
bonuses or other remuneration of any employees of the
Corporation except as may be required by the terms of a
Material Contract or Collective Agreement;
(ix) suffered any extraordinary loss, whether or not covered by
insurance;
(x) suffered any material shortage or any cessation or
interruption of inventory shipments, supplies or ordinary
services;
(xi) cancelled or waived any material claims or rights;
(xii) compromised or settled any litigation, proceeding or other
governmental action relating to the Assets, the Business or
the Corporation;
(xiii) cancelled or reduced any of its insurance coverage;
(xiv) authorized, agreed or otherwise committed, whether or not in
writing, to do any of the foregoing;
In addition, since the Interim Balance Sheet Date the Corporation
has not (i) except in connection with the transactions contemplated
by this Agreement, made, and has not agreed to make, any change in
any method of accounting or auditing practice, or (ii) amended or
approved any amendment to its constating documents, by-laws or
capital structure.
(j) No Material Adverse Change. Since the Interim Balance Sheet Date,
there has not been any material adverse change in the affairs,
prospects, operations or condition of the Corporation, any material
assets or the Business and to the best knowledge of the Management
Shareholders no event has occurred or circumstance exists which may
result in such a material adverse change;
(k) Compliance with Laws. The Corporation is conducting and has always
conducted the Business and any past business in compliance with all
applicable Laws other than acts of non-compliance which, in the
aggregate, are not material;
-17-
(l) Authorizations. The Corporation owns, holds, possesses or lawfully
uses in the operation of the Business, all Authorizations which are,
in any manner, necessary for it to conduct the Business as presently
or previously conducted or for the ownership and use of the Assets
in compliance with all applicable Laws, except where the failure to
so hold, possess or lawfully use any Authorization would not have a
material adverse effect on its business. All Authorizations material
to the Corporation or the Business are listed in Schedule 3.2(l)
attached hereto (the "Material Authorizations"). Each Material
Authorization is valid, subsisting and in good standing, the
Corporation is not in default or breach of any Material
Authorization and, to the knowledge of the Corporation, no
proceeding is pending or threatened to revoke or limit any Material
Authorization. All Material Authorizations are renewable by their
terms or in the ordinary course of business without the need for the
Corporation to comply with any special rules or procedures, agree to
any materially different terms or conditions or pay any amounts
other than routine filing fees.
Matters Relating to the Assets
(m) Sufficiency of Assets. The Business is the only business operation
carried on by the Corporation and the Assets include all rights and
property necessary to the conduct of the Business after the Closing
substantially in the same manner as it was conducted prior to the
Closing.
(n) Title to the Assets. The Corporation owns (with good title) all of
the properties and Assets (whether real, personal or mixed and
whether tangible or intangible) reflected as being owned by the
Corporation in its financial Books and Records, and has legal and
beneficial ownership of such owned Assets free and clear of all
Liens except for Permitted Liens;
(o) No Options, etc. No Person has any written or oral agreement,
option, understanding or commitment, or any right or privilege
capable of becoming such for the purchase or other acquisition from
the Corporation of any of the Assets and other than Permitted Liens;
(p) Condition of Tangible Assets. The buildings, plants, structures,
equipment and other tangible personal property of the Corporation
(including the Buildings and Fixtures) are in good operating
condition and repair having regard to their use and age and are
adequate and suitable for the uses to which they are presently being
put. None of such buildings, plants, structures, equipment or other
property are in need of maintenance or repairs except for ordinary
routine maintenance and repairs that are not material in nature or
cost;
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(q) Owned Property. The Corporation does not currently have and has
never had any Owned Properties.
(r) Leases. The Corporation is not a party to, or under any agreement to
become a party to, any lease with respect to real property other
than the Leases, copies of which have been provided to the
Purchaser. Each Lease is in good standing, creates a good and valid
leasehold estate in the Leased Properties thereby demised and is in
full force and effect without amendment, except as disclosed in
Schedule 3.2(r) attached hereto. With respect to each Lease (i) the
Lease (or a notice in respect of the Lease) has been properly
registered in the appropriate land registry office if so required,
(ii) all rents and additional rents have been paid, (iii) no waiver,
indulgence or postponement of the lessee's obligations has been
granted by the lessor, (iv) there exists no event of default or
event, occurrence, condition or act (including the purchase of the
Purchased Shares) which, with the giving of notice, the lapse of
time or the happening of any other event or condition, would become
a default under the Lease, and (v) to the knowledge of the
Corporation, all of the covenants to be performed by any party
(other than the Corporation) under the Lease have been fully
performed. Each of the Leased Properties is adequate and suitable
for the purposes for which it is presently being used and the
Corporation has adequate rights of ingress and egress into each of
the Leased Properties for the operation of the Business in the
Ordinary Course. Schedule 3.2(r) attached hereto contains a list of
all of the Leases setting out, in respect of each Lease, a
description of the leased premises (by municipal address and proper
legal description), the term of the Lease, the rental payments under
the Lease (specifying any breakdown of base rent and additional
rents), any rights of renewal and the term thereof, and any
restrictions on assignment or change of control of the Corporation;
(s) Material Contracts. Except for the Contracts described in Schedule
3.2(s) attached hereto (collectively, the "Material Contracts") and
the Leases, the Corporation is not a party to or bound by:
(i) any distributor, sales, advertising, agency or manufacturer's
representative Contract;
(ii) any continuing Contract for the purchase of materials,
supplies, equipment or services involving in the case of any
such Contract more than $100,000 over the life of the
Contract;
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(iii) any Contract that expires or may be renewed at the option of
any Person other than the Corporation so as to expire more
than one year after the date of this Agreement;
(iv) any trust indenture, mortgage, promissory note, loan agreement
or other Contract for the borrowing of money, any currency
exchange, commodities or other hedging arrangement or any
leasing transaction of the type required to be capitalized in
accordance with GAAP;
(v) any Contract for capital expenditures in excess of $100,000 in
the aggregate;
(vi) any confidentiality, secrecy or non-disclosure Contract or any
Contract limiting the freedom of the Corporation to engage in
any line of business, compete with any other Person, operate
its assets at maximum production capacity or otherwise conduct
its business other than such agreements entered into in the
Ordinary Course;
(vii) any Contract pursuant to which the Corporation is a lessor of
any machinery, equipment, motor vehicles, office furniture,
fixtures or other personal property;
(viii) any Contract with any Person with whom the Corporation or the
Vendors do not deal at arm's length within the meaning of the
Income Tax Act (Canada); or
(ix) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with
respect to, the obligations, liabilities (whether accrued,
absolute, contingent or otherwise) or indebtedness of any
other Person;
(t) No Breach of Material Contracts. The Corporation has performed all
of the obligations required to be performed by it and is entitled to
all benefits under, and is not alleged to be in default of any
Material Contract. Each of the Material Contracts is in full force
and effect and there exists no default or event of default or event,
occurrence, condition or act (including the purchase of the
Purchased Shares) which, with the giving of notice, the lapse of
time or the happening of any other event or condition, would become
a default or event of default under any Material Contract. True,
correct and complete copies of all Material Contracts have been
delivered to the Purchaser or made available to its counsel;
(u) No Breach of Other Contracts. Except for certain acts of default or
breach which, in the aggregate, are not material, the Corporation
has not violated or breached, in any material respect, any of the
terms or conditions of any Contract (other than the Material
Contracts), and to the Corporation's knowledge, except for certain
failures to perform which, in the aggregate, are not material, all
the covenants to be performed by any other party to such Contract
have been fully performed, in all material respects;
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(v) Accounts Receivable. All Accounts Receivable are bona fide, and,
subject to an allowance for doubtful accounts that has been
reflected on the books of the Corporation in accordance with GAAP
and consistent with past practice, collectible without set-off or
counterclaim;
(w) Intellectual Property. Attached as Schedule 3.2(w) attached hereto
is a complete and accurate list of all Intellectual Property (other
than commercially available software) owned or used by the
Corporation in carrying on the Business.
(x) Subsidiaries. Other than Gran Tierra Energy Argentina S.A. and
Petroleros Canadienses de Ecuador S.A., the Corporation has no
subsidiaries and holds no shares or other ownership, equity or
proprietary interests in any other Person;
Financial Matters
(y) Books and Records. All accounting and financial Books and Records
have been fully, properly and accurately kept and completed in all
material respects. The Books and Records and other data and
information are not recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means
(including any electronic, mechanical or photographic process,
whether computerized or not) which are not available to the
Corporation in the Ordinary Course;
(z) Financial Statements. The audited statements of the Acquired
Properties for the fiscal years ended December 31, 2003 and December
31, 2004 provided to the Purchaser (the "Year-End Financial
Statements") and the Interim Financial Statements of the Acquired
Properties and the Corporation have been prepared in accordance with
GAAP applied on a basis consistent with those of previous fiscal
years and each presents fairly:
(i) the assets, liabilities, (whether accrued, absolute,
contingent or otherwise) and financial position of the
Acquired Properties and the Corporation as of the respective
dates of the relevant statements; and
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(ii) the income derived from the Acquired Properties and the
Corporation during the periods covered by the Year-End
Financial Statements and the Interim Financial Statements;
True, correct and complete copies of the Year-End Financial
Statements and the Interim Financial Statements for the Acquired
Properties and the Corporation are attached as Schedule "B".
(aa) No Liabilities. Except as disclosed in this Agreement and as
incurred in connection with the Bridge Loan and the Argentine
Acquisition (including Schedule 3.2(aa) attached hereto) or
reflected or reserved against in the balance sheet forming part of
the Interim Financial Statements, the Corporation has no liabilities
or obligations of any nature (whether absolute, accrued, contingent
or otherwise) except for current liabilities incurred in the
Ordinary Course since the Interim Balance Sheet Date;
(bb) Bank Accounts and Powers of Attorney. Schedule 3.2(bb) attached
hereto is a correct and complete list showing (i) the name of each
bank in which the Corporation has an account or safe deposit box and
the names of all Persons authorized to draw on the account or to
have access to the safety deposit box, and (ii) the names of all
Persons holding powers of attorney from the Corporation.
Particular Matters Relating to the Business
(cc) Environmental Matters. Except as set forth in Schedule 3.2(cc)
attached hereto:
(i) none of the real properties (including, without limitation,
the Subject Properties) currently or, to the knowledge of the
Corporation, formerly owned, leased or used by the Corporation
or over which the Corporation has or had charge, management or
control (i) has ever been used by any Person as a waste
disposal site or as a licensed landfill, or (ii) has ever had
asbestos, asbestos-containing materials, PCBs, radioactive
substances or aboveground or underground storage systems,
active or abandoned, located on, at or under them; and
(ii) the Corporation has not been required by any Governmental
Entity to (i) alter any of the Subject Properties in a
material way in order to be in compliance with Environmental
Laws, or (ii) perform any environmental closure,
decommissioning, rehabilitation, restoration or post-remedial
investigations, on, about, or in connection with any real
property;
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(dd) Employees. Except as set forth in Schedule 3.2(dd) attached hereto:
(i) the Corporation is in compliance in all material respects with
all Laws respecting employment and employment practices, terms
and conditions of employment, pay equity and wages and hours
of work;
(ii) the Corporation has not and is not engaged in any unfair
labour practice and no unfair labour practice complaint,
grievance or arbitration proceeding is pending or, to the best
of the knowledge of the Corporation, threatened against the
Corporation;
(iii) no collective bargaining agreement is currently being
negotiated by the Corporation with respect to any employees of
the Corporation and no collective agreements are in force. No
union representation question exists respecting the employees
of the Corporation. There is no labour strike, dispute, work
slowdown or work stoppage pending or involving or, to the best
of the knowledge of the Management Shareholders, threatened
against the Corporation; and
(iv) all amounts due or accrued due for all salary, wages, bonuses,
commissions, vacation with pay, pension benefits or other
employee benefits are reflected in the Books and Records;
Schedule 3.2(dd) attached hereto contains a correct and complete
list of each employee, director, independent contractor, consultant
and agent of the Corporation, whether actively at work or not in
each case whose annual income or commission exceeds $75,000.00,
their salaries, wage rates, commissions and consulting fees, bonus
arrangements, benefits, positions, ages, status as full-time or
part-time employees and length of service. No employee of the
Corporation has any agreement as to length of notice or severance
payment required to terminate his or her employment, other than such
as results by Law from the employment of an employee without an
agreement as to notice or severance.
(ee) Employee Plans.
The Corporation does not currently have an Employee Plan and will
not, as of the Closing Date, have implemented an Employee Plan (it
being understood that in connection with the transactions
contemplated hereby the Purchaser shall establish an employee stock
option plan (the "Option Plan") for the benefit of the employees of
the Corporation);
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(ff) Insurance. Schedule 3.2(ff) attached hereto contains insurance
policies which are maintained by the Corporation setting out, in
respect of each policy, a description of the type of policy, the
name of insurer, the coverage allowance, the expiration date, the
annual premium and any pending claims. The Corporation is not in
default with respect to any of the provisions contained in the
insurance policies, the payment of any premiums under any insurance
policy and has not failed to give any notice or to present any claim
under any insurance policy in a due and timely fashion. There has
not been any material adverse change in the relationship of the
Corporation with its insurers, the availability of coverage, or in
the premiums payable pursuant to the policies;
(gg) Litigation. There are no actions, suits or proceedings, at law or in
equity, by any Person (including, without limitation, the
Corporation), nor any arbitration, administrative or other
proceeding (collectively "Legal Proceedings") by or before (or to
the knowledge of the Corporation any investigation by) any
Governmental Entity pending, or, to the knowledge of the
Corporation, threatened against or adversely affecting the
Corporation, the Business or any of the material Assets, and the
Corporation has no knowledge of a valid basis for any such Legal
Proceedings by or against the Corporation. The Corporation is not
subject to any judgment, order or decree entered in any lawsuit or
proceeding nor has the Corporation settled any claim prior to being
prosecuted in respect of it.
(hh) Taxes. The Corporation has filed or caused to be filed, within the
times and in the manner prescribed by Law, all federal, provincial,
local and foreign tax returns and tax reports which are required to
be filed by or with respect to the Corporation. The information
contained in such returns and reports is correct and complete and,
to the knowledge of the Corporation, such returns and reports
reflect accurately all liability for taxes of the Corporation for
the periods covered thereby. All federal, provincial, local and
foreign income, profits, franchise, sales, use, occupancy, excise
and other taxes and assessments (including interest and penalties)
that are or may become payable by or due from the Corporation have
been fully paid or fully disclosed and fully provided for in the
Books and Records and the Interim Financial Statements. There are no
claims, actions, suits or proceedings (or, to the knowledge of the
Corporation, any investigation) pending, or to the knowledge of the
Corporation, threatened against the Corporation or the Acquired
Properties relating to taxes and the Corporation knows of no valid
basis for any such claim, action, suit, proceeding, investigation or
discussion. The Corporation has withheld from each payment made by
it the amount of all taxes and other deductions required to be
withheld therefrom and has paid the same to the proper taxing or
other authority within the time prescribed under any applicable Law.
The Corporation is a registrant for purposes of the tax imposed
under Part IX of the Excise Tax Act (Canada).
-24-
(ii) Full Disclosure. Neither this Agreement nor any Ancillary Agreement
to which the Vendors or the Corporation is a party (i) contains any
untrue statement of a material fact in respect of any of the Vendors
or the Corporation, or (ii) omits any statement of a material fact
necessary in order to make the statements in the Agreement or any
Ancillary Agreement in respect of the Vendors or the Corporation
contained herein or therein, in light of the circumstances in which
they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 4.1 Representations and Warranties of the Purchaser
The Purchaser represents and warrants as follows to the Vendors and
acknowledges and confirms that the Vendors are relying on such representations
and warranties in connection with the sale by the Vendors of the Purchased
Shares:
(a) Incorporation and Corporate Power. Each of Purchaser, CallCo,
LeaseCo and ExchangeCo is a corporation incorporated, in good
standing and existing under the Laws of its jurisdiction of
incorporation and has the corporate power to own and operate its
property and carry on its business and has authority to enter into
and perform its obligations under this Agreement and each of the
Ancillary Documents to which it is a party.
(b) Qualification. Each of Purchaser, CallCo and ExchangeCo is duly
qualified, licensed or registered to carry on business in each
jurisdiction in which the nature of its business or assets requires
it to be qualified, licensed or registered.
(c) Validity of Agreement. The execution, delivery and performance by
each of Purchaser, CallCo and ExchangeCo of this Agreement and each
of the Ancillary Documents to which it is a party:
(i) have been duly authorized, or will by Closing be duly
authorized, by all necessary corporate action on the part of
each of Purchaser, CallCo and ExchangeCo;
(ii) do not (or would not with the giving of notice, the lapse of
time or the happening of any other event or condition) result
in a breach or a violation of, or conflict with, or allow any
other Person to exercise any rights under any of the terms or
provisions of its constating documents or by-laws or any
material contract; and
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(iii) will not result in the violation of any Law.
(d) Execution and Binding Obligation. This Agreement and each of the
Ancillary Documents to which the Purchaser, CallCo, Leaseco or
ExchangeCo is a party has been duly executed and delivered by the
Purchaser, CallCo, Leaseco and ExchangeCo, as the case may be, and
constitute legal, valid and binding obligations of the Purchaser,
CallCo, Leaseco and ExchangeCo, as the case may be, enforceable
against it in accordance with their terms subject only to any
limitation under applicable Laws relating to (i) bankruptcy,
winding-up, insolvency, reorganization, arrangement and other
similar Laws of general application affecting the enforcement of
creditors' rights, and (ii) the discretion that a court may exercise
in the granting of equitable remedies such as specific performance
and injunction and general equitable principals.
(e) Required Authorizations. None of the Purchaser, CallCo, Leaseco or
ExchangeCo is required to make any filing with, give any notice to,
or obtain any Authorization of, any Governmental Entity or Person as
a condition to the lawful completion of all the transactions
contemplated in this Agreement and each of the Ancillary Documents
to which the Purchaser, CallCo, Leaseco or ExchangeCo is a party,
except for the filings, notifications and Authorizations described
in Schedule 6.1(c) attached hereto.
(f) No Material Adverse Change. On or prior to the date hereof there has
not been any material adverse change in the affairs, operations,
business, assets or condition of the business of the Purchaser,
except as disclosed in the Purchaser Reports (as hereinafter
defined) or the Confidential Information Memorandum attached hereto
as Schedule "E".
(g) Compliance with Laws. The Purchaser is conducting and has always
conducted its business and any past business in compliance with all
applicable Laws other than acts of non-compliance which, in the
aggregate, would not have a material adverse effect on the
Purchaser's business.
(h) Authorizations. Purchaser owns, holds, possesses or lawfully uses,
in the operation of its business, all Authorizations which are
necessary for it to conduct such business, as presently conducted or
for the ownership and use of its assets in compliance with all
applicable Laws, except where the failure to so hold, possess or
lawfully use any Authorization would not have a material adverse
effect on its business on the Purchaser's business.
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(i) Material Contracts. The Purchaser has performed all of the
obligations required to be performed by it and is entitled to all
benefits under, and is not in material default or alleged to be in
material default in respect of, any material contract relating to
the assets of Purchaser to which it is a party or beneficially
entitled, bound under or subject to or by which it is otherwise
bound; all such Purchaser material contracts are in good standing
and in full force and effect; and no event, condition or occurrence
exists which, after notice or lapse of time or both, would
constitute a material default under any of the foregoing or which
would detrimentally affect the entitlement of Purchaser to the
benefit of such material contracts.
(j) Purchaser Shares. The Consideration Shares to be issued at the
Closing and the Goldstrike Shares to be issued from time to time on
exchange of the Exchangeable Shares will be duly authorized and
validly issued by Purchaser on their respective dates of issuance
and will be fully paid and non-assessable securities.
(k) Authorized and Issued Capital. The authorized capital of the
Purchaser consists of (1) 75,000,000 shares of common stock, par
value $0.001 per share, of which 23,507,089 (and no more) have been
duly issued and are outstanding as fully paid and non-assessable
common shares, 6,470,933 warrants to acquire common shares of the
Purchaser have been issued and no options to acquire common shares
of the Purchaser have been issued; (ii) one share, par value of
$0.001, designated as Special Voting Stock, which is not currently
outstanding and (iii) 5,000,000 shares of preferred stock, par value
$0.001 per share, none of which is issued and outstanding.
Immediately prior to the Closing, and after giving effect to the
transactions contemplated by the Split-Off Agreement, the Purchaser
will have issued and outstanding 21,941,871 shares of common stock
and 6,470,933 warrants;
(l) Corporate Records. The corporate records of each of the Purchaser,
CallCo and ExchangeCo are complete and accurate and all corporate
proceedings and actions reflected in the corporate records of each
of the Purchaser, CallCo and ExchangeCo have been conducted or taken
in compliance with all applicable Laws and with the articles and
by-laws of each of the Purchaser, CallCo and ExchangeCo. Without
limiting the generality of the foregoing, (i) the minute books of
each of the Purchaser, CallCo and ExchangeCo contain complete and
accurate minutes of all meetings of the directors and shareholders
held since incorporation and all such meetings were properly called
and held, (ii) the minute books of each of Purchaser, CallCo and
ExchangeCo contain all resolutions passed by the directors and
shareholders (and committees, if any) and all such resolutions were
properly passed, (iii) the share certificate books, register of
shareholders and register of transfers are complete and accurate,
all transfers have been properly completed and approved and any tax
payable in connection with the transfer of any securities has been
paid, and (iv) the registers of directors and officers are complete
and accurate and all former and present directors and officers were
properly elected or appointed, as the case may be. Each of
Purchaser, CallCo and ExchangeCo has never been subject to, or
affected by, any unanimous shareholders agreement.
-27-
(m) Subsidiaries. Other then Callco, Exchangco and Leasco, the Purchaser
does not have any Subsidiaries.
(n) Authorization and Issuance. The Exchangeable Shares and Goldstrike
Shares to be issued pursuant to this Agreement shall be validly
authorized and upon the Closing Date shall be validly issued, fully
paid and non-assessable.
(o) Exchange Act Reports. The Purchaser has furnished or made available
to the Corporation complete and accurate copies, as amended or
supplemented, of its (a) Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2004, as filed with the SEC, and (b) all
other reports filed by the Purchaser under Section 13 or 15 of the
Exchange Act with the SEC since the Purchase became subject to the
reporting provisions of the Exchange Act (such reports are
collectively referred to herein as the "Purchaser Reports"). The
Purchaser Reports constitute all of the documents required to be
filed by the Purchaser under Section 13 or 15 of the Exchange Act
with the SEC through the date of this Agreement. The Purchaser
Reports complied in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder when
filed. As of their respective dates, the Purchaser Reports 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.
(p) Compliance with Laws. Each of the Purchaser and its Subsidiaries:
(i) has conducted the operations of their respective businesses in
compliance with all applicable Law, except for any violations
or defaults that, individually or in the aggregate, have not
had and would not reasonably be expected to have a Purchaser
Material Adverse Effect. For purposes of this Agreement,
"Purchaser Material Adverse Effect" means a material adverse
effect on the assets, business, condition (financial or
otherwise), results of operations or future prospects of the
Purchaser and its subsidiaries, taken as a whole;
-28-
(ii) has complied with all federal and state securities laws and
regulations, including being current in all of its reporting
obligations under such federal and state securities laws and
regulations;
(iii) has not, and the past and present officers, directors and
affiliates (an "Affiliate"), as defined in Rule 12b-2 under
the Exchange Act, of the Purchaser have not, been the subject
of, nor does any officer or director of the Purchaser have any
reason to believe that Purchaser or any of its officers,
directors or Affiliates will be the subject of, any civil or
criminal proceeding or investigation by any federal or state
agency alleging a violation of securities laws;
(iv) has not been the subject of any voluntary or involuntary
bankruptcy proceeding, nor has it been a party to any material
litigation;
(v) any agreement under which the consequences of a default or
termination would reasonably be expected to have a Purchaser
Material Adverse Effect;
(vi) has not, and the past and present officers, directors and
Affiliates have not, been the subject of, nor does any officer
or director of the Purchaser have any reason to believe that
the Purchaser or any of its officers, directors or affiliates
will be the subject of, any civil, criminal or administrative
investigation or proceeding brought by any federal or state
agency having regulatory authority over such entity or person;
(vii) does not and will not on the Closing, have any liabilities,
contingent or otherwise, including but not limited to notes
payable and accounts payable, and is not a party to any
executory agreements; and
(viii) is not a "blank check company" as such term is defined by
Rule 419 of the Securities Act.
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(q) Financial Statements. The Purchaser has provided or made available
to the Corporation the unaudited and consolidated balance sheet (the
"Purchaser Interim Balance Sheet") as of and for the six months
ended June 30, 2005 (the "Purchaser Interim Balance Sheet Date") and
related statements of operations and cash flows (collectively, the
"Purchaser Interim Financial Statements. The audited financial
statements and unaudited interim financial statements of the
Purchaser included in the Purchaser Reports and the Purchaser
Interim Financial Statements (collectively, the "Purchaser Financial
Statements") (i) complied as to form in all material respects with
applicable accounting requirements and, as appropriate, the
published rules and regulations of the SEC with respect thereto when
filed, (ii) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except as
may be indicated therein or in the notes thereto, and in the case of
quarterly financial statements, as permitted by Form 10-QSB under
the Exchange Act), (iii) fairly present the consolidated financial
condition, results of operations and cash flows of the Purchaser as
of the respective dates thereof and for the periods referred to
therein, and (iv) are consistent with the books and records of the
Purchaser.
(r) Litigation. Except as disclosed in the Purchaser Reports, there are
no Legal Proceedings, by any Person (including, without limitation,
the Purchaser), nor any Legal Proceeding by or before (or to the
best of the knowledge of the Purchaser any investigation by) any
Governmental Entity pending, or, to the best of the knowledge of the
Purchaser, threatened against or adversely affecting the Purchaser
which, if determined adversely to the Purchaser, could have,
individually or in the aggregate, a Purchaser Material Adverse
Effect or which in any manner challenges or seeks to prevent,
enjoin, alter or delay the transactions contemplated by this
Agreement, and the Purchaser knows of no valid basis for any such
action, suit, proceeding, arbitration or investigation by or against
the Purchaser. The Purchaser is not subject to any judgment, order
or decree entered in any lawsuit or proceeding nor has the Purchaser
settled any claim prior to being prosecuted in respect of it. The
Purchaser is not the plaintiff or complainant in any Legal
Proceeding.
(s) Undisclosed Liabilities. None of the Purchaser and its subsidiaries
has any liability (whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated and whether due or to
become due), except for (a) liabilities shown on the Purchaser
Interim Balance Sheet, (b) liabilities which have arisen since the
Purchaser Interim Balance Sheet Date in the Ordinary Course and (c)
contractual and other liabilities incurred in the Ordinary Course
which are not required by GAAP to be reflected on a balance sheet.
-30-
(t) Tax Matters.
(i) For purposes of this Agreement, the following terms shall have
the following meanings:
(A) "Taxes" means all taxes, charges, fees, levies or other
similar assessments or liabilities, including without
limitation income, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property,
sales, use, transfer, withholding, employment,
unemployment insurance, social security, business
license, business organization, environmental, workers
compensation, payroll, profits, license, lease, service,
service use, severance, stamp, occupation, windfall
profits, customs, duties, franchise and other taxes
imposed by the United States of America or any state,
local or foreign government, or any agency thereof, or
other political subdivision of the United States or any
such government, and any interest, fines, penalties,
assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax
or any contest or dispute thereof.
(B) "Tax Returns" means all reports, returns, declarations,
statements or other information required to be supplied
to a taxing authority in connection with Taxes.
(ii) By the Closing the Purchaser shall have filed all Tax Returns
that it was required to file, and all such Tax Returns will be
complete and accurate in all material respects. Neither the
Purchaser nor any subsidiary is or has ever been a member of a
group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax
Returns, other than a group of which only the Purchaser and
the Subsidiaries are or were members. The unpaid Taxes of the
Purchaser and the Subsidiaries for tax periods through the
Purchaser Interim Balance Sheet Date do not exceed the
accruals and reserves for Taxes (excluding accruals and
reserves for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the
Purchaser Interim Balance Sheet. Neither the Purchaser nor any
subsidiary has any actual or potential liability for any Tax
obligation of any taxpayer (including without limitation any
affiliated group of corporations or other entities that
included the Purchaser or any subsidiary during a prior
period) other than the Purchaser and the subsidiaries. All
Taxes that the Purchaser or any subsidiary is or was required
by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the
proper Governmental Entity.
-31-
(iii) Neither the Purchaser nor any subsidiary: (i) is a "consenting
corporation" within the meaning of Section 341(f) of the Code,
and none of the assets of the Purchaser or the subsidiaries
are subject to an election under Section 341(f) of the Code;
(ii) has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section
897(c)(l)(A)(ii) of the Code; (iii) has made any payments, is
obligated to make any payments, or is a party to any agreement
that could obligate it to make any payments that may be
treated as an "excess parachute payment" under Section 280G of
the Code; (iv) has any actual or potential liability for any
Taxes of any person (other than the Purchaser and its
subsidiaries) under Treasury Regulation Section 1.1502 6 (or
any similar provision of federal, state, local, or foreign
law), or as a transferee or successor, by contract, or
otherwise; or (v) is or has been required to make a basis
reduction pursuant to Treasury Regulation Section 1.1502-20(b)
or Treasury Regulation Section 1.337(d)-2(b).
(iv) None of the assets of the Purchaser or any subsidiary: (i) is
property that is required to be treated as being owned by any
other person pursuant to the provisions of former Section
168(f)(8) of the Code; (ii) is "tax-exempt use property"
within the meaning of Section 168(h) of the Code; or (iii)
directly or indirectly secures any debt the interest on which
is tax exempt under Section 103(a) of the Code.
(v) Neither the Purchaser nor any subsidiary has undergone a
change in its method of accounting resulting in an adjustment
to its taxable income pursuant to Section 481 of the Code.
(vi) No state or federal "net operating loss" of the Purchaser
determined as of the Closing Date is subject to limitation on
its use pursuant to Section 382 of the Code or comparable
provisions of state law as a result of any "ownership change"
within the meaning of Section 382(g) of the Code or comparable
provisions of any state law occurring prior to the Closing
Date.
(u) Assets. The Purchaser owns or leases all tangible assets necessary
for the conduct of its businesses as presently conducted and as
presently proposed to be conducted. Each such tangible asset is free
from material defects, has been maintained in accordance with normal
industry practice, is in good operating condition and repair
(subject to normal wear and tear) and is suitable for the purposes
for which it presently is used. No asset of the Purchaser (tangible
or intangible) is subject to any Lien.
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(v) Owned Real Property. The Purchaser does not own any real property.
(w) Real Property Leases. The Purchaser does not lease any real
property.
(x) Contracts.
(i) Schedule 4.1(x) attached hereto lists the following agreements
(written or oral) to which the Purchaser is a party as of the
date of this Agreement:
(A) any agreement (or group of related agreements) for the
lease of personal property from or to third parties;
(B) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or
receipt of services (A) which calls for performance over
a period of more than one year, (B) which involves more
than the sum of $5,000, or (C) in which the Purchaser
has granted manufacturing rights, "most favored nation"
pricing provisions or exclusive marketing or
distribution rights relating to any products or
territory or has agreed to purchase a minimum quantity
of goods or services or has agreed to purchase goods or
services exclusively from a certain party;
(C) any agreement establishing a partnership or joint
venture;
(D) any agreement (or group of related agreements) under
which it has created, incurred, assumed or guaranteed
(or may create, incur, assume or guarantee) indebtedness
(including capitalized lease obligations) involving more
than $5,000 or under which it has imposed (or may
impose) a Lien on any of its assets, tangible or
intangible;
(E) any agreement concerning confidentiality or
noncompetition;
(F) any employment or consulting agreement;
(G) any agreement involving any officer, director or
stockholder of the Purchaser or any Affiliate thereof;
-33-
(H) any agreement under which the consequences of a default
or termination would reasonably be expected to have a
Purchaser Material Adverse Effect;
(I) any agreement which contains any provisions requiring
the Purchaser to indemnify any other party thereto
(excluding indemnities contained in agreements for the
purchase, sale or license of products entered into in
the Ordinary Course); and
(J) any other agreement (or group of related agreements)
either involving more than $5,000 or not entered into in
the Ordinary Course.
(ii) The Purchaser has delivered or made available to the
Corporation a complete and accurate copy of each agreement
listed in Schedule 4.1(x) attached hereto. With respect to
each agreement so listed: (i) the agreement is legal, valid,
binding and enforceable and in full force and effect; (ii) the
agreement will continue to be legal, valid, binding and
enforceable and in full force and effect immediately following
the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing; and (iii) neither the
Purchaser nor, to the knowledge of the Purchaser, any other
party, is in breach or violation of, or default under, any
such agreement, and no event has occurred, is pending or, to
the knowledge of the Purchaser, is threatened, which, after
the giving of notice, with lapse of time, or otherwise, would
constitute a breach or default by the Purchaser or, to the
knowledge of the Purchaser, any other party under such
contract.
(y) Accounts Receivable. All accounts receivable of the Purchaser
reflected on the Purchaser Interim Balance Sheet are valid
receivables subject to no setoffs or counterclaims and are current
and collectible (within 90 days after the date on which it first
became due and payable), net of the applicable reserve for bad debts
on the Purchaser Interim Balance Sheet. All accounts receivable
reflected in the financial or accounting records of the Purchaser
that have arisen since the Purchaser Interim Balance Sheet Date are
valid receivables subject to no setoffs or counterclaims and are
collectible (within 90 days after the date on which it first became
due and payable), net of a reserve for bad debts in an amount
proportionate to the reserve shown on the Purchaser Interim Balance
Sheet Date.
(z) Insurance. Schedule 4.1(y) attached hereto lists each insurance
policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product
liability and automobile insurance policies and bond and surety
arrangements) to which the Purchaser is a party. Such insurance
policies are of the type and in amounts customarily carried by
organizations conducting businesses or owning assets similar to
those of the Purchaser. There is no material claim pending under any
such policy as to which coverage has been questioned, denied or
disputed by the underwriter of such policy. All premiums due and
payable under all such policies have been paid, the Purchaser will
not be liable for retroactive premiums or similar payments, and the
Purchaser is otherwise in compliance in all material respects with
the terms of such policies. The Purchaser has no knowledge of any
threatened termination of, or material premium increase with respect
to, any such policy. Each such policy will continue to be
enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect
immediately prior to the Closing.
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(aa) Employees. The Purchaser currently has no employees.
(bb) Employee Benefits.
(i) For purposes of this Agreement, the following terms shall have
the following meanings:
(A) "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of ERISA), any
"employee welfare benefit plan" (as defined in Section
3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect
compensation, including without limitation insurance
coverage, severance benefits, disability benefits,
deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other
forms of incentive compensation or post-retirement
compensation.
(B) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(C) "ERISA Affiliate" means any entity which is, or at any
applicable time was, a member of (1) a controlled group
of corporations (as defined in Section 414(b) of the
Code), (2) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or
(3) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under
Section 414(o) of the Code), any of which includes or
included the Corporation or a subsidiary.
-35-
(ii) Schedule 4.1(aa) attached hereto contains a complete and
accurate list of all Employee Benefit Plans maintained, or
contributed to, by the Purchaser, any Subsidiary or any ERISA
Affiliate. Complete and accurate copies of (i) all Employee
Benefit Plans which have been reduced to writing, (ii) written
summaries of all unwritten Employee Benefit Plans, (iii) all
related trust agreements, insurance contracts and summary plan
descriptions, and (iv) all annual reports filed on IRS Form
5500, 5500C or 5500R and (for all funded plans) all plan
financial statements for the last five plan years for each
Employee Benefit Plan, have been delivered or made available
to the Purchaser. Each Employee Benefit Plan has been
administered in all material respects in accordance with its
terms and each of the Purchaser, the subsidiaries and the
ERISA Affiliates has in all material respects met its
obligations with respect to such Employee Benefit Plan and has
made all required contributions thereto. The Purchaser, each
subsidiary, each ERISA Affiliate and each Employee Benefit
Plan are in compliance in all material respects with the
currently applicable provisions of ERISA and the Code and the
regulations thereunder (including without limitation Section
4980 B of the Code, Subtitle K, Chapter 100 of the Code and
Sections 601 through 608 and Section 701 et seq. of ERISA).
All filings and reports as to each Employee Benefit Plan
required to have been submitted to the Internal Revenue
Service or to the United States Department of Labor have been
duly submitted.
(iii) To the knowledge of the Purchaser, there are no Legal
Proceedings (except claims for benefits payable in the normal
operation of the Employee Benefit Plans and proceedings with
respect to qualified domestic relations orders) against or
involving any Employee Benefit Plan or asserting any rights or
claims to benefits under any Employee Benefit Plan that could
give rise to any material liability.
(iv) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received
determination letters from the Internal Revenue Service to the
effect that such Employee Benefit Plans are qualified and the
plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively,
of the Code, no such determination letter has been revoked and
revocation has not been threatened, and no such Employee
Benefit Plan has been amended since the date of its most
recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would
adversely affect its qualification or materially increase its
cost. Each Employee Benefit Plan which is required to satisfy
Section 401(k)(3) or Section 401(m)(2) of the Code has been
tested for compliance with, and satisfies the requirements of,
Section 401(k)(3) and Section 401(m)(2) of the Code for each
plan year ending prior to the Closing Date.
-36-
(v) Neither the Purchaser, any subsidiary, nor any ERISA Affiliate
has ever maintained an Employee Benefit Plan subject to
Section 412 of the Code or Title IV of ERISA.
(vi) At no time has the Purchaser, any subsidiary or any ERISA
Affiliate been obligated to contribute to any "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA).
(vii) There are no unfunded obligations under any Employee Benefit
Plan providing benefits after termination of employment to any
employee of the Purchaser or any subsidiary (or to any
beneficiary of any such employee), including but not limited
to retiree health coverage and deferred compensation, but
excluding continuation of health coverage required to be
continued under Section 4980B of the Code or other applicable
law and insurance conversion privileges under state law. The
assets of each Employee Benefit Plan which is funded are
reported at their fair market value on the books and records
of such Employee Benefit Plan.
(viii) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by the
Purchaser, any subsidiary or any ERISA Affiliate that would
subject the Purchaser, any subsidiary or any ERISA Affiliate
to (i) any material fine, penalty, tax or liability of any
kind imposed under ERISA or the Code or (ii) any contractual
indemnification or contribution obligation protecting any
fiduciary, insurer or service provider with respect to any
Employee Benefit Plan.
(ix) No Employee Benefit Plan is funded by, associated with or
related to a "voluntary employee's beneficiary association"
within the meaning of Section 501(c)(9) of the Code.
(x) Each Employee Benefit Plan is amendable and terminable
unilaterally by the Purchaser at any time without liability to
the Purchaser as a result thereof and no Employee Benefit
Plan, plan documentation or agreement, summary plan
description or other written communication distributed
generally to employees by its terms prohibits the Purchaser
from amending or terminating any such Employee Benefit Plan.
-37-
(xi) Schedule 4.1(aa) attached hereto discloses each: (i) agreement
with any stockholder, director, executive officer or other key
employee of the Purchaser (A) the benefits of which are
contingent, or the terms of which are materially altered, upon
the occurrence of a transaction involving the Purchaser of the
nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such
director, executive officer or key employee; (ii) agreement,
plan or arrangement under which any person may receive
payments from the Purchaser that may be subject to the tax
imposed by Section 4999 of the Code or included in the
determination of such person's "parachute payment" under
Section 280G of the Code; and (iii) agreement or plan binding
the Purchaser, including without limitation any stock option
plan, stock appreciation right plan, restricted stock plan,
stock purchase plan, severance benefit plan or Employee
Benefit Plan, any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by
this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions
contemplated by this Agreement. The accruals for vacation,
sickness and disability expenses are accounted for on the
Purchaser Interim Balance Sheet and are adequate and properly
reflect the expenses associated therewith in accordance with
generally accepted accounting principles.
(cc) Environmental Matters.
(i) Each of the Purchaser and the subsidiaries has complied with
all applicable Environmental Laws, except for violations of
Environmental Laws that, individually or in the aggregate,
have not had and would not reasonably be expected to have a
Purchaser Material Adverse Effect. There is no pending or, to
the knowledge of the Purchaser, threatened civil or criminal
litigation, written notice of violation, formal administrative
proceeding, or investigation, inquiry or information request
by any Governmental Entity, relating to any Environmental Law
involving the Purchaser or any subsidiary, except for
litigation, notices of violations, formal administrative
proceedings or investigations, inquiries or information
requests that, individually or in the aggregate, have not had
and would not reasonably be expected to have a Purchaser
Material Adverse Effect.
-38-
(ii) Set forth in Schedule 4.1(bb) attached hereto is a list of all
documents (whether in hard copy or electronic form) that
contain any environmental reports, investigations and audits
relating to premises currently or previously owned or operated
by the Purchaser or a subsidiary (whether conducted by or on
behalf of the Purchaser or a subsidiary or a third party, and
whether done at the initiative of the Purchaser or a
subsidiary or directed by a Governmental Entity or other third
party) which were issued or conducted during the past two
years and which the Purchaser has possession of or access to.
A complete and accurate copy of each such document has been
provided to the Purchaser.
(iii) The Purchaser is not aware of any material environmental
liability of any solid or hazardous waste transporter or
treatment, storage or disposal facility that has been used by
the Purchaser or any subsidiary.
(dd) Certain Business Relationships With Affiliates. No Affiliate of the
Purchaser or of any subsidiary (a) owns any property or right,
tangible or intangible, which is used in the business of the
Purchaser or any subsidiary, (b) has any claim or cause of action
against the Purchaser or any subsidiary, or (c) owes any money to,
or is owed any money by, the Purchaser or any subsidiary. Schedule
4.1(dd) attached hereto describes any transactions involving the
receipt or payment in excess of $5,000 in any fiscal year between
the Purchaser or a subsidiary and any Affiliate thereof which have
occurred or existed since the beginning of the time period covered
by the Purchaser Financial Statements, other than employment
agreements.
(ee) Split-Off. Prior to or simultaneously with the Closing, the
Purchaser will have discontinued all of its business operations
which it conducted prior to the Closing by consummating the
transactions contemplated by the Split-Off Agreement. Upon the
closing of the transactions contemplated by the Split-Off Agreement,
the Purchaser will have no material liabilities, contingent or
otherwise in any way related to its pre-Closing business operations.
(ff) Interested Party Transactions. Except for the Split-Off Agreement,
to the knowledge of the Purchaser, no officer, director or
stockholder of Purchaser or any Affiliate or "associate" (as such
term is defined in Rule 405 under the Securities Act) of any such
person has had, either directly or indirectly, (a) an interest in
any person that (i) furnishes or sells services or products that are
furnished or sold or are proposed to be furnished or sold by
Purchaser or any subsidiary or (ii) purchases from or sells or
furnishes to Purchaser or any subsidiary any goods or services, or
(b) a beneficial interest in any contract or agreement to which
Purchaser or any subsidiary is a party or by which it may be bound
or affected. Neither Purchaser nor any subsidiary has extended or
maintained credit, arranged for the extension of credit, or renewed
an extension of credit, in the form of a personal loan to or for any
director or executive officer (or equivalent thereof) of the
Purchaser or any subsidiary.
-39-
(gg) Accountants. Moen and Company is and has been throughout the periods
covered by such financial statements (a) a registered public
accounting firm (as defined in Section 2(a)(12) of the
Sarbanes-Oxley Act of 2002, (b) "independent" with respect to
Purchaser within the meaning of Regulation S-X and (c) in compliance
with subsections (g) through (l) of Section 10A of the Exchange Act
and the related rules of the Commission and the Public Company
Accounting Oversight Board. Schedule 4.1(gg) attached hereto lists
all non-audit services performed by Moen and Company for Purchaser
and/or any of subsidiary for the last two fiscal years. None of the
reports of Moen and Company on the financial statements of Purchaser
for either of the past two fiscal years contained an adverse opinion
or a disclaimer of opinion, or was qualified as to uncertainty,
audit scope, or accounting principles. During Purchaser's two most
recent fiscal years and the subsequent interim periods, there were
no disagreements with Moen and Company on any matter of accounting
principles or practices, financial statement disclosure, or auditing
scope or procedures. None of the reportable events listed in Item
304(a)(1)(iv) of Regulation S-B occurred with respect to Moen and
Company.
(hh) Full Disclosure. Neither this Agreement nor any of the documents to
be delivered by the Purchaser pursuant to this Agreement nor the
Offering Memorandum of the Purchaser attached hereto as Schedule "E"
contain any untrue statements of a material fact, or to the
Purchaser's knowledge, omit to state a material fact necessary to
make the statements contained herein or therein in light of the
circumstances under which they were made not misleading.
ARTICLE 5
PRE-CLOSING COVENANTS OF THE PARTIES
Section 5.1 Conduct of Business Prior to Closing
(a) During the Interim Period, the Corporation will conduct the Business
in the Ordinary Course.
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(b) Without limiting the generality of this Section 5.1, and except in
connection with the transactions contemplated hereby, the Vendors
will not permit the Corporation to:
(i) sell, transfer or otherwise dispose of any of the Assets
except for (i) Assets which are obsolete and which
individually or in the aggregate do not exceed $100,000, or
(ii) inventory sold in the Ordinary Course;
(ii) make any capital expenditure or commitment therefor which
individually or in the aggregate exceeds $100,000 except as
may be required in connection with maintaining the
Corporation's interest in the Acquired Properties in good
standing;
(iii) discharge any secured or unsecured obligation or liability
(whether accrued, absolute, contingent or otherwise) which
individually or in the aggregate exceeds $100,000 other than
obligations incurred in connection with the Argentine
Acquisition;
(iv) increase its indebtedness for borrowed money or make any loan
or advance or assume, guarantee or otherwise become liable
with respect to the liabilities or obligations of any other
Person other than indebtedness to the Purchaser as
contemplated by the Bridge Loan Agreement;
(v) make any bonus or profit sharing distribution or similar
payment of any kind except as may be required by the terms of
a Material Contract or Collective Agreement;
(vi) remove the auditor or any director or terminate any officer or
other senior employee;
(vii) grant any general increase in the rate of wages, salaries,
bonuses or other remuneration of any employees except as may
be required by the terms of a Material Contract or Collective
Agreement;
(viii) cancel or waive any material claims or rights;
(ix) enter into any compromise or settlement of any litigation,
proceeding or governmental investigation relating to all or
any material portion of Assets, the Business or the
Corporation;
(x) cancel or reduce any of its insurance coverage;
(xi) agree, whether or not in writing, to do any of the foregoing.
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(c) Without limiting the generality of this Section 5.1, the Corporation
will:
(i) maintain the Assets, where applicable, in good state of repair
and condition;
(ii) comply with all Authorizations and contractual obligations
under the Contracts, except for legitimate disputes pursued
with the consent of the Purchaser;
(iii) maintain all Books and Records in the usual, regular and
ordinary manner;
(iv) use its best efforts to preserve intact the current business
organization of the Corporation, keep available the services
of the present employees and agents of the Corporation and
maintain good relations with, and the goodwill of, the
suppliers, customers, landlords, creditors, distributors and
all other Persons having business relationships with the
Corporation;
(v) confer with the Purchaser concerning operational matters of a
material nature;
(vi) use reasonable efforts consistent with past practice to retain
possession and control of its Assets and preserve the
confidentiality of any confidential or proprietary information
of the Business or the Corporation;
(vii) conduct the Business in such a manner that on the Closing
Date, the representations and warranties of the Vendor
contained in this Agreement shall be true, correct and
complete as if such representations and warranties were made
on and as of such date;
(viii) otherwise periodically report to the Purchaser concerning the
state of the Business and the Corporation; and
(ix) report to and confer with the Purchaser regarding any other
matter in respect of which the Purchaser has expressed to the
Vendors a particular concern.
Section 5.2 Access for Due Diligence
(1) The Corporation and the Purchaser shall (i) permit each other and their
respective employees, agents, counsel, accountants or other
representatives, between this date and the Closing, without undue
interference to the ordinary conduct of the Business, to have reasonable
access during normal business hours and upon reasonable notice to (a) the
premises of the other party, (b) the Assets and, in particular to any
information, including all Books and Records whether retained by the
Vendors, the Corporation, the Purchaser or otherwise, (c) all Contracts,
and (d) the senior personnel of the Corporation or the Purchaser, and (ii)
furnish to the Purchaser or the Corporation as the case may be or their
respective employees, agents, counsel, accountants or other
representatives such financial and operating data and other information
the Purchaser shall from time to time reasonably request.
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(2) No investigations made by or on behalf of the Purchaser or the
Corporation, whether under this Section 5.2 or any other provision of this
Agreement or any Ancillary Agreement, shall have the effect of waiving,
diminishing the scope of, or otherwise affecting any representation or
warranty made in this Agreement or any Ancillary Agreement.
(3) The Purchaser shall afford the Vendors reasonable access during normal
business hours and upon reasonable notice to the premises of the Purchaser
and to all information of the Purchaser necessary to allow the Vendors to
conduct appropriate enquiries with respect to the proposed transaction.
Section 5.3 Actions to Satisfy Closing Conditions
(1) Each of the Vendors and the Corporation shall take all such actions as are
within their power to control and to use their best efforts to cause other
actions to be taken which are not within their power to control, so as to
ensure compliance with all of the conditions set forth in Article 6
including ensuring that during the Interim Period and at Closing, there is
no breach of any of their respective representations and warranties.
(2) The Purchaser shall take all such actions as are within its power to
control and to use its best efforts to cause other actions to be taken
which are not within its power to control, so as to ensure compliance with
all of the conditions set forth in Article 6 including ensuring that
during the Interim Period and at Closing, there is no breach of any of its
representations and warranties.
Section 5.4 Transfer of the Purchased Shares
The Vendors shall take all necessary steps and corporate proceedings to
permit good title to the Purchased Shares to be duly and validly transferred and
assigned to the Purchaser at the Closing, free of all Liens other than the
restrictions on transfer, if any, contained in the articles of the Corporation.
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Section 5.5 Request for Consents
The Corporation will use its reasonable efforts to obtain, prior to
Closing, all Consents. Such Consents shall be upon such terms as are acceptable
to the Purchaser, acting reasonably. The Purchaser will co-operate in obtaining
such Consents.
Section 5.6 Filings and Authorizations
Each of the Vendors, the Corporation and the Purchaser, as promptly as
practicable after the execution of this Agreement, will (i) make, or cause to be
made, all such filings and submissions under all Laws applicable to it, as may
be required for it to consummate the purchase and sale of the Purchased Shares
in accordance with the terms of this Agreement, (ii) use all reasonable efforts
to obtain, or cause to be obtained, all Authorizations necessary or advisable to
be obtained by it in order to consummate such transfer, and (iii) use all
reasonable efforts to take, or cause to be taken, all other actions necessary,
proper or advisable in order for it to fulfil its obligations under this
Agreement. The Vendors, the Corporation and the Purchaser, as applicable, will
coordinate and cooperate with one another in exchanging such information and
supplying such assistance as may be reasonably requested by each in connection
with the foregoing including, without limitation, providing each other with all
notices and information supplied or filed with any Governmental Entity (except
for notices and information which the Vendors or the Purchaser, in each case
acting reasonably, considers highly confidential and sensitive which may be
filed on a confidential basis), and all notices and correspondence received from
any Governmental Entity.
Section 5.7 Notice of Untrue Representation or Warranty
The Corporation shall promptly notify the Purchaser, and the Purchaser
shall promptly notify the Corporation, upon any representation or warranty made
by it contained in this Agreement or any Ancillary Agreement becoming untrue or
incorrect during the Interim Period and for the purposes of this Section 5.7
each representation and warranty shall be deemed to be given at and as of all
times during the Interim Period. Any such notification shall set out particulars
of the untrue or incorrect representation or warranty and details of any actions
being taken by the Corporation or the Purchaser, as the case may be, to rectify
that state of affairs.
Section 5.8 Exclusive Dealing
During the Interim Period, the Vendors, individually or as a group shall
not, directly or indirectly, solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public information
to, or consider the merits of any inquiries or proposals from, any Person (other
than Purchaser) relating to any transaction involving the sale of any shares of
the Vendors or the Corporation or the sale of the Business or any of the Assets
(other than as permitted in this Agreement).
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The Parties hereto agree that they shall use reasonable commercial efforts
to complete the transactions contemplated herein and in the Ancillary Agreements
by November 10, 2005 but, in the event that such closing has not occurred by
November 10, 2005, they shall continue to work exclusively with each other to
satisfy all conditions and complete the transactions contemplated herein until
December 30, 2005.
ARTICLE 6
CONDITIONS OF CLOSING
Section 6.1 Conditions for the Benefit of the Purchaser
The purchase and sale of the Purchased Shares is subject to the following
conditions to be fulfilled or performed prior to Closing, which conditions are
for the exclusive benefit of the Purchaser and may be waived, in whole or in
part, by the Purchaser in its sole discretion:
(a) Truth of Representations and Warranties. The representations and
warranties of the Vendors contained in this Agreement or in any
Ancillary Agreement shall have been true and correct as of the date
of this Agreement and as of the Closing Date with the same force and
effect as if such representations and warranties had been made on
and as of such date. The representations and warranties of the
Corporation contained in this Agreement or in any Ancillary
Agreement shall have been true and correct as of the date of this
Agreement and as of the Closing Date with the same force and effect
as if such representations an warranties had been made on and as of
such date and the Corporation shall have executed and delivered a
certificate to that effect. The receipt of such certificate and the
Closing shall not constitute a waiver by the Purchaser of any of the
representations and warranties of the Corporation which are
contained in this Agreement or in any Ancillary Agreement. Upon the
delivery of such certificate, the representations and warranties of
the Corporation in Article 3 shall be deemed to have been made on
and as of the Closing Date with the same force and effect as if made
on and as of such date;
(b) Performance of Covenants. The Corporation and the Vendors shall have
fulfilled or complied with all covenants contained in this Agreement
and in any Ancillary Agreement to be fulfilled or complied with by
them at or prior to the Closing;
(c) Consents. All Required Consents shall have been obtained on terms
acceptable to the Purchaser acting reasonably;
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(d) Deliveries. The Vendors delivering or causing to be delivered to the
Purchaser the following in form and substance satisfactory to the
Purchaser:
(i) share certificates together with a completed letter of
transmittal representing the Purchased Shares, or accompanied
by irrevocable security transfer powers of attorney duly
executed in blank, in either case by the holders of record,
together with evidence satisfactory to the Purchaser that the
Purchaser or its nominee(s) have been entered upon the books
of the Corporation as the holder of the Purchased Shares;
(ii) certified copies of (i) the charter documents and by-laws of
the Corporation, (ii) all resolutions of the shareholders and
the board of directors of the Corporation approving the
entering into and completion of the transaction contemplated
by this Agreement and the Ancillary Agreements, and (iii) a
list of the officers and directors authorized to sign
agreements together with their specimen signatures;
(iii) a certificate of status, compliance, good standing, where
applicable, or like certificate with respect to the
Corporation issued by each jurisdiction in which the
Corporation carries on its business as listed in Schedule
3.2(a) attached hereto;
(iv) the certificates referred to in Section 2.5 and in Section
6.1(a) and Section 6.1(b);
(v) an opinion of counsel to the Corporation substantially in the
form set forth in Schedule 6.1(d)(v) attached hereto;
(vi) an employment agreement duly executed by the Chief Executive
Officer of the Corporation; and
(vii) evidence that all necessary steps and proceedings as set out
in Schedule 6.1(d)(vii) attached hereto as approved by counsel
for the Purchaser to permit all of the Purchased Shares to be
transferred to the Purchaser or its nominee(s) have been
taken.
(e) Proceedings. All actions to be taken in connection with the
transactions contemplated in this Agreement including completion and
execution of all Ancillary Agreements shall be reasonably
satisfactory in form and substance to the Purchaser, acting
reasonably, and the Purchaser shall have received copies of all
instruments and other evidence as it may reasonably request in order
to establish the consummation of such transactions and the taking of
all necessary actions in connection therewith; and
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(f) Change in Law. Since this date, no Law, proposed Law, any change in
any Law, or the interpretation or enforcement of any Law shall have
been introduced, enacted or announced (including the introduction,
enactment or announcement of any Law respecting taxes or
environmental matters), the effect of which will be to prevent or to
increase materially the cost to the Purchaser of the completion of
the transaction contemplated in this Agreement or to prevent or to
increase materially the cost to the Corporation of operating the
Business after Closing on substantially the same basis as currently
operated.
(g) Closing. Closing shall have occurred on or before December 30, 2005.
Section 6.2 Conditions for the Benefit of the Vendors and the Corporation
The purchase and sale of the Purchased Shares is subject to the following
conditions to be fulfilled or performed prior to the Closing, which conditions
are for the exclusive benefit of the Vendors and the Corporation and may be
waived, in whole or in part, by the Vendors and the Corporation in their sole
discretion:
(a) Truth of Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement and in any
Ancillary Agreement shall be true and correct as of the Closing Date
with the same force and effect as if such representations and
warranties had been made on and as of such date and the Purchaser
shall have executed and delivered a certificate of a senior officer
to that effect. The receipt of such certificate and the Closing
shall not constitute a waiver of the representations and warranties
of the Purchaser which are contained in this Agreement or any
Ancillary Agreement. Upon delivery of such certificates, the
representations and warranties of the Purchaser in Article 4 shall
be deemed to have been made on and as of the Closing Date with the
same force and effect as if made on and as of such date;
(b) Performance of Covenants. The Purchaser shall have fulfilled or
complied with all covenants contained in this Agreement and in any
Ancillary Agreement to be fulfilled or complied with by it at or
prior to the Closing and the Purchaser shall have executed and
delivered a certificate of a senior officer to that effect. The
receipt of such certificate and the Closing shall not constitute a
waiver by the Vendors of the covenants of the Purchaser which are
contained in this Agreement or any Ancillary Agreement);
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(c) Deliveries. The Purchaser shall deliver or cause to be delivered to
the Vendors the following in form and substance satisfactory to the
Vendors acting reasonably:
(i) certified copies of (i) the constating documents and by-laws
of the Purchaser, Callco and Exhangeco (ii) all resolutions of
the board of directors of the Purchaser, Callco, and
Exchangeco approving the entering into and completion of the
transactions contemplated by this Agreement and the Ancillary
Agreements, and (iii) a list of its officers and directors
authorized to sign agreements together with their specimen
signatures;
(ii) the certificates referred to in Section 6.2(a) and Section
6.2(b);
(iii) an opinion of counsel to the Purchaser in substantially the
form set forth in Schedule 6.2(c)(iii) attached hereto;
(iv) the Voting Exchange and Support Agreement;
(v) evidence satisfactory to the Vendors that the transactions
contemplated by the Split-Off Agreement have been completed;
(vi) resignations of the current directors and officers of the
Purchaser;
(vii) evidence reasonably satisfactory to the Vendors as to the
capitalization of the Purchaser immediately prior to the
Closing;
(viii) resolutions of the Purchaser expanding its Board of Directors
to seven members and appointing Jeffrey J. Scott, Walter A.
Dawson, Dana Coffield, James Hart, Verne Johnson and such
other person as the directors determine as directors of the
Purchaser; and
(ix) evidence reasonably satisfactory to the Vendors of the
adoption of a two million share Option Plan.
(d) Proceedings. All proceedings to be taken in connection with the
transactions contemplated in this Agreement and any Ancillary
Agreement shall be reasonably satisfactory in form and substance to
the Vendors, acting reasonably, and the Vendors shall have received
copies of all the instruments and other evidence as they may
reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection
therewith; and
(e) Closing. Closing shall have occurred on or before December 30, 2005.
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Section 6.3 Conditions Precedent
The purchase and sale of the Purchased Shares is subject to the following
terms and conditions to be fulfilled prior to the Closing, which conditions are
true conditions precedent:
(a) No Legal Proceeding. No Legal Proceeding shall be pending or
threatened by any Person (other than the Vendor, the Purchaser or
the Corporation) in any jurisdiction, to enjoin, restrict or
prohibit any of the transactions contemplated by this Agreement or
the right of the Corporation to conduct the Business after Closing
on substantially the same basis as heretofore operated.
ARTICLE 7
CLOSING
Section 7.1 Date, Time and Place of Closing
The completion of the transaction of purchase and sale contemplated by
this Agreement shall take place at the offices of Osler, Hoskin & Harcourt LLP
in Calgary, Alberta at 10:00 a.m. (Calgary time) on the Closing Date or at such
other place, on such other date and at such other time as may be agreed upon in
writing between the Vendors and the Purchaser.
Section 7.2 Closing Procedures
Subject to satisfaction or waiver by the relevant Party of the conditions
of closing, at the Closing, the Vendors shall deliver actual possession of the
Purchased Shares to the Purchaser and upon such delivery the Purchaser shall pay
or satisfy the Purchase Price in accordance with this Agreement.
ARTICLE 8
TERMINATION
Section 8.1 Termination by Purchaser
Subject to Section 5.3(2), if any of the conditions set forth in Section
6.1 have not been fulfilled or waived at or prior to Closing or any obligation
or covenant of the Vendors or the Corporation to be performed at or prior to
Closing has not been observed or performed by such time, the Purchaser may
terminate this Agreement by notice in writing to the Vendors, and in such event
the Purchaser shall be released from all obligations hereunder save and except
for its obligations under Section 11.2, Section 11.3 and Section 11.5, which
shall survive. The Vendors shall only be released from their obligations
hereunder if the condition or conditions for the non-performance of which the
Purchaser has terminated this Agreement are not reasonably capable of being
performed or caused to be performed by the Vendors. If the Purchaser waives
compliance with any of the conditions, obligations or covenants contained in
this Agreement, the waiver will be without prejudice to any of its rights of
termination in the event of non-fulfilment, non-observance or non-performance of
any other condition, obligation, or covenant in whole or in part.
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Section 8.2 Termination by Vendors
Subject to Section 5.3(1), if any of the conditions set forth in Section
6.2 have not been fulfilled or waived at or prior to Closing or any obligation
or covenant of the Purchaser to be performed at or prior to Closing has not been
observed or performed by such time, the Vendors or the Corporation may terminate
this Agreement by notice in writing to the Purchaser, and in such event the
Vendors and the Corporation shall be released from all obligations hereunder
save and except for this obligations under the Section 11.2, Section 11.3 and
Section 11.5 which shall survive. The Purchaser shall only be released from its
obligations hereunder if the condition or conditions for the non-performance of
which the Vendors or the Corporation have terminated this Agreement are not
reasonably capable of being performed or caused to be performed by the
Purchaser. If the Vendors or the Corporation waives compliance with any of the
conditions, obligations or covenants contained in this Agreement, the waiver
will be without prejudice to any of its rights of termination in the event of
non-fulfilment, non-observance or non-performance of any other condition,
obligation or covenant in whole or in part.
Section 8.3 Other Termination Rights
(1) This Agreement may, by notice in writing given prior to or on the Closing
Date, be terminated:
(a) by mutual consent of the Vendors, the Corporation and the Purchaser;
or
(b) if any of the conditions precedent set forth in Section 6.3 have not
been fulfilled or waived at or prior to Closing;
and, in such event, each Party shall be released from all obligations
under this Agreement, save and except for its obligations under Section
11.2, Section 11.3 and Section 11.5 which shall survive.
Section 8.4 Effect of Termination
Each Party's right of termination under this Article 8 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. Nothing in
Article 8 shall limit or affect any other rights or causes of action either the
Purchaser or the Vendors may have with respect to the representations,
warranties, covenants and indemnities in its favour contained in this Agreement.
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ARTICLE 9
INDEMNIFICATION
Section 9.1 Indemnification in Favour of the Purchaser
(1) Subject to Section 9.5, each Vendor shall severally indemnify and save
each of the Purchaser and the Purchaser's directors, officers, agents and
representatives (collectively, the "Purchaser's Indemnified Persons"),
together with the Corporation and the Corporation's directors, officers,
agents and representatives harmless of and from any loss, liability,
claim, damage or expense (whether or not involving a third-party claim)
including legal expenses suffered by, imposed upon or asserted against any
of the Purchaser's Indemnified Persons, together with the Corporation and
the Corporation's directors, officers, agents and representatives as a
result of, in respect of, connected with, or arising out of, under, or
pursuant to any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or
unknown, or due or to become due or otherwise), monetary damages, fines,
fees, penalties, interest obligations, deficiencies, losses and expenses
(including without limitation amounts paid in settlement, interest, court
costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) (collectively "Damages") incurred or suffered by the Purchaser
or any Affiliate thereof resulting from, relating to or constituting any
breach by such Vendor of the representations and warranties of such Vendor
set out in Section 3.1 herein.
(2) The Corporation shall indemnify and save the Purchaser's Indemnified
Persons harmless of and from any Damages suffered by, imposed upon or
asserted against any of the Purchaser's Indemnified Persons as a result
of, in respect of, connected with, or arising out of, under or pursuant
to:
(a) any failure of the Corporation to perform or fulfill any covenant of
the Corporation under this Agreement; or
(b) any breach or inaccuracy of any representation or warranty given by
the Corporation contained in this Agreement
provided that any claim against the Corporation shall be limited to an
obligation to deliver additional Goldstrike Shares as set out in Section
9.4.
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Section 9.2 Indemnification in Favour of the Vendor.
The Purchaser shall indemnify and save the Vendors and the Corporation's
directors, officers, employees, agents and representatives (collectively, the
"Vendors' Indemnified Persons") harmless of and from any Damages suffered by,
imposed upon or asserted against any of the Vendors' Indemnified Persons as a
result of, in respect of, connected with, or arising out of, under or pursuant
to:
(a) any failure of the Purchaser to perform or fulfil any covenant of
the Purchaser under this Agreement; or
(b) any breach or inaccuracy of any representation or warranty given by
the Purchaser contained in this Agreement.
provided that any claim against the Purchaser shall be limited to an obligation
to deliver additional Goldstrike Shares as set out in Section 9.5.
Section 9.3 Time Limitations
All representations and warranties set out in this Agreement and in any
Ancillary Agreement shall survive the Closing and, notwithstanding the Closing
or any investigation made by or on behalf of the Purchaser or the Vendors, shall
continue for a period of 24 months after the Closing Date and any claim in
respect thereof shall be made in writing during such time period.
Section 9.4 Limitations on Amount
(1) The Corporation will have no liability (for indemnification or otherwise)
with respect to the matters described in Section 9.2 other than to permit
the issuance of the additional shares of the Purchaser as set out in
Section 2.5(1)(b).
(2) The Purchaser will have no liability (for indemnification or otherwise)
with respect to the matters described in Section 9.2 other than the
covenant to issue additional shares set out in Section 2.5(1)(a).
Section 9.5 Procedure for Indemnification--Third Party Claims.
(1) Promptly after receipt by an indemnified party (an "Indemnified Party")
under Section 9.1 or Section 9.2 of a notice of the commencement of any
proceeding against it, the Indemnified Party will, if a claim is to be
made against an indemnifying party under such Section, give notice to the
Indemnifying Party (an "Indemnifying Party") of the commencement of such
claim. The failure to notify the Indemnifying Party will not relieve the
Indemnifying Party of any liability that it may have to any Indemnified
Party, except to the extent that the Indemnifying Party demonstrates that
the defence of such action is prejudiced by the Indemnified Party's
failure to give such notice.
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(2) If any proceeding referred to in Section 9.5(1) (a "Proceeding") is
brought against an Indemnified Party and it gives notice to the
Indemnifying Party of the commencement of the Proceeding, the Indemnifying
Party will, unless the claim involves taxes, be entitled to participate in
the Proceeding. Subject to the next following sentence, to the extent that
the Indemnifying Party wishes to assume the defence of the Proceeding with
counsel satisfactory to the Indemnified Party, it may do so provided it
reimburses the Indemnified Party for all of its out-of-pocket expenses
arising prior to or in connection with such assumption. The Indemnifying
Party may not assume defence of the Proceeding if (i) the Indemnifying
Party is also a party to the Proceeding and the Indemnified Party
determines in good faith that joint representation would be inappropriate,
or (ii) the Indemnifying Party fails to provide reasonable assurance to
the Indemnified Party of its financial capacity to defend the Proceeding
and provide indemnification with respect to the Proceeding. After notice
from the Indemnifying Party to the Indemnified Party of its election to
assume the defence of the Proceeding, the Indemnifying Party will not, as
long as it diligently conducts such defence, be liable to the Indemnified
Party under this Section 9.5 for any fees of other counsel or any other
expenses with respect to the defence of the Proceeding, in each case
subsequently incurred by the Indemnified Party in connection with the
defence of the Proceeding, other than reasonable costs of investigation
approved in advance by the Indemnifying Party. If the Indemnifying Party
assumes the defence of a Proceeding, no compromise or settlement of such
claims may be made by the Indemnifying Party without the Indemnified
Party's consent unless (i) there is no finding or admission of any
violation of Laws or any violation of the rights of any Person and no
effect on any other claims that may be made against the Indemnified Party,
and (ii) the sole relief provided is monetary damages that are paid in
full by the Indemnifying Party, and (iii) the Indemnified Party will have
no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an Indemnifying Party
of the commencement of any Proceeding and the Indemnifying Party does not,
within ten days after receipt of such notice, give notice to the
Indemnified Party of its election to assume the defence of the Proceeding,
the Indemnifying Party will be bound by any determination made in the
Proceeding or any compromise or settlement effected by the Indemnified
Party.
(3) Notwithstanding the foregoing, if an Indemnified Party determines in good
faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this
Agreement, the Indemnified Party may, by notice to the Indemnifying Party,
assume the exclusive right to defend, compromise, or settle the
Proceeding. In such case, the Indemnifying Party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
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(4) Where the defence of a Proceeding is being undertaken and controlled by
the Indemnifying Party, the Indemnified Party will use all reasonable
efforts to make available to the Indemnifying Party those employees whose
assistance, testimony or presence is necessary to assist the Indemnifying
Party in evaluating and defending any such claims. However, the
Indemnifying Party shall be responsible for the expense associated with
any employees made available by the Indemnified Party to the Indemnifying
Party pursuant to this Section 9.5(4), which expense shall be equal to an
amount to be mutually agreed upon per person per hour or per day for each
day or portion thereof that the employees are assisting the Indemnifying
Party and which expenses shall not exceed the actual cost to the
Indemnified Party associated with the employees.
(5) With respect to any Proceeding, the Indemnified Party shall make available
to the Indemnifying Party or its representatives on a timely basis all
documents, records and other materials in the possession of the
Indemnified Party, at the expense of the Indemnifying Party, reasonably
required by the Indemnifying Party for its use in defending any such claim
and shall otherwise cooperate on a timely basis with the Indemnifying
Party in the defence of such claim.
(6) With respect to any re-assessment for income, corporate, sales, excise, or
other tax or other liability enforceable by Lien against the property of
the Indemnified Party, the Indemnifying Party's right to so contest shall
only apply after payment of the re-assessment or the provision of such
security as is necessary to avoid a Lien being placed on the property of
the Indemnified Party.
Section 9.6 Procedure for Indemnification--Other Claims
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the Party from whom indemnification is
sought.
ARTICLE 10
POST-CLOSING COVENANTS
Section 10.1 Further Assurances
From time to time after the Closing Date, each Party shall, at the request
of any other Party, execute and deliver such additional conveyances, transfers
and other assurances as may be reasonably required to effectively transfer the
Purchased Shares to the Purchaser and carry out the intent of this Agreement and
any Ancillary Agreement. In addition, the parties shall reasonably cooperate
with each other in the preparation and filing of a Current Report on Form 8-K
with the SEC reporting on the transactions contemplated by this Agreement within
the time periods specified by such Report.
-54-
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices
Any notice, direction or other communication given under this Agreement or
any Ancillary Agreement shall be in writing and given by delivering it or
sending it by facsimile or other similar form of recorded communication
addressed:
(a) to the Purchaser at:
Goldstrike Inc.
1055 West Hastings Street, Suite 1980
Vancouver, British Columbia
Canada
V6E 2E9
Attention: Dr. Yenyou Zhang
Telephone: (604) 688-8002
Facsimile: (604) 688-8030
with a copy to:
Gottbetter & Partners, LLP
488 Madison Avenue, 12th Floor
New York, NY
10022
Attention: Kenneth S. Goodwin, Esq.
Telephone: (212) 400-6900
Facsimile: (212) 400-6901
-55-
And
Stikeman Elliott LLP
4300 Bankers Hall West
888 - 3rd Street S.W.
Calgary, Alberta T2P 5C5
Attention: Stuart M. Olley, Esq.
Telephone: (403) 266-9057
Facsimile: (403) 266-9034
(b) to the Corporation or the Vendors at:
Gran Tierra Energy Inc.
10 - 8th Avenue SW, Tenth Floor
Calgary, Alberta
Canada
T2P 1G5
Attention: Dana Coffield
Telephone: (403) 537-7454
Facsimile: (403) 537-7440
with a copy to:
Osler, Hoskin & Harcourt LLP
Suite 2500, 450 - 1st Street S.W.
Calgary, Alberta
T2P 5H1
Attention: Don Boykiw, Esq.
Telephone: (403) 260-7000
Facsimile: (403) 260-7024
-56-
And
McGuireWoods LLP
1345 Avenue of the Americas
New York, NY 10105
Attention: Louis W. Zehil, Esq.
Telephone: (212) 548-2138
Facsimile: (212) 548-2175
Any such communication shall be deemed to have been validly and effectively
given (i) if personally delivered, on the date of such delivery if such date is
a Business Day and such delivery was made prior to 4:00 p.m. (Calgary time) and
otherwise on the next Business Day, or (ii) if transmitted by facsimile or
similar means of recorded communication on the Business Day following the date
of transmission. Any Party may change its address for service from time to time
by notice given in accordance with the foregoing and any subsequent notice shall
be sent to such Party at its changed address.
Section 11.2 Brokers
The Vendors shall indemnify and save harmless the Purchaser and the
Corporation from and against any and all claims, losses and costs whatsoever for
any commission or other remuneration payable or alleged to be payable to any
broker, agent or other intermediary who purports to act or have acted for the
Vendors or the Corporation. The Purchaser shall indemnify and save harmless the
Vendors from and against any and all claims, losses and costs whatsoever for any
commission or other remuneration payable or alleged to be payable to any broker,
agent or other intermediary who purports to act or have acted for the Purchaser
other than Mr. Robert Anderson who shall be issued 250,000 Purchaser Shares as a
finder's fee.
Section 11.3 Announcements
At all times prior to Closing, any press release or public statement or
announcement (a "Public Statement") with respect to the transaction contemplated
in this Agreement shall be made only with the prior written consent and joint
approval of the Corporation and the Purchaser unless such Public Statement is
required by Law or by any stock exchange, in which case the Party required to
make the Public Statement shall use its best efforts to obtain the approval of
the other Party as to the form, nature and extent of the disclosure. After the
Closing, the parties acknowledge that a public filing on Form 8K will be
required to be made by the Purchaser.
-57-
Section 11.4 Third Party Beneficiaries
Except as otherwise provided in Section 9.1 and Section 9.2, the Vendors
and the Purchaser intend that this Agreement shall not benefit or create any
right or cause of action in, or on behalf of, any Person other than the Parties
to this Agreement and no Person, other than the Parties to this Agreement shall
be entitled to rely on the provisions of this Agreement in any action, suit,
proceeding, hearing or other forum.
Section 11.5 Expenses
Except as otherwise expressly provided in this Agreement, all costs and
expenses (including the fees and disbursements of legal counsel, investment
advisers and accountants) incurred in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated therein shall be paid by
the Party incurring such expenses.
Section 11.6 Amendments
This Agreement may only be amended, supplemented or otherwise modified by
written agreement signed by the Vendors, the Corporation and the Purchaser.
Section 11.7 Waiver
(1) No waiver of any of the provisions of this Agreement or any Ancillary
Agreement shall be deemed to constitute a waiver of any other provision
(whether or not similar); nor shall such waiver be binding unless executed
in writing by the Party to be bound by the waiver.
(2) No failure on the part of the Vendors, the Corporation or the Purchaser to
exercise, and no delay in exercising any right under this Agreement shall
operate as a waiver of such right; nor shall any single or partial
exercise of any such right preclude any other or further exercise of such
right or the exercise of any other right.
Section 11.8 Non-Merger
Except as otherwise expressly provided in this Agreement, the covenants,
representations and warranties shall not merge on and shall survive the Closing
and, notwithstanding such Closing or any investigation made by or on behalf of
any Party, shall continue in full force and effect. Closing shall not prejudice
any right of one Party against any other Party in respect of anything done or
omitted under this Agreement or in respect of any right to damages or other
remedies.
-58-
Section 11.9 Entire Agreement
This Agreement together with the Ancillary Agreements constitutes the
entire agreement between the Parties and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
Parties. There are no representations, warranties, covenants, conditions or
other agreements, express or implied, collateral, statutory or otherwise,
between the Parties in connection with the subject matter of this Agreement
except as specifically set forth herein and therein and neither the Vendors nor
the Purchaser has relied or is relying on any other information, discussion or
understanding in entering into and completing the transactions contemplated in
this Agreement and the Ancillary Agreements. If there is any conflict or
inconsistency between the provisions of this Agreement and the provisions of any
Ancillary Agreement, the provisions of this Agreement shall govern.
Section 11.10 Successors and Assigns
(1) This Agreement shall become effective when executed by the Vendors, the
Corporation and the Purchaser and after that time shall be binding upon
and enure to the benefit of such parties and their respective successors
and permitted assigns.
(2) Except as provided in this Section 11.10, neither this Agreement nor any
of the rights or obligations under this Agreement shall be assignable or
transferable by any Party without the prior written consent of the other
Party. The Purchaser shall be entitled, upon giving notice to the Vendors
at any time on or prior to the Closing Date, to assign this Agreement or
any of the Purchaser's rights and obligations under this Agreement to any
affiliate (as such term is defined under the Business Corporations Act
(Alberta)) of the Purchaser subject to the following three conditions:
(a) The assignee shall become jointly and severally liable with the
Purchaser, as a principal and not as a surety, with respect to all
of the representations, warranties, covenants, indemnities and
agreements of the Purchaser; and
(b) The assignee shall execute an agreement confirming the assignment
and the assumption by the assignee of all obligations of the
Purchaser under this Agreement.
Section 11.11 Severability
If any provision of this Agreement shall be determined by an arbitrator or
any court of competent jurisdiction to be illegal, invalid or unenforceable,
that provision shall be severed from this Agreement and the remaining provisions
shall continue in full force and effect.
-59-
Section 11.12 Tax Election
The Parties agree that ExchangeCo and the Vendors will, at the request of
each Vendor, file (and the Purchaser agrees that it will cause ExchangeCo to
file) joint elections pursuant to subsection 85(1) of the Income Tax Act
(Canada) in prescribed form and within the prescribed time, in the case of each
such election specifying such elected amount as is designated by the Vendor. In
the case of each such election, ExchangeCo's sole responsibility will be to sign
the election form and provide the required information with respect to its
identity, and the Vendor will be solely responsible for completing the remaining
information and filing the form.
Section 11.13 Governing Law
(1) This Agreement shall be governed by and interpreted and enforced in
accordance with the laws of the Province of Alberta and the federal laws
of Canada applicable therein.
(2) Each of the Parties irrevocably attorns and submits to the non-exclusive
jurisdiction of the Court of Queens Bench of Alberta and the Vendors
appoint Osler, Hoskin & Harcourt LLP attention Don Boykiw as agent for the
service of any process with respect to any matter arising under or related
to the Agreement or any Ancillary Agreement.
Section 11.14 Counterparts.
This Agreement may be executed in any number of counterparts by facsimile
or otherwise and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
IN WITNESS WHEREOF the Parties have executed this Share Purchase
Agreement.
GOLDSTRIKE INC.
- -------------------------------------
Name:
Position
-60-
GRAN TIERRA ENERGY INC.
- ------------------------------------- -------------------------------------
Name: Name:
Position Position
- ------------------------------------- -------------------------------------
Jeffrey J. Scott Walter A. Dawson
Perfco Investments Ltd. KristErin Resources Inc.
By: By:
--------------------------------- ----------------------------------
- ------------------------------------- -------------------------------------
Randall Pounds Rafael Orunesu
- ------------------------------------- -------------------------------------
Dana Coffield Max Hsu Wei
- ------------------------------------- -------------------------------------
James Robert Hart Mark Wayne
- ------------------------------------- -------------------------------------
Gary R. Smith Verne G. Johnson
- ------------------------------------- -------------------------------------
Neil MacKenzie Frank Elliott
- ------------------------------------- -------------------------------------
Luc Chartrand
Adeco Exploration Company Ltd. 1053361 Alberta Ltd.
By: By:
--------------------------------- ----------------------------------
-61-
- ------------------------------------- -------------------------------------
John Taylor Edward J. Muchowski
- ------------------------------------- -------------------------------------
Margaret A. Dawson Barry R. Balsillie
- ------------------------------------- -------------------------------------
Reg Greenslade Dale Foster
- ------------------------------------- -------------------------------------
William J. Scott Dennis Flanagan
The Roger Tang Family Trust MH Financial Management Ltd.
By: By:
--------------------------------- ----------------------------------
- ------------------------------------- -------------------------------------
Josef Hocher Keith Bekker
NBN Clearing ITF Soderglen Ranches Ltd. NBCN Clearing Inc. ITF Jamie Mackie
By: By:
--------------------------------- ----------------------------------
- ------------------------------------- -------------------------------------
David Roger Keith H. Alexander Rowlands
Interstellar Enterprises Limited 411209 Alberta Ltd.
By: By:
--------------------------------- ----------------------------------
- ------------------------------------- -------------------------------------
Robert D. Steele James Greenslade
-62-
- ------------------------------------- -------------------------------------
Ernest Yin Gordon E. Skulmoski
Aran Asset Management SA Roytor & Co. A/C M12078211
By: By:
--------------------------------- ----------------------------------
Ahmed Hussain Al-Khalaf Argentiere Ltd.
International Projects Developments c/o MSC
Co.
By: By:
--------------------------------- ----------------------------------
- ------------------------------------- -------------------------------------
Dan Wright M.C. Coffield
-63-
SCHEDULE "A"
VENDORS
SCHEDULE "B"
AUDITED FINANCIAL STATEMENTS AND INTERIM FINANCIAL STATEMENTS
SCHEDULE "C"
PERMITTED LIENS
(a) Easements, rights-of-way, servitudes, restrictions and similar rights in
real property or interests therein granted or reserved to other Persons,
provided that such rights do not, in the Purchaser's opinion, reduce the
value of the Asset so affected or materially interfere with its use in the
operation of the Business;
(b) Title defects or irregularities which are of a minor nature and which, in
the Purchaser's reasonable opinion, do not reduce the value of the Asset
so affected or materially interfere with its use in the operation of the
Business;
(c) The reservations, limitations, provisos and conditions, if any, expressed
in any original grant from the Crown of any real property or any interest
therein or in any comparable grant in jurisdictions other than Canada,
provided they do not, in the Purchaser's reasonable opinion, reduce the
value of the Asset so affected or materially interfere with its use in the
operation of the Business;
(d) Liens given to a public utility or any Governmental Entity when required
by such utility or Governmental Entity in connection with the operation of
the Business or the ownership of the Assets, provided that the Liens do
not, in the Purchaser's reasonable opinion, reduce the value of the Asset
so affected or materially interfere with its use in the operation of the
Business;
(e) Servicing agreements, development agreements, site plan agreements, and
other agreements including, without limitation, any obligations to deliver
letters of credit and other security as required, with Governmental
Entities pertaining to the use or development of any of the Assets,
provided they are complied with and do not in the Purchaser's reasonable
opinion, reduce the value of any Asset so affected or materially interfere
with its use in the operation of the Business; and
(f) Applicable municipal and other governmental restrictions, including
municipal by-laws and regulations, affecting the use of land or the nature
of any structures which may be erected on the land, provided such
restrictions have been complied with and do not, in the Purchaser's
reasonable opinion, reduce the value of the Asset so affected or
materially interfere with its use in the operation of the Business.
(g) Rights of first refusal with respect to any transfer of the Corporation's
interest in the Argentinean assets acquired pursuant to the Argentinean
Acqusition.
SCHEDULE "D"
EXCHANGEABLE SHARE PROVISIONS
SCHEDULE "E"
OFFERING MEMORANDUM
SCHEDULE "F"
VOTING EXCHANGE AND SUPPORT AGREEMENT
SCHEDULE 3.2(a)
JURISDICTIONS IN WHICH CORPORATION CARRIES ON BUSINESS, ETC.
Alberta
Ecuador
Argentina
SCHEDULE 3.2(c)
REQUIRED AUTHORIZATIONS
SCHEDULE 3.2(i)
ORDINARY COURSE EXCEPTIONS
SCHEDULE 3.2(l)
MATERIAL AUTHORIZATIONS
SCHEDULE 3.2(q)
OWNED PROPERTIES
Nil
SCHEDULE 3.2(r)
LEASES AND LEASED PROPERTIES
o Office space at 610 - 8th Avenue S.W. Calgary, Alberta - month to month
lease, 3-month cancellation, approximately $4,000 per month (inclusive).
o temporary office space in Ecuador and Argentina
o the Corporation's undivided interest in the oil and gas properties
acquired pursuant to the Argentine Acquisition.
SCHEDULE 3.2(s)
MATERIAL CONTRACTS
o Engagement letters with Osler, Hoskin & Harcourt LLP, McGuireWoods LLP and
Deloitte & Touche LLP for the provision of professional services.
o Employment contracts with Dana Coffield, James Hart, Max Wei and Rafael
Orunesu.
o Escrow Agreement between Bank of New York, Gran Tierra Energy Inc. and
Doug Won Corporation S.A. dated July, 2005.
o Trust Agreement between BBVA Banco Frances S.A., Gran Tierra Energy
Argentina S.A., YPF S.A., Pluspetrol S.A. and CGC S.A. dated October,
2005.
o Assignment Agreements entered into with respect to the Argentine
Acquisition
SCHEDULE 3.2(w)
INTELLECTUAL PROPERTY MATTERS
Nil
SCHEDULE 3.2(aa)
LIABILITIES
SCHEDULE 3.2(bb)
BANK ACCOUNTS AND POWERS OF ATTORNEY
(i) Bank Accounts
o CIBC Calgary - authorized signatories Dana Coffield, James Hart and
Jeffery Scott.
o HSBC Buenos Aires - authorized signatories Rafael Orunescu, James
Hart, Pablo De Rosso/Hugo Martelli of Martelli Abogados (Gran
Tierra's Argentinean legal counsel).
(ii) Power of Attorney
o In compliance with operating standards within Argentina, the bank
signatories listed above for the HSBC account have been granted
limited and specific powers of attorney.
SCHEDULE 3.2(cc)
ENVIRONMENTAL MATTERS
Nil
SCHEDULE 3.2(dd)
EMPLOYEE MATTERS
- Dana Coffield
- James Hart
- Max Wei
- Rafael Orunescu
- Carmen Nuefeld
- Heather Campbell
SCHEDULE 3.2(ff)
INSURANCE
- - Directors and Officers Insurance - ACE INA, $10 million limit, premium
$77,000 in accordance with term sheet dated November 1, 2005.
SCHEDULE 3.2(gg)
LITIGATION
Nil
SCHEDULE 4.1(x)
CONTRACTS
SCHEDULE 4.1(dd)
CERTAIN BUSINESS RELATIONS WITH AFFILIATES
SCHEDULE 4.1(gg)
ACCOUNTANTS
SCHEDULE 6.1(c)
REQUIRED CONSENTS AND AUTHORIZATIONS
None.
SCHEDULE 6.1(d)(v)
FORM OF VENDOR'S OPINION
SCHEDULE 6.1(d)(vii)
EVIDENCE OF TRANSFER OF SHARES
SCHEDULE 6.2(c)(iii)
FORM OF PURCHASER'S OPINION