TOM BROWN, INC.
(hereinafter, "Parent Co.")
and
TOM BROWN RESOURCES LTD.
(hereinafter, "A Co.")
and
STELLARTON ENERGY CORPORATION
(hereinafter, "Stellarton")
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PRE-ACQUISITION AGREEMENT
December 13, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I
INTERPRETATION
1.1 Definitions..................................................................1
1.2 Singular, Plural, etc........................................................4
1.3 Deemed Currency..............................................................5
1.4 Headings, etc................................................................5
1.5 Date for any Action..........................................................5
1.6 Governing Law................................................................5
1.7 Attornment...................................................................5
1.8 Incorporation of Schedules...................................................5
ARTICLE II
THE OFFER
2.1 The Offer....................................................................6
2.2 Stellarton Directors' Circular...............................................8
2.3 Offer Documents..............................................................9
2.4 Outstanding Stock Options...................................................10
ARTICLE III
PUBLICITY AND SOLICITATION
3.1 Publicity...................................................................11
3.2 Solicitation................................................................12
ARTICLE IV
TRANSACTIONS FOLLOWING COMPLETION OF THE OFFER
4.1 Second Stage Transaction....................................................12
4.2 Information Circular, Etc...................................................12
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT CO. AND A CO.
5.1 Organization and Qualification..............................................13
5.2 Authority Relative to this Agreement........................................13
5.3 No Violations...............................................................13
5.4 Availability of Funds.......................................................14
5.5 Knowledge...................................................................15
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF STELLARTON
6.1 Organization and Qualification..............................................15
6.2 Authority Relative to this Agreement........................................15
6.3 No Violations...............................................................15
6.4 Capitalization..............................................................16
6.5 No Material Adverse Change..................................................17
6.6 No Undisclosed Material Liabilities.........................................17
6.7 Impairment..................................................................17
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6.8 Officer Obligations.........................................................17
6.9 Brokerage and Other Fees....................................................17
6.10 Conduct of Business.........................................................18
6.11 Reports.....................................................................18
6.12 Subsidiaries................................................................19
6.13 Compliance with Law.........................................................19
6.14 Material Agreements.........................................................19
6.15 Interim Financial Statements................................................20
6.16 Employment Agreements.......................................................20
6.17 Employee Benefit Plans......................................................20
6.18 United States Relationships and Operations..................................20
6.19 Data and Information........................................................21
6.20 Engineering Report..........................................................21
6.21 Books and Records...........................................................21
6.22 Litigation, etc.............................................................21
6.23 Environmental...............................................................21
6.24 Tax Matters.................................................................22
6.25 Reporting Issuer Status.....................................................24
6.26 Debt and Working Capital....................................................24
6.27 Confidentiality Agreements..................................................24
6.28 Insurance...................................................................24
6.29 Secure Oil Tools Ltd........................................................24
ARTICLE VII
CONDUCT OF BUSINESS
7.1 Conduct of Business by Stellarton...........................................24
7.2 Conduct of Business by Parent Co. and A Co..................................27
7.3 Integration of Operations...................................................27
7.4 Market Purchases............................................................27
ARTICLE VIII
COVENANTS OF STELLARTON
8.1 Notice of Material Change...................................................28
8.2 Non-Completion Fee..........................................................28
8.3 No Solicitation.............................................................29
8.4 Stellarton Board of Directors...............................................30
8.5 Representations and Warranties..............................................30
8.6 Structure of Transaction....................................................31
ARTICLE IX
COVENANTS OF PARENT CO. AND A CO.
9.1 Representations and Warranties..............................................31
9.2 Employment Agreements.......................................................31
9.3 Indemnities.................................................................31
9.4 Other Covenants.............................................................31
ARTICLE X
MUTUAL COVENANTS
10.1 Other Filings...............................................................32
10.2 Additional Agreements.......................................................32
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ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination.................................................................33
11.2 Effect of Termination.......................................................34
11.3 Amendment...................................................................34
11.4 Waiver......................................................................34
ARTICLE XII
GENERAL PROVISIONS
12.1 Notices.....................................................................34
12.2 Miscellaneous...............................................................36
12.3 Directors' and Officers Insurance...........................................36
12.4 Assignment..................................................................37
12.5 Expenses....................................................................37
12.6 Severability................................................................37
12.7 Parent Co. Guarantee........................................................37
12.8 Counterpart Execution.......................................................37
SCHEDULE A - CONDITIONS TO THE OFFER
SCHEDULE B - FORM OF PRE-TENDER AGREEMENT
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PRE-ACQUISITION AGREEMENT
THIS PRE-ACQUISITION AGREEMENT (the "Agreement") is made and entered
into as of this 13th day of December, 2000, by and between Tom Brown, Inc., a
corporation formed under the laws of the State of Delaware with its head and
principal office in the City of Denver, in the State of Colorado ("Parent Co."),
Tom Brown Resources Ltd., a corporation formed under the laws of the Province of
Alberta with an office in the City of Calgary, in the Province of Alberta ("A
Co.") and Stellarton Energy Corporation, a corporation duly amalgamated under
and governed by the laws of the Province of Alberta with its head and principal
office in the City of Calgary, in the Province of Alberta ("Stellarton"). Except
as otherwise set forth in this Agreement, capitalized terms shall have the
meanings set forth in Article 1.
RECITALS:
1. The board of directors of Stellarton wishes to encourage Parent Co. to
make a take-over bid to the securityholders of Stellarton by offering to
purchase all of the issued and outstanding common shares of Stellarton.
2. Parent Co., through its wholly-owned subsidiary A Co., is willing to
make an offer subject to the terms and conditions of this Agreement.
3. Parent Co. has agreed to guarantee the obligations of A Co. as
contemplated herein.
4. The board of directors of Stellarton has unanimously determined to
recommend acceptance of the A Co. offer to the securityholders of
Stellarton, to cooperate with A Co. and to take all reasonable action to
support the A Co. offer.
5. The board of directors of Stellarton has determined that it would be in
the best interests of Stellarton to enter into this Agreement.
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained and other good and valuable consideration (the receipt and adequacy
whereof is hereby acknowledged), the parties hereto agree as follows:
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless there is something in the subject matter or
context inconsistent therewith:
"A Co." means Tom Brown Resources Ltd., a wholly-owned subsidiary of Parent Co.;
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"Act" means the Business Corporations Act (Alberta) as the same has been and may
hereafter from time to time be amended;
"affiliate" has the meaning set forth in the Act;
"Agreement", "this Agreement", "herein", "hereto", and "hereof" and similar
expressions refer to this Agreement, as the same may be amended or supplemented
from time to time and, where applicable, to the appropriate Schedules hereto;
"Business Day" means any day excepting a Saturday, Sunday or statutory holiday
in Calgary, Alberta;
"Corporate Laws" means all applicable corporate laws, including the Act;
"Data Room" means the data room maintained by Stellarton in connection with its
efforts to solicit proposals for the acquisition of Stellarton;
"diluted basis" means, with respect to the number of outstanding Stellarton
Shares at any time, such number of outstanding Stellarton Shares calculated
assuming that all outstanding options to purchase Stellarton Shares are
exercised;
"Disclosed Information" means the information disclosed to Parent Co. or A Co.
pursuant to or contemplated by the Parent Co. Confidentiality Agreement or made
available to Parent Co. or A Co. (or their respective representatives) in the
Data Room;
"Effective Time" means the time that A Co. shall have acquired ownership of and
paid for at least the Minimum Required Shares pursuant to the terms of the
Offer;
"Expiry Time" means the Initial Expiry Time unless the Offer has been extended,
in which case it means the expiry time of the Offer as extended from time to
time;
"in writing" means written information including documents, files, records,
books and other materials made available, delivered or produced to Parent Co. or
A Co. by or on behalf of Stellarton in the course of conducting its due
diligence review in respect of Stellarton between October 5, 2000, being the
date of the Parent Co. Confidentiality Agreement, and the date of this
Agreement;
"Initial Expiry Time" means 5:00 p.m. (Calgary time) on the first Business Day
which falls after the 21st day following the day of the mailing of the Offer
Documents to the shareholders of Stellarton (where the first day of this period
is the day immediately following the day of mailing);
"Material Adverse Change" means any change (or any condition, event or
development involving a prospective change) in the business, operations, results
of operations, petroleum and natural gas reserves, assets, capitalization,
financial condition, licenses, permits, leases, concessions, rights,
liabilities, prospects or privileges, whether contractual or otherwise, of
Stellarton and its subsidiaries which is materially adverse to the business of
Stellarton and its subsidiaries, considered as a whole, other than a change (i)
which arises out of hedging activities
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undertaken by Stellarton prior to the date hereof, consistent with past
practice, (ii) which arises out of a matter that has been publicly disclosed or
otherwise disclosed in writing to A Co. prior to the date of this Agreement,
(iii) resulting from conditions affecting the oil and gas industry as a whole;
(iv) resulting from general economic, financial, currency exchange, securities
or commodity market conditions in Canada or elsewhere; or (v) resulting from the
drilling, completion or testing of any wells establishing that any such well or
prospect is not commercially viable or is less successful than anticipated by
Stellarton;
"Material Adverse Effect" means any event, change or effect that is or would
reasonably be expected to be materially adverse to the financial condition,
operations, assets, liabilities, or business of Stellarton and its subsidiaries,
considered as a whole; provided that a Material Adverse Effect shall not include
an adverse effect resulting from a change (i) which arises out of hedging
activities undertaken by Stellarton prior to the date hereof, consistent with
past practice, (ii) which arises out of a matter that has been publicly
disclosed or otherwise disclosed in writing to Parent Co. or A Co. prior to the
date of this Agreement, (iii) resulting from conditions affecting the oil and
gas industry as a whole; (iv) resulting from general economic, financial,
currency exchange, securities or commodity market conditions in Canada or
elsewhere; or (v) resulting from the drilling, completion or testing of any
wells establishing that any such well or prospect is not commercially viable or
is less successful than anticipated by Stellarton;
"Minimum Condition" means the condition set forth in paragraph (a) of Schedule
A;
"Minimum Required Shares" means at least that number of the outstanding
Stellarton Shares required pursuant to the Minimum Condition unless A Co. shall
have waived the Minimum Condition in which case "Minimum Required Shares" means
that number of the outstanding Stellarton Shares which A Co. takes up on the
Take-up Date, provided that such number of Stellarton Shares shall not be less
than 50% of the issued and outstanding Stellarton Shares on a diluted basis;
"Offer" has the meaning set forth in Section 2.1(a);
"Offer Documents" has the meaning set forth in Section 2.3(a);
"Officer Obligations" means any obligations or liabilities of Stellarton or any
of its subsidiaries to pay any amount to its or their officers, directors, or
employees, other than for salary, bonuses under its or their existing bonus
arrangements and directors' fees in the ordinary course in each case in amounts
consistent with historic practices and obligations or liabilities in respect of
insurance or indemnification contemplated by this Agreement or arising in the
ordinary and usual course of business and subject to Corporate Laws and, without
limiting the generality of the foregoing, Officer Obligations shall include the
obligations of Stellarton or any of its subsidiaries to officers or employees
(i) for severance or termination payments on or in connection with the change of
control of Stellarton pursuant to any executive involuntary severance and
termination agreements in the case of officers and pursuant to Stellarton's
severance policy in the case of employees; or (ii) retention bonus payments
pursuant to any retention bonus program, all as previously disclosed in the
Disclosed Information to A Co.;
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"Parent Co. Confidentiality Agreement" means the confidentiality agreement dated
October 5, 2000 between Parent Co. and Stellarton;
"Second Stage Transaction" has the meaning set forth in Section 4.1;
"Securities Authorities" means the appropriate securities commissions or similar
regulatory authorities in Canada and each of the provinces and territories
thereof and in the United States and each of the states thereof;
"Securities Laws" has the meaning set forth in Section 2.3(a);
"Stellarton" means Stellarton Energy Corporation;
"Stellarton Governing Documents" means the Certificate and Articles of
Amalgamation and By-laws of Stellarton;
"Stellarton Options" means the outstanding options to acquire Stellarton Shares
under the Stock Option Plan;
"Stellarton Shares" means the Class A Voting Common Shares in the share capital
of Stellarton;
"Stock Option Plan" means the amended and restated stock option plan of
Stellarton dated May 25, 2000;
"subsidiary" has the meaning set forth in the Act;
"Superior Proposal" has the meaning ascribed to such terms in Section 8.3;
"Take-over Proposal" means a proposal or offer by a third party (other than by A
Co.), whether or not subject to a due diligence condition and whether or not in
writing, to acquire in any manner, directly or indirectly, beneficial ownership
of all or a material portion of the assets of Stellarton or to acquire in any
manner, directly or indirectly, beneficial ownership or control or direction
over more than 20% of the outstanding voting shares of Stellarton whether by an
arrangement, amalgamation, a merger, consolidation or other business
combination, by means of a sale of shares of capital stock, sale of assets,
tender offer or exchange offer or similar transaction involving Stellarton
including without limitation any single or multi-step transaction or series of
related transactions which is structured to permit such third party to acquire
beneficial ownership of all or a material portion of the assets of Stellarton or
to acquire in any manner, directly or indirectly, more than 20% of the
outstanding voting shares of Stellarton (other than the transactions
contemplated by this Agreement); and
"Take-up Date" means the date that A Co. first takes up and acquires Stellarton
Shares pursuant to the Offer.
1.2 SINGULAR, PLURAL, ETC.
Words importing the singular number include the plural and vice versa
and words importing gender include the masculine, feminine and neuter genders.
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1.3 DEEMED CURRENCY
In the absence of a specific designation of any currency any undescribed
dollar amount herein shall be deemed to refer to Canadian dollars.
1.4 HEADINGS, ETC.
The division of this Agreement into Articles and Sections, the provision
of a table of contents hereto and the insertion of the recitals and headings are
for convenience of reference only and shall not affect the construction or
interpretation of this Agreement and, unless otherwise stated, all references in
this Agreement or in the Schedules to Articles, Sections and Schedules refer to
Articles, Sections and Schedules of and to this Agreement or of the Schedules in
which such reference is made.
1.5 DATE FOR ANY ACTION
In the event that any date on which any action is required to be taken
hereunder by any of the parties hereunder is not a Business Day, such action
shall be required to be taken on the next succeeding day which is a Business
Day.
1.6 GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws of the Province of Alberta and the laws of Canada applicable therein.
1.7 ATTORNMENT
The parties hereby irrevocably and unconditionally consent to and submit
to the courts of the Province of Alberta for any actions, suits or proceedings
arising out of or relating to this Agreement or the matters contemplated hereby
(and agree not to commence any action, suit or proceeding relating thereto
except in such courts) and further agree that service of any process, summons,
notice or document by single registered mail to the addresses of the parties set
forth in this Agreement shall be effective service of process for any action,
suit or proceeding brought against either party in such court. The parties
hereby irrevocably and unconditionally waive any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
matters contemplated hereby in the courts of the Province of Alberta and hereby
further irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such action, suit or proceeding so brought has been
brought in an inconvenient forum.
1.8 INCORPORATION OF SCHEDULES
Schedules A and B attached hereto and described below shall, for all
purposes hereof, form an integral part of this Agreement.
Schedule A Conditions to the Offer
Schedule B Form of Pre-tender Agreement
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ARTICLE II
THE OFFER
2.1 THE OFFER
(a) Subject to the terms and conditions of this Agreement, A Co.
shall use commercially reasonable efforts to mail before 11:59
p.m. (Calgary time) on December 20, 2000 and in any event not
later than 11:59 p.m. (Calgary time) on December 22, 2000, an
offer to purchase all of the outstanding Stellarton Shares, which
includes all Stellarton Shares which may become outstanding after
the date of the Offer on the exercise of Stellarton Options for a
cash consideration of $5.00 for each Stellarton Share which offer
shall be made in accordance with Securities Laws and Corporate
Laws and be subject only to the conditions set forth in Schedule
A hereto (the "Offer", which term shall include any amendments
to, or extensions of, such Offer, including, without limitation,
increasing the consideration, removing or waiving any condition,
as permitted, or extending the date by which Stellarton Shares
may be tendered). The documentation relating to the Offer (the
"Offer Documents") shall be prepared in both the English and
French languages and in accordance with Securities Laws and
Corporate Laws. A Co. shall, on a confidential basis, provide
Stellarton with a draft of the Offer Documents prior to mailing
for its review and comment, with the intent that Stellarton will
have a reasonable opportunity to review and provide comments in
respect of the Offer Documents. It is understood that the content
of the Offer Documents will be determined by A Co., provided that
such Offer Documents will not contain any information or
statements that are inconsistent with matters that are
specifically addressed or provided for in this Agreement or as
otherwise contemplated hereby.
(b) Parent Co. may make the Offer itself, or through one or more
direct or indirect wholly-owned subsidiaries, or any combination
thereof (which, for the purposes hereof, may include a trust or
partnership, all of the beneficiaries or partners of which are
direct or indirect subsidiaries of Parent Co.). In the event that
any such entities makes the Offer, the term "A Co." as used
herein shall include all of such entities, but Parent Co. shall
continue to be liable to Stellarton, as principal obligor, for A
Co.'s obligations hereunder and for any default in performance by
any such party.
(c) The Offer shall expire at the Initial Expiry Time, except that
the Offer may be extended, subject to 2.1(d), at the sole
discretion of A Co., if the conditions thereto set forth in
Schedule A are not satisfied on the date and time at which the
Offer expires or if A Co. shall have taken up the Minimum
Required Shares under the Offer. If A Co. acquires the Minimum
Required Shares pursuant to the Offer but the number of
Stellarton Shares acquired at such time is less than the Minimum
Condition, it will publicly announce such fact and extend the
Offer for at least 10 days.
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Upon the satisfaction or waiver of the conditions set forth in
Schedule A hereto, A Co. shall within one (1) Business Day,
accept for payment and pay for all Stellarton Shares validly
tendered (and not properly withdrawn) pursuant to the Offer. Each
of A Co. and Stellarton shall use all commercially reasonable
efforts to consummate the Offer, subject to the terms and
conditions thereof.
Notwithstanding the foregoing, if the conditions set out in
paragraphs (b) or (c) of Schedule A have not been satisfied or
waived on the Initial Expiry Time, A Co. agrees to extend the
Offer for such period of time, not to exceed 60 days following
the Initial Expiry Time, as is necessary to satisfy or fulfill
such conditions, but only if A Co. has made a bona fide
determination, acting reasonably, that there is a reasonable
prospect that such conditions may be satisfied within such 60 day
period.
(d) It is agreed that A Co. may, in its sole discretion:
(i) waive in whole or in part, any term or condition of the
Offer at any time and from time to time, provided that if
A Co. takes up and pays for any Stellarton Shares it shall
acquire not less than the Minimum Required Shares; and
(ii) amend any term or condition of the Offer, provided that A
Co. shall not:
(A) change the number of Stellarton Shares for which
the Offer is made;
(B) decrease the value or change the form of the
consideration to be paid for each Stellarton Share
provided that A Co. shall be permitted to increase
the consideration to be paid for each Stellarton
Share; or
(C) modify or impose additional conditions to the Offer
in a manner that is, in the opinion of Stellarton,
acting reasonably, materially adverse to the
holders of Stellarton Shares (it being understood
that an extension of the Offer or a permitted
waiver of any condition thereto will not be
considered to be adverse to the holders of
Stellarton Shares).
(e) A Co. will instruct the depositary under the Offer to advise
Stellarton from time to time, not less frequently than daily
commencing five Business Days prior to the Initial Expiry Time
until the day immediately prior to the Expiry Time and thereafter
on an hourly basis, if requested by Stellarton and in such manner
as Stellarton may reasonably request, as to the number of
Stellarton Shares that have been tendered (and not withdrawn)
under the Offer; provided that, subject to its public disclosure
obligations under Corporate Laws, Securities Laws or stock
exchange rules, Stellarton shall keep such information
confidential. Stellarton agrees that A Co. may, if it so decides,
retain Stellarton's transfer agent as the depositary and as
information agent under the Offer.
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(f) The obligation of A Co. to make the Offer as set forth in Section
2.1(a) shall be conditional upon the following:
(i) no Material Adverse Change shall have occurred in respect
of Stellarton, no person shall have brought or threatened
to bring a bona fide action for injunctive relief against
the performance of this Agreement or the completion of the
Offer or for material damages against A Co. in connection
with this Agreement or the completion of the Offer and no
other event shall have occurred or circumstance shall
exist which would make it impracticable in the opinion of
A Co, acting reasonably, to satisfy one or more of the
conditions of the Offer described in Schedule A;
(ii) as at the date that the Offer is to be made, no
representation or warranty by Stellarton contained in this
Agreement shall have been determined by A Co., acting
reasonably, to be inaccurate in any material respect (or
in the case of representations and warranties that are
themselves qualified by a materiality limitation,
determined to be inaccurate) and no breach by Stellarton
of, or non-compliance by Stellarton with, any covenant or
obligation contained in this Agreement shall in a material
respect have occurred;
(iii) the board of directors of Stellarton shall have provided
and not have withdrawn, modified or changed any of its
recommendations, approvals, resolutions, or determinations
referred to in Section 2.2(a); and
(iv) A Co.'s receipt, concurrent with the execution of this
Agreement, of duly executed pre-tender agreements dated
the date hereof substantially in the form attached hereto
as Schedule B from each of the directors and senior
officers of Stellarton and certain other shareholders of
Stellarton in respect of Stellarton Shares which, in
aggregate, represent not less than 42% of the Stellarton
Shares on a diluted basis.
The foregoing conditions are for the exclusive benefit of A Co.
and may be waived by A Co., in whole or in part at any time and
from time to time.
(g) Stellarton agrees to provide A Co. a certificate of the President
or other officer of Stellarton acceptable to A Co., in such
officer's capacity as an officer of Stellarton and not in such
officer's personal capacity, dated the date of the Offer and on
the Take-up Date under the Offer to the effect that Stellarton
has complied with its covenants and obligations under the
Agreement and that the representations and warranties of
Stellarton contained in the Agreement are true and correct as of
such date with the same force and effect as if given on and as of
the date of such certificate.
2.2 STELLARTON DIRECTORS' CIRCULAR
(a) Stellarton hereby consents to the Offer as set forth in Section
2.1 and confirms that its board of directors has (i) unanimously
approved the Offer and this
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Agreement, (ii) after receiving the advice of its financial
advisor, has determined that the consideration to be offered to
Stellarton's shareholders pursuant to the Offer is fair, from a
financial point of view, to the holders of Stellarton Shares and
is in the best interests of Stellarton, and (iii) has unanimously
resolved to recommend acceptance of the Offer by the holders of
Stellarton Shares.
(b) Stellarton shall prepare and make available for mailing, in both
the English and French languages, sufficient copies of a
directors' circular prepared in accordance with Securities Laws
and Corporate Laws. The directors' circular will set forth (among
other things) the recommendation of the board of directors of
Stellarton as described in Section 2.2(a). Stellarton shall
provide A Co. with a draft copy of the directors' circular prior
to its finalization and in reasonably sufficient time for A Co.'s
review and comment, and the parties shall use all commercially
reasonable efforts to cause the directors' circular to be mailed
together with the Offer Documents without any delay in the time
the Offer Documents would otherwise be mailed.
(c) After reasonable inquiry, Stellarton has been advised that each
of the directors and senior officers of Stellarton intend to
tender their Stellarton Shares under the Offer and to exercise
their "in the money" options to acquire Stellarton Shares or to
receive payment therefore as contemplated by Section 2.4.
Stellarton hereby delivers concurrently with the execution of
this Agreement, pre-tender agreements (in the form or
substantially in the form of the agreement attached hereto as
Schedule B) duly executed by such directors and senior officers
in respect of 6,132,565 Stellarton Shares and Stellarton Options.
The directors' circular shall reflect the execution and delivery
of such pre-tender agreements and the agreement of the directors
and senior officers to tender their Stellarton Shares pursuant to
the Offer.
(d) Stellarton represents that it has obtained oral advice from
Waterous Securities Inc. that the consideration to be offered to
Stellarton's shareholders pursuant to the Offer is fair, from a
financial point of view, to holders of Stellarton Shares and that
such financial advisor will provide a written fairness opinion to
such effect on or before the date of the directors circular. The
fairness opinion will be attached to or referred to in the
directors' circular referred to in Section 2.2(b).
2.3 OFFER DOCUMENTS
(a) A Co. shall file or cause to be filed with the appropriate
Securities Authorities an Offer to Purchase and Take-over Bid
Circular and the related Letter of Transmittal and Notice of
Guaranteed Delivery pursuant to which the Offer will be made
(collectively, the "Offer Documents"). The Offer Documents, when
filed with Securities Authorities and when mailed to holders of
Stellarton Shares, shall contain (or shall be amended in a timely
manner to contain) all information which is required to be
included therein in accordance with the Act and any applicable
Canadian provincial securities laws, United States securities
laws, the "blue sky"
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or securities laws of the states of the United States and any
other applicable law (collectively, the "Securities Laws") and
all Corporate Laws.
(b) Stellarton agrees to provide such assistance as A Co. or its
agents may reasonably request in connection with communicating
the Offer and any amendments and supplements thereto to the
holders of the Stellarton Shares and to such other persons as are
entitled to receive the Offer under Securities Laws, including
providing lists and updated or supplemental lists of the
shareholders of Stellarton and of the holders of Stellarton
Options and other securities convertible into or exchangeable for
Stellarton Shares and mailing labels with respect to all such
holders of securities as soon as possible after the date of this
Agreement but in any event no later than the close of business in
Calgary on December 15, 2000 and updates or supplements thereto
from time to time as may be requested by A Co.
2.4 OUTSTANDING STOCK OPTIONS
(a) Subject to the receipt of any necessary regulatory approvals,
persons holding options pursuant to the Stock Option Plan who may
do so under Securities Laws and in accordance with the Stock
Option Plan (or pursuant to this section 2.4) shall be entitled
to exercise all of their options and tender all Stellarton Shares
issued in connection therewith under the Offer. The Stellarton
board of directors shall not, prior to completion of the Offer,
grant additional options pursuant to the Stock Option Plan. It is
agreed by A Co. that all Stellarton Options which have been
tendered to Stellarton for exercise, conditional on A Co. taking
up Stellarton Shares under the Offer ("Conditional Option
Exercise"), shall be deemed to have been exercised concurrently
with the take-up of Stellarton Shares by A Co. Furthermore, A Co.
shall accept as validly tendered under the Offer as of the
Take-up Date all Stellarton Shares which are to be issued
pursuant to the Conditional Option Exercise, provided that the
holders of such options indicate that such shares are tendered
pursuant to the Offer and provided that such holder agrees to
surrender their remaining unexercised options to Stellarton for
cancellation for no consideration effective immediately after the
Take-up Date.
(b) Stellarton and A Co. agree that to the extent holders of
Stellarton Options do not exercise their Stellarton Options and
tender the Stellarton Shares they receive upon such exercise,
Stellarton may agree with all remaining holders of Stellarton
Options that, in lieu of such persons exercising their Stellarton
Options, Stellarton will pay to such persons the difference
between the exercise price of their Stellarton Options and the
purchase price for the Stellarton Shares under the Offer
immediately after the Expiry Time of the Offer in exchange for
the termination of their Stellarton Options and provided that
such holder agrees to surrender their remaining unexercised
options to Stellarton for cancellation for no consideration
effective immediately after the Take-up Date.
(c) Stellarton and A Co. agree that with respect to holders of
Stellarton Options with exercise prices equal to or greater than
$5.00 per Stellarton Share (other than any
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holder who is a director or officer of Stellarton), Stellarton
may, on behalf of A Co., pay such person $0.05 for each
Stellarton Option to purchase one (1) Stellarton Share in
exchange for the cancellation of such Stellarton Option
immediately after the Expiry Time of the Offer, provided that a
holder of Stellarton Options receiving payment under this
paragraph (c) shall not also be entitled to payment for the same
Stellarton Options under paragraph (b) above.
(d) Stellarton agrees to use its reasonable commercial efforts and
represents that its directors have:
(i) determined to use their respective reasonable commercial
efforts to encourage and facilitate all persons holding
options to acquire Stellarton shares to either:
(A) exercise those options and tender all Stellarton
Shares issued in connection therewith to the Offer;
or
(B) agree with Stellarton to the payment described in
Sections 2.4(b) and (c); or
(C) terminate their rights to exercise any of those
Stellarton Options;
prior to the Expiry Time of the Offer;
(ii) authorized and directed Stellarton to cause the vesting of
option entitlements under the Stock Option Plan to
accelerate prior to or concurrently with the completion of
the Offer, such that all outstanding Stellarton Options
shall be exercisable and fully vested prior to the Expiry
Time of the Offer; and
(iii) determined to use reasonable commercial efforts to amend
the Stock Option Plan or applicable option agreements so
as to allow for the payment described in Section 2.4(b).
ARTICLE III
PUBLICITY AND SOLICITATION
3.1 PUBLICITY
(a) So long as this Agreement is in effect, each of Parent Co., A Co.
and Stellarton shall advise, consult and cooperate with the other
party prior to issuing, or permitting any of its directors,
officers, employees or agents to issue, any press release or
other written public or private statement to the press with
respect to this Agreement, the transactions contemplated hereby
or any other matters from the date hereof until the Expiry Time.
Parent Co., A Co. and Stellarton shall not issue any such press
release or make any such written public or private statement
prior to such consultation, except as may be required by
applicable law or by
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obligations pursuant to any listing agreement with a stock
exchange and only after using its reasonable efforts to consult
the other party taking into account the time constraints to which
it is subject as a result of such law or obligation.
(b) Stellarton and A Co. agree that a joint press release shall be
issued immediately following the execution of this Agreement.
3.2 SOLICITATION
Lehman Brothers Canada Inc. has been selected by A Co. to act as dealer
manager (the "Dealer Manager") in connection with the Offer and solicit
acceptances of the Offer. The Dealer Manager will form a soliciting dealer group
comprised of members of the Investment Dealers Association of Canada and of the
stock exchanges in Canada and their United States broker dealer affiliates to
solicit acceptances of the Offer.
ARTICLE IV
TRANSACTIONS FOLLOWING COMPLETION OF THE OFFER
4.1 SECOND STAGE TRANSACTION
If A Co. takes up and pays for Stellarton Shares pursuant to the terms
of the Offer, and thereby acquires at least the Minimum Required Shares, A Co.
agrees to use all commercially reasonable efforts to acquire, and Stellarton
agrees to use all commercially reasonable efforts to assist A Co. in acquiring,
the balance of the Stellarton Shares by way of a statutory arrangement,
amalgamation, merger, reorganization, consolidation, recapitalization or other
type of acquisition transaction or transactions ("Second Stage Transaction")
carried out for consideration per Stellarton Share which (i) consists of the
same kind or kinds of consideration paid pursuant to the Offer, and (ii) in
respect of each such kind of consideration, is not less than the consideration
paid pursuant to the Offer. Nothing herein shall be construed to prevent A Co.
from acquiring, directly or indirectly, additional Stellarton Shares in the open
market or in privately negotiated transactions, in another take-over bid, tender
or exchange offer, or otherwise in accordance with Securities Laws (including by
way of compulsory acquisition) following completion of the Offer.
4.2 INFORMATION CIRCULAR, ETC.
Without limiting Section 4.1, Stellarton agrees that if A Co. is
required to effect a Second Stage Transaction which requires approval of
Stellarton's shareholders in a meeting of Stellarton's shareholders, Stellarton
shall take all action necessary in accordance with Securities Laws, other
applicable Canadian laws, the Stellarton Governing Documents and the
requirements of The Toronto Stock Exchange or any other regulatory authority
having jurisdiction to duly call, give notice of, convene and hold a meeting of
its shareholders as promptly as practicable to consider and vote upon the action
proposed by A Co. In the event of such a meeting or meetings, Stellarton shall
use all commercially reasonable efforts to mail to its shareholders an
Information Circular with respect to the meeting of Stellarton's shareholders.
The term "Information Circular" shall mean such proxy or other required
informational statement or circular, as the case may be, and all related
materials at the time required to be mailed to
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Stellarton's shareholders and all amendments or supplements thereto, if any. A
Co. and Stellarton each shall use all commercially reasonable efforts to obtain
and furnish the information required to be included in any Information Circular.
The information provided and to be provided by A Co. and Stellarton for use in
the Information Circular, on both the date the Information Circular is first
mailed to Stellarton's shareholders and on the date any such meeting is held,
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not misleading
and will comply in all material respects with all applicable requirements of
law. A Co. and Stellarton each agree to correct promptly any such information
provided by it for use in any Information Circular which shall have become false
or misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT CO. AND A CO.
Parent Co. and A Co. jointly and severally hereby represent and warrant
to Stellarton as follows and acknowledge that Stellarton is relying upon these
representations and warranties in connection with the entering into of this
Agreement:
5.1 ORGANIZATION AND QUALIFICATION
Each of Parent Co. and A Co. is a corporation duly incorporated and
organized and validly existing under the laws of its respective jurisdiction of
incorporation and has the requisite corporate power and authority to carry on
its respective business as it is now being conducted.
5.2 AUTHORITY RELATIVE TO THIS AGREEMENT
Each of Parent Co. and A Co. have the requisite corporate authority to
enter into this Agreement and to carry out its respective obligations hereunder.
The execution and delivery of this Agreement and the consummation by each of
Parent Co. and A Co. of the transactions contemplated hereby have been duly
authorized by each of the Parent Co. and A Co. boards of directors and no other
corporate proceedings on their part are or will be necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by each of Parent Co. and A Co. and constitutes legal,
valid and binding obligations of each of Parent Co. and A Co. enforceable
against them in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and to general principles of equity.
5.3 NO VIOLATIONS
(a) Neither the execution and delivery of this Agreement by Parent
Co. and A Co., the consummation by them of the transactions
contemplated hereby nor compliance by them with any of the
provisions hereof will: (i) violate, conflict with, or result in
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 a creation of any lien, security interest, charge or
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encumbrance upon any of the properties or assets of Parent Co. or
A Co. or any of their subsidiaries under any of the terms,
conditions or provisions of (x) the charter or bylaws of Parent
Co. or A Co. or (y) any material note, bond, mortgage, indenture,
loan agreement, deed of trust, agreement, lien, contract or other
instrument or obligation to which Parent Co. or A Co. or any of
their subsidiaries is a party or to which any of them, or any of
their respective properties or assets, may be subject or by which
Parent Co. or A Co. or any of their subsidiaries is bound; or
(ii) subject to compliance with the statutes and regulations
referred to in Section 5.3(b), violate any judgment, ruling,
order, writ, injunction, determination, award, decree, statute,
ordinance, rule or regulation applicable to Parent Co. or A Co.
or any of their subsidiaries (except, in the case of each of
clauses (i) and (ii) above, for such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances which, or any
consents, approvals or notices which if not given or received,
would not have any Material Adverse Effect on the business,
operations or financial condition of Parent Co. or A Co. and
their respective subsidiaries taken as a whole or on the ability
of Parent Co. or A Co. to consummate the transactions
contemplated hereby); or (iii) cause the suspension or revocation
of any authorization, consent, approval or license currently in
effect which would have a Material Adverse Effect on the
business, operations and financial condition of Parent Co. or A
Co. and their subsidiaries taken as a whole.
(b) Other than in connection with or in compliance with the
provisions of Corporate Laws, Securities Laws the United States
Securities Exchange Act of 1934, as amended, state securities or
"blue-sky" laws of the states of the United States, as amended
and any pre-merger notification statutes, (i) there is no legal
impediment to Parent Co.'s or A Co.'s consummation of the
transactions contemplated by this Agreement and (ii) no filing or
registration with, or authorization, consent or approval of, any
domestic or foreign public body or authority is necessary by
Parent Co. or A Co. in connection with the making or the
consummation of the Offer, 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 ability of Parent Co. or A Co. to
consummate the transactions contemplated hereby.
5.4 AVAILABILITY OF FUNDS
The aggregate cash consideration payable pursuant to the Offer is
available to A Co. so that A Co. is in a position to pay for all Stellarton
Shares tendered pursuant to the Offer in accordance with the terms of the Offer
and to pay all related fees and expenses; and A Co. will provide written
confirmation of its lenders, in a form satisfactory to Stellarton, acting
reasonably, dated the date hereof, to such effect.
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5.5 KNOWLEDGE
As of the date hereof, neither Parent Co. nor A Co. has any actual
knowledge of any misrepresentation, breach or non-performance by Stellarton of
any representation, warranty or covenant contained in this Agreement which would
have or would be reasonably likely to have a Material Adverse Effect on
Stellarton should the Offer be completed.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF STELLARTON
Stellarton hereby represents and warrants (and, as applicable,
covenants) to Parent Co. and A Co. as follows and acknowledges that Parent Co.
and A Co. are relying upon these representations and warranties in connection
with the entering into of this Agreement:
6.1 ORGANIZATION AND QUALIFICATION
Stellarton is a corporation duly amalgamated and organized and validly
existing under the laws of Alberta and has the requisite corporate power and
authority to own its properties and carry on its business as now owned and being
conducted. Stellarton is duly registered to do business and is in good standing
in each jurisdiction in which the character of its properties, owned or leased,
or the nature of its activities make such registration necessary, except where
the failure to be so registered or in good standing would not have a Material
Adverse Effect on Stellarton.
6.2 AUTHORITY RELATIVE TO THIS AGREEMENT
Stellarton has the requisite corporate authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by Stellarton's board of directors, and no other
corporate proceedings on the part of Stellarton are necessary to authorize this
Agreement (except for obtaining shareholder approval in respect of any Second
Stage Transaction) and the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Stellarton and constitutes a legal, valid
and binding obligation of Stellarton enforceable against Stellarton in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and to general principles of equity.
6.3 NO VIOLATIONS
(a) Except as previously disclosed in the Disclosed Information to
either Parent Co. or A Co., neither the execution and delivery of
this Agreement by Stellarton, the consummation by it of the
transactions contemplated hereby nor compliance by Stellarton
with any of the provisions hereof will: (i) violate, conflict
with, or result in a breach of any provision of, require any
consent, approval or notice under, or constitute a default (or an
event which, with notice or lapse of time or both, would
constitute a default) or result in a right of termination or
acceleration under, or result in a creation of any lien, security
interest, charge or encumbrance
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upon any of the properties or assets of Stellarton or any of its
subsidiaries under, any of the terms, conditions or provisions of
(x) the Stellarton Governing Documents or (y) any material note,
bond, mortgage, indenture, loan agreement, deed of trust,
agreement, lien, contract or other instrument or obligation to
which Stellarton or any of its subsidiaries is a party or to
which Stellarton or any of its subsidiaries or any of their
respective properties or assets, may be subject or by which
Stellarton or any of its subsidiaries is bound, other than a
potential breach of the Credit Facility with the National Bank of
Canada dated April 12, 1998, as amended by letter agreements
dated July 15, 2000, August 4, 2000 and November 6, 2000, and the
Fixed and Floating Charge Demand Debenture and Negative Pledge
issued by Stellarton to the National Bank of Canada dated October
17, 1996, arising from a change of control and as a result of the
necessity for lender consent; (ii) subject to compliance with the
statutes and regulations referred to in Section 6.3(b), violate
any judgment, ruling, order, writ, injunction, determination,
award, decree, statute, ordinance, rule or regulation applicable
to Stellarton or any of its subsidiaries (except, in the case of
each of clauses (i) and (ii) above, for such violations,
conflicts, breaches, defaults, terminations which, or any
consents, approvals or notices which if not given or received,
would not have any Material Adverse Effect on the business,
operations or financial condition of Stellarton and its
subsidiaries or on the ability of Stellarton to consummate the
transactions contemplated hereby); or (iii) cause the suspension
or revocation of any authorization, consent, approval or license
currently in effect which would have a Material Adverse Effect on
the business, operations and financial condition of Stellarton
and its subsidiaries take as a whole.
(b) Other than in connection with or in compliance with the
provisions of Corporate Laws, Securities Laws and the rules of
The Toronto Stock Exchange, (i) there is no legal impediment to
Stellarton's consummation of the transactions contemplated by
this Agreement and (ii) no filing or registration with, or
authorization, consent or approval of, any domestic or foreign
public body or authority is necessary by Stellarton in connection
with the making or the consummation of the Offer, 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 ability of
Stellarton to consummate the transactions contemplated hereby.
6.4 CAPITALIZATION
As of the date hereof, the authorized share capital of Stellarton
consists of an unlimited number of Class A Voting Common Shares, an unlimited
number of Class B Non-Voting Common Shares, and an unlimited number of Class 1
Preferred Shares. As of the date hereof, 22,403,046 Stellarton Shares are issued
and outstanding, and no Class B Non-Voting Common Shares or Class 1 Preferred
Shares are issued and outstanding. As of the date hereof, options to acquire an
aggregate of 2,010,333 Stellarton Shares have been granted under the Stock
Option Plan, details of which, including the number of such options at each
exercise price, are as set forth in the Disclosed Information. Except as set
forth above there are no options, warrants or other rights, agreements or
commitments of any character whatsoever (contingent or otherwise)
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requiring the issuance, sale or transfer by Stellarton of any shares of
Stellarton (including the Stellarton Shares) or any securities convertible into,
or exchangeable or exercisable for, or otherwise evidencing a right to acquire,
any shares of Stellarton (including the Stellarton Shares), nor are there any
outstanding stock appreciation rights, phantom equity or similar rights,
agreements, arrangements or commitments based upon the book value, income or
other attribute of Stellarton. All outstanding Stellarton Shares have been duly
authorized and validly issued, are fully paid and non-assessable and are not
subject to, nor were they issued in violation of, any preemptive rights, and all
Stellarton Shares issuable upon exercise of outstanding stock options in
accordance with their respective terms will be duly authorized and validly
issued, fully paid and non-assessable and will not be subject to any preemptive
rights.
6.5 NO MATERIAL ADVERSE CHANGE
Except as publicly disclosed, since December 31, 1999, there has not
been any Material Adverse Change in respect of Stellarton and its subsidiaries
taken as a whole.
6.6 NO UNDISCLOSED MATERIAL LIABILITIES
Except (a) as disclosed or reflected in the consolidated audited
financial statements of Stellarton as at December 31, 1999 and the unaudited
interim financial statements of Stellarton as at September 30, 2000, previously
delivered to Parent Co. or A Co. as part of the Disclosed Information, and (b)
for liabilities and obligations (i) incurred in the ordinary course of business
and consistent with past practice or (ii) pursuant to the terms of this
Agreement, Stellarton and its subsidiaries, taken as a whole, has not incurred
any liabilities of any nature, whether accrued, contingent or otherwise (or
which would be required by generally accepted accounting principles to be
reflected on a consolidated balance sheet of Stellarton) that have constituted
or would be reasonably likely to constitute a Material Adverse Change.
6.7 IMPAIRMENT
Neither the making of the Offer nor the successful completion of the
Offer will result in a Material Adverse Change pursuant to or as a result of the
provisions of any agreement or arrangement to which Stellarton is a party.
6.8 OFFICER OBLIGATIONS
The Officer Obligations do not exceed an aggregate of $1,260,000 for
severance payable to officers and senior management, an aggregate of $850,000
payable to employees for retention bonuses and $950,000 for pro rata performance
bonuses payable to officers and employees.
6.9 BROKERAGE AND OTHER FEES
Stellarton has not retained nor will it retain any financial advisor,
broker, agent or finder or paid or agreed 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 that
Waterous Securities Inc. has been retained as Stellarton's financial advisor in
connection with certain matters including the transactions contemplated hereby.
Stellarton has delivered or will deliver concurrently with the execution hereof
to Parent Co. a
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true and complete copy of its agreement with Waterous Securities Inc. Based upon
the terms of the Offer as contemplated as of the date hereof, the aggregate
payment payable by Stellarton pursuant to (i) the agreement with Waterous
Securities Inc. and (ii) expenses of independent engineers, legal counsel and
other third party service providers shall not exceed $2,000,000 plus applicable
Goods and Services Taxes.
6.10 CONDUCT OF BUSINESS
Since September 30, 2000, Stellarton has not taken any action that would
be in violation of Section 7.1 if such provision had been in effect since such
date, other than violations which would not have any Material Adverse Effect or
would materially affect Stellarton's ability to consummate the transactions
contemplated hereby.
6.11 REPORTS
(a) Stellarton has heretofore made available to Parent Co. or A Co.
true and complete copies of (i) Stellarton's 2000 Annual
Information Form, Stellarton's Information Circular relating to
its 2000 annual and special meeting of shareholders, Stellarton's
1999 Annual Report to shareholders and unaudited interim
financial statements for the periods ended March 31, 2000, June
30, 2000 and September 30, 2000; and (ii) all prospectuses or
other offering documents used by Stellarton in the offering of
its securities and filed with Securities Authorities since
September 16, 1996; and (iii) the audited financial statements of
Stellarton dated December 31, 1999. As of their respective dates,
such forms, statements, prospectuses and other offering documents
(including all exhibits and schedules thereto and documents
incorporated by reference therein) 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 and complied in all material respects with
all applicable requirements of law. The audited financial
statements and unaudited interim financial statements of
Stellarton publicly issued by Stellarton, previously delivered to
Parent Co. or A Co., or included or incorporated by reference in
such form, statements, prospectuses and other offering documents
were prepared in accordance with generally accepted accounting
principles in Canada (except (i) as otherwise indicated in such
financial statements and the notes thereto or, in the case of
audited statements, in the related report of Stellarton's
independent accountants or (ii) in the case of unaudited interim
financial statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly
present the financial position, results of operations and changes
in financial position of Stellarton 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).
(b) Stellarton will deliver to Parent Co. as soon as they become
available true and complete copies of any report or statement
filed by it with Securities Authorities subsequent to the date
hereof. As of their respective dates, such reports and
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statements (excluding any information therein provided by Parent
Co. or A Co., as to which Stellarton makes 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 under which they are made, not misleading and will
comply in all material respects with all applicable requirements
of law. The financial statements of Stellarton issued by
Stellarton or to be included in such reports and statements
(excluding any information therein provided by Parent Co. or A
Co., as to which Stellarton makes no representation) will be
prepared in accordance with generally accepted accounting
principles in Canada (except (i) as otherwise indicated in such
financial statements and the notes thereto or, in the case of
audited statements, in the related report of Stellarton's
independent accountants or (ii) in the case of unaudited interim
financial statements, to the extent they may not include
footnotes or may be condensed or summary statements) and will
present fairly the financial position, results of operations and
changes in financial position of Stellarton 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).
6.12 SUBSIDIARIES
Stellarton has no direct or indirect wholly-owned or partially owned
subsidiaries except for the following:
(a) Stellarton Energy International Corp.;
(b) Stellarton de Venezuela C.A.; and
(c) Secure Power Systems Ltd.
6.13 COMPLIANCE WITH LAW
Stellarton and each of its subsidiaries has complied with and is in
compliance with all laws and regulations applicable to the operation of its
business, except where such non-compliance would not, considered individually or
in the aggregate, have a Material Adverse Effect or would materially affect the
ability of Stellarton to consummate the transactions contemplated hereby.
6.14 MATERIAL AGREEMENTS
There are no agreements, permits, licenses, approvals, certificates and
other rights and authorizations material to the conduct of Stellarton's and its
subsidiaries' business except as contained in the Data Room at the time of the
attendance thereat by Parent Co.'s or A Co.'s representatives, and all such
agreements, permits, licences, approvals, certificates and other rights and
authorizations are valid and subsisting and neither Stellarton nor its
subsidiaries is in material default under any such agreements, permits,
licences, approvals, certificates and other rights and authorizations.
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6.15 INTERIM FINANCIAL STATEMENTS
The interim unaudited financial statements as at and for the nine months
ended September 30, 2000, a copy of which was provided to Parent Co. or A Co. by
Stellarton as part of Parent Co.'s or A Co.'s data review process, were prepared
in accordance with generally accepted accounting principles in Canada and
present fairly in all material respects, the financial position of Stellarton,
the results of its operations and the changes in its financial position for the
applicable period; provided however that such statements are condensed and do
not include notes. Except as disclosed in this Agreement or in such financial
statements, Stellarton and its subsidiaries had no material liabilities (whether
actual, accrued or contingent, and whether direct or indirect) at September 30,
2000.
6.16 EMPLOYMENT AGREEMENTS
Except as disclosed in the Disclosed Information, Stellarton and its
subsidiaries are not party to any written employment or consulting agreement or
any verbal employment or consulting agreement with a term of more than thirty
(30) days or any written agreement which provides for a payment by Stellarton or
its subsidiaries on a change of control of Stellarton or severance of employment
and Stellarton and its subsidiaries agree not to amend the terms and conditions
of any of the foregoing which were disclosed in the Disclosed Information.
6.17 EMPLOYEE BENEFIT PLANS
Stellarton does not have any employee benefit plans and has made no
promises with respect to increased benefits under such plans, other than: (i)
the Stock Option Plan; and (ii) existing health, dental, vision and short and
long term disability plan of general application, together with the employee
savings and stock purchase plan as disclosed in the Disclosed Information. All
contributions (including premiums) required by law or contract to and including
September 30, 2000 to have been paid or accrued, under or with respect to such
plans, have been paid or accrued as at that date, as the case may be.
6.18 UNITED STATES RELATIONSHIPS AND OPERATIONS
(a) Stellarton does not have actual knowledge that the level of
ownership by U.S. holders of Stellarton Shares equals or exceeds
10% of the total of such outstanding class of securities. The
term "U.S. holder" means any person whose address appears on the
records of Stellarton, any voting or other trustee, any
depository, any share transfer agent or any person acting in a
similar capacity on behalf of Stellarton, as being located in the
United States. None of the securities of Stellarton are
registered under the Securities Exchange Act of 1934 of the
United States.
(b) Direct sales by Stellarton, if any, into the United States in
calendar year 1999 and to date in calendar year 2000 are less
than $25 million (U.S.) in the aggregate per period and the
assets of Stellarton located in the United States, if any, have
an aggregate value less than $10 million (U.S.).
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6.19 DATA AND INFORMATION
To the knowledge of Stellarton, the data and information in respect of
Stellarton and its subsidiaries and their respective assets, liabilities,
business, operations and capital provided by Stellarton to Parent Co. or A Co.
was and is accurate and correct in all material respects, taken as a whole, as
at the respective dates thereof and, taken as a whole, did not and does not now
omit any data or information necessary to make any data or information provided
not misleading in any material respects as at the respective dates thereof.
Stellarton agrees to preserve information contained in the Data Room (without
any amendment or changes to such information), with such information to be
maintained by Stellarton, and reasonable access shall be provided to Parent Co.
or A Co. upon reasonable request for purposes of identifying the information
relating to the index of information and to facilitate efforts under Section
7.3.
6.20 ENGINEERING REPORT
Stellarton has provided to Gilbert Lausten Jung Associates Ltd. ("GLJ"),
independent geological and petroleum engineering consultants, all material
information concerning land descriptions and well data respecting the principal
oil and gas assets of Stellarton at September 1, 2000 in respect of the
evaluation report dated September 1, 2000 and, in particular, all material
information respecting Stellarton's interests in its principal oil and gas
assets and the royalty burdens and net profits interest burdens thereon and
Stellarton is not aware of any information not provided to GLJ that would have a
material adverse impact on the evaluation report, taken as a whole.
6.21 BOOKS AND RECORDS
The corporate records and minute books of Stellarton have been
maintained in accordance with all applicable statutory requirements and are
complete and accurate in all material respects.
6.22 LITIGATION, ETC.
Except as disclosed in writing to Parent Co. or A Co. or made available
in the Data Room prior to the date hereof, there are no actions, suits or
proceedings pending, or to the knowledge of Stellarton threatened, affecting
Stellarton or any of its subsidiaries before or by any federal, provincial,
state, local, foreign, municipal or other governmental department, commission,
board, bureau, agency, court or instrumentality, which action, suit or
proceeding involves a possibility of any judgment against or liability of
Stellarton or any of its subsidiaries or other person which, if successful,
would have a Material Adverse Effect, or materially adversely affect the ability
of Stellarton to consummate the transactions contemplated hereby.
6.23 ENVIRONMENTAL
Except as disclosed in the information contained in the Data Room;
(a) Stellarton is not aware of, and has not received:
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(i) any order or directive which relates to environmental
matters and which requires any material work, repairs,
construction, or capital expenditures; or
(ii) any demand or notice with respect to the material breach
of any environmental, health or safety law applicable to
Stellarton and its subsidiaries or any of their respective
business undertakings, including, without limitation, any
regulations respecting the use, storage, treatment,
transportation, or disposition of environmental
contaminants.
(b) Stellarton has not received notice of and is not aware of any
material environmental liabilities related to its assets, other
than obligations in the ordinary course of business to abandon
wells when they have ceased to be productive, remove production
equipment when they are no longer being used and restore and
reclaim the surface sites thereof;
(c) all material environmental and health and safety permits,
licenses, approvals, consents, certificates and other
authorizations of any kind or nature ("Environmental Permits")
necessary for the ownership, operation, development, maintenance,
or use of any of the assets have been obtained and maintained in
effect;
(d) Stellarton, its assets and the ownership, operation, development,
maintenance and use thereof are in material compliance with all
environmental laws and with all terms and conditions of all
Environmental Permits; and
(e) all known spills or similar incidents pertaining to or affecting
the business or the assets of Stellarton have been reported to
the appropriate governmental entity to the extent required by
environmental laws.
For purposes of this section 6.23, Stellarton provides each of the
representations and warranties to its knowledge, without inquiry, with respect
to those operations and assets which it does not operate.
6.24 TAX MATTERS
(a) For purposes of this Agreement, the following definitions shall
apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other
additions that may become payable in respect thereof,
imposed by any federal, provincial, state, local or
foreign government or any agency or political subdivision
of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income or
profits taxes (including, but not limited to, federal
income taxes and provincial income taxes), capital,
payroll and employee withholding taxes, labour taxes,
unemployment insurance, social insurance taxes, sales and
use taxes, ad valorem taxes, value added taxes, excise
taxes, franchise taxes, gross receipts taxes, business
license
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taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, transfer taxes, workers'
compensation and other governmental charges, and other
obligations of the same or of a similar nature to any of
the foregoing, which Stellarton or any of its subsidiaries
is required to pay, withhold or collect.
(ii) The term "Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements and
returns relating to, or required to be filed in connection
with, any Taxes.
(b) All Returns required to be filed by or on behalf of Stellarton or
any or its subsidiaries have been duly filed on a timely basis
(excepting thereout a Return for the year ended 1999 for the
Sultanate of Oman, which Return will reflect Taxes payable of no
more than $50,000) and such Returns are true, complete and
correct in all material respects. All Taxes shown to be payable
on the Returns or on subsequent assessments with respect thereto
have been paid in full on a timely basis, and no other Taxes are
payable by Stellarton or any subsidiaries with respect to items
or periods covered by such Returns.
(c) Stellarton and each of its subsidiaries has paid or provided
adequate accruals in its financial statements for the year ended
dated December 31, 1999 for Taxes, including income taxes, labour
taxes and related future taxes, in conformity with generally
accepted accounting principles applicable in Canada.
(d) For all periods covered by the filed tax returns disclosed in the
Disclosed Information, Parent Co. or A Co. has been furnished by
Stellarton true and complete copies of (i) relevant portions of
income tax audit reports, statements of deficiencies, closing or
other agreements received by Stellarton or on behalf of
Stellarton or any of its subsidiaries relating to Taxes, and (ii)
all federal, provincial, state, local or foreign income or
franchise tax returns for Stellarton or any of its subsidiaries.
(e) No material deficiencies exist or have been asserted with respect
to Taxes of Stellarton or any of its subsidiaries. Neither
Stellarton nor any of its subsidiaries is a party to any action
or proceeding for assessment or collection of Taxes, nor has such
event been asserted or threatened against Stellarton or any of
its subsidiaries or any of their respective assets. No waiver or
extension of any statute of limitations is in effect with respect
to Taxes or Returns of Stellarton or any of its subsidiaries.
Except as disclosed in the Disclosed Information, the Returns of
Stellarton or any of its subsidiaries have not been audited by a
government or taxing authority within the last three (3) years,
nor is any such audit in process, pending or threatened.
(f) Stellarton has provided adequate accruals in its financial
statements for the year ended December 31, 1999 (or, in either
case, such amounts are fully funded) for all employee benefit
obligations of Stellarton arising under or relating to each of
the pension or retirement income plans or other employee benefit
plans or
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agreements or policies maintained by or binding on Stellarton or
any of its subsidiaries.
6.25 REPORTING ISSUER STATUS
Stellarton is a "reporting issuer" in material compliance with all
applicable securities laws of British Columbia, Alberta, Manitoba, Ontario and
Quebec.
6.26 DEBT AND WORKING CAPITAL
As at November 30, 2000, Stellarton's consolidated debt (other than
trade debt) does not exceed $17,000,000 and, as at September 30, 2000, its
working capital deficiency is not greater than $3,400,000.
6.27 CONFIDENTIALITY AGREEMENTS
All agreements entered into by Stellarton with persons other than Parent
Co. or A Co. regarding the confidentiality of information provided to such
persons or reviewed by such persons in the Data Room are in substantially the
form of the Parent Co. Confidentiality Agreement. Stellarton has not negotiated
any Take-over Proposal with any person who has not entered into such a
confidentiality agreement or provided access to the Data Room to any person who
has not entered into such a confidentiality agreement. Stellarton agrees to
fully enforce all such confidentiality agreements and Stellarton, subject to
this Agreement, will not amend, modify or provide any consents under such
confidentiality agreements or provide any release from, or relaxation of, the
obligations under such confidentiality agreements to any of the parties thereto.
6.28 INSURANCE
Policies of insurance in force as of the date hereof naming Stellarton
as an insured adequately cover all risks reasonably and prudently foreseeable in
the operation and conduct of the business of Stellarton and its subsidiaries.
All such policies of insurance shall remain in force and effect and shall not be
canceled or otherwise terminated as a result of the transactions contemplated
hereby or by the Offer.
6.29 SECURE OIL TOOLS LTD.
All holdback amounts due and receivable pursuant to the sale of Secure
Oil Tools Ltd. have been received.
ARTICLE VII
CONDUCT OF BUSINESS
7.1 CONDUCT OF BUSINESS BY STELLARTON
Stellarton covenants and agrees that, during the period from the date of
this Agreement until the earlier of either: (i) the Effective Time; or (ii) this
Agreement is terminated by its terms,
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unless A Co. shall otherwise agree in writing, except as required by law or as
otherwise expressly permitted or specifically contemplated by this Agreement:
(a) the business of Stellarton and its subsidiaries shall be
conducted only in, and Stellarton shall not take and Stellarton
shall cause its subsidiaries not to take any action except in the
usual and ordinary course of business and consistent with past
practice, and Stellarton shall use and shall cause its
subsidiaries to use all commercially reasonable efforts to
maintain and preserve its applicable business organization,
assets, employees and advantageous business relationships;
(b) Stellarton shall not directly or indirectly do or permit to occur
any of the following: (i) amend the Stellarton Governing
Documents; (ii) declare, set aside or pay any dividend or other
distribution or payment (whether in cash, shares or property) in
respect of its shares owned by any person; (iii) issue, grant,
sell or pledge or agree to issue, grant, sell or pledge any
shares of Stellarton or any of its subsidiaries, or securities
convertible into or exchangeable or exercisable for, or otherwise
evidencing a right to acquire, shares of Stellarton or any of its
subsidiaries, other than Stellarton Shares issuable pursuant to
the terms of the Stellarton Options; (iv) redeem, purchase or
otherwise acquire any of its outstanding shares or other
securities including, without limitation, under a normal course
issuer bid; (v) split, combine or reclassify any of its shares;
(vi) adopt a plan of liquidation or resolutions providing for the
liquidation, dissolution, merger, consolidation or reorganization
of Stellarton or any of its subsidiaries; (vii) reduce the stated
capital of Stellarton or any of its subsidiaries, or (viii) enter
into or modify any contract, agreement, commitment or arrangement
with respect to any of the foregoing, except as permitted above;
(c) Since September 30, 2000, neither Stellarton nor any of its
subsidiaries has, other than as disclosed, and shall not, without
prior consultation with and the consent of A Co., such consent
not to be unreasonably withheld, directly or indirectly do any of
the following: (i) sell, pledge, dispose of or encumber any
assets having an individual value in excess of $250,000
(excepting thereout Stellarton's interest in Secure Power Systems
Ltd., it being acknowledged that Stellarton shall consult with A
Co. with respect to the treatment of such interest, but A Co.'s
consent to the treatment is not required); (ii) acquire (by
merger, amalgamation, consolidation or acquisition of shares or
assets) any corporation, partnership or other business
organization or division thereof, or make any investment either
by purchase of shares or securities, contributions of capital or
property transfer; (iii) acquire any assets with an acquisition
cost which would exceed (A) $250,000 individually or (B) $750,000
in the aggregate, with the exception of purchases at crown lease
sales and freehold lease acquisitions where A Co. has been
consulted with prior to such acquisition; (iv) incur any
indebtedness for borrowed money in excess of existing facilities,
or any other material liability or obligation or issue any debt
securities or assume, guarantee, endorse or otherwise as an
accommodation become responsible for, the obligations of any
other individual or entity, or make any loans or advances, other
than the Officer Obligations and fees payable to legal advisors
in the ordinary course and fees payable to legal and
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financial advisors in respect of the Offer; (v) authorize,
recommend or propose any release or relinquishment of any
material contract right; (vi) waive, release, grant or transfer
any material rights of value or modify or change in any material
respect any existing material license, lease, contract,
production sharing agreement, government land concession or other
material document; (vii) enter into or terminate any hedges,
swaps or other financial instruments or like transactions; (viii)
enter into any agreements with directors or officers of
Stellarton or their respective affiliates; (x) enter into
commitments of a capital expenditure nature or incur any
contingent liability other than in accordance with ordinary
course expenditures, including AFE's approved prior to the date
hereof and the drilling of individual wells with a cost of up to
$500,000 each, having an aggregate cost of up to $10,000,000
except: (A) as may be necessary for the maintenance of existing
facilities, machinery and equipment in good operating condition
and repair in the ordinary course of business; or (B) as may be
required by law; 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;
(d) Stellarton shall not create any new Officer Obligations and,
except for payment of the existing Officer Obligations (from
which Stellarton shall make appropriate withholdings as required
by applicable tax laws), Stellarton shall not grant to any
officer or director an increase in compensation in any form,
grant any general salary increase other than in accordance with
the requirements of any existing collective bargaining or union
contracts, grant to any other employee any increase in
compensation in any form other than routine increases in the
ordinary course of business consistent with past practices, make
any loan to any officer or director, or take any action with
respect to the grant of any severance or termination pay arising
from the Offer or a change of control of Stellarton or the
entering into of any employment agreement with, any senior
officer or director, or with respect to any increase of benefits
payable under its current severance or termination pay policies;
(e) Stellarton shall use its reasonable commercial efforts to cause
the current insurance (or re-insurance) policies of Stellarton,
taken as a whole, 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;
(f) Stellarton shall and shall cause each of its subsidiaries to 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;
(g) neither Stellarton nor any of its subsidiaries shall adopt or
amend or make any contribution to any bonus, profit sharing,
option, deferred compensation, insurance, incentive compensation,
other compensation or other similar plan,
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agreement, trust, fund or arrangements for the benefit of
employees, except as is necessary to comply with the law or with
respect to existing provisions of any such plans, programs,
arrangements or agreements; and
(h) Stellarton shall and shall cause each of its subsidiaries to
comply in all material respects with all applicable laws and
material contracts.
Notwithstanding the foregoing, Stellarton may, prior to the Expiry Time,
enter into a transaction contemplating the sale, transfer or other treatment of
Stellarton's interest in Secure Power Systems Ltd., provided that any proceeds
from such sale will be retained by Stellarton.
7.2 CONDUCT OF BUSINESS BY PARENT CO. AND A CO.
Parent Co. and A Co. each covenant and agree that, during the period
from the date of this Agreement until this Agreement is terminated in accordance
with its terms, unless Stellarton shall otherwise agree in writing, except as
required by law or as otherwise expressly permitted or specifically contemplated
by this Agreement:
(a) each of Parent Co. and A Co. and their respective subsidiaries
will not take any actions which would or might be reasonably
expected to materially impede or otherwise frustrate the
completion of the Offer; and
(b) each of Parent Co. and A Co. shall and shall cause each of its
respective subsidiaries to 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.
7.3 INTEGRATION OF OPERATIONS
From and after the mailing of the Offer, A Co. and its representatives
will be permitted reasonable access to Stellarton's premises, field operations,
records, computer systems, properties, books, contracts, records management
personnel and employees to permit A Co. to be in a position to expeditiously and
efficiently integrate the business and operations of Stellarton with that of A
Co. immediately upon but not prior to, the Effective Time without causing any
unreasonable disruptions to Stellarton's business or operations prior to the
Effective Time.
7.4 MARKET PURCHASES
Stellarton agrees that A Co., notwithstanding anything to the contrary
contained in the Parent Co. Confidentiality Agreement, after the date hereof may
purchase Stellarton Shares in the market or otherwise, provided that such
purchases are made in compliance with the provisions of Securities Laws and
provided that any Stellarton Shares so acquired shall be included in determining
whether the Minimum Condition has been satisfied.
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ARTICLE VIII
COVENANTS OF STELLARTON
8.1 NOTICE OF MATERIAL CHANGE
From the date hereof until the termination of this Agreement, Stellarton
shall promptly notify Parent Co. in writing of:
(a) any material change (actual, anticipated, contemplated or, to the
knowledge of Stellarton, threatened, financial or otherwise) in
the business, affairs, operations, assets, liabilities
(contingent or otherwise) or capital of Stellarton or any of its
subsidiaries;
(b) any change in the facts relating to any representation or
warranty set forth in Article 6 which change is or may be of such
a nature as to render any such representation or warranty
misleading or untrue in a material respect; or
(c) any material fact which arises and which would have been required
to be stated herein had the fact arisen on or prior to the date
of this Agreement.
Stellarton shall in good faith discuss with A Co. any change in
circumstances (actual, anticipated, contemplated or, to the knowledge of
Stellarton, threatened, financial or otherwise) which is of such a nature that
there may be a reasonable question as to whether notice need to be given to A
Co. pursuant to this section.
8.2 NON-COMPLETION FEE
If at any time after the execution of this Agreement:
(a) the board of directors of Stellarton has withdrawn or, in any
manner adverse to A Co., redefined, modified or changed any of
its recommendations or determinations referred to in Section
2.2(a) prior to the Expiry Time of the Offer, or shall have
resolved to do so;
(b) any bona fide Take-over Proposal for the Stellarton Shares is
publicly announced or commenced, and the board of directors of
Stellarton shall have failed to publicly reaffirm and maintain
its recommendation of the Offer to Stellarton's shareholders
within 5 days after the commencement of any such Take-over
Proposal;
(c) the board of directors of Stellarton shall have recommended that
Stellarton's shareholders deposit their Stellarton Shares under,
vote in favour of, or otherwise accept, a Take-over Proposal;
(d) Stellarton shall have entered into any contractual agreement with
any person with respect to a Take-over Proposal prior to the
Expiry Time of the Offer, excluding a confidentiality agreement
entered into in compliance with Section 8.3; or
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(e) another Take-over Proposal is publicly announced, proposed,
offered or made to all or substantially all holders of Stellarton
Shares or to Stellarton prior to the Expiry Time, the Offer has
expired and has not been consummated by reason of the Minimum
Condition not having been satisfied, and before or within six
months of the Expiry Time of the Offer, the Take-over Proposal
(as originally proposed or as amended) or any other Take-over
Proposal is completed.
Stellarton shall forthwith upon the occurrence of any such event and in any
event within two Business Days pay to A Co. the amount of $4,500,000.
Any payment pursuant to Section 8.2 shall be without prejudice to the
rights or remedies available to A Co. upon the breach of any provision of this
Agreement.
8.3 NO SOLICITATION
Stellarton shall immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, activity, discussion,
negotiation or other procedures with any parties conducted heretofore by
Stellarton, or its officers, directors, employees, financial advisors, legal
counsel, representatives and agents ("Representatives") with respect to a
Take-over Proposal (as defined herein) whether or not initiated by Stellarton
and in connection therewith, Stellarton shall not release any third party from
any confidentiality or standstill agreement to which Stellarton and such third
party is a party or amend any of the foregoing and shall exercise all rights to
require the return of information regarding Stellarton previously provided to
such parties and shall exercise all rights to require the destruction of all
materials including or incorporating any information regarding Stellarton. From
and after the date hereof, Stellarton will not, and will not authorize or permit
any of their Representatives to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing information) 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 a Take-over Proposal from
any person, or engage in any discussion, negotiations or inquiries relating
thereto or accept any Take-over Proposal; provided, however, that Stellarton
may: (i) engage in discussions or negotiations with a third party who (without
any solicitation, initiation or encouragement, directly or indirectly, by
Stellarton, or the Representatives after the date hereof) seeks to initiate such
discussions or negotiations and may furnish such third party information
concerning Stellarton and its business, properties and assets which has
previously been provided to Parent Co. or A Co. if, and only to the extent that:
(A) the third party has first made a bona fide written Take-over Proposal that
is financially superior to the Offer and has demonstrated that such proposal
constitutes a commercially feasible transaction which could be carried out
within a time frame that is reasonable in the circumstances and that the funds
or other consideration necessary for the Take-over Proposal are available (as
determined in good faith in each case by Stellarton's board of directors after
receiving the advice of its financial advisors) (a "Superior Proposal") and
Stellarton's board of directors has concluded in good faith, after considering
applicable law and receiving the advice of legal counsel that such action is
required by the Stellarton board of directors to comply with fiduciary duties
under applicable law; (B) prior to furnishing such information to or entering
into discussions or negotiations with such person or entity, Stellarton provides
immediate notice orally and in writing to A Co. specifying that it is furnishing
information to or entering into discussions or negotiations with such person or
entity in respect to a Superior Proposal, receives
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from such person or entity an executed confidentiality agreement having
confidentiality and standstill terms substantially similar to those contained in
the Parent Co. Confidentiality Agreement, and provides A Co. with a copy of such
Superior Proposal and any amendments thereto excepting thereout the name of the
party making the Superior Proposal and confirming in writing the determination
of Stellarton's board that the Take-over Proposal if completed would constitute
a Superior Proposal; (C) Stellarton provides immediate notice to A Co. at such
time as it or such person or entity terminates any such discussions or
negotiations; and (D) Stellarton immediately provides to A Co. any information
provided to any such person or entity whether or not previously made available
to A Co.; (ii) comply with Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to a tender or exchange offer, if applicable, and similar rules
under applicable Canadian securities laws relating to the provision of
directors' circulars, and make appropriate disclosure with respect thereto to
Stellarton's shareholders; and (iii) accept, recommend, approve or implement a
Superior Proposal from a third party, but only (in the case of this clause
(iii)) if prior to such acceptance, recommendation, approval or implementation,
Stellarton's board of directors shall have concluded in good faith, after
considering provisions of applicable law and after giving effect to all
proposals to adjust the terms and conditions of this Agreement and the Offer
which may be offered by A Co. during the three Business Days notice period set
forth below and after receiving the advice of legal counsel, and Stellarton
terminates this Agreement in accordance with Sections 8.2 and 11.1(g).
Stellarton shall give A Co. orally and in writing at least three Business Days
advance notice of any decision by the Board of Stellarton to accept, recommend,
approve or implement a Superior Proposal which notice shall identify the party
making the Superior Proposal and shall provide a true and complete copy thereof
and any amendments thereto. In addition Stellarton shall, and shall cause its
respective financial and legal advisors to, negotiate in good faith with A Co.
to make such adjustments in the terms and conditions of this Agreement and the
Offer as would enable Stellarton to proceed with the Offer as amended rather
than the Superior Proposal. In the event A Co. proposes to amend this Agreement
and the Offer to provide substantially equivalent or superior value to that
provided under the Superior Proposal within the three Business Days time period
specified above, then Stellarton shall not enter into any agreement regarding
the Superior Proposal.
8.4 STELLARTON BOARD OF DIRECTORS
As soon as reasonably practicable following the acquisition by A Co. of
more than 50% of the outstanding Stellarton Shares pursuant to the Offer, the
board of directors of Stellarton shall be immediately reconstituted through
resignations of all existing Stellarton directors and the appointment of A Co.
nominees in their stead. Stellarton shall, in accordance with the foregoing and
subject to the provisions of the Act, assist A Co. to secure the resignations of
all Stellarton directors to be effective at such time as may be required by A
Co. and to use its best efforts to cause the election or appointment of the A
Co. nominees to fill the vacancies so created in order to effect the foregoing
without the necessity of a shareholder meeting.
8.5 REPRESENTATIONS AND WARRANTIES
Stellarton covenants and agrees that at all times when the Offer is
outstanding, Stellarton shall not take any action, or fail to take any action,
which would or could result in the representations and warranties set out in
Article VI being untrue in any material respect, and
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Stellarton will provide a certificate of an officer as to the status of the
representations and warranties set out in Article VI on the Take-up Date.
8.6 STRUCTURE OF TRANSACTION
Stellarton shall use reasonable commercial efforts in cooperating with A
Co. in structuring the acquisition by A Co. of Stellarton in a tax efficient
manner, provided that no such cooperation shall be required where such
structuring shall have a material adverse effect on the business, operations or
financial condition of Stellarton or cause any breach of or default under this
Agreement by Stellarton.
ARTICLE IX
COVENANTS OF PARENT CO. AND A CO.
9.1 REPRESENTATIONS AND WARRANTIES
Parent Co. and A Co. covenant and agree that at all times when the Offer
is outstanding, neither Parent Co. nor A Co. shall take any action, or fail to
take any action, which would or could result in the representations and
warranties set out in Article V being untrue in any material respect.
9.2 EMPLOYMENT AGREEMENTS
Parent Co. and A Co. covenant and agree, and after the Effective Time
will cause Stellarton and any successor to Stellarton to agree, to honour and
comply with the terms of those existing executive employment agreements,
termination, severance and retention agreements, plans or policies of Stellarton
which Stellarton has disclosed to Parent Co. or A Co. in writing prior to the
date hereof.
9.3 INDEMNITIES
Parent Co. and A Co. agree that if A Co. acquires the Stellarton Shares
under the Offer they shall cause Stellarton to fulfill its obligations pursuant
to indemnities provided or available to past and present officers and directors
of Stellarton pursuant to the provisions of the articles, by-laws or similar
constating documents of Stellarton, applicable corporate legislation and any
written indemnity agreements between any of Stellarton and its past and current
officers and directors.
9.4 OTHER COVENANTS
Parent Co. and A Co. covenant and agree that, from and including the
date hereof until the termination of this Agreement, unless Stellarton agrees
otherwise in writing:
(a) each of Parent Co. and A Co. shall use its best efforts to
consummate the Offer, subject only to the terms and conditions
hereof and thereof; and
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(b) each of Parent Co. and A Co. shall use its best efforts to obtain
all of the regulatory approvals, waivers and consents set out in
paragraphs (b) and (c) of Schedule A.
ARTICLE X
MUTUAL COVENANTS
10.1 OTHER FILINGS
A Co. and Stellarton shall, as promptly as practicable hereafter,
prepare and file any filings required under any Securities Law, the rules of The
Toronto Stock Exchange, the United States Securities Exchange Act of 1934, as
amended, state securities or "blue-sky" laws of the states of the United States,
as amended, or any other applicable law relating to the transactions
contemplated herein.
10.2 ADDITIONAL AGREEMENTS
Subject to the terms and conditions herein provided and to fiduciary
obligations under applicable law as advised by counsel, each of the parties
hereto agrees to use all commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement and to cooperate with each other in
connection with the foregoing, including using commercially reasonable efforts
(i) to obtain all necessary waivers, consents and approvals from other parties
to material agreements, leases and other contracts or agreements (including,
without limitation, the agreement of any persons as may be required pursuant to
any agreement, arrangement or understanding relating to Stellarton's
operations), (ii) to obtain all necessary consents, approvals and authorizations
as are required to be obtained under any federal, provincial or foreign law or
regulations, (iii) to defend all lawsuits or other legal proceedings challenging
this Agreement or the consummation of the transactions contemplated hereby, (iv)
to cause to be lifted or rescinded any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, (v) to effect all necessary registrations and
other filings and submissions of information requested by governmental
authorities, and (vi) to fulfill all conditions and satisfy all provisions of
this Agreement and the Offer. For purposes of the foregoing, the obligation to
use "commercially reasonable efforts" to obtain waivers, consents and approvals
to loan agreements, leases and other contracts shall not include any obligation
to agree to a materially adverse modification of the terms of such documents or
to prepay or incur additional material obligations to such other parties.
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ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 TERMINATION
This Agreement, other than any obligations heretofore accrued, may be
terminated by written notice promptly given to the other party hereto, at any
time prior to the time A Co. first takes up and pays for Stellarton Shares:
(a) by mutual agreement by A Co. and Stellarton; or
(b) by either A Co. or Stellarton if a court of competent
jurisdiction or a governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by
this Agreement and such order, decree, ruling or other action
shall have become final; or
(c) by Stellarton, if A Co. has not mailed the Offer Documents to
Stellarton's Shareholders on or before 11:59 p.m. (Calgary time)
on December 22, 2000; or
(d) by A Co., if the conditions to the Offer set forth in Schedule
"A" have not been satisfied or waived by A Co. on or before the
Expiry Time; or
(e) by either A Co. or Stellarton, if A Co. has not taken up and paid
for the Stellarton Shares deposited under the Offer on or before
the date which is 60 days following the day of mailing of the
Offer Documents; or
(f) by A Co. or Stellarton, if the Offer terminates or expires at the
Expiry Time without A Co. taking up and paying for any of the
Stellarton Shares as a result of the failure of any condition to
the Offer to be satisfied or waived, unless the absence of such
occurrence shall be due to the failure of the party seeking to
terminate this Agreement to perform the obligations under this
Agreement required to be performed by it; or
(g) by A Co. or Stellarton, if the fee referred to in Section 8.2
becomes payable and payment is made to A Co.; or
(h) by either A Co. or Stellarton, if there has been a breach or
non-performance by the other party of any representation,
warranty or covenant contained in this Agreement which would have
or would be reasonably likely to have a material adverse effect
on the party seeking to terminate, provided the breaching party
has been given notice of and three days to cure any such
misrepresentation, breach or non-performance, other than in
respect of Section 8.2 and Section 8.3.
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11.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement as provided in Section
11.1, this Agreement shall forthwith have no further force or effect and there
shall be no obligation on the part of A Co. or Stellarton hereunder except as
set forth in Section 8.2 and Section 12.5 and this Section 11.2, which
provisions shall survive the termination of this Agreement. Nothing herein shall
relieve any party from liability for any breach of this Agreement.
11.3 AMENDMENT
This Agreement may be amended by mutual agreement between the parties
hereto. This Agreement may not be amended except by an instrument in writing
signed by the appropriate officers on behalf of each of the parties hereto.
11.4 WAIVER
A Co., on the one hand, and Stellarton, on the other hand, may (i)
extend the time for the performance of any of the obligations or other acts of
the other, (ii) waive compliance with any of the other's agreements or the
fulfillment of any conditions to its own obligations contained herein or (iii)
waive inaccuracies in any of the other's representations or warranties contained
herein or in any document delivered by the other party hereto; provided,
however, that any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party.
ARTICLE XII
GENERAL PROVISIONS
12.1 NOTICES
All notices and other communications given or made pursuant hereto shall
be in writing and shall be deemed to have been duly given or made as of the date
delivered or sent if delivered personally or sent by cable, telegram, telecopier
or telex or sent by prepaid overnight courier to the parties at the following
addresses (or at such other addresses as shall be specified by the parties by
like notice):
(a) if to A Co.:
Tom Brown Resources Ltd.
Suite 1410, 311 -- 6th Avenue S.W.
Calgary, Alberta T2P 3H2
Attention: Amar Pandila
Vice President and General Manager
Telecopy No.: (403) 264-5586
and to Parent Co.:
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Tom Brown, Inc.
555 Seventeenth Street
Suite 1850
Denver, Co 80202-3918
Attention: James D. Lightner
President
Telecopy No.: (303) 260-5095
with a copy to:
Macleod Dixon LLP
3700, 400 -- 3rd Avenue S.W.
Calgary, Alberta
T2P 4H2
Attention: Kent D. Kufeldt
Telecopy No.: (403) 264-5973
(b) if to Stellarton:
Stellarton Energy Corporation
700, 736 -- 8th Avenue S.W.
Calgary, Alberta
T2P 1H4
Attention: Robert D. Steele
President
Telecopy No.: (403) 250-2586
with a copy to:
Bennett Jones LLP
4500 Bankers Hall East
855 - 2nd Street S.W.
Calgary, Alberta
T2P 4K7
Attention: R. Vance Milligan
Telecopy No.: (403) 265-7219
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12.2 MISCELLANEOUS
(a) This Agreement (i) except for the Parent Co. Confidentiality
Agreement between the parties hereto, constitutes the entire
agreement and supersedes all other prior agreements and
understandings, both written and oral, between the parties, with
respect to the subject matter hereof and (ii) shall be binding
upon and enure to the benefit of the parties hereto and their
respective successors and assigns. The parties hereto shall be
entitled to rely upon delivery of an executed facsimile copy of
the Agreement, and such facsimile copy shall be legally effective
to create a valid and binding agreement among the parties hereto.
Stellarton agrees in favour of Parent Co. and A Co. that the
standstill provisions of the Parent Co. Confidentiality Agreement
are waived and terminated to the extent necessary to permit A Co.
to purchase Stellarton's Shares in accordance with Securities
Laws and for so long as the Offer remains outstanding. The
parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms
and provisions hereof in any court of the Province of Alberta
having jurisdiction, this being in addition to any other remedy
to which they are entitled at law or in equity.
(b) Subject to the prior consent of A Co., acting reasonably, as to
the form and substance thereof, Stellarton agrees coincidentally
with the mailing of the Offer Documents to deliver a letter to
all parties to, and recipients under, the confidentiality
agreements who received evaluation material requesting the return
or destruction of such evaluation material in accordance with
terms of the applicable confidentiality agreement and advising
such parties and recipients as to their obligations under the
confidentiality agreements in the context of this Agreement and
the Offer.
12.3 DIRECTORS' AND OFFICERS INSURANCE
If prior to the Effective Date, Stellarton secures directors' and
officers' liability insurance for Stellarton's current and former directors and
officers, covering claims made prior to or within six years after the date that
A Co. first takes up and pays for any Stellarton Shares pursuant to the Offer
which has a scope and coverage substantially equivalent in scope and coverage to
that provided by Stellarton's current directors' and officers' insurance policy,
A Co. agrees to cause Stellarton to maintain such insurance in place (or, if
such insurance is unavailable during such six year period, use reasonable
commercial efforts to obtain equivalent insurance) and agrees not to take any
action, or to cause Stellarton to take any action, to terminate such directors'
and officers' liability insurance or any indemnity agreements (whether pursuant
to Stellarton's articles, by-laws or similar constating documents of Stellarton
or any written indemnity agreements but subject to Corporate Laws) in favour of
current and former directors and officers of Stellarton, provided in all events
that the total premium therefor does not exceed $20,000.
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12.4 ASSIGNMENT
Except as expressly permitted by the terms hereof, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties. A Co. may assign all or any part of its rights or obligations
under this Agreement to a direct or indirect wholly-owned subsidiary of A Co.,
provided that if such assignment takes place, A Co. shall continue to be liable
to Stellarton, as principal obligor, for any default in performance by the
assignee.
12.5 EXPENSES
Except as provided in Section 8.2, all fees, costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such cost or expense, whether or not the Offer is
consummated.
12.6 SEVERABILITY
Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law. Any provision
of this Agreement that is invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining provisions hereof, and any
such invalidity or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
12.7 PARENT CO. GUARANTEE
Parent Co. hereby unconditionally and irrevocably guarantees the
performance of all covenants and obligations of A Co. in this Agreement. Parent
Co. waives, diligence, presentment, demand of payment, any right to require
proceeding first against A Co., protest notice and all demands whatsoever.
Parent Co. agrees that this guarantee will not be discharged except by complete
performance of the covenants and obligations of A Co. under this Agreement.
12.8 COUNTERPART EXECUTION
This Agreement may be executed in any number of counterparts and each
such counterpart shall be deemed to be an original instrument but all such
counterparts together shall constitute one agreement.
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IN WITNESS WHEREOF, Parent Co., A Co. and Stellarton have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
STELLARTON ENERGY CORPORATION TOM BROWN, INC.
Per: "R.D. Steele" Per: "James D. Lightner"
Name: R.D. Steele Name: James D. Lightner
Title: President Title: President
Per: "Dell Chapman"
Name: Dell Chapman
Title: Chief Financial Officer
TOM BROWN RESOURCES LTD.
Per: "James D. Lightner"
-----------------------------
Name: James D. Lightner
Title: President
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SCHEDULE A
CONDITIONS TO THE OFFER
The capitalized terms used in this Schedule A have the meanings set
forth in the attached Pre-Acquisition Agreement dated December 13, 2000 (the
"Agreement") between Parent Co., A Co. and Stellarton, except that the term
"Offeror" shall be deemed to refer to A Co.
Notwithstanding any other provision of the Offer, but subject to the
provisions of the Agreement, the Offeror reserves the right to withdraw or
terminate the Offer and not take up and pay for, or to extend the period of time
during which the Offer is open and postpone taking up and paying for, any
Stellarton Shares deposited under the Offer unless all of the following
conditions are satisfied or waived by the Offeror:
(a) prior to the Expiry Time, and at the time the Offeror first takes
up and pays for Stellarton Shares under the Offer, there shall
have been validly deposited under the Offer and not withdrawn at
least 66 2/3% of the outstanding Stellarton Shares (calculated on
a diluted basis) (the "Minimum Condition");
(b) all necessary approvals under the Investment Canada Act in
connection with the Offer and the acquisition of the Stellarton
Shares pursuant to the Offer shall have been obtained or deemed
to be obtained;
(c) all requisite regulatory approvals and regulatory consents
(including, without limitation, those of any stock exchanges or
other securities or regulatory authorities) which are considered
by A Co., acting reasonably, as being necessary to complete the
Offer shall have been obtained on terms and conditions
satisfactory to the Offeror, acting reasonably, and all
applicable statutory or regulatory waiting periods shall have
expired or been terminated and no unresolved objection or
opposition shall have been filed, initiated or made during any
applicable statutory or regulatory period;
(d) (i) no act, action, suit, proceeding, objection or opposition
shall have been threatened or taken before or by any domestic or
foreign court or tribunal or governmental agency or other
regulatory authority or administrative agency or commission by
any elected or appointed public official or by any private person
in Canada or elsewhere, whether or not having the force of law,
and (ii) no law, regulation or policy (including applicable tax
laws and regulations in those jurisdictions in which Stellarton
or any of its subsidiaries carries on business) shall have been
proposed, enacted, promulgated, amended or applied, which in
either case, in the sole judgment of the Offeror, acting
reasonably:
(A) has the effect or may have the effect to cease trade,
enjoin, prohibit or impose material limitations, damages
or conditions on the purchase by, or the sale to, the
Offeror of the Stellarton Shares or the right of the
Offeror to own or exercise full rights of ownership of the
Stellarton Shares;
(B) has had, or if the Offer was consummated would result in,
a material adverse change or, in the case of (ii) above,
would have a material adverse affect on the Offeror's
ability to complete the Offer as determined by the
Offeror, acting reasonably;
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(C) has a material adverse effect on the ability to complete
any compulsory acquisition or any amalgamation, statutory
arrangement or other transaction involving the Offeror
and/or an affiliate of the Offeror and Stellarton and/or
the holders of Stellarton Shares for the purposes of
Stellarton becoming, directly or indirectly, a
wholly-owned subsidiary of the Offeror or affecting an
amalgamation or merger of Stellarton's business and assets
with or into the Offeror and/or an affiliate of the
Offeror (a "Subsequent Acquisition Transaction");
(e) the Offeror shall have determined, in its sole judgment, acting
reasonably, that there shall not exist any prohibition at law
against the Offeror making the Offer or taking up and paying for
all of the Stellarton Shares under the Offer or completing any
compulsory acquisition or Subsequent Acquisition Transaction in
respect of any Stellarton Shares not acquired under the Offer;
(f) the Offeror shall have determined, in its sole judgment, acting
reasonably, that there shall not have occurred, developed or come
into effect or existence any event, action, state, condition or
major financial occurrence of national or international
consequence or any law, regulation, action, government
regulation, enquiry or other occurrence of any nature whatsoever
which, in the sole judgment of the Offeror, acting reasonably,
have a materially adverse effect on the business or operations of
Stellarton;
(g) there shall not have occurred any actual or threatened change
(including any proposal by the Minister of Finance (Canada) to
amend the Income Tax Act (Canada) or any announcement,
governmental or regulatory initiative, condition, event or
development involving a change or a prospective change) that, in
the sole judgment of the Offeror, acting reasonably, directly or
indirectly, has or may have material adverse significance with
respect to the business or operations of any of the Offeror and
Stellarton and their respective subsidiaries or entities, in each
case taken as a whole, in which either of them has a material
interest or with respect to the regulatory regime applicable to
their respective businesses and operations or with respect to
completing any compulsory acquisition or Subsequent Acquisition
Transaction;
(h) the Offeror shall have determined in its sole judgment, acting
reasonably, that (i) Stellarton shall not have breached, or
failed to comply with, in any material respect, any of its
covenants or other obligations under the Agreement, and (ii) all
representations and warranties of Stellarton contained in the
Agreement shall have been true and correct in all material
respects as of the date of the Agreement, shall continue to be
true and correct as though made on each successive date
thereafter and shall not have ceased to be true and correct in
any material respect thereafter;
(i) the Agreement shall not have been terminated pursuant to its
terms; and
(j) the Offeror shall, in its sole judgment, acting reasonably, be
satisfied that all outstanding stock options, warrants and all
other rights to acquire any Stellarton Shares shall have either
been exercised or terminated or may be terminated or otherwise
dealt with on a basis acceptable to the Offeror in its sole
judgment, acting reasonably, prior to the Offeror taking-up any
Stellarton Shares pursuant to the Offer.
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SCHEDULE B
FORM OF PRE-TENDER AGREEMENT
December 13, 2000
Dear Sir:
RE: OFFER BY A CO. TO PURCHASE ALL OF THE STELLARTON SHARES
Reference is made to the Pre-Acquisition Agreement dated December 13,
2000 (the "Pre-Acquisition Agreement") between Tom Brown Resources Ltd. (herein
called "A Co."), Tom Brown, Inc., as guarantor of the obligations of A Co. and
Stellarton Energy Corporation (herein called "Stellarton") pursuant to which A
Co. has agreed, on certain terms and conditions, to make an offer to purchase
all of the issued and outstanding Stellarton Shares. All capitalized terms
referred to herein shall have the meanings attributed thereto in the
Pre-Acquisition Agreement.
We understand that you (the "Selling Shareholder") beneficially own,
directly or indirectly, or exercise control or direction over, the number of
Stellarton Shares and options to acquire further Stellarton Shares set forth in
your acceptance at the end of this Agreement.
1. Covenants of Selling Shareholder
By the acceptance of this letter agreement, the Selling Shareholder
hereby agrees, subject to the terms of paragraph 3 of this letter agreement,
from the date hereof until the completion of the Offer:
(a) not to sell, assign, convey or otherwise dispose of any of the
Stellarton Shares owned, controlled or directed by such Selling
Shareholder except pursuant to the Offer;
(b) unconditionally to accept the Offer made by A Co. by tendering or
causing to be tendered the Stellarton Shares presently owned,
controlled or directed or hereafter acquired, controlled or
directed (including any Stellarton Shares hereafter acquired
pursuant to the exercise of any options to purchase Stellarton
Shares) by such Selling Shareholder prior to the expiry of the
Offer and in accordance with the terms and conditions of the
Offer free and clear of any and all liens, encumbrances, charges
and rights and interests of third parties whatsoever;
(c) to sell or surrender to Stellarton or exercise all options held
by the Selling Shareholder to acquire Stellarton Shares (the
"Options") that have an exercise price less than the
consideration offered pursuant to the Offer, and to forthwith
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surrender all remaining Options to Stellarton immediately
following the Effective Time;
(d) not to exercise any statutory or other rights of withdrawal with
respect to any Stellarton Shares owned by such Selling
Shareholder once deposited pursuant to the Offer unless this
letter agreement is terminated prior to A Co. taking up the
Stellarton Shares under the Offer; and
(e) not to exercise any shareholder rights or remedies available at
common law or pursuant to the Business Corporations Act (Alberta)
or applicable securities legislation to delay, hinder, upset or
challenge the Offer.
2. Expenses
A Co. and the Selling Shareholder agree to pay their own respective
expenses incurred in connection with this letter agreement.
3. Termination
It is understood and agreed that the respective rights and obligations
hereunder of A Co. and the Selling Shareholder shall cease and this letter
agreement shall terminate:
(a) if, prior to the expiry of the Offer, another bona fide Take-over
Proposal is announced, proposed, offered or made to the holders
of Stellarton Shares or Stellarton which, in the opinion of
Stellarton's board of directors after consultation with its
financial advisors, would constitute a Superior Proposal and
which permits the board of directors of Stellarton to withdraw,
modify or change any recommendation regarding the Offer in
accordance with Section 2.2(a) of the Pre-Acquisition Agreement
and to terminate the Pre-Acquisition Agreement as a consequence
thereof; or
(b) in the event that the Pre-Acquisition Agreement is terminated
pursuant to Section 11.1 thereof.
In the event of termination of this letter agreement, the Selling
Shareholder may withdraw all of the Stellarton Shares deposited in accordance
with the terms and conditions of the Offer, this letter agreement shall
forthwith be of no further force and effect and there shall be no liability on
the part of either the Selling Shareholder or A Co., except to the extent that
either such party is in default of its obligations herein contained.
4. Amendment
Except as expressly set forth herein, this letter agreement constitutes
the whole of the agreement between the parties and may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
5. Assignment
Except as expressly set forth herein, no party to this letter agreement
may assign any of its rights or obligations under this letter agreement without
the prior written consent of the other party.
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6. Disclosure
Prior to first public disclosure of the existence and terms and
conditions of this letter, none of the parties hereto shall disclose the
existence of this letter agreement, or any details hereof, to any person other
than Stellarton, its directors and officers, without the prior written consent
of the other parties hereto, except to the extent required by law. The existence
and terms and conditions of this letter agreement may be disclosed by A Co. and
Stellarton in the press release issued in connection with the execution of the
Pre-Acquisition Agreement and the Offer Documents and the Directors Circular
prepared by Stellarton.
7. Enurement
This letter agreement will be binding upon and enure to the benefit of A
Co., the Selling Shareholder and their respective executors, administrators,
successors and permitted assigns.
8. Applicable Law
This letter agreement shall be governed and construed in accordance with
the laws of the Province of Alberta and the federal laws of Canada applicable
therein and each of the parties hereto irrevocably attorns to the jurisdiction
of the courts of the Province of Alberta.
9. Counterparts
This letter agreement may be signed in counterparts which together shall
be deemed to constitute one valid and binding agreement and delivery of such
counterparts may be effected by means of telecopier.
Yours truly,
TOM BROWN RESOURCES LTD.
Per: _________________________
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ACCEPTANCE
The foregoing is hereby accepted as of and with effect from the ___ day
of December, 2000 and the undersigned hereby confirms that the undersigned
beneficially owns ___________ Stellarton Shares and options to acquire a further
__________ Stellarton Shares.
-------------------------------- ------------------------------------
Witness Name:
Title: