1. | Name and Address of Company: |
|
Pengrowth Energy Trust 2900, 240 4th Avenue S.W. Calgary, AB T2P 4H4 |
||
2. | Date of Material Change: |
|
July 24, 2006 |
||
3. | News Release: |
|
A news release setting out information relating to the material change described herein was
disseminated on July 24, 2006 through Canada NewsWire and filed on SEDAR. |
||
4. | Summary of Material Change: |
|
Pengrowth Energy Trust (Pengrowth), Pengrowth Corporation, Esprit Energy Trust (Esprit)
and Esprit Exploration Ltd. (Esprit Ltd.) have entered into a combination agreement dated
July 23, 2006 (the Combination Agreement), providing for the combination of Pengrowth and
Esprit into a single trust to continue under the name Pengrowth Energy Trust (the
Transaction). The Transaction is expected to close on or about September 28, 2006 (the
Closing Date). |
||
5. | Full Description of Material Change: |
|
Pengrowth, Pengrowth Corporation, Esprit and Esprit Ltd. have entered into a combination
agreement dated July 23, 2006, providing for the combination of Pengrowth and Esprit into a
single trust to continue under the name Pengrowth Energy Trust. The Transaction is expected
to close on or about September 28, 2006. |
||
The Transaction is to be completed pursuant to a tax free roll over under Section 132.2 of
the Income Tax Act (Canada) and is subject to customary regulatory approvals. Pursuant to
the Transaction, at the Time of closing, the following shall occur and be deemed to occur
immediately in the below order: |
1. | The Esprit trust indenture will be amended to the extent necessary to
facilitate the Transaction. |
||
2. | Pengrowth will, subject to the terms and conditions of the Combination
Agreement, acquire all of the assets and assume all of the liabilities of Esprit, in
exchange for 0.53 trust units of Pengrowth (the new units from the consolidation of
Pengrowths Class A and Class B trust units effective July 27, 2006) (the
Pengrowth Units) to be paid by Pengrowth to Esprit for each outstanding trust unit of
Esprit (the Esprit Units). |
||
3. | All outstanding Esprit Units (other than one Esprit Unit which Esprit will
issue to Pengrowth immediately prior to closing) will be redeemed by Esprit in exchange
for the Pengrowth Units which will be distributed by Esprit to the Esprit unitholders
on the pro rata basis of their holdings of Esprit Units, in accordance with the 0.53
exchange ratio. |
- 2 -
On completion of the Transaction, existing Pengrowth and Esprit unitholders will own
approximately 82 percent and 18 percent of the combined trust, respectively. |
||
A copy of the Combination Agreement is attached hereto hereto as Schedule A. Readers are
cautioned that the Combination Agreement has not been prepared as a disclosure document and
is not intended to provide factual information about Pengrowth for the benefit of investors
or others, but rather is being filed pursuant to applicable regulator requirements. The
Agreement contains representations and warranties made by Pengrowth to Esprit for risk
allocation purposes, and solely for benefit of Esprit. Likewise, the Combination Agreement
contains representations and warranties made by Esprit to Pengrowth for risk allocation
purposes, and solely for the benefit of Pengrowth. Readers are cautioned that the factual
statements embodied or reflected in the representations and warranties made in the
Combination Agreement may be qualified (in whole or in part) by information in confidential
disclosure schedules or other documents that Pengrowth and Esprit have exchanged in
connection with the execution and delivery of the Combination Agreement, but which are not
appended hereto, have not been filed with securities regulatory authorities in Canada or the
US and are not otherwise available to the public. Accordingly, investors and securityholders
should not rely on the representations and warranties contained in the Combination Agreement
as accurate statements of fact. Moreover, information concerning the subject matter of the
representations and warranties may change after the date of the Combination Agreement, which
subsequent information may or may not be fully reflected in Pengrowths public disclosures. |
||
The following are among the terms and conditions in the Combination Agreement: |
1. | On the business day immediately preceding the Closing Date, Esprit may declare
a special cash distribution to Esprit unitholders of $0.30 per Esprit Unit, which if
declared must be paid not later than the close of business on the business day
immediately preceding the Closing Date. |
||
2. | The Transaction is subject to approval by Esprit unitholders at a special
meeting to be held on or about September 26, 2006 (the Special Meeting). An
information circular will be mailed to Esprit unitholders in late August 2006 in
respect of the Special Meeting (the Esprit Circular). |
||
3. | Esprit has agreed to use its best efforts to encourage and facilitate all
persons holding rights to acquire Esprit Units pursuant to Esprits performance unit
incentive plan, to exercise their rights prior to closing, and Esprit will satisfy the
obligations under such rights with cash payments, and will ensure that any such rights
not exercised are terminated. Esprit has also agreed to redeem its outstanding
exchangeable shares in exchange for Esprit Units in accordance with their terms, and
has agreed to issue the Esprit Units to the holders of post-arrangement entitlements
prior to closing so that at closing there will be no post-arrangement entitlements
outstanding. |
||
4. | Pengrowth has agreed to offer substantially all employees of Esprit and its
subsidiaries continued employment with Pengrowth on terms and conditions substantially
similar to their current terms and conditions of employment with Esprit. |
||
5. | Pengrowth has agreed to increase the size of its board of directors by one
member and appoint one member of the board of directors of Esprit Ltd. as a director of
Pengrowth |
- 3 -
Corporation. Mr. Michael Stewart, presently chairman of the board of trustees of
Esprit, has been selected to join the board of directors of Pengrowth Corporation. |
|||
6. | The board of directors of each of Pengrowth Corporation and Esprit Ltd. have
unanimously determined that the Transaction is in the best interests of Pengrowth,
Esprit and their respective unitholders, and the board of directors of Esprit Ltd. has
also unanimously determined that it will recommend that Esprit unitholders vote in
favour of the Transaction. |
||
7. | Esprit has received a verbal fairness opinion from its financial advisor CIBC
World Markets Inc., and will receive a written fairness opinion therefrom stating that
the consideration to be received by Esprit unitholders is fair, from a financial point
of view, to Esprit unitholders. This fairness opinion will be included in the Esprit
Circular. |
||
8. | Esprit has covenanted to use reasonable commercial efforts to obtain written
lock-up agreements within 72 hours of the execution of the Combination Agreement, from
all directors and officers of Esprit Ltd. requiring them to vote all of their Esprit
Units at the Special Meeting in favour of the Transaction and the Esprit trust
indenture amendments. |
||
9. | Pengrowth has agreed to assume Esprits $96 million aggregate principal amount
of 6.5 percent convertible unsecured subordinated debentures due 2010 (Esprit
Debentures) in accordance with their terms. Holders of Esprit Debentures will have the
option of redeeming their Esprit Debentures at a price equal to 101 percent of the
principal amount plus any accrued interest, or conversion to Esprit Units at $13.85, or
to have the obligations under the Esprit Debentures assumed by Pengrowth. |
||
10. | Pengrowth has agreed that the Esprit trust indenture amendments will also
include the grant of a right of dissent to Esprit unitholders in respect of the
Transaction. |
||
11. | Esprit and Pengrowth have agreed to pay a reciprocal non-completion fee of $35
million to each other in certain circumstances. Pengrowth also has the right to match a
competing proposal for Esprit. |
Caution Regarding Forward-Looking Information |
||
This material change report contains forward-looking statements within the meaning of
securities laws, including the safe harbour provisions of the Ontario Securities Act and
the United States Private Securities Litigation Reform Act of 1995. Forward-looking
information is often, but not always, identified by the use of words such as anticipate,
believe, expect, plan, intend, forecast, target, project, may, will,
should, could, estimate, predict or similar words suggesting future outcomes or
language suggesting an outlook. Forward-looking statements in this material change report
include, but are not limited to, statements with respect to: benefits of the Transaction,
synergies, business strategy and strengths, acquisition criteria, capital expenditures,
reserves, reserve life indices, estimated production, remaining producing reserve lives, net
present values of future net revenue from reserves, commodity prices and costs, exchange
rates, the impact of contracts for commodities, development plans and programs, tax effect
and treatment, abandonment and reclamation costs, government royalty rates and expiring
acreage. Statements relating to reserves are deemed to be forward-looking statements, as
they involve the implied assessment, based on certain estimates and assumptions that the
reserves described exist in the quantities predicted or estimated and can profitably be
produced in the future. |
- 4 -
Forward-looking statements and information are based on current beliefs as well as
assumptions made by and information currently available to Pengrowth concerning anticipated
financial performance, business prospects, strategies and regulatory developments. Although
management considers these assumptions to be reasonable based on information currently
available to it, they may prove to be incorrect. |
||
By their very nature, forward-looking statements involve inherent risks and uncertainties,
both general and specific, and risks that predictions, forecasts, projections and other
forward-looking statements will not be achieved. We caution readers not to place undue
reliance on these statements as a number of important factors could cause the actual results
to differ materially from the beliefs, plans, objectives, expectations and anticipations,
estimates and intentions expressed in such forward-looking statements. These factors
include, but are not limited to: the volatility of oil and gas prices; production and
development costs and capital expenditures; the imprecision of reserve estimates and
estimates of recoverable quantities of oil, natural gas and liquids; Pengrowths ability to
replace and expand oil and gas reserves; environmental claims and liabilities; incorrect
assessments of value when making acquisitions; increases in debt service charges; the loss
of key personnel; the marketability of production; defaults by third party operators;
unforeseen title defects; fluctuations in foreign currency and exchange rates; inadequate
insurance coverage; compliance with environmental laws and regulations; changes in tax laws;
the failure to qualify as a mutual fund trust; and Pengrowths ability to access external
sources of debt and equity capital. Further information regarding these factors may be
found under the heading Business Risks in our managements discussion and analysis for the
year ended December 31, 2005, under Risk Factors herein and in other recent filings with
the Securities and Exchange Commission and Canadian securities regulatory authorities. |
||
The foregoing list of factors that may affect future results is not exhaustive. When
relying on our forward-looking statements to make decisions, investors and others should
carefully consider the foregoing factors and other uncertainties and potential events.
Furthermore, the forward-looking statements contained in this material change report are
made as of the date of this material change report and Pengrowth does not undertake any
obligation to up-date publicly or to revise any of the included forward-looking statements,
whether as a result of new information, future events or otherwise. The forward-looking
statements contained in this material change report are expressly qualified by this
cautionary statement. |
||
6. | Reliance on Subsection 7.1(2) or (3) of National Instrument 51-102: |
|
Not Applicable. |
||
7. | Omitted Information: |
|
Not Applicable. |
||
8. | Executive Officer: |
|
Mr. James S. Kinnear, Chairman, President and Chief Executive Officer, is knowledgeable
about the material change and may be reached at (403) 233-0224. |
||
9. | Date of Report: |
|
Dated at Calgary, Alberta, this 2nd day of August, 2006. |
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Page | ||||||||||
ARTICLE I INTERPRETATION | 1 | |||||||||
1.1 | Definitions. | 1 | ||||||||
1.2 | Interpretation Not Affected by Headings. | 9 | ||||||||
1.3 | Currency. | 9 | ||||||||
1.4 | Numbers and Gender. | 9 | ||||||||
1.5 | Date For Any Action. | 10 | ||||||||
1.6 | Entire Agreement. | 10 | ||||||||
1.7 | Canadian GAAP. | 10 | ||||||||
1.8 | Knowledge. | 10 | ||||||||
1.9 | Interpretation Not Affected by Party Drafting. | 10 | ||||||||
1.10 | Trust Power and Capacity. | 10 | ||||||||
1.11 | Schedules. | 10 | ||||||||
ARTICLE II THE ACQUISITION AND REDEMPTION TRANSACTION | 11 | |||||||||
2.1 | General. | 11 | ||||||||
2.2 | Purchase of Esprit Assets. | 11 | ||||||||
2.3 | Consideration. | 12 | ||||||||
2.4 | Deposit of Payment Units and Fractional Trust Units. | 12 | ||||||||
2.5 | Distributions With Respect to Unsurrendered Certificates. | 13 | ||||||||
2.6 | Lost Certificates. | 13 | ||||||||
2.7 | Extinction of Rights. | 13 | ||||||||
2.8 | Withholding Rights. | 13 | ||||||||
2.9 | Rollover Election. | 14 | ||||||||
2.10 | Esprit Special Distribution. | 14 | ||||||||
2.11 | Acquisition and Redemption Documentation and Esprit Special Meeting. | 14 | ||||||||
2.12 | U.S. Filings. | 15 | ||||||||
2.13 | Circular Contents. | 16 | ||||||||
2.14 | Compilation of Proxies. | 16 | ||||||||
2.15 | Fairness Opinion. | 16 | ||||||||
2.16 | Sequence of the Acquisition and Redemption and Related Transactions. | 16 | ||||||||
2.17 | Esprit Rights. | 16 | ||||||||
2.18 | Employees. | 17 | ||||||||
2.19 | Board Composition. | 17 | ||||||||
2.20 | Esprit Approval. | 17 | ||||||||
2.21 | Support Agreements. | 18 |
Page | ||||||||||
2.22 | Subscription for Pengrowth Esprit Unit. | 18 | ||||||||
2.23 | Pengrowth Approval. | 18 | ||||||||
ARTICLE III IMPLEMENTATION OF THE ACQUISITION AND REDEMPTION | 18 | |||||||||
3.1 | Obligations of the Esprit Parties. | 18 | ||||||||
3.2 | Obligations of the Pengrowth Parties. | 18 | ||||||||
3.3 | Unitholder Communications and Disclosure. | 19 | ||||||||
3.4 | Dealer Managers. | 19 | ||||||||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ESPRIT AND ESPRIT LTD. | 19 | |||||||||
4.1 | Representations and Warranties. | 19 | ||||||||
4.2 | Investigation. | 20 | ||||||||
4.3 | Survival. | 20 | ||||||||
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PENGROWTH AND PENGROWTH CO | 20 | |||||||||
5.1 | Representations and Warranties. | 20 | ||||||||
5.2 | Investigation. | 20 | ||||||||
5.3 | Survival. | 20 | ||||||||
ARTICLE VI COVENANTS | 20 | |||||||||
6.1 | Esprit Conduct of Business. | 20 | ||||||||
6.2 | Pengrowth Conduct of Business. | 23 | ||||||||
6.3 | Access to Information. | 25 | ||||||||
6.4 | No Solicitation. | 26 | ||||||||
6.5 | Right to Match. | 27 | ||||||||
6.6 | Further Action. | 27 | ||||||||
6.7 | Approvals. | 28 | ||||||||
6.8 | Insurance. | 28 | ||||||||
6.9 | Esprit Tax Returns. | 28 | ||||||||
6.10 | Esprit Exchangeable Shares. | 28 | ||||||||
6.11 | Structure of Transaction. | 28 | ||||||||
6.12 | Indemnity. | 29 | ||||||||
6.13 | Esprit PUIP Liability. | 29 | ||||||||
6.14 | Esprit Debentures. | 29 | ||||||||
6.15 | Right of Dissent. | 29 | ||||||||
6.16 | Post-Arrangement Entitlements. | 29 | ||||||||
ARTICLE VII CONDITIONS | 29 |
Page | ||||||||||
7.1 | General Conditions. | 29 | ||||||||
7.2 | Esprit Party Conditions. | 30 | ||||||||
7.3 | Pengrowth Party Conditions. | 31 | ||||||||
7.4 | Notice Requirements. | 32 | ||||||||
7.5 | Merger of Conditions. | 33 | ||||||||
ARTICLE VIII CLOSING MATTERS, TERMINATION FEE, TERMINATION AND EXPENSES | 33 | |||||||||
8.1 | Closing Matters. | 33 | ||||||||
8.2 | Agreement as to Termination Fee. | 33 | ||||||||
8.3 | Liquidated Damages. | 34 | ||||||||
8.4 | Termination. | 35 | ||||||||
8.5 | Expenses. | 35 | ||||||||
ARTICLE IX NOTICES | 36 | |||||||||
9.1 | Address For Notice. | 36 | ||||||||
9.2 | Receipt and Deemed Receipt of Notice. | 37 | ||||||||
9.3 | Change of Address. | 37 | ||||||||
ARTICLE X GENERAL | 37 | |||||||||
10.1 | Amendment. | 37 | ||||||||
10.2 | Waiver. | 37 | ||||||||
10.3 | Assignment. | 38 | ||||||||
10.4 | Amendment. | 38 | ||||||||
10.5 | Time of the Essence. | 38 | ||||||||
10.6 | Counterparts. | 38 | ||||||||
10.7 | Governing Law. | 38 | ||||||||
10.8 | Severability. | 38 | ||||||||
10.9 | Binding Effect. | 38 | ||||||||
10.10 | Employment Agreements. | 38 | ||||||||
10.11 | Third Party Beneficiaries. | 38 | ||||||||
10.12 | Confidentiality Agreement. | 39 | ||||||||
10.13 | Acknowledgement. | 39 | ||||||||
10.14 | Public Statements. | 1 |
SCHEDULE A
|
| Esprit Assets | ||
SCHEDULE B
|
| Assumption and Indemnity Agreement | ||
SCHEDULE C
|
| Representations and Warranties of the Esprit Parties | ||
SCHEDULE D
|
| Representations and Warranties of the Pengrowth Parties |
-2-
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-4-
-5-
-6-
-7-
-8-
(a) | the Commissioner or any Person authorized to exercise the powers and perform
the duties of the Commissioner shall have issued an advance ruling certificate under
Section 102 of the Competition Act to the effect that she is satisfied that she would
not have sufficient grounds on which to apply to the Competition Tribunal under Section
92 of the Competition Act in respect of the Acquisition and Redemption Transaction, or
advised the Parties in writing that the Commissioner has determined not to file an
application for an order under Part VIII of the Competition Act and any terms and
conditions attached to such advice shall be acceptable to the Parties; |
||
(b) | the Minister under the Investment Canada Act is satisfied or deemed to be
satisfied that the consummation of the transactions contemplated hereunder are likely
to be of net benefit to Canada; |
||
(c) | the Registration Statement shall have been declared effective by the SEC under
the U.S. Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceeding for that
purpose shall have been initiated by the SEC; and |
||
(d) | the Pengrowth Units issuable pursuant to the Acquisition and Redemption
Transaction shall have been conditionally approved for listing on the TSX and the NYSE,
subject to the filing of required documentation. |
-9-
-10-
Schedule A
|
- | Esprit Assets | ||
Schedule B
|
- | Assumption and Indemnity Agreement | ||
Schedule C
|
- | Representations and Warranties of the Esprit Parties | ||
Schedule D
|
- | Representations and Warranties of the Pengrowth Parties |
-11-
2.1 | General. |
2.2 | Purchase of Esprit Assets. |
(a) | the Esprit Trust Indenture will be amended to the extent necessary to
facilitate the Acquisition and Redemption Transaction; |
(b) | Esprit shall sell, transfer, convey, assign and deliver to Pengrowth, and
Pengrowth shall purchase and accept from Esprit, all the Esprit Assets, as the same
shall exist at the Time of Closing; |
(c) | Pengrowth shall assume and become liable to pay, satisfy, discharge, observe,
perform and fulfill the Assumed Liabilities in accordance with their terms; |
||
(d) | Pengrowth shall issue the Payment Units to Esprit; and |
||
(e) | the Esprit Units (other than the Pengrowth Esprit Unit) will be redeemed in
exchange for the Payment Units which shall be distributed to the Esprit Unitholders, on
a pro rata basis of their holdings of Esprit Units, in accordance with the Exchange
Ratio. |
(f) | indemnify and save Esprits and its Subsidiaries trustees, directors,
officers, employees and agents (together, the Indemnified Persons) harmless from all
and any costs, damages or expenses that may be paid or incurred following any claim,
suit or action taken by any other party because of the failure of Pengrowth to
discharge and perform all or any of the obligations, covenants, agreements and
obligations forming part of the Assumed Liabilities; and |
(g) | if any suit or action is commenced against any of the Indemnified Persons in
connection with any of the Assumed Liabilities or in respect of any covenant,
condition, agreement or obligation assumed as contemplated herein, assume the conduct
of such case and provide to the Indemnified Persons such further indemnification from
all costs, damages or expenses as they may reasonably require. |
-12-
2.3 | Consideration. |
2.4 | Deposit of Payment Units and Fractional Trust Units. |
-13-
2.5 | Distributions With Respect to Unsurrendered Certificates. |
2.6 | Lost Certificates. |
2.7 | Extinction of Rights. |
2.8 | Withholding Rights. |
-14-
2.9 | Rollover Election. |
2.10 | Esprit Special Distribution. |
2.11 | Acquisition and Redemption Documentation and Esprit Special Meeting. |
-15-
(i) | any misrepresentation or alleged misrepresentation in the
material provided by Pengrowth for inclusion in the Esprit Circular; |
||
(ii) | any order made or any inquiry, investigation or proceeding by
any securities commission or other competent authority based upon any untrue
statement or omission or alleged untrue statement or omission of a material
fact or any misrepresentation or any alleged misrepresentation in the
information provided by Pengrowth for inclusion in the Esprit Circular or in
any material filed by or on behalf of Pengrowth in compliance or intended
compliance with Applicable Canadian Securities Laws, which prevents or
restricts the trading in the Pengrowth Units; and |
||
(iii) | Pengrowth not complying with any requirement of applicable Law
in connection with the transactions contemplated in this Agreement; |
2.12 | U.S. Filings. |
-16-
2.13 | Circular Contents. |
2.14 | Compilation of Proxies. |
2.15 | Fairness Opinion. |
2.16 | Sequence of the Acquisition and Redemption and Related Transactions. |
(a) | transfer of the Esprit Assets, assumption of the Assumed Liabilities and
issuance of the Payment Units; and |
||
(b) | the Esprit Units (other than the Pengrowth Esprit Unit) will be redeemed in
exchange for the Payment Units which shall be distributed to the Esprit Unitholders, on
a pro rata basis of their holdings of Esprit Units, in accordance with the Exchange
Ratio. |
2.17 | Esprit Rights. |
-17-
2.18 | Employees. |
2.19 | Board Composition. |
2.20 | Esprit Approval. |
(a) | has unanimously determined that: |
(i) | the Acquisition and Redemption Transaction is in the best
interests of Esprit and the Esprit Unitholders; and |
||
(ii) | it will recommend that the Esprit Unitholders vote in favour of
the Acquisition and Redemption Transaction; |
(b) | has received advice (which shall subsequently be in the form of a written
opinion) (the Esprit Fairness Opinion) from CIBC World Markets Inc., financial
advisors to the Esprit Board of Directors, to the effect that the consideration to be
received by Esprit Unitholders in connection with the Acquisition and Redemption
Transaction, assuming the prior payment of the Special Distribution, is fair, from a
financial point of view, to the Esprit Unitholders; and |
||
(c) | has advised that each of its members intends to vote the Esprit Units
beneficially owned by them, or over which they exercise control or direction, in favour
of the Acquisition and Redemption Transaction, |
-18-
2.21 | Support Agreements. |
2.22 | Subscription for Pengrowth Esprit Unit. |
2.23 | Pengrowth Approval. |
3.1 | Obligations of the Esprit Parties. |
(a) | duly call, give notice of, convene and hold the Esprit Special Meeting as
promptly as practicable and submit the resolutions to approve the Esprit Trust
Indenture Amendments and the Acquisition and Redemption Transaction and any other
matters as may be properly brought before such meeting to the Esprit Unitholders for
consideration; |
||
(b) | solicit proxies in favour of the Esprit Trust Indenture Amendments and the
Acquisition and Redemption Transaction; and |
||
(c) | subject to the terms and conditions hereof, do all things reasonably necessary
or desirable to give effect to the Esprit Trust Indenture Amendments and the
Acquisition and Redemption Transaction. |
3.2 | Obligations of the Pengrowth Parties. |
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(a) | cause the Payment Units which are to be issued to Esprit and then to be
received by Esprit Unitholders in exchange for the Esprit Units pursuant to the
Acquisition and Redemption Transaction not to be subject to any trading restrictions
under Applicable Canadian Securities Laws or U.S. Securities Laws (other than pursuant
to Section 2.6 of National Instrument 45 102 Resale of Securities and Affiliate
Restrictions) and to be listed and posted for trading on the TSX and the NYSE (subject
to notice of issuance) by the Closing Date; |
||
(b) | prior to the Closing Date, allot for issuance a sufficient number of Pengrowth
Units to issue to Esprit pursuant to the Acquisition and Redemption Transaction and
issue such units as the Payment Units pursuant to the Acquisition and Redemption
Transaction at the Time of Closing; and |
||
(c) | subject to the terms and conditions hereof, do all things necessary or
desirable to give effect to the Acquisition and Redemption Transaction. |
3.3 | Unitholder Communications and Disclosure. |
3.4 | Dealer Managers. |
4.1 | Representations and Warranties. |
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4.2 | Investigation. |
4.3 | Survival. |
5.1 | Representations and Warranties. |
5.2 | Investigation. |
5.3 | Survival. |
6.1 | Esprit Conduct of Business. |
(a) | it will, and will cause each of its Subsidiaries to, conduct its undertaking
and businesses only in, and not take any action except in, the usual, ordinary and
regular course of business and consistent with past practice except to the extent
necessary to comply with applicable Laws and to complete the transactions contemplated
hereby or any |
-21-
transactions entered into prior to the date hereof (all of which have been in the
ordinary course of business); |
|||
(b) | it will not, and will not permit any of its Subsidiaries to, directly or
indirectly: |
(i) | issue, sell, pledge, lease, dispose of, encumber or agree to
issue, sell, pledge, lease, dispose of or encumber: |
(A) | any Esprit Units or shares of any Subsidiary or
any options, warrants, calls, conversion privileges or rights of any
kind to acquire any such shares or trust units other than Esprit Units
pursuant to the exercise, exchange or conversion of Esprit Rights,
Esprit Debentures, Esprit Exchangeable Shares or Esprit
Post-Arrangement Entitlements; or |
||
(B) | other than oil and natural gas production in
the ordinary course of business, any assets of Esprit or its
Subsidiaries in excess of $2.5 million individually or $10 million in
the aggregate; |
(ii) | except as contemplated hereby, amend or propose to amend their
respective trust declaration, articles, by-laws, unanimous shareholder
agreements, management agreements or other constating documents, including
without limitation, the Esprit Trust Indenture and the Esprit NPI Agreement; |
||
(iii) | split, combine or reclassify any outstanding Esprit Units, or
declare, set aside or pay any dividends or other distributions payable in cash,
stock, property or otherwise with respect to the Esprit Units, other than the
Special Distribution and Esprits current regular monthly cash distributions,
in an amount equal to $0.15 per Esprit Unit paid on a single specified date to
Esprit Unitholders of record as of a single specified date; |
||
(iv) | except as contemplated hereby, redeem, purchase, offer to
purchase or otherwise acquire any Esprit Units or other securities of Esprit or
any of its Subsidiaries including under any normal course issuer bid; |
||
(v) | reorganize, amalgamate, merge or otherwise continue Esprit or
any of its Subsidiaries with, or acquire or agree to acquire (by merger,
amalgamation, consolidation, acquisition of stock or assets or otherwise), any
Person, corporation, trust, partnership or other business organization
whatsoever (including any division) or acquire or agree to acquire any assets
having a value of $5 million or greater in aggregate; |
||
(vi) | except in the usual, ordinary and regular course of business
and consistent with past practice, satisfy any claims or liabilities except
such as have been reserved against in the Esprit Financial Statements or
relinquish any material contractual rights; |
||
(vii) | except as required to make the Special Distribution, initiate
any capital expenditures which exceed $2.5 million on an individual basis or
$10 million or greater in aggregate, or incur, except in the ordinary course of
business consistent with past practice, any indebtedness for borrowed money or
any other liability or obligation or issue any debt securities or assume,
guarantee, endorse or otherwise |
-22-
as an accommodation become responsible for, the obligations of any other
individual or entity or make any loans or advances, except in the ordinary
course of business consistent with past practice and except for refinancing
of existing debt on substantially the same or more favourable terms; |
|||
(viii) | enter into any employment or consulting contract, operating agreement or
similar agreement that cannot be terminated on sixty (60) days or less notice
without penalty; |
||
(ix) | enter into rate swap transactions, basis swaps, forward rate
transactions, commodity swaps, commodity options, equity or equity index swaps,
equity or equity index options, bond options, interest rate options, foreign
exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, production sales transactions having terms
greater than 120 days or any other similar transactions (including any option
with respect to any of such transactions) or any combination of such
transactions; or |
||
(x) | authorize or propose any of the foregoing, or enter into or
modify any contract, agreement, commitment, or arrangement to do any of the
foregoing; |
(c) | neither it nor any of its Subsidiaries shall (otherwise than as may be
contemplated herein) enter into or modify any employment, severance or similar
agreements, policies or arrangements with, or grant any bonuses, salary increases,
retention, severance or termination pay to or make any loans to, any of its employees,
officers or directors other than pursuant to written agreements in effect (without
amendment) on the date hereof, other than indemnity agreements entered into in the
normal course of business in accordance with the Business Corporations Act (Alberta),
as applicable; |
||
(d) | other than the acceleration of vesting of the Esprit Rights and its ordinary
monthly contributions to Esprits employee group registered savings plan, neither it
nor any of its Subsidiaries shall adopt or amend, or make any contribution to any
bonus, profit sharing, option, pension, retirement, deferred compensation, insurance
incentive compensation, other compensation or similar plan, agreement, trust, fund or
arrangements for the benefit of employees, except as is necessary to comply with law or
with respect to existing provisions of any such plans, programs, arrangements or
agreements that have been disclosed in writing prior to the date hereof to Pengrowth; |
||
(e) | it will, and will cause each of its Subsidiaries to, use reasonable commercial
efforts to cause its current insurance (or re-insurance) policies not to be cancelled
or terminated or any of the coverage thereunder to lapse, unless simultaneously with
such termination, cancellation or lapse, replacement policies underwritten by insurance
and re-insurance companies of nationally recognized standing providing coverage equal
to or greater than the coverage under the cancelled, terminated or lapsed policies for
substantially similar premiums are in full force and effect; and |
||
(f) | it will, and will cause each of its Subsidiaries to: |
(i) | use reasonable commercial efforts to preserve intact their
respective business organizations and goodwill and to maintain satisfactory
relationships with |
-23-
suppliers, agents, distributors, customers and others having business
relationships with it; |
|||
(ii) | not take any action that would render, or that reasonably may
be expected to render, any representation or warranty made by it in this
Agreement untrue in any material respect at any time prior to the completion of
the transactions contemplated in this Agreement; |
||
(iii) | co-operate and use reasonable commercial efforts to comply
with all reasonable requests by Pengrowth and its Subsidiaries to make joint
investor presentations or other forms of information available in order to
support the transactions contemplated by this Agreement; |
||
(iv) | confer on a regular basis with Pengrowth with respect to
operational and financial matters and promptly notify Pengrowth Co orally and
in writing of any Material Adverse Change in respect of Esprit and of any
material Governmental Entity or third party complaints, investigations or
hearings (or communications indicating that the same may be contemplated); |
||
(v) | at the Time of Closing and upon receipt of mutual releases
satisfactory to the Parties, Esprit and Esprit Ltd. shall use their reasonable
best efforts to cause the resignation of such trustees, directors and officers
of each of Esprit and its Subsidiaries as Pengrowth may specify and to fill the
resulting vacancies with designees of Pengrowth and Esprit and Esprit Ltd.
shall cooperate with Pengrowth to provide an orderly transition of control and
management; |
||
(vi) | not waive, release, grant or transfer any rights of value or
modify or change any existing material license, lease, contract or other
document, other than in the ordinary course of business consistent with past
practice; and |
||
(vii) | not settle or compromise any claim brought by any present,
former or purported holder of any securities of Esprit or its Subsidiaries in
connection with the transactions contemplated by this Agreement without the
prior written consent of Esprit Ltd. |
6.2 | Pengrowth Conduct of Business. |
(a) | it will, and will cause each of its Subsidiaries to, conduct its undertaking
and businesses only in, and not take any action except in, the usual, ordinary and
regular course of business and consistent with past practice except to the extent
necessary to comply with applicable Laws and to complete the transactions contemplated
hereby or any transactions entered into prior to the date hereof (all of which have
been in the ordinary course of business); |
-24-
(b) | other than as disclosed in the meeting materials prepared for Pengrowths 2006
Annual and Special Meeting of Unitholders and except as contemplated hereby, it will
not, and will not permit any of Subsidiaries to, directly or indirectly: |
(i) | issue, sell, pledge, lease, dispose of, encumber or agree to
issue, sell, pledge, lease, dispose of or encumber: |
(A) | any Pengrowth Units or shares of any Subsidiary
or any options, warrants, calls, conversion privileges or rights of any
kind to acquire any such shares or trust units other than the issue of
Pengrowth Units pursuant to the terms of this Agreement and pursuant to
the Pengrowth Incentive Plans or the Pengrowth DRIP; or |
||
(B) | other than oil and natural gas production in
the ordinary course of business, any assets of Pengrowth or its
Subsidiaries in excess of $5 million individually or $20 million in the
aggregate; |
(ii) | amend or propose to amend their respective trust declarations,
articles, by-laws, unanimous shareholder agreements, management agreements or
other constating documents, including without limitation, the Pengrowth Trust
Indenture and the Pengrowth Royalty; |
||
(iii) | split, combine or reclassify any outstanding Pengrowth Units,
or declare, set aside or pay any dividends or other distributions payable in
cash, stock, property or otherwise with respect to the Pengrowth Units, other
than the regular monthly cash distributions made by Pengrowth, of an amount
equal to $0.25 per Pengrowth Unit paid on a single specified date to Pengrowth
Unitholders of record as of a single specified date; |
||
(iv) | redeem, purchase, offer to purchase or otherwise acquire any
Pengrowth Units or other securities of Pengrowth or any of its Subsidiaries
including under any normal course issuer bid or pursuant to Pengrowths odd lot
program; |
||
(v) | reorganize, amalgamate, merge or otherwise continue Pengrowth
or any of its Subsidiaries with, or acquire or agree to acquire (by merger,
amalgamation, consolidation, acquisition of stock or assets or otherwise), any
Person, corporation, trust, partnership or other business organization
whatsoever (including any division) or acquire or agree to acquire any assets
having a value of $5 million or greater on an individual basis or $20 million
or greater in aggregate; |
||
(vi) | delist, or make any announcements of the intention to delist,
the Pengrowth Units from trading on either the TSX or the NYSE; or |
||
(vii) | authorize or propose any of the foregoing, or enter into or
modify any contract, agreement, commitment, or arrangement to do any of the
foregoing; |
(c) | it will, and will cause each of its Subsidiaries to, use reasonable commercial
efforts to cause its current insurance (or re-insurance) policies not to be cancelled
or terminated or any of the coverage thereunder to lapse, unless simultaneously with
such termination, cancellation or lapse, replacement policies underwritten by insurance
and re-insurance |
-25-
companies of nationally recognized standing providing coverage equal to or greater
than the coverage under the cancelled, terminated or lapsed policies for
substantially similar premiums are in full force and effect; and |
|||
(d) | it will, and will cause each of its Subsidiaries to: |
(i) | use reasonable commercial efforts to preserve intact their
respective business organizations and goodwill and to maintain satisfactory
relationships with suppliers, agents, distributors, customers and others having
business relationships with it; |
||
(ii) | not take any action that would render, or that reasonably may
be expected to render, any representation or warranty made by it in this
Agreement untrue in any material respect at any time prior to the completion of
the transactions contemplated in this Agreement; |
||
(iii) | co-operate and use reasonable commercial efforts to comply
with all reasonable requests by Esprit and its Subsidiaries to make joint
investor presentations or other forms of information available in order to
support the transactions contemplated by this Agreement; |
||
(iv) | promptly notify Esprit orally and in writing of any Material
Adverse Change in respect of Pengrowth and of any material Governmental Entity
or third party complaints, investigations or hearings (or communications
indicating that the same may be contemplated); |
||
(v) | not waive, release, grant or transfer any rights of value or
modify or change any existing material license, lease, contract or other
document, other than in the ordinary course of business consistent with past
practice and other than amendments to the Pengrowth Trust Indenture disclosed
in the meeting materials prepared for Pengrowths 2006 Annual and Special
Meeting of Unitholders, dated May 16, 2006; and |
||
(vi) | not settle or compromise any claim brought by any present,
former or purported holder of any securities of Pengrowth or its Subsidiaries
in connection with the transactions contemplated by this Agreement without the
prior written consent of Esprit Ltd.; and |
||
(vii) | use its reasonable commercial efforts to obtain approval for
the listing of the Pengrowth Units issuable pursuant to the Acquisition and
Redemption Transaction on the TSX and the NYSE and will make an application for
the substitutional listing on the TSX of the Esprit Debentures which shall be
assumed by Pengrowth pursuant to the Acquisition and Redemption Transaction and
the Assumption Agreement. |
6.3 | Access to Information. |
(a) | Esprit and Esprit Ltd. shall not directly or indirectly, through any trustee,
officer, director, employee, financial advisor or other representative or agent of the
Esprit Parties (i) solicit, initiate or encourage (including by way of furnishing
information or entering into any form of agreement, arrangement or understanding) any
inquiries or proposals regarding any Acquisition Proposal involving it or its
Subsidiaries or unitholders or participate in or take any other action to facilitate
any inquiries or the making of any proposal which constitutes or may reasonably be
expected to lead to such an Acquisition Proposal, or (ii) provide any confidential
information to, participate in any discussions or negotiations relating to any
Acquisition Proposal with, or otherwise cooperate with or assist or participate in any
effort to initiate any Acquisition Proposal by, any Person; provided that, nothing
contained in this Section 6.4(a) or any other provision of this Agreement shall prevent
the Esprit Board of Directors from responding or acting in any manner (including
considering, negotiating, approving and recommending to its respective unitholders
(provided that prior to furnishing information or entering into negotiations with any
Person, Esprit and Esprit Ltd. shall have (i) complied with Section 6.4(c) hereof,
prior to providing any non-public information to any such Person, (ii) complied with
Section 6.4(d) hereof and (iii) prior to entering into any agreement in respect of any
such Acquisition Proposal, have complied with Section 6.5 hereof) to an unsolicited
bona fide written Acquisition Proposal (A) in respect of which any funds or other
consideration necessary for such Acquisition Proposal has been demonstrated to the
satisfaction of the Esprit Board of Directors to be reasonably likely to be obtained,
and (B) in respect of which the Esprit Board of Directors determines in good faith
would, if consummated in accordance with its terms, result in a transaction financially
more favourable to Esprit or the Esprit Unitholders than the transactions contemplated
by this Agreement (any such Acquisition Proposal being referred to herein as a
Superior Proposal). Any good faith determination under this Section 6.4(a) shall
only be made by duly passed resolution of the Esprit Board of Directors after
consultation with its financial advisors and receipt by such Board of advice of counsel
to the effect that entertaining or negotiating such Acquisition Proposal or the
furnishing of information concerning the Esprit Parties is necessary for such board to
satisfy its fiduciary duties under applicable Laws. |
||
(b) | Subject to Section 6.4(a), each of Esprit and Esprit Ltd. agrees that it shall,
and shall direct and use its best commercial efforts to cause their respective
trustees, directors, officers, employees, representatives and agents to, immediately
cease and cause to be terminated any discussions or negotiations with any Person, other
than the Pengrowth Parties with respect to any actual, future or potential Acquisition
Proposal. Subject to Sections 6.4(a) and 6.4(d), the Esprit Parties shall immediately
close any data rooms and the Esprit Parties agree not to release any third party from
or forebear in the enforcement of any confidentiality or standstill agreement to which
the Esprit Parties and any such third party is a party. The Esprit Parties will
immediately request the return or |
destruction of all information provided to any third parties who have entered into a
confidentiality agreement with any of the Esprit Parties relating to a potential
Acquisition Proposal and will use its best commercial efforts to ensure that such
requests are honoured. |
|||
(c) | Prior to furnishing any information to or entering into any negotiations with
any Person in respect of an Acquisition Proposal, each of Esprit and Esprit Ltd. shall
notify the Pengrowth Parties of any Acquisition Proposal received by it or any request
received by it following the date hereof for non-public information relating to the
Esprit Parties in connection with an Acquisition Proposal or for access to the
properties, books or records of the Esprit Parties by any Person that informs the
Esprit Parties that it is considering making, or has made, an Acquisition Proposal.
Such notice shall be made, from time to time, orally and in writing and shall indicate
such details of the proposal, inquiry or contact known to the Esprit Parties as the
Pengrowth Parties may reasonably request, having regard to the fiduciary obligations of
the Esprit Board of Directors and the identity of the Person making such proposal,
inquiry or contact. |
||
(d) | If any of the Esprit Parties receives a request for material non-public
information from a Person who proposes to the Esprit Parties a bona fide Acquisition
Proposal and the Esprit Board of Directors determines, having complied with Section
6.4(a), that such proposal is a Superior Proposal, the Esprit Party may, subject to the
execution of a confidentiality agreement containing customary terms, conditions and
restrictions substantially similar to the Confidentiality Agreement, provide such
Person with access to information regarding the Esprit Party. To the extent not
previously done, the Esprit Parties shall provide to the Pengrowth Parties a copy of
all information provided to such Person forthwith after the information is provided to
such Person. |
(a) | co-operation in the preparation and filing of the documentation giving effect
to the transactions contemplated hereby (including the Esprit Circular) and any
regulatory and governmental filings or submissions in connection with all Required
Regulatory Approvals, including under the Competition Act and under the Investment
Canada Act and any amendments to any such filings; and |
||
(b) | to diligently make all required regulatory filings and applications and to
obtain all licenses, permits, consents, approvals, authorizations, qualifications and
orders (i) in connection with all Required Regulatory Approvals, and (ii) in connection
with all Required Third Party Approvals. |
(a) | the Esprit Unitholders shall have approved the resolutions to approve the
Esprit Trust Indenture Amendments and Acquisition and Redemption Transaction in
accordance with applicable Law and the Esprit Trust Indenture at the Esprit Special
Meeting; |
(b) | the documents by which the Acquisition and Redemption Transaction is to be
effected shall be in form and substance satisfactory to the Esprit Parties and the
Pengrowth Parties, acting reasonably, including without limitation, documents providing
for the Esprit Trust Indenture Amendments to effect the Acquisition and Redemption
Transaction; |
||
(c) | each of Pengrowth and Esprit shall have determined, each acting reasonably,
that all Required Regulatory Approvals and Required Third Party Approvals have been
obtained on terms satisfactory to each of Pengrowth and Esprit in their reasonable
judgment and any applicable Governmental Entity waiting period shall have expired or
been terminated; |
||
(d) | each of Pengrowth and Esprit shall have received from and delivered to the
other a certificate from a designated officer confirming that each qualifies, and has
qualified at all material times, as a mutual fund trust (as defined in the Tax Act); |
||
(e) | each of Pengrowth and Esprit, each acting reasonably, shall have determined
that: |
(i) | no act, action, suit, or proceeding has been threatened or
taken before or by any domestic or foreign court or tribunal or Governmental
Entity or Person in Canada or elsewhere, whether or not having the force of
Law; and |
||
(ii) | no Law has been proposed,
enacted, promulgated or applied, |
||
in the case of either (i) or (ii); | |||
(iii) | to cease trade the Esprit Units or the Pengrowth Units or
enjoin, prohibit or impose material limitations or conditions on the
Acquisition and Redemption Transaction; or |
||
(iv) | which would have a Material Adverse Effect with respect to
Pengrowth or Esprit; |
(f) | Pengrowth shall have, effective as at the Closing Time, taken all necessary
action to increase the size of the Pengrowth Board of Directors and appointed one
member as contemplated in Section 2.19; and |
||
(g) | there shall not exist any prohibition at Law against Pengrowth and Esprit
completing the Acquisition and Redemption Transaction. |
(a) | the representations and warranties made by Pengrowth and Pengrowth Co in this
Agreement shall be true and correct in all material respects as of the Time of Closing
as if made on and as of such date (except to the extent such representations and
warranties |
speak as of an earlier date or except as affected by transactions
contemplated or permitted by this Agreement or the Acquisition and Redemption
Transaction), and Pengrowth and Pengrowth Co shall have provided to Esprit and Esprit
Ltd. a certificate of two Designated Officers certifying such accuracy at the Time of
Closing; |
|||
(b) | Pengrowth and Pengrowth Co shall have complied in all material respects with
their respective covenants herein and Pengrowth and Pengrowth Co shall have provided to
Esprit and Esprit Ltd. a certificate of two Designated Officers certifying compliance
with its covenants herein including Section 2.12, Section 2.13, Section 2.18 (in
connection with the payment of a retention bonus to Offered Employees), Section 2.19
and Section 3.2(a); |
||
(c) | the Esprit Board of Directors shall have received the written Esprit Fairness
Opinion; |
||
(d) | Esprit and Esprit Ltd. shall have received an opinion of counsel to Pengrowth
and Pengrowth Co, in form and substance satisfactory to Esprit and Esprit Ltd., as to
such matters as Esprit and Esprit Ltd., acting reasonably, may require, including with
respect to the status of Pengrowth as a mutual fund trust under Section 132 of the
Tax Act; |
||
(e) | all other documents and information that may be reasonably requested by Esprit
and Esprit Ltd. or their respective counsel shall have been provided or delivered to
Esprit or Esprit Ltd. by Pengrowth or Pengrowth Co, as applicable; |
||
(f) | there shall not have occurred or arisen after the date of this Agreement (or,
if there has previously occurred, there shall not have been omitted to be disclosed in
writing, generally or to Esprit by Pengrowth prior to the date of this Agreement) any
change (or any condition, event or development involving a prospective change) which,
in the reasonable judgment of Esprit involves a Material Adverse Effect with respect to
Pengrowth; and |
||
(g) | the Pengrowth Unit Consolidation shall have been completed substantially in the
form described in the Information Circular Proxy Statement of Pengrowth and Pengrowth
Co dated May 16, 2006. |
(a) | the representations and warranties made by Esprit and Esprit Ltd. in this
Agreement shall be true and correct in all material respects as of the Time of Closing
as if made on and as of such date (except to the extent such representations and
warranties speak as of an earlier date or except as affected by transactions
contemplated or permitted by this Agreement or the Acquisition and Redemption
Transaction), and Esprit and Esprit Ltd. shall have provided to Pengrowth and Pengrowth
Co a certificate of two Designated Officers certifying such accuracy at the Time of
Closing; |
(b) | Esprit and Esprit Ltd. shall have complied in all material respects with their
respective covenants herein and Esprit and Esprit Ltd. shall have provided to Pengrowth
and Pengrowth Co a certificate of two Designated Officers certifying compliance with
its covenants herein; |
||
(c) | the number of Esprit Units at the Time of Closing shall not exceed 67,025,000
Esprit Units (excluding Esprit Units that may be issued upon exercise of any Esprit
Debenture); |
||
(d) | Pengrowth and Pengrowth Co shall have received an opinion of counsel to Esprit
and Esprit Ltd., in form and substance satisfactory to Pengrowth and Pengrowth Co, as
to such matters as Pengrowth and Pengrowth Co, acting reasonably, may require,
including with respect to the status of Esprit as a mutual fund trust under Section
132 of the Tax Act; |
||
(e) | all outstanding Esprit Rights shall have been exercised, terminated or
surrendered for cancellation on terms and conditions set forth herein or Pengrowth
shall be satisfied in respect thereof; |
||
(f) | all other documents and information that may be reasonably requested by
Pengrowth and Pengrowth Co or their respective counsel shall have been provided or
delivered to Pengrowth or Pengrowth Co by Esprit or Esprit Ltd., as applicable; |
||
(g) | there shall not have occurred or arisen after the date of this Agreement (or,
if there has previously occurred, there shall not have been omitted to be disclosed in
writing, generally or to Pengrowth by Esprit prior to the date of this Agreement) any
change (or any condition, event or development involving a prospective change) which,
in the reasonable judgment of Pengrowth involves a Material Adverse Effect with respect
to Esprit; and |
||
(h) | Esprit shall not have received notice before the applicable deadline from the
holders or more than 5% of the issued and outstanding Esprit Units of their intention
to exercise the right of dissent contemplated by Section 6.15 hereof. |
(a) | cause any of the representations and warranties of such Party contained herein
to be untrue or inaccurate in any material respect on the date hereof or at the Time of
Closing; |
||
(b) | result in the failure to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such Party prior to the Time of Closing; |
||
(c) | cause any Material Adverse Change in respect of such Party or its Subsidiaries;
or |
||
(d) | results in a misrepresentation being contained in the Esprit Circular or the
Registration Statement. |
(a) | If at any time after the execution of this Agreement and prior to the
termination hereof: |
(i) | the Esprit Board of Directors or the Pengrowth Board of
Directors (in such case the Esprit Parties or the Pengrowth Parties,
respectively, being the Non-Completing Party in this Section 8.2(a)(i)) has
withdrawn, changed or modified in a manner adverse to the Other Party, or
failed to reaffirm upon request (other than as a result of and in direct
response to a material breach by the Other Party of their obligations under
this Agreement that would or reasonably could result in the non-satisfaction of
the conditions precedent to the closing of the transactions contemplated hereby
or a material misrepresentation by the Other Party or a Material Adverse Change
to the Other Party) any of: |
(A) | the recommendations or determinations referred
to in Section 2.20 in respect of the Esprit Board of Directors; or |
||
(B) | the authorization to complete the Acquisition
and Redemption Transaction as contemplated by the representations in
paragraph (b) in Schedule C in respect of the Esprit Parties and
paragraph (b) in Schedule D in respect of the Pengrowth Parties, |
or resolved to take any of the foregoing actions prior to the completion of
the Acquisition and Redemption Transaction; or |
(ii) | Esprit or the Esprit Board of Directors (in such case the
Esprit Parties being the Non-Completing Party) accepts, recommends, approves
or enters into an agreement to implement a Superior Proposal; or |
||
(iii) | prior to the date of the Esprit Special Meeting a bona fide
Acquisition Proposal is publicly announced, proposed, offered or made to any of
the Esprit Parties (in |
such case the Esprit Parties being the Non-Completing
Party) or the Esprit Unitholders, the Acquisition and Redemption Transaction
is not completed and the transactions contemplated by any Acquisition Proposal
is completed within 180 days of the Outside Date; or |
|||
(iv) | any of the Esprit Parties or the Pengrowth Parties (in such
case the Esprit Parties or the Pengrowth Parties, respectively, being the
Non-Completing Party in this Section 8.2(a)(v)) breaches any of its
representations or warranties or covenants contained in this Agreement which
breach individually or in the aggregate would or would reasonably be expected
to have a Material Adverse Effect upon the Non-Completing Party, or would
materially impede completion of the transactions contemplated hereby, and which
the Non-Completing Party fails to cure within five Business Days after receipt
of written notice thereof from the Other Party (except that no cure period
shall be provided for a breach by a Non-Completing Party which by its nature
cannot be cured and in no event shall any cure period extend beyond the Time of
Closing), |
then, subject to Section 8.2(b), if the Esprit Parties are the Non-Completing Party,
Esprit shall pay to Pengrowth, or if the Pengrowth Parties are the Non-Completing
Party, Pengrowth shall pay to Esprit, the sum of $35 million (the Termination Fee)
as liquidated damages in immediately available funds to an account designated by the
Other Party within one Business Day after the first to occur of the events described
above. Only one payment pursuant to this paragraph shall be required to be made. |
|||
(b) | In the event that a Acquisition Proposal is publicly announced, proposed,
offered or made as contemplated by Section 8.2(a)(iii), the Non-Completing Party agrees
to deliver to the Other Party prior to the earlier of the date of the Esprit Special
Meeting and two Business Days prior to the scheduled expiry or closing of the
Acquisition Proposal, an irrevocable letter of credit, in form satisfactory to the
Other Party, acting reasonably, drawable within one Business Day after the Other Party
(not being the Non-Completing Party) shall have delivered to the Non-Completing Party a
written certificate confirming the completion of the transactions contemplated by any
Acquisition Proposal specified in Section 8.2(a)(iii). |
(a) | Each Party acknowledges that all of the payment amounts set out in Section 8.2
are payments of liquidated damages which are a genuine pre-estimate of the damages
which the Party entitled to such damages will suffer or incur as a result of the event
giving rise to such damages and resultant termination of this Agreement and are not
penalties. Each Party irrevocably waives any right it may have to raise as a defence
that any such liquidated damages are excessive or punitive. For greater certainty, the
Parties agree that payment of the amount pursuant to this Article is the sole monetary
remedy of the Party receiving such payment. |
||
(b) | Notwithstanding Section 8.3(a), nothing herein shall prevent any party from
seeking specific performance, injunctive or other equitable relief in order to enforce
or cause the enforcement of or compliance with, any provision of this Agreement. |
(a) | by mutual written consent of the Parties; |
||
(b) | by either Esprit and Esprit Ltd. or Pengrowth and Pengrowth Co, giving notice
in writing to Pengrowth and Pengrowth Co or Esprit and Esprit Ltd., respectively, if
the Closing Date shall have not occurred on or before the Outside Date; |
||
(c) | by either Esprit and Esprit Ltd. or Pengrowth and Pengrowth Co giving notice in
writing to Pengrowth and Pengrowth Co or Esprit and Esprit Ltd., respectively, if any
of the conditions contained in Section 7.1 are not satisfied or waived on or before the
date required for the performance thereof unless the failure of any such condition
shall be due to the failure of the party seeking to terminate this Agreement to perform
the obligations required to be performed by it under this Agreement; |
||
(d) | by Esprit and Esprit Ltd. giving notice in writing to Pengrowth and Pengrowth
Co if any of the conditions contained in Section 7.2 are not satisfied or waived on or
before the date required for the performance thereof; |
||
(e) | by Pengrowth and Pengrowth Co giving notice in writing to Esprit and Esprit
Ltd. if any of the conditions contained in Section 7.3 are not satisfied or waived on
or before the date required for the performance thereof; or |
||
(f) | by either of Esprit or Pengrowth, as the case may be, if the Other Party, as
the case may be, becomes a Non-Completing Party (as defined in Section 8.2(a)). |
(a) | in the case of Esprit or Esprit Ltd., to: | |||||
Esprit Energy Trust 900, 606 4th Street S.W. Calgary, AB T2P 1T1 |
||||||
Attention: | Paul Myers | |||||
President and Chief Executive Officer | ||||||
Facsimile: | (403) 213-3735 | |||||
with a copy to: | ||||||
Osler, Hoskin & Harcourt LLP 2500 TransCanada Tower 450 1st Street S.W. Calgary, AB T2P 5H1 |
||||||
Attention: | Robert A. Lehodey, Q.C. | |||||
Facsimile: | (403) 260-7024 | |||||
(b) | in the case of Pengrowth or Pengrowth Co, to: | |||||
Pengrowth Corporation 2900, 240 4th Avenue S.W. Calgary, AB T2P 4H4 |
||||||
Attention: | James S. Kinnear | |||||
Chairman, President and Chief Executive Officer | ||||||
Facsimile: | (403) 294-0041 | |||||
with a copy to: | ||||||
Pengrowth Corporation 2100, 101 6th Avenue S.W. Calgary, AB T2P 3P4 |
||||||
Attention: | Charles V. Selby | |||||
Vice President and Corporate Secretary | ||||||
Facsimile: | (403) 262-8866 | |||||
Bennett Jones LLP 4500 Bankers Hall East 855 2nd Street S.W. Calgary, AB T2P 4K7 |
||||||
Attention: | Brad Markel | |||||
Facsimile: | (403) 265-7219 |
(a) | change the time for performance of any of the obligations or acts of the
Parties; |
||
(b) | waive any inaccuracies or modify any representation contained herein or in any
document delivered pursuant hereto; |
||
(c) | waive compliance with or modify any of the covenants herein contained and waive
or modify performance of any of the obligations of the Parties; and |
||
(d) | waive compliance with or modify any conditions precedent herein contained. |
(a) | extend the time for the performance of any of the obligations or other acts of
the Other Party; |
||
(b) | waive any inaccuracies in the representations and warranties contained herein
or in any document delivered pursuant hereto that are for the benefit of such Parties;
and |
||
(c) | waive compliance with any of the agreements or conditions contained herein that
are for the benefit of such Party. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the Party to be bound thereby; |
ESPRIT ENERGY TRUST, by Esprit | PENGROWTH ENERGY TRUST, by | |||||
Exploration Ltd. | Pengrowth Corporation | |||||
Per:
|
Paul B. Myers | Per: | James S. Kinnear | |||
Name: Paul B. Myers | Name: James S. Kinnear | |||||
Title: President and Chief Executive Officer | Title: Chairman, President and Chief Executive Officer | |||||
Per:
|
Stephen B. Soules | Per: | Christopher A. Webster | |||
Name: Stephen B. Soules | Name: Christopher A. Webster | |||||
Title: Executive Vice President and Chief Financial Officer | Title: Chief Financial Officer | |||||
ESPRIT EXPLORATION LTD. | PENGROWTH CORPORATION | |||||
Per:
|
Paul B. Myers | Per: | James S. Kinnear | |||
Name: Paul B. Myers | Name: James S. Kinnear | |||||
Title: President and Chief Executive Officer | Title: Chairman, President and Chief Executive Officer | |||||
Per:
|
Stephen B. Soules | Per: | Christopher A. Webster | |||
Name: Stephen B. Soules | Name: Christopher A. Webster | |||||
Title: Executive Vice President and Chief Financial Officer | Title: Chief Financial Officer |
1. | 100% of the issued and outstanding shares in the capital of Esprit Exploration Ltd. |
|
2. | 100% of the issued and outstanding common shares in the capital of Esprit Exchangeco Ltd. |
|
3. | NPI Agreement. |
|
4. | $86,500,000 No-Interest Unsecured Subordinated Promissory Note of Esprit Acquisition Corp. (a
predecessor by amalgamation to Esprit Exploration Ltd.) due October 1, 2014. |
|
5. | $260,600,000 11% Unsecured Subordinated Promissory Note of Esprit Acquisition Corp. (a
predecessor by amalgamation to Esprit Exploration Ltd.) due October 1, 2014. |
|
6. | $80,065 11% Unsecured Subordinated Demand Class A Promissory Note of Esprit Exploration Ltd.
due December 31, 2015. |
|
7. | $85,819,493 11% Unsecured Subordinated Demand Class A Promissory Note of Esprit Exploration
Ltd. due December 31, 2015. |
|
8. | $199,442,136 11% Unsecured Subordinated Demand Class B Promissory Note of Esprit Exploration
Ltd. due December 31, 2015. |
1. | (a) | Interpretation Capitalized terms not specifically defined herein have the meanings
given to them in the Combination Agreement. |
(b) | Assumption of Liabilities Pengrowth hereby assumes and becomes liable for,
and shall pay, satisfy, assume, discharge, observe, perform and fulfill, all the
Assumed Liabilities in accordance with their terms. |
(c) | Indemnified Persons - In connection therewith, Pengrowth shall: |
(i) | indemnify and save Esprits and its Subsidiaries trustees,
directors, officers, employees and agents and its Unitholders (together, the
Indemnified Persons) harmless from all and any costs, damages or expenses
that may be paid or incurred following any claim, suit or action taken by any
other party because of the failure of Pengrowth to discharge and perform all or
any of the obligations, covenants, agreements and obligations forming part of
the liabilities assumed hereunder (for purposes hereof, Subsidiary has the
meaning ascribed thereto in the Combination Agreement); and |
(ii) | if any suit or action is commenced against any of the
Indemnified Persons in connection with any of the assumed liabilities or in
respect of any covenant, condition, agreement or obligation assumed hereby,
assume the conduct of such case and provide to the Indemnified Persons such
further indemnification from all costs, damages or expenses as they may
reasonably require. |
2. | Further Assurances Pengrowth will, from time to time, and at all times hereafter upon the
reasonable request of the Indemnified Persons and at the cost of Pengrowth, do and execute or
cause or procure to be made, done and executed all such further acts, deeds and assurances for
more effectually and completely assuming and becoming liable for the liabilities assumed in
accordance with this agreement. |
3. | Governing Law This agreement shall be construed, interpreted and enforced in accordance
with, and the respective rights and obligations of the parties shall be governed by, the laws
of the Province of Alberta. Each party hereby unconditionally and irrevocably submits to the
non-exclusive jurisdiction of the courts of the Province of Alberta. |
4. | Binding Effect This agreement shall enure to the benefit of and shall be binding on and
enforceable by the parties, including the Indemnified Persons, and, where the context so
permits, their respective heirs, administrators, legal personal representatives, successors
and permitted assigns. Notwithstanding the foregoing: |
(i) | The Parties hereto acknowledge that Esprit Ltd. is entering into this
Agreement solely in its capacity as agent on behalf of Esprit and the
obligations of Esprit hereunder shall not be personally binding upon Esprit
Ltd. or any Esprit Unitholders or any beneficiary under a plan of which a
holder of trust units acts as a trustee or carrier, and that resort shall not
be had to, nor shall recourse be sought from, any of the foregoing or the
private property of any of the foregoing in respect of any indebtedness,
obligation, or liability of Esprit arising hereunder or arising in connection
herewith or from the matters to which this Agreement relates, if any, including
without limitation claims based on negligence or otherwise tortious behavior,
and recourse shall be limited to, and satisfied only out of, the Trust Assets
(as defined in the Esprit Trust Indenture). |
(ii) | The parties hereto acknowledge that Pengrowth Co is entering into
this agreement solely in its capacity as administrator on behalf of the
Pengrowth and the obligations of Pengrowth hereunder shall not be personally
binding upon Pengrowth Co or any of the Pengrowth Unitholders and that any
recourse against Pengrowth, Pengrowth Co or any Pengrowth Unitholder in any
manner in respect of any indebtedness, obligation or liability of Pengrowth
arising hereunder or arising in connection herewith or from matters to which
this agreement relates, in any way, including without limitation claims based
on negligence or otherwise tortious behaviour, shall be limited to, and
satisfied only out of, the Trust Fund (as defined in the Pengrowth Trust
Indenture). |
ESPRIT ENERGY TRUST, by Esprit Exploration Ltd. |
||||
By: | ||||
Name: | ||||
Title: | ||||
PENGROWTH ENERGY TRUST, by Pengrowth Corporation |
||||
By: | ||||
Name: | ||||
Title: | ||||
(a) | Organization and Qualification. Esprit is a trust duly created and
validly existing under the Laws of the Province of Alberta and has the requisite trust
power and authority to own its assets and to conduct its affairs as now conducted. Each
of Esprit Ltd. and Esprit Exchangeco is a corporation duly incorporated or amalgamated
and validly existing under the Laws of its jurisdiction of incorporation and has the
requisite corporate power and authority to own its assets as now owned and to carry on
its business as now conducted. Each of the Esprit Parties is duly registered to conduct
its affairs or do business, as applicable, in each jurisdiction in which the character
of its assets, owned or leased, or the nature of its activities makes such registration
necessary, except where the failure to be so registered would not have a Material
Adverse Effect on the Esprit Parties. |
(b) | Authority Relative to this Agreement. Esprit Ltd. has the requisite
corporate power and authority to execute this Agreement, in its own capacity and in its
capacity as administrator of Esprit, as applicable, and each of Esprit and Esprit Ltd.
has the requisite trust or corporate power and authority, as applicable, to carry out
its obligations hereunder. The execution and delivery of this Agreement and the
consummation by Esprit and Esprit Ltd. of the Acquisition and Redemption Transaction
have been duly authorized by the Esprit Board of Directors and, subject to the
requisite approval of the Esprit Unitholders, no other proceedings on the part of
Esprit or Esprit Ltd. are necessary to authorize this Agreement or the Acquisition and
Redemption Transaction. This Agreement has been duly executed and delivered by each of
Esprit and Esprit Ltd. and constitutes a legal, valid and binding obligation of each of
Esprit and Esprit Ltd. enforceable against them in accordance with its terms, subject
to the qualification that such enforceability may be limited by bankruptcy, insolvency,
reorganization or other Laws of general application relating to or affecting rights of
creditors and that equitable remedies, including specific performance, are
discretionary and may not be ordered. |
(c) | Subsidiaries. Esprit has no Subsidiaries (other than the Material
Subsidiaries) that are material to its business, operation or financial condition. |
(d) | No Violations. Except as disclosed to Pengrowth in the Esprit
Disclosure Letter, or as contemplated by this Agreement: |
(i) | neither the execution and delivery of this Agreement by Esprit
and Esprit Ltd. nor the consummation of the Special Distribution or the
Acquisition and Redemption Transaction nor compliance by the Esprit Parties
with any of the provisions hereof will: (A) violate, conflict with, or result
in a breach of any provision of, require any consent, approval or notice under,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) or result in a right of termination or
acceleration under, or result in the creation of any encumbrance upon any of
the properties or assets of the Esprit Parties or cause any indebtedness to
come due before its stated maturity or cause
|
any credit to cease to be available, under any of the terms, conditions or
provisions of (1) the Esprit Material Agreements or the articles, by-laws,
shareholder agreements or other constating document of any Esprit Party, or
(2) any material note, bond, mortgage, indenture, loan agreement, deed of
trust, agreement, lien, contract or other instrument or obligation to which
a Esprit Party is a party or to which any of them, or any of their
respective properties or assets, may be subject or by which a Esprit Party
is bound; or (B) subject to compliance with applicable statutes and
regulations, violate any judgment, ruling, order, writ, injunction,
determination, award, decree, statute, ordinance, rule or regulation
applicable to the Esprit Parties or any of their respective properties or
assets (except, in the case of each of clauses (A) and (B) above, for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of encumbrances which, or any consents, approvals or notices which
if not given or received, would not have any Material Adverse Effect on the
Esprit Parties taken as a whole, or significantly impede the ability of the
Esprit Parties to consummate the Special Distribution or the Acquisition and
Redemption Transaction); or (C) cause the suspension or revocation of any
authorization, consent, approval or license currently in effect which would
have a Material Adverse Effect on the Esprit Parties; and |
|||
(ii) | than in connection with or in compliance with the provisions of
applicable Laws, and except for the requisite approval of Esprit Unitholders,
the Court, the Competition Bureau and the Minister of Industry, (A) there is no
legal impediment to the Esprit Parties consummation of the Special
Distribution or the Acquisition and Redemption Transaction, and (B) no filing
or registration with, or authorization, consent or approval of, any domestic or
foreign public body or authority is required of the Esprit Parties in
connection with the consummation of the Special Distribution or the Acquisition
and Redemption Transaction, except for such filings or registrations which, if
not made, or for such authorizations, consents or approvals which, if not
received, would not have a Material Adverse Effect on the Esprit Parties, or
significantly impede the ability of the Esprit Parties to consummate the
Special Distribution or the Acquisition and Redemption Transaction. |
(e) | Litigation. There are no actions, suits or proceedings in existence or
pending or, to the knowledge of Esprit Ltd., threatened or for which there is a
reasonable basis, affecting or that would affect the Esprit Parties or affecting or
that would affect any of their respective property or assets at law or equity or before
or by any court or Governmental Entity which action, suit or proceeding involves a
possibility of any judgment against or liability of the Esprit Parties which, if
successful, would have a Material Adverse Effect on the Esprit Parties, or would
significantly impede the ability of the Esprit Parties to consummate the Acquisition
and Redemption Transaction. |
(f) | Taxes, etc. Except as disclosed in the Esprit Disclosure Letter: |
(i) | all Tax Returns required to be filed by or on behalf of any
Esprit Parties have been duly filed on a timely basis and such tax returns are
correct in all material respects. All Taxes shown to be payable on the Tax
Returns or on subsequent assessments with respect thereto have been paid in
full on a timely basis, and no other Taxes are payable by any Esprit Parties
with respect to items or periods covered by such Tax Returns; |
(ii) | Esprit has paid or provided adequate accruals in its
consolidated financial statements for the period from inception to December 31,
2005 for Taxes, including income taxes and related future taxes, if applicable,
for such periods, in conformity with GAAP; |
(iii) | no material deficiencies exist or have been asserted with
respect to Taxes of Esprit or any of its Subsidiaries; |
(iv) | none of Esprit or its Subsidiaries is a party to any action or
proceeding for assessment or collection of Taxes, nor, to the knowledge of
Esprit and Esprit Ltd., has such an event been asserted or threatened against
Esprit or its Subsidiaries or any of their respective assets that would have a
Material Adverse Effect on the Esprit Parties. No waiver or extension of any
statute of limitations is in effect with respect to Taxes or Tax Returns of
Esprit or its Subsidiaries. No audit by tax authorities of Esprit or its
Subsidiaries is in process or pending, to the knowledge of Esprit; and |
(v) | Esprit has provided adequate accruals in its consolidated
financial statements in accordance with GAAP for the period ended December 31,
2005 (or such amounts are fully funded) for all pension or other employee
benefit obligations of Esprit and its Subsidiaries arising under or relating to
each of the pension or retirement income plans or other employee benefit plans
or agreements or policies maintained by or binding on Esprit or its Material
Subsidiaries. |
(g) | Reporting Issuer Status. Esprit is a reporting issuer (where such
concept exists) in good standing in all provinces of Canada and is in material
compliance with all Applicable Canadian Securities Laws therein and the Esprit Units
and the Esprit Debentures are listed and posted for trading on the TSX. |
(h) | Capitalization. As of the date hereof, the authorized capital of Esprit
consists of an unlimited number of Esprit Units and an unlimited number of Special
Voting Shares (as defined in the Esprit Trust Indenture). As of June 30, 2006, there
were issued and outstanding 66,466,903 Esprit Units and 1 Special Voting Unit. Other
than (i) up to 2,100,000 Esprit Units issuable pursuant to Esprit Rights outstanding
under the Esprit PUIP, (ii) the 529,528 Esprit Units issuable pursuant to the Esprit
Exchangeable Shares (assuming an exchange ratio of 1.35 applied to the 392,243
outstanding Esprit Exchangeable Shares), (iii) Esprit Units issuable pursuant to the
Esprit Debentures, and (iv) 27,320 Esprit Units issuable pursuant to the
Post-Arrangement Entitlements (collectively, the Esprit Securities Instruments),
there are no options, warrants or other rights, agreements or commitments of any
character whatsoever requiring the issuance, sale or transfer by Esprit of any
securities of Esprit (including Esprit Units) or any securities convertible into, or
exchangeable or exercisable for, or otherwise evidencing a right to acquire, any
securities of Esprit (including Esprit Units). All outstanding Esprit Units have been
duly authorized and validly issued, are fully paid and non-assessable and are not
subject to, nor were they issued in violation of, any pre-emptive rights and all Esprit
Units issuable pursuant to the Esprit Securities Instruments in accordance with their
respective terms will be duly authorized and validly issued as fully paid and
non-assessable and will not be subject to any pre-emptive rights. |
(i) | Ownership of Subsidiaries. As of the date hereof, except for the Esprit
Exchangeable Shares, Esprit is the beneficial direct or indirect owner of all of the
outstanding shares of |
(j) | No Orders. No order, ruling or determination having the effect of
suspending the sale of, or ceasing the trading of, the Esprit Units, the Esprit
Debentures or any other securities of Esprit has been issued by any regulatory
authority and is continuing in effect and no proceedings for that purpose have been
instituted, are pending or, to the knowledge of Esprit and Esprit Ltd., are
contemplated or threatened under any applicable Law or by any other regulatory
authority. |
(k) | Material Agreements. There are no agreements material to the conduct of
the Esprit Parties affairs or businesses, as applicable, except for those agreements
disclosed in the Public Record, or disclosed in the Esprit Disclosure Letter or those
entered into in the ordinary course of business, and all such material agreements are
valid and subsisting and the Esprit Party that is a party thereto is not in material
default under any such agreements. Without limitation, the Esprit Disclosure Letter
contains a complete list of all contracts and commitments with any director, officer or
employee of any Esprit Party or any associate or affiliates. |
(l) | Filings. Esprit has filed all documents required to be filed by it with
all applicable Governmental Entities and all such documents were, as of their
respective dates, in compliance in all material respects with all applicable Law and at
the time filed did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading.
Esprit Ltd. will deliver to Pengrowth Co, as soon as they become available, true and
complete copies of any material reports or statements required to be filed by Esprit
with any Governmental Entity subsequent to the date hereof. As of their respective
dates, such reports and statements (excluding any information therein provided by the
Pengrowth Parties, as to which Esprit and Esprit Ltd. make no representation) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading and will comply in all
material respects with all applicable Law. |
(m) | No Material Adverse Change. Since December 31, 2005, other than as
disclosed in the Public Record, (i) the Esprit Parties have conducted their respective
businesses only in the ordinary and normal course, (ii) no liability or obligation of
any nature (whether absolute, accrued, contingent or otherwise) material to Esprit,
taken as a whole, has been incurred other than in the ordinary course of business, and
(iii) there has not been any Material Adverse Change in respect of the Esprit Parties
taken as a whole. |
(n) | Books and Records. The records and minute books of the Esprit Parties
have been maintained substantially in accordance with all applicable Law and are
complete and accurate in all material respects. |
(o) | Reports. As of their respective dates, (i) the Esprit Financial
Statements, (ii) Esprits Revised Annual Information Form dated June 15, 2006
(including all documents incorporated by reference therein), (iii) Esprits information
circular and proxy statement dated March 15, 2006, (iv) all Esprit press releases,
material change reports, business acquisition reports or similar documents filed with
the Securities Authorities since January 1, 2005, and (v) all prospectuses or other
offering documents used by Esprit in the offering of its securities or filed with the
Securities Authorities since January 1, 2005, 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 in which they
were made, not misleading and complied in all material respects with all applicable
Laws. The Esprit Financial Statements and other financial statements of Esprit included
or incorporated by reference in such forms, statements, prospectuses and other offering
documents were prepared in accordance with GAAP (except (x) as otherwise indicated in
such financial statements and the notes thereto or, in the case of audited statements,
in the related report of Esprits independent auditors or (y) in the case of unaudited
interim statements, to the extent they may not include footnotes, are subject to normal
year end adjustments or may be condensed or summary statements), and present fairly in
accordance with GAAP the consolidated financial position, results of operations and
changes in financial position of Esprit on a consolidated basis as of the dates thereof
and for the periods indicated therein (subject, in the case of any unaudited interim
financial statements, to normal year-end audit adjustments) and reflect appropriate and
adequate reserves in respect of contingent liabilities, if any, of Esprit on a
consolidated basis. There has been no material change in Esprit accounting policies,
except as described in the notes to the Esprit Financial Statements, since January 1,
2005. |
(p) | Environmental. Except as disclosed in the Esprit Disclosure Letter, or
than has been disclosed in the Public Record, there has not occurred any material
spills, emissions or pollution on any property of any Esprit Party or Subsidiary, nor
has any Esprit Party or Subsidiary been subject to any stop orders, control orders,
clean-up orders or reclamation orders under applicable Environmental Laws, any of which
might reasonably be expected to have a Material Adverse Effect on Esprit. All
operations of the Esprit Parties and Subsidiaries have been and are now being conducted
in compliance with all applicable Environmental Laws, except where the failure to be in
compliance would not have a Material Adverse Effect on the Esprit Parties and
Subsidiaries, taken as a whole. The Esprit Parties are not subject to nor are they
aware of: |
(i) | any proceeding, application, order or directive which relates
to environmental, health or safety matters, and which may require any material
work, repairs, construction, or expenditures; or |
(ii) | any demand or notice with respect to the breach of any
Environmental Laws applicable to the Esprit Parties, including, without
limitation, any regulations respecting the use, storage, treatment,
transportation, or disposition of any Hazardous Substances, |
which would have a Material Adverse effect on the Esprit Parties. |
(q) | Title. Although they do not warrant title, except as disclosed in the
Esprit Disclosure Letter, neither Esprit nor Esprit Ltd. has any knowledge or is aware
of any defects, failures or impairments in the title of the Esprit Parties to their
respective assets, whether or not an action, suit, proceeding or inquiry is pending or
threatened or whether or not discovered by any third party, which in aggregate could
have a Material Adverse Effect on: (i) the quantity and pre-tax present worth values of
such assets; (ii) the current production volumes of the Esprit Parties; or (iii) the
current consolidated cash flow of the Esprit Parties. |
(r) | Licences. Except as disclosed in the Public Record, each of the Esprit
Parties has obtained and is in compliance with all licences, permits, certificates,
consents, orders, grants and other authorizations of or from any Governmental Entity
necessary to conduct its businesses as they are now being or are proposed to be
conducted, other than such licences, permits, certificates, consents, orders, grants
and other authorizations the absence of which would not have a Material Adverse Effect
on the Esprit Parties. |
(s) | Compliance with Laws. Each of the Esprit Parties has complied with and
is in compliance with all Laws applicable to the operation of its business, except
where such non-compliance would not have a Material Adverse Effect on the business,
affairs, operations, assets, prospects or financial condition of the Esprit Parties or
on the ability of the Esprit Parties to consummate the Acquisition and Redemption
Transaction. |
(t) | Fairness Opinion. The Esprit Board of Directors has received a verbal
opinion as of July 23, 2006 from CIBC World Markets Inc. to the effect that, assuming
the prior payment of the Special Distribution, the consideration to be received by
Esprit Unitholders in connection with the Acquisition and Redemption Transaction is
fair, from a financial point of view, to the Esprit Unitholders. |
(u) | Investment Canada Act. Esprit is a Canadian within the meaning of the
Investment Canada Act (Canada). |
(v) | Insurance. Policies of insurance are in force as of the date hereof
naming each Esprit Party as an insured that adequately cover all risks as are
customarily covered by oil and gas producers in the industry in which the Esprit
Parties operate. All such policies shall remain in force and effect and shall not be
cancelled or otherwise terminated as a result of the transactions contemplated by this
Agreement. |
(w) | Information to Independent Engineer. Esprit and Esprit Ltd. have no
reason to believe that the report prepared by GLJ dated February 23, 2006, with a
preparation date of February 9, 2006 and effective as at December 31, 2005, evaluating
the crude oil, natural gas liquids and natural gas reserves and future net production
revenues attributable to the properties of Esprit as of December 31, 2005 and, if
applicable, any updates to such report or any other reserve evaluation reports which
may be, or be deemed to be, included or incorporated by reference in the Esprit
Information Circular, whether in addition to or as a replacement for such report, was
not accurate in all material respects as at the effective date of such report, and,
except for any impact of changes in commodity prices, which may or may not be material,
Esprit and Esprit Ltd. have no knowledge of a Material Adverse Change in the
production, costs, price, reserves, estimates of future net production revenues or
other relevant information from that disclosed in that report. Esprit has provided to
GLJ all material information concerning land descriptions, well data, facilities and
infrastructure, ownership and operations, future development plans
|
and historical technical and operating data respecting the principal oil and gas
assets of the Esprit Parties, in each case as at the effective date of such reports,
and, in particular, all material information respecting the Esprit Parties
interests in their principal oil and gas assets and royalty burdens and net profits
interest burdens thereon and such information was accurate and correct in all
material respects as at the respective dates thereof and did not omit any
information necessary to make any such information provided not misleading as at the
respective dates thereof and there has been no Material Adverse Change in any of the
material information so provided since the date thereof. |
(x) | Disclosure. The data and information in respect of the Esprit Parties
and their respective assets, reserves, liabilities, businesses, affairs and operations
provided by or on behalf of Esprit to or on behalf of Pengrowth was and is accurate and
correct in all material respects as at the respective dates thereof and does not omit
any material data or information necessary to make any data or information provided not
misleading as at the respective dates thereof. |
(y) | Debt. Esprits consolidated indebtedness does not exceed $365 million
including the Esprit Debentures and the Esprit Credit Facility but excluding hedging
obligations, the Special Distribution, amounts payable in respect of the Esprit Rights
and costs of this transaction. |
(z) | No Reduction of Interests. Except as disclosed in the Esprit Disclosure
Letter, none of the Esprit Parties oil and gas assets are subject to reduction by
reference to payout of or production penalty on any well or otherwise or to change to
an interest of any other size or nature by virtue of or through any right or interest
granted by, through or under a Esprit Party except to the extent that such reduction or
change to an interest would not in the aggregate have a Material Adverse Effect. |
(aa) | Operation and Condition of Wells. All wells in which any of the Esprit
Parties holds an interest, directly or indirectly: |
(i) | for which any of the Esprit Parties was or is operator, were or
have been drilled and, if and as applicable, completed, operated and abandoned
in accordance with good and prudent oil and gas industry practices in Canada
and all applicable Law; and |
(ii) | for which none of the Esprit Parties was or is operator, to
their knowledge, were or have been drilled and, if and as applicable,
completed, operated and abandoned in accordance with good and prudent oil and
gas industry practices in Canada and all applicable Law; |
(bb) | Operation and Condition of Tangibles. The Esprit Parties tangible
depreciable property used or intended for use in connection with their oil and gas
assets: |
(i) | for which any of the Esprit Parties was or is operator, was or
has been constructed, operated and maintained in accordance with good and
prudent oil and gas industry practices in Canada and all applicable Law during
all periods in |
(ii) | for which none of the Esprit Parties was or is operator, to
their knowledge, was or has been constructed, operated and maintained in
accordance with good and prudent oil and gas industry practices in Canada and
all applicable Law during all periods in which none of the Esprit Parties was
operator thereof and is in good condition and repair, ordinary wear and tear
excepted, and is useable in the ordinary course of business; |
(cc) | Outstanding AFEs. there are no outstanding authorizations for
expenditure pertaining to any of the Esprit Parties oil and gas assets or any other
commitments, approvals or authorizations pursuant to which an expenditure may be
required to be made in respect of such assets after the date of the Esprit Financial
Statements in excess of $2.5 million for each such commitment, approval or
authorization other than disclosed in the Esprit Disclosure Letter. The Esprit
Parties outstanding authorizations for expenditure are listed in the Esprit Disclosure
Letter. |
(dd) | Brokers and Finders. The Esprit Parties have not retained nor will they
retain any financial advisor, broker, agent or finder or pay, or agree to pay any
financial advisor, broker, agent or finder on account of this Agreement, any
transaction contemplated hereby or any transaction presently ongoing or contemplated,
except for those advisors which have been retained by Esprit as financial, mergers and
acquisitions, and strategic advisors as set forth in the Esprit Disclosure Letter, in
connection with certain matters including the transactions contemplated hereby. The
total obligation of the Esprit Parties to such advisors is set forth in the Esprit
Disclosure Letter, a copy of which has been provided to Pengrowth. After the payment of
such financial obligations to Esprits advisors, the Esprit Parties will not have any
continuing obligations to such advisors other than those related to indemnification,
confidentiality and the payment of expenses. |
(ee) | Employment and Officer Obligations. Other than the Esprit Employment
Agreements and Esprit Ltd.s consulting services agreements, termination, severance and
retention agreements, and the existing health and benefit plans and pension obligations
and as disclosed in the Esprit Disclosure Letter, in connection with the Acquisition
and Redemption Transaction there are no other employment or consulting services
agreements, termination, severance and retention plans or policies of the Esprit
Parties. The obligations of Esprit Parties under the Esprit Employment Agreements and
all such employment or consulting services agreements, termination, severance plans or
policies for severance, termination or bonus payments or any other payments whatsoever
arising out of or in connection with the Acquisition and Redemption Transaction, shall
not exceed the amounts set forth in the Esprit Disclosure Letter. |
(ff) | Confidentiality Agreements. All agreements entered into by Esprit with
Persons other than Pengrowth regarding the confidentiality of information provided to
such Persons or reviewed by such Persons with respect to the sale of Esprit or a
substantial portion of its assets or any other business combination or similar
transaction with another party are in |
(gg) | Outstanding Acquisitions. The Esprit Parties have no rights to purchase
assets, properties or undertakings of third parties under any agreements to purchase
that have not closed. |
(hh) | Mutual Fund Trust. Esprit is a mutual fund trust and a unit trust
within the meaning of the Tax Act. |
(ii) | Place of Principal Offices. The principal offices of the Esprit Parties
are not located within the United States. |
(jj) | Foreign Private Issuer. Esprit is a foreign private issuer within the
meaning of Rule 405 of Regulation C adopted by the SEC under the U.S. Securities Act. |
(kk) | Investment Company Act of 1940. Esprit is not an investment company
within the meaning of the United States Investment Company Act of 1940, as amended. |
(ll) | Board Approval. The members of the Esprit Board of Directors entitled
to vote have unanimously endorsed the Acquisition and Redemption Transaction and
approved this Agreement, have unanimously determined that the Special Distribution,
Acquisition and Redemption Transaction and this Agreement are in the best interests of
Esprit and the Esprit Unitholders, and has, based on the opinion of its financial
advisor, unanimously determined that the Acquisition and Redemption Transaction is
fair, from a financial point of view, to Esprit Unitholders and has resolved to
unanimously recommend approval of the Acquisition and Redemption Transaction by Esprit
Unitholders. |
(mm) | Esprit Disclosure Letter. The matters disclosed to Pengrowth in the
Esprit Disclosure Letter remain true and correct in all material respects as of the
date hereof. |
(nn) | Registration Statement. The information in the Esprit Information
Circular (excluding any information therein provided by the Pengrowth Parties) and the
information supplied by the Esprit Parties for inclusion in the Registration Statement
shall not at (i) the time the Registration Statement becomes effective, (ii) the time
the Esprit Circular (or any amendment thereof or supplement thereto) is first mailed to
the Esprit Unitholders, (iii) the time of the Esprit Special Meeting and (iv) at the
Closing Date, contain any untrue statement of a material fact or omit to state any
material fact which is necessary in order to make the statements therein, not
misleading. |
(oo) | Disclosure. To the knowledge of Esprit, Esprit has not withheld from
Pengrowth any material information or documents concerning Esprit or any of its
Subsidiaries or their respective assets or liabilities during the course of Pengrowths
review of Esprit and its assets. No representation or warranty contained herein and no
statement contained in any schedule or other disclosure document provided or to be
provided to Pengrowth by Esprit pursuant hereto (including without limitation, any
matter disclosed by Esprit in the Esprit Disclosure Letter) contains or will contain
any untrue statement of a material fact or omits to state a material fact which is
necessary in order to make the statements herein or therein not misleading. |
(pp) | Transaction Expenses. The aggregate expenses of Esprit in respect of
the transactions contemplated hereby, including severance and termination payment to
trustees, directors, |
(a) | Organization and Qualification. Pengrowth is a trust duly created and
validly existing under the Laws of the Province of Alberta and has the requisite trust
power and authority to own its assets and to conduct its affairs as now conducted.
Pengrowth Co is a corporation duly incorporated or amalgamated and validly existing
under the Laws of its jurisdiction of incorporation and has the requisite corporate
power and authority to own its assets as now owned and to carry on its business as now
conducted. Each of the Pengrowth Parties is duly registered to conduct its affairs or
do business, as applicable, in each jurisdiction in which the character of its assets,
owned or leased, or the nature of its activities makes such registration necessary,
except where the failure to be so registered would not have a Material Adverse Effect
on the Pengrowth Parties. |
||
(b) | Authority Relative to this Agreement. Pengrowth Co has the requisite
corporate power and authority to execute this Agreement, in its own capacity and in its
capacity as administrator of Pengrowth, as applicable, and each of Pengrowth and
Pengrowth Co has the requisite trust or corporate power and authority, as applicable,
to carry out its obligations hereunder. The execution and delivery and the consummation
by Pengrowth and Pengrowth Co of the Acquisition and Redemption Transaction have been
unanimously approved and duly authorized by the Pengrowth Board of Directors and no
other proceedings on the part of Pengrowth or Pengrowth Co are necessary to authorize
the Acquisition and Redemption Transaction. This Agreement has been duly executed and
delivered by each of Pengrowth and Pengrowth Co and constitutes a legal, valid and
binding obligation of each of Pengrowth and Pengrowth Co enforceable against them in
accordance with its terms, subject to the qualification that such enforceability may be
limited by bankruptcy, insolvency, reorganization or other Laws of general application
relating to or affecting rights of creditors and that equitable remedies, including
specific performance, are discretionary and may not be ordered. |
||
(c) | Subsidiaries. Pengrowth has no Subsidiaries (other than the Material
Subsidiaries) that are material to its business, operation or financial condition. |
||
(d) | No Violations. Except as disclosed in the Pengrowth Disclosure Letter
or as contemplated by this Agreement: |
(i) | neither the execution and delivery of this Agreement by
Pengrowth and Pengrowth Co nor the consummation of the Acquisition and
Redemption Transaction nor compliance by the Pengrowth Parties with any of the
provisions hereof will: (A) violate, conflict with, or result in a breach of
any provision of, require any consent, approval or notice under, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) or result in a right of termination or acceleration
under, or result in the creation of any encumbrance upon any of the properties
or assets of the Pengrowth Parties or cause any indebtedness to come due before
its stated maturity or cause any credit |
-D-2-
to cease to be available, under any of the terms, conditions or provisions
of (1) the Pengrowth Material Agreements or the trust indenture articles,
by-laws, shareholder agreements or other constating document of any
Pengrowth Party, or (2) any material note, bond, mortgage, indenture, loan
agreement, deed of trust, agreement, lien, contract or other instrument or
obligation to which an Pengrowth Party is a party or to which any of them,
or any of their respective properties or assets, may be subject or by which
a Pengrowth Party is bound; or (B) subject to compliance with applicable
statutes and regulations, violate any judgment, ruling, order, writ,
injunction, determination, award, decree, statute, ordinance, rule or
regulation applicable to the Pengrowth Parties or any of their respective
properties or assets (except, in the case of each of clauses (A) and (B)
above, for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of encumbrances which, or any consents, approvals
or notices which if not given or received, would not have any Material
Adverse Effect on the Pengrowth Parties taken as a whole, or significantly
impede the ability of the Pengrowth Parties to consummate the Acquisition
and Redemption Transaction); or (C) cause the suspension or revocation of
any authorization, consent, approval or license currently in effect which
would have a Material Adverse Effect on the Pengrowth Parties; and |
(ii) | other than in connection with or in compliance with the
provisions of applicable Laws or which are required to be filed following the
Acquisition and Redemption Transaction, and, except for the requisite approval
of a court of competent jurisdiction, the Competition Bureau, Investment Canada
and the Minister of Industry, as applicable, (A) there is no legal impediment
to the Pengrowth Parties consummation of the Acquisition and Redemption
Transaction, and (B) no filing or registration with, or authorization, consent
or approval of, any domestic or foreign public body or authority is required of
the Pengrowth Parties in connection with the consummation of the Acquisition
and Redemption Transaction, except for such filings or registrations which, if
not made, or for such authorizations, consents or approvals which, if not
received, would not have a Material Adverse Effect on the Pengrowth Parties, or
significantly impede the ability of the Pengrowth Parties to consummate the
Acquisition and Redemption Transaction. |
(iii) | Litigation. There are no actions, suits or proceedings
in existence or pending or, to the knowledge of Pengrowth Co, threatened or for
which there is a reasonable basis, affecting or that would affect the Pengrowth
Parties or affecting or that would affect any of their respective property or
assets at law or equity or before or by any court or Governmental Entity which
action, suit or proceeding involves a possibility of any judgment against or
liability of the Pengrowth Parties which, if successful, would have a Material
Adverse Effect on the Pengrowth Parties, or would significantly impede the
ability of the Pengrowth Parties to consummate the Acquisition and Redemption
Transaction. |
(e) | Taxes, etc. Except as disclosed in the Pengrowth Disclosure Letter: |
(i) | All Tax Returns required to be filed by or on behalf of any
Pengrowth Parties have been duly filed and such tax returns are correct in all
material respects. All Taxes shown to be payable on the Tax Returns or on
subsequent assessments with respect thereto have been paid in full on a timely
basis, and no other Taxes |
-D-3-
are payable by any Pengrowth Parties with respect to items or periods
covered by such Tax Returns; |
(ii) | Pengrowth has paid or provided adequate accruals in its
consolidated financial statements for the period from inception to December 31,
2005 for Taxes, including income taxes and related future taxes, if applicable,
for such periods, in conformity with GAAP; |
||
(iii) | no material deficiencies exist or have been asserted with
respect to Taxes of Pengrowth or any of its Subsidiaries; |
||
(iv) | none of Pengrowth or Pengrowth Co is a party to any action or
proceeding for assessment or collection of Taxes, nor, to the knowledge of
Pengrowth and Pengrowth Co, has such an event been asserted or threatened
against Pengrowth or Pengrowth Co or any of their respective assets that would
have a Material Adverse Effect on the Pengrowth Parties. No waiver or extension
of any statute of limitations is in effect with respect to Taxes or Tax Returns
of Pengrowth or Pengrowth Co. No audit by tax authorities of Pengrowth or
Pengrowth Co is in process or pending, to the knowledge of Pengrowth; and |
||
(v) | Pengrowth has provided adequate accruals in its consolidated
financial statements in accordance with GAAP for the period ended December 31,
2005 (or such amounts are fully funded) for all pension or other employee
benefit obligations of Pengrowth and its Material Subsidiaries arising under or
relating to each of the pension or retirement income plans or other employee
benefit plans or agreements or policies maintained by or binding on Pengrowth
or its Material Subsidiaries. |
(f) | Reporting Issuer Status. Pengrowth is a reporting issuer (where such
concept exists) in good standing in all provinces of Canada and is in material
compliance with all Applicable Canadian Securities Laws therein and the Class A trust
units of Pengrowth are listed and posted for trading on the TSX and the NYSE and the
Class B trust units of Pengrowth are listed on the TSX; following the Pengrowth Unit
Consolidation the Pengrowth Units will be listed and posted for trading on the TSX and
the NYSE. |
||
(g) | Capitalization. As of the date hereof, the authorized capital of
Pengrowth consists of 500,000,000 Pengrowth Units and one Special Voting Unit (as
defined in the Pengrowth Trust Indenture). As of June 30, 2006 there were issued and
outstanding 160,777,279 trust units of Pengrowth, comprised of 77,527,433 Class A trust
units, 83,215,734 Class B trust units and 34,112 trust units in the form existing prior
to the reclassification of the trust unit capital of Pengrowth that occurred on July
27, 2004 and no Special Voting Units. Other than pursuant to the Pengrowth Incentive
Plans, and up to the maximum limits allowable in connection therewith, there are no
options, warrants or other rights, agreements or commitments of any character
whatsoever requiring the issuance, sale or transfer by Pengrowth of any securities of
Pengrowth (including Pengrowth Units) or any securities convertible into, or
exchangeable or exercisable for, or otherwise evidencing a right to acquire, any
securities of Pengrowth (including Pengrowth Units). All outstanding Pengrowth Units
have been duly authorized and validly issued, are fully paid and non-assessable and are
not subject to, nor were they issued in violation of, any preemptive rights and all
Pengrowth Units issuable pursuant to the Pengrowth Incentive |
-D-4-
Plans in accordance with their respective terms will be duly authorized and validly
issued as fully paid and non-assessable and will not be subject to any pre-emptive
rights. |
|||
(h) | Ownership of Subsidiaries. As of the date hereof Pengrowth is the
beneficial direct or indirect owner of all of the outstanding shares of its Material
Subsidiaries with good title thereto free and clear of any and all encumbrances. Other
than 100 common shares of Pengrowth Co held by the Pengrowth Manager, there are no
options, warrants or other rights, shareholder or unitholder rights plans, agreements
or commitments of any character whatsoever requiring the issuance, sale or transfer by
any of the Pengrowth Parties (other than Pengrowth) of any securities of the Pengrowth
Parties (other than Pengrowth) or any securities convertible into, or exchangeable or
exercisable for, or otherwise evidencing a right to acquire, any securities of any of
the Pengrowth Parties (other than Pengrowth) or any of their Subsidiaries. All
outstanding securities of the Pengrowth Parties (other than Pengrowth) have been duly
authorized and validly issued, are fully paid and non-assessable and are not subject
to, nor were they issued in violation of, any pre-emptive rights. |
||
(i) | No Orders. No order, ruling or determination having the effect of
suspending the sale of, or ceasing the trading of, the Pengrowth Units, the Pengrowth
Notes or any other securities of Pengrowth has been issued by any regulatory authority
and is continuing in effect and no proceedings for that purpose have been instituted,
are pending or, to the knowledge of Pengrowth and Pengrowth Co, are contemplated or
threatened under any applicable Law or by any other regulatory authority. |
||
(j) | Material Agreements. There are no agreements material to the conduct of
the Pengrowth Parties affairs or businesses, as applicable, except for those
agreements disclosed in the Public Record, disclosed in writing to Esprit prior to July
19, 2006 or those entered into in the ordinary course of business, and all such
material agreements are valid and subsisting and the Pengrowth Party that is a party
thereto is not in material default under any such agreements. |
||
(k) | Filings. Pengrowth has filed all documents required to be filed by it
with all applicable Governmental Entities and all such documents were, as of their
respective dates, in compliance in all material respects with all applicable Laws and
at the time filed did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading.
Pengrowth Co will deliver to Esprit Ltd., as soon as they become available, true and
complete copies of any material reports or statements required to be filed by Pengrowth
with any Governmental Entity subsequent to the date hereof. As of their respective
dates, such reports and statements (excluding any information therein provided by the
Esprit Parties, as to which Pengrowth and Pengrowth Co make no representation) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading and will comply in all
material respects with all applicable Laws. |
||
(l) | No Material Adverse Change. Since December 31, 2005, other than as
disclosed in the Public Record, (i) the Pengrowth Parties have conducted their
respective businesses only in the ordinary and normal course, (ii) no material
liability or obligation of any nature (whether absolute, accrued, contingent or
otherwise) to Pengrowth and Pengrowth Co, taken as a whole, has been incurred other
than in the ordinary course of business, and (iii) |
-D-5-
there has not been any Material Adverse Change in respect of the Pengrowth Parties
taken as a whole. |
|||
(m) | Books and Records. The records and minute books of the Pengrowth
Parties have been maintained substantially in accordance with all applicable Laws and
are complete and accurate in all material respects. |
||
(n) | Reports. As of their respective dates, (i) the Pengrowth Financial
Statements, (ii) Pengrowths Annual Information Form dated March 29, 2006 (including
all documents incorporated by reference therein), (iii) Pengrowths information
circular and proxy statement dated May 16, 2006, (iv) all Pengrowth press releases,
material change reports, business acquisition reports or similar documents filed with
the Securities Authorities since January 1, 2006, and (v) all prospectuses or other
offering documents used by Pengrowth in the offering of its securities or filed with
the Securities Authorities since January 1, 2006, 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 in which they
were made, not misleading and complied in all material respects with all applicable
Law. The Pengrowth Financial Statements and other financial statements of Pengrowth
included or incorporated by reference in such forms, statements, prospectuses and other
offering documents were prepared in accordance with GAAP (except (x) as otherwise
indicated in such financial statements and the notes thereto or, in the case of audited
statements, in the related report of Pengrowths independent auditors or (y) in the
case of unaudited interim statements, to the extent they may not include footnotes, are
subject to normal year end adjustments or may be condensed or summary statements), and
present fairly in accordance with GAAP the consolidated financial position, results of
operations and changes in financial position of Pengrowth on a consolidated basis as of
the dates thereof and for the periods indicated therein (subject, in the case of any
unaudited interim financial statements, to normal year-end audit adjustments) and
reflect appropriate and adequate reserves in respect of contingent liabilities, if any,
of Pengrowth on a consolidated basis. There has been no material change in Pengrowth
accounting policies, except as described in the notes to the Pengrowth Financial
Statements, since January 1, 2006. |
||
(o) | Environmental. Except as disclosed in the Pengrowth Disclosure Letter
or than has been disclosed in the Public Record, there has not occurred any material
spills, emissions or pollution on any property of any Pengrowth Party, nor has any
Pengrowth Party been subject to any stop orders, control orders, clean-up orders or
reclamation orders under applicable Environmental Laws, any of which might reasonably
be expected to have a Material Adverse Effect on Pengrowth. All operations of the
Pengrowth Parties have been and are now being conducted in compliance with all
applicable Environmental Laws, except where the failure to be in compliance would not
have a Material Adverse Effect on the Pengrowth Parties, taken as a whole. The
Pengrowth Parties are not subject to nor are Pengrowth or Pengrowth Co aware of: |
(i) | any proceeding, application, order or directive which relates
to environmental, health or safety matters, and which may require any material
work, repairs, construction, or expenditures; or |
(ii) | any demand or notice with respect to the breach of any
Environmental Laws applicable to the Pengrowth Parties, including, without
limitation, any |
-D-6-
regulations respecting the use, storage, treatment, transportation, or
disposition of any Hazardous Substances, |
which would have a Material Adverse Effect on the Pengrowth Parties. |
|||
(p) | Title. Although they do not warrant title, except as disclosed in the
Pengrowth Disclosure Letter, neither Pengrowth nor Pengrowth Co has any knowledge or is
aware of any material defects, failures or impairments in the title of the Pengrowth
Parties to their respective assets, whether or not an action, suit, proceeding or
inquiry is pending or threatened or whether or not discovered by any third party, which
in aggregate could have a Material Adverse Effect on: (i) the quantity and pre-tax
present worth values of such assets; (ii) the current production volumes of the
Pengrowth Parties; or (iii) the current consolidated cash flow of the Pengrowth
Parties. |
||
(q) | Licences. Except as disclosed in the Public Record, each of the
Pengrowth Parties has obtained and is in compliance with all licences, permits,
certificates, consents, orders, grants and other authorizations of or from any
Governmental Entity necessary to conduct its businesses as they are now being or are
proposed to be conducted, other than such licences, permits, certificates, consents,
orders, grants and other authorizations the absence of which would not have a Material
Adverse Effect on the Pengrowth Parties. |
||
(r) | Compliance with Laws. Each of the Pengrowth Parties has complied with
and is in compliance with all Laws applicable to the operation of its business, except
where such non-compliance would not have a Material Adverse Effect on the business,
affairs, operations, assets, prospects or financial condition of the Pengrowth Parties
or on the ability of the Pengrowth Parties to consummate the Acquisition and Redemption
Transaction. |
||
(s) | Insurance. Policies of insurance are in force as of the date hereof
naming a Pengrowth Party as an insured that adequately cover all risks as are
customarily covered by oil and gas producers in the industry in which the Pengrowth
Parties operate. All such policies shall remain in force and effect and shall not be
cancelled or otherwise terminated as a result of the transactions contemplated by this
Agreement. |
||
(t) | Information to Independent Engineer. Pengrowth and Pengrowth Co have no
reason to believe that the report prepared by GLJ dated February 17, 2006 and effective
as at December 31, 2005, evaluating the crude oil, natural gas liquids and natural gas
reserves and future net production revenues attributable to the properties of Pengrowth
as of December 31, 2005 and, if applicable, any updates to such report or any other
reserve evaluation reports which may be, or be deemed to be, included or incorporated
by reference in Esprit Circular, whether in addition to or as a replacement to such
report, was not accurate in all material respects as at the effective date of such
report, and, except for any impact of changes in commodity prices, which may or may not
be material, Pengrowth and Pengrowth Co have no knowledge of a Material Adverse Change
in the production, costs, price, reserves, estimates of future net production revenues
or other relevant information from that disclosed in that report. Pengrowth has
provided to GLJ all material information concerning land descriptions, well data,
facilities and infrastructure, ownership and operations, future development plans and
historical technical and operating data respecting the principal oil and gas assets of
the Pengrowth Parties, in each case as at the effective dates of such report, and, in
particular, all material information respecting the Pengrowth Parties interests in
their principal oil and gas assets and royalty |
-D-7-
burdens and net profits interest burdens thereon and such information was accurate
and correct in all material respects as at the respective dates thereof and did not
omit any information necessary to make any such information provided not misleading
as at the respective dates thereof and there has been no Material Adverse Change in
any of the material information so provided since the date thereof. |
|||
(u) | Disclosure. The data and information in respect of the Pengrowth
Parties and their respective assets, reserves, liabilities, businesses, affairs and
operations provided by or on behalf of Pengrowth to or on behalf of Esprit was and is
accurate and correct in all material respects as at the respective dates thereof and
does not omit any material data or information necessary to make any data or
information provided not misleading as at the respective dates thereof. |
||
(v) | Debt. As at March 31, 2006, Pengrowths long term consolidated
indebtedness did not exceed $421.1 million. |
||
(w) | No Reduction of Interests. Except as disclosed in the Pengrowth
Disclosure Letter, none of the Pengrowth Parties material oil and gas assets are
subject to reduction by reference to payout of or production penalty on any well or
otherwise or to change to an interest of any other size or nature by virtue of or
through any right or interest granted by, through or under an Pengrowth Party except to
the extent that such reduction or change to an interest would not in the aggregate have
a Material Adverse Effect. |
||
(x) | Operation and Condition of Wells. All wells in which any of the
Pengrowth Parties holds an interest: |
(i) | for which any of the Pengrowth Parties was or is operator, were
or have been drilled and, if and as applicable, completed, operated and
abandoned in accordance with good and prudent oil and gas industry practices in
Canada and all applicable Law; and |
(ii) | for which none of the Pengrowth Parties was or is operator, to
their knowledge, were or have been drilled and, if and as applicable,
completed, operated and abandoned in accordance with good and prudent oil and
gas industry practices in Canada and all applicable Law; |
except, in either case, to the extent that such non-compliance with prudent oil and
gas industry practices or applicable Law would not in the aggregate have a Material
Adverse Effect; |
|||
(y) | Operation and Condition of Tangibles. The Pengrowth Parties tangible
depreciable property used or intended for use in connection with their oil and gas
assets: |
(i) | for which any of the Pengrowth Parties was or is operator, was
or has been constructed, operated and maintained in accordance with good and
prudent oil and gas industry practices in Canada and all applicable Law during
all periods in which an Pengrowth Party was operator thereof and is in good
condition and repair, ordinary wear and tear excepted, and is useable in the
ordinary course of business; and |
-D-8-
(ii) | for which none of the Pengrowth Parties was or is operator, to
their knowledge, was or has been constructed, operated and maintained in
accordance with good and prudent oil and gas industry practices in Canada and
all applicable Law during all periods in which none of the Pengrowth Parties
was operator thereof and is in good condition and repair, ordinary wear and
tear excepted, and is useable in the ordinary course of business; |
except to the extent that such non-compliance with prudent oil and gas industry
practices or applicable Law would not in the aggregate have a Material Adverse
Effect. |
|||
(z) | Outstanding AFEs. There are no outstanding authorizations for
expenditure pertaining to any of the Pengrowth Parties oil and gas assets or any other
commitments, approvals or authorizations pursuant to which an expenditure may be
required to be made in respect of such assets after the date of the most recent
Pengrowth Financial Statements in excess of $25 million for each such commitment,
approval or authorization other than pursuant to the 2006 capital budget disclosed in
writing to Esprit. |
||
(aa) | Brokers and Finders. The Pengrowth Parties have not retained nor will
they retain any financial advisor, broker, agent or finder or pay, or agree to pay any
financial advisor, broker, agent or finder on account of this Agreement or, any
transaction contemplated hereby, other than otherwise as disclosed to Esprit. |
||
(bb) | Employment and Officer Obligations. Other than the Pengrowth Management
Agreement, and employment agreements with the executive officers, Pengrowth Cos
existing employee health and benefit plans, employee savings plans, pension obligations
and as disclosed in writing in the Pengrowth Disclosure Letter, there are no other
employment or consulting services agreements, termination, severance and retention
plans or policies of the Pengrowth Parties. |
||
(cc) | Outstanding Acquisitions. The Pengrowth Parties have no rights to
purchase assets, properties or undertakings of third parties under any agreements to
purchase that have not closed in excess of the amount specified in the Pengrowth
Disclosure Letter. |
||
(dd) | Mutual Fund Trust. Pengrowth is a mutual fund trust and a unit
trust within the meaning of the Tax Act. |
||
(ee) | Place of Principal Offices. The principal offices of the Pengrowth
Parties are not located within the United States. |
||
(ff) | Pengrowth Disclosure Letter. The matters disclosed to Esprit in the
Pengrowth Disclosure Letter remain true and correct in all material respects as of the
date hereof. |
||
(gg) | Disclosure. To the knowledge of Pengrowth, Pengrowth has not withheld
from Esprit any material information or documents concerning Pengrowth or any of its
Subsidiaries or their respective assets or liabilities during the course of Esprits
review of Pengrowth and its assets. No representation or warranty contained herein and
no statement contained in any schedule or other disclosure document provided or to be
provided to Esprit by Pengrowth pursuant hereto (including without limitation, any
matter disclosed by Pengrowth in the Pengrowth Disclosure Letter) contains or will
contain any untrue statement of a material fact or omits to state a material fact which
is necessary in order to make the statements herein or therein not misleading. |
-D-9-
(hh) | Foreign Private Issuer. Pengrowth is a foreign private issuer within
the meaning of Rule 405 of Regulation C adopted by the SEC under the U.S. Securities
Act. |
||
(ii) | Investment Company. Neither Pengrowth Party is an investment company
within the meaning of the United States Investment Company Act of 1940, as amended. |
||
(jj) | Board Approval. The members of Pengrowths Board of Directors entitled
to vote have unanimously endorsed the Acquisition and Redemption Transaction and
approved this Agreement and have unanimously determined that the Acquisition and
Redemption Transaction and this Agreement are in the best interests of Pengrowth and
Pengrowth Unitholders. |
||
(kk) | U.S. Tax Election. Pengrowth has made a valid election pursuant to
Section 754 of the U.S. Code. |
||
(ll) | Registration Statement. The information in the Registration Statement
(excluding any information therein provided by the Esprit Parties) and the information
supplied by the Pengrowth Parties for inclusion in the Esprit Circular shall not at (i)
the time the Registration Statement becomes effective, (ii) the time the Esprit
Circular (or any amendment thereof or supplement thereto) is first mailed to the Esprit
Unitholders, (iii) the time of the Esprit Special Meeting and (iv) at the Closing Date,
contain any untrue statement of a material fact or omit to state any material fact
which is necessary in order to make the statements therein, not misleading. |
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
In connection with the proposed transaction, Pengrowth intends to file relevant materials with the Securities and Exchange Commission (the SEC) on a Registration Statement on Form F-10 (the Registration Statement) to register the Pengrowth Units (the Units) to be issued in connection with the proposed transaction. Investors and unit holders are urged to read the Registration Statement and any other relevant documents to be filed with the SEC when available because they will contain important information about Pengrowth and Esprit, the transaction and related matters. Investors and unit holders will be able to obtain free copies of the Registration Statement and other documents filed with the SEC by Pengrowth through the web site maintained by the SEC at www.sec.gov. In addition, investors and unit holders will be able to obtain free copies of the Registration Statement and such other documents when they become available from Pengrowth by contacting Pengrowth Investor Relations at investorrelations@pengrowth.com or by telephone at 403-233-0224 or toll free at 1-888-744-1111.